Storebrand ASA climbed the most in eight months in Oslo as Pareto Securities ASA said delays to new capital requirements could put Norway’s second-largest insurer in a position to resume dividends as soon as 2014.
Storebrand rose as much as 6.4 percent, the biggest intraday gain since July 13, and was up 4.5 percent at 24.10 kroner as of 11:43 a.m. in Oslo trading. The stock was the best performer on the 33-company Stoxx Europe 600 Insurance index.
Storebrand and other European insurers are preparing for the introduction of risk-based capital rules known as Solvency II. The implementation of the regulations has been delayed until 2016 or 2017 from 2014 because of objections from insurers over how much capital the rules require to back long-term guaranteed products such as annuities.
“As Solvency II is likely to be postponed until 2016, Storebrand will have more time to adapt its business to new regulations,” Pareto analysts Vegard Eid Mediaas and Jon David Gjertsen said in a report. “Although reserve strengthening for longevity will weigh on earnings, we do not foresee a need for additional equity and believe Storebrand potentially can reinstate its dividends from 2014.”
Investors will probably see payouts of 1.3 kroner a share in 2014, 1.5 kroner in 2015 and 1.75 kroner in 2016, according to Bloomberg dividend forecasts.
Pareto reiterated its buy recommendation on Storebrand and increased its 12-month price target price to 44 kroner from 35 kroner. Storebrand is the broker’s “top pick among Nordic financials,” the analysts wrote.
Storebrand is also building up its balance sheet to adapt to longer life expectancy in Norway. Moody’s Investors Service last month cut its outlook on the insurer’s debt to negative from stable, saying the increased reserve requirements will curb the company’s profitability.
Gjensidige Forsikring ASA, Norway’s largest insurer, owns 24 percent of Storebrand.