Storebrand Climbs as Yield Gain Cuts Share-Sale Risk: Oslo Mover

Storebrand ASA gained the most in a month after SEB AB advised investors to buy shares in Norway’s second-largest insurer as higher Norwegian bond yields reduced the risk of the company needing to sell shares.

Storebrand, based in Oslo, rose as much as 2.3 percent, the most since Jan. 4, and were up 1.4 percent at 28.79 kroner as of 3:38 p.m. in the Norwegian capital. More than 4.1 million shares have been traded so far today, more than double the three-month daily average volume.

“Storebrand will continue to focus on building capital, rather than maximizing earnings in the near-term,” SEB wrote in an e-mailed note today. The subsequent improvement to the company’s balance sheet will “reduce the risk and probability of an equity issue,” the Stockholm-based investment bank said. SEB upgraded its recommendation on Storebrand to buy from hold.

Like its European rivals, Storebrand is preparing for stricter capital rules as regulators seek to impose common standards for insurers through regulations known as Solvency II. Norway is also planning to change rules on occupational pension products to ensure life insurers can adjust to the stricter capital requirements and longer life expectancy.

Full implementation of Solvency II rules isn’t expected before Jan. 1, 2015, Norway’s Financial Supervisory Authority said in a letter published on its website today. The authority doesn’t exclude the possibility of further delays to the rules being implemented, it said.

Bond Correlation

A widening of the historically-close correlation between Storebrand’s share price and yields on 10-year Norwegian government bonds may also lead to gains in the company’s share price as the gap closes, said SEB.

Storebrand will probably report net income of 392 million kroner ($71.6 million), according to the average of nine analyst estimates compiled by Bloomberg. That compares to a profit of 16 million kroner a year earlier and 280 million kroner in the third quarter. The company is scheduled to report fourth-quarter earnings on Feb. 13.

Gjensidige Forsikring ASA, Norway’s largest insurer, owns 24 percent of Storebrand. Gjensidige gained as much as 0.6 percent to the highest intraday level since it started trading shares in Oslo in December 2010. The stock traded 0.1 percent higher at 86.55 kroner as of 3:35 p.m. local time.

DNB ASA, Norway’s biggest lender, traded 1.2 percent weaker at 76.55 kroner at the same time.