- Cash-Based Earnings: NOK2.249 billion in the quarter.
- Operating Result: NOK819 million, up by 38% year on year.
- Financial Result: NOK1.431 billion, including NOK1.047 billion from the sale of health insurance businesses.
- Solvency Ratio: 191% in the second quarter.
- Share Buyback Program: NOK1.5 billion planned for the year, with NOK800 million completed in the first half.
- Unit Linked Growth: 19% year over year, corresponding to NOK68 billion in reserves.
- Assets Under Management: Grew by 14% compared to second-quarter 2023, with net flow of NOK7 billion.
- Insurance Premium Growth: 16% year on year.
- Retail Banking Loan Balance Growth: 13% annual growth rate.
- Cash Earnings Per Share: NOK4.59 in the quarter.
- Fee and Administration Income: Up 13% from the second quarter last year.
- Cost Guidance: NOK5.9 billion for the full year, excluding performance costs, currency effects, and one-offs.
- Tax Charge: 10% in the quarter, with a normalized tax rate of 19% to 22%.
- Combined Insurance Premiums: Up 16% year on year.
- Return on Equity (Banking): More than 12% in the quarter.
- Interest Rate Margin (Banking): 1.6% in the quarter.
- Guaranteed Business: Down to 40% of total pension reserves for the group.
- Acquisition of AIP Management: Increased ownership to 60%, with total commitments from investors of EUR8 billion.
- Acquisition of Headquarters: Storebrand Lysaker Park at a gross property value of just below NOK1.7 billion.
Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Storebrand ASA (SREDF, Financial) reported strong cash-based earnings of NOK2.249 billion for the quarter, with an operating result up by 38% year on year.
- The company executed a NOK1.5 billion buyback program, with NOK800 million completed in the first half and NOK700 million planned for the next two quarters.
- Storebrand ASA (SREDF) achieved a robust solvency ratio of 191% in the second quarter.
- The company saw double-digit growth across all business lines, with unit-linked volumes growing by 19% year over year.
- Storebrand ASA (SREDF) was recognized by Time Magazine as the most sustainable company in Norway and among the top 50 in the world across all industries.
Negative Points
- Insurance results remain weak, with the company still working towards achieving a combined ratio below 92% by 2025.
- The disability level in Norway remains high, impacting the insurance segment's profitability.
- The company faced significant large losses in the second quarter, negatively impacting the combined ratio by approximately 2 percentage points.
- The fee margin for unit-linked Norway decreased by 4 basis points quarter over quarter, indicating margin pressure.
- The integration of Kron is still ongoing, with the company expecting losses in the next two quarters before full integration.
Q & A Highlights
Q: Can you explain the drivers behind the lower-than-expected cost base for Norway unit-linked in Q2?
A: We continue to take out synergies from the Danica integration and maintain strict cost control. There may be some periodic effects between quarters, but overall, we aim for scalability and profitability through cost control.
Q: What insights can you provide on the benefits of the internal solvency model application?
A: The internal model helps us better understand business risks and make informed capital allocation decisions. The process with regulators will extend into next year, so it's too early to comment on specific effects.
Q: How do you assess the likelihood of the public pension market opening up following the Norwegian government's response to ESA?
A: The development is as expected. We anticipate ESA to take up the case after summer, and we see more municipalities considering tender offerings, indicating a gradual market opening.
Q: How far are you from seeing price increases in P&C insurance reflected in the P&L?
A: Price increases are coming through, especially in disability and P&C. We had significant large losses in Q2, but we expect the combined ratio to gradually decrease towards our 90-92% target for 2025.
Q: What would the impact on Q2-2024 solvency have been if the internal model application was approved?
A: We have calculated the impact but cannot disclose specifics as we are still in discussions with regulators. The application is for a whole package, not selective elements.
Q: Can you explain the decrease in interest costs this quarter?
A: We repaid one loan, reducing interest costs. Additionally, hedging and swap costs should be considered, bringing the total to around NOK160-170 million per quarter.
Q: What is your outlook for the public pension market given the current situation with ESA and the Norwegian government?
A: We see increased discussions and focus on public pensions, with more municipalities considering tender offerings. The market is gradually opening up.
Q: Why is the fee margin for unit-linked Norway down 4 basis points quarter over quarter?
A: The fixed element of fees becomes a smaller part of the total as the portfolio grows, leading to dilution. There is also normal margin pressure in a competitive market.
Q: Do you need additional price increases to reach the 90-92% combined ratio target for insurance?
A: Pricing is dynamic, and we will continue to adjust to achieve our targeted combined ratios. We expect to remain competitive due to our capital synergies.
Q: What is the impact of new capital requirements for banks on Storebrand?
A: The new requirements are beneficial for low-risk residential mortgages, potentially releasing NOK500-750 million in capital. This could fund further growth or free up capital for the holding company.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
