BofA upgrades Storebrand to “buy,” lifts target to NOK175 on profit recovery

Investing.com -- BofA Securities upgraded Storebrand ASA (OL:STB)A to a “buy” rating from “neutral” and raised its price objective by 6% to NOK175, pointing to a stronger operating outlook and higher earnings forecasts. 

The brokerage cited Storebrand’s third-quarter 2025 results as further evidence of a sharp rebound in its non-life business in Norway. 

“The quarter was another proof point that non-life profitability is recovering sharply in Norway, and we see more to come,” the brokerage said. 

The analysts said they expect the company’s upcoming strategy update on December 10 to outline “an attractive combination of earnings growth and capital return.” 

They now forecast a 9% compound annual earnings growth rate over 2025-28, supported by expanding profitability in property and casualty insurance and stronger cash generation. 

On the new estimates, Storebrand trades at 12x 2027 earnings, with a total yield of 7.3%, including dividends and buybacks.

BofA’s research team said operating earnings could grow 6% a year across the next strategic cycle, powered by a 16% CAGR in non-life, aided by higher pricing and better cost control. 

“With higher forecasts and a better operating backdrop, we increase our PO by 6% to NOK175 and upgrade our rating to Buy,” the analysts said. 

For 2028, the analysts project group pre-tax profit to surpass NOK6.5 billion and return on equity to exceed 15%, up from a current target of 14%.

The brokerage expects the company’s solvency ratio to rise above 210%, comfortably ahead of its 150-175% target range. It also anticipates annual share buybacks of NOK2 billion and dividend per share growth of roughly 10% a year. 

“We think STB can increase annual buybacks to NOK2bn p.a. and continue to grow its DPS at c.10% each year,” the brokerage said. This would result in a total shareholder return of 6.4-7.3%, or about 21% of market capitalization over three years.

Earnings forecasts were raised modestly, with 2026 EPS increasing to 11.49 from 10.84 and 2027 EPS to 12.29 from 11.93. The 2025 EPS estimate remained steady at 10.32.

Analysts also noted improved cash generation, with expected growth of more than 10% per year, and a dividend payout ratio just below 50%.

Third-quarter results were described as “another strong P&C delivery,” with pre-tax profit of NOK1.59 billion, about 12% above consensus. 

The non-life business was the key driver, with a combined ratio of 89%, better than expectations. “Once more, non-life is driving the positive surprise today with P&C profitability improving sharply,” the brokerage said.

BofA said Storebrand’s mix of “earnings growth potential over the next few years coupled with attractive capital return” underpinned its new recommendation.

 The analysts added that the stock’s valuation, at 12.9x 2027 earnings and a 7.3% total yield, offers room for further upside as “buffers across backbooks are healthier.”