Article / 09 September 2014 at 8:38 GMT

Equity on the move: Storebrand up 4% on Norwegian FSA rule change

Head of Equity Strategy / Saxo Bank
Denmark
  • Storebrand's share price jumps 4% in early morning trading  
  • Spike follows rule changes from Norwegian FSA  
  • Move may propel stock back to 38 level 

By Peter Garnry

Norway-based financial services firm Storebrand is the most traded stock on the Euro Stoxx 600 Index in early European trading, up 4% as the Norwegian Financial Services Authority announced a rule change last night after the close. 

The rule changes are divided between being permanent and transitional in order for Norwegian insurance companies to comply with the Solvency II framework that applies to all insurance companies in the EU and the euro area from 2016. 

Most traded European stocks
















The most interesting permanent rule change is the recommendation that insurance companies in Norway are permitted to use the Volatility Adjustment, which is a technical specification that increases the level of the discount rate used to discount insurance liabilities. 

A higher discount rate means lower present value of insurance liabilities and thus an immediate higher net asset value for Storebrand's shareholders. The announcement is positive for the company's share price both in the short and long term.

We believe the permanent change to the discount rate could easily be the catalyst that propels the stock back to the 38 level from the current level around 35.

Storebrand share price the past year
Storebrand share price
Source: Saxo Bank

-- Edited by Oliver Morrison

Peter Garnry is head of equity strategy at Saxo Bank

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