Storebrand ASA

Regulatory Filings • Sep 8, 2023

Rating Action: Moody's upgrades Storebrand's ratings with IFSR at A2; outlook stable

8 September 2023

London, September 8, 2023 – Moody's Investors Service (Moody's) has today upgraded the longterm issuer rating of Storebrand ASA (Storebrand; the Group) to Baa1 from Baa2, as well as the insurance financial strength rating (IFSR) of Storebrand Livsforsikring AS (Storebrand Liv), the group's main operating subsidiary, to A2 from A3 and Storebrand Liv's subordinated debt rating to Baa1(hyb) from Baa2(hyb). The outlook for both entities remains stable.

RATINGS RATIONALE

The upgrade of Storebrand Liv's IFSR to A2 from A3 reflects the Group's improved business diversification and lower balance sheet risk arising from its long-term guaranteed products. This has resulted from steady growth in its capital-light savings, asset management and insurance businesses which provide diversifying income streams, and on the guaranteed book, improved asset-liability matching (ALM), a build-up of healthy client fund buffers and the gradual run-off of this portfolio. Rising interest rates have been a significant tailwind for the Group, supporting higher capital generation and enabling reinvestment yields comfortably above guaranteed rates.

Storebrand Liv's A2 IFSR further reflects its good financial profile underpinned by resilient capitalisation, steady profitability and consistently low leverage, along with its strong market position in both the Norwegian and Swedish private defined contribution markets and growing asset management and insurance businesses.

These strengths are partly offset by its exposure to capital-consumptive guaranteed policies that will run-off over a long time period and present interest rate risk, albeit significantly diminished compared to the past, and exposure to market risk that could erode capital buffers and lead to pressure on fee income in the Group's unit linked and asset management businesses. While the Group's business diversification has improved, geographic diversification remains modest compared to higher-rated peers.

Consistent with its strategy of the reducing the capital intensity of its business mix, the Group has achieved strong growth in its savings and asset management divisions and is well positioned to increase its share of the Norwegian insurance market. Capital intensive guaranteed business accounted for around 15% of the Group's premiums in 2022, down from around 50% in 2012.

The shift in business mix has contributed toward strengthened capital adequacy and diminished sensitivity to interest rate movements. This, together with rising interest rates, has resulted in the Group's Solvency II coverage ratio rising steadily over the years, from 144% at year-end 2016 (excluding the impact of transitional provisions) to 196% at 30 June 2023. Storebrand's capital sensitivity to interest rates has improved significantly over that time period, with a 50bps downward shift in rates resulting in an estimate 3% decline in Solvency II coverage ratio as of half-year 2023, compared to an estimated 10% decline as of year-end 2016.

Profitability is supported by the Group's good business diversification and improving performance of its guaranteed book, where expected investment returns in excess of guaranteed returns will provide a tailwind in future periods. Storebrand's general insurance business has experienced weaker than

expected performance in the first half of 2023, with a combined ratio of 96% compared to 90% for the prior-year period, mainly driven by motor claims inflation and higher Norwegian disability claims. However, this has had a limited impact on the Group's overall profitability and the Group expects pricing and underwriting actions taken to result in improvements to underwriting performance.

The stable outlook reflects Moody's view that the group will continue to grow its non-guarantee business lines that diversify its sources of income and reduce its exposure to interest rates and financial markets, while maintaining strong capital adequacy and good profitability.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's said that the following factors could lead to upward pressure on Storebrand's ratings: (i) improved business and geographic diversification that reduces the group's dependence on the Norwegian life insurance and savings market, (ii) strengthened capital adequacy, with Solvency II capital maintained at around 200% or significantly reduced sensitivity to interest rates and financial markets movements.

Conversely, the following factors could lead to downward pressure on the ratings: (i) deterioration in capital adequacy, with Solvency II coverage consistently below 150% or a significant increase in sensitivity to interest rates and financial market movements, (ii) weakening of financial flexibility with financial leverage above 25% or earnings coverage consistently below 5x, (iii) diminished profitability, with for example, cash return on equity consistently below 8%, or (iv) deterioration in the group's market position and franchise that impedes its ability to continue diversifying its business.

The principal methodology used in these ratings was Life Insurers Methodology published in January 2023 and available at https://ratings.moodys.com/rmc-documents/397713. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https:// ratings.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are unsolicited.

a.With Rated Entity or Related Third Party Participation: YES

b.With Access to Internal Documents: YES

c.With Access to Management: YES

For additional information, please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC\_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Brandan Holmes VP-Sr Credit Officer Financial Institutions Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

Simon James Robin Ainsworth Associate Managing Director Financial Institutions Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

Releasing Office: Moody's Investors Service Ltd. One Canada Square Canary Wharf London, E14 5FA

United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

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