Storebrand ASA

OSE:STB

Earnings Call Analysis

Storebrand Reports 41% Growth Driven by Enhanced Financial Performance and Strategic Execution

Storebrand achieved cash-based earnings of NOK 1.5 billion in Q3, marking a 41% increase compared to the previous year. The operating result surged 36%, bolstered by double-digit growth, notably a 27% rise in unit-linked pensions. The company forecasts annual profit sharing in Norway to reach NOK 100 to 150 million in 2024, aiming for NOK 300 million by 2025. Additionally, asset management saw 19% growth year-on-year, while the bank's loan volumes rose 13%. The combined ratio for the insurance segment targets a reduction to 90-92% by 2025, showcasing ongoing improvements.

Strong Quarter Results

Storebrand reported impressive results for the third quarter, with cash-based earnings reaching NOK 1,507 million. This represents a remarkable increase of 41% compared to the same period last year. The operating result surged 36% to NOK 944 million, underscoring efficient cost management and a substantial improvement in overall performance.

Growth Across Business Segments

The company's growth trajectory is notable across various segments. Occupational pensions yielded a year-over-year volume growth of 27%, translating into NOK 95 billion in assets. In asset management, total assets under management grew by 19%, with net inflows of NOK 14 billion during the quarter, continuing a robust trend. The retail banking segment reported a 13% increase in loan volumes, further establishing Storebrand's competitive positioning in the market.

Strategic Financial Management

Storebrand's strategic approach involves continuous investment in business expansion while maintaining stringent cost controls. The company has committed to a NOK 1.5 billion share buyback program expected to conclude by year-end, reflecting its strong cash position and confidence in future growth. Additionally, the solvency ratio remains stable at a strong 190%, reinforcing the financial health of the company.

Profit Sharing and Future Guidance

The profit-sharing mechanism indicates positive trends, especially in Sweden, where profit sharing is projected to reach between NOK 100 million to NOK 150 million for 2024. Looking further ahead, the company anticipates this amount could increase to approximately SEK 300 million annually starting in 2025, signaling anticipated growth in profit-sharing capabilities.

Insurance and P&C Market Dynamics

In terms of property and casualty (P&C) insurance, premium volume growth reached 19% year-over-year, with a combined ratio target aiming for below 92% by 2025. The company is seeing gradual improvements in claims frequency and participating in price corrections to mitigate previous inflation losses. Currently, Storebrand holds a market share of 7% in the retail P&C market.

Sustainability and Long-Term Goals

Storebrand positions itself as a leader in sustainability within the financial sector, committing to ambitious non-financial goals alongside its financial targets. The company has set a target to achieve a result of SEK 5 billion and a return on equity (ROE) of 14% by 2025, signaling its dedication towards maintaining a balance between profitability and sustainable practices.

Conclusion and Investor Confidence

Overall, Storebrand's third quarter results reflect a strong operational performance marked by robust growth across its business segments. The emphasis on sustainability, coupled with financial discipline and strategic objectives for continued growth and profitability, positions Storebrand as an attractive investment opportunity for both current and potential investors.

Earnings Call Transcript 2024-Q3

[Johannes Narum, executive]

Good morning, ladies and gentlemen, and welcome to Storebrand's Third Quarter Results presentation. Due to some technical issues, we started a few minutes later than scheduled today. We apologize for the inconvenience. As usual, our CEO, Odd Arild Grefstad, will present the key highlights of the quarter; followed by CFO, Lars Lødøssøl, who will dive deeper into the numbers. At the end of the presentation, participants in the teams webinar will have a chance to ask questions. Details on how to join the team's webinar are found on the Investor Relations website. But without further ado, I give the word to our CEO, Odd Arild Grefstad.

[Odd Arild Grefstad, executive]

Thank you, Johannes, and good morning, everyone. Let me give an overview of the third quarter's highlights. Storebrand's group cash-based earnings amounted to NOK 1,507 million in the quarter. The operating result was NOK 944 million, up by 36% year-on-year. The record strong operating result was driven by continued double-digit growth and strong cost control.

The financial result of NOK 563 million was made up of profit sharing from both Sweden and Norway and solid returns from the company portfolios. We have continued to execute on the annual NOK 1.5 billion buyback program, and we expect to complete this within year-end. The strong results reflect that we execute on Storebrand's strategy to take 3 commercial positions in the market we operate in: A, to be the leading provider of occupational pension in both Norway and Sweden; B, to be a Nordic powerhouse in asset management; and C, to be a fast-growing challenger in the Norwegian retail market for financial services.

These positions are strengthened by our strategic enablers, people, sustainability and digital frontrunner together unlocking additional growth. I am very happy to say again that we deliver double-digit growth across the entire business. This stems from both structural growth, supportive markets, and growing market shares in several segments.

Now let me go into further details on our growth areas and share some highlights from this quarter. Let me start with occupational pension business. We see structural growth within unit-linked, where volumes have grown by 27% year-over-year, corresponding to absolute growth of NOK 95 billion in assets. Within occupational pensions, SPP was selected as best-in-class within sustainability by industry brokers.

During the quarter, we also launched a new digital solution for paid-up policies with investment choice. This has been well received by customers. And even with a soft launch, we see promising traction. Within public occupational pensions, there is a limited number of ongoing tenders this year. We continue to wait for a clarification on the ESA case and will let you know once we have more information on this topic.

Public occupational pension is a growth area for Storebrand and our aim remains to grow assets under management in this market by NOK 7 billion annually from 2023 through 2025. Within Asset Management, we keep delivering strong growth. Total assets under management grew by 19% year-on-year, while net flow in the quarter stood at NOK 14 billion.

During the third quarter, the Cubera X fund closed on a hard cap of EUR 800 million. Storebrand Asset Management maintained its #1 position on sustainable investments according to a recent survey from Prospera. In sum, this has led to an earnings growth of 20% since third quarter 2023, stemming from stable top line margin, positive flows and a solid contribution from actively managed funds.

Let me lastly turn to the Norwegian retail market. Within insurance, we continue to gain market share, while premium volumes grew by 19% year-on-year. Repricing measures are having effects, and we are seeing gradually progress towards achieving our target of a combined ratio below 92% for 2025.

Our market share in retail P&C is now 7% compared to 6.5% a year ago. Meanwhile, the bank delivered strongly as a fast-growing challenger in the Norwegian retail market. Loan volumes were up by 13% year-on-year and we are taking market share. And with the highest customer satisfaction in the market, Kron, the retail savings platform increased assets by 14% during the third quarter and 72% year-to-date.

Within retail as a whole, there is a solid growth momentum, and we are pleased to report double-digit earnings growth in the quarter. Now let us take a step back again and look at Storebrand as a whole. It's pleasing to see that the growth in the front book, combined with strong cost control leads to increasing cash results for shareholders.

The group result is up by 41% year-over-year, supported both by a record high operating profit and a strong financial results. In sum, this has been a very strong quarter for Storebrand and a positive year-to-date. I'm pleased to see that we are executing on our strategy and making progress towards our financial targets for 2025.

Finally, I want to extend my gratitude to the employees in Storebrand. Thank you for the great job you do every day. And with that, I give the word back to you, Johannes.

[Johannes Narum, executive]

Thank you, Odd Arild. Now let's take a closer look at the numbers. Lars, please go ahead.

[Lars Aasulv Løddesøl, executive]

Thank you, Johannes, and good morning to you all. As usual, let me start by emphasizing that the numbers I present here today are the cash equivalent earnings as defined by our APM. The quarterly results ended at NOK 1.507 billion, a record for the ordinary quarterly results and an increase of 41% compared to the same period last year.

As was the case in the last quarter, the result improvement is explained by strong growth in the front book, cost control and an improving insurance result. The P&C results are still weak, but price increases and other measures will continue to be implemented until the targeted profitability has been restored.

The financial result amounted to NOK 563 million in the quarter. Profit sharing from the guaranteed portfolios is up, especially in Sweden, where financial markets were particularly supportive in the quarter. In Norway, our main focus this year is on buffer building and profit sharing is expected to improve further next year.

When we now acquire an additional 50% of AIP, the Danish infrastructure company as announced before the summer, the initial 10% holding that we had has been restated to market value. The amount is positive NOK 67 million and is listed as a special item in the graph. The solvency position stays strong at 190% after a NOK 1.2 billion increase in our own funds, but also an increase of NOK 800 million in SCR following strong organic growth.

The cash EPS after tax comes in at NOK 3.12 in the quarter. The solvency position is stable at 190%. The solvency has been strengthened by improved buffer capital rules at the beginning of the year and strong cash results year-to-date. The improved underlying solvency has been reinvested in the business to accelerate growth and profitability. This is very much in line with our long-term risk management policy to adjust the risk taking with the risk capacity to enhance long-term value creation for customers and shareholders.

The sensitivities show robustness in all scenarios. The fee and administration income is up 13% year-to-date. The insurance results have improved from the previous quarters, but are still below the targeted level. The cost level is slightly up caused by good performance fees. The underlying cost level is stable due to continued synergy effects from recent acquisitions and general cost control, but also helped by seasonally lower market activity through the summer.

We expect somewhat higher cost in the fourth quarter and maintain our cost guiding for the full year of NOK 5.9 billion, excluding performance cost currency effects and one-offs. The operating result is up 36% compared to last year, showing the growth and scalability of the business.

Financial results include the gain from AIP of NOK 67 million and good returns in company portfolios as well as increased profit sharing. The tax charge was 10% in the quarter, following unrealized currency losses from the SEK to NOK hedges we are carrying with the strengthening of the Swedish kroner to the Norwegian kroner, the increased value of the ownership in Swedish subsidiaries is not taxed, while the currency hedge losses are tax deductible.

The normalized tax rate remains at 19% to 22%. The same numbers split into savings, insurance and guaranteed shows a 37% improvement in savings and more than doubling for insurance, stable results in guaranteed and a doubling also in other as compared to the third quarter last year. Overall, cash equivalent earnings are up 41% in the quarter.

As Odd Arild has already illustrated, the front book savings business in store brand continues to grow double digit within Unit Linked Asset Management and banking. Cost control is strong and the scalability of the business comes through as shown in significant profit improvements in all subsegments. Unit Linked in both Norway and Sweden show scalability and strong results improvements. Store and asset management has generated higher transaction fees and strong performance fees in the quarter.

Assets under management continues to grow, and the positive flow is once again picking up after 2 weak quarters. The bank continues with good result development from the first half of the year, or follow with the same good result development as we saw in the first half of the year with more than 12% return on equity and a combined ratio of 41% -- sorry, not a combined ratio, obviously, but a cost-income ratio of 41% in the quarter. Deposits show good growth and the interest rate margin remained at 1.6%.

The insurance results are behind our combined ratio target, but the measures implemented, including significant price increases are beginning to show visible results. In the third quarter, the disability level we experienced in our portfolio seems to be normalizing, but the sick leave numbers in Norway in general are still disturbingly high. Additional price adjustment has been communicated and the development is closely monitored.

In P&C, the claims frequency seems to stabilize, but the results are still impacted by high claims inflation, especially within spare parts, all priced in euro or dollars. The combined insurance premiums are up 19% compared to the third quarter in 2023, largely due to price increases, but also volume growth. The renewal churn is within normal variation.

In P&C, we continue to increase our market share in the retail market, and our market share has now reached 7%. Our clear ambition is to be back at the targeted combined ratio of 90% to 92% for the full year 2025. The guaranteed business continues to fall as a percentage of total pension reserves and is now below 40% for the group. Nominal pension liabilities are largely unchanged in the quarter. Whilst margins in Norwegian paid-up policies are down as there has been a reduction in fees from previously acquired corporate pension funds.

Both the Swedish and the Norwegian business show good improvement in profit sharing. We maintain our expectations for growing profit sharing as communicated at the Capital Markets Day in December last year. Other is up primarily from good company -- good market returns in the company portfolios.

Finally, I leave you with our financial ambitions towards 2025. The results we present today show that we are well on the path to deliver on the SEK 5 billion result ambition and the ROE target for 2025. Furthermore, we aim to deliver growing dividends and NOK 1.5 billion in annual share buybacks up until 2030. We also showed progress on our nonfinancial targets, and I encourage you to study our annual report for 2023, which was published in March.

It has been built on the CSRD framework, 1 year ahead of the regulatory requirements. Yesterday, the Board discussed our transition plan and our transition targets for the next 5 years. Storebrand's ambition is to be in the forefront of sustainable finance through our commitment to society, through our own operations and through our products and services. And with that, I pass the word back to you, Johannes.

[Johannes Narum, executive]

Thank you, Lars. We're now happy to take questions from our audience. [Operator Instructions] And the first question comes from David Barma in Bank of America.

[David Barma, analyst]

The first one is on the investment result. And if I can split that in 2 smaller ones, please. Firstly, on the pure investment result side, can you help us understand the drivers and how much of this is driven by revaluations of assets following market movements in the quarter versus an underlying result improvement?

And then the second part of this question is around the profit sharing in Sweden, which was very good in this quarter and whether this is more driven by a seasonal effect due to indexation taken in the third quarter and hence, your guidance of EUR 300 million a year remains or if it's a step change.

And then secondly, on P&C, can you talk about where you are in terms of pricing? And what kind of average premium growth you have on the pure P&C book so far this year?

[Lars Aasulv Løddesøl, executive]

Yes. Thank you, David. On the investment results, we have basically mark-to-market on all the different portfolios. And when interest rates have been falling. You have a mark-to-market effect on that. And also credit spreads have contracted, which gives an additional mark-to-market effect. So these are all basically mark-to-market and read values. In terms of the under savings, you also have the effects from AIP, which is NOK 67 million, which is a revaluation of the ownership -- of the 10% ownership we had in AIP before we bought another 50%.

On the profit split in Sweden, it can be split into 3 elements, which is deferred capital contribution that has been reversed and a profit split and indexation fee. And the 3 elements year-to-date are in that same order, NOK 70 million, NOK 90 million and NOK 100 million. So all together, NOK 260 million for the year so far. We have guided that we anticipate that to be around NOK 300 million per year. That's a guiding from the Capital Markets Day last year. And this shows that we are slightly ahead of that goal so far this year. But our remaining -- our guiding going forward is on the same level.

[Odd Arild Grefstad, executive]

To add a little bit on the company portfolios as well in addition to what Lars said, we've had about 1.2% in returns in this quarter, when we look at normalized risk premiums and the asset allocation that's there, we expect somewhere in the area of 4.3% next 12 months. So that gives you kind of an idea of what has come from kind of the change in credit spreads in this single quarter versus what we expect on an ongoing basis going forward.

[Lars Aasulv Løddesøl, executive]

And on P&C and P&C price development, we cannot comment on forward-looking -- on the pricing going forward for anti-competition reasons. But as you've seen, the overall price increase -- the overall premium increase over the last 12 months was 19%. And as I mentioned before, the bulk of that -- most of that comes from price increases. But there is also some volume -- remaining volume growth, especially on the P&C side.

[Johannes Narum, executive]

We have a next question from Ulrik Zürcher in Nordea. Please go ahead, Ulrik.

[Ulrik Zürcher, analyst]

Yes. Just a quick follow-up on the P&C insurance because we had 2 years now of what I call unexpected claims inflation. And I was just wondering how the industry seems to be surprised last year and then they're surprised again this year. So I'm just wondering how your pricing decisions reflect the risk that we might be surprised next year too? Or are you pricing for -- it's like it's over now. Will we know the trends? It's fine.

[Lars Aasulv Løddesøl, executive]

Yes, it's -- we have -- we have been behind the curve, and there's a 12-month lag before you get the full effect of pricing. And what has not been fully anticipated on claims inflation is especially the weak Norwegian kroner and that impact on all the spare parts coming from abroad. So I guess that's an area where we've been behind the curve. We are now doing the necessary measurements on our measures on pricing and other things on claims in order to -- we get ahead of the curve again.

[Odd Arild Grefstad, executive]

And I think generally, what we see is that frequency has kind of stopped out at a higher level than pre-pandemic, but it's not increasing. Whilst as Lars said, inflation is still there.

[Ulrik Zürcher, analyst]

I just see you taking market shares. And I'm wondering -- I guess, it's difficult to answer, but it's like are you penciling in sort of margin of safety that we could get a shock next year. The kroner keep sliding or how should we...

[Lars Aasulv Løddesøl, executive]

I think this market has, over time, been very like the whole market has been very disciplined in terms of pricing. So everyone are -- have been behind the curve for a year or 2 now, and everyone are repricing to get ahead of the curve. We do not see that we have a competitive disadvantage as we are continuing to take market share. And we see that the claims ratio is going down. So it seems that we are moving in the right direction.

And hopefully, the measure is taken now, we'll ensure the necessary profitability or desired profitability next year and maintain our strong competitive situation. As you are very well aware, we have some competitive advantages in terms of capital synergies on P&C insurance, which allows us to take a somewhat higher price -- sorry, a lower price than the competition and still have a very good ROE and profitability on this kind of business.

[Ulrik Zürcher, analyst]

And just a quick one. The consolidation ratio in Sweden, 110% and I think your targets assume 112%. Is it a problem or?

[Lars Aasulv Løddesøl, executive]

As long as we have more than 107%, we can take out the indexation fee. So 110% will allow us to take out a full indexation fee with a 3% inflation because the difference between 110% and 107%. So I don't think we've targeted an indexation fee -- no sorry, an indexation or consolidation higher than 107%, but that will depend on how much higher the inflation is before you can take out the full indexation fee. But right now, that looks like we can continue to take that out for the next 12 months. And that, as you may recall, decided as of the end of September. So this kind of finalizes the last year. And then we will continue to build consolidation for 30th of September next year before we can get indexation for the following year.

[Johannes Narum, executive]

Thank you, Ulrik. We have a next question from Håkon Astrup in DNB.

[Håkon Astrup, analyst]

Two questions from me. The first one, a follow-up on the the insurance and the P&C and individual life, so a strong improvement there, both quarter-over-quarter and year-over-year. Could you give any color on -- is this just driven by price increases? Or is it some help from runoff gains, low large losses, et cetera. And that was the first question.

The second question, Lars, so broadly under our strong growth in -- in bank insurance. Is it a limit to your appetite in terms of volumes or market share here, for instance, a capital constraints or something like that? Or are you happy to become market leader at -- at some point?

[Lars Aasulv Løddesøl, executive]

On the P&C and individual life profitability, it's a very strong improvement. But if you look at in the supplement, you'll find the insurance result. The P&C insurance company, specifically. And there, you will see that the profitability from pure P&C is still marginal, but helped by good financial markets with some financial return on the company on the reserves.

So the bulk of the profitability is from the individual life business. And if you -- I think the combined ratio for P&C alone, somewhere around 100% just around 100%. So we still have room to improve that significantly down towards the low 90% numbers for the overall combined 90% to 92% for next year.

[Odd Arild Grefstad, executive]

If I should comment a bit on the growth, we are very happy to see the growth coming through now for Unit Linked and also the bank activities, even if it has some impact on the solvency ratio. The Unit Linked business is extremely capital light. It comes with a solvency of 130% to 140%. But having a solvency at 190%, it has some weighting out of the very high solvency ratio we have, but it's extremely profitable business for us, and we will be very welcome to see all the growth we can have in Unit Linked.

When it comes to the bank, having a bank in solvency system is waiting out of the solvency. But we have already once restated our solvency target for being our capitalized from 180% to 175% because we have to have the right capital for the bank in such system that we are all together. And of course, if we have tremendous growth in the bank going forward, we have to adjust the targets again to have the right target for the overall business in the group. So we will really like to see the growth, both in bank and Unit Linked continue going forward.

[Håkon Astrup, analyst]

And on insurance?

[Lars Aasulv Løddesøl, executive]

The growth in the insurance? That's extremely capital-light if it's that you're talking about because you have this, of course, synergies in capital between insurance and the market risk. That makes us very capital-light growth of insurance. And it's, of course, very helpful for us altogether to see growth in insurance.

[Johannes Narum, executive]

Thank you, Håkon. We have a next question from Johan Ström in Carnegie.

[Johan Ström, analyst]

Johannes. A follow-up question to Håkon's question around the bank. So the new regulatory package for bank CRR3 is just around the corner. So if that's implemented from January 1, what would the capital effects be for the bank? And with potentially lower capital requirements, do you aim to accelerate that growth.

Then secondly, on the solvency position is 15 percentage points above them, call it over capitalization threshold. So unless you deploy this capital in growth, is there anything that you will sort of make you hold on to this capital rather than paying it out after the Q4 report?

[Lars Aasulv Løddesøl, executive]

So, I'll start on the CRR3. So expected to come into force after the new year, and it will lead to lower capital requirements for standard model banks dependent on the final interpretation of the rules, you may see something in the area of NOK 500 million, but with some uncertainty around the final amount for our portfolio. Based on just using the new risk weights that comes from CRR3. So -- but we'll get back to that when the finance industry and ourselves have interpreted the rules finally.

[Odd Arild Grefstad, executive]

Well, when it comes to capital, we have a very clear message around our capital management, NOK 1.5 billion in share buybacks annually and a growing dividend as we see the results are growing. Last year, we increased the dividends with 11% per share. And of course, based on the results at the year-end, the Board will make our decisions on the dividends for 2024.

[Johannes Narum, executive]

Thank you, Johan. We have a next question from Thomas Svendsen in SEB. Please go ahead, Thomas.

[Thomas Svendsen, analyst]

Yes. So moving back to the bank again. So given that you will adjust your capital targets when the bank grows. Are there any limits for growth in the bank, any thresholds you have in terms of growth per year or in terms of total lending, do you have any limits there?

And -- sort of a follow-up there also on the non-life insurance, if you look away from the capital difference in capital requirements, how much easier or how much more difficult is it to grow in the bank versus the nonlife and take market shares from an operational point of view?

[Lars Aasulv Løddesøl, executive]

I can start on the bank. We are not limiting the bank. We are looking at healthy growth, good credit work. We are looking at return on equity, cost income ratios of the bank. So we monitor the growth of the bank out of what is hefty profitable growth in our bank business. And the bank is also very important for the total go-to-market strategy for bank and savings in store brand. And then as long as we meet these targets, we like to see the bank grow further going forward. And then, of course, adjust for capital, as I already have talked about.

[Odd Arild Grefstad, executive]

And I think one reference point could be what we said on our CMD last year, where we said that growth up to around 10% annually up until 2025 is what we expect to see.

[Thomas Svendsen, analyst]

P&C?

[Lars Aasulv Løddesøl, executive]

Yes. P&C, again, profitable growth is what we're looking for. We have a clear combined ratio target out in the market, and we are trying to build the business. within a profitable growth strategy and according to the combined ratio targets that we have presented to the market. We are primarily growing in the retail sector. We also have some products available for the SMEs, but we're not going into industrial, marine, energy and those kind of insurance corporate insurance products.

[Odd Arild Grefstad, executive]

And I think as we have talked about before, we see very strong synergies in capital by increasing actually our insurance business compared to the large business of savings Unit Linked with market risk. We have seen that around 70%, 80% of the capital for a stand-alone P&C player. We can diversify away in our solvency calculations, making our growth in insurance extremely capital light.

[Johannes Narum, executive]

Thank you, Thomas. We have a next question from Hans Rettedal Christiansen in Danske Bank.

[Hans Rettedal Christiansen, analyst]

Yes. I have 2, actually. On -- or sticking to growth, but on the asset management side of 19% growth year-over-year. I'm trying to understand that number in relation to your targeted sort of 7% to 11% volume growth CAGR that you guided for over the previous CMD and also then linked to sort of the profit ambition of NOK 5 billion in 2025. So I was wondering, if you could talk a little bit around how you're tracking in relation to that figure when looking at sort of net flows and returns so far in 2024.

[Lars Aasulv Løddesøl, executive]

Yes, if we start with that, of course, it's been very healthy markets, since our capital markets stay in a combination with strong market return and also, of course, the Norwegian kroner weakening against other currencies has helped the volumes in asset management. But we have also seen a very strong transfer balance or to transfer into our asset management business.

And all this altogether has been very positive. But I would say it's the more than 10% growth is very much that we have seen stronger markets in combination with currency compared to what we saw when we gave out our targets back in our Capital Markets Day. And that means, of course, that we altogether is now very well on our way to very good progress towards our targets for 2025. Of course, the NOK 5 billion target, but also the 14% return on equity. And as we have talked a lot about now, the target for having combined ratio below 92%.

[Hans Rettedal Christiansen, analyst]

And then my second question...

[Lars Aasulv Løddesøl, executive]

Hans, sorry. I could just like add one comment that you know the PPM system in Sweden is in total overhaul. So that's also both an opportunity and a threat that might impact numbers for flow numbers for next year. We see it more of an opportunity than a threat, but all of that PPM system is being renegotiated as we speak, and that may impact flow numbers in the coming years for us and for all the other competitors out there.

[Hans Rettedal Christiansen, analyst]

Got it. And my second question was on the share buyback program that's running now until the end of December. I was just wondering, if you could remind me how the dynamic work sort of between that time and the next AGM, what are you allowed to do? Or what do you have the authority to do? And if you do apply for the FSA just so I understand how to bridge that gap.

[Lars Aasulv Løddesøl, executive]

Yes. You may recall from the last AGM that we asked for -- to have the opportunity program to have an opportunity to have the buyback program across the next AGM, so we are planning on not having to have a pause around the AGM in the spring, but to have a continuing program, and we'll revert with more details on exactly how and when. When we come to the fourth quarter presentation in the beginning of February.

[Odd Arild Grefstad, executive]

But it's fair to say that between the end of this buyback program and the fourth quarter result presentation that there will be a pause in the buyback program.

[Johannes Narum, executive]

Thank you, Hans. Then we have a next question here from Jan Erik Gjerland in ABG. Jan Erik, your line is now open. Can you turn your mic. No, it seems like it doesn't work. So I think we will progress on with the next question then from David Barma.

[Jan Gjerland, analyst]

When it comes to the capital requirements in the bank.

[Johannes Narum, executive]

Please go on Jan Erik. We had some issues with the line here, but it seems like it's now working.

[Odd Arild Grefstad, executive]

Please go ahead.

[Jan Gjerland, analyst]

When it comes to capital on the ROE in the bank, what kind of growth are you now seeing from the bank in the overall business. What kind of growth are you seeing? And what kind of ROEs is giving you at the end of the day? Because see your asset rate is quite high.

[Lars Aasulv Løddesøl, executive]

Well, as you can see from the numbers we just presented, the growth in the bank is double digit as both Odd Arild and I presented. And the ROE, as I mentioned, is above 12%, both in the second quarter and now in the third quarter. And the cost income was 38% in the second quarter, 41% this quarter. So this is according to -- this is in line with our objectives to have double-digit growth to have an ROE with around 12% and a cost income in the area of 40%.

[Jan Gjerland, analyst]

And it's also fair to say that, that does not include any of the positive externalities the bank provides for the group. So that could also probably when you look at what kind of cross sales it generates, add another percent on the ROE.

[Odd Arild Grefstad, executive]

There seems to be a lag on the line here.

[Jan Gjerland, analyst]

When it comes to profit sharing for 2024.

[Odd Arild Grefstad, executive]

It seems like we have some delays on the line today. So apologies for that.

[Jan Gjerland, analyst]

Great. On the profit sharing side, is it possible to give you some more guidance for 2024?

[Lars Aasulv Løddesøl, executive]

I will recommend you to look at the Capital Markets Day.

[Jan Gjerland, analyst]

Which means that how are you thinking about the Norwegian part of it when it comes to the Q4?

[Lars Aasulv Løddesøl, executive]

On the Capital Markets Day last year, we said that we have an objective to reach between NOK 100 million and NOK 150 million for 2024. We have now taken a profit split of approximately SEK 100 million as of the end of the third quarter. So we are very much in line with the guiding from last year. Then as we also said, we are going to rebuild buffer to have a stronger buffer and the focus is on building buffers in '24, but that will allow us coming into '25 to increase the profit sharing to a higher amount approaching around SEK 300 million in the next couple of years per year.

[Johannes Narum, executive]

Yes. I think, we'll progress on with a last question from David Barma in Bank of America then.

[David Barma, analyst]

I had a few follow-ups. So staying on the bank and the margin this time, are you seeing competition pick up in the fourth quarter? Or should we basically expect the NIM to stay pretty resilient until we pass the first rate cut in Norway and so a combination of strong NIM and pretty good volume growth above what you expected for the next few quarters? That's the first question.

And then secondly, on the regulatory side, there was a hearing note a few weeks ago that suggested a few potential changes impacting Storebrand. Could you help us in running through the different components there and in particular, the potential introduction of deferred capital and how that could help your risk-bearing capacity? And then a small third one on the paid-up portfolio and the fees that were a bit lower in the third quarter. Is there anything specific to flag there?

[Lars Aasulv Løddesøl, executive]

Let me take the first and third question. The first question on bank margin. When rates fall, there is a positive tailwind in the falling, while because of the repricing in the market happens with a little bit of a lag. So operating a bank in a high interest rate environment is more profitable than operating a bank in a low interest rate environment. So as rates fall, we go into an expected lower margin for the bank. But in the process of rates falling, we have this tailwind, which is positive. So I would expect that the margin for next year will be somewhat lower than what we've seen this year, if the rates go down as anticipated by markets.

On the paid-ups, as I mentioned earlier as well, we have had -- we've taken over corporate pension funds in the last couple of years, and that has given an additional profitability that has been reported in the paid-up policy book for -- in last year and in the first half of this year. As we have not taken over any corporate pension funds over the last 12 months or so, we have lost some of the revenue from the previously taken over pension funds. So we will continue to look for or offer to take over pension funds from time to time, but that's a market which will -- which is not very predictable and happens a little bit of bulks, only 2 or 3 cases a year on a normalized basis.

And lastly, on the regulatory side, I think what we see, if we get so-called deferred capital contribution in the Norwegian book of business like we have in the Swedish book of business, it enables more dynamic risk management. It enables that we can take somewhat more risk and have higher expected pensions for customers and higher expected profit sharing for shareholders. So I think that will be the main effect from that. This is a process that's underway. It's hard to -- to guide on governmental time lines and what is the outcome. But all in all, we think this is a net positive, if it comes along.

[Johannes Narum, executive]

Thank you, David. It seems like that was the final question today. So that concludes today's presentation. Our next set of results are due on February 12, and we look forward to seeing you again then. Thank you for attending, and goodbye.