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Norwegian Life Insurer Storebrand Livsforsikring AS' Subordinated Notes Rated 'BBB'

    LONDON (S&P Global Ratings) May 20, 2022--S&P Global Ratings today assigned its 'BBB' issue rating to the 30NC5 Norwegian krone 650 million floating rate, subordinated Tier 2 notes issued on March 19, 2022, by Norwegian life insurer Storebrand Livsforsikring AS (A-/Stable/--). We classify the notes as having intermediate equity content. The rating and equity content classification are subject to our review of the final terms and conditions.

    Our rating on the notes is two notches below the long-term issuer credit and financial strength rating on Storebrand Livsforsikring, reflecting our standard approach for considering the notes' subordination and interest deferral features. It also considers our understanding that:

    • The notes are subordinated to Storebrand Livsforsikring policy holders and senior creditors;
    • The issuer can choose to defer interest payments, or redeem the notes on or after the first call date in 2027;
    • Under the notes' terms and conditions, interest deferral is mandatory if a solvency event has occurred, which, under Solvency II, would be a breach of the solvency capital requirement; and
    • The notes will be eligible as regulatory Solvency II Tier 2 capital.

    We classify the notes as having intermediate equity content under our criteria. Securities of this nature can comprise up to a maximum of 25% of total adjusted capital (TAC), which is the basis of our consolidated risk-based capital analysis of insurance companies. The inclusion in TAC is subject to the notes being considered eligible for regulatory solvency treatment.

    The notes are scheduled to mature on May 27, 2052. We understand that the instrument is callable at the first call date on May 27, 2027, five years after the issue date, or on any interest payment date thereafter, subject to the repayment conditions including approval from the insurance regulator. The notes will bear annual interest equal to the three-month Norwegian Interbank Offered Rate (NIBOR) plus a margin of 2.60% until 2032, and the three-month NIBOR plus the applicable step-up of 100 basis points on the margin, thereafter. The interest is payable quarterly.

    In conjunction with the new green bond issuance, Storebrand Livsforsikring has repurchased Swedish krona 102 million of the outstanding bonds with ISIN NO0010810237 at a price of 100.623% at par. We understand that the estimated net proceeds of the issue may be used, in whole or part, to repurchase or refinance its existing Tier 2 debt callable later in 2022. An amount equal to the net proceeds of the notes will be allocated by the issuer for the financing or refinancing, in whole or in part, of green assets as eligible under its Green Bond Framework. Nevertheless, there is no legal obligation to do so. In addition, we do not believe that the green designation presents any limits to this instrument's ability to absorb losses, either through coupon deferral or through liquidation of the assets if the group is in financial difficulty, whatever the nature of the event triggering the losses. We believe the bonds' loss-absorbing capacity is the same as for other Tier 2 instruments that are not designated green. We do not foresee any material effect on capitalization or leverage over the medium term.

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