GJF: Higher Pricing And IT Setback Will Shape Future Returns

Analysts have raised their price target for Gjensidige Forsikring by about NOK 4 per share, reflecting improved expectations for revenue growth and profit margins as the company benefits from rising Norwegian insurance prices.

Analyst Commentary

Bullish analysts view the recent upgrade in rating and substantial increase in the price target as evidence that the market had been underestimating Gjensidige Forsikring's earnings power in a higher pricing environment.

Bullish Takeaways

• Bullish analysts highlight that the higher price target, raised to NOK 321 from NOK 185, signals increased confidence in both near term earnings visibility and medium term value creation.
• Rising Norwegian insurance prices are seen as a structural tailwind that should support sustained premium growth and margin expansion, enhancing return on equity assumptions in valuation models.
• Improved pricing power in core markets is expected to offset cost inflation and claims volatility, supporting better underwriting discipline and a more resilient profit profile.
• The combination of stronger fundamentals and the prior discount in the share price is viewed as creating an attractive risk reward skew, which in the view of bullish analysts justifies a positive stance on the stock.

Bearish Takeaways

• Bearish analysts remain cautious that the recent re rating and higher price target may already embed optimistic assumptions for continued premium growth, leaving less room for upside surprise.
• There is concern that the benefit from higher insurance prices could normalize if competitive pressures increase, which would challenge the sustainability of current margin expectations.
• Some are wary that claims trends or regulatory changes in the Norwegian insurance market could dilute the anticipated profitability gains, putting pressure on valuation multiples.

What's in the News

• Gjensidige Forsikring will hold a Capital Markets Day, giving investors an updated view on strategy, financial targets, and capital allocation priorities (Key Developments).
• Gjensidige Pensjonsforsikring will discontinue its planned CoreSuite core IT system after determining it does not meet evolving business requirements, and will instead extend the life of the existing platform (Key Developments).
• The termination of CoreSuite is expected to reduce profit before tax for the pension business by around NOK 400 million in the third quarter of 2025. It will not affect the Group's Solvency II eligible own funds or dividend capacity, since own funds exclude intangible assets (Key Developments).
• The decision on CoreSuite is explicitly ring fenced from the implementation of a new core IT system in the Group's general insurance business. This limits operational and financial spillover risk between segments (Key Developments).

Valuation Changes

• Fair Value Estimate has risen slightly, up from about NOK 288.14 to around NOK 292.52 per share, indicating a modest increase in intrinsic value.
• Discount Rate is effectively unchanged, remaining steady at approximately 6.34 percent in the updated valuation model.
• Revenue Growth has increased moderately, moving from roughly 2.55 percent to about 3.07 percent, reflecting stronger top line expectations.
• Net Profit Margin has edged higher, improving from around 18.72 percent to approximately 18.98 percent, signaling a small uplift in expected profitability.
• Future P/E has fallen slightly, easing from about 19.64x to roughly 19.37x, implying a marginally lower valuation multiple applied to forward earnings.