We set a EUR 341 target price based on a sum-of-the-parts valuation using divisional 3-year average expected FCF. FCFs are valued into perpetuity by applying a bottom-up cost of equity. We then adjust for our solvency upside estimate and leverage to get our target price. The implied group cost of equity is 6.9% and comprises of a 3.4% weighted average 10-year risk-free rate, a 4.0% equity risk premium, 0.0% Business Risk Premium and -0.5% Growth. The BRP is a weighted average of L&H (1.0%), P&C (0.5%) and Asset Management (-1.5%).

We consider the following risks to the investment case and achievement of our target price. Although the group's P&C operations are focused on retail business, the company still has exposure to catastrophe losses and long-tail insurance liabilities. The life insurance business is highly geared to investment market movements and bond yields. Asset management is also sensitive to market movements (particularly the level of bond yields, given its mainly fixed income exposure) as well as uncertainty over future client net inflows. If the impact from any of these factors proves to be more negative than we anticipate, the stock will likely have difficulty achieving our financial and price targets. However, if any of these factors proves to have less of an effect than we anticipate, the stock could materially outperform our target.