We set a EUR 49.81 target price based on a sum-of-the-parts valuation whereby we forecast 2025e divisional underlying free cash flow capacity (using capital generation as a proxy). The divisional free cash flows are discounted back to today and then valued into perpetuity (a similar concept to the dividend discount model) by applying a bottom-up cost of equity.  The cost of equity is 8.8%, comprised of 2.4% weighted average ten-year, 5% equity risk premium, 1.2% business risk premium, and 0.2% specific risk premium.

Key risks to our target price include:

1) Macro and actuarial risks. ASR's valuation is sensitive to investment markets, interest rates, and longevity rates.

2) Litigation risk from unit-linked mis-selling in the Netherlands. We have factored a provision for this within our valuation, but there remains a risk that future compensation may be over or under this amount.

3) M&A execution risks. The Aegon Nederland transaction creates integration risk, which could impact the realisation of synergies. 

4) Regulatory risk. ASR is exposed to balance sheet and capital risk, given the evolving nature of Solvency II and European insurance regulatory environment generally.

If the impact on the company from any of these factors differs from our base case expectations, the stock could have difficulty achieving our target price or could increase more than we expect.