We set a EUR 42.1 target price based on a sum-of-the-parts 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 7.8% and comprises of a 2.8% weighted average 10-year risk-free rate, a 4.0% equity risk premium, 1.0% Business Risk Premium and 0.0% Growth. The BRP is a weighted average of L&H (1.0%) and P&C (1.0%).

The following risks might impede the share price from reaching our target price: 1) Volatility in investment markets; 2) A material further sharp downward shift in global bond yields impacting investment returns; 3) Higher corporate bond defaults than would be anticipated in current spreads; 4) Lower than anticipated growth in insurance business. 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.