We set a EUR53.9 target price based on a sum-of-the-parts valuation where we forecast 2025 divisional underlying free cash flow. 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 9.3% comprised of a 2.5% weighted average 10 year, 3.5% equity risk premium, and 3.4% business / specific risk premium. 

1) Macro and actuarial risks. NN's valuation is sensitive to investment markets and the level of interest rates. It is also affected by mortality rates, specifically relating to the longevity of pension and annuity customers in the Netherlands.


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


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.