Sjóvá-Almennar tryggingar hf. – Valuation as of 1 Jan 2025

Key assumptions

• Income from insurance operations is projected to grow by an average of 5.6% per year during the forecast period, corresponding to 2.4% real growth.
• The claims and reinsurance ratio averages 74.5% per year during the forecast period.
• The cost ratio in insurance operations averages 20.5% per year during the forecast period.
• The average return on bonds is 8% per year in 2025–2026, and thereafter 6.5% for the remainder of the forecast period. The average return on shares is 12% per year during the forecast period.
• For the calculation of capital items in insurance contracts, an annual rate of 3.6% is used on liabilities at the beginning of each year.
• The effective income tax rate averages about 11% per year during the forecast period; the lower tax rate compared to the statutory rate is explained by tax-exempt income from equities.
• The proportion of shares in the investment portfolio is 33% during the forecast period.
• The ratio of insurance contract liabilities to income is 115% during the forecast period.
• Dividends amount to 80% of total comprehensive income from the previous year in 2025, and 70% thereafter, assuming a solvency ratio in the range of 1.4 to 1.7 during the forecast period, in line with Sjóvá’s target.
• The terminal growth rate at the end of the forecast period is 4%, or 1% real growth.
• See other general assumptions under “Valuation.”
• A nominal required return on equity of 10% is assumed when discounting the forecasted results for 2025–2034.

Results

• Based on the above assumptions, the estimated share value is ISK 52.4 as of 1 January 2025.