Skagi hf. – Valuation as of 1 Jan 2025

Key assumptions

• Revenue 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 75% per year during the forecast period.
• The cost ratio in insurance operations averages 20.5% per year during the forecast period.
• Net commission income is projected to grow by an average of 7.3% per year during the forecast period.
• The ratio of operating expenses (financial operations and support functions) to the sum of net interest income and net commission income declines over time and will reach 90% per year from 2030 onwards.
• The average return on bonds is 8% per year in 2025–2026 and 6.5% thereafter 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 9.8% per year during the forecast period. The lower rate compared to the statutory level is due to tax-exempt income from equities.
• The proportion of shares in the investment portfolio averages 35% during the forecast period.
• The ratio of insurance contract liabilities to income is 105% during the forecast period.
• Dividend payouts average 50.2% of the owners’ total comprehensive income from the previous year during the forecast period, assuming a solvency ratio in the range of 1.4 to 1.7.
• The minority interest is insignificant and therefore excluded from the forecast results.
• The terminal growth rate at the end of the forecast period is 4%, corresponding to 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 23.9 as of 1 January 2025.