ALMB.CO — mttssn research

HOLD

Conviction: MEDIUM

A Danish P&C insurer (enlarged by the Codan Denmark acquisition) earning an 11% ROE but trading at a high 1.86× book versus a Gordon-justified ~1.22× — fully valued, with Codan integration synergies the key swing factor. HOLD.

Return on Equity

10.9%

Cost of equity ~9.5%

Price / Book

1.86×

1.86× book; premium

Fair P/B (Gordon)

1.22×

(ROE−g)/(COE−g); g 3%

Price / Target

DKK 15 → DKK 14

-3% base; HOLD

Price / Earnings

17.0×

≈17.0× earnings

P / TBV

7.23×

Price / tangible book

Economic Profit

+DKK 364M

+DKK 364M; 11% ROE

Equity (book)

DKK 12.4B

P&C insurer equity

Thesis

Alm. Brand is a Danish non-life (P&C) insurer, substantially enlarged by the acquisition of Codan's Danish business, making it a leading Danish P&C player. It earns an ~11% return on equity, with the combined ratio and Codan integration synergies the key earnings drivers.

On the ROE/P-B frame the equity is fully valued — 1.86× book against a Gordon-justified ~1.22× (ROE 11%, COE ~9.5%, g 3%), at ~17× earnings. The premium prices successful Codan synergies and combined-ratio improvement; on current returns it is rich.

Valuation · residual income (equity frame) & scenarios

Gordon fair P/B = (11%−3%)/(9.5%−3%) ≈ 1.22×, versus the current 1.86× — i.e. the market prices Codan synergies lifting ROE/combined-ratio. Fully valued on current returns, with the synergy delivery the swing factor.

Base DKK 14.5 (−3%); bull DKK 18 (Codan synergies + combined-ratio improvement lift ROE); bear DKK 11 (underwriting deterioration, a catastrophe year, or synergy disappointment).

Market-implied ROE

15.1%

sustainable ROE the price already demands — vs 10.9% observed

Current → Fair P/B

1.86× → 1.22×

at a sustained 10.9% ROE, K_e 9.5%, g 3%

Excess-return premium

DKK 2 / sh

value above DKK 8.03 book from the +1.4pp ROE−K_e spread

The operating reverse-DCF (NOPAT / invested capital / WACC) does not apply to a balance-sheet business — leverage is the raw material and "net debt" is not meaningful. The equity is valued on residual income: book equity plus the present value of returns above the cost of equity, discounted at K_e; the single-stage lens is the Gordon fair price-to-book, (ROE−g)/(K_e−g). The market prices in a sustainable ROE of 15.1% vs 10.9% currently earned; at a sustained 10.9% ROE the warranted P/B is 1.22× (DKK 10/sh, -34%).

Scenario	24m target	Impl. ROE	Upside	Prob.	Driver
Bull	DKK 18	18%	+20%	30%	Codan synergies + combined-ratio improvement lift ROE
Base	DKK 14	15%	-3%	45%	Full: prices synergies/ROE uplift
Bear	DKK 11	12%	-26%	25%	Underwriting deterioration / catastrophe / synergy miss
Prob-weighted	DKK 15	—	-2%	100%	Scenario-weighted expected value

Sensitivity — fair value / share at K_e × ROE

K_e \ ROE	10%	14%	18%	22%	26%	30%	34%
8.00%	11	18	24	30	37	43	50
8.75%	10	15	21	27	32	38	43
9.50% (base)	9	14	19	23	28	33	38
10.25%	8	12	17	21	25	30	34
11.00%	7	11	15	19	23	27	31

Green = fair value above the current price of DKK 14.96. For a financial the surface is dominated by cost of equity and sustainable ROE — not unit growth.

Method & data. ROE 10.9% and book equity are observed (net income / total equity). Cost of equity 9.5% and terminal g 3% are assumptions, shown explicitly and overridable. The underwriting bridge (combined ratio → float → ROE) is [DATA SAKNAS] — it requires a financial deep-dive to extract the combined ratio and investment yield, and is omitted here rather than estimated.

⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.

Key drivers

1. Leading Danish P&C

Scale in Danish non-life insurance post-Codan, with pricing/underwriting data advantages.

2. Codan synergies

Integration cost/revenue synergies are the core earnings-uplift driver — the bull case.

3. Combined-ratio improvement

Underwriting discipline driving a better combined ratio lifts ROE.

4. High dividend / capital return

P&C cash generation funds a high dividend (13% free-cash yield).

5. Local focus

A focused Danish franchise with disciplined underwriting.

Key risks

Full valuation1.86× book vs a Gordon-justified ~1.22×; synergies/ROE uplift are priced in — the dominant risk.
IntegrationCodan integration carries execution risk.
Underwriting/catastropheA soft pricing cycle, claims inflation or a catastrophe year hits results.
Reserve adequacyClaims-reserve inadequacy would pressure earnings.
Investment/ratesInsurance-float returns are sensitive to rates and markets.

Conclusion

Alm. Brand is a leading Danish P&C insurer at a full 1.86× book, pricing Codan synergies and a combined-ratio improvement. HOLD, medium conviction; base target DKK 14.5 (−3%).

Synergy delivery and combined-ratio improvement are the upside; the rich valuation on current returns and underwriting/catastrophe risk are the cautions.