Skagi hf

Quarterly Report • Nov 27, 2024

Vátryggingafélag Íslands hf. Financial results

Q3 2024

November 27th 2024

Key highlights Q3 2024

AUM group Efforts implemented to improve efficiency across the group going forward

~300m¹ Cost savings measures executed

in Q4

Formal closing of Íslensk verðbréf acquisition and refreshed visual identity

AUM group Skagi will change investor communication moving forward, with more focus on H1 and FY results and a summarized report on Q1 and Q3

1 Annualized impact

Íslensk verðbréf and ÍV sjóðir merged into Skagi

4 1 Structure reflects how group operates in practice, rather than the legal structure. Vátryggingafélag Íslands is currently the parent company, while we expect to be able to complete the transfer of VÍS insurance to a subsidiary early in 2025

SIV and ÍV Sjóðir merger provides a broad range of product offering

Ongoing efforts to realize synergies and improve efficiency across the group

Expected impact of efficiency measures¹ , Annualized ISKm

Cost savings implemented across insurance, financial services and shared services.

Efforts implemented reduce FTE's across the Group by 15 on annual basis.

Increases operational efficiency and provides a better platform towards reaching financial targets

Further opportunities ahead in streamlining shared services across the Group

1 Figures reflect impact on annual basis once fully realized

Skagi financial targets

Guidance range and targets for 2024 and 2025

		2024	2025
Combined ratio		<95%	<94%
	Range:	94 - 97%	93 - 96%
Financial services revenue		>2.2bn	>3.1bn
	Range:	1.9 - 2.6n	2.9 - 3.5bn
Investment return		11%	10%

1. Target Combined ratio for VÍS insurance business. Guidance range 94-97% in 2024 and 93-96% in 2025.

2. Target Financial Services Income includes all income of Financial services. Guidance range 1.9-2.6bn in 2024 and 2.9-3.5bn in 2025. Target RoTE from Financial services is >20%.

3.. Investment return target is based on market conditions and assumptions in November 2024 and asset allocation policy for 2025 (35% Equity & 65% Bonds). Investments include solely the investments and income derived from VÍS Insurance investment portfolio.

Outlook to be updated if performance is expected to be outside of target range on Combined Ratio in Insurance or on revenue in Financial Services.

No update is given on Investment return of Investments nor on RoTE in Financial services.

Long-term targets put forward in relation to VÍS/Fossar merger¹

	2026
Profit per share	2.50
AuM	250bn
Core revenue	36bn
Financial services revenue	4bn

1. Targets were defined in 2023 and have not been reevaluated. The Group will define new long term targets ahead of FY2025 results

Group financials

• Key financial results
• Income statement
• Balance sheet

Key financial results in Q3 2024

	Core revenue Group PBT 8,126m 13% 441m -38% YoY PF YoY	Group profit 428m -29% YoY
Insurance Operational changes showing results • Insurance revenues grow 9.8% YoY in Q3, of which 14.2% in life and health insurances • Combined ratio of 92.3% (Q3 2023: 94.7%) and is 95.2% in 9M 2023 • Cost ratio improves at 16.3% (Q3 2023: 18.7%) • Cost measures and increased emphasis on sales provides path towards target combined ratio <95%	Investments Defensive return in challenging markets • Return of 1.6% from investment assets (Q3 2023: 1.7%) • 9m return on investments is 4.6% (9m 2023: 7.4%) • Investment income of 713 million (Q3 2023: 777 ) • Share price drop of Controlant negatively affects returns by 0.9% in the quarter • Investment portfolio stands at 45.4bn at quarter end	Financial services Continued growth and broader revenue drivers • Continued diversification of financial services income • Net financial services income grow 86% YoY pro forma at 123bn at the end of the quarter2 • AuM • Operating loss before tax 31m in financial services • SIV now has 10 funds with AuM of 29,5bn thereof about 80% of which are from external clients
590m insurance service result 92.3% Combined ratio 9.8% YoY revenue growth	40m operating profit before tax1 713 million investment income 1.6% return	tax1 31m operating loss before 123 AuM 492 million net financial income

Income statement Q3 2024

Strong growth in revenue from insurance and financial services

Group core revenue 8.1bn and profit after tax 428m

Insurance

• Insurance revenue was 7,634m (+9.8% YoY)
• Net insurance service income 1,833 (+10% YoY)
• Combined ratio 92.3% and 590m profit on insurance contracts (222 million improvement YoY)

Financial services

• Net financial service income 454m from Fossar and SIV

Investments

• Investment income was 713m, representing a 1.6% return in the quarter
• Net investment income 104m, after finance expenses of insurance liability and subordinated bond

Net operating income

• Net operating income 2,401 (+11% YoY)

Expenses

• Operating expenses 1,796m (+40% YoY) with Fossar and SIV added to the group the main factor

Results

• Pre-tax profit of 441m and profit after tax of 428m

Income statement, ISKm	Q3 2024	Q3 2023	Δ	Δ%
Net insurance service income	1,833	1,665	168	10%
Net financial service income	454	9	445	n/a
Net investment income	104	456	-352	-77%
Other income	10	36	-26	-73%
Net Operating Income	2,401	2,166	235	11%
Operating expenses	-1,796	-1,282	-514	40%
Depreciations, amortizations and net impairment	-137	-152	15	-10%
One-off expenses	-28	-20	-8	38%
Profit before taxes	441	712	-271	-38%
Income tax	-13	-105	92	88%
Profit	428	607	-179	-29%
Group KPIs
Core Revenue6	8,126	7,216	910	12.6%
ROE - annualised	8.5%	14.6%		-5.6p.p
Profit per share	0.23	0.35	-0.12	-34.3%
Business Unit KPIs
Insurance revenue	7,634	6,952	682	9.8%
Combined ratio	92.3%	94.7%		-2.4p.p
Insurance contract result	590	368	222	60.3%
Net financial services income (excl. intra group adj.)	492	47	445	946.8%
Investment income	713	777	-64	-8%
Investment income return %	1.6%	1.7%		-0.1p.p

1. Net Insurance Service Income is premium insurance revenue less costs related to claims and reinsurance and differs from implementation of IFRS17 – reference is made to annual account for Income statement in accordance with IFRS accounting standards. 2. Net financial service income includes all revenues of Fossar and SIV, including but not limited to net interest, fee and financial income. 4. Investment income is gross income from VÍS investment portfolio. 5. Operating expenses includes all operating expenses of VÍS, SIV and Fossar, also insurance and investment related operating expenses. 6.Core Revenue includes premium revenue of Insurance and net financial income. Core Revenue for 2023 is on Pro Forma basis with Fossar. All amounts are in ISKm 10

Income statement 9M 2024

Strong growth in revenue from insurance and financial services

Group core revenue 23.1bn and profit after tax 700m

Insurance

• Insurance revenue was 21,636m (+10.2% YoY)
• Net insurance service income 5,127m (+23% YoY)
• Combined ratio 95.2% and 1,043m profit on insurance contracts (1,145m improvement YoY)

Financial services

• Net financial service income 1,340m from Fossar and SIV

Investments

• Investment income was 2,011m, representing a 4.6% return in the period
• Net investment income 766m, after finance expenses of insurance liability and subordinated bond

Net operating income

• Net operating income 7,295 (+13% YoY)

Expenses

• Operating expenses 5,853m (+44% YoY) with Fossar and SIV added to the group the main factor

Results

• Pre-tax profit of 929m and profit after tax of 700m

Income statement, ISKm	9M 2024	9M 2023	Δ	Δ%
Net insurance service income	5,127	4,177	950	23%
Net financial service income	1,340	9	1,331	n/a
Net investment income	766	2,205	-1,439	-65%
Other income	62	78	-16	-21%
Net Operating Income	7,295	6,469	826	13%
Operating expenses	-5,853	-4,096	-1,777	44%
Depreciations, amortizations and net impairment	-415	-454	40	-9%
One-off expenses	-99	-191	93	-48%
Profit before taxes	929	1,748	-819	-47%
Income tax	-229	-68	-161	-237%
Profit	700	1,680	-980	-58%
Group KPIs
Core Revenue6	23,087	20,409	2,678	13.1%
ROE - annualised	3.9%	13.1%		-6.3p.p
Profit per share	0.37	0.98		-62.2%
Business Unit KPIs
Insurance revenue	21,636	19,630	2,006	10.2%
Combined ratio	95.2%	100.5%		5.3p.p
Insurance contract result	1,042	-102	1,145	n/a
Net financial services income (excl. intra group adj.)	1,340	47	1,293	n/a
Investment income	2,011	3,254	-1,243	-38%
Investment income return %	4.6%	7.6%		-2.7p.p

1. Net Insurance Service Income is premium insurance revenue less costs related to claims and reinsurance and differs from implementation of IFRS17 – reference is made to annual account for Income statement in accordance with IFRS accounting standards. 2. Net financial service income includes all revenues of Fossar and SIV, including but not limited to net interest, fee and financial income. 4. Investment income is gross income from VÍS investment portfolio. 5. Operating expenses includes all operating expenses of VÍS, SIV and Fossar, also insurance and investment related operating expenses. 6.Core Revenue includes premium revenue of Insurance and net financial income. Core Revenue for 2023 is on Pro Forma basis with Fossar. All amounts are in ISKm 11

• Strong and robust balance sheet of VÍS Insurance, Fossar Investment Bank and Skagi
• Total assets of the Group are 72.8bn (+41% YoY)
• Insurance investment assets stand at 45.1bn (+4% YoY)
• Insurance liability 28.4bn (+7% YoY)
• Balance sheet of Fossar consists of liquid assets mainly of government bonds and listed assets
• Fossar loans to customers consist in part of financing with security in liquid listed assets
• Fossar funding source is mostly in form of money market deposits and bills
• Fossar has issued its first bond prospectus and aims on diversifying its funding sources with longer term bonds
• Goodwill and intangible assets are mainly related to Fossar and Lífís
• Equity of the group stands at 20bn

Balance sheet, ISKm	30.9.2024	31.12.2023	Δ%	30.09.2023	Δ%
Assets
Cash	1,836	2,271	-19%	2,182	-16%
Insurance investments assets	45,051	42,759	5%	43,376	4%
Fixed income securities	5,574	4,562	22%	0
Shares and other variable income securities	403	337	20%	0
Securities used for hedging	5,631	4,521	25%	0
Loans to customers	4,407	1,673	163%	0
Goodwill and intangible assets	4,087	4,259	-4%	1,865	119%
Other assets	5,845	5,086	15%	4,239	38%
Total Assets	72,835	65,468	11%	51,662	41%
Liabilities and Equity
Insurance liabilities	28,441	26,162	9%	26,565	7%
Money market deposits	9,274	6,227	49%	0
Bills	3,564	2,285	56%	0
Other liabilities	7,448	6,031	23%	3,887	92%
Subordinated liabilities	3,706	3,590	3%	3,491	6%
Total Liabilities	52,432	44,296	18%	33,944	54%
Equity	20,403	21,172	-4%	17,719	15%
Total Liabilities and Equity	72,835	65,468	11%	51,662	41%

Business unit financials

• Insurance
• Financial services
• Investments

stated otherwise

Operational changes showing results

Insurance

• Continued positive momentum in insurance revenue
• 9.8% insurance revenue growth in Q3 and 10.2% in first 9 months 2024
• Strong 14.2% growth in life and health insurance with increased emphasis on growth in this product range
• Combined ratio for is 92.3% in Q3 and 95.2% in 9M, in line with management expectations, supporting the guidance range
• Cost measures implemented and higher premium base starting to reduce the cost ratio which came in at 16,3% compared with 18.7% in Q3 2023
• 222m improvement in insurance contract results YoY in Q3, and 1,141m improvement in 9M 2024

Net insurance service income

6,952 6,844 6,789

Insurance revenue Combined ratio %

7,634

7,213

+9.8%

-2.5p.p

Claims and reinsurance Operating cost

Insurance contract results

Financial services

Continued growth and broader revenue drivers

• Financial services generated strong revenue growth in Q3 with net income of 492m (+86% YoY pro forma), despite challenging market conditions
• AuM of 123bn¹ at end of the quarter and asset Management generating about 33% of total financial services income in the quarter
• Acquisition of Íslensk verðbréf will provide external AuM and revenue growth and further scale to the platform – with synergy opportunities
• SIV has 10 funds with 28.2 bn AuM, of which around 75% are from external clients
• Financial services within Skagi continue to diversify its income pillars, with 61% of income coming from non-capital markets related activities in 9M 2024, compared to 34% in 2023
• Financial services result pre-tax loss of -31m²in Q3 and -150m in 9M 2024. After tax profit of 76m in Q3, due to positive tax effects of forward contracts in the quarter and after tax loss of 61m in 9M .

Net financial services income Excluding intra-group adj,

Income and costs per FTE

ISKm annualized, only including financial services

Composition of financial services income, % Pro Forma excluding financial income

Assets under management1, billions ISK

1. AuM and placement by clients into foreign funds which Fossar are distributors for. 2. Financial Services result pre-tax is combined results of Fossar and SIV. 3. Financial services income and costs per FTE excludes impairments on the cost side. All amounts are in ISKm unless 15

Investments

Defensive return in challenging markets

• Return on investments 1.6% in Q3 (4.6% in 9m) and investment income of 713m in Q3, 2.011m in 9m
• Positive return from all asset classes except unlisted equities
• Solid total and relative return from bonds and cash contributing a total of 664m in Q3
• Other bonds with highest contribution in the quarter of 326m
• Listed equity contributed 293m after difficult H1 2024
• Loss from unlisted equity in Q3 was -297m
• Value of Controlant was lowered by 417m or 63% at quarter end, reflecting a share price of 30 (80 share price in Q2)

Investment income from assets in Q3 24

Return on investment assets

Net investment income breakdown in Q3 24

Investment portfolio

Investment portfolio shifted towards government bonds

• Investment asset portfolio¹ stands at 45.4bn at end of quarter, consisting of financial assets of VÍS insurance
• Composition of portfolio is 67% bonds and cash and 33% equity, thereof 19% in unlisted equity
• Allocation shift from other bonds into government bonds and listed equity
• Duration higher at about 3.0 in Q3 (2.8 in Q2)
• CPI-linked bonds correspond to 40% at end of quarter, similar to Q2
• Foreign bonds are comprised of foreign credit funds and bonds issued by financial institutions
• Currency hedges are in place against the foreign bond exposure

Bonds - duration and CPI-linked ratio Asset allocation

Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3
20	21	21	21	21	22	22	22	22	23	23	23	23	24	24	24

Key takeaways

Group performance in line with targets

• Insurance: Growing faster than market and cost measures continue to emerge
• Financial Services: Continued growth, broader revenue drivers and more synergies ahead with ÍV
• Investments: Listed equities bounce back but revaluation of Controlant affects return

Positive momentum in insurance revenue

9.8% insurance revenue growth in Q3 and 10.2% in 9m 2024

Combined ratio 92.3% in Q3 and 95.2% in 9M 2024

Both supporting the guidance range

Financial services continue to grow within the Group – with a YoY income growth of 86% on pro-forma basis

Acquisition of Íslensk verðbréf has been finalized and the company will join the Skagi group as of Q4

Appendix: Further information

Operating costs

Streamlining of operating costs continue in line with plans

• Operating costs increase YoY mainly due to inclusion of Financial services (Fossar & SIV)
• Streamlining of operating costs continues with high focus on cost measures across the group
• Synergies between insurance and financial services operations are being extracted across housing, IT, finance and legal
• Average employees in Q3 increase up to 241 from 237 in Q2, but will decrease in coming quarters due to measures implemented in Q4 2024
• Insurance base costs decrease ~4% YoY in Q3 and 4.5% in 9M 2024 YoY

Breakdown of operating costs

Business units

826

502

153

1,481

Skagi SIV Fossar

VÍS

Solvency ratio and investment bank capital

Group is well capitalised for growth

Solvency position

• Both Group and VÍS solvency ratio is 1.48 at end of Q3
• Own funds are within target policy level

Fossar capital position

• Fossar capital ratio of 19%
• Fossar capital position is ~500bn above minimum target

Capital allocation

• Further capital allocation optimization within the Group to support internal and external growth is underway

Solvency ratio

Investment portfolio – additional information

Breakdown of asset allocation and major positions in the portfolio

Allocation of bonds and equity

Unlisted assets – 5 largest

Value 30.09.2024	Value 31.06.2024	Difference	Share price 30.09.2024
827	827	0	13.7
705	705	0	80
604	604	0	133.1*
349	349	0	83.5**
250	667	-417	30

* indirect via VPE AN (VEX) | **indirect via Nox Holding ehf.

Equity – 10 largest and return in quarter

Fossar Investment Bank – balance sheet

Strong balance sheet with majority of assets in listed assets

Balance sheet	30.9.2024	30.6.2024	Δ%
Assets
Fixed income securities	5,471	4,699	16%
Shares and other variable income securities	403	617	-35%
Securities used for hedging	5,631	4,226	33%
Cash	517	411	26%
Loans to customers	4,407	3,908	13%
Claims and other assets	1,670	986	69%
Total assets	18,100	14,847	22%
Liabilities and Equity
Borrowings	1,399	1,298	8%
Money market deposits	9,274	9,115	2%
Bills	3,564	2,119	68%
Other liabilities	2,004	531	278%
Total liabilities	16,241	13,062	24%
Total equity	1,859	1,785	4%
Total Liabilities and Equity	18,100	14,847	22%

LCR ratio and net stable funding	ratio
Liquidity coverage ratio (LCR)	30.9.2024	30.6.2024
High quality liquid assets	3.958	3,559
Net outflow	1,311	794
Liquidity coverage ratio (LCR)	301%	448%
Minimum regulatory requirement	100%	100%
Net stable funding ratio (NSFR)	30.9.2024	30.6.2024
Available stable funding	4,432	4,255
Required stable funding	3,007	3,238
Net stable funding ratio (NSFR)	147%	131%
Minimum regulatory requirement	100%	100%

All amounts are in ISKm unless stated otherwise

Disclaimer

The information in this presentation is based on sources that Vátryggingafélag Íslands hf . ("Skagi" or "the Company") deems reliable at a given time but it is not possible to guarantee that they are infallible . Skagi is not responsible for the quality, accuracy, or reliability of information in this presentation and Skagi shall not be liable for damages that can be attributed to the fact that the information turns out to be inaccurate, unreliable, or insufficient .

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Skagi is not obligated in any way to provide recipients of this presentation with further information about the company or update or amend the presentation if the underlying information changes .

The future outlook of Skagi is subject to various risk - and uncertainty factors, which can mean that actual future results could differ considerably from the statements in this presentation . External factors, such as supply of capital, laws and regulations coming into effect, impact of regulatory authorities can all have substantial effect . Skagi reiterates that the recipients of this presentation should not rely on statements in this presentation at a later date as they are only applicable on the date of publication . Any forward -looking statements are fully valid with respect to this disclaimer .

By receiving this presentation, its recipients confirm that they are bound by the above disclaimers and limitations .