Exista Right place waiting for the right time

Initiation of coverage ▪ Speciality and Other Finance, Iceland
26 September 2007

Exista hf. Buy
(Initiation)
790 Price ISK 30.5
Target 38.1

Right place, waiting for the right time
In a relatively short time, Exista has established itself as a
financial services company in the Nordic area. We believe
that market trends are favourable for Exista's business
model in the short to medium term. We initiate coverage
with a Buy recommendation and a target price of ISK 38.1.
We believe Exista has positioned itself well; it is in the right place with the right
business model ahead of the coming consolidation of Scandinavian and northern
European financial markets. We also believe that the symbiotic relationship between
the cash-generating insurance and leasing services on the one hand, and strategic
investments on the other, will give an edge on the funding side. While this in itself
does not guarantee success, it does enable the company to realistically aim for qual-
ity targets. We believe Exista can capitalise on this potential.

Exista is the largest shareholder in two top ten financial companies in Scandina-
via in terms of market cap – Sampo and Kaupthing. Both of these companies are
aiming to expand and can be considered good investments in their own right. Exista's
investment arm is a substantial part of its business model. We are optimistic that the
financial market will recover from the recent setback in the short to medium term.
Exista's cash flow eliminates any risk premium and its strong asset base provides
good collateral. We believe this gives Exista an advantage in light of the current li-
quidity problems and higher risk premium in global credit markets.

Exista has substantial insurance and asset finance operations in Iceland. We
see some room for greater operational efficiency. However, domestic growth oppor-
tunities are limited in light of the relatively small and stable market. More impor-
tantly, these operations are significant for Exista's business model as they provide a
steady cash flow and liquid reserves to use in the investment arm.

The main risk factor in our case is market risk. Given that a large part of Ex-
ista's asset portfolio consists of two large stakes in financial stocks, the company is
subject to both idiosyncratic risk as well as financial sector risk. The company holds
large stakes in four companies, which could lead to liquidity problems.

We initiate coverage with a Buy recommendation. Our excess return model
suggests that the company's net present value is ISK 34.1 per share. With a required
return on equity of 11.5%, we set our one-year target price at ISK 38.1 per share,
implying upside potential of 25% from the current share price.

Share data Share price performance
Market cap (ISKm) 345,945
Number of shares (m) 11,361.1
Bloomberg code EXISTA IR
Reuter code EXISTA.IC
Average volume 16,543,211

Performance 1M 3M 12M
Abs. perf. (%) -10 -10 30
Rel. to ICEX15 -13 -27 3

Kaupthing Research
Guðrún Ögmundsdóttir (lead analyst) Haraldur Yngvi Pétursson
gudrun.ogmundsdottir@kaupthing.com haraldur.petursson@kaupthing.com
+ 354 444 6952 +354 444 6961

See important disclosures on last page of this report

Investment case
We initiate coverage of Exista with a Buy rating and a target price of ISK 38.1 per We initiate coverage with
share, implying upside potential of 25% from the current share price. However, this a Buy recommendation
is still about 5.5% below the price peak of ISK 40.25 reached in 19 July. The main and a target price of
reason for our bullish stance is that we believe that Exista has managed to position ISK 38.1 per share
itself in the right place with the right business model ahead of the coming consolida-
tion of the Scandinavian and northern European financial market, not least in light of
the recent financial turmoil. While this in itself does not guarantee success, it enables
the company to realistically set its sights on quality targets. Nevertheless, and in
spite of management's relatively short track record, we believe that Exista has the
means to capitalise on this potential.

Our recommendation is also partly based on valuation of the main strategic holdings,
mainly Kaupthing and Sampo, as they appear in consensus estimates for these com-
panies. In fact, when consensus target prices of these two main holdings are taken
into account, the P/B valuation goes from 1.6 to just 1.2.

Key reasons for our bullish stance
Exista is the largest shareholder in two top ten financial companies in Scandinavia Exista has created oppor-
in terms of market cap – Sampo and Kaupthing. Both of these companies are tunities for itself through
aiming to expand and can be considered good investments in themselves. Sampo its strategic holdings in
has a large war chest and a stated intention to participate in the consolidation of Sampo and Kaupthing
the Nordic banking arena. In fact, Sampo has already built up a 5.5% stake in
Nordea. We believe Exista has its sights set on opportunities that will enable it to
expand into the Nordic financial market. For example, Exista could provide sup-
port to Sampo if the latter decides on an aggressive M&A route. In this scenario, it
could gain part of a potential target in the restructuring process. The same applies
to Kaupthing Bank, which has been growing fast and now has a firm presence in
northern Europe.

Exista has substantial insurance and asset finance operations in Iceland. We see The operational arm of
some room for greater operational efficiency. However, domestic growth opportu- the business model gives
nities are limited in light of the relatively small and stable market. However, more Exista access to steady
importantly, these operations are significant for Exista's business model as they cash flow and reserve
provide a steady cash flow and liquid reserves to use for its investment arm. that can be use for its
investment arm
Exista's investment arm is an important part of the business model. For example,
trading gains accounted for about one third of Exista's income for 1H07. We are
We are optimistic that the
optimistic that the financial market will recover in the short to medium term from
financial market will re-
the recent setback. Exista's cash flow eliminates any risk premium and the com-
cover and that good in-
pany's strong asset base provides good leverage. We believe this gives Exista an
vestment opportunities
advantage in light of the current liquidity problems and a higher risk premium
will be available
(which we believe might persist) in global credit markets.

Exista's business model gained acknowledgement recently when the company re- Exista's recent re-
financed a quarter of its short-term liabilities on favourable terms (e.g. 130 and financing terms show it is
62.5bps over EURIBOR), at the same as time the credit market was showing signs benefiting from its trans-
of distress. The company has historically had a front-weighted maturity profile, formation into a financial
raising concerns about both refinancing risk and the future cost of capital. These services group
re-financing terms shows that the company is benefiting from its transformation
from an investment company into a financial services company.

We consider the ownership structure of the company to be favourable for inves-
tors. The largest shareholders have invested heavily and therefore share the same
interests as the rest of the shareholders. Management has a good but short track

Exista hf. ▪ 26 September 2007 ▪ 2

record and the company relies on its investment skills. However, it is important to
bear in mind that past performance does not guarantee good future performance.

Risk to our case
The main risk factor in our case is market risk and a possible prolonged downturn The main risk factor is
and volatility in global financial markets. As such, a downturn could affect Exista's market risk
earnings and capital in the medium term, while at the same time opening oppor-
tunities for strategic investments.

Further on, given the concentration in Exista's asset portfolio on the large finan- The company is exposed
cial stocks, the company is subject to both idiosyncratic risk as well as financial to idiosyncratic and finan-
sector risk that cannot be ignored, even though Exista applies the equity method cial sector risk
to both of these stakes.

Exista is exposed to liquidity risk as the company currently holds large stakes in Liquidity risk as the com-
four companies. It could be difficult at times for Exista to liquidate these stakes at pany holds large stakes in
desired times. four companies

There is also uncertainty in our estimates since a relatively large part of Exista's
holdings is in-transparent; no information is available about the trading portfolio
and FX reserves. That in-transparency creates some uncertainty in terms of
valuation.

Another risk factor relates to Exista's management, since the company relies on Management risk due to
its investment skills for the investment operation. the investment operation

Exista has some operational risk due to its insurance and asset finance subsidiar-
ies. The insurance risk mainly relates to underwriting risk or unpredictable devel-
opments, many of which are beyond the direct control of the company.

Exista is exposed to some refinancing risk as its borrowings are front-weighted so
dramatic changes in credit market terms for the company would have a negative
effect on the company.


Valuation
Financial services firms are often valued using the excess return model. By this Exista's net present value
method, the value of a company is the capital currently invested in the firm in addi- is ISK 34.1 per share, and
tion to the present value of excess returns that the firm anticipates will be created in with a required return on
the future. Based on this model, we estimate Exista's net present value at ISK 34.1 equity of 11.5% we set
per share. With a required return on equity of 11.5%, we set our one-year target our target price at
price at ISK 38.1 per share and initiate coverage with a Buy recommendation. ISK 38.1

In 2006, Exista was earning a return on equity of 27% and annualised return on
equity for 1H07 was 70%. This past performance has been significantly higher than
the company target of 16-25% ROE, which is a reflection of favourable trends in
markets in which Exista operates, as well as good strategic positioning.

In our valuation, we estimate Exista's income for this year and the next four years We estimate that about
and combine the NPV. The company has a diverse revenue stream derived from in- 35% of future income will
surance premiums, interest income, capital gains, dividends and participation in the be generated by shares in
profit of associates. The majority of Exista's total revenues this year, or 64%, has associates, 40-45% from
been derived from shares in profits of the associates Kaupthing and Sampo. This investment activities and
does not provide a clear indication of Exista's future revenue stream, since Sampo 20-25% from operating
reported EUR 2.9bn in one-time profit from the sale of its banking services in its units, insurance and asset
1Q07 report. However, we estimate that about one third of Exista's future income will financing
be generated by shares in associates, 40-45% from investment activities and 20-
25% from its operating units, insurance and asset financing.

Exista's trading activities are in many respects similar to investment companies' ac-
tivities, but about 40% of the company's income is capital gains.

In our valuation we use consensus estimates for Exista's income from shares in profit
from associates. We estimate growth in Exista's income from operating units, insur-
We assume that the re-
ance and asset financing will be around 15% to 10% in 2008 and 2009. We are opti-
turn on equity this year
mistic about further developments on world financial markets providing Exista with
will be 35% and return on
good opportunities for its investment activities and estimate return on the company's
equity over the next four
trading portfolio to be approximately 20% for the next four years. Furthermore, we
years will average 20%,
estimate that there are some hidden values in Exista's books due to its stake in
and that the cost of eq-
Siminn, which will be listed later this year. Based on this we assume that the return
uity will be unchanged
on equity this year will be 35% and return on equity over the next four years will
over that period
average at 20%, and that the cost of equity will be unchanged over that period. In
addition, we assume that Exista's dividend payout ratio will be 15% but it must be
noted that the company does not have a dividend policy. We assume that Exista's
excess returns will diminish in the future as it is likely that competition for lucrative
investments will increase, reducing opportunities for Exista. We therefore assume in
our valuation that Exista's long-term ROE will be 16% with a terminal growth rate of
3.75%.


Excess return model – Exista (EURm)
2007E 2008E 2009E 2010E 2011E
Net Income 665.1 493.1 576.9 675.0 789.8
- Equity Cost 218.5 283.5 331.7 388.1 454.1
Excess Equity Return 446.5 209.6 245.2 286.9 335.6
Terminal Value of Excess Equity Return 2378.8
Cumulated Cost of Equity 1.1 1.2 1.4 1.5 1.7
Present Value 400.5 168.6 176.9 185.6 1575.1
Cost of Equtiy 11.5% 11.5% 11.5% 11.5% 11.5%
ROE 35% 20% 20% 20% 20%
Terminal ROE 16%
Termingal growth rate 3.75%

Equity Invested = 1900.2
PV of Equity Excess Return 2506.7
Value of Equity = 4406.9
Number of shares = 11361.1
Value Per Share euro= 0.39

ISK/EUR exchange rate 88.0

Value Per Share ISK 34.1

Source: Kaupthing estimates

The valuation is sensitive to changes in assumptions about Exista's future return on
equity, cost of equity, the EUR/ISK exchange rate and expected growth rate. The
tables below show the effects that changes in these assumptions have on Exista's fair
value.

Sensitivity of the valuation for ROE assumptions on Exista's fair value
Terminal ROE
34.1 12% 13% 14% 15% 16% 17% 18% 19% 20%
14% 20.4 22.5 24.6 26.6 28.7 30.8 32.9 35.0 37.0
15% 21.1 23.2 25.3 27.4 29.6 31.7 33.8 36.0 38.1
Average ROE year 2-5

16% 21.8 23.9 26.1 28.3 30.5 32.6 34.8 37.0 39.2
17% 22.4 24.7 26.9 29.1 31.3 33.6 35.8 38.0 40.2
18% 23.2 25.4 27.7 30.0 32.3 34.5 36.8 39.1 41.4
19% 23.9 26.2 28.5 30.9 33.2 35.5 37.8 40.2 42.5
20% 24.6 27.0 29.4 31.8 34.1 36.5 38.9 41.3 43.6
21% 25.4 27.8 30.2 32.7 35.1 37.5 40.0 42.4 44.8
22% 26.2 28.6 31.1 33.6 36.1 38.6 41.1 43.5 46.0
23% 27.0 29.5 32.0 34.6 37.1 39.6 42.2 44.7 47.2
24% 27.8 30.4 32.9 35.5 38.1 40.7 43.3 45.9 48.5
25% 28.6 31.2 33.9 36.5 39.2 41.8 44.5 47.1 49.7


Sensitivity of the valuation for ROE and cost of equity assumptions
Terminal ROE
34.1 12% 13% 14% 15% 16% 17% 18% 19% 20%
10.0% 29.3 32.3 35.2 38.2 41.1 44.1 47.0 50.0 52.9
10.5% 27.5 30.3 33.0 35.7 38.4 41.2 43.9 46.6 49.4
Cost of Equity

11.0% 26.0 28.5 31.1 33.6 36.1 38.7 41.2 43.8 46.3
11.5% 24.6 27.0 29.4 31.8 34.1 36.5 38.9 41.3 43.6
12.0% 23.4 25.7 27.9 30.1 32.4 34.6 36.8 39.1 41.3
12.5% 22.4 24.5 26.6 28.7 30.8 32.9 35.0 37.1 39.2
13.0% 21.5 23.4 25.4 27.4 29.4 31.4 33.4 35.4 37.4
13.5% 20.6 22.5 24.4 26.3 28.2 30.1 31.9 33.8 35.7
14.0% 19.8 21.6 23.4 25.2 27.0 28.8 30.6 32.4 34.2



Sensitivity of the valuation for ROE and growth rate assumptions
Terminal ROE
34.1 12% 13% 14% 15% 16% 17% 18% 19% 20%
2.75% 24.5 26.6 28.7 30.7 32.8 34.9 37.0 39.1 41.2
3.00% 24.5 26.7 28.8 31.0 33.1 35.3 37.4 39.6 41.7
Growth rate

3.25% 24.6 26.8 29.0 31.2 33.4 35.7 37.9 40.1 42.3
3.50% 24.6 26.9 29.2 31.5 33.8 36.1 38.4 40.7 43.0
3.75% 24.6 27.0 29.4 31.8 34.1 36.5 38.9 41.3 43.6
4.00% 24.7 27.1 29.6 32.1 34.5 37.0 39.4 41.9 44.4
4.25% 24.7 27.3 29.8 32.4 34.9 37.5 40.0 42.6 45.1
4.50% 24.8 27.4 30.1 32.7 35.4 38.0 40.7 43.3 46.0
5.00% 24.9 27.7 30.6 33.5 36.3 39.2 42.1 44.9 47.8


Sensitivity of the valuation for cost of equity and growth rate assumptions
Cost of Equity
34.1 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0% 13.5%
2.75% 38.5 36.4 34.5 32.8 31.3 30.0 28.8 27.7
3.00% 39.1 36.8 34.9 33.1 31.6 30.2 28.9 27.8
Expected growth

3.25% 39.7 37.3 35.3 33.4 31.8 30.4 29.1 27.9
3.50% 40.4 37.9 35.7 33.8 32.1 30.6 29.2 28.0
rate

3.75% 41.1 38.4 36.1 34.1 32.4 30.8 29.4 28.2
4.00% 41.9 39.1 36.6 34.5 32.7 31.0 29.6 28.3
4.25% 42.7 39.7 37.1 34.9 33.0 31.3 29.8 28.4
4.50% 43.7 40.4 37.7 35.4 33.3 31.6 30.0 28.6
5.00% 45.8 42.1 39.0 36.3 34.1 32.1 30.4 28.9


Sensitivity of the valuation for ROE and growth rate assumptions
Terminal ROE
34.1 12% 13% 14% 15% 16% 17% 18% 19% 20%
80 22.4 24.6 26.7 28.9 31.0 33.2 35.4 37.5 39.7
82 23.0 25.2 27.4 29.6 31.8 34.0 36.2 38.4 40.7
EURISK E/R

84 23.5 25.8 28.0 30.3 32.6 34.9 37.1 39.4 41.7
86 24.1 26.4 28.7 31.0 33.4 35.7 38.0 40.3 42.6
88 24.6 27.0 29.4 31.8 34.1 36.5 38.9 41.3 43.6
90 25.2 27.6 30.1 32.5 34.9 37.3 39.8 42.2 44.6
92 25.8 28.2 30.7 33.2 35.7 38.2 40.7 43.1 45.6
94 26.3 28.8 31.4 33.9 36.5 39.0 41.5 44.1 46.6
96 26.9 29.5 32.1 34.6 37.2 39.8 42.4 45.0 47.6



Net Asset Value: ISK 20.5 per share
NAV Exista as of 24 September 2007
Listed Holdings No.Shares Market ISK/ % of Sensi-
(ISK) (millions) Price Value Share Assets tivity*
Our net asset valuation
Kaupþing Bank 170 1080 184,075 6.90 35.7% 1.62
indicates that Exista is
Sampo 114 20.3 193,817 7.27 37.6% 1.71
currently trading at 1.6x
Storebrand ASA 14 83 12,607 0.47 2.4% 0.11
its book value
Bakkavör 855 66.1 56,526 2.12 11.0% 0.50
Flaga 159 1.43 227 0.01 0.0% -
Other listed holdings 42,476 1.59 8.2% 0.42
Total Listed Holdings 489,727 18.37 94.9%

Reported Adjusted ISK/ % of Sensi-
Other Holdings Value Value Share Assets tivity*
Síminn 13,510 21,110 4.1% 0.19
Other unlisted 5,176 5,176 1.0% 0.04
Total Other Holdings 18,686 26,286 0.99 5.1% 0.23

Summary Reported Adjusted ISK/ % of
(ISK) Value Value Share Assets
Total Holdings 508,413 516,013 100.0%
Net Cash/Debt -296,154 -296,154
Net Asset Value (NAV) 212,260 219,859 19.35
NAV per share ISK 18.68 19.35
Premium 63% 57%

Note: The market value of Exista holdings are calculated at fixed e/r as of 30.06.2007
Source: Kaupthing estimates and company data

Sensitivity in changes in share prices
Listed securities are a large part of Exista's holdings. Although Exista has made
changes to its accounting policy and reduced the effect of market exposure on its
equity, the performance of its holdings still has an impact on NAV, as listed securities
represent 95% of the company's holdings. If the share price of Sampo increases by
10%, then the Exista's NAV per share should increase by ISK 1.71, reducing the
market premium by 11%. Changes in Sampo and Kaupthing share prices have the
greatest impact on Exista's NAV, as they are the company's largest holdings. A 10%
increase in Kaupthing, Bakkavör and Storebrand market values would increase NAV
per share by ISK 1.62, ISK 0.5, and ISK 0.11, respectively. Exista has a trading port-
folio of undisclosed securities that, at the end of 2Q07, amounted to ISK 47bn. This
portfolio includes both Icelandic and foreign securities, and a 10% increase in its
market value would add a further ISK 0.42 to the share price and reduce the pre-
mium by 3%.

NAV sensitivity to a 10% increase in market value of holdings
Listed Holdings No.Shares Market ISK/ % of Sensi-
(SEK) (millions) Price Value Share Assets tivity*
Kaupthing Bank 170 1080 184,075 7.26 35.4% 1.62
Sampo 114 20.32 193,817 7.64 37.2% 1.71
Storebrand ASA 14 83 12,607 0.50 2.4% 0.11
Bakkavör 855 66.1 56,526 2.23 10.9% 0.50
Flaga 159 1.43 227 0.01 0.0% -
Other listed holdings 0 0 46,976 1.85 9.0% 0.42
Total Listed Holdings 494,227
* Sensitivity indicates NAV per share increase in ISK terms if the stock price increases by 10%
Source: Kaupthing estimates and company data. Market data as of 24.09.2007


Listed holding updated to consensus estimates
Exista's four largest holdings are in Sampo, Kaupthing, Bakkavör and Storebrand.
These companies are covered by a number of equity analysts and consensus esti-
mates suggest that outlook for the holdings is relatively good. By changing the cur-
rent market value to potential market value, using Kaupthing's or mean consensus
estimates, this would add ISK 9.2 to Exista's current share price, reducing the pre-
mium to 7%.

Potential market value of listed holdings and the effect on Exista's NAV
Listed
Holdings No, Market % of Target Pot.mkt Pot.mkt.
(SEK) Shares Price Value Assets Price value* value change
Kaupthing Bank 170 1080 184,075 35.4% 1250 213,049 28,975
Sampo 114 20.32 193,817 37.2% 24.5 233,687 39,870
Storebrand ASA 14 83 12,607 2.4% 93.57 14,213 1,606
Bakkavör 855 66.1 56,526 10.9% 72 90,738 34,212
Total 447,025 2.4% 551,687 104,663
Percentage change 23%
Per share 9.21

Source: Kaupthing estimates and JCF


Success – so far
Business model focus
Exista was established in 2001 and was listed on the Icelandic Stock Exchange in
September 2006, when Kaupthing bank sold a 14.8% stake in the company. Since its
listing, Exista has outperformed the Icelandic stock market, showing a share price
increase of 35% compared to 27% for the OMXI15 index.

Exista defines itself as a financial services company operating in the areas of insur- Exista is a financial ser-
ance services, asset finance and strategic investments. The main theme of the busi- vices company operating
ness model is the mutual interaction of strong-cash-flow operating units and invest- in the areas of insurance
ment activities that are chiefly focused on the strategic and even long-term asset services, asset finance
gathering. The synergies created by this alliance benefit both arms of the company and strategic investments
as a strong balance sheet facilitates more favourable terms for long-term funding.
Furthermore, the operating units as well the depository properties of the technical
provisions provide access to a stable cash flow that lacks intermediation risk and
spread of they type that would be incurred if this liquidity were served by an unre-
lated party.

The investment activities focus mainly on strategic holdings in financial companies, Investment focus is
although Exista is open to other options in various sectors with the aim of acquiring mainly on strategic hold-
well established companies that have growth potential and good cash flow. The com- ings in financial compa-
pany is therefore not interested in start-ups or "turnaround" cases and differs from nies or in well established
private equity funds in the sense that there are no limits on how long it holds a cer- companies with growth
tain asset. potential

Exista's focus is on northern Europe as its core market, with a medium-term target of
gaining a strategic position ahead of the consolidation of the financial services sector The main geographic
in that area. So far, Exista has considerable stakes in three Scandinavian financial focus is northern Europe
services companies, Kaupthing, Sampo and Storebrand.

Exista's portfolio Exista's assets compositions

9.0% 5.0% 7% 2%
2.4% 8%
37.2%
10.9% 10%

60%
35.4% 13%

Sampo Kaupþing Bank Investments in associates Assets at fair value
Bakkavör Storebrand ASA Loans and acc. rec. Assets held for trading
Other listed holdings Unlisted holdings Goodwill Other assets

Source: Kaupthing estimates and company data Source: Company data

High growth in a favourable market environment
Exista's balance sheet has grown immensely, increasing ten-fold over the past two
years. At year-end 2004, the company's total assets amounted to approximately.
EUR 730m compared to EUR 7.71bn at the end of 1H07. The growth has chiefly been
achieved through retained earnings since the company's share capital has only been
increased one time since the listing in September 2006. Exista has indeed been prof-
itable with a ROE in 2005 and 2006 of 63% and 27%, respectively. This success has


continued in the current year, as annualised return on equity for 1H07 was 70%. This
past performance has been significantly higher than the company target of 16-25%
ROE, which reflects favourable trends in the markets where Exista operates as well as
good strategic positioning.

The company has a diverse revenue stream derived from insurance premiums, inter- The company's revenue
est income, capital gains, dividends and participation in the profit of associates. The stream is from insurance
majority of Exista's total revenues this year, or 64%, has been derived from shares premiums, interest in-
in profits of the associates Kaupthing and Sampo. This does not provide a clear indi- come, capital gains, divi-
cation of Exista's future revenue stream, as Sampo reported EUR 2.9bn in profit from dends and participation in
the sale of its banking services in its 1Q07 report. However, we expect that about the profit of associates
one third of Exista's future income will be generated by shares in associates, 40-45%
from investment activities and 20-25% from its operating units, insurance and asset
financing. Exista's total revenue for 1H07 amounted to EUR 958m and after-tax profit
was EUR 862m.

The company has a large trading book, i.e. financial assets held for trading, which
amounted to EUR 643m at the end of 2Q07. Exista's annualised return on this book
was approximately 28% in 2Q07, slightly above management's ambitious target of
25% annual return on its trading assets and delivering about 15% of Exista's reve-
nues for 1H07.

Revenue mix for 1H07 Growth in assets and liabilities (EURbn)

4% 1%1%
7%
8% 9.0
8.0
7.0
6.0
5.0
15% 4.0
64% 3.0
2.0
1.0
0.0
Mar-05

jun.05

Sep-05

Dec-05

Mar-06

jun.06

Sep-06

Dec-06

Mar-07

jun.07
Share in associates Held for trading
Fair value changes Insurance premium
Interest revenues Dividend
Total assets Total liabilities
Other revenues

Source: Company data Source: Kaupthing estimates and company data

Front-weighted maturity profile but excellent refinancing terms
The maturity profile of the company has historically been front-weighted and, at the
end of June, about half of outstanding liabilities, or EUR 2,370m, were due within 12
months. However, with a bigger emphasis on financial services, the maturity profile
has been extended above three years and has shifted from secured debt to unse-
cured funding. The company's target is to increase issued bonds to account for 35%
of total liabilities compared to the current 15%. Management states that its funding
focus is on diversification, liquidity and maturity.


Exista has been able to further enhance its funding position, both in terms of matur- 3M Libor EUR
ity and cost, despite the recent turmoil in credit markets. On 31 August Exista signed 5
4.8
a EUR 500m senior unsecured credit facility. The term loan has two tranches, a EUR 4.6
4.4
407.5m tranche for three years at 130bps over EURIBOR, and a EUR 92.5m tranche 4.2
4
for one year at 62.5bps over EURIBOR, with an option to extend up to three years at 3.8
the lender's discretion. Through this facility and a EUR 400m 10-year securitisation 3.6
3.4
transaction completed in September, Exista has been successful in substantially ex-

1.1.2007

2.1.2007
3.1.2007

4.1.2007

5.1.2007

6.1.2007

7.1.2007

8.1.2007
tending its maturity profile and further enhancing the liquidity position. The favour-
able terms of the borrowings must indicate the greater importance that is now at-
Source: Bloomberg
tached to good cash generation in general and a strong faith in Exista's business
model in particular.

Maturity profile 30 June 2007 (EURm) Borrowing specified by currencies (EUR m)

2,500 1%
1%
2,133 4% 3% 2% 0%
6%
2,000

1,500 1,248
1,110 1,057
1,000 802
24% 59%
500 268
16 12 40 72
-
On 0-3 3 1-5 5
demand months months years years+ EUR ISK CHF JPY USD GBP NOK DKK SEK
- 1 year

2006 30.06.2007

Source: Company data Source: Company data

Target maturity profile (EURm) Breakdown of funding historical and target

2000 120%

1500 100% 3% 6% 6% 8%
13% 4% 4% 6%
12% 5%
80% 6% 8%
1000 15% 14% 8%
60%
500 35%
40% 84%
63% 65%
0
20% 35%
1 year 2 year 3 year 4 year 5 year<
0%
2006 2007YTD Target 2005 2006 2007 YTD Target

Loans Bonds Technical provisions CP MM Repo

Source: Exista's Capital Markets Day Handout Source: Exista's Capital Markets Day Handout

Investment capacity depends on the route Exista takes
Exista's capitalisation has changed in line with a new emphasis on insurance provi-
sion and asset financing. The equity ratio was close to 60% when Exista was an in-
vestment company, but has declined to about 36.7% as of 30 June this year, or 40%
excluding operational liabilities. Although Exista is defined as a financial services
company, its investment strategy is opportunistic and many ways in-transparent.

Management does not provide a clear indication of the company's investment capac-
ity, its target equity ratios or the extent to which it is willing to leverage the com-


pany, as investment capacity depends on the direction in which Exista intends to take Estimated investment cap.
its investments, e.g. in property, asset financing or insurance. It is clear that while Approx.
Target equity investment
current problems in the global credit markets have had a negative effect on the abil-
ratio capacity
ity of private equity funds to finance their deals; it has created opportunities for
35% 400
companies like Exista, which, having their own cash flow, are now in a better position
30% 1,800
to finance a bid.
25% 3,800
20% 6,300
However, the company's target is to increase its bond issuing significantly, so its goal
15% 11,000
must be to attain a credit rating above non-investment grade (BBB or above). It is
therefore our view that Exista will not strain its balance sheet by increasing its gear- 10% 20,000

ing significantly.
Exista's equity ratio Financial ratios

70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
Equity ratio TD/TA LTD/LTD+ LTD/BVE+L
Mar-05

Mar-06

Mar-07
Dec-05

Dec-06
jun.05

Sep-05

jun.06

Sep-06

jun.07

30.6.2006 30.9.2006 31.12.2006
30.3.2007 30.6.2007


Insurance and asset finance business
The Icelandic insurance business
Exista's operational business consists of two insurance companies, VÍS focusing on
general property and casualty (P&C), insurance Lífís that is specialized in life insur-
ance, and an asset finance company, Lýsing. These three units were acquired in the
takeover of the Icelandic company VÍS Holding in May 2006. The Icelandic insurance
sector is a highly concentrated market dominated by three local insurance compa-
nies. VÍS' market share is currently 35%, with a good distribution of premium in-
come. Last year, growth in insurance policies amounted to 8.8% and premium
growth was 14.8%, but we believe that domestic growth potential is limited.

VÍS revenue growth 2004-2007 (ISKm) VÍS insurance operations

3% 2% 6%
3,500
9%
38%
3,000
9%
2,500

2,000

1,500
13%
1,000 23%
Compulsory motor Property
500
Other motor Accident and sickness
0
General liability Marine
1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07
Re Life

Source: Company data Source: Exista capital markets day handout


The market structure for insurance companies in Iceland is favourable with e.g. auto-
matic renewals. However, the market is small and price competition has been fierce
at times when the companies have been fighting for market share. At the same time,
combined ratios in the Icelandic market have remained relativity high, e.g. VÍS' com-
bined ratio was 115% in 2006, illustrating the tight margin in the core business.

Exista has stated that VÍS' operational results are satisfactory and measures have
been taken to streamline operations, both on the cost side and the income side. The
goal for VÍS is to push the combined ratio below 100% in 2007, and the ratio has
been gradually decreasing since the acquisition, reaching 100.1% at the end of 2Q07.

Insurance-based financial services play a key role in Exista's business model, as they
diversify the revenue stream, provide access to reserves and give a stable cash flow
that supports Exista in its investment activities.

Further insurance expansion abroad?
Domestic growth opportunities in the insurance business are limited and future
growth will have to be achieved through acquisitions in other markets. The Nordic
market is the most likely target market for further expansion, we believe. However,
valuations in the insurance sector are currently high for Scandinavian insurance com-
panies, and market shares seem to be stable and concentrated. The five largest com-
panies account for about 70% of the market in Denmark, with significantly higher
market shares in Finland, Norway and Sweden.

Denmark – Market share distribution Sweden – Market share distribution

18%
29%

21%
30%

15%

18% 20%

20% Länsförsäkringar Sampo (If Skadeförsäkring)
6%
10% Trygg-Hansa (RSA) Folksam
13%
Other
Tryg Topdanmark Codan (RSA)
Alm Brand If Others

Source: Sampo capital markets day handout Source: Sampo capital markets day handout

Norway – Market share distribution Finland – Market share distribution
8%
9% 28%
10%
30% 10%
18%

10% 19%
26%
32% Sampo (If P&C Insurance) Pohjola (OKO bank)
If (Sampo Group) Gjensidige NOR SpareBank 1 Tapiola General Fennia
Vesta Other Lähivakuutus Other

Source: Sampo capital markets day handout Source: Sampo capital markets day handout


While consolidation of Nordic financials companies is anticipated, the property &
casualty (P&C) companies have not been considered as vulnerable as other financial
companies, due to higher valuations. However, it is possible that valuations could
change following further equity market correction, but so far the multiples of Nordic
P&C companies have not changed significantly.

Exista already owns a 20% stake in Sampo and 5.5% in Storebrand, Nordic financial
companies that operate in different segments of the insurance business, and specula-
tion has persisted in the market that these companies could be possible acquisition
targets. However, Exista does not appear to have a sufficient balance sheet to buy
Sampo (market cap. EUR 11.5bn.) on its own, although it could do so in cooperation
with others. Acquiring Storebrand (market cap. EUR 2.6bn) would be more feasible
for the company, although management has stated that its investment in Storebrand
is merely a trading position.

Strong performance of asset financing could be slowing
Lýsing, Exista's asset financing company, is the largest provider of asset financing in
Iceland, providing a wide range of financing products to commercial and private cli-
ents. The company has been performing well, with income increasing by 34% in 2005
and 43% in 2006. The company's total assets increased by 14% and 60% respec-
tively during the same years. At the same time, the cost ratio has been relatively
stable.

Cost ratio and growth in assets and revenue Lýsing's profit before tax (ISKm)

70.0% 1,233
60.0% 1,200
50.0%
1,000
40.0% 841
30.0%
800 671 682
20.0%
10.0% 555
600
0.0%
-10.0% 1H06 1H07 2003 2004 2005 2006 400

200
Cost income ratio Growth in total assets
1H06 1H07 2004 2005 2006
Growth in total revenue


According to management, the company intends to expand its asset financing busi-
ness through organic and external growth. However, the Icelandic economy has been Lýsing is an important
booming for the past four years, showing average annual GDP growth of 5%. Con- part of the business
sumption and investment have also reached new heights and have grown on average model, as it diversifies
by 7.6% and 22%, respectively, during this period. However, the economy has begun the group's income
to move to balance. In 2007, Kaupthing expects that economic growth will be ap- stream and provides the
proximately 1% and investment is expected to contract sharply. Growth in private company with a stable
consumption is declining mainly due to lower import of cars; the number of new pas- cash flow, benefiting the
senger car registrations declined by 12% during the first eight months of 2007 com- investment activities.
pared to the same period in the previous year. These factors should lead to a slow-
down in growth in Lýsing's income and assets. We do not see much growth potential
for Lýsing in the domestic market, so further expansion would be through acquisi-
tions abroad, where competition is currently fierce. However, the market structure
for leasing companies in Scandinavia differs from Lýsing's model. For example, leas-
ing companies in Scandinavia tend to concentrate on specific sectors, while Lýsing's
business model consists of providing financial services for a broad customer range.

While we do not believe that Exista will expand its asset financing operation in the
near future, Lýsing is currently an important part of the business model, as it diversi-


fies the group's income stream and provides the company with a stable cash flow,
benefiting investment activities.

Investment business
Sampo - Strong purchasing power
Exista's strategic holdings in financial companies consist of a 20% stake in Sampo, a Strategic holdings in fi-
Finnish insurance company, and a 23% stake in Kaupthing Bank. Exista is the largest nancial companies are a
shareholder in each of these companies, but does not have board representation in 20% stake in Sampo, and
either. These stakes could provide Exista with strategic alliances in opening up oppor- a 23% stake in Kaupthing
tunities in the consolidation of the Nordic banking arena. Bank

After the sale of its banking operations in November 2006, Sampo has about
EUR 5.5bn in excess capital on its balance sheet awaiting investment opportunities. Sampo has a large in-
Initially, Sampo's management gave itself time until the FY07 results to find a use for vestment capacity and
the cash; if there are no attractive opportunities, it will be returned to shareholders. holds a 5.5% stake in
The board has decided on a repurchase scheme that allows for approximately 4.8% Nordea.
of the total number of shares to be repurchased, at a cost of around EUR 600m.
Meanwhile, Sampo purchased a 5.5% stake in Nordea (EUR 1.6bn) and speculation
persists that this stake will be further enlarged, fuelled in part by comments by
Sampo's CEO that Nordea would be among the biggest gainers in Nordic banking
consolidation and that Sampo's holdings in the firm are long-term. It is moreover
possible that Sampo will not confine itself to the Nordic region nor to a specific sec-
tor.

In terms of how the Sampo holding fits into Exista's plans, we see two main possibili- Rather than taking over
ties. One is that Sampo is simply a good investment that Exista's believes will outper- Sampo, we believe that
form the market. Sampo could for example be the target of a takeover due to its Exista is eying collabora-
large cash balance and highly cash-generative and stable P&C business. The second tion with Sampo in the
possibility is that Exista is eying some collaboration possibilities in the coming con- coming consolidation of
solidation in Nordic financial markets. Exista could for example support Sampo if it the Nordic financial mar-
decides on an aggressive M&A route, or acquire certain assets that fit well with its ket
business model in the phase of restructuring following a Sampo acquisition. In any
case, Exista does not appear to have the balance sheet to buy Sampo, except in
cooperation with another company. Sampo's excess cash could render the use of
debt in an acquisition easy, but at the same time Sampo could use this cash in a
defensive strategy. Rather than taking over Sampo, we believe that for Exista the
two mentioned possibilities are not mutually exclusive and might be simultaneously
targeted.

EPS for Kaupthing and Sampo Kaupthing's Assets (ISK billion)

7,000 7,000
6,000 6,000
5,000 5,000
4,000 4,000
3,000 3,000
2,000 2,000
1,000 1,000
0 0
2000

2001

2002

2003

2004

2005

2006

2007E

2008E

2009E

2000

2001

2002

2003

2004

2005

2006

2007E

2008E

2009E

Source: Company data and JCF Source: Kaupthing estimates and company data


Long-term investments in Kaupthing
Exista (then SP eignarhaldsfélag) was initially founded in 2001 with the objective of We believe that the stake
holding shares in Kaupthing Bank and today the company is the largest Kaupthing in Kaupthing is a long-
shareholder, with a 23% stake in the company. The stake in Kaupthing is a core term investment for Ex-
asset in Exista's business model and a long-term investment. Despite this, Exista ista
does not have board representation in the bank. Kaupthing Bank is Iceland's largest
bank and for the past six years it has strengthened its international operations
through acquisitions and the establishment of subsidiaries. The majority of the Bank's
operations take place outside Iceland and, after the acquisition of NIBC is finalised,
over 75% of Kaupthing's revenues will be generated abroad. outlook for Kaupthing
seems good and is reflected in the relatively positive opinion equity researchers have
on the company's stock. According to mean consensus estimates, the target price for
Kaupthing is ISK 1,250 per share, suggesting upside potential of 16% compared to
the current price of ISK 1080.

Investment in companies with good cash flow
Exista defines itself as a financial services company and, at first glance, investment in Holds a 39.6% stake in
food manufacturing company Bakkavör or Skipti does not seem to fit into the busi- Bakkavör and 43.6%
ness model. However, although Exista is a financial services company, its investment stake in Skipti
strategy is broad. It focuses on investment in financial- or good-cash-flow compa-
nies, and is not interested in “start-up” or “turnaround” cases. Therefore, holdings in
Bakkavör and Skipti fit well into the Exista business model, as both are mature com-
panies with good cash flow providing opportunities for further growth.

Bakkavör - Capital employed (GBPm) Bakkavör - Revenues and assets (GBPm)

1,200 30.0% 1,800 4.5
1,000 25.0% 1,600 4.0
1,400 3.5
800 20.0%
1,200 3.0
600 15.0% 1,000 2.5
400 10.0% 800 2.0
600 1.5
200 5.0%
400 1.0
0 0.0% 200 0.5
2000

2001

2002

2003

2004

2005

2006

2007E

2008E

2009E

0 0.0
2000 2002 2004 2006 2008E

Capital Employed RoCE Total revenue Total Assets Asset Turnover

Source: Kaupthing estimates and company data Source: Kaupthing estimates and company data

Exista's largest shareholders are Lýður Guðmundsson and Ágúst Guðmundsson, two Exista's largest share-
brothers who founded Bakkavör in 1986. They acquired 55% of the share capital in holders are the founders
Exista in 2002. A year later, Exista acquired two holding companies whose portfolios of Bakkavör
included the brothers' stakes in Bakkavör Group. As a result of these transactions,
Exista became the largest shareholder in Bakkavör and the company now holds a
39.6% stake in the company. Bakkavör Group has expanded its operation extensively
for the past year and multiplied its balance sheet and income stream. We believe that
Exista considers Bakkavör a long-term investment due to both of sentimental value
and a good medium-term outlook.

Skipti - IPO by year end
Exista acquired a 43.6% stake in Skipti (Icelandic Telecom) when the company was
privatised in 2005, at which time the company was valued at ISK 66.7bn. One of the
conditions that the Icelandic government made for the sale was that at least 30% of
the company should be floated before year-end 2007. Kaupthing also participated in
this deal, buying 29.1% of Iceland Telecom, and this stake will be floated before
year-end.


Since privatisation, Skipti has undergone considerable changes, such as an increased
range of services domestically and expansion of its operation abroad through M&A.
The company's bottom line was negative last year, mainly due to exchange rate fluc-
tuations and their impact on financial expenses. Skipti's revenues increased by 30%
yoy in 1H07, but EBITDA margins fell to 28% compared to 33% in 1H06. The com-
pany claims this drop in margin is due to acquisitions in new IT companies with lower
margins.

Net profit and growth in revenue (ISKm) Skipti/Iceland Telecom - EBITDA ratio (ISKm)

3,000 35%
2,000 50% 10,000
30%
1,000 40% 8,000
25%
0
20% 30% 6,000
-1,000 1H02 1H03 1H04 1H05 1H06 1H07
-2,000 15% 20% 4,000
-3,000 10% 10% 2,000
-4,000
5% 0% 0
-5,000
-6,000 0% 2000 2001 2002 2003 2004 2005 2006 1H07
-7,000 -5%
Net profit Growth in revenues EBITDA Ratio EBITDA


In the time that has passed since the privatisation, competition in the Icelandic tele- Est. profit on investment
communications market has stiffened, especially in terms of mobile systems service, Est. profit in
where almost 40% of Skipti's domestic telecom revenues are generated. New com- ROI ISK (m.)
petitors are also on the horizon, as Nova intends to start providing experimental -5% -1.3
services in this field. The Executive Chairman of Exista has stated that the company's 10% 2.8
aim is that the annual return on the capital it invested in Skipti, ISK 13.5bn, is
25% 7.6
around 25%. This suggests that the value of Skipti has grown by ISK 21bn and that
35% 11.1
there is a hidden value of about ISK 7bn (EUR 90m) in Exista's books. Assuming that
the debt-to-equity ratio has remained unchanged from the time of purchase, it can 45% 14.9

be assumed that the enterprise value of Skipti will be around ISK 100bn when it is Source: Kaupthing estimate
listed.

We do not have sufficient information to accurately estimate the value of Skipti, as
the company has expanded its business significantly and has not published any busi-
ness plan or budgets. However, the stake in Skipti does not have any significant im-
pact on the overall value of Exista, as Skipti's book value is about 2% of Exista's total
assets.

Storebrand is an opportunistic investment
Exista announced in the beginning of August that it holds a 5.56% stake in Store- Storebrand price per-
brand. This announcement came in the wake of a permission given by the Financial formance (NOK)
Supervisory Authority in Norway to allow Kaupthing Bank to own up to 20% of Store- 110
brand shares and has provoked an investigation of whether these two companies are 90
working in tandem to gain control of the company. 70
50
Storebrand has indeed been considered a potential takeover target for some time but
09.06

12.06

03.07

06.07

09.07

Exista's management states that its stake in Storebrand is merely a trading position.
It is clear Exista has been building up this position for some time prior to the an-
Source: JCF
nouncement to the Oslo Stock Exchange as Exista purchased the shares in Store-
brand at an estimated average price of NOK 76.25. Storebrand's share price has
increased by almost 20% ytd and has been trading at an average price of NOK 91
ytd.


Good portfolio outlook
Exista's largest holdings are in Sampo, Kaupthing, Bakkavör and Storebrand. These Consensus estimates
companies are covered and valued by a number of equity analysts. Changing the suggest 23% upside po-
current market value to potential market value, using Kaupthing's or mean consen- tential in Exista's portfolio
sus estimates, would increase the market value of Exista stakes in these companies
by 23%. This indicates that the outlook for Exista's portfolio of listed assets is bright.

Potential market value of listed holdings updated to consensus estimates
Listed
Holdings No, Market % of Target Pot.mkt Pot.mkt.
(SEK) Shares Price Value Assets Price value* value change
Kaupthing Bank 170 1080 184,075 35.4% 1250 213,049 28,975
Sampo 114 20.32 193,817 37.2% 24.5 233,687 39,870
Storebrand ASA 14 83 12,607 2.4% 93.57 14,213 1,606
Bakkavör 855 66.1 56,526 10.9% 72 90,738 34,212
Total 447,025 2.4% 551,687 104,663
Percentage change 23%
Per share 9.21

Source: Kaupthing estimates and JCF

Exista reduces market impact on its equity
Exista is the largest shareholder in Kaupthing Bank and Sampo Group and views Exista applies the equity
these assets as its core assets in the financial sector. The company believes that method on its stake in
market fluctuations do not reflect the long-term nature of these holdings and believes Kaupthing and Sampo,
that the underlying performance is more important than the prevailing market price. which reduces the impact
Therefore, the company applies the equity method to account for these holdings, as of market fluctuations on
this reduces the impact of market fluctuations on the company's P&L. This method the P&L
was used for the first time in the 1Q07 report, and resulted in reported income for
1H07 being EUR 19m lower than it would have been according to the fair value
method.

Strategic holdings in Kaupthing and Sampo represent approximately 70% of Exista's These holdings represent
total listed holdings. Despite the changes in accounting policy, the company still has about 70% of Exista's
considerable market exposure, as its holdings in Bakkavör and Storebrand and its total listed holdings
trading portfolio go through the P&L. However, 15% of Exista's income in 1H07 was
from trading gains of proprietary trading and 22% of overall 1H07 revenues were
capital gains.

Currently, the value of Exista's listed securities is more than twice the value of its
reported equity. However, by applying the equity method on the stakes in Kaupthing
and Sampo, the impact of market fluctuations on Exista's equity is reduced. A 10%
decrease in the value of Exista's holdings that go through the P&L will lead to a 5%
reduction in equity; prior to the change in accounting policy the change would have
been approximately 20%.

Increased emphasis on the euro

Exista presented its accounts in EUR for the first time in its 1Q07 report. This change The company's accounts
was due to the fact that Exista's operational region is northern Europe, and a large are in EUR from the be-
part of the group's revenue, expenses and funding are in currencies other than the ginning of 2007
ISK and mostly in EUR. Furthermore, Exista considers that most of its growth oppor-
tunities in investment and operations are outside Iceland.

Exista's last AGM approved giving the board of directors the authority to issue the
share capital of the company in EUR instead of ISK if the Board considers the option
feasible. We believe that Exista will do this soon, as technical obstacles have now


been removed. This should make shares in Exista more attractive for foreign inves-
tors, as it reduces exchange rate risk.

Investors have high expectations of Exista
Exista has been performing well on the Icelandic stock exchange, and, until the re- Exista was this year's top
cent volatility started, the company was this year's top performer on the market, performer on the Ice-
showing a share price increase of 80%. However, as Exista's assets consist largely of landic exchange until the
listed holdings, the company's share price has fallen during the recent market tur- recent market turmoil
moil, resulting in a net increase of 35% ytd. So far this year, Exista's share price has
fluctuated broadly in line with those of its largest holdings. At the same time, the
company has been trading at high multiples, an average price-to-book value of 1.5x.
We believe investors view Exista as a growth stock and that they are buying it pri-
marily because of the expectation of capital gains and an interest in the future
growth of the company. It seems that Exista has created opportunities for itself
through its stakes in Sampo, Kaupthing and to some extent Storebrand.

Exista has a defined strategy of investing in financial companies or companies with The company has a good
good cash flow, but at the same time is able to be opportunistic. It has diversified its but short track record
revenue stream and has a good, but short, track record. We view the ownership
structure as favourable for investors. The largest shareholders have invested heavily
in the company and therefore share the same interests as the rest of the sharehold-
ers, i.e. dividends and/or value appreciation of their holdings. The Exista story is
short and it will be interesting to see how it continues.

Exista's P/B estimated for 2007 YTD Exista's and its portfolio's performance

1.8 200
180
1.7
160
1.6 140
120
1.5 100
1.4 80
60
1.3 12/06 02/07 04/07 06/07 08/07

1.2
Storebrand Kaupthing Exista
12/29/2006 3/29/2007 6/29/2007
Sampo Bakkavor

Source: Kaupthing estimates, JCF and company data Source: Kaupthing estimates, JCF and company data


Company overview
Brief history
Exista defines itself as a financial services company that operates in the areas of
insurance, asset finance and investments. The foundation of Exista was established
when a group of savings banks established SP Eignarhaldsfélag in June 2001 with the
objective of holding shares in Kaupthing Bank. Later, Kaupthing Bank joined this
group and the name was changed to Meiður ehf. Towards the end of 2002, the com-
pany increased its stake in Kaupthing, becoming the largest shareholder in the bank.
l
In the beginning of 2003, Bakkabraedur Holding B.V., a company owned by Ágúst
Guðmundsson and Lýður Guðmundsson, acquired 55% of the share capital in Meiður.
Since then, the Meiður portfolio has increased substantially and the investment strat-
egy has been expanded. In 2003, Meiður became the largest shareholder in Bakkavör
Group and in 2004 Meiður acquired a 23.3% stake in Flaga Group. In 2005, Meiður
acquired a stake in Iceland Telecom. During the same year, the name of the com-
pany was changed from Meiður to Exista and the strategy of becoming a leading
investment company in specific industry sectors was implemented. Significant
changes were made to Exista in 2006 and the company transitioned from an invest-
ment company into a financial services group. By acquiring VÍS Holding, Exista ex-
panded its operations to include insurance underwriting and asset finance. In Sep-
tember 2006, the company was listed on OMX Nordic Exchange in Iceland. So far this
year, Exista has announced that it has built up a 20% stake in Sampo Group, a lead-
ing Scandinavian insurance company. Furthermore, Exista has sold its stake in UK-
based insurance company IGI Group Ltd, and in June the company announced that it
had entered into a joint venture vehicle which acquired a 29% stake in JJB Sports. In
August, Exista announced it had acquired a 5.5% stake in the Norwegian insurance
company Storebrand.

Business model and operational approach
The company defines itself as a financial services company that operates in the areas
of insurance, asset finance and strategic investments. The main theme of its business
model is the mutual interaction of strong-cash-flow operating units and the invest-
ment arm of the company. The business model is based on gathering assets in the
effort to maximise the use of the balance sheet. The group goal is to build a leading
financial services company with Northern Europe as its core market.


Exista's organisation

Source: Exista Fact sheet

Operating businesses
Insurance
Exista Insurance consists of two insurance underwriters, each with its own inde-
pendent organisation. VÍS is non-life insurance company and Lífís is a life insurance
provider. Insurance-based financial services fit well with the investment operation, as
they stabilise the business and provide access to stable cash flow and funds for the
investment operation. However, domestic growth opportunities are limited, so growth
must be achieved through acquisitions in other markets.

VÍS (Vátryggingafélag Íslands hf.) is a general insurance company based in Iceland,
where it is one of three major insurance companies and has a market share of
around 35%. The company specialises in non-life insurance operations, offering full
insurance across Iceland for individuals, families, companies, municipalities and insti-
tutions. According to Exista, the main operating focus of VÍS has changed from gain-
ing market share to increasing profitability. VÍS' annual premium income is approxi-
mately EUR 108m, with a good distribution of both premiums and clients. Exista ac-
quired VÍS in May 2006.

VÍS - Revenue 2004-2007 (ISKm) VÍS - Current insurance operations

3% 2% 6%
3,500
9%
38%
3,000
9%
2,500

2,000

1,500
13%
1,000 23%
Compulsory motor Property
500
Other motor Accident and sickness
0
General liability Marine
1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07
Re Life

Source: Company data Source: Exista capital markets day handout


LÍFÍS (Líftryggingafélag Íslands hf.) is a provider of life insurance and other health-
related insurance. The company was established in 1990 and is the third largest life
insurance company in Iceland, with a market share of about 20%, as measured in
terms of gross premiums. Lífís provides a wide range of insurance, such as life insur-
ance, critical illness insurance, unit linked life insurance, and income insurance. Ex-
ista acquired LÍFÍS with VÍS and owns 100% of the company.

Non-life portfolio VÍS Life portfolio - Lífís

7% 2%1%
7% 3%
10%
8%
43%
49%

17% 15%

20% 18%

Government bonds Equities
Mutual funds Capital guaranteed bonds Government bonds Equities
Money market Corporate bonds Mutual funds Money market
Real estate Capital guaranteed bonds Corporate bonds

Source: Exista Capital Markets Day handout Source: Exista Capital Markets Day handout

Asset Finance
Lýsing is one of three leading asset-finance providers in Iceland and offers a range
of financing products to commercial and private clients. The company has a market
share of over 40% in asset financing in Iceland. Lýsing provides real estate leasing
and operating leases to corporations in Iceland, as well as vehicle leasing to individu-
als. Iceland is Lýsing's main operating region. Exista acquired Lýsing at the same
time as VÍS and LÍFÍS, May 2006.

Lýsing - Changes in fundamental ratios Lýsing clients distribution

9% 3%
70.0%
30%
60.0%
50.0% 22%
40.0%
30.0%
20.0%
10.0%
36%
0.0%
-10.0% 1H06 1H07 2003 2004 2005 2006 Individuals Retail and services Contractors
Manufacturing Other
Cost income ratio Growth in total assets
Growth in total revenue

Source: Company data Source: Exista's Capital Markets Day handout

Trading
Exista Trading consists of proprietary trading for the parent company and asset
management for subsidiaries. The subsidiaries are regulated entities, VÍS and Lífís,
and their portfolio approach focuses on diversification and relatively stable returns.
Exista Trading manages technical provisions where the investment objectives in the
non-life and life portfolios differ. For the non-life portfolio, the investment horizon is
medium to long term, but focus in the life portfolio is mainly on long-term invest-
ments. The proprietary trading strategy is mainly aimed at a short-term investment
perspective, where focus is on listed securities and money market instruments. The
trading approach is defined as opportunistic, i.e. seeking benefit from market oppor-


Exista Right place waiting for the right time

Exista Right place waiting for the right time

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (20)

En vedette

En vedette (19)

Similaire à Exista Right place waiting for the right time

Similaire à Exista Right place waiting for the right time (20)

Plus de Mar Wolfgang Mixa

Plus de Mar Wolfgang Mixa (20)

Dernier

Dernier (20)

Exista Right place waiting for the right time