Financial Targets & Strategic Priorities

Transcription

1 Financial Targets & Strategic Priorities A G E A S I N V E S T O R D AY 6 TH O F J U N E I LISBON PORTUGAL

2 Ageas... Continuing the growth journey

3 FY 2015 FY 2016 Insurance excl. UG/L without Hong Kong 11.0% 11.8% 10.6% 8.1% Status Ambition bps 36 bps 93 bps 25 bps Targets 96.9% 101.1% Insurance 182% 179% I 3 I

4 Inflows FAQ s clustered around Net Profit Solvency II & FCG 5 Themes Dividend & Use of Net Cash Strategy & M&A I 4 I

5 Continuing the growth journey Inflows I 5 I

6 Sustainability of Belgian Life inflows? Inflows FAQ s Growth potential in Non-Life in European core countries? Inflow growth in Asia over time? Evolution distribution channel mix going forward? I 6 I

7 Belgium CAGR +13% Inflows Consistent inflow growth UK (excl. UK Life) Continental Europe Asia (excl. HK) Reinsurance 21,269 17,220 11,420 9,340 7,436 5,805 31,654 29,792 25,781 23,220 in EUR mio 17,774 15, ,849 1,983 4,272 2,143 5,048 2,284 5,489 2,398 5,157 2,457 5,429 2,203 6,179 6,886 5,956 5,856 5,679 6, I 7 I

8 Insurance Business Mix Europe Business Mix Asia Business Mix Inflows Different profiles Europe vs. Asia Life (excl. UK Life & HK) Non-Life in EUR mio 16,816 20,737 5,680 22,628 5,861 25,163 6,047 29,234 6,299 31,471 6,285 CAGR +13% +5% Life (excl. UK) Non-Life in EUR mio 11,011 4,284 13,301 13,288 4,928 5,095 13,743 5,225 13,293 5,386 13,696 5,392 CAGR +4% +5% Life (excl. HK) Non-Life in EUR mio 5,805 7, , , , ,028 17, ,881 CAGR +25% +8% +27% 4,891 11,924 15,057 16,767 19,116 22,936 25, % 6,727 8,373 8,193 8,518 7,908 8,304 +4% 607 5,197 6,684 8,574 10, I 8 I

9 Life Inflows Belgium & Continental Europe Guaranteed Inflows Belgium & Continental Europe Unit-Linked Inflows Belgium & Continental Europe Inflows Guaranteed Unit-Linked in EUR mio Belgium Continental Europe in EUR mio Belgium Continental Europe in EUR mio European Savings market remains guaranteed driven 6,727 1,771 6, ,956 5,174 5,941 5,677 5,812 6,085 1,510 1,029 1,198 1,325 4,431 4,648 4,614 4,760 4, ,265 5, ,647 4, ,095 4,648 4,614 1,306 3,541 3,553 3,308 4, ,779 1,771 1, , , ,198 1, I 9 I

10 Inflows Asia Life Inflows Business Mix Asia Life Technical Underlying* Asian Life market growth driven by profitable renewal & regular premiums Single Regular Renewal in EUR mio CAGR China Other Asia in EUR mio 49,541 CAGR +21% 15,585 17, % 42,303 12, % Growing Technical Liabilities support sustainable profit growth 5,551 2,919 1,035 1,597 7,131 3,963 1,210 1,958 9,058 4,622 1,603 2,833 11,079 5,575 2,284 3,220 8,691 3,207 3,687 9,501 3,823 3, % +30% +19% 19,034 6,857 12,177 22,553 8,067 14,486 25,953 8,009 17,944 34,852 10,052 24,800 10,934 31,369 36, % *Excl. Hong Kong I 10 I

11 Non-Life Net Earned Premiums Belgium, UK & Continental Europe Motor Household Accident & Health Other lines Inflows in EUR mio European Non-Life business mix stable over time mostly driven by Motor & Household 3, , ,007 3,749 3, ,029 4,038 4, ,078 1,067 25% 9% % 26% 10% % 1,571 2,058 1,557 1,616 1,709 1,790 45% 44% I 11 I 2012 inflow not restated for deconsolidation Tesco Underwriting since 2013

12 Belgium Life Inflows Distribution Mix Belgium Non-Life Inflows Distribution Mix Inflows Bank Broker Employee Benefits 26% Bank Broker Employee Benefits 14% 16% Belgian Life business bank driven Non-Life business broker driven % 20% 70% I 12 I

13 CEU Consolidated CEU Consolidated UK Life Inflows Non-Life Inflows Non-Life Inflows Distribution Mix Distribution Mix Distribution Mix Inflows Bancassurance Brokers Agents Direct Affinity Bancassurance Brokers Agents Direct Affinity Brokers Partnerships Direct European Life business bank driven Non-Life business broker driven 18% 4% 4% 2% 7% 6% 13% 10% % 23% % % 77% I 13 I

14 Asia Life Distribution Mix Agency Banca Other Agency Banca Other Inflows 9% 5% Growing importance of Agency channel in distribution mix % 42% % 52% I 14 I

15 Belgian Life inflows remain strong despite current low i-rate environment Inflows Conclusion Non-Life driven by organic & inorganic growth Growth in Asia driven by focus on regular premiums Distribution mix stable with growing importance of agency channel in Asia I 15 I

16 Continuing the growth journey Net Profit I 16 I

17 Underlying net profit going forward? Impact continued low i-rate environment? Net Profit FAQ s Recurring level of holding costs? Sustainable level of net capital gains? Sustainable level of operating margin & combined ratio? I 17 I

18 Belgium Insurance Net Profit As reported Belgium Insurance Net Profit Underlying* Net Profit Non-Life Life in EUR mio Robust & stable net profit levels (327) (330) I 18 I * 2011 Corrected for Greek impairments 2016 Corrected for Terrorism events

19 Net Profit Belgium Gross * Realised Capital Gains Fixed Income Real Estate & Other Equities Ageas Gross Unrealised Gains/Losses in EUR bn Steady level of in EUR mio Real Estate unrealized gains despite 8% 33% 19% 22% Equities yearly realisation 11% 61% 36% 66% % 31% 32% 12% I 19 I * Net of tax share before impairments and profit sharing

20 FY 13 FY 14 FY 15 FY 16 Guaranteed interest rate 2.80% 2.71% 2.63% 2.49% Fixed income yield 3.97% 3.84% 3.71% 3.45% Net Profit Life Back book Estimated yield on RE & EQ Total Estimated Yield 0.5% 4.47% 0.5% 4.34% 0.5% 4.21% 0.5% 3.95% Additional yield on real estate & equities estimated at 0.5% Liabilities Guaranteed (EUR bn) Matched portfolio in Belgium Fixed income yield 2.89% 2.11% 1.71% New Money Life & Non-Life Estimated yield on RE & EQ Total Estimated Yield 0.5% 3.39% 0.5% 2.61% 0.5% 2.21% Reinvested amount (EUR bn) I 20 I

21 Back book vs. Fixed Income Investments 50,000 Liabilities guaranteed i-rate Existing bonds Book yield existing bonds Existing guaranteed rates 5% in EUR mio 40,000 4% Net Profit Strategic choice to continue sale of traditional savings 30,000 3% Flexible pricing allows to match customer interest with group objectives products & maintain market share Limited support of new 20,000 2% business by back book 10,000 1% 0 0% I 21 I

22 UK Insurance Net Profit As reported Non-Life Life UK Insurance Net Profit Underlying* in EUR mio Net Profit Restructuring 1 st step to return to previous structural levels of net profit in EUR mio (4) (0) (2) (3) I 22 I (156) *11-16 Excl. Net result UK Life FY 14 corrected for capital gain sale of UK Life FY 16 corrected for Closure Glasgow office, Special risks & Ogden rate review

23 CEU Insurance Net Profit As reported CEU Insurance Net Profit Underlying* Net Profit Life Non-Life in EUR mio 90 in EUR mio 99 CAGR +9% Full contribution from integrated Portuguese activities expected as of % (19) (8) I 23 I * 2011 Corrected for Greek impairments 2016 Corrected for integration costs Ageas Seguros

24 Asia Insurance Net Profit As reported Asia Insurance Net Profit Underlying* Net Profit Non-Life Life in EUR mio in EUR mio Further net profit growth driven by structurally growing technical liabilities & ramp up new countries CAGR +56% +27% +68% (72) (64) I 24 I *11-16 Excl. Net result Hong Kong FY 16 corrected for capital gain sale of Hong Kong

25 Net Profit Corporate Costs As reported Operating Staff & Intercompany Corporate Costs Underlying* in EUR mio Underlying run rate of EUR mio/year in EUR mio 95 Holding costs critically reviewed *2016 corrected for legal fees related to the Fortis settlement & variable remuneration plans I 25 I

26 Insurance Net Profit As reported Insurance Net Profit Underlying Net Profit Underlying Insurance net profit capacity of EUR mio in EUR mio Belgium UK Continental Europe Asia Reinsurance CAGR +7% +56% +9% -9% +3% 86 (327) (8) (64) (313) (156) I 26 I

27 Net Realized Capital Gains Belgium UK Continental Europe Asia Net Profit Average level of realized capital gains per year of EUR mio * 107** in EUR mio * Exceptionally high due to timing difference on Real Estate on top of cap gains on bonds & equities ** Exceptionally high level of capital gains *** Equity impairments in Q *** I 27 I

28 Return on Equity excl. UG/L As reported Return on Equity excl. UG/L Underlying Non-Life Life Net Profit 10.7% 10.4% 11.4% 11.0% 12.3% 11.3% 12.3% 11.8% 11.8% Underlying ROE consistently above 11% 12.1% 12.5% 11.4% 7.7% 10.6% 0.8% 12.1% 12.5% 11.1% 7.7% 11.2% 10.1% 9.6% 11.5% 12.8% 15.5% 12.3% 10.7% 12.9% 14.5% 12.1% I 28 I

29 Belgium Investment margin Underwriting margin Expense & other margin Operating margin Net Profit in bps Operating Margin Guaranteed 32 (29) 32 (31) 30 (38) 25 (27) 29 (34) Group wide discipline to consistently realise Ambition 2018 target Ageas Operating margin CEU Operating margin (33) (31) (39) (23) (36) (85) (83) (102) (71) (65) I 29 I

30 * Expense ratio Net Profit Claims ratio -- PY claims ratio Combined Ratio in % * Underlying excluding 5.6 pp terrorism & UK one-offs Ageas target combined ratio structurally 97% with stable reserve releases (3.5) (3.1) (3.8) (4.0) (5.9) (3.0) I 30 I Underlying

31 Belgium UK CEU Expense ratio Claims ratio -- PY claims ratio * ** Net Profit Underlying business combined ratio segments 100% (7.3) (4.5) (3.6) (3.4) (7.2) (8.2) 0.1 (2.1) (4.0) (4.6) (4.4) 4.5 (2.0) (2.5) (4.0) (4.3) (6.5) (6.5) Underlying Underlying I 31 I * Excluding terrorism events * Excluding exceptional items

32 Solid underlying net profit with sustainable net capital gains A further yield decrease will NOT affect future cash flows thanks to Net Profit Conclusion matched portfolio Despite low i-rate environment stable evolution of the operating margin on back book Underlying holding costs EUR mio a year Strong underlying operational performance expected to continue I 32 I

33 Solvency II & FCG I 33 I

34 Solvency II & FCG What about our 175% insurance target? Will we move to a group target? Predictability of our Solvency II levels? FAQ s Convergence going forward between Solvency II ageas model & Solvency II PIM model? I 34 I

35 Ageas will move to a group target after the completion of the settlement Solvency II ageas is considered economically more appropriate and prudent Solvency II & FCG The 175% Insurance target is a decision of Ageas, not defined by the regulator and hence not restrictive with respect to capital management flexibility Solvency II is inherently volatile, mainly due to basis risk, and as a result so is Free Capital Generation First underlying results suggest a sufficient basis of Free Capital Generation to ensure a sustainable dividend payout I 35 I

36 Continuing the growth journey Dividend & Use of Net Cash I 36 I

37 Dividend & Use of Net Cash FAQ s Future cash upstream pattern : Belgium vs. other segments? Future evolution of annual dividend? What about the dividend policy when Solvency II ageas ratio goes below target? I 37 I

38 Belgium 519 UK Dividend & Use of Net Cash Continental Europe Asia in EUR mio Regular annual upstream of EUR mio/year supported by all segments estimated 2013 Belgium excluding EUR 200 mio capital restructuring 2014 CEU excluding EUR 30 mio France & EUR 61 mio Portugal Capital restructuring EUR 115 mio Portugal M&A I 38 I

39 Total returned to shareholders EUR 4 bn since 09 Dividend & Use of Net Cash Capital Reduction Share Buy Back executed Paid Dividend in EUR mio * Ageas returned 50% of current market cap since I 39 I * Share buy-back programme considered as fully executed

40 Dividend & Use Own Funds in EUR bn of Net Cash Dividend policy remains unchanged even if SII directional target goes below 175% SCR (1.5) (1.4) FY16 3M 17 FY16 3M 17 FY16 3M 17 FY16 3M 17 FY16 3M 17 FY16 3M 17 FY16 3M 17 FY16 3M 17 FY16 3M 17 Belgium UK CEU Reins. Diversification Non-transferable Insurance GA Group Non-EU Non-controlled participations* Solvency IIageas in % 244% 235% 100% 109% 127% 136% 278% 213% 179% 177% 191% 186% 264% 255% I 40 I

41 Continuing the growth journey Strategy & M&A I 41 I

42 Successful execution of Fortis settlement? Strategy & M&A FAQ s What is the likelihood the AG Insurance related put option will be exercised? M&A / Divestment strategy in Europe vs Asia? What is Ageas financial capacity to fund organic & inorganic growth? I 42 I

43 Strategy & M&A Announcement at least 18 months Opt-out period Distribution Fortis Settlement : 2 months 2-4 months 6-9 months 3-6 months 3-12 months decision Amsterdam Court announced on 1. Settlement 14/03/ Pre-hearing 25/08/ Hearing 24/03/ Decision on termination right 16 June 2. Filing 23/05/ Notification & Announcement done 6.Notification & Announcement of Court s binding decision 16/06/ Distribution of compensation I 43 I

44 Description of the 25% AG Insurance put option Strategy Put option part of global agreement between Fortis, Belgian State & BNP Paribas concluded in 2009 BNP Paribas Fortis bank received an unconditional right to sell to Ageas at fair value the acquired 25% + 1 & M&A Put Option AG Insurance share in AG Insurance Exercise period runs from 1 st of January until 30 th of June 2018 Exercise period coincides with potential decision on renewal exclusive distribution agreement between Clarity expected by mid 2018 at the latest AG Insurance & BNP Paribas Fortis bank Accounting methodology Accounting value reflected in the General Account (EUR 1,340 mio as per 30 March 2017) Ageas is using the embedded value of the Life business of AG Insurance and a discounted cash flow model for Non-Life as a basis for the calculation of the Liability I 44 I

45 Distribution agreement renewed Strategy YES NO & M&A Status quo on distribution Put Option AG Insurance YES Ageas full owner of Separation BNP put AG Insurance 4 possible scenarios option exercised Status quo on distribution Unlikely since NO & ownership no strategic logic I 45 I

46 Total Liquid Assets Strategy & M&A Ring-fenced for Settlement Liquid Assets Net Cash in EUR bn Financing in case of a compelling M&A transaction can come out of: Available Net Cash Projected future cash flows Debt issuing capacity Total Financing capacity estimated at EUR bn I 46 I

47 Strategy & M&A Own Funds Debt capacity is a function of regulatory & rating constraints Tier 3 capital linked to DTA AG Insurance 5.25% AG Insurance 3.5% AG Insurance 6.75% Fresh, Euribor +1.35% Tier 1 unrestricted Tier 2/3 combined Max 50% of SCR PIM Restricted Tier 1 Max 20% of Tier 1 Regulatory room EUR 1.3 bn T3 EUR 0.1 bn T2 EUR 0.9 bn RT1 EUR 1.4 bn Own Funds 8, ,250 Leverage EUR 2.3 bn Hybrid Tier 1 classified instruments exceed maximum allowed level of Restricted Tier 1 by EUR 341 mio Regulatory maximum to issue T2/T3 provides EUR 1.3 bn room Maximum leverage (senior and hybrid) should not exceed 50% of Unrestricted Tier 1 (or 33% of total capital; EUR 2.8 bn) from a rating perspective composition Unrestricted Tier 1 IT1 EUR 5.7 bn 5,654 Leverage room is thus more constraining and might reduce (or limit) room to issue debt In case of M&A, leverage may nevertheless temporarily exceed this norm, but has to be brought back via profit retention Rating agencies not only look at leverage expressed as a percentage of total capital, but also look at leverage costs vs EBITDA I 47 I

48 Priority to strengthen positions in existing markets Strategy & M&A M&A Criteria Inorganic Growth Clear preference for Non-Life Further expansion in fast growing emerging markets while: respecting Ageas M&A criteria & overall financial targets continuing to build on a successful partnership model Flexibility for opportunities where Ageas believes its expertise can create growth & improve the business I 48 I

49 I 49 I Conclusion

50 Ageas works towards sustainable value creation Healthy growing and qualitative inflow mix Balanced profit levels with further growth potential Conclusion Solid capital position Steady cash upstreams to fund dividend Additional funding capacity available to fund growth I 50 I

51 We are... A top insurer in Europe and Asia; growing in our existing markets and exploring new opportunities A partner in insurance; with a proven competence in developing strong and dynamic partnerships with leading companies in the local market Experts in insurance; offering Retail and Business customers personalised solutions in Life and Non-Life insurance Organised in a way that allows us to reap the benefits of local autonomy; adding value by sharing group-wide best practices It s a journey, not a destination Evolving as an insurer by constantly investing in relevant skills and capabilities with a strong entrepreneurial culture Well diversified with a balanced portfolio spanning both the mature and growth markets of Europe and Asia I 51 I