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Your partner in Insurance 12 May 2010
Q1 2010Periodic financial information
112 May 2010 |
Fortis’ shareholders accepted name change on 28-29 April 2010
“The new name is a crucial element in the
repositioning of the group and
symbolizes the start of a new era”
212 May 2010 |
Highlights first quarter 2010
Strong inflow levels
Total inflow levels up 20% to EUR 5.0 billion Life inflow up to EUR 4.0 billion (+20%), Non-Life up to EUR 1.0 billion (+16%) Significant growth in Asia; Total inflow at EUR 1.8 billion (+59%) Inflow on a consolidated basis at EUR 3.3 billion, up 3%
Insurance net result significantly up
First quarter net profit at EUR 85 million (Q1 09 at EUR 21 million*) Life : EUR 91 million; strong overall recovery Non-Life : EUR 10 million negative; adverse weather conditions and an increased
claims frequency and severity in Motor in both Belgium and UK UK Other Insurance : EUR 4 million
Group net result negative due to volatility General Account
Group : EUR 209 million negative General Account : EUR 294 million negative; Combined negative impact in Q1 of
EUR 271 million on fair value call option BNP Paribas shares and RPN(I)
Further rebalancing government bond portfolio
EUR 4.0 billion divested on South-European government bonds in 2010 (up to 10 May)
Position on Greece, Portugal, Italy at EUR 3.8 billion, EUR 2.2 billion and EUR 5.9 billion respectively
Capital & equity position remains strong
Total insurance solvency stable at 229% EUR 5.8 billion above regulatory minimum Shareholders’ equity at EUR 8.5 billion, or EUR 3.4 per share
* Net Insurance result Q109 restated from EUR 13 mio to EUR 21 mio as a result of the new segment structure
312 May 2010 |
Reporting structure as of Q1 10 aligned with management structure
Belgium Continental Europe
United Kingdom Asia
Operating under name AG Insurance since June 09 25% owned by BNP Paribas Fortis EUR 7 bn inflow in 2009; >2.5 million customers Multi-channel strategy via brokers and banking
channel AG Employee Benefits dedicated channel for life &
healthcare Life/ Non-Life inflow : 75%/25%
Includes all European insurance activities, except Belgium & UK
EUR 4 bn inflow in 2009 Mix of mature positions (Portugal, Luxembourg),
smaller positions in fast growing markets (e.g. Turkey) and new activities (e.g. Italy)
Multi-channel strategy via brokers, bancassurance, affinity partners and tied agents
Life/ Non-Life : 95%/5%
Leading national provider of Non-Life insurance; recently launched activity in Life protection business
EUR 1 bn inflow in 2009 Strong presence Personal lines & expanding
Commercial lines (83%/17%); Multi-channel strategy via brokers, affinity partners
and owned distribution Distribution agreements with ao Marks & Spencer,
Tesco, Toyota, John Lewis Partnership 100% owner of specific distributors RIAS & Fortis
Insurance Solutions; Reporting will include a separate line for its Other Insurance
Active in 5 countries of which Hong Kong 100% owned EUR 4 bn inflow in 2009 (incl partnerships at 100%) Strong partnerships with leading local partners and
financial institutions in China, Malaysia, Thailand and India
100% owned activity incl regional headquarters in Hongkong;
Life/ Non-Life : 94%/6%
412 May 2010 |
Commercial performance remains strong in Q110
Belgium LifeNon-Life
United Kingdom*LifeNon-LifeOther Insurance
Continental EuropeLifeNon-Life
Asia** LifeNon-Life
Total LifeNon-LifeRetail
Of which non-consolidated partnershipsLifeNon-Life
Change
(3%)(6%)7%
21%-
20%
16%12%
*
59%63%15%
20%20%16%
55%67%15%
Q1 09
1.91.40.5
0.2-
0.2
1.00.90.1
1.11.00.1
4.13.30.8
1.11.00.1
Q1 10
1.81.30.5
0.3-
0.3
1.11.00.1
1.81.70.1
5.04.01.0
1.71.60.1
Total gross inflow (EUR bn) Total net profit (EUR mio)***Q1 09
541
5(2)
3434
(1)
981
211434
11101
Q1 10
6472(8)
(2)(1)(5)
411101
12102
8591
(10)4
1073
* Life inflow Q1 10 at EUR 5 million/ Retail distribution not reported at inflow level/ ** All entities at 100%/ *** Net profit after tax & minorities
512 May 2010 |
Gross Written premiums Non-Life
Inflow* details by segment
Belgium
United Kingdom
Continental EuropePortugalFranceLuxembourgItalyGermanyTurkeyUkraine
AsiaHong Kong
Non-consolidated partnerships at 100%MalaysiaThailandChinaIndia
Total
Q1 09
1,401
1
90068374
117
817
1,04566
97914410870522
3,346
Q1 10
1,315
5
1,009554100327
1216
1,70068
1,632185156
1,25041
4,029
Gross inflow Life(EUR mio)
%Ownership
75%
100%
51%100%
50%/100%25%
100%100%100%
100%
31%31%/13%
25%26%
TotalQ1 09
453
217
7159
12
95
957322
836
Q1 10
483
260
11966
54
109
1098326
972
Q1 09
1,854
218
97074274
129
817
1,14066
1,07421713070522
4,182
Q1 10
1,798
265
1,129620100327541216
-1,809
68
1,741268182
1,25041
5,001
* All entities at 100%
612 May 2010 |
146 158
132 144
13713342 44
Q1 09 Q1 10
Belgium (AG Insurance)
Life inflowIn EUR mio
Non-Life Gross Written PremiumsIn EUR mio
73 75
942 764
20598288 271
Q1 09 Q1 10
1,401 1,315
453 483
Group LifeUnit-Linked
Savings
Traditional
Other
Property
Accident & Health
Motor
(6%)
Individual Life Down 6% to EUR 1 bn Bank channel inflow down; Q1 09 exceptionally
high thanks to specific commercial campaigns Broker channel up 18%, in line with positive
trend second half year Unit-linked more than doubled to EUR 205 mioGroup Life Down 6%; Q1 09 inflow included exceptional
premium payments related to group unit-linked contracts
Funds under Management Up 10% to EUR 46.5 billion
Property and Casualty Inflows up mainly thanks to motor (+9%) Despite negative ABEX* evolution, property
inflow up 3% Accident & Health +8% with strong growth in health care (+17%)Combined Ratio 113.3% vs 107.1% last year Hit from weather related winter events and storm
Xynthia & unfavorable development in Workmen’s compensation
* ABEX : The abex-index is based on price evolutions of public & private buildings. It reflects the national average and its evolution over a well defined period.
+7%
712 May 2010 |
Motor
1 5
217260
Q1 09 Q1 10
United Kingdom
Total inflowIn EUR mio
Non-Life (+20%) Driven by growth in Commercial and Personal
linesLife Significant progress in protection market Over 80,000 customers. Aim to have the protection products available to
the whole IFA market by mid 2010Other Insurance RIAS & FIS income up 6% thanks to good
performance renewals, add-on income and growth in partnership income
Personal lines (+12%) Strong performance in Household portfolio Good growth in Travel account in collaboration
with partners Post Office & Age Concern Commercial lines (+82%) Full launch into Fleet market Continuing development electronic trading
capability facilitating new business generationCombined Ratio 110.2% vs 108.9% in Q1 2009 Results driven by severe weather and motor
claims costs: an industry-wide issue
218265
Non-Life
Life
Other
Property
Accident & Health
11 15
140 145
654917
35
Q1 09 Q1 10
217 260+20%
+21%
Non-Life Gross Written PremiumsIn EUR mio
812 May 2010 |
Continental Europe
Life inflowIn EUR mio
Inflow Strong performance Luxembourg & France due
to pick-up sales Unit-linked sales up 17%, thanks to Luxembourg
mainly Portugal steady although down on last year;
Lower structured unit-linked sales and Q1 09 benefited from high pension business sales (anticipated reduced i-rate)
Funds under Management Up 21% to EUR 22.4 bn Increase in Portugal & Luxembourg (19% resp.
28%)
Inflow First time inclusion Italian operations
compensate for deconsolidation Luxembourg Non-Life
Portugal up 10% thanks to strong development Médis brand
Combined Ratio 97.6% vs. 97.1% last year (scope changed)
69 69354 395
488416
6158
Q1 09 Q1 10
6659
53
12
Q1 09 Q1 10
71
119+69%
Non-Life Gross Written PremiumsIn EUR mio
Accident & Health
Motor
Unit-Linked
Savings
Traditional
Group9001,009
+12%
912 May 2010 |
+15%
59 71
3638
Q1 09 Q1 10
Asia
Life inflowIn EUR mio
Inflow Strong continued growth mainly related to non-
consolidated partnerships Hong Kong +4% (+5% excl currency rate impact) China driven by further investments in
distribution capacity & boosted by single premium product innovation
Inflow in other countries strongly supported by local bank partners
Funds under Management Up 20% to EUR 1.24 bn (Hong Kong only) EUR 13.8 bn including non-consolidated
partnerships at 100%
Inflow Both Malaysia and Thailand performed well Strong development of the retail motor and
corporate MAT linesCombined Ratio Improved claims experiences and better cost
ratios 79% thanks to UPR releases in Malaysia
700
1.574251
8
49
60
Q1 09 Q1 10
95109
Non-Life Gross Written PremiumsIn EUR mio
1,045
1,700
+63%
Non-Motor
Motor
Unit-LinkedSavings
Traditional
* Non-motor includes Fire, MAT, Accident & Health and other lines
* Group sales amounted to EUR 48 mio in Q1 09 and to EUR 58 mio in Q1 10
1012 May 2010 |
Combined ratio mainly up due to adverse weather conditionsFirst impact corrective measures visible
Motor Tariff increases of 3.5% in ‘09 - 4.5% in ‘10 Higher frequency in TPL and material damage, cfr ‘09 Severe weather related events in Jan & Feb Additional measures, e.g. reviewed product features Full impact corrective measures not yet visible
Fire 50% tariff increase Natural Disaster cover (+3.5% impact on
Fire premium income) Impact Xynthia storm (EUR 16.5 mio) and more large claims
(EUR 3.8 mio) Additional measures envisaged
Workmen’s Compensation Higher claims frequency and aggravation of some PY claims
Belgium (AG Insurance) United Kingdom
Expense ratio
Claims ratio76.6%66.4%65.0%63.7%61.6%
37.0%36.8%35.9%36.7%37.4%
06 07 08 09 Q1 10
80.0%80.4%73.1%79.7%70.2%
30.2%27.7%28.8%27.7%
28.2%
06 07 08 09 Q1 10
98.4 %107.4% 101.9%108.1%
99.1% 100.4% 100.9% 103.2%113.7% 110.2%
Motor Combined ratio worsened to 111.8%, as a result of the
claims ratio increasing to 87.4% Industry-wide poor performing private motor principally
due to increased third party injury claims Corrective actions taken in 09 & 10 which will benefit
account in 10 and 11
Fire/Household Combined ratio improved from 115.1% to 110.1% Underlying loss ratio improvement offset by impact of
severe weather in Jan 10
1112 May 2010 |
Ageas’s Investment Portfolio at 31 March 2010
Insurance Investment Portfolio (EUR 58.3 bn)In EUR bn Fixed Income securities
99% investment grade, 90% rated A or higher EUR 4.8 bn in BBB-status; mainly Greek
government bonds (EUR 3.8 bn) Government bonds further reduced in Q1 10 and
in Q2 10 (until 10 May)− EUR 2.7 bn Italy, EUR 0.8 bn Portugal, EUR
0.5 bn Greece− Mainly redeployed in Belgian governments
bonds, equities & corporate bonds Greece at EUR 3.8 bn, Italy at EUR 5.9 bn,
Portugal at EUR 2.2 bn, Spain at EUR 1.9 bn**
Equities Up to EUR 1.9 bn
Real Estate Unrealized gain net-of-tax remained intact at
EUR 0.6 bn
Fixed Income Securities
52.9
RE Inv Prop*
2.1 RE own use*
1.4
Equities1.9
* Real Estate valued at market value; Unrealized gain after tax (incl. own use) amounts to EUR 0.6 billion** Values at historical/ amortized cost
1212 May 2010 |
Fixed Income Securities of EUR 53.1 bnSituation end of 31 March 2010In EUR bn
GovernmentBonds
34.064%
Structured Credits0.6 1%
Corporate Bonds18.535%
AAA18.535%
A15.630%
AA13.925%
BBB4.89%
Below Inv grade/ Unrated0.31%
End of March gross unrealized gains before tax EUR 2.2 bn or EUR 1.2 bn after tax and after shadow accounting
90% bond portfolio single A or higher 60% rated AA or higher Only 1% below investment grade or unrated No major changes since end of Q1 10
1312 May 2010 |
Government & Corporate Bond portfolio of EUR 52.4 bnSituation end of 31 March 2010
Gross unrealized gains before tax and shadowaccounting (UCG) of EUR 1.2 bn (end of March
10). Gross unrealized loss on Greece at EUR 377 mio
As per 10 May, unrealized capital gains at EUR 538 mio
In EUR bn
Gross unrealised gains of EUR 954 mio end Q1 10 vsEUR 649 mio end 09
91% bond portfolio single A or higher; 69% rated AA or higher; only 1% below investment grade or unrated
Government bonds EUR 34.0 bn* Corporate bonds EUR 18.4 bn
* All values at fair value
Spain2.0
Banking/Other financials
9.3
Othercorporates2.4
Supra-national2.0
Government related4.7
Greece3.9
Belgium8.2
Portugal3.2
Italy 7.4
France2.0
Others5.5
Germany1.9
1412 May 2010 |
General Account
Q1 10 net result of EUR 294 mio negative (including eliminations) EUR 126 mio negative charge related to RPN(I) EUR 145 mio net-of-tax negative impact revaluation call option on
BNP Paribas shares
Recovery deferred taxes as a result of liquidation Fortis Brussels only in Q2 10
Investment Royal Park Investments not impacted in Q1 10
Other items : Net interest margin EUR 4 mio negative Staff & administrative expenses of EUR 19 mio, including some
one-off separation costs Interest payment to Fortis Bank related to RPN of EUR 1.6 mio Capital gain of EUR 12 mio on sale Luxembourg Non-Life
Net cash position General on 31 March of EUR 2.8 bn
1512 May 2010 |
Update Q1 valuation call option related to BNP Paribas shares
Valuation Black & Scholes as per30/09/2009
Volatility impact set at 24% ► EUR 943 mio total value option as at 31 March Dividend yield of 4.476% (vs 3.565% end Dec 09) Strike price unchanged at EUR 66.672 per share Non standard features: 30% haircut ► EUR 660 mio Volatility +5% ► total value option +32%
Monetisation Ageas continues to examine all options
Taxation
Ageas announced intention to liquidate sub-holding Fortis Brussels SA/NV As a result deferred taxes on value call option can be offset by estimated tax
losses of Ageas SA/NV Positive impact on P&L deferred tax recovery only in second quarter 2010
Value as per 31/03/2010
Net-of-tax valuation call option on BNP Paribas shares estimated at EUR 436 mio per 31 March 2010; Deferred tax charge of EUR 224 mio
1612 May 2010 |
Fair value interest mechanism related to RPN(I)
Valuation methodology
Net discounted value all future interest paymentsuntil a potential reimbursement of the CASHES
End 09 methodology refined based on valuation techniques for financial derivatives
Drivers quarterly interest payments
Evolution Ageas’s share price Evolution theoretical market value CASHES Evolution short term interest rate
Value as per 31/03/2010
EUR 442 mio negative as per 31/03/2010 mark-to-market value RPN(I) Cash interest cost Q1 10 : EUR 1.6 mio
Assumptions
Ageas’s share price (B-S model) :− EUR 2.64 per share (closing price 31/03/10)− Dividend yield consistent with the proposed dividend− Share price volatility of 43% (base Q1 10 data)
LT-value CASHES:− 60.4% of par (closing price 31/03/10) vs 54.4% end 09− Evolution based on forward spread curves
LT i-rate: Standard arbitrage-free i-rate model Model also accounts for conversion option embedded in the CASHES
1712 May 2010 |
Ageas’s Core equity EUR 5.8 bn above required regulatory minimum
* Asia : Investments in partnerships are deducted from Total Capital; Given the significant investments in partnerships, total capital is lower than Core capital** Under local Asian solvency regulation, DAC and VOBA are deducted from available capital; VOBA Asia amounts to EUR 340 mio; Under local regulation the solvency
ratio of FICA amounts to 388%
Belgium United Kingdom
Other Core Tier 1 capital
AgeasInsurance
Required Regulatory minimum
EUR 3.7 bn excess capital in Insurance + EUR 2,1 bn General
Account = EUR 5.8 bn
ActualActual Min
0.5
0.6
2.0
3.5
0.5 0.2
6.54.1
6.4
0.1
2.8
Minimum
Core equity
200% 298%Total Solvency Ratio
1.30.5
Actual Min Actual MinContinental
EuropeAsia
0.80.3
0.1
1.30.5*/**
Actual Min
250% 902%
2.3
0.2
2.1
ActualGeneral
229%
1812 May 2010 |
Discretionary Capital of the General Account: a view on liquidity & capital
Net Cash: EUR 2.8 bnPassed onLT assets & LT liabilities
Discretionary Capital on balance sheet
Assets
Cash & Cash equivalentsDue from banks LTOther
Royal Park InvestmentsCall option net of tax on BNP PLoan to operating ciesTotal
In EUR bn, 31 March 2010
3.90.91.3
0.80.40.37.8
Liabilities
ST (EMTN (0.9) + Bank (0.2))NITSH I & NITSH IIRPN(I)OtherFRESHNet equity
1.10.90.41.61.32.5
7.8
Shareholders equity + FRESH Invested in non-current assets on balance sheetTotal Capital Contingent asset off balance (Fortis Bank Tier 1 loan, due Sep 11) Already committed to projects (Tesco JV and dividend)Discretionary Capital * (if available in cash)
3.8(1.5)2.3
(1.0)(0.3)1.0
Discretionary capital down due to the incurred losses in the General Account, scope change (FII holding & Fortis Re part of General Account), partially compensated by lower valuation (investment) in BNP Call option
* Fortis defines discretionary capital as the lower of the available cash and total capital of the General Account corrected for (contingent) illiquid assets and existing investment commitments
1912 May 2010 |
Conclusion
Inflows Continued strong commercial performance in all regions
Net result
Solid financial results Life operations Non-Life performance impacted by adverse weather conditions; Full impact
corrective measures to be expected in the next quarters Negative net result General Account due to volatility
Outlook Strong commercial performance expected to continue but with growth rates
below first quarter level Second quarter net result will benefit from deferred tax recovery following
liquidation Fortis Brussels SA/NV
Balance sheet management
Management of investment portfolio in light of the current risk profile of certain asset categories
Position in Southern European government bonds reduced in Q1 10 and YTD; Proceeds mainly redeployed into other fixed income securities
Strong capital buffers within Insurance and General Account should help to resist against potential sovereign shocks
2012 May 2010 |
Cautionary Statements
Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known andunknown risks and uncertainties that could cause actual results,performance or events to differ materially from those expressed or implied in such statements. Future actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in Fortis’ core markets, (ii) performance of financial markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) interest rate levels, (vii) currency exchange rates, (viii) increasing levels of competition, (ix) changes in laws and regulations, including monetary convergence and the Economic and Monetary Union, (x) changes in the policies of central banks and/or foreign governments and (xi) general competitive factors, in each case on a global, regional and/or national basis.
In addition, the financial information contained in this presentation, including the pro forma information contained herein, is unaudited and is provided for illustrative purposes only. It does not purport to be indicative of what the actual results of operations or financial condition of Fortis and its subsidiaries would have been had these events occurred or transactions been consummated on or as of the dates indicated, nor does it purport to be indicative of the results of operations or financial condition that may be achieved in the future.
2112 May 2010 |
Investor Relations
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E-mail:
Website:
+ 32 2 565 53 78+ 31 30 226 65 66
www.ageas.com
