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Creating value in a deleveraging environment
Bart De SmetCEO Ageas
Morgan Stanley Conference London – 29 March 2012
1Morgan Stanley Conference I 29 March 2012
Value creation at AgeasWork on various levers to come to a more comprehensive story
9/30/2009
Insurance Operational performance
Life: investment yield Non-Life: combined ratio
Profit generation Value creation
Embedded Value New business
General Account
Reduce complexity & volatility Solve legacies
Simplify Ageas’s story
Constant strive to optimize the use of capital
2Morgan Stanley Conference I 29 March 2012
Value Life InsuranceMix of ensuring sustained profit levels vs. long term value enhancing initiatives
(600)(425)
(172) (99) +147**
309342 309
Norm
alize
d 201
0
FY 20
11Gr
eek i
mpairm
ents
Equit
ies Im
pairm
ents
Good
willCa
p Ga
ins/L
osse
s
Othe
rNo
rmali
zed 2
011
+ EUR 734 mio
3,360 2,446
157 162814 440
4,980 3,686
649 638
Year‐start 2011 Year‐end 2011
Asia
Continental Europe
UK
Belgium43
51
(1)
0
(15)
64 32
(2)
(3)
23
Year‐start 2011 Year‐end 2011
Embedded Value (EV) (EUR mio) Value added by New Business (VANB) (EUR mio)
3Morgan Stanley Conference I 29 March 2012
81145
+2(38)
+10(9)
82
(27)
Norm
alize
d 201
0
FY 20
11Gre
ek Im
pairm
ents
Equit
ies Im
pairm
ents
Cap G
ains/
Losse
sAdv
erse
Wea
ther
Othe
rNo
rmali
zed 2
011
+ EUR 63 mio
Combined ratio Belgium*
102.4%104.2%
99.9%
90%
95%
100%
105%
110%
115%
2009 2010 2011
Combined ratio UK108.2%
109.5%
99.9%
90%
95%
100%
105%
110%
115%
2009 2010 2011
Value Non-Life InsuranceImproved operational performance should drive higher net profits
* Excluding Workmen’s Compensation
4Morgan Stanley Conference I 29 March 2012
1,025 984
505
108
20856
(271)
(290)
(275)(82)
Q4 09 Q4 11
581436
759 836
609 611694
361 395
Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11
(316)(442)
(340)(496) (465)
(722)(583)
(145) (190)
Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11
760 760 8401,027 933 913 899 850 779
Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11
RPI Sum of legacies +/- EUR 1bn
Call option on BNP Paribas sharesIn EUR mio
Value General Account: Clarity gained on valuation legacy issuesVolatility remains but partially offsetting
RPN(i)In EUR mio
In EUR mio In EUR mio
Average 587
Average (411)
Average 876
5Morgan Stanley Conference I 29 March 2012
Solution around CASHES is important step forwardTransaction settled on 26 March 2012
Rationale for Ageas Reduced credit risk to Fortis Bank EUR 4.6 bn EUR 2.8 bn
Decreased volatility in results RPN(I) volatility
Improved liquidity position
Result of the offer : 63% converted
Impact on Net Cash position: EUR 953 mio redemption Tier 1
EUR (287) mio indemnifications paid---------------------EUR 666 mio
Limited influence on equity & solvency of General Account +/- (2%)
Impact on Net Result (in Q1 12) : EUR 131 mio Tier 1 redemption
EUR 21 mio release RPN(I) liability
EUR (299) mio indemnifications paid---------------------EUR (147) mio
6Morgan Stanley Conference I 29 March 2012
General Account: good grasp of outstanding legacy issues Ageas does not expect new major litigation issues to rise
November 11Receipt report Belgian experts (Cats, Smets, De Bodt)
May 10US class actiondismissed
June 10Receipt report Dutch experts (Ondernemingskamer)
Sep- Dec 10Ageas starts legal procedure against Dutch State & ABN AMRO to obtain compensation in return for conversion of Mandatory Convertible Securities (MCS) into Ageas’ shares
June 09Ageas claims compensation with respect to “FCC preferred shares” from Fortis Bank NL
June 09Receipt report Belgian experts (Van Gerven/Horsmans)
February 11Claim re FRESH hybrid instrument dismissed by Brussels Court
Timing and (financial) outcome remains hard to estimate….In many legal proceedings still at the stage of first instance
To be expected before end June 2012 Judgment of Ondernemingskamer re mismanagement
May 11- Claim dismissed of
VEB/Deminor and FortisEffect by Amsterdam Court
- Rotterdam court confirmedfine AFM I: appeal filed
March 12Brussels Commercial Court dismissed all claims initiated by former MCS holders
February 12- Rotterdam court confirmed
fine AFM II; appeal to be filed- Utrecht court re
communication May-June2008 in favour of plaintiffs; appeal to be filed
201120102009 2012
7Morgan Stanley Conference I 29 March 2012
Ageas’ solvency calculation methodology : any unrealized loss on fixed income on balance is deducted, any net unrealized gain is eliminated.
Ageas applies a conservative solvency calculation methodologyIFRS Solvency remains solid & well above required minimum
Ageas passed very successfully the EIOPA solvency stress tests for Belgium & Portugal with simulated Solvency II ratios exceeding the average of the European industry in all stress test scenarios adopted.
6.4 6.6 6.8 6.47.5
229% 226% 227% 207%
3.13.02.92.8 3.6
207%
Q4 09 Q2 10 Q4 10 Q2 11 Q4 11
Total available capital Required Minimum Margin (RMM)
Insurance Solvency Ratio Ageasas reportedIn EUR bn
Solvency I Belgium
IFRS Solvency ratio :198% Ageas Insurance ratio: 227%
Solvency II Belgium
AG Insurance EIOPA solvency II ratio (MCR): 517%Average Insurance industry : 380%
Based on 31/12/10 data
8Morgan Stanley Conference I 29 March 2012
Ageas strives for an optimal use of cash Almost equal share of three alternative uses of cash since 2009
Going forward :Insurance: Lower growth in capital intense savings business
Increased proportion of Non-Life and Fee related businessGeneral Account: Net cash position at EUR 1.3 bn (before dividend payment)
9/30/2009
Invest in Businesses
Organic growth Selective acquisitions Create new partnerships
Return to debtholders
Debt buy back (EMTN)
Return to shareholders
Dividend payment Share buy back
May 2009 – March 2012:
+/- EUR 740 mio
+/- EUR 450 mio UK (Tesco, KFIS, Castle Cover)
+/- EUR 190 mio CEU (Italy, Turkey) +/- EUR 100 mio Asia (India, HK)
+/- EUR 850 mio
+/- EUR 600 mio constant dividend over 2009, 2010 & 2011
EUR 250 mio share buy-back finalized early 2012
+/- EUR 700 mio
+/- EUR 700 mio EMTN program redeemed (31/12/2011)
9Morgan Stanley Conference I 29 March 2012
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
23/08/2011Day before announcement of share buy-back program Ageas at EUR 1.09/share
25/01/2012Announcement of finalization
share buy-back program Ageas at EUR 1.46/share
Ageas announced a share buy-back program on 24 August 2011Program successfully completed on 25 January 2012
Ageas stock price in EUR
192 mio shares bought back (7.33%) for EUR 250 mio
Cancellation of acquired shares proposed at next shareholders’ meetings (25 & 26/04/12)
Share price + 34%
10Morgan Stanley Conference I 29 March 2012
Confirm & further improve operational performance
Ageas’s operational priorities 2012
Review/ Rethink strategic assetallocation
Make further progress on unwindinglegacy issues
Disciplined capital management
Prepare for regulatory changes