ageas SA/NV

Good morning ladies and gentlemen. Thank you all for dialing in to this conference call and for being with us for the presentation of the results of Ageas for the full year 2019.

I'm joined in the room by Christophe Boizard, our CFO; Manu Van Grimbergen, our Chief Risk Officer; Filip Coremans, Chief Development Officer; Antonio Cano, Chief Operating Officer; and Hans De Cuyper, the CEO of AG Insurance. We are happy to report our highest full year results ever.

Despite a challenging environment marked by low interest rates in our Life business and high claims inflation affecting the Non-Life market in U.K., we achieved a record group result of €979 million. This strong result, which was driven by a solid operating performance also benefited from a high level of capital gains and by exceptional elements such as the retroactive change in the tax regime in China.

In U.K., the Ogden rate review partly compensated restructuring costs and above-average large losses. On the commercial front, we enjoyed a very dynamic year with a double-digit growth of 11% scope-on-scope when excluding the divested activity in Luxembourg and the recently acquired Non-Life entity in India.

As you know, 2019 was the first year of our new strategic plan, Connect21, and with five out of the six targets achieved; Connect21 is off to a good start. The sixth target, the unit-linked margin is still slightly below our ambition level, but improving.

In 2019, we also modernized our capital structure through our offer to purchase the FRESH securities, giving debt investors an opportunity to exit these instruments stemming from the past. In conjunction with this offer, we successfully issued a €750 million subordinated debt.

This was the second time we issued debt instruments at the holding level this year since our rating was upgraded to an A level and each time the instruments were multiple times oversubscribed. In line with our commitments towards our shareholders, we also announced this year a new share buyback, the ninth consecutive one for Ageas for a total amount of €200 million.

And finally, given the record results reported this year, combined with our high solvency, the Board will propose to increase the dividend to an all-time high of €2.65, which represents a 20% increase compared to the €2.2 paid last year. To conclude and before handing over to Christophe, I would like to mention the commitments we make to all our stakeholders.

This year, we confirmed our ambition to create sustainable value by signing the United Nation's PRI principles. We also adopted a new Corporate Governance Charter with increased focus on sustainability, ESG matters, and ethical requirements.

Ladies and gentlemen, I will now hand over to Christophe for more details on the results.

Thank you, Bart, and good morning, ladies and gentlemen. As mentioned by Bart, and as you can see on slide 7, we enjoyed a record result this year and a solid fourth quarter despite the negative impact from the revaluation of the RPN(i).

Over the full year, the RPN(i) had no impact as the €106 million positive evolution recorded in the first nine months was offset in the fourth quarter by a negative evolution, which, by coincidence, was of the exact same amount. As usual, I will give you now some more comments per segment.

Slide 8, in Belgium. We've achieved a strong fourth quarter, supported by a solid operating performance in both our Life and Non-Life businesses.

As previously announced, the results also benefited from a high level of capital gains, thanks to real estate transactions. In Life, we ended the year with both the guaranteed and unit-linked operating margins well in line with our group targets.

In Non-Life, we also delivered a solid operating performance, although down compared to the excellent but non-sustainable performance reported last year. Higher claims in Accident & Health and in Motor were indeed observed this year.

Our pro forma combined ratio excluding the impact of internal reinsurance stood nevertheless, at a solid 95.2% for the full year. On the commercial front, the growth path continued this quarter with Life inflows up in both guaranteed and unit-linked product, and Non-Life inflows increasing across all product lines.

Over the full year, the inflows growth totaled 8%. In the U.K., slide 9, our net results suffered this quarter from high claim inflation in Motor, which is a phenomenon observed across all the U.K.

market and also from a higher than average number of large losses. The strong operating performance recorded in Household could only partially mitigate the adverse claims experienced in Motor.

Over the full year, the pro forma combined ratio stood at 98.7%, reflecting the challenging Motor market. The inflows which had been declining in the first nine months of the year, following the strategic decision to exit underperforming schemes, have stabilized in the fourth quarter.

Direct sales through the aggregator platforms continued to increase steadily. In Continental Europe, slide 10.

We recorded this quarter a strong result in both Life and Non-Life. Please keep in mind that the 2018 results included the contribution from Luxembourg divested at the end of that year.

Scope-on-scope, our result in Continental Europe has increased by a high 16% over the year with an excellent Non-Life performance both in Portugal and in Turkey offsetting a lower Life result in a low interest rate environment. Despite the Q2 reserves strengthening in the Life business of Portugal, the full year guaranteed operating margin stood at 90 bps, in line with our target range.

Excluding the reserves strengthening, the margin would have amounted to 129 bps above the strong level recorded last year. The unit-linked margin, although improving in the fourth quarter, remained affected by low volumes.

In the Non-Life, the full year pro forma combined ratio stood at 91.2%, well below the group target, thanks to a continued excellent operating performance, especially in rates. Non-Life inflows continued their strong growth with sales up in all product lines.

In Life, inflows decreased in Portugal with a low yield environment and we are currently in a transition phase with the launch of new products better suited to the low interest rates. In Asia, slide 11.

We recorded an exceptionally high result this year, thanks to a solid operating performance in Life and a high level of capital gains totaling €127 million over the year, see slide 22. This was made possible by the high level of impairments recognized in 2018 followed by a quick recovery of the equity markets in Q1 of this year.

Our Life results also benefited from the positive evolution of the discount rate curve and from the retroactive tax change in China. Due to an evolving product mix, the tax benefit relating to 2019, which was booked in the second half of the year was for a significant lower amount than the retroactive one recorded in the first half of the year.

The Non-Life result was impacted in the fourth quarter by the impairment of a debt security in India. The strong sales momentum continued this quarter with double-digit growth recorded in both Life and Non-Life segments.

The Reinsurance segment now on slide 12. So reinsurance had a positive result this quarter as the adverse claim experience in Belgium and in the U.K.

was more than fully offset by a positive reserve review done by reinsurance. As you can see slide 13 on the bottom right, the total liquid assets increased to €2.2 billion following the €750 million active Tier 1 debt issuance of December.

This amount does not take into account the tender of the FRESH, which generated a cash out of €513 million in January of 2020, so beginning of this year. Our group Solvency II ratio on slide 15, which stood at a high 217%, also benefited from the debt issuance of December, which had 18 percentage points positive impact, while the expected 12 percentage point negative impact from the tender of the FRESH will only be taken into account in Q1.

Our group pro forma solvency ratio after the impact of the FRESH would nevertheless remain at a strong 205%, well above our target. As you can see on slides 16, 59 and 60, our operations generated this quarter a solid level of free capital generation amounting to €130 million in line with our quarterly guidance.

The strong operations free capital generation coming from Belgium and Continental Europe compensated the impact of the adverse claim experience in the U.K. Over the year, operational free capital generation totaled €521 million, including €98 million of dividend upstream from the non-European non-consolidated participation.

It was mainly impacted by the large losses and the claim inflation in the U.K. That's the end of my speech.

And this is the end of my presentation.

Good morning, Chris. I have a few questions, if you can help me.

First of all, would be around your cash balance and M&A bandwidth. I mean how should we think about the visibility of any potential M&A?

It feels like based on the Bloomberg news flow that you are looking for cash there, but that didn't happen, so how should we think about the M&A bandwidth and how much you can do? Is there any file at the moment which is open or visible?

Any thoughts on that? Now the reason why I'm asking about M&A is clearly you're sitting with a lot of cash and you still have a lot of debt leverage, thanks to the way you have handled the FRESH securities.

It has been pretty amazing in terms of boosting the bandwidth on leverage and capital, but that also means that unless you do those things, it's hard for you to really increase the cash flow in the business materially in the near future. So that means the payout growth looks a bit -- the dividend growth looks a bit tough going forward in lack of M&A.

So that's one question. Secondly, could you just give us some fresh thoughts about Asian clean earnings now?

The reason I'm asking is interest rates in China has gone down marginally again. I mean, you gave a clear guidance of €325 million to €350 million at the third quarter results, but any fresh thoughts on that?

And in addition, in case you think any impact from the coronavirus or anything? And lastly, how do you see the future of U.K.?

I mean U.K. is struggling at the moment.

You tried to restore it. But again, because of the price inflation, the claims inflation, it's still going backwards.

So how do you see the future of U.K. going forward?

Thank you.

Okay. Ashik, thanks.

I'll take the first two questions, and then I'll hand over to Antonio for the third one. So after all the operations we have made and if you look to the cash position taking into account that we are still an amount to be reserved for the settlement and another one that has been, let's say, spent in January to compensate the tendered FRESHes, you could see that we have a kind of a headroom capacity of €1.3 billion.

Our M&A policy did not really change. So the criteria, be it strategic or financial are still the ones that we announced in the past Investor Day in end of 2018.

I think looking to 2019, we indeed, missed, if you can use that word, there are a number of potential opportunities that might fit in our strategy. And the reasons are not necessarily only financial, it's also sometimes a matter of conditions we put in reps and warranties.

It's also sometimes maybe not sufficiently fitting to our strategic expectations. And so we continue to screen opportunities, but we'll keep our discipline in this area.

It's clear that we -- you cannot -- we cannot comment on potential running files, but be assured that we are not just sitting on our back not looking to opportunities. The second point with respect to the question on Asia.

So I think we don't see a real reason to change the guidance, I would say, in a normal situation. As you surely have seen in the quote in the press release, we indicated that with respect to the coronavirus, we don't expect a specific high impact directly -- sorry, in terms of insured people that die or in the context of medical expenses and so on.

The only thing that is still uncertain and very difficult to qualify/quantify is that we -- it will depend on the duration of the crisis. And okay, the indirect impact that might come from economic slowdown, volatility, financial markets and changes in interest rates is, of course, something that in all transparency, we say that could influence the commercial activity and the results in 2020.

But we follow the situation very closely -- sorry. And I cannot give more information on that.

Okay. That's very clear.

Thank you.

Good morning to you. Antonio here for the U.K.

So maybe I'll take a bit longer than normal also anticipating surely follow-up questions on the U.K. I think the two negatives on our U.K.

results, as Christophe was also already alluding to is the attritional claims inflation, which is indeed a market phenomenon that we see in Q3 and Q4 accelerating to 8%. That is our view.

Our response to that has been to already during Q4 increasing our prices within that range. But obviously, it will take 12 months before those rate increases will flow through in the earned premiums.

I think this is a market phenomenon. I hear and read that the market is also starting to increase prices, but I've said that before and then the proof proved otherwise, so the ABI and confuse.com talked about rate increases around 3% to 4%.

We are slightly north of that. And we see that also having an impact on reducing new business, particularly in Q4 in Motor, because I think we're slightly ahead of the pack in terms of rate increases.

So that's a bit the attritional inflation story, which again is something that most marketplaces are confronted with. What we have which is peculiar to us and I already commented on that in Q1 Q2 is that we have a slightly higher number of large losses.

And slightly higher is eight to nine more large losses during the quarter, which have -- and more than we expect and historically have seen, which obviously has a big impact on our results as our retention level is relatively high compared to most of our peers which stands at £3 million. Now having said that, it is also true and we are realizing that very clearly that we tend to be rather prudent in the way we reserve for these large losses, but we are certainly not under reserving.

And you see also that reflected in the fact that also in Q4, our previous year's releases on claims, which is mainly Motor has been again rather high. It was about 9% on the quarter, which for a fourth quarter is high.

So these are mainly releases on claims booked in previous years and most of them are also these large losses. So we have this effect that we tend to be rather conservative and high in the way we reserve for new large losses.

And we see that afterwards there are significant releases on these case reserves. So that is what we would expect going forward, that this higher level of large losses we've seen during this year will also lead to a higher level than expected of previous year's releases in 2020 and 2021.

The other actions that we're doing behind -- besides the rating actions, we're still reducing expenses and that will continue. During Q4, we also had a slight increase in the total restructuring cost.

So we expect expenses to further come down combined with rating actions. And then we expect also the level of large claims to come down again to what we have seen historically plus previous year's leases going forward.

Having said all that, it is still a very tough market. We have the FCA pricing review that will be forthcoming.

We'll see what that will bring, it could slightly change the dynamics. So looking forward to 2020, there is quite some uncertainty on the market.

Sorry for take a bit longer than normal, but I guess I've already answered a lot of the questions that you've already written down. Happy to comment on those items.

This is very clear. And many thanks for the detail answer.

Thanks a lot.

Yes. Good morning all.

Thanks for taking my questions as well. The first question is maybe a bit more forward-looking guidance if possible on the cash upstreaming from the units last year the €632 million.

Normally, you upstreamed earnings from the Belgium, let's say the following year. So could it be -- yes will it be the same or could it even be higher than the €426 million?

And what to expect also for the U.K. in terms of remittances given the -- yes the aforementioned trends that we just discussed?

And anything you can maybe highlight for Asia in terms of expectations would be helpful. The second question is on the free capital generation on slide 60.

Yes, the total number for the quarter was still €130 million, but of course the U.K. was impacted by the claims.

But in central -- or in Europe Continental Europe was a big benefit from the SCR move. Can you quantify that a bit which is shift away from savings?

Yes. And I know it's difficult to say, but this is a one-off kind of -- or is it more a trend that could continue even into 2020?

Thank you.

Okay. Albert for the first question is what you can -- I think we explained in the past that upstream from the operating entities is somewhere linked to the position they have with respect to our target solvency levels for each of these entities.

So you can expect for Belgium like we had in the previous years taking into account their strong solvency level that 100% of the profit will be upstreamed. In the U.K.

where the situation in terms of solvency strongly improved, we will expect 100% of the result in a combination of dividend, but also repayment of an internal loan. Continental Europe will be in line with the previous years.

And then the last part is the Asian continent. So we don't see reasons why dividends from Malaysia and Thailand would be diverging from what we received in the previous years.

And with respect to China in principle, if the -- that it's important to mention that the dividend upstream is based not on our IFRS results, but on the local accounting. We of course as you know Taiping Group is a listed entity.

So we cannot anticipate or communicate about the intentions. But we can expect if you look also to the nine-month results that with a similar payout to AGS last year that the dividend that we might expect from the Chinese joint venture would be higher than last year, so no real indications that there would be a negative impact in terms of dividend upstream.

That also reminds me to a part of the question of Ashik that I did not fully answer with respect to the dividend which is in any case that it's ever high with €2.65 and what going forward. So I think we have this clear promise of distributing 50% of the net result of the group eliminating non-cash elements like movements on the RPN(i) and also the cap gain that will be recorded on the FRESH operation.

So that's a hard promise. And next to that I can always repeat, the previously expressed ambition of the Board to keep dividends stable or increasing.

So that's not -- a clear hard promise, but that's in any case an intention. So that's a bit the story of the dividends.

Okay. And maybe one follow-up before moving to the capital generation.

So yes, I mean so last year -- or this year dividend's €490 million compared to last year's remittance €632 million. Yes, it sounds like you're still pointing towards higher overall remittances.

But in relation to holding cost as well I mean, the gap is still not huge. So in relation to yes growing the dividend how should we see that?

And that was also related to my question then are you becoming dependent on basically distributing more than 100% of earnings on Belgium? Or you're still comfortable that you can grow the dividends by growing outside Belgium the cash flows basically?

No, no. We remain fully comfortable that with the current dividend upstream policy to cover with that amount the dividend that we pay to shareholders and to cover the corporate center costs.

Okay. Thank you.

Yes. So I think we still have to answer the second question of Albert.

Yes. So good morning, Albert, Emmanuel speaking.

So I will take the question on the SCR for Continental Europe. Indeed so, if you remember in Q4 2018 then we had quite a material increase in the SCR of Continental Europe due to a big new business increase in savings product in Portugal.

And then we had -- and that's a mechanic calculation. You have an additional operational risk because the increase was extremely material.

Over 2019, we are yes shifting from that type of product. We are moving more to a unit-linked product now.

We have also mentioned that we are launching new products, which means that the exceptional costs in operational risk by the end of 2018 is now going away. So, the answer to your question, there's a small part due to the shift in product mix, but there's a material part because of the reducing operational risk that we had in Q4 2018.

Moving forward, the shift in product mix is certainly much less capital-intensive, but we cannot exclude of course that we will also do some re-risking moving forward as we did in Q2 for Continental Europe.

Okay. Thank you for the explanation.

Thank you very much. Hi guys.

I guess sticking with that last point back on slide 60. Can you just remind us your expectation for the Belgian SCR evolution?

You've had another year of small releases. I was wondering are you expecting that releases are sustainable from your Belgian operation at around about this 27 level.

Or at some point are you going to start adding to the SCR if Belgium sort of returns to growth? So, if you could comment on that.

Could you comment a little bit more about what happened with regards to the Asian tax impact on your earnings in the fourth quarter? Because at least against my expectations, I thought there was going to be an impact of Asian tax.

The amount by which you missed in the fourth quarter was exactly the amount of what I thought the Asian tax benefit was going to be. And whilst you seem to have explained that it's kind of business mix the shift to annual products, I would have thought you guys would have already known about that business mix shift because it's part of a long-term trend.

So, I'm just a little bit confused about -- I'm still a bit confused about why the Asian profit was so weak in the fourth quarter. And then lastly pretty nerdy point, but you did make a reference to the strong reinsurance results after a reserve review in the fourth quarter.

And I guess as a comment that I'd like you to respond to it seems to be slightly strange particularly given the U.K. headwinds, but also given what you said about Belgium that you're then deciding that your reserves in reinsurance are in some way in surplus.

I would have thought you'd be taking a more cautious stance if the underlying entities are facing some headwinds. Thank you.

Okay. So, I'll take the -- your first question on Belgium for the SCR.

But the first thing that I would like to remind let's not forget that we are talking about the movement of if I'm on slide 60 a movement of €27 million out of total SCR I think I need to check now off the top of my mind of probably close to €three billion. So, that's -- let's always put everything in the context.

Now, looking at Belgium, there are a couple of things that are playing here, but we had also still quite some unit-linked product sold in 2019. We had also, for instance, in the fourth quarter we have sold real estate -- part of the real estate portfolio.

And thirdly and it is something that we already also commented we have what we call some type of projects that are yearly projects where you have at the end of the year you have a quite increase in your SCR. But then over the year you have a release of this SCR because those projects are yearly projects that are mainly as projects and government compensation projects.

Thank you. I'm sorry may I just come back.

I totally appreciate your point that this is a small number. I'm just wondering in the future do you think it's a small number that remains a reduction in SCR or do you think the normal picture is for the SCR to be going up?

This is Christophe. So, when you take Belgium what you can see is that there is still growth in Belgium and you can see that we have increasing technical reserves.

We have good sales. So, the minus €27 million as Manu explained it's a small difference, but I would not extrapolate this.

I think it would be normal to have a small increase, but a small one along with the growth of the business which is still there in Belgium.

Fantastic. Thank you.

Okay. On the second question with respect to Asia, again, I have to repeat that that we are somewhat limited in the detailed information we can give due to the fact that China Taiping has not published its year results yet.

But you can say in two big elements that make that -- we believe that you might have somewhat overestimated the results we realized in Q4. First of all, the fourth quarter in China is -- because mainly due to China is traditionally lower in terms of profits.

Main reason being that sales is mostly coming down because sales agents prepare the start of the year campaign. But the two main elements are on one side one you referred to that indeed the tax benefit was lower than what you might have expected and lower than the year before, mainly due to a different product mix and much more say regular premium which is in the -- towards the future more positive than single premiums.

So, it's another less business mix -- less new business and more in renewal mode. That's one reason.

The second reason is that there has been a claims review related to the critical illness product a product that is reviewed by the industry together with the regulators. So, those two elements; so less benefit from the tax review and claims review and critical illness make this miss between consensus in our results of something like €20 million.

Thank you.

No, no, sorry there was still a third question on -- the nerdy question from William, I think it was on the reinsurance good results. So, actually in Q4 what we did is we start to look at our reinsurance book which is now quite sizable, so our internal reinsurance book on a portfolio basis.

Actually during the year, we were you could say a bit prudent a bit lumpy in the way we reserved. And now we're actually looking at the combination of those three portfolios.

And we saw that the diversification benefits part of them can be captured. So, we are certainly not being less conservative in our reinsurance book than in the ceding companies.

It is just actually the first time we start to look at this portfolio in a combined way.

Thank you.

Yes, good morning. My first question is a follow-up on the Belgium capital.

And could you may be run us through in a bit more detail on the movements in the capital in Q4 and especially, the Own Funds generation. And maybe also could you give us some color on whether it's the individual savings part of your business that's driving that in the quarter or maybe coming from a bit more now from the group protection side?

Or any color there would be very helpful. Secondly, on Asia, so you -- I appreciate you mentioned that you don't expect any direct impact from the virus in China.

I thought Taiping had quite a big exposure to protection. So, could you maybe remind us a little bit the type of protection products or long-term care-like products that you sell there and why they wouldn't see any impact in the current environment?

And lastly on the U.K. where you've talked about pricing and actions on cost of distribution, et cetera, your expectations were for topline to start growing back again and by the end of the year -- or stabilizing by the end of the year and going into 2020, is that still valid?

Thank you.

Okay. I'll take the question on the Own Fund generation in Belgium.

Indeed, Q4 was a strong quarter, but again, I would like to make a little bit also the same remark that I prefer to look on a yearly basis. And when I look on a yearly basis, the Own Fund generation of Belgium are at a level of €578 million, which is looking at the time value the new business that has been generated.

Also still a good Non-Life year which is in line with our expectation from an Own Funds generation perspective. Of course, on a quarterly basis, you have much more seasonality and volatility there.

But on a yearly basis, I think we are completely in line with expectation.

Maybe if I can add that. On the year, I think first of all on the Own Funds remember that in the beginning of the year the sub-debt was replaced by an on-lent within the group at a lower level so that had a minor impact on the Own Funds over the full year.

On the SCR in Q4, worth mentioning is on the one hand the symmetric adjustment in the equity part, which went up a little bit in the equity side. And also in our new strategic asset allocation, we have increased the real estate part and that is also affecting a little bit the SCR, but these movements are not in numbers are not very big.

Okay. The second question on the protection products we have in China, you have of course the classical debt protection be it on short-term debt coverage or, let's say, long-term debt coverage.

Then next to that also critical illness, so to give a figure of comparison. On a yearly basis, China has something like nine million to 10 million people dying.

And so what we see today the number of cases where people died after the infection of the virus is, let's say, is marginal compared to that figure. On top of that it appears to be more older people, which in most cases are not insured.

So in the critical illness product which is the second one we have with something like five million customers. This was not covered until last week.

Now there is a kind of a limit cover that is provided. But where the overall impact and that was the reason why we say that the direct impact is not expected to be of high importance that assures us that that is more than under control.

So the U.K. guidance?

Yes, on the guidance on the U.K. Indeed we've seen in Q4 a stabilization of the premium was particularly true for household that was growing.

Motor, quarter-on-quarter Q4 was slightly down, whereas in Q3 we saw an uptick. I already mentioned the reason for that is that we had rating actions that have led to us selling less new policies.

So going forward we expect to gradually continue to grow the business, but always in a disciplined way in terms of pricing.

Thank you.

Hi, everybody. Thanks very much.

Just want to return on coronavirus. One of the things that's being reported is clearly a massive slowdown in agent activity for obvious reasons.

Could you -- do you have any sort of guidance on what's happening in your JV? And could this actually -- if there is a slowdown in agent activity and new business, could this actually be good under the local Chinese GAAP for earnings?

That's question one. Secondly, could you talk about your unit-linked margin being below target and you mentioned volume being one factor.

Do you think this will now recover with your bigger push on volume in Belgium and in Portugal? And lastly, in your direct business in the U.K., it's clearly getting greater prominence over here.

Are you finding that that business is materially more profitable? Just to know how you feel about that?

Thank you,

So on the first question Farooq, it's one of the points we referred to and the quote in the press release that the commercial activity might be impacted us. So what we see is that of course the mobility of agents to go outside and visit customers is not as evident than it was before.

So this is partly compensated by more online contacts and so on. Taiping Life already published the figures for the month of January where you see that the total inflows came down with 10%.

I think this is also the moment where we see that the important book of renewal business that we built up in the past is giving the benefits. So this renewal book continues to grow.

And okay, it's too early as I said to make a final qualification or quantification of situation, because a lot will depend on the period in which the crisis will be under control. If -- what we saw in previous years is that most of the sales were realized in the first nine months of the year with then a very slowdown in Q4.

If this crisis is within some months more under control, we might expect an opposite movement so a much stronger second half of the year. Also, maybe counting a bit on what we already see today that this crisis has strongly increased the attention to -- for and the appetite of Chinese citizens to buy insurance.

So again, impacting sales at this moment in any case. What it will be going forward is I think we have to wait still one or two months to have a clearer view on that.

And unit-linked margin, I will hand over to Hans and Antonio, but important to mention is that we are at 28 basis points where the target is 30 to 40. But if you look to the country figures Belgium is at 40 basis points so at the high end of our target.

But it's more in Portugal where we have still some stress on -- or issues to come to the margin that we expect to realize. But Hans maybe you can say…

Yeah. For Belgium, as Bart said, very stable at 40 basis points.

Remember that the years before 2018 where we're always in the range 30 to 38. I think two main reasons.

First in Q4 was relatively good, because this was a nice volume growth, but without specific investments in commercial campaign like cash-back, which often impacts one quarter, but which we are able to bring up to the required margin over the full year. So Q4 was a normal quarter.

The second is that unit-linked is always a mix between the structured closed-end funds and the open-ended, but today in a low-yield environment, it is extremely difficult to structure these closed and guaranteed products, which typically have a lower margin. So this is more the recurring open-ended unit-linked where margins are slightly higher.

So those -- the combination of those two helped us to sustain the level of 40 basis points.

Yeah. Maybe very short on Portugal.

So in Portugal, it is indeed about increasing volumes that helped to restore the margin. We saw actually in Q4 over 16 basis points margin in unit-linked for Continental Europe, which is essentially Portugal.

And there the volume growth is partly, because higher push towards the bank for those -- for that type of product and also the introduction of new products that are actually kind of a blended product with a guaranteed component and a unit-linked component. So the short answer is yes, more volumes.

And then the question on the direct business in the U.K., difficult to make general statements here. What is sure is that the nature of the margin is different.

For those familiar with the U.K. the direct business or the pure direct players on aggregators get also quite a bit of their margin from so-called ancillary services, so installment fees, claim handling fees, all types of fees.

That source of margin is less presence in the broker or intermediated channel, because it's actually the intermediator that provides those services. So the composition of the margin is different.

I would say provided you have the right scale, inherently there should not be a large difference. Although, if we look historically to pure players in a direct or in the intermediated markets, the pure direct players have enjoyed higher margins.

Is that because of their size or the business model itself, it will be a combination of both. But it's definitely not less profitable than the intermediated market.

Can I just return very quickly. I mean I've noticed Ageas' brand appearing a lot more.

I mean are you expecting this to become a significantly larger part of your business quite quickly in 2020?

I'm happy you saw our brand appearing often. As I said earlier, we don't want to ramp up this massively, so the growth will be gradual.

But obviously in the pure direct aggregator channel, we're starting from a very low base. So yes, we have high double-digit growth from a very low base.

I don't think that in 2020 or 2021 say 50% of our business would already be sourced through the aggregator channel, but it will continue to increase. Big question mark is how fast will that happen if the FCA review on which there are various opinions out there would that favor the direct aggregated market or not.

Okay. That's very clear.

Thank you very much.

Hello. Can you hear me?

Yes. We hear you.

Okay. Great.

Great. So good morning everyone.

I've got three questions. Firstly, going back to the U.K.

and I'll rephrase the question slightly given the discussions that have already happened. Can you share if your view around the U.K.

operations has changed at all? I mean, I remember the discussion perhaps a couple of years ago when you described how being present in the U.K.

was contributing to the learning of the group and hence it made sense to be present there. So my question really is has anything changed in management's viewpoint since then?

That's question one. Secondly, given that there were some negative impacts from falling interest rates in Belgium and Portugal on the guaranteed life business last year and yields have fallen back again this year, how likely is it that the margins may actually end up at the lower end of your target range?

Also there was some noise from adverse mortality in Belgium in second quarter last year. So how has that aspect developed since then?

And the last question is any thoughts you can share with respect to the operational FCG going forward would be really helpful. Would you still want to stick to your rather stringent view of loading the SCR change by 1.75 times?

Or would you consider being more lenient with the way you view your OFCG?

Thanks. So on the U.K., our view has not fundamentally changed.

First of all, U.K. business should earn its cost of capital and we're not there yet obviously.

The fact that we indeed are learning in the U.K. because of the nature of the market and being as competitive as it is, is just a nice icing on the cake.

Let's be clear we're not in the U.K. just to learn we're also in the U.K.

to make a decent return.

I think on your second question for Belgium indeed interest rates have been falling since the middle of last year and remaining low in the course of this year. I can already announce that very shortly, we will do another reduction of the guaranteed rates and that is fully in line with the market.

So I would not expect significant competitive damage on that because we are -- we keep on being aligned with the market. And that confirms our policy.

As you know, we are transparent on our asset-liability matching profile. We are confident that we can continue that principle including securing the margin in the matching going forward.

So in that sense I have no concerns. Also I think be aware that we still have room in profit sharing to intervene if we really have to.

Profit-sharing levels we have given have been attractive to support our growth, but we definitely still have room to intervene if we need to. So I'm not too worried there.

The capital gains of course always coming from equities and real estate. But there we are lining up as we always do the current year and we have adequate unrealized capital gains at the moment.

On the mortality, indeed mortality margins have been lower. This is a mix of two effects.

On the one hand, there were a few one-off effects. Again 2000 -- so -- and the second one is also some recurring.

The recurring is more that 2019, I would say is more a normal year while 2018 was a very positive year on mortality claims. On the other hand and we are working actively on it that you see the risk pricing pressure on mortality in the Belgian market.

Margins historically have been very high and you see that they are coming down a little bit. But no major concern for our overall margin going forward.

But it's a mix of one-off and some recurring elements going forward.

That was for Belgium. If you look to Portugal and on slide 10, you can see that the operating margin for the guaranteed business was 90 basis points, but negatively impacted by 29 basis points reserve strengthening we did.

So correcting for that it would have been 119 basis points. And the Portuguese activity we have taken already in 2019 measures to bring down the guaranteed trade to very low levels close to zero.

Also reviewed the way we compensate the bank to stimulate more Unit-Linked in line with what Antonio said. So there also of course we have a high proportion of mortality -- profitable mortality in Portugal.

And the whole together makes that we don't see a reason to doubt on the capacity to be in that 85 to 95 range that we have put forward in Connect21. Christophe?

On the free capital generation. First, on the method itself, I think we have reached some kind of steady-state, so there is no major change and we are happy with the definitions where they are.

But this is on a reduced scope. This is a Solvency II scope.

My ambition, but it is more on the longer term would be to improve the disclosure on Asia to -- so far we give a dividend, which comes on top of the operating free capital generation of the Solvency II scope. But it would be better to get enough confidence to be able to issue free capital generation coming from the JVs.

But as I said, it is more on the longer term. Obviously, the goal here is to show that there is creation of free capital out of Asia.

We are confronted with something mature/stable in Europe. But what I expect -- what I would like to do is to show the creation of free capital out of Asia, but as I said longer term.

Now one word to conclude on the guidance. So you know that our guidance is set at €130 million per quarter without the incoming dividend from Asia meaning €520 million.

At this stage, we maintain the guidance as it is. So no change on the guidance itself.

Thank you.

Hi. I have two questions please.

The first one is you just mentioned that you don't want to change your guidance including the guidance for Asia business. But actually I've seen quite a few like obvious drags in your 2020 Asia results the first one is the discount curve in China is going to come down.

And the second one is I've seen some like combined ratio drag from your India business just requires. And the last one is from -- looks like your -- if I strip out the capital gains of your Asian Life business, your 4Q 2019 is substantially like weaker than 4Q 2018 suggesting some like fundamental weaker or profitability of the business.

So, despite all these three like drags to your Asia like profit plus put aside the coronavirus impact you're still like keeping your Asia guidance unchanged. Is there anything actually obviously positive apart from the -- like the intrinsic growth of the business itself?

Is there anything positive we actually kind of missed there? So, that's my first question.

And then second question is you mentioned a couple of times that the 30% remittance from China based on their statutory results. Just wonder is that something you actually agreed on a year-on-year basis or this is a long-term agreement?

I'm just wondering whether this cash remittance will be changed because of the -- or could they be changed because of the China business potentially need some investments to cope with the virus situation? Thank you.

Okay. First of all, I think with respect to the fees looking to evolution of interest rates.

So, it's indeed reality that that will come down. I think it's also something we already somehow indicated in Q3.

But okay there are also compensating measures possible thinking about the volatility adjustment and so on where Taiping is far from being at the highest level of the possibilities. The second element combined ratio in India, I would say, we just entered into the joint venture in the course of this year and one of the objectives is to together with the local partner to come to a better profitability of the company.

So, that's something where we should more see an upside than a downside. And then with respect to the one-offs, you have one-offs indeed in terms of financial markets.

So, more last year impairments; this year capital gains. We also have this review, what I said, claims review of critical illness.

Also this kind of reviews can go in both directions. So, very difficult to go on into the details of every -- of these aspects but we don't see a reason to go back from the guidance we gave of this €300 million to €350 million for the Asian activities with, of course, that caveat that once like a certain financial crisis or an impact that we cannot quantify today of this coronavirus might have for one year an impact on the result.

But going forward, the main reason for our belief in this range of results is also the fact that the portfolio is continuously growing and mainly based on renewal premiums that have a rather positive impact on profitability. So, it's the growth of the underlying business that is the motor of our expectation.

With respect to the dividend payment, this is, of course, a matter amongst the shareholders and it's something where we don't disclose what has been -- what has what is contractually agreed and how we deal with that. But okay we somewhere expect that with respect to past year there will be a dividend upstream.

Okay. Thank you.

Yes, good morning. Three questions on my side.

So, the first one was again on China. Could you update us on the sensitivity of the Chinese rate curve based on the current level?

So, what will be the drag on earnings next year? Second one is on the difference -- well the various terms we have seen in Belgium and U.K.

in Q1. I think AG guided for €40 million negative impact after the first storm.

It was before reinsurance, would be useful to get an update on kind of storm impacts in Q1. And also maybe comment on whether this is higher than last year or not so far in the quarter?

And last one was on the competitive environment in Non-Life in Belgium. Do you see it moving?

Got impression that some of the banks have been a bit more aggressive recently. But just wanted to get your view on the general competitive environment and market share in Non-Life in Belgium.

Thank you.

So, on the first question we stay away from forward-looking sensitivities for the reason that I just gave that there are also compensating elements and that is too volatile at this moment. The only thing we can say that with respect to 2019 the impact was around €50 million positive where it was something like €12 million the year before.

Okay. Your questions for Belgium.

First the storms, indeed last week and -- the first week with Kiara storm, we spoke about €40 million to €45 million. With storm of Dennis this weekend, we are moving up to €60 million.

Now, if I bring back that to the numbers that means that we are also reaching our retention in the reinsurance and so that we hope in the results it will come down. I'm not sure the wind will come down, but in the results, the effect should start coming down because we start benefiting from reinsurance.

If I make then the link with previous years that means that we can expect more or less the same in our results as the year before where also as you remember very early in the year, we fully consumed the retention. And then we had a lot more stable results in -- for the rest of the year we also had stable weather.

So, very much in line with last year. Second question in Non-Life, well, as you can see, we have been gaining slightly market share in the Non-Life market.

For the second year in a row, we are growing just before -- just above the market which is approximately at 3.4. If you will take the Non-Life part, impact on performance there, well, our combined ratio we think is much more in line with what we would call normal.

Christophe in his speech already said that 2018 in that respect was extraordinary good slightly higher current year with Motor & Workers Compensation, better results in Fire. But we also see that in the corporate market there I think the competition is weakening a little bit and we see some market -- some rate increases across-the-board in the corporate segment which is a more difficult segment in the Belgian market.

One adjustment is -- it's not an adjustment clarification is the figures that Hans gave are of course 100% Ageas. So, for Ageas, if it's €60 million gross, you should count something like €30 million net.

Thank you. And in the U.K.

any impact so far?

Yes. So, the U.K.

showed both storms. And in U.K.

was mainly the flood that had an impact. We estimate today the combination of those two storms and actually Dennis was a bit more heavier than Kiara somewhere between £20 million and £30 million pretax pre-reinsurance, but still early days.

£20 million to £30 million, yes, for the two combined.

Yes, good morning everybody. Sorry to come back on the rate environment in Asia again.

But I just want to understand how this volatility adjuster works, because if I look at the current level of rates in China I would expect the average to drop down by more than 30 basis points. I think you currently apply a volatility adjuster of 25 basis points.

So, I can see that your account might be lenient to increase that spread a little bit for reliability discounting. But it seems to me that more than doubling that spread that is in place today might be a bit aggressive to assume.

And I think in the pre earnings calls over the last quarters you've been guiding a per-basis point impact of roughly €3 million to €5 million. So, this could add up to a quite significant number if you're not able to move that spread.

So, just wondering if you could just give your thoughts on how you can manage this impact in 2020. And again I do appreciate that this is just a one-off element and that the underlying dynamics within the business are going well.

Second question is more on the free capital generation run rate that you've reiterated. I was just wondering, because if I look at your 2019 numbers then your SCR release, although, it's a small number, it does add €30 million to the run rate.

And the sounds of it you want to grow your volumes better in Belgium and Portugal, which at lower rates might also lead to more SCR strain. So I was just wondering if you could comment on, yeah, the forward-looking breakdown of that €520 million.

Should we expect Own Funds generation to be closer to €550 million, €600 million with a drag basically from SCR? Yeah, that's basically it.

Thank you.

Okay. I'll take the first question on the volatility adjuster.

So just want to avoid any confusion. So in Europe we have the volatility adjuster, which is prescribed by EIOPA and there is really a sort of mathematical formula behind it and that's every quarter is updated by the regulator, and we as an insurance industry we have to apply that one.

In Asia, it does not work in that way. So it's a file that you -- that every insurance company has to submit to the Chinese regulator and you have to justify why you want to use a certain level of they call it illiquidity premium.

And it is true that we are using 25 basis points illiquidity premium in China, which is compared to all the peers that we -- that are on the market, which is a very low amount. So there if we want to change it or if our company in China want to change it, they have to submit a file to the regulator with the justification and then the regulators approve or doesn't approve.

But again, keep in mind, we are very, very prudent compared to the peers in the Chinese market.

So on the -- I will answer on the FCG question. So indeed we reaffirm the guidance at €520 million.

Please keep in mind that this year which is a miss, we are below the guidance, we heavily suffered from the U.K. contribution, which was much lower than expected.

We consider that this is a temporary effect. When you have claims inflation, when you have exceptional high claim you take actions to restore the profitability.

So my expectation is that the U.K. will come back next year and that we will be able to meet the guidance.

So it's the reason why we confirm. There is really the absence of the U.K.

in the contribution to the FCG. Then it is true that sometimes we have some contribution from release in this year, but that's not really the case this year.

If I look at slide 60, the effect is extremely small. At the end of the day, the result and the future performance on free capital generation will depend on the interest rates.

If they stay very, very, very low we will have maybe to reconsider. But at this stage, we think that we can maintain the guidance as it was announced at €520 million.

Okay. Thank you.

Maybe coming back on this volatility adjuster. Can you disclose where peers sit compared to your 25 basis points?

And just to be very clear, it seems that what you've been saying on Asia guidance that this does not include indirect impacts like this. Can you just confirm that by a simple yes or no?

Thank you.

Well, I hope you will appreciate that I will not comment too much on this. But okay, I can only reinforce the fact that, okay, we know that most of the peers are again much higher than the 25 basis points that we are using in China.

And about the -- whether this is included in the €300 million to €350 million for Asia? I think you said indirect impacts are not considered for that guidance?

No. When we say €300 million to €350 million guidance for Asia, it's what we expect as a run rate for the net profit of that region.

What we -- when we refer to, let's say, exceptional circumstances something like we had in 2018 with a big decrease of the equity markets with impairments, but where you've seen that in the year after this year is to a large extent compensated. And also referring to exceptional circumstances, it could be the overall impact it would be very high of the consequences of the coronavirus.

But where again at this moment we are cautious. We look at it.

We -- but we cannot quantify. I have no idea at this moment the total impact would be.

And like we also said if there is, for instance, a negative impact from the peer, it might be compensated by the VA. So, again, leading more to the guidance of the €300 million, €350 million that we pronounced.

Okay. That's clear.

Thank you.

Yes. Hi, gentlemen.

Some quick ones. On Asia, just so that I'm clear on the fourth quarter it was about €15 million the impact of the interest rates positive?

That's one. The other thing is on Asia.

If you look at it coming back to a question that was asked earlier, if you look year-on-year, the progression that every quarter and you strip out all the one-offs and all the realized gains you actually have had a growth that is if you take the average over nine months for example it was zero. So it is important to understand, was there any element of the critical illness that we have to take into account?

So, fully aware that 2018 was a very strong year. How do we -- should we look at it at the underlying going forward in terms of growth and especially knowing that your top line and the inflows are showing every quarter a phenomenal growth?

And the last thing is just on a couple of other things is U.K. If we look at your €70 million to €90 million guidance for 2020, how should we look at it in light of what's happening in the fourth quarter?

And finally just with the two M&A misses that you had in 2019, does that change actually how the aggressiveness that you want to have in nailing and getting a deal? I know you're disciplined and that's very good for us, and also you at the end of the day have the buybacks.

But does it change your thinking around how you want to be on the next opportunity that comes around? Thank you.

Okay. On the first question when you referred to €50 million positive impact in Q4, no the €50 million was for the full year.

No. €15 million.

1-5.

1-5. 1-5, yeah, that's indeed the figure we had in.

Of course, we -- as I mentioned, the elements that probably explain the difference between the consensus from the analysts and our real figures are in the area of less tax benefit on the business of this year of 2019. And the second one was what I said claims review in the critical illness product.

So that are the main elements that make that we believe that the results you expected and your colleagues were higher than the ones we have made. On the U.K.

guidance, I think the €70 million to €90 million guidance we gave in the past with the impact of the attritional claims inflation, it would be more prudent for the next year to position it between €60 million and €80 million, so it's €10 million down. And when we keep the guidance overall of €850 million to €950 million, it means that we are quite convinced that that €10 million loss can be recovered elsewhere.

The third question the M&A misses, again, we are indeed not extremely aggressive in M&A. The question is, what the motivation would be to be aggressive or to go really beyond our criteria just because we want to do M&A.

So we have always taken this balance between returning capital or cash to shareholders, if we don't see sufficient M&A deals or to go for M&As. So we will continue to not buy at any price and at any condition, because we have this, let's say, this potential to do M&As.

Great. If I may just come back quickly on Asia.

If I look at -- if we forget a bit about the fourth quarter and we look just at the year Q1, Q2, Q3, Q2 was up if we exclude again realized gains and the rest. But are there any reasons why the trend was probably slower year-on-year increases and that we should take more confidence that that should be restored for 2020 of course post virus effect?

I think first of all and that's not only for Asia, so we don't believe that it's fair in the insurance sector to compare quarter-to-quarter. There are so many exceptionals.

Take the example of the real estate gains in Belgium. Sometimes it's quarter one then it's in quarter four.

So I think we should look -- and we look in any case more at year-to-date and full year results and quarterly results in all honesty. What we see for Asia when we look our look at the underlying where we take out what is really exceptional then we see that the Asian result is going up year-on-year with let's say 10% which is a bit in line with the increase of the underlying liabilities.

Okay. Very good.

Thank you very much.

Yes. Good morning.

Thank you for taking my questions. Most have been answered.

So a few detailed questions if I might. First, you have done 70% of the Fortis settlement.

Now the last quarters you already -- your operational cost and the general account were up because of that. Can we expect those to come down again this year?

Then on the storm impacts, I appreciate the guidance on the figures, but for our models, is there a split between your direct lines in Non-Life and the internal Reinsurance, could you guide on that? And then if I can just come back on that claim review in critical illness which impacted the 4Q.

Would there be some results of that in this year too? Or is that something that is done each quarter and you will have to wait where it comes out this year?

Maybe two words on the cost of the -- indeed the operational cost of the Fortis settlement. I'm going to be very transparent on that.

The run rate of the administration of that is almost at around €1.5 million a month. And of course that will continue we believe at least in the mid of next year.

And after that we should see that come down to become virtually zero at the end of the year. So that's a component in our expenses which is going to disappear by the end of next year materially.

Then maybe one additional insight on that is that we have provided part of these expenses actually last year to an amount of €10 million at year-end which already anticipate some of these expenses until the mid of next year. So that was a double cost which is effectively in our accounts last year, which should not be there in a recurring basis.

So the expenses on the general account are for last year inflated with that effect. By the end of next year that should die out.

Okay. And maybe a follow-up on the storm and the Reinsurance.

So the amounts that I mentioned and Hans mentioned were gross pretax. For AG bear in mind that only 75% is retained by Ageas, the other 25% is retained by Fortis.

And again, so these numbers are pre-Reinsurance so pre-quota share impact. So you can take the proportion of that.

The treaty -- well the fees are close to the retention points of the real protection outward Reinsurance. That was a bit what Hans was referring to that the protection of the storm and flood for Belgium should we again have a few storms would trigger the external protection.

So not the quota share so the LPTs of the internal reinsurance. I don't know if that was helpful.

Yes. That was very helpful.

Okay. And then the last question about the -- with the effect to the claims review critical illness.

As indicated, so the critical illness product is a product that is under review by the whole industry in China, but also by the regulator because there have been some concerns about the weight of the coverage and also the use of those products. So you could say that the claims review that has taken place is more an anticipation to create some additional prudency and we don't expect -- the new products first of all have been already redesigned and are sold with much more -- let's say much less possibility to abuse the product.

So we don't -- can't indicate at any moment that we expect a similar review in 2020.

Okay.

We have no reason to believe that.

Thank you very much.

Okay. Ladies and gentlemen, thank you for your questions.

To end the call, let me summarize the main conclusions. We -- first of all we recorded our highest result ever thanks to a solid operating performance supported by exceptional elements.

Just for your information, if you take the pure insurance result over the year it was €1,103,000,000. And for the fourth quarter the insurance result was €234 million.

We also enjoyed a strong sales momentum with a double-digit growth of 11% scope on scope. And finally given our record results, the Board will propose to increase dividend to an all-time high of €2.65 which represents a 20% increase compared to last year.

With this, I would like to bring this call to an end. Do not hesitate to contact our Investor Relations team should you have outstanding questions.

Thank you for your time and we'd like to wish you a very nice day.