ageas SA/NV

Bart De Smet - CEO Christophe Boizard - CFO Frank Vandenborre - IR Filip Coremans - Chief Risk Officer Antonio Cano - COO Andy Watson - CEO, Ageas UK

Ashik Musaddi - JPMorgan Albert Ploegh - ING Financial Markets Matthias De Wit - KBC Securities Arjan Van Veen - UBS Nadine Van Der Meulen - Morgan Stanley Farquhar Murray - Autonomous Research William Hawkins - KBW Bart Horsten - Kempen & Co Steven Haywood - HSBC Global Research Benoit Petrarque - Kepler Cheuvreux Bart Jooris - Degroof Petercam Kamran Hossain - RBC Capital Markets

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 full-year results 2016 of Ageas.

As usual, I'm joined in the room by my colleagues of the Executive Committee, Christophe Boizard, our CFO; Filip Coremans, CRO; Antonio Cano, our COO; and also Andy Watson, the CEO of our UK operations, is in the room. Ladies and gentlemen, 2016 has been an eventful year for Ageas in many respects.

I was very pleased that earlier this year we could announce the settlement of the long-outstanding legal claims. This is probably the most important event for Ageas since 2009 and I can only hope that later this year we will obtain approval from the Amsterdam Court so that we can move forward and execute settlement.

2016 was also an eventful year with respect to our insurance activities; first and foremost because of the implementation of the long-awaited and prepared Solvency II framework. All in all this went pretty smoothly but we, like most of our peers, have been confronted in the course of the year with the inherent volatility and both you and we must get used to this.

In addition, there was the closing of the sale of Hong Kong and the acquisition in Portugal. And we started sales in the Philippines and Vietnam.

The last quarter of 2016 was unfortunately marked by disappointing results in the UK. As the gap with the analyst consensus was too material, we decided, in line with the Belgian Market Abuse Regulation, to make a preliminary announcement on the main items explaining the deviation.

Ladies and gentlemen, allow me to briefly comment on this. Of course, we're all aware that UK's a very dynamic market.

In this respect we had already decided early this year to review our local organization structure. The restructuring in Glasgow, already announced in November last year, was part of that process.

We were required to complete a mandatory 45 days' consultation period which ended mid-January. By the end of the year it also became clear that the so-called Ogden discount rate might be reviewed by the Lord Chancellor.

It was unclear whether the decision would be taken end of January but, as soon as it became clear that the decision was postponed, we decided not to wait and to already strengthen our reserves based on the discount rate of 1%. In addition, we recorded unexpected losses on a specific underwriting scheme in our special risks activity which forced us to take an additional charge.

We decided to strengthen our reserves in the context of additional potential losses related to this contract and based on our best estimate. In Asia we were faced with a lower net result in the fourth quarter.

However, in this instance this was purely related to the evolution of the financial markets and to our stringent IFRS impairment rules. But, despite this fourth-quarter evolution, 2016 remains a solid year in terms of performance, the Fortis settlement and the closing of the sale of Hong Kong activities.

With respect to the operational performance, I want to highlight the excellent results in Belgium, Continental Europe and Asia that also give us confidence for the years to come. And, as such, the Board proposes a gross cash dividend of €2.1 per share, made up of a regular component of €1.7, up from €1.65 last year and another €0.4 related to the capital gain on the Hong Kong divestment.

So, ladies and gentlemen, the most important elements of the 2016 results were already in the market since last week and so the press release of this morning did not include a lot of new news. That said, we presume you have questions for us and, before taking those, I would ask Christophe to briefly cover the other key items of the annual results.

Christophe, please?

Thank you, Bart and good morning, ladies and gentlemen. I will indeed for the sake of time just focus on the major items.

Let me start with slide 3, highlighting the key figures. The insurance net profit for 2016 amounted to €821 million.

This amount includes a net positive impact compared to 2015 related to the sale of Hong Kong of €158 million which is the sum of the allocated part of the capital gain realized, €199 million, minus the lower net result contribution of €41 million compared to 2015. On the other hand, you had the €137 of exceptional negative items we disclosed last week.

The Group net profit amounted to €127 million and is, of course, marked by the provision taken in relation to the Fortis settlement agreement totaling €894 million. Our insurance Solvency II ratio amounted to 182% and our Group Solvency II ratio amounted to 195%.

The decline of the Group ratio compared to end 2015 is largely explained by the impact of the settlement in the first half of the year. The decline compared to the previous quarter purely relates to an adjustment of the value of the put option on AG Insurance.

Our total liquid assets amounted end 2016 to €1.9 billion, but of which €0.8 billion is ring fenced for the Fortis settlement. Moving further to slide 4 allows me to provide you some more granular comments regarding the insurance result at the Ageas level.

The net result can be broken down in a net life result of €704 million and €118 million for non-life. As already mentioned, the life result includes the exceptional contribution related to Hong Kong, while non-recurring charges hitting the non-life result amounted to €176 million.

This includes the already-announced one-off charge of €107 million related to the UK's fourth-quarter result, of which €55 million relates to the anticipated review of the Ogden discount rate, €27 million to the announced restructuring of the Glasgow site and €25 million related to reserve strengthening on a special risk scheme. In the first half we also had the negative impact of the terrorist event in Belgium and adverse weather both in Belgium and in the UK for a total amount of €60 million.

Lastly, we should also refer to the integration cost of €9 million related to Ageas Seguros in Portugal. All these elements hide the progress made in the operating performance of both our life and non-life businesses.

Let me explain. In life we see, in fact, strong results in our three segments, while the realized net capital gains in Asia were more than €100 million lower compared to 2015.

This illustrates again the importance of moving to the more profitable regular premium business which also leads to a growing percentage of renewal business in the total inflow figures. This will automatically result in better more consistent positive results going forward.

In Continental Europe we saw a nice recovery in Portugal of our existing Ocidental activity and a solid contribution to the result of the acquired Ageas Seguros life business. The operating life margin, as a result, improved over 2015 to 93 bps.

In non-life I'd like to mention the combined ratio in Belgium which amounted to 93.8% when excluding the impact of the Brussels terrorist attack. This is the result of a disciplined approach over the past years.

With respect to the dividend, I would like to draw your attention on slide 7, on which you can find the upstreamed amounts from the operating companies in 2016. Note that in the second half almost €100 million was upstreamed coming from Belgium and from the UK.

Now commenting very briefly about the business segments, excluding the UK which has already been discussed in detail and I will start with Belgium. I am on slide 8.

So in Belgium the fourth-quarter result came down year on year by €37 million to €82 million which is solely related to a lower amount of realized capital gain in the life activities. The non-life performance even improved compared to the previous quarters to an impressive 92.8% combined ratio.

Full year, the result is in line with 2015. In Continental Europe, slide 10, the full-year net result increased by almost 30% to €90 million, benefiting from an excellent fourth quarter of €30 million and despite €9 million integration cost in Portugal.

Both life and non-life did very well. In life the net result is marked by a very strong contribution of Portugal, both from the acquired Ageas Seguros life activities but also from the Ocidental, our longstanding life partnership with Millennium bcp.

In non-life our net result improved to €41 million, despite the aforementioned integration cost in Portugal and this thanks to strong results in Italy and Turkey, in particular. Lastly, Asia on slide 11.

A net profit of €394 million for the full year with a weak fourth-quarter net result of €17 million. In our preliminary announcement we already referred to the high level of equity impairments in China compared to substantial capital gains last year in the fourth quarter.

Excluding the previously mentioned net contribution related to Hong Kong of €158 million, the net result year on year appears to come down at first sight. However, one should not forget, as already mentioned, that we benefited in 2015 from more than €100 million higher net realized capital gains.

Excluding this, the net result made a strong progress and benefited from strong results in China and Thailand. Very encouraging and worthwhile highlighting as well is the doubling of the net profit of the non-life activities.

To complete the segment review, our internal reinsurance company Intreas. Intreas realized a net profit of €3 million in the soft reinsurance market.

With respect to the general account on slide 13 in the pack, I will limit my comments to highlighting the exceptional staff cost in the third and fourth quarter related to variable remuneration plans. This does not impact the recurring base of our corporate cost going forward.

The net result in the fourth quarter was €8 million negative. On the Solvency II ratio, slide 15, you already knew that the insurance ratio has remained stable compared to end of September at 182%.

At Group level the ratio came down to 195% and this as a result of the higher valuation of the put option on the 25% stake in AG Insurance. Ladies and gentlemen, I'd like to end my comments here and to hand back to Frank.

Thank you, Christophe. Ladies and gentlemen, this concludes the introduction and I would now like to open the line for questions.

May I ask you, as usual, to limit yourself to three questions. Thank you.

So just three questions. First of all, could you give us some thought about what's the strategic rationale to be in the UK at the moment, given that I think results are still struggling in terms of profitability, in terms of combined ratio.

There is more restructuring cost. There is a bit of reserve strengthening.

So how should we think about the UK because UK has been a drag for not just this year, has been a drag for, I guess, three, four years as well? So any thoughts on that?

What's your plan about UK non-life? Then second thing is can you give us a bit more color about Asian underlying earnings?

I mean how should we think about the trends in China, Malaysia and Thailand? And are you still comfortable with, say, a 15% sort of growth in the service you have delivered in, say, past five, six years, if we exclude Hong Kong.

Any thoughts on that? And thirdly is, if I heard it correctly, you mentioned that there is €9 million of integration cost in Ageas Seguros which is a Portuguese business.

Was that in this quarter or was it full year? Because how should we think about clean earnings from Continental Europe because in this quarter it was €30 million, if I add back €9 million it's like €39 million, so is that the right number to think about?

Or how should we think about that? These are the three questions.

Thank you.

First of all the UK. So we, indeed, have to recognize that in this year, the past year 2016, the results were overly disappointing.

If you look to 2015 they were not in line with our expectations either but that year was mainly due to weather events. When we look to the underlying of the UK we see something, let's say, to look at 2016, of between €55 million and €60 million underlying result.

We have been taking a lot of actions in the course of the past year with the whole restructuring to one company. One of the effects of elements in that plan was also the closing of the Glasgow site and that has led to a number of also expense reductions that will, in any case, be beneficial in the years to come.

So our expectation for the UK is one, it will remain a very competitive market where being very agile on pricing and underwriting is a key priority for management. Secondly, we have been working on cost reductions that will show its results as of 2017.

And so we thirdly, we see the UK as also market where we have a lot of learning experience that we can use in the other regions like, for instance, the upcoming detariffication we see in a number of Asian markets, like Malaysia, where we're. The second question, Asian underlying.

If you look to Asia underlying you can say that we have somewhere, also looking back to past year, an underlying that is slightly above €200 million. We're in a growing area so we continue to expect growth not only in top but also in bottom line.

The top line is quite clear; there is still a huge potential in the Asian markets. And the bottom line is mainly thanks to the fact that we have given attention over the past few years to the quality of the business we underwrite.

So we have a lot of regular premiums which makes that every year we start with a nice bonus to pass above the volumes of the year before and, at the same time, this will continue to help us increase the underlying, let's say, volume of liabilities that we've got and investments that we've got and that should be, let's say, the main lever for growing profits in the future. I think both elements are, let's say, the one in the UK is a point of attention where we think we have taken appropriate action.

Asia is another point of attention in this sense that we believe that we're on the right track and that we can expect growing top and bottom line for the years to come. Then the third question I would like to pass to Antonio.

The €9 million that was mentioned that's a full-year number. I think at the end of the third quarter we mentioned already a cost of €7 million in Portugal.

So it was €2 million to €3 million in Q4 and it is mainly related to integration/revamping of our IT systems in Portugal.

The only thing I'm a bit struggling is with respect to underlying profit. You mentioned €55 million to €60 million but what we have seen in the UK non-life market, especially motor, we're going through a very strong, say, a hard market at the moment.

So profitability for most of the UK non-life peers are moving up steadily and actually very fast. And the outlook for them is even better, is what they're saying, because of the lag.

So would you say that the outlook -- I mean there is a bit of lag in terms of price, getting the hard market, getting into your earnings as well. Or would that be running ahead of expectation?

Thank you.

So we have been increasing our rate in motor. So in household it's a bit more the opposite side but I prefer maybe to pass the question to Andy, who is daily in the UK, so to give a bit our view on price evolution in the motor business in the coming period.

Yes, we certainly agree that the pricing environment in motor in the UK as being one of inflation and prices have been rising relatively strongly. That said, there are also a number -- notwithstanding Ogden which I'll put to one side, notwithstanding Ogden there are a number of claims' inflationary risks, not least accidental damage.

But we've made progress during the course of 2016. Our pricing has been ahead of claims inflation and we've seen our underlying motor combined operating ratio improve during the course of 2016 and we're looking to build on that momentum into 2017.

A few questions from my end. First one is on slide 7 on the upstream of cash to the holdco.

And last year it was €487 million. It basically bumped up a bit the Belgium cash flows to pay out, I think, of roughly 87% of last year's earnings.

But I wonder a little bit on the outlook here because on the UK can you maybe explain a bit what all happened there because you still paid out a dividend of €47 million but you also granted an internal loan and the Solvency ratios are hovering around 115% to 120%? So is it realistic for this year, maybe even next year, to see a dividend coming out of the UK or at least maybe lower substantially compared to the size of €47 million?

Can you also give us a bit of feeling for what to expect from Asia? China has been a quite good number last year.

Is the €80 million or €90 million run rate is that something sustainable? And the reason I'm asking because if I look at €487 million which I think might be challenging to repeat in 2017 and look at the holdco costs on slide 47 of €110 million, then there's not a lot of room, let's say, to grow the dividend, the underlying dividend I mean, then of €1.70 into 2017.

So can you maybe help us out a bit on what to expect there, especially as we don't know the really organic Solvency II capital generation how we should square these kinds of calculations? That was basically my main question.

Thank you.

Maybe give a start and then hand over to Christophe more specifically for the UK situation. So I think you can see on slide 7 that, on average, taking out exceptionals that we have had in 2013 and 2014, that we have something like a €450 million upstream.

And you also see that one year to another there are some changes from one region to another with Belgium, of course, as a solid base. The €110 million corporate center costs you referred to cannot be taken as recurring because we have had this year a number of exceptional ones, mainly related to the settlement but also, as mentioned by Christophe in his speech, a number of, let's say, corrections in very old compensation plans from the past that we had in the course of this year.

So you could say that, with an upstream of dividend that is around €330 million, €350 million plus something like, let's say, even take €100 million max for corporate costs, you have €420 million to €450. And that's the capacity of dividend upstream we also expect in the coming years.

On the UK, so true that in 2016 we have collected €47 million from the UK. For next year the expectation is that no dividend will be collected when taking into consideration the Solvency situation of the UK which is below our objective.

So for next year nothing will come from the UK but, as Bart already mentioned, there is enough room to even grow the dividend.

Yes, maybe I misunderstand then. On slide 7 the €487 million that is before any holdco cost, yes?

If I take into account your remark the €110 million is maybe a little bit too high, but I have to deduct that first to see what the cover is for the underlying dividend, I guess.

Yes. The €487 million are all the dividends collected but you have to deduct the holding cost to see the potential.

And it is where, as Bart mentioned, there is sufficient room if you take the €330 million of dividend plus the run rate on the holding cost which is in the range of €70 million. What is expected is lower than what we had this year, the room is there.

And if you look, for instance, to the profit of Belgium for 2016 it's €391 million. So if we have 100% dividend upstream or embedded value we're close to what Christophe just mentioned.

Also do not forget that we have the running buyback which each time also reduces the number of shares. And I think that's also what you have to read in our communication about the dividend.

That is showing a confidence, have increased the regular dividend from €1.65 to €1.70. Management and Board would never have done that if there was the minor doubt about our capacity to continue in the future to cover the dividend plus the corporate cost center costs with the upstream dividends from the operating companies.

Okay. Once more followed on the remark on the Belgium capacity, because your Sols II ratio, I think, is still roughly around 240%.

What kind of comfort would you like to have an absolute ratio to maybe indeed decide to move it up to 100% payout? And I think there are also some concerns in the market that year to date your sovereign spreads have widened.

They came in already a little bit compared to where the big stress was in the end of January. But can you give us some comfort that the Solvency II ratio in the Belgium unit is still reasonably in line with where it was at the end of last year?

Or is it, indeed, a significant drop, maybe, already year to date?

I will leave the comments on Solvency II and evolution to Filip, but we have an internal capital management dividend policy where the dividend you pay upstream depends on the target Solvency II ratio we expect for each our companies. And also the situation there with the 240% is such that we do not expect that to have fundamental impacts on the dividend upstream capacity in Belgium.

Maybe you, Filip, give some comments on that?

Of course, it's true that and we already indicated that, spread moves create pressure on Solvency ratios. But to start, first and foremost, let's not forget Belgium is, indeed, still at 242%.

So there is still ample cushion to absorb some of that volatility. What happened in the first months of the year and also the last weeks is, indeed, we see spreads move up along the line of 20 basis points on the average book that we hold in government securities.

Corporate spreads did hardly move or even came down a bit. Of course, we benefit a little bit from the yield increase but, all in all, that is not going to be without any effect in line with the sensitivities that we show.

But that is not to the extent that it would worry us about the dividend capacity of Belgium. And as last year we moved close to 100% I think that is still what we aim for this year as well.

Another side remark on spread volatility, because it is going to be a topic I think maybe that will return throughout the year and let's not forget, indeed, that the Solvency ratios overall of the insurance companies are sensitive to spread moves, especially if it is not coming with a sharp increase in the risk-free yield. But, on the other hand, spread, as long as it does not materialize in real impairments, also improves or increases the future capital generation.

So it's kind of discount, like on bond almost. So it may be putting pressure on Solvency ratios but, on the other hand, capital generation and, indeed, in fact, real-world earnings of insurance companies are not negatively affected by yield, including spread increases, as long as it is not leading to impairments.

So that's what I would like to say on that.

Also three questions, please. First of all on the holding company cash expenses, you just guided for a run rate expense of €70 million per annum.

If I look at the actuals in 2015 and 2016 they were rather at €110 million for 2016. So where is the difference exactly coming from?

And is this all linked to one-offs or is there anything else I should look at? And secondly, to come back on the Q4 Solvency II ratio movements, there was a positive impact from market movements of 5 percentage points which was a bit lower than what I would have expected based on sensitivity.

So could you maybe break that down in spreads, rates and equity movements in order to get a bit better insight into that? And, linked to that, the Lag DT went down by €0.2 billion compared to the previous quarter.

So could you provide some color on that quarterly decrease, please?

On your first question; so the two years you refer to, 2015 and 2016, has, indeed, a number of non-recurring costs. 2015 it was the hedging cost related to the Hong Kong deal and this year it is an element of variable remunerations more linked to the share plans and so on where the final vesting was done at a higher rate than initially when granted and, of course, increased legal costs and costs related to the settlement.

And so these are costs we do not expect, in any case not at the same level, for the coming years.

And that bucket other is that exchange movements? Or -- on the same slide you used to highlight the cash bridge in the general account.

It was €20 million positive this year.

It's impairment on shares we have in the general account.

Okay.

It's also, let's say, exceptional. Filip, you take the second --

About the Solvency II ratio movement over the last quarter, you have some of the elements on page 53 of the presentation and, as you point out, market movements and others amount to about 5 basis points positive. You said you would have expected a slightly higher increase, due to the market components now in effect.

If you look at the movement over the last quarter, interest and spread together is in the range of 5% to 6% up. But we did increase a little bit our exposure to equity, as you can see in the documentation.

And, at the same time, the anti-cyclical adjustment on equity actually moved a bit up because of the increase in the active equity market. So Solvency benefits from the rise in the equity markets has been absorbed, in fact, by an increased stress test on that.

But that also explains the increase in the required capital for market risk, I guess, on a quarter-on-quarter base.

Correct, you're right. That is exactly where that comes from.

So although that is exactly where it comes from, otherwise underlying we would have seen a 5% to 6% increase coming from interest and spread. And then about loss absorption deferred tax, of course the loss absorption deferred tax it moved down a bit.

It's related to the market consistent balance sheet on real life loss. Also there the interest rate moved up, where we benefit on one hand, slightly absorbed by the reduction in the unrealized gains there.

As you know, in Belgium there is a cap on that and that affects it but you get actually compensated by the interest rate impact overall. The loss absorption deferred tax and you know our colleagues of KBC talk about a lot, it is more sensitive to spreads than to yields to start with.

And secondly, of course, you know that in Belgium there is still a debate with the regulator about whether that cap should be lifted looking forward, but that is something that is ongoing between the industry and the National Bank.

Three questions, please. Firstly, Belgium life.

The numbers are a bit weaker in the current quarter and that looks like mainly due to realized losses versus realized gains in the prior period. So can you just confirm that you're happy with your guidance there and there's no longer term underlying changes there that would make you more cautious on that?

The second question is a follow up on the UK. Can you give any sort of run-rate savings from some of the charges you've taken?

Or is that something you're going to discuss at the Investor Day? And if you don't improve the UK is that something that you would consider divesting down the track if it doesn't turn around, say, within a certain timeframe?

And then, finally, on the Fortis settlement. There has been a little bit of news flow recently.

I think it was some smaller shareholder groups trying to make a bit noise ahead of the hearing. So can you just confirm how many people have now signed up to the agreement that you made last year?

And, again, just reaffirm what you expect to be the timelines around the core judgments there? Thank you.

The first question, indeed fourth quarter in Belgium life is weaker than a year before. And I think we also in the Q3 call communicated that, let's say, the margin to be made on the guaranteed business in Q4 would be lower than in the first three quarters of the year, mainly due to the fact that a lot of the real estate capital gains already had been realized, where a year ago it was spread decently over the year.

So no reason to doubt about the future margin that we will make. We even see that, due to decisions we've taken with respect to the profit sharing and also further improvement in the investment portfolio, that we expect even a slight increase in the margin we can make in Belgium compared to the past.

For the UK, the only element we can say with respect to the Glasgow operation is that we from that operation expect and some others linked to that, that we expect something of €4 million to €5 million savings or profits on top, thanks to that. Divestment of the UK operations is not on our agenda.

And then maybe the Fortis settlement, Filip?

Now relating to the Fortis settlement I would say everything is as planned and on track. You know that on March 24 we have the hearing in front of the Court in Amsterdam where we and, indeed, also those who wish, can voice their opposition and we will defend our case.

That is what was expected. The news flow you refer to is, indeed, about, I would say, two material parties.

ConsumentenClaim, who is mostly representing slightly above 1,000 retail investors who are not in the active claimant category and so they have some points they want to raise at the hearing. And the other party is Mr.

Modrikamen, who wants to be assured that he can continue his case against the breakup. Also not a surprise.

Now, in terms of materiality, I can confirm, of course, that we have more than 95% we said last time and it's closer to 99%, of the parties who were involved in active proceedings behind the settlement. So that is confirmed.

And so we also had, of course, the whole notification process we went through which is a logical step. We informed over 120,000 clients or previous shareholders directly and so you have to look at these numbers and representativeness of these organizations in the context of that.

Perfect. Thank you.

So it's on track, I would say and there's nothing changed in our expectations and aspirations.

On the Solvency, the Group Solvency ratio or the Insurance AG's Solvency ratio at 182%, could you tell us what it is now, given and that government spreads have moved quite a bit year to date. And, in that light, if you look at the target of 175% what does it actually mean if the Group would fall below that level?

So what would be the implication of that? Would that mean that potentially you would revisit potential buybacks?

And I know you don't disclose the Solvency II capital generation but could you give us an indication around that level or perhaps your range or some kind of indication that we have an idea of the Solvency II organic capital generation uplift? Then the second question is on whether you have a plan for a new agreement with BNP Paribas to repurchase more CASHES.

Thank you.

The question maybe first and second one for Christophe. And then we will ask Filip to answer the third one.

On BNP Paribas we had an agreement. It came to its natural end December 31, 2016.

And after a discussion at the Board level it was decided not to renew it. So there is no agreement any more to settle the CASHES at this moment.

Regarding your questions related to the Solvency ratio, indeed the Insurance solvency ratio Ageas came in at 182%. As indicated earlier and also as expected by the market, this was a bit below what was expected.

And that is mainly due, I believe, to the exceptional one-off items in the UK. I refer to page 53 of the presentation, where you have the main blocks of movement.

If you look at the Q4 result, first and foremost, if we would not have had the revaluation of the put option and revaluation of the put option is largely driven by valuation increase in insurance stocks all over and we would not have had the one-offs in the UK, the ratio would have been up quite a bit. In fact, the overall impact of these two items is 7% on Group and 3% to 4% on insurance.

So we would have moved up and that gives you a feel and that is the last line on page 53, of what the capital generation, including some other items, was during the quarter. So the quarter was actually, from that perspective, plus 5% which is quite solid and in line with what we expect to see in normal course.

If pressure comes and that can come due to spread increases not so much by yield, that would be beneficial, as we indicated before. And you can have a look at the sensitivities on page 54 on where things could be.

Then, of course, 175% is our target. But let's be clear that the 175% is a target and that we will take actions to stay close to that or to move towards that, even if we're above or below.

If we're above we intend to increase our dividend upstream from the operating entities. If we're below we can reduce that a bit.

So that would be the normal mechanisms. Let's not forget, we still have ample buffer also at the Group level on top of that.

And 175% is not something we cast in stone but it is definitely something we manage towards, both up and down. It's also the reason why we're very comfortable to confirm that we will continue full upstream out of Belgium and where, in this case, we say in the UK we will indeed next year not ask for dividends but let the capital strength increase by its own merits.

And, Filip, to manage the Solvency we still have ample room to raise sub debt. We still have a lot of room to manage with new issuance of sub debt.

Regarding to detailed disclosures relating to capital generating, I have to refer to our Investor Day, where we promise we will do so in June and there we will get more comprehensive and in-depth analysis on that presented to the investors.

Maybe finally add that, with respect to the Asian entities, you can also see on page 52 the good level of Solvency in the non-controlled participations which is also indicating and confirms what we have said already some years ago that we do not expect immediate capital calls from Asia of any importance. Of course, we have, like we had the Philippines and Vietnam, the new startups but, next to that, from that side not too much to be expected.

Just two questions, if I may. Firstly, just going back to slide 53 and the 5 percentage points of market movements in other that you've got coming through in the fourth quarter.

I think earlier in the call you indicated that spreads and rates were 5 percentage points which would seem to imply that capital generations maybe be zero within the quarter. I'm just wondering whether we're missing something and I suspect unfortunately we probably just don't have the right pieces of the jigsaw there.

And then secondly, on the Consumer Claim litigation settlement and obviously the Consumer Claim's to action to take it to court in opposition, can you just work through your views on what that action can do? And, in particular, could you work through the legal hurdles that Consumer Claim would need to demonstrate to stop the settlement happening?

And, in particular there, I know you've given the 1,000 retail investors but could you maybe help us by giving us a sense of how much you think that is as a percentage of the shareholder base relative to the number of people you already have of the shareholder base on the active side? Because I think one of the legal issues here is obviously which party is more representative and I think actually it's relatively -- I wouldn't mind just getting a better sense of the numbers there.

Thanks.

Maybe to answer your last question first. The opt-out percentage, let's start with that, that we have foreseen in the procedure is 5%.

That is a right that Ageas has reserved itself in case we would see material opt-out in the process so we can, of course, pull the emergency brake. But 5% on the shares, not 5% on claimants.

Now the parties that have so far, as I indicated before and this is a rough figure because we don't have final numbers there, but they represent about 3,000, 4,000, I would say, retail shareholders. Now, thinking about it, 4,000 retail shareholders represented at the hearing to plead, not necessarily against the settlement but maybe against certain aspects of the settlement, does not mean the settlement will not go through.

And certainly not -- in terms of percentage that they represent of the shares is quite a bit lower than the percentage they would represent as shareholders. So even there, if you think that we have almost 60,000 people actively involved in the proceedings and aside that I mentioned that we have written to more than an additional 60,000 non-active shareholders that we have been able to identify and this without all those we have not been able to identify, I think the number of eligible shareholders in this context lies somewhere around 150,000 to 200,000 shareholders.

So it gives you an idea of perspective and so we believe that we're far below the expected opt-out percentage. Regarding your question on Solvency, that was about the figures on page 53.

You see there market and other movements showing the plus 5 percentage points. I indicated, indeed, that interest and spread is 5% to 6% positive.

But I also mentioned that equity and real estate, that is more equity and real estate funds, actually have been quite negative for the quarter; minus 2% direct impact on the equity side. That is without the additional investments in equity.

So the overall pressure coming from the diminishing effect of the count is cyclical premium on equity and the additional investments together you should think of an effect of that of also between around 4% negative on the quarterly movement in the Solvency ratio. So that closes the gap, more or less, with what I mentioned before.

Three questions, I hope. I'm going over some ground again, apologies, but your ordinary dividend growth of 3% per share I found a little bit disappointing.

And the implication, once we allow for the reduction in the share count, is that your distributed cash in regular terms has actually been about flat year on year. What should I infer from that?

On the one hand, some people could be seeing that this implies challenges of capital management; a lot of the questions you've had already. On the other hand, you may just have decided that you didn't need to do anything impressive with the ordinary dividend because you had a great special coming through.

If you could just answer the way you thought about the ordinary dividend at that high level I'd be grateful. And then, secondly, on slide 54.

Those sensitivities that you're showing to spreads, can you just remind us whether they are net or excluding any benefit from the change in the volatility adjustment? Because, again, from one of your earlier answers, Filip, if we just take the 20 basis point widening of sovereign spreads that seems to be about 10 percentage point hit year to date from that single issue.

But I'm not sure if I'm right to take that 10 percentage point or if there's a mitigating element within the volatility adjustment. And then, lastly, all the talk this year's been about Ogden in the UK.

There has been -- I've heard some further conversation about whiplash reform that could, on the one hand, be helping reserves but could also have a negative impact on your ability to adjust rates in the future. I'm a bit vague on all of this but I just wondered if we could get a UK update about whether there could be more coming from whiplash after we've been so focused on Ogden recently.

Thank you.

On the first question I think we have a clear dividend policy which is a payout between 40% and 50% of the insurance result. With the dividend we paid now, the €2.10, we're above the 50% which is also a bit due to the specific situation.

If we take out the exceptional negatives from the UK and that's I think what you also find on the slide on dividend, we see the dividend payout more as a 45%. So I think, looking to the Board, what we tried to realize over the years is, one, to have respect for our dividend policy; two, to try to have a dividend that is constant or increasing.

And I think if you look back to 2009 until now this is what we always have been doing. So I accept your slight disappointment about the increase of the dividend but we see that as in line with our policy and also confirming that next year we work towards a dividend that is at minimum €1.70 and if we're able to raise it like we did in the past years we will definitely do it.

So for the second question, that's for you.

It's a factual question. These estimated sensitivities are, indeed, taking into account the estimated effect of the VA for that specific component.

So, of course, in reality many of these things happen at the same time. So if you would have only one of these, so these are single impacts, spread increase on sovereign, indeed, of 50 bps would lead to about approximately 24% impact.

That is if there is no spread change, of course, on corporates and/or no yield moves at the same time. But the VA effect is included.

Then the question on whiplash Andy?

The up-to-date position on whiplash is that the UK Government is currently consulting and specifically is consulting on soft-tissue injuries in road traffic accidents. That consultation period ended in early January and we're waiting to hear what the Government response is.

Fundamentally, there are two suggestions. The first one is that general damages which typically for whiplash might be in the order of GBP2,000 to GBP2,500, are either banned completely, so there is no payment of general damages or the general damages are limited to GBP400.

That is one area of consultation. And the second area of consultation is that the limits for the small claims court is raised from GBP1,000 to GBP5,000.

That would have the effect of bringing most whiplash injuries and disputes into the scope of the small claims court and the small claims court claimants do not need lawyers to represent them in that court. You'll not be surprised to learn that the insurance industry is generally supportive of those changes, the lawyer fraternity is very much against and we're waiting to see where the consultation lands.

A few questions left from my side. Again, on the UK Solvency II, if I may.

You're now at 119%. You said we should not expect dividend to be upstreamed as it is below your desired level.

Could you remind us of what the desired level is? And is there a chance that you might need some extra reserve strengthening in 2017 from the current levels?

That's the first question. And the second question relates to the change in your investment portfolio.

You increased your equity exposure. At the same time we see some pressure on your Solvency II ratios while, by adding equity exposure, your ratio required capital.

So how should we read this? Is it something structural where you add more risk in the portfolio?

And does it relate to investments of your own funds or also covering your liabilities? Thank you.

For the UK we have in each, as mentioned earlier, in each of our operating companies a kind of a target Solvency ratio. It's clear that with the measures taken or the losses taken in Q4 in the UK that the current level of Solvency ratio is below that target.

As Christophe said, we will not upstream dividend in the UK. So we believe and that's also obvious in our plans, that over the coming year, so the running year 2017, the Solvency will be restored to a level that is in line with our expectations for the UK.

Further reserve strengthening in the UK. So I think we there have to draw the attention to one element that is not only for us, it's an industry element and can find it on slide 35, where we have an estimate of an additional impact that could come if the Ogden Rate Review leads to a lower rate, discount rate, under 1%, we have now taken as an assumption.

But that would be then an impact for the whole industry, of course. Next to that we believe that we have a level of reserves that are taking in account the practices in the UK and, again, our confidence levels that we look for where we don't need additional strengthening in the course of 2017.

Okay.

So I take the question on equity. So first let's take the precise figures.

When I read the slides the equity, the market value, was €3.9 billion at the end of 2015 and €4.4 billion at the end of 2016. So let's say that it's a 10% increase.

But, first, let's remember that we had supportive markets at the end of the year so we have a market effect here. Apart from putting more money in equity, we have the supportive market.

Then I don't agree with your comment that the Solvency is under pressure. We're still above the objective.

So we put in place our policy on the investment side without putting limitation coming from Solvency at this very moment. Then my last comment will be I know that when the market value is up the loading coming from Solvency II is higher.

But I prefer to have a better cushion of unrealized capital gain on that sector. So I am not worried at all.

And maybe as a follow up on your unrealized capital gains in real estate, this is, on average, more or less the same amount you realize on a yearly basis. Is that the same you would expect for 2017 in your Belgian operations?

In real estate you have to know that we account at amortized costs. So it means that every year we have the rent coming out of the buildings we own minus the depreciation costs.

And so, in order to have in the final investment income an income that is close to what we expect also in our asset allocation exercises, we have this regular realization of capital gains. So you could say on a yearly basis it's between €70 million and €80 million.

If you go back in time you will see that that has been realized and that, notwithstanding this level of cap gains, that the unrealized cap gains on the real estate portfolio have been €1.5 billion for many years now. So that proves that we have a very consistent policy from that point of view.

And so also for 2017 you can expect a similar level of unrealized gains in real estate. Of course, you cannot measure it on the €1 million exactly.

It depends a bit on what type of building. But we can already confirm that in Q1 we realized a first transaction in real estate that will influence positively, of course, the results of this year and that will also contribute to the margin that we want to achieve on the guaranteed life business.

Just a few questions, please. There was a capital injection into France about €50 million.

How come this was done? It's quite large in comparison to the size of the business here.

So I just wanted to know what it's there for and whether it's any change in the business structure at all. With regards to the UK restructuring, just to follow up from previous questions and sorry if I missed anything here but is there any further additional kitchen-sinking or restructuring or closures that you anticipate in any parts of this business going forwards?

And then, finally, on your Belgian life business there's been some comments in the market about the Belgian back book is funding the new business currently. Do you have any comments around this or any thoughts about these market comments so far?

Thank you.

Christophe, France?

So I take the question on France. So there is, indeed, a capital injection of €50 million which was a capital increase made out of the holding from the general accounts.

So it was not sub debt. It was a straight capital increase of €50 million.

So some comments around this. So in France we have a large book of annuities and the duration matching is not insured on this, so we have high sensitivity to interest rate.

And it's the reason why the Solvency of France decreased along the year 2016 and we had to address this situation. We had a discussion with the regulator and it was kind of a package within the discussion and with this €50 million capital increase we got the benefit of the transitional measures.

So, from the regulatory standpoint view from France and including the transitional measures, the Solvency is now very high; in excess of 200%. And then if you take our view, Ageas view which excludes the benefit of transitional measures, we're in the range of 120% now in France.

For the UK I think, maybe I repeat myself but we have been taking a lot of initiatives in the past year. And you also see it, for instance, in the expense ratio that has come down with 2% compared to two years ago and 1% compared to a year ago.

And the full benefit of decisions taken, like the closing of Glasgow, will be in our results 2017. So, at this moment, we don't expect other similar operations in the coming period but we nevertheless expect the benefits from all these decisions taken in the past 1.5 years.

And then the Belgian life business, Antonio?

Maybe on the Belgian life business and the market rumor, I don't know it was called, that the back book is funding the new business. But remember this is not a unit-linked contractor, this is a life insurance partner, but there is always an element of mutualization between people in this fund.

Bear in mind people that -- so the new business that enters in this contract, they also pay upfront fees. So it's not it's like a free entry.

And then it is the very principle of how we manage this book. We look at the total margin of this book and the people, the new business that come in also get a lower guarantee.

Today the guarantee for new business is 0.25%. So 0.25% for the new business.

And yes, they have a possible profit sharing but that's not guaranteed. So I don't know if you would call that really that the back book is funding the new business but it's fair to say that it's some kind of mutualization but also new business contributes in the form of lower guarantee and also their cost loadings.

Two questions on my side. The first one is on the partial internal model and especially the difference now with the Ageas version of the Solvency II ratio.

You have quite a large difference, roughly 18 percentage points, between both ratios. All peers are talking partial internal model so why are you still pushing for the Ageas version?

Are you 100% sure you will get an approval on your internal model for real estate? Or I try to understand why you are still pushing for the Ageas model and put less emphasis on partial internal model which, in my opinion, is key for the regulator and the distribution capacity.

The second point will be on the high level Solvency II trend. If I look at the Group Solvency II end of H1 we were at 221%, end of H1 2015, sorry.

Now we end up at 195%. We might get some negatives from spread widening in the first quarter.

So how does the Board see the general trends? And at which point will you start to be concerned by stopping the share buyback?

Or do you have concerns in terms of your total distribution? Thank you.

So, first and foremost, relating to internal models and whether or not we apply them only on the level of Ageas or also on the Group, let's be clear that the fact that we have opted for an internal model non-life which has been recognized both in Ageas as well as in PIM, is based on the same logic that we're now looking at internal models' market risk. But, so far, for the internal model on market risk we have only really found logic to the economic reality which is there related to real estate and parking concessions which are treated in a strange way, I must say, under the PIM.

So we cannot and that is very clear from a regulatory point of view, we can, however, not implement a partial internal model on market risk. So we're looking and studying the opportunities related to developing a full market risk model and if we feel that we're ready for that we may go to a process of trying to get that approved also in the PIM.

But, so far, we stick only to the one within Ageas related to real estate and the parking concessions where we feel there is a real economic reason to do so. Now let's, on the other hand, not forget that in the PIM, so in the Solvency II PIM, the use of transitional measures is there in France, in Portugal, whereas on the level of Ageas we do not take that into account.

So there is more than one difference between the two. When you point to the overall evolution over the year, because on insurance level we stay relatively stable, on the Group level it came down quite significantly, the reductions on the Group level are mainly related to capital movements, as you can see on page 53, the legal settlement, let's not discount that, it is 20% and a relative high dividend that we paid this year, including the share buyback.

So some of them are recurring but most important components are non-recurring reductions in the Solvency ratio and so do not indicate a trend, I think. If you look at the real trend it is stability that is coming out of our reporting to date.

Our insurance Solvency ratio has actually steadily evolved around the 180%; quite a notch above still our long-term target. And we continue to manage based on the Ageas ratio which we still feel is the best representation of economic reality and takes into account, as we indicated before, still some levels of prudence related to diversification, related to not inclusion of non-controlled participations amongst others, because there is a few more.

So that's what I'd like to say on that.

Can I do some follow ups on the UK and Asia and the settlement, please? On the UK, if we look at the fourth quarter gross inflow it dropped like 14% quarter on quarter where the currency only decreased 4%.

Could you see what's driving that? Is that due to the increase of rates that you mentioned?

In Asia, if we add back the equity impairments then you see that the net profit is rather stable versus the third quarter, so around €40 million. Can we see this as a recurrent base for growth in the coming years?

Or are there still startup costs for Philippines, Vietnam involved in there? And then lastly, on the settlement we talked a lot about numbers of people who agree with the settlement and people who don't agree with the settlement but could you explain us what would drive the Court to agree with the settlement?

Is that the number of people who agree? Or is it more like is the settlement fair, based in the view of the Court?

For the first question, the influence in the UK in Q4, indeed they are 0.5% compared to 0.6% a year ago but, I'm looking to Andy, I think it's mainly a currency impact. So you see on a yearly base there are 1% up at constant rates.

So he's confirmed. So it's not due to less new business due to increased rates, so that's not the point.

So it's currency. For Ageas I think the run rate of €40 million, €50 million a quarter is something that I already earlier in the call also expressed as to be expected run rate going forward with, then, the underlying hypothesis that we expect due to increasing portfolios that the profits in Asia over time continue to increase.

Filip?

Related to the main aspects on what the Court will look at when it decides on declaring a settlement proposal binding, there's actually two. And so we talk, indeed, a lot about numbers of claimants and then claimant organizations who support, who have not supported it.

That is the first criteria; its representativeness. And they will assess whether the people who support the settlement, indeed, represent a substantial or a substantial enough part of the potential eligible claimants.

That's the first criteria. The second one that they will assess is the reasonableness of the proposal.

Of course, the support does reflect on the reasonableness but it is the Court who will look at whether, from an economic perspective, the proposed settlement is reasonable and balanced. These are the two main criteria they will focus on.

I have just one follow-up question on your Solvency ratio. Given that a large part of your litigation is now solved, what is the point of having the insurance hurdle rate of 175%?

Why not that is a Group hurdle rate? So that's one simple question.

Thank you.

Yes, we're pondering the same question and we have decided, because we announced our 175% insurance early last year as part of our Ambition 2018 program, but we're considering and we will probably move, because you already can see that we report more and more on Group Solvency today, to make a transition to Group target in due course. But, that being said, that will be once we have full clarity on the tail of the litigation risk, then you can expect us to do so.

I've just got two questions; both of them are on the UK. Could I ask in terms of the Ogden rate how you decided to get to the 1% assumption what the thinking was around that?

And the second question, I guess relating to that, if the rate does settle at 1%, how do you expect UK motor insurance prices to react? I guess I would have thought they'd probably go up a touch more but just any thoughts around that would be really helpful.

Thank you.

On the Ogden rate the situation what we're following, we were still with the official rate of 2.5% and when the issue became very public and it was in December, we had to assess our position with a view of having some kind of best estimate. And so what we decided is to go for something taking into account real interest rate and the 1% seemed to be a very reasonable assumption.

Then taking into account what we know about peers and we know that we're, let's say, within the peer group, having taken, I would say, the prudent approach. So that's the reason why.

So first element, the 1% real interest rate for a discount rate seems reasonable. Second, we're very well in line with other prudent peers.

Perfect.

I'd just like to add some comments from myself. Clearly the ABI and the insurers are lobbying hard for a sensible outcome to this.

It's very disappointing that the Lord Chancellor has not consulted with the insurance industry as to where this might land. So we're, to a certain extent, blind and Christophe has given an explanation why we've chosen 1%.

There's clearly a consideration as to various reserving strengths of insurers but, whatever the reserving strength, a reduction of the Ogden discount rate from 2.5% down to something less will be an economic impact on those insurers and our assumption is that rates would increase as a result of that. Obviously, the size of the rate increase depends on where the discount rate lands but certainly at a movement to 1% we would expect rates to move up reasonably significantly and very quickly after any announcement was made.

Okay. Thank you, ladies and gentlemen, for your questions.

To end the call let me summarize the main messages of our annual results. The recent news related to the UK did not change our overall view that 2016 was an eventful, remarkable and good year for Ageas; remarkable especially because of the big milestone which was the settlement agreement with most of the claimant organizations.

In a struggling environment we managed to further structurally improve the earnings in most of the segments and we created some additional comfort on the balance sheet by strengthening the reserves, anticipating on a couple of events. And last, but not least, the proposed growth dividend over 2016 is a clear sign of comfort of the Board with respect to the financial health of the Company.

I also want to draw your attention to the invitation that we have sent to you this morning for our Investor Day on June 6, in Lisbon and it's clear that topics like capital generation, our positioning in the UK and the work in progress in Portugal will be top items on that Investor Day and we will, at the same time, also give you an update of where we're with our Ambition 2018 progress. And, 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. Thanks for your time and I would like to wish you a very nice day.

Goodbye.