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 first quarter of 2020.

I'm joined in the call by our CFO, Christophe Boizard; our CRO, Emmanuel Van Grimbergen; Antonio, our Chief Operating Officer; and Filip Coremans, our Chief Development Officers. In these special times and for security reasons, we are, however, not all present in the same room, so we will have to be a bit creative in passing the questions to the different exco members.

The group net results was supported this quarter by a noncash one-off related to the finalization of the FRESH tender offer at the beginning of January. In the context of the global COVID-19 pandemic, our insurance activities have proven quite resilient over the quarter.

We have been impacted by the global financial market turmoil, which triggered a significant level of impairments partly offset by realized capital gains, and by the interest rates movement, but the impact on our insurance operations has remained so far relatively limited both in terms of inflows and of trades. The revaluation of our equity investment has heavily hit our P&L during the quarter.

However, our balance sheet remains strong, thanks to our prudent investment strategy to invest primarily in sovereign bonds. With more and more companies facing difficulties in the current environment, our lower exposure to corporate bonds compared to sovereign bonds has proven to be a sensible decision.

And we provide you more details on the composition of our corporate bond portfolio on Slide 4, the impact of a one-notch downgrade of the whole corporate bond portfolio on our solvency ratio which remains limited to less than five points. I would like to emphasize that both our capital and cash positions remained strong.

Despite the volatility of the financial markets, our Solvency II Ageas ratio stood at 196% at the end of the first quarter and at 192% at the end of April, comfortably above our target of 175%. And as for our cash position, it stood above the €1 billion when excluding the amount ring-fenced for the Fortis settlement and the ongoing share buyback, which gives us strong comfort that we are in a solid position to face the uncertainties brought by the COVID outbreak.

As you know, we anyway complied with the recommendations made by the Belgian insurance regulator in the context of the COVID outbreak regarding prudency around the use of our capital. We have adjusted the distribution of the 2019 dividend while confirming our intention to pay over 2019 a total dividend of €2.65 per share.

A first dividend payment of €0.27 per share will be proposed next Wednesday to the general shareholders' meeting, and we intend to propose for approval in October an intermediary dividend of €2.38 per share. Our Belgian subsidiary, AG, aligned to the group view, but the other operating companies have already decided and upstreamed their dividend or will do so in the coming months.

The COVID-19 pandemic brings uncertainty over the overall economic slowdown and the volatility of the financial markets. Although our operations have proven resilient in this first quarter, it is too early to get a full and accurate picture of the total potential impacts that this pandemic might have.

These exceptional circumstances may prevent us from achieving this year the net results that we expected, and we hope to be in a condition to provide you with a better estimate at the time of our Q2 results. Two weeks ago, we have celebrated Ageas' ten-year anniversary.

These past ten years have been an eventful journey, and this pandemic is not the first crisis that we have to overcome and will overcome. I strongly feel that at times like these it's all the more important to live up to being as our purpose is supporter of your life.

Many initiatives have emerged within Ageas in the past weeks or months to provide our customers, partners and employees with additional support in these difficult times. We hope that they will bring some relief to the economic impact of this pandemic on society and will benefit to all in the long run.

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

Thank you, Bart. And good morning, ladies and gentlemen.

As you can see, Slide 5, our group result stood at a high €452 million this quarter. This result included €310 million net capital gain related to the tender on the FRESH securities launched at the end of the last year and finalized at the beginning of 2020.

This was already announced during the previous call reporting on the Q4 2019. An additional tranche has been acquired in April at 50% of the nominal value, generating a further gain of €23 million in the second quarter.

I remind you that these gains constitute a noncash element and will therefore not be available for dividend distribution. Our group net result also benefited from a positive revaluation of the RPN(i) for €56 million.

Under pure insurance scope, meaning without the holding result, the net result amounted to €113 million compared to €259 million last year. This decrease compared to last year is mainly explained by impairments on the equity portfolio in Belgium and Asia.

Also these impairments were partly offset by realized capital gains. The total capital gains net of impairment on our insurance operation amounted to a negative €36 million this quarter versus a positive €93 million during the first quarter of 2019, which you will remember was exceptionally good, thanks to the favorable equity market in Asia at that time.

Our net result was also affected but to a lesser extent by the storms that hit Belgium and the UK last February, for a total amount of €64 million, but the underlying combined ratio, meaning without the storms, was lower than last year. As regards the Commercial performance, our inflows decreased by 7% over the quarter, as our continued growth in Non-life couldn't offset a significant decrease in Life.

As usual, I will give you now some comments per segment. Slide 6.

In Belgium, our Life net results suffered from a €60 million impairment impact resulting from the weak equity market at the end of the quarter. Consequently, our Life results ended in negative territory despite higher underwriting results.

These impairments, along with lower recurring real estate revenues, weighed on the Guaranteed margin. We have here to mention the significant drop in revenues from our controlled parking business Interparking because of the COVID-19 lockdown.

The Unit-Linked margin, which stood at 47 bps compared to 26 bps in Q1 last year, was supported by higher management fees, whereas in Q1 last year we had the impact of higher costs. In Non-life, the strong operational performance in Motor and the sale of two old reinsurance portfolio in runoff mitigated the claim costs related to the storms.

Without these weather events, the combined ratio would have stood at 88%. The net cost of the storms amounted to €20 million, as part of the gross costs were shared with the Reinsurance segment through the internal quota share agreement.

I take this opportunity to remind you that, as previously announced, we have increased this quarter the cession rate of the quota share Reinsurance agreements between ageas SA/NV, the holding; and the operating entities in Belgium, UK and Portugal. And the new cession rate is now 40%.

Also, this has no material impact on the group net result. It has, however, an effect on the result by segment.

Regarding the Commercial performance in Belgium, Life inflows were down compared to the exceptionally high level of last year. 2019 benefited indeed from a successful sales campaign in Unit-Linked and high Guaranteed inflows in the bank channel.

In Non-life, all business lines contributed to the continued growth. On the UK now, on Slide 7.

The impact from the adverse weather on the net result amounted to €15 million, while the Motor business continued to suffer from market-wide claims inflation. This quarter confirmed the stabilization of the inflows, supported by steady growth in Commercial lines through digital distribution; and increased volume in Household, thanks to new distribution partnerships.

In Continental Europe, Slide 8, our Life result was strongly up, driven by a reserve release in Portugal where we aligned the local reserving policy with the group policy. This had a positive impact, net, of €20 million on the result; and this was partly offset by the adverse evolution of the financial markets.

While this reserve release drove Guaranteed margin strongly up, the Unit-Linked margin, on the other hand, declined sharply due to exceptional arbitrage costs in France in the context of intense market volatility. These one-off costs completely offset the improvement in Portugal.

In Non-life, Portugal did very well with an excellent combined ratio of 87.3%. On the Commercial front, Non-life inflows continued their strong growth, with sales up in all business lines.

In Life, the strong increase in Unit-Linked inflows could not fully compensate for the sharp decline in Guaranteed products in Portugal in the current low interest rate environment. In this country, we are in a transition phase marked by the launch of new products better suited to this low yield environment.

In Asia, Slide 9, we…

So I am on Slide 9. In Asia, we recorded a resilient result this quarter compared to an exceptionally high result in Q1 last year.

As previously announced, the COVID-19 had a limited impact on our claims. Nevertheless, we suffered from three things: the equity market declines that triggered some impairments, especially in Thailand where the market was down by nearly 30%.

This was partly offset by equity capital gain in China. The difficult context to sell life product with the lockdown.

Fortunately, the decrease in the Life inflow remained limited, thanks to the large part of regular premium products in our business mix. And to the excellent persistency level of the Non-life business, the strong sales momentum continued with double-digit growth.

And then the third and last thing, the decrease of the government bond yield in China, which amplified the unfavorable evolution of the discount rate curve. Given the evolution of the Chinese government yields, the discount rate curve is expected to further decline throughout the year.

Overall, these three negative impacts of the COVID-19 were mitigated this quarter by the solid operational performance. The Reinsurance segment now, so on Slide 10.

So the reinsurance segment was heavily impacted by the weather event in Belgium and the UK. Moving now to the balance sheet items and capital position.

As you can see on Slide 11, the total liquid asset stood at €1.6 billion at the end of the quarter, following the €513 million cash-out for the tender of the FRESH. Excluding the amount ring-fenced for the settlement and the cash set aside for the ongoing share buyback, our total liquid asset amounted to €1.1 billion.

Despite the turbulent financial markets, you can see, Slide 12, that our group Solvency II ratio stood at a high 196%, still comfortably exceeding our target level. And surprisingly, the two main drivers for the solvency this quarter were the 11 percentage point impact coming from the tender for the FRESH; and another 11 percentage points coming from the markets movement, mainly the downward shift of the risk-free curve and the declining equity markets.

Our operational free capital generation, Slide 13, amounted to €95 million, including €10 million dividends from our non-controlled participation. The storms had a total impact on our IFRS result exceeding €60 million, which directly weighted on the own fund generation over the quarter, the SCR being broadly unchanged.

By segment, this impact is spread over Belgium, UK and Reinsurance through the 40% quota share. And this is now the end of my presentation.

Thank you.

Thank you. And good morning, Bart.

Good morning, Chris. Hope, everything good at your end.

Just a few questions. So first of all, I’m not sure if it is the right time to ask this question, but I still want to check about M&A.

Now in my view, markets are down 30%, 20%. This is probably the best time for you to consider doing M&A because you might get something good value for money and given that you have a lot of cash at the balance sheet.

What you are thinking about it. Is this something you’re looking at it?

Or I mean, are you just busy with other stuff? That’s number one.

Secondly is can you give some thoughts on, updated thoughts, on Chinese earnings, how Asian earnings will work in this year. I mean, are you still comfortable with €325 million to €350 million of guidance?

Or do you think that lower interest rates will have a drag? And lastly is the DTA thing, the new change in the Reinsurance.

I mean, is it going to crystallize some of the DTA benefit? Or is it a bit too early?

Thank you.

Okay, thank you, Ashik. First question, on M&A.

So maybe go a bit broader. I would say that, during this – in the meantime, more than eight weeks lockdown in most of our activities, we’ve been able to bring all our people, from the first day, even a bit before in some countries, to a full daily work environment working from home.

And I can assure you that our operations did not suffer from it. So it means that all teams continue to focus to serve customers; to be in connection, I would say, with people like you, with investors and analysts.

And the same counts for our M&A team. So we continue to work on what has been announced to the market in 2018, being part of our strategy.

It’s clear that a number of, let’s say, potential targets maybe change in value or in ease of operation, but in essence we do not change our criteria. We continue to spot opportunities as we’ve been doing in the past years.

We – I would say we continue to be somewhere prudent in our approach. I think some of the – okay, the opportunities we missed in the past year, looking backwards, and that’s of course with hindsight, we are probably not that dissatisfied not having made these deals, but okay.

You know that we cannot give more concrete information, but we continue to spot, to see where we can do additional acquisitions in countries where we are. We look to the markets that we spotted, like Indonesia.

And we also look to a possibility eventually to find a fourth home market in Europe. The second point, on the Chinese earnings: First of all, as I mentioned in my introductory speech, we – the only thing we can say is that we cannot confirm our guidance for the Ageas results for this year.

So it also counts for the underlying segments. The only thing, and Christophe referred to this, is of course that, due to the low interest rate in Asia, in China, the impact that has on the 75 days average, that is expected to have a further negative impact in the course of this year.

The big question will be, of course, what potential mitigating elements could appear in the next nine months to partly maybe compensate that decrease. And then for Reinsurance, I propose to pass to Antonio.

Yes. Hello, good morning, Ashik.

And hope you’re doing well. On Reinsurance and the DTA question that you asked, I’ll be very short.

I think it’s far too early to think about DTAs.

Okay, that’s very clear. Thank you for this.

Yes, good morning. A few questions from my end.

Maybe first, one follow-up from Ashik on Asia. Can you help us out a little bit at least in terms of the discount curve impact in the first quarter and remind us where Taiping is currently with the VA compared to peers?

That might be one of the offsets, I assume. And the second question I have is unfortunately a bit forward looking, but you’re in a way quite special that you’re still continuing your share buyback program.

I want to understand why and – that is at all possible. But looking a little bit ahead, in August, you normally update the market, but in light of, let’s say, this period of EIOPA and restraints on capital return, what is your thinking about it as things stand today and especially looking at your share price?

Actually, yes, a new buyback would actually make a lot of sense compared to your book value. That will be my second question.

And the third one, a little bit linked maybe to the buyback, is on the cash upstreaming outlook. Normally, you provide that with Q1, some kind of overall outlook for the year.

And you have not done this, this time, but I heard in the opening remarks that I think you mentioned something like remittances or upstreams is probably going according to plan, so can you say something about that? And is there any risk of timing of upstreaming the Belgium dividends maybe more to the second half compared to typically in the second quarter?

Any color there would be appreciated. Thank you.

Okay. On the first question, the discount curve impact in the first quarter.

Let’s say, compared to last year first quarter, it’s an impact of something like a bit more than €30 million negative, where it was slightly positive last year. And the VA has not been changed and is lower than the one applied by the peers.

The second question, the share buyback: first of all, the continuation. When we announced the dividend payment in two steps, we confirmed indeed the continuation of the running share buyback, first of all, because we still had, I would say, only €60 million outstanding to complete the program.

We had this strong solvency level that we still have today. We had the strong cash position that we still have today.

And I must say also in our communication or exchange of communication with the national bank this has not led to frustrations or anything from their side. So – and we just wanted to deliver on the promise that we made in 2018, when we said we will do every year €150 million minimum buyback unless we have sizable acquisitions.

So that’s the reason why we continued. What we will do with the maybe next moment of decision, so I – my answer is the same as the one I gave in the past.

We will have at that moment a view on the economic financial environment, our own position, our own plans. And so we cannot say anything about it today.

With respects to the cash upstream. So as you can see, we already received €85 million dividend.

It’s dividend from Turkey. Portugal paid a dividend.

We have in the meantime – and also a little amount from India. In the meantime, I can say all our operation – operating companies have decided on a dividend upstream.

So it’s Belgium. It’s UK.

It’s China. It’s India.

It’s India paid, Thailand, Malaysia. And most of them will be, let’s say, paid out in the coming quarter.

The only where we follow the Ageas timing is for AG in Belgium, but so we are at this moment more than convinced that the upstream of dividends will be more than sufficient to pay the dividend to cover the operating costs and also to cover part of the buyback. So it should be an amount of above €600 million.

Great, thank you. Very clear.

William Hawkins at KBW. First of all, Bart and Christophe, could you just comment slightly on the solvency environment on Belgium – in Belgium and the discussions you’ve had with the regulator?

Because I still come back to this point that I don’t believe it’s a naïve comment to say that, if your solvency ratio is 2 times the regulatory minimum and you only have a 5 percentage point sensitivity to a one-notch downgrade across your corporate bond portfolio, it’s very strange, understanding the current environment, there is so much regulatory intervention into your behavior. So could you sort of help me understand what I’m missing in terms of the bigger debate?

And then I guess, much more importantly, how has this experience changed your attitude to what you think need to be the appropriate solvency buffers? So your thought about the 175% because you could argue there’s no point having that buffer if the moment things get challenging.

You have to suspend your dividend, anyway. On the other hand, you could say, well, maybe you need to take your buffer up a lot further just so that, hopefully, the environment will be different next time when we have a crisis.

So can you talk a bit about the regulatory environment and your solvency ratio? And then secondly, again I appreciate there are so many moving parts on this, given that you’ve made it very clear that you’ve dropped your guidance for IFRS earnings this year, could you help us just sort of summarize what you think are the most important drivers that tipped you over the edge to drop your guidance?

Because again there are so many different things going with the discount curve and impairments and underwriting. Are there a few things that you would highlight that have been a particular issue?

Or is it just kind of all of the above? They will just add up.

Thank you.

Okay. On the first one, it’s I would say I will have to give it also a bit of political answer.

I would say, even if we would have had a solvency level of 300%, I think the regulators in average would have expected the same. So they apparently, at this moment, do not really give the impression to make a difference between a company that has a 200% solvency or one that has its 125%.

The only explanation I can give is a kind of an overall uncertainty, fear amongst regulators that the worst might be yet to come. But so it’s I think we tried to make our point.

And I’ve seen that many other European insurance group did the same, where we say that, first of all, there should be a kind of a discretionary approach at this moment between different insurance, depending on the proper situation. So that’s also the reason why we have been quite, let’s say, affirmative in our decision communicated early this year that we – okay, we somehow respect the – of course, the request from EIOPA and the Belgium regulator, but we do not change our plans.

And we will propose the remainder of the dividend by the end of this year, so in the month of October. So – but having said that, there has been no, I would say, unfriendly communications with the regulator.

I think they also recognize our strong position. They also recognize that it’s maybe a bit a pity, but they want to make the rule for – the real – or the recommendation for everybody the same.

And I will, at the end, maybe pass to our Chief Risk Officer, Manu, to give his comments because he’s, of course, weekly in contacts with them on the weekly update of the solvency. And with respect to the prudency around the outlook, I think the most important uncertainty is everything which happens on the asset portfolio, so the financial impact.

We are not that uncertain in – with respect to the really product-related claims, yes. So that’s something where we see some positives in some areas, some negatives in the others but not really to have a huge impact.

On the investments, you have, first of all, of course, the equities. We have real estate, where you know this is an important part of our investment portfolio.

So we will have – or we have lower income in our parking business. We have some interventions in the shopping centers with the rents to be paid by our customers, so that’s also something that will impact the financial income.

And then you have, of course, what you already referred to, impact of the lower interest rate on the VIRs in Asia. And there has been a certain impact on the top line, but if you look, for instance, like you see the figures in Asia, in China we have minus 5.9% after 3 months.

And the outlook for the future is not that bad because they recruited net more than 60,000 more agents in Q1. So we expect to catch up over there.

And Manu, maybe you can give some feelings about the interactions with the regulator on solvency.

Sure. Okay, yes.

Thank you, Bart. Emmanuel speaking indeed.

So we had to start to report on a weekly basis our capital position to the National Bank of Belgium since mid of March, but for your information: We started earlier to do this already. Somewhere in end of February, we started to have a sort of internal follow-up on our capital position on a weekly basis.

My interaction with the national bank on a weekly basis – but I have not a lot to add to what Bart said. So I – at least in my conversation I don’t have any sign of worrying from the regulator on our current position.

And my guess is only the – probably the – also the lack of visibility moving forward from their side and that they want to be very, very prudent from that perspective. Then we – you also had a question related to our buffer and our target capital.

There we don’t change our mind. And I would like to remind you that, and we presented this in our Investor Day in 2018, as a recap also, our target capital is based on our risk appetite.

So we start from our risk appetite. And from a solvency point of view, we want to be protect from 1-in-30 event of solvency.

We want to protect our solvency from a 1-in-30 event, and that remains the same. We calibrate this on a regular basis, and we follow up this on a quarterly basis.

And a 1-in-30 event protection leads to a target capital of 175%, and that’s what we still have as a risk appetite policy within the group.

That’s helpful insight. Thank you, gentlemen.

Will, if I may add something. So the regulators, they usually issue directly for the whole market altogether, so they cannot specifically mention one or another company.

And it’s a well-known fact that AG is among the strongest entity in Belgium. And it’s the reason why one of the hint that you can see is that, when we declared that we will pay this first dividend in May and that we will keep on with the existing share buyback and that we have this second opportunity in October, they didn’t make comment.

So it’s another hint that we are not a matter of concern to the regulator.

That’s great. Thank you.

Two questions, if I may, one kind of general and the other slightly more specific but both really on business interruption. And I do appreciate you mentioned that you’re kind of comfortable with the claims picture in the background.

Firstly, could you outline in broad terms how business interruption policies are provided across the group and in particular what exposures you might have to nonphysical triggers? I understand you’ve got some policies that have nonphysical elements in the UK, but I’d also like to understand Belgium if possible as well.

And then more specifically, can you just outline what exposures you might have to business interruption in the restaurant sector? And because obviously that sector has legitimate reasons for nonphysical triggers.

Hi, Farquhar. Good morning, hope you are well too.

So business interruption in the UK. We have a fairly small Commercial lines book, as you are aware of, so the impact that we see even in a worst case will be rather limited.

And you’re probably aware that the FCA has started up what I’d call a friendly legal procedure to clarify certain wordings that are a bit unclear in the market. We’ll see how that winds up, but the good thing about it is that it will create fairly quickly, I think, some clarity.

I think it’s probably June we’ll already know the sentence. So in UK very limited.

And in Belgium we also have kind of business interruption, although the wording is not that issues, but also there the impact is fairly limited, also because the wordings are much clearer. So the direct impact, to come back to your question on business interruption, we expect it to be fairly limited.

And to be totally clear: There is also in the UK a small book of what we called landlord insurance or rental protection. Also that is a fairly small book.

And there we could have some claims, but also there the legal aspects are not entirely clear. I hope that helps.

And on the restaurant sector...

I don’t really have top of my mind what our exposure is in the restaurant sector. It’s not a sector that we particularly like, certainly not in Belgium.

It is huge in the UK. There might be a few, but again our book is small.

Where there could be an impact because of the economic slump in the restaurant sector will be indirectly on the real estate business. You have some food and beverage type of establishments in shopping centers, et cetera.

So if some tenants would ask for rent relief, it would be those. So restaurant sector may be more on the real estate.

Then just final thing then. So the claims in the UK that obviously triggered, I mean, is that – are we talking literally hundreds of policies at most?

To come back – to clarify your question: if any claims have been triggered. That was your question...

I mean according to the Ageas UK website, there are policies that will have triggered. And given your limited statement, I presume that must be like hundreds of policies at most.

Yes, at most, yes.

Yes.

Okay. Perfect.

Thanks a lot.

I think that generally speaking the group, being in Belgium, UK and Portugal, we are more in personal lines. We don’t do a lot on the corporate side.

So the business interruption matter, we are not on the forefront of this problem, being on personal lines, as I said.

All right. Thanks a lot.

Hi. Good morning.

A couple of questions. So first of all is in terms of the intergroup remittance.

Did you just say actually all the – like, India, China, Turkey, they’re already kind of confirmed for the remittance. Did you actually just say that the Belgium remittance is still in discussion?

Could you please kind of confirm that point? So that’s the first one.

And then secondly is that – so considering that you just mentioned that your capital return is doesn’t really matter how strong your solvency is. And also we see that your solvency ratio is really not sensitive to the credit portfolio because you’re under-invested in credit.

And then we see that your Belgium actually is under pressure on the Guaranteed book. What’s actually the solution or the next kind of step would be actually more rational to re-risk your Belgium book given that you have plenty of solvency to support that re-risk and then recover the book to – in terms of the profitability?

So that’s the second question. And then last one is that – the real estate.

You just mentioned you will have some rental reduction concession and like that. And when will you actually revaluate the real estate?

And would that be normally in the second half of the year? Thank you.

Okay, I’ll pass the third question to Christophe. The first one, remittance Belgium, and first of all, the decision on the payment – the amount and the payment to be proposed to the shareholders of AG Insurance has been decided, but we follow their exactly the timing of Ageas itself because, as well Ageas, Ageas are, let’s say, overlooked by the Belgian national bank.

So it means that in principle there will be a shareholders’ meeting of AG Insurance before the one of Ageas planned in October and then a remittance to the group in such a way that it can perfectly match with the payment we have to do to our shareholders. So that’s the only reason.

And as Christophe mentioned, due to – or linked to the reactions or the non-reactions from national bank on our communication earlier this year about the split of a dividend and the continuation of the running buyback, we in principle don’t expect any problems with that. The second question is, let’s say, the guaranteed book in Belgium.

I don’t think that we are concerned about the possibilities of this business. We have – of course, if you look to the inflows, they are lower than last year, but don’t forget that last year, in the first quarter, there was an increase with almost 40% due to a number of commercial actions before a reduction of the guaranteed rate, and secondly, a strong Unit-Linked action.

So we see the volume of Q1 this year was something like 15% higher than two years ago. So we continue to believe in that business.

And the investment portfolio is following in-depth and yearly reviewed strategic allocation exercises, where one of the reasons, I think Christophe probably – Christophe referred to it, in the free capital generation, you have a bit increase of SCR in Belgium due to an increase of the equity exposure, not fundamentally, yes, but – so we don’t see a change in our policy, not with respect to business we underwrite, not big changes in our assets portfolio. You can take...

Yes. So on the asset side.

So two themes, first, the re-risking of the portfolio, and then the real estate. So first, on the re-risking of the portfolio, we have – we are studying a new concept derived from the upcoming IFRS 9 regulation.

It is to build a kind of long-term equity portfolio where we should – where we could opt for the fair value to OCI instead of being subject to impairment. So we would create a kind of bucket a little bit in between bond and equity because, at the end, the change in valuation at each closing would be recognized through OCI, as it is the case for bonds, for instance.

So that’s an ideal. If we opt for this and that’s a study, but obviously this could be done when IFRS 9 is in force.

And it is connected to IFRS 17, but we have this study of having at the end more equity in our asset portfolio. But it is not exactly for today, but the idea is there.

On real estate, so all the revaluation process is spread all over the year, but there is kind of peak in Q2, where we review most of the valuation. And we will try to take into account all the different impact.

And during Q2, we will have a better view on the parking business because we are progressively exiting from the lockdown. So we will be able to more precisely assess the impact on revenue in the parking, in the airports, in the cities and so on.

And then we will review the rent, so on real estate, I think, but we will be in a position to give you more info at the next closing, end of Q2. So in conclusion, re-risking through equity, thanks to IFRS 9, but not now and then on real estate, more to come end of Q2.

Okay. Thank you.

That’s very clear.

Maybe I have to get a small add-on on the real estate. Be aware that the way we value real estate is at amortized cost.

So even if valuations of real estate objects will come down, they will still be above our book value because of the accumulated depreciation. So you – there will obviously be big impact on…

Yes. Thank you very much.

Good morning, gentlemen, nice to see that we have full house today. My first question would be on Asia, just wanted to understand, if we look at the results, €69 million in Life.

You take out the capital gains of €14 million. You add the €30 million that is due to the discount.

We get €85 million. It does look that, if we were to exclude the capital gains, normally in Asia you should be already still kind of on track on an underlying basis to still meet your guidance.

So I would be interested to have your thoughts there on an underlying basis, also just check that there are no other one-offs in these results in Asia. And also, how do you see the outlook?

I mean I can see that you have brought 60,000 new agents. That’s good, but do you see a catch-up during second quarter, or more in second half?

And do you see, for example, COVID-19 playing into your hand where basically it raises awareness and suddenly we get to see very good sales? Because already in Q1 they were very good at minus – just minus 6%.

Second question would be on the UK. You have changed the management.

Results continue to be under pressure. I understand that you could possibly have some one-offs, like Ogden coming in the future, helping you out, but could you give us your thoughts on any potential sale of the UK at some stage?

And the third question, a quick one, did you get your tax authorities clearance finally in Q1? I think – I presume you have.

And does that mean that we are going to move to life reinsurance at some stage during the year? Thanks very much.

Okay. On the first question.

And second and third, I will pass to Antonio. On the first question, if we make, and you almost did it yourself also, Jason, our underlying for Asia, we come to an underlying result of €87 million Life plus Non-life compared to €94 million last year.

So it’s a slight decrease. And that’s then correcting for VIR and for capital gains, capital losses.

So you could say, yes, that €86 million multiplied by 4, but we know also from the past that that’s not necessarily the way we can extrapolate in Asia. And our decision not to give any guidance is also there related to again the same uncertainties, yes.

So it’s what will be the evolution of the equity markets. What will happen with the interest rate and, as a consequence, VIR?

So that’s a reason not to give any confirmation on the – let’s say, the normally expected results for Asia. Because when we said €300 million to €325 million or €350 million, it was always, of course, before taking into account cap gains and VIR impact.

So that’s the uncertainty that we have everywhere. From the commercial front, we see indeed that – and it’s sometimes different one country from another.

We see, in any case, in China quite some resilience. And the fact that the decrease in the first quarter was only 6% was mainly thanks to the very important book of renewal premiums, yes.

So 90% – 9-0 percent of our inflows are renewals. So even if you would have a quite important drop in new business, you will only have a partial impact.

The first signs we have of the period since at the end of March is, in any case, promising; and so we don’t see a big, big difficulty in Asia to catch up. Whether the what happened with COVID-19 is creating awareness, improving awareness mainly to subscribe some life and critical illness contracts, definitely it is, yes, but don’t underestimate the fact that also the sales process, which is still a rather face-to-face process in the first instance to convince customers, has been strongly hampered in the first quarter.

It’s now taking up. So we remain by saying impossible to give a clear guidance on what the results will be.

From a commercial point of view, we believe that – if there is no renewal of the COVID outbreak, that the remainder of the year will permit to catch up. Antonio?

Yes. Hello, good morning.

On the UK, indeed we have announced the appointment of a new CEO as of the 1 of June. So Ant Middle will take over from Andy.

And coming back to the second part of that question, the sale of the UK is not on the table. On the tax clearance, I think you are referring to the tax ruling related to internal reinsurance.

Yes, indeed, we got our ruling for Belgium. And now we are looking into the life reinsurance options.

By the way, we did already a fairly small first life reinsurance treaty, internal life insurance treaty, with our Portuguese entities.

Thank you very much.

Hi, everybody, good morning. Just on China, can you tell us what the discussions are currently around the volatility adjuster and what the timing might be around that?

Secondly, what comments can you make on lower motor claims frequency that you may have seen in March and in 2Q to date? And is your intention really to hold back from giving refunds at this stage as you assess what happens with the claims experience?

And then lastly, just on the reinsurance agreement that you've – that you – quota share that you've increased, can you talk about some of the benefits that will have in terms of fungibility of capital and upstreaming that you didn't already have with your previous quota share arrangement? Thank you.

Okay. On the timing on discussion on VA, we are not in discussion on VA at this moment.

So we continue to apply what we did in the past. And let's say – and of course, our partner is in the lead for that discussion if there would be one upcoming.

In frequency in motor and rebates, this is a very, we know, sensitive point. And companies and countries take different stance.

For instance, the Belgian regulator national bank urge insurers not to do any rebates because, say, it's a too-short period to take that initiative. And that's also a bit our view.

We, of course, have had six, seven weeks of, of course, less traffic, with as a consequence with the lower loss ratios, but as the industry is now getting back, started, and there is a high request from the authorities to avoid to take public transport and to take cars to go to the office, there might be an opposite movement in the second part of the year or even in May and June. And you also see that less-experienced people will get on the roads and probably will cause accidents.

So it's too early. And we also don't believe that giving a £20, £25 or €20, €25 rebate to all your portfolio is much more than a marketing initiative.

So – but maybe, Antonio, you can dwell a bit more on that.

Well, Bart, I think you've made the main points. It is too early.

As Bart was saying, we don't know what frequency and severity will be going forward, so we'll see. There again, at the end of Q2, we'll have a better view.

Maybe one additional comment on the VA in China. So clearly, as Bart said, the partner is in the lead, we know, but there is a small amount of VA rather below the peers level.

It is something that has to be discussed with the regulator in China, so that's not an easy discussion, but what we can say is that with the solvency ratio being very high in China there is absolutely no need to come back on the VA. So it could be even seen as a kind of prudent approach.

And it could be put at a slightly higher level, but to our knowledge there is absolutely no intention because there is simply no need.

Then there was a third question, on the internal reinsurance and the motives to do that. Well, again just to remind you, one of the main motives is this indeed capital fungibility, which is actually kind of monetizing the diversification effects across the regions by concentrating those risks on one balance sheet.

And then this diversification becomes material and you can have an SCR saving. That is, I mean, not telling anything new.

That's the basic thought behind it. And there was – yes.

Is that a kind of upstreaming? Well, you could see there's a kind of upstreaming of the results, as the – part of the Non-life results will materialize at ageas SA/NV instead of flowing through dividends.

You could see that as such, but be aware there's also SCR that you're transferring from the operating company to ageas SA/NV.

Okay. Thank you very much.

Thanks and good morning gentlemen. Just coming back on the real estate moving parts that you mentioned.

I mean you said it's amortized cost so we won't see effects to – I think, to IFRS equity from that side, but could you comment a little bit about the potential impact for your Solvency II ratio? Because there I would assume that it's on fair value.

Next to that, to what extent would this impair your guidance for Guaranteed margins in your Life business? Because presumably it will be more difficult to realize the real estate gains you've been putting through throughout the year, but also your running yield might go down on the back of that.

So any quantification there would be helpful. Then am I correct in understanding that the sensitivity per basis point from a China 750-day average 10-year is around four million to five million per basis point?

And coming back on the buyback. I understand everything you've said, that you're comfortable on capital or you're comfortable with the quality of your assets basically to be able to deliver future buybacks as well, but simply practically speaking, do you think that – in a way, I think the NBB has been quite general in saying that they are sort of in line with EIOPA.

And you are talking a little bit more about the discretionary approach per company. Do you think that basically that discretionary approach will still apply to you also in August?

Thank you.

Okay, I will ask Manu at the end to give his comment on the solvency impact for real estate. Let's – and the question was also whether we will be able to realize real estate operations in the course of the year.

Okay. We have a number of potential deals in preparation.

Of course, you look to the opportunities you may miss. In any case, the guidance, we cannot give guidance with respect to the end result of this year, the net profit.

We will continue, like we did in the past, to try to achieve our targets in terms of combined ratio and margins on Guaranteed and non-guaranteed business. Don't forget also that in this first quarter, for instance, we foresaw an amount for profit sharing in Life which is only provisionary because the profit sharing is something that is decided at the end of the year, depending on the full year result.

And to give you a comparison: In 2009 over 2008, in 2012 over 2011, no profit sharing has been given because the financial results were under the expected levels. So we also there will work in function of the targets we have set.

So, I will give the question on the impact on solvency to Manu at the end for technical reasons because Manu is in another room. And the sensitivity in China on 750 days moving average, I think we communicated, it was last year I think, that one basis point sensitivity is more or less six million P&L impact – no.

I'm reading what they confirm me. So less than what you projected, but of course, also there the impact is there is a gross impact, but then you have mitigating actions as possible like also profit sharing and things like that.

Sorry. I cannot confirm your 45, nor my six million.

And I propose that our investor relation people try to get back Robin.

Sorry. I said two million to five million, so it's not that far off actually.

Excuse me.

I was mentioning four million to five million, so not forty five million, four million to five million. So...

Four million and five million, okay. Yes, yes, yes, okay.

Then we are not far from each other, yes.

Exactly.

On real estate, I would like to add something. You have to remember the amount of unrealized capital gain, which is very high, yes, in excess of €1 billion.

And you will remember that a figure we have – we gave in the past, that we need roughly €80 million a year to achieve the margin. So put in perspective €80 million to the unrealized capital gain.

Even if the revaluation of the portfolio goes slightly down, I think that we have a very thick and comfortable cushion. And then the last element is that our CEO for real estate is still indicating that there is appetite to buy buildings, so we are not stuck in this, not at all.

Okay. That's very clear.

And on the buybacks...

I can only repeat what I said earlier. This is, I'd say, for us, it's not an issue today.

It's one we will tackle later in the year. And okay, we will follow our decision – or create our decision, take into account all the elements available at that time.

And the provision of the national bank could be one of these elements. And maybe pass to Manu for impacts of real estate on solvency.

Manu?

Yes, okay. Thank you, Bart.

So what I propose is that you take Page 58 of the investor relation presentation. On that page, you can see that we have updated our sensitivities.

And on that page it's more specifically sensitivities for Pillar 2. And in the middle of the page you have the sensitivity on property, where you have a negative revaluation of 10%.

The impact on our solvency is minus 11%, which is absolutely in line with the sensitivities that we published also last year. And that's on Page 58 is for Pillar 2.

And on Page 60, you have the one related to Pillar 1, which is significantly in line with Pillar 2. So for Pillar 1, we have a 12% negative for a devaluation of 10% on our real estate portfolio.

Okay. Thank you.

Yes, good morning. Happy to hear all of you.

Most of my questions have been answered. So there's one follow-up regarding potential M&A and share buybacks, as in the beginning of the presentation you said that your cash position of over €1 billion makes you feel comfortable in this crisis.

Does that mean that, for the moment, you want to keep more cash aside as a buffer and that your war chest to do M&A, hence, has decreased? Could you give us an idea of what you think about your war chest at this time?

I think that on top of the cash you have abilities to further issue debt and that the – in total something like €2 billion that we had before is still available. Again, whether we will use that amount, we've never used such amount in the past, so – and I – also in the past, we have never come to a cash position that was close to zero.

So as I indicated in the beginning, M&A policy did not change. Maybe some opportunities come up.

Others disappeared, but we don't see a real reason to change our position in this respect.

That’s very clear. Thank you.

Yes. Hi.

Just a very quick one on COVID. Which is the one – if you were to look at your – I mean I can – or appreciate you cannot give details, but in which country are you more likely to have the higher claims, and in which line?

Across the – I know that developments has been critical in China. We talked earlier about business interruption, but in general.

And another quick one is on the holding costs. They were again slightly higher in Q1.

Are they going to fall back to normal in Q2? Or is it going to be further down the year?

Thank you.

So I can answer on the holding costs. Indeed it is slightly above the guidance, and we can – we could maintain the guidance here.

We are not affected by COVID-19, but here, so far it's only the first quarter, so I'd rather wait until Q2 to have the better view, but I already have one explanation on this. It's that we had to pay for the cost of the FRESH transaction.

So you'll remember that the transaction was completed in January. And we had to pay some fees, legal fees, banking fees there.

So on the quarter, it's kind of one-off which is not really flagged, but since you are a sharp analyst, you noticed the small increase. But let's put it on the back of the FRESH operation.

Thank you.

And Jason, on your question on which country could be most heavily impacted. I really struggle to give you an answer.

I don't think that any country will be materially impacted. Where the possibility could be that it would be bigger than the others but then very manageable could be the U.K.

maybe because of the sometimes uncertain legal situations that you have there. So yes, that will be my best guess but again nothing material as we see it today.

Thank you very much. That’s what I was looking for.

That’s enough.

Good morning. Thank you.

Just I wanted to talk about the U.K. and – I guess, and see whether in particular do you have any thoughts about the FCA comments about and review into those products offering value to customers.

And we've seen a couple of these companies making adjustments and potentially removing covers, such as driving cars abroad and for multi-trip holidays and travel insurance, et cetera. I wonder if you have any thoughts about what Ageas U.K.

may do here. And also, in light of the whole Ageas, have you given a non-Life figure that tells us what all the claims from COVID-19 could amount to in the first quarter or year-to-date?

Thanks.

So first, on the FCA – yes, offering products that really create value and if that has any impact on our portfolio. Again, as we are not in these – we're not reactive in travel, for example.

You referred to that. So there is no real change.

We – obviously, our team is in contact with the FCA. We don't see for now any big impacts on the covers we offer.

And I think your second question was on claims. What will be the total impact?

Again, as I said earlier, we don't expect any material impact of those claims. It's a question that, for example, reinsurance – reinsurers ask us.

We give them the same answer. It is not appearing on our radar screen.

Okay. So ladies and gentlemen, thank you for your questions.

And to end this call, let me summarize the main conclusions. In the context of the COVID-19 pandemic, our results was impacted by the financial markets volatility, but insurance activities have proven resilient.

Both our capital and cash positions remained strong. And looking past the short-term turbulences brought by the COVID-19, we are confident in the solid fundamentals of the group and confirm our intent to pay our 2019 dividend in October.

With this, I would like to bring this call to an end. Do not hesitate to contact our investor relations team if you would have outstanding questions.

Thanks for your time. Keep safe.

And I want to wish you, on behalf of the team, a very nice day. Thank you.