Ageas Earnings: Mid- To High-Single-Digit Decrease in Net Income

Ageas AGS has reported average results for the first six months of the year. Management reiterates a target for a net operating result of between EUR 1.1 billion and EUR 1.2 billion for the full year. The operating free capital the business has generated over the last six months is EUR 492 million. As a result, management has announced the payment of a EUR 1.5 interim dividend per share, equal to around EUR 275 million. Ageas reiterated an average growth rate of 6% to 10% for its dividends per share.

The business has managed to increase its inflows by around 6 percentage points at constant exchange rates to around EUR 9.3 billion and this growth in life inflows has mainly been driven by higher sales in China in particular as the business has sought to position itself ahead of a change in the guaranteed rate of return. However, the detailed picture is messy. Life inflows in China, India, Thailand, and Turkey have been strong, but there have been sizable outflows in nearly all other regions. Nonlife inflows have been more balanced and are generally positive across all countries. However, given the size of the life business versus nonlife, this has led to a drop in operating profit across all regions.

Margins are under pressure as the life guaranteed margin has fallen by close to 50 basis points to 1.16%, approaching low levels historically. The nonlife combined ratio has improved by close to 2 percentage points to 93.3% because of the benign weather of this first interim. The solvency position of Ageas improved by 2 percentage points to 220%, above the 175% target.

We maintain our EUR 37 fair value estimate and our no moat rating.