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Ageas to get solvency boost if BNP Paribas retains Belgian insurer stake

Ageas SA/NV's solvency ratio will rise by roughly 10 percentage points should French lender BNP Paribas SA decide not to exercise an option to sell its stake in a Belgian insurer that both entities own, Ageas' CEO said May 16.

Belgium-based Ageas holds a 75% stake in AG Insurance SA, while BNP Paribas holds 25%. Ageas was born out of failed Belgian-Dutch banking and insurance group Fortis, which collapsed during the financial crisis. BNP Paribas acquired the Belgian banking operations, and both entities hold stakes in AG Insurance as it was formerly part of Fortis.

BNP Paribas has until June 30 to exercise the option to sell its stake to Ageas.

"If it is not exercised, the liability will disappear from our balance sheet as a one-off positive impact on solvency that can be estimated at something like 10% and it will also decrease the volatility of solvency going forward," CEO Bart De Smet told analysts following publication of the group's first-quarter results. Current solvency ratios assume that the put option would be exercised, De Smet said, adding that some €400 million in own funds would be created were that assumption eliminated.

Ageas' total group Solvency II ratio, a measure of capital strength, stood at 194.7% at the end of March, compared to 196.3% at 2017-end. The total insurance Solvency II ratio was 196.0% at March-end, compared to 196.1% at the end of 2017. A 100% ratio implies that an insurer has exactly enough capital to withstand a 1-in-200-year event, and is the regulatory minimum.

De Smet said Ageas had a good working partnership with BNP Paribas over AG Insurance and although he did not expect the French bank to sell its stake, the group was prepared for both situations.

"We give the highest probability to a no-exercise of the put, but we will only be sure once the date of June 30 is passed," he said.

Share buyback plan

De Smet said the group favored giving back additional capital to shareholders through dividends and buybacks when not using excess capital for investments. Ageas is undertaking a share buyback plan and has bought 1.63% of its outstanding shares for €140 million since August 2017.

The group reported first-quarter net profit of €247.7 million, up from €110.2 million in the year-ago period. Net profit from insurance totaled €299.4 million, up from €222.3 million a year earlier.

The life business brought in income of €251.9 million, a 50% increase from the year-ago €167.9 million, while the nonlife net result of €47.5 million was down from €54.4 million a year earlier.

Ageas is targeting between €750 million and €850 million in insurance profit in 2018, and De Smet said he expected the group to reach the upper side of the range. Net profit from insurance in Asia amounted to €123.8 million, up from the year-ago €51.5 million, which De Smet said meant that Ageas would likely meet the upper end of its €200 million to €250 million target.

De Smet also noted that the Amsterdam Court of Appeal will render a decision July 13 over a settlement with groups of Fortis investors, who accuse the group of making misleading statements during the financial crisis. Ageas had agreed to settle the suit, but the court of appeal in June 2017 rejected that arrangement and subsequently gave the insurer until Dec. 12, 2017, to submit an amended settlement.

The new settlement includes an additional €100 million payment from Ageas and has been accepted by the investor groups, but not yet declared binding by the court.