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Ageas could beat '19 profit guidance, will keep M&A discipline, CEO says

Ageas SA/NV could beat its guidance of 2019 net profit of €800 million to €900 million, and will maintain discipline on how much it pays to make acquisitions despite missing out on recent deals, CEO Bart De Smet said Aug. 7.

On the conference call for Ageas's first-half 2019 earnings, an analyst pointed out that several potential acquisition opportunities had passed the company by, including Belgian insurer FIDEA NV, bought by Swiss insurer Baloise, and Portuguese insurer Seguradoras Unidas SA, commonly known as Tranquilidade, acquired by Italian insurer Generali.

De Smet said that in these cases that the company "decided not to go beyond a certain level of price that we are wiling to pay" in keeping with its overall strategy. He said that if the company did not find acquisition opportunities that fit with its strategy it would buy back shares.

He added: "Don't expect us to completely change our pricing or financial discipline. This is something we keep high on the agenda."

De Smet said the discipline would extend to any acquisitions made in Asia. Noting the company's preference for nonlife acquisitions, he said that major M&A in Asia was "not exactly what we believe will be concrete in the coming period."

When asked if the company would break its typical habit of buying minority stakes in Asia, De Smet said that the company liked pairing with strong local partners because of the ready-made access to distribution and customers, but added: "never say never."

Beating guidance

Ageas announced a €200 million share buyback along with a first-half 2019 net profit of €606 million, up from €441 million in the first half of 2018. De Smet said that based on the first-half performance, the company "could exceed" its guidance of a group net profit of between €800 million and €900 million in 2019, with the caveat that the financial markets could affect the second-half result.

The insurer's shares were up 2.58% to47.64 at 12:01 p.m. Central European Time.

One area where Ageas was below guidance in the first half was operational free cash generation, which was €163 million if dividends paid to the group by non-European, nonconsolidated operations are excluded, compared with guidance of €130 million per quarter, or €260 million per half.

Ageas CFO Christophe Boizard said that a big reason was a series of large claims in the company's U.K. motor insurance business, where in the second quarter bodily injury claims involving vulnerable road users were more than twice the typical 15 cases the company sees each quarter, and the amount paid out on these claims was also higher than usual.

But he added that, as far as the group can tell, this was a one-off, and that both the company and an external actuarial firm had determined that there was "no clear trend" for increased claims. Nevertheless he said he still had "a bit of doubt" whether there was a trend or not.

Boizard confirmed that the company is keeping its guidance for free cash flow generation at €130 million a quarter.