Ageas Sa/nv · EURONEXT:AGS
Ageas Sa/nv — Investor Day (December 2021)
56 slides from Ageas Sa/nv's investor day presentation, Dec 2, 2021
Slide 1: Asia Deep Dive, 2 December 2021
ICCP VIVC ASIA Thursday 2nd December 2021 8 @ietite teh ys
Slide 2: Agenda
Agenda I. 20 years of value creation in Asia II. A closer look on China III. Core financials TPL 2
Slide 3: 20 years of value creation in Asia
20 years of value creation in Asia 3
Slide 4: A franchise that started exactly 20 years ago
A franchise that started exactly 20 years ago China (#6) India (#18 Life / #11 Non-Life) 2001 Taiping Life – 24.90% 2008 Ageas Federal (Life) – 49% • Gross Inflows: EUR 19.5 bn 2019 Royal Sundaram General (Non-Life) – 40% • Life Technical Liabilities: EUR 75.2 bn • Gross Inflows: EUR 565 mio (Life:
Slide 5: Companies at different level of development
Companies at different level of development Gross Inflows @Ageas’ stake IFRS Net Result @Ageas’ stake Net Dividend Upstream @Ageas’ stake EUR, mio EUR, mio EUR, mio 6,561 515 6,326 167 5,449 5,196 4,616 123 293 269 92 87 182 77 169 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2017 2018 2019 202
Slide 6: Companies at different levels of development
Companies at different levels of development ● Mix of greenfield and cash generating companies ● Top line growth emerging rapidly ● Net profit contribution following shortly after ● Growth profile = volatility in results ● Vietnam profitable in year 3, from a greenfield start ● Only recent start-ups
Slide 7: Potential for the future
Potential for the future Premiums as a % of GDP in 2020 Real GDP growth Life 2010-2019 Non-Life 2021E 2022F 7.9 7.4 3.3 5.4 5.3 4.1 4.5 1.5 4.2 1.9 4% World 1.0 2.1 growth 2022F 2.3 4.6 1.9 1.8 4.0 0.7 3.3 3.4 3.2 0.5 0.5 2.4 1.6 1.4 1.2 World Western China Asia excl. Europe China Source: Swiss Re 2
Slide 8: Potential for the future
Potential for the future Insurance premium Source: GlobalData; National insurance associations 20 years of value creation in Asia 8
Slide 9: Potential for the future
Potential for the future ● Confident on valuable long-term picture on China, supported by middle class and income development ● Short term growth could be under pressure 20 years of value creation in Asia 9
Slide 10: Our approach to partnerships is both unique and effective
Overview of critical success factors for a partnership Our approach to A basis for long-term partnerships is partnerships both unique and effective 20 years of value creation in Asia 10
Slide 11: Overview of critical success factors for a partnership
Overview of critical success factors for a partnership ● A careful, methodical and robust two-way selection process ● Alignment of interest, both in the short and long term ● Shared ambitions, visions and values ● Continuously evolving to remain attractive ● Local autonomy and empowerment are critic
Slide 12: Part of the local management structure
Management participation next to Board representation China Representative Office; Country Manager, Chief Representative, Shanghai Representative Office Taiping Life; Chief Actuary, Deputy Chief Financial Officer, Malaysia Taiping Asset Management; Chief Risk Officer Maybank Ageas Holdings; Chief Ri
Slide 13: Management participation next to Board representation
Management participation next to Board representation ● Extensive interaction all the way down, through Ageas executive and management committee, and Hong Kong regional office ● Ageas’ Exco members participate to local Boards ● Ageas well represented in local management teams ● “Senior Country Offic
Slide 14: A closer look on China
A closer look on China iMPACTeY
Slide 15: Taiping Life Partnership with Ageas since 2001
Taiping Life Partnership with Ageas since 2001 State-owned enterprise, a State Council owned insurance group A greenfield start in November 2001 250 Employees 500 Agents 4 offices in 4 cities No customers To today 19,000+ employees 370,000+ agents 1,400 branches and sale offices 15 mio customers A c
Slide 16: Consistent, stable growth that fuels a strong pattern of dividend flows
Consistent, stable growth that fuels a strong pattern of dividend flows IFRS Gross Inflows @Ageas’ stake IFRS Net Result @Ageas’ stake Net Dividend Upstream @Ageas’ stake EUR, mio EUR, mio EUR, mio 4,751 4,846 432 141 4,109 3,870 3,389 100 196 203 62 53 46 104 82 2016 2017 2018 2019 2020 2016 2017 2
Slide 17: Partnership in several entities – strengthened over the years
Partnership in several entities – strengthened over the years CTIH 2020 2012 2005 25% 12% 20% Reinsurance General Asset P&C brokerage & Management of Real Estate Financial Life Insurance Reinsurance e-Commerce Pension management Insurance Insurance Non-Financial Investment support service agency Inv
Slide 18: TPL profitable since 2006 and consistent positive cash flows since 2014
TPL profitable since 2006 and consistent positive cash flows since 2014 Capital injection and net dividends received. EUR, mio Capital injection 141 Net dividends received 100 61 62 46 53 14 2 1 (1) (3) (3) (2) (2) (13) (22) (33) (36) (100) (203) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201
Slide 19: Inflow growth driven by renewals and regular premium
Inflow growth driven by renewals and regular premium Life Gross Inflow by Premium @100%. EUR, mio Renewal Premium New Business Regular Premium 9% New Business Single Premium CAGR 19,080 19,461 1,049 1,254 16,502 15,541 751 3,210 4,196 13,611 2,631 4,101 3,230 3,985 3,050 14,998 13,836 11,649 8,925 7
Slide 20: Inflow growth driven by renewals and regular premium
Inflow growth driven by renewals and regular premium • Strong growth pattern despite COVID disruptions in 2019-2020. • Decrease of single premium sales, now largely tactical sales used in the bancassurance channel, and also to help drive the expense margin • Regular premiums account for 72% of new b
Slide 21: Market leading persistency ratio
Market leading persistency ratio Agency Persistency Banca Persistency 97% 96% 96% 96% 96% 96% 96% 95% 95% 94% 91% 91% 91% 90% 91% 90% 89% 89% 87% 87% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 13th month Peer avg persistency* 13th month Peer avg persistency* Note: *Peers: Ping An Life, China
Slide 22: From start-up to top Life insurer in years
From start-up to top 6 Life insurer in 20 years Top 10 life insurers in China by inflows, YTD Sep’21. EUR, bn European JVs CPIC Life PICC Life Ping An China Life Taikang Taiping New China Life China Post Life Funde Sino Life Foresea Life Market share 22% 14% 7% 5% 5% 5% 3% 3% 3% 3% YTD Sep’21 A clos
Slide 23: Ageas has by far the largest presence of European insurers in China
Ageas has by far the largest presence of European insurers in China 25% stake created possibility to obtain national mandate European life JV’s in China by inflow, 2020. EUR, mio Taiping Life (Ageas 24.9%) 4,961 14,962 CITIC Prudential (Prudential 50.0%) 2,473 2,473 ICBC-AXA (AXA 27.5%) 1,657 4,369
Slide 24: Breakdown of premium
Breakdown of premium Premiums by product, @100%. EUR, mio + 43% 19,461 8% Accident & short-term Health 14% Traditional life 13,611 3% 4% 23% Long-term Health 8% 24% 16% Annuity 62% 39% Participating products 2016 2020 A closer look on China 24
Slide 25: Breakdown of premium
Breakdown of premium ● Accident & short-term Health: Products paying lump sums or medical expense reimbursement (up to limits) on occurrence of accident and/or sickness ● Traditional Life: Whole life / endowment products with main benefits payable upon either death or maturity ● Long-term Health: Cr
Slide 26: Agency network main distribution channel
Agency network main distribution channel Life Gross Inflow by Distribution Channel @100%. EUR, mio Agency Banca 19,461 19,080 Other 1,430 1,701 16,502 15,541 1,103 3,575 4,209 948 13,611 3,264 316 4,969 5,160 14,076 13,551 12,135 9,625 8,135 2016 2017 2018 2019 2020 A closer look on China 26
Slide 27: Inflow growth supported by high value agency network
Inflow growth supported by high value agency network NBV margin per segment Agency Banca 44.3% 42.8% 42.4% 42.1% 35.3% 4.8% 3.9% 4.6% 3.2% 1.8% 2016 2017 2018 2019 2020 NBV @Ageas stake EUR, mio 276 372 370 303 234 A closer look on China 27
Slide 28: Strong focus on improving business profitability in the banca channel
Strong focus on improving business profitability in the banca channel Agency NBV margin Bancassurance NBV margin NBV margin 5.7% 29.2% 0pp 29.0% 17.6% +10pp +4p 13.4% -4.1% 1H20 1H21 1H20 1H21 1H20 1H21 NBV margin H1 traditionally lower than H2 due to higher volumes sales during the opening campaign
Slide 29: Inflow growth supported by high value agency network
Inflow growth supported by high value agency network ● Agency is main driver of inflows with c. 400k dedicated agents ● Total agency force stable (1H21 vs. 1H20) ● Strong focus on high-performance agents ● Number of agents with FYRP over RMB 1 mio up 50%+ (1H21 vs. 1H20) ● Agents focus on selling hi
Slide 30: TPL's asset allocation is more conservative than peers
TPL’s asset allocation is more conservative than peers* TPL Asset Mix Market Asset Mix 1% 3% 6% 2% 15% 27% Sovereign bonds 19% Bonds Corporate bonds 9% 43% Other fixed income Other fixed income Policy loans Equity Equities Cash Real Estate 22% Cash Others 22% 30% *Peers: Ping An Life, China Life, Ch
Slide 31: TPL's asset allocation is more conservative than peers
TPL’s asset allocation is more conservative than peers ● Biggest part of assets allocated to fixed income ● 83.5% domestic - with 99.8% being rated AAA under local rating standards ● 91.5% of the international bonds are investment grade ● Bonds assessed against TPAM internal rating system built on i
Slide 32: High quality growth strategy based on 8 goals
High quality growth strategy based on 8 goals 1 Steady growth of premium income 2 Continuous optimization of business structure 3 Industry-leading quality 4 NBV growth rate outperforming the market 5 Steady increase in NBV margin 6 Increase quality of agency force 7 Market-leading persistency 8 Indu
Slide 33: High quality growth strategy based on 8 goals
High quality growth strategy based on 8 goals ● Close alignment between partners ● Sole KPI is value creation ● Steady growth, at least in line with market, but not trade off on value ● Focus on higher margin regular premium products while maintaining high persistency ratios ● Enhanced training of a
Slide 34: Core financials TPL
Core financials TPL 34
Slide 35: Translation to IFRS framework adding extra layer of prudency
Translation to IFRS framework adding extra layer of prudency Local vs IFRS Net Result @Ageas stake. EUR, million Local Net Result 29% IFRS Net Result CAGR 432 420 370 18% CAGR 196 203 182 179 180 152 129 104 82 2016 2017 2018 2019 2020 6M 21 Core financials TPL 35
Slide 36: Translation to IFRS framework adding extra layer of prudency
Translation to IFRS framework adding extra layer of prudency ● Trend and CAGR positive, but quite volatile, with noticeable difference between IFRS and CAS result ● CAS drives dividend and free cash flows out of China ● IFRS result structurally more conservative due to accounting adjustments ● Equit
Slide 37: Stable underlying release of residual margin and some volatile components
Stable underlying release of residual margin and some volatile componants Local Net Result @Ageas stake. EUR, million 29% CAGR 420 370 182 179 180 152 2016 2017 2018 2019 2020 6M 21 Core financials TPL 37
Slide 38: Local accounting result mix of stable basis and volatile elements
Local accounting result mix of stable basis and volatile elements Expected profits Mainly release Residual Margin + Investment variances Capital market fluctuations Capital gains, losses and impairments + Other / operational variances Reflect the operating efficiency Include deviation of expenses, s
Slide 39: Local accounting result mix of stable basis and volatile elements
Local accounting result mix of stable basis and volatile elements ● Expected profit mainly determined by the concept of the release of residual margin; the release of an additional risk margin minus liability revaluation effects ● Investment variances capture the difference between the actual invest
Slide 40: Residual margin best indicator to project long-term Life insurance profit
Residual margin best indicator to project long-term Life insurance profit At issuance of the policy Over the life-time of the policy New business Residual margin Release Unwind of to P&L discount Discounted Residual value of Discounted margin premiums value of expenses and claims Core financials TPL
Slide 41: Residual margin best indicator to project long-term Life insurance profit
Residual margin best indicator to project long-term Life insurance profit ● Captures best estimate of present value of profits, representing future profit potential, and is determined at issuance of a policy ● Not recognized as one-off profit at issuance and therefore not included in CAS Equity ● Am
Slide 42: Residual margin representing future profit potential gradually increasing
Residual margin representing future profit potential gradually increasing Residual Margin @100%. EUR, million 18% CAGR 21,370 19,237 16,476 13,034 5,321 4,790 4,103 3,246 2017 2017 2018 2018 2019 2019 2020 2020 @100% Ageas @100% Ageas @100% Ageas @100% Ageas stake stake stake stake Core financials T
Slide 43: VIR overestimates interest rate impact, while preserving future margins
VIR overestimates interest rate impact, while preserving future margins 10Y Govt rate & 750 Moving avg rate 4.60% 3.97% 3.88% 3.92% 3.86% 3.84% 3.66% 3.68% 3.78% 3.78% 3.68% 3.51% 3.50% 3.64% 3.67% 3.38% 3.49% 3.29% 3.31% 3.28% 3.17% 3.19% 3.05% 2.85% 10Y Govt China 750 Moving Avg 2009 2010 2011 201
Slide 44: Discount rate volatility on increasing Non-Par liabilities
Discount rate volatility on increasing Non-Par liabilities 20% Life Technical Liabilities. EUR, mio CAGR 75,155 62,417 49,194 41,851 36,584 Non-par 18,713 15,542 12,249 Par 9,109 10,421 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 @100% Ageas @100% Ageas @100% Ageas @100% Ageas @100% Ageas stak
Slide 45: VIR overestimates interest rate impact, while preserving future margins
VIR overestimates interest rate impact, while preserving future margins ● VIR impact essentially captures the cumulative positive or negative impact on earnings in the future, resulting from the change in reinvestment yields caused by interest rate movements ● VIR is calculated as the 750-day averag
Slide 46: Underlying IFRS result good proxy for operational performance
Underlying IFRS result good proxy for operational performance Expected profits Expected profits + Investment variances ꭗ IFRS adjustments Net capital gains and losses + Other / operational variances Other / operational variances + VIR = ꭗVIR Local accounting result Underlying result Core financials
Slide 47: Underlying IFRS result good proxy for operational performance
Underlying IFRS result good proxy for operational performance Local vs IFRS vs Underlying Result @Ageas’ stake. EUR, mio Local Net Result IFRS Net Result Underlying result 432 420 370 282 206 215 196 203 182 179 152 160 146 104 82 2016 2017 2018 2019 2020 Core financials TPL 47
Slide 48: Solvency available capital
Solvency available capital Available and required capital @100%. EUR, mio 21% CAGR Required capital Available capital 25,201 22,613 17,111 26% CAGR 14,012 11,872 11,819 9,950 7,644 5,697 4,730 2016 2017 2018 2019 2020 Comprehensive 251% 246% 224% 227% 213% local Solvency Core financials TPL 48
Slide 49: Solvency available capital
Solvency available capital ● Total available capital CAGR after dividend payment of 21% ● Awaiting clarity on C-ROSS phase II, not concerned given TPL’s asset quality ● Most relevant points that have been in debate for the last months ● 750-day averaging currently used for liability valuation on the
Slide 50: EV – Best proxy for economic value of already underwritten business
EV – Best proxy for economic value of already underwritten business Value of In-force Business Adjusted Embedded (VIF) Net Asset value Link between EV, solvency-based adjustments and profits Accounting profits Solvency-adjusted distributable profits Aggregation of all the historical Solvency- Discou
Slide 51: EV doesn't capture value of new business yet to be underwritten
EV doesn’t capture value of new business yet to be underwritten Embedded PV future Appraisal Value VNB Value Embedded Value Discounted future Appraisal Present value value of new business existing business to be underwritten Value Core financials TPL 51
Slide 52: EV – Best proxy for economic value of already underwritten business
EV – Best proxy for economic value of already underwritten business ● EV and VNB still extremely important indicators because of the growth nature of Asian markets ● VNB consistently positive in the past – strategic focus on profitability for the future ● EV methodology offers an economic view of th
Slide 53: Embedded Value (EV) is a component of economic value
Embedded Value (EV) is a component of economic value Embedded Value. EUR, mio 17% CAGR 21,122 18,952 15,180 12,523 11,254 5,259 4,719 3,780 2,802 3,118 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 @100% Ageas @100% Ageas @100% Ageas @100% Ageas @100% Ageas stake stake stake stake stake NBV @Age
Slide 54: All valuation frameworks point to a growth well outpacing Cost of Capital
All valuation frameworks point to a growth well outpacing Cost of Capital Going forward reporting on a half yearly basis on all metrics shown below Valuation frameworks @Ageas stake. EUR, mio IFRS Net Equity CAGR CAS Net Equity C-ROSS AC Embedded Value CAGR 37% CAGR CAGR 20% 24% 23% 2017 2018 2019 2
Slide 55: All valuation frameworks point to a growth well outpacing Cost of Capital
All valuation frameworks point to a growth well outpacing Cost of Capital ● Important to look through IFRS and CAS result into the underlying evolution ● Driven by expected result through the residual margin release and actual operating performance ● Putting VIR impact into right perspective, at the
Slide 56: Q&A
Q&A 56