“2015 was a strong year for AG Insurance. All our core activities contributed to the growth and profitability of the company. At the same time, we continued innovating and preparing our business for the digital world of the future.”
Hans De Cuyper
2015 was the year that AG Insurance continued to improve its operational performance particularly in Non-Life, increasing at the same time its focus on Unit-Linked business. It was also the year in which AG Insurance maintained its leadership position for products and service quality as the No.1 insurer for the broker community.
2015 was the year that AG Insurance Belgium continued to improve its operational performance in general, and in Non-Life in particular. We have achieved a combined ratio below 97% as we aspired to in Vision 2015. This was the result of the fact that firstly, compared to last year, there was no single weather event weighing down our performance, but more importantly we took decisive pro-active actions to prune our portfolio and adjust our tariffs.
As the dominant player in the Life market, we continue to explore ways to offer attractive returns to customers for our savings products despite the negative backdrop of continuing low interest rates. And while this situation does not impact our existing book, for new business we are witnessing a reduced appetite for short-term investment products. We have been very successful in converting part of this into Unit-Linked business, and we launched new Unit-Linked offerings through private banking alongside the space we already occupy in retail banking with BNP Paribas Fortis. The appetite for pension-related products remains high and we continue to grow in this segment. New regulations designed to reduce the pension gap could lead to new business opportunities in 2016.
AG Real Estate continues to be important within AG Insurance. We have rebuilt our real estate exposure, following the sale of 39% of Interparking last year, concluding a number of important transactions in Belgium and abroad. Our Employee Benefits business has remained strong and, through digital developments, we started to connect directly with employees rather than just with the employers themselves.
As the No.1 player in Life and the No.2 player in Non-Life we are still viewed as the leader in products and service quality. An external survey among brokers conducted by ICMA confirmed our position as No.1 in customer service, a position we have held for 9 years out of the past 11. We received the FVF ‘Gulden Regel’ award from brokers for our support of the digitisation of the broker community. And we once again, in 2015, won the DECAVI Life Insurance ‘Trofee van de Makelaar’.
As the market leader, we also follow closely trends in customer behaviours, and in this context the growing influence of technology. Digitisation is starting to impact the way we do business - particularly on the servicing side - and we expect this to be important in our ongoing efforts to get closer to the customer. We have a clear strategy on how we will integrate these new technologies into the way we do business in support of our distribution channels, and we have created a dedicated digital transformation office to ensure we have a coordinated approach across the business.
Recognising the increasing importance of data, we are also strengthening our data analytic capabilities. In this context, we are completely revamping our motor repair workshops based on historical statistical data. And in 2016 we will put greater emphasis on data analytics as part of our efforts to strengthen our ‘Business to Business to Customer’ relationships. We are evolving away from a linear relationship between the broker and the customer towards a more triangular model that allows us to get closer to our customers alongside our partners. At the same time, we are increasing the support to our distribution partners providing them with access to stronger technological platforms. In short, we will embrace the digital revolution and leverage big data for the benefit of the end customer, our partners and ourselves.
As we look forward to 2016, we view this as a year to stabilise our performance in Non-Life at the levels we see today while aiming for more profitable growth.
The broker channel and bancassurance remain business-critical for us in Belgium, and in building out our digital capabilities we are also developing tools that strengthen the presence of our bank partners and the brokers. Together with those partners, we want to ‘get closer to the customer’ and increase our engagement with consumers, based on new technologies.
“We aspire to be respected by brokers and partners and trusted by our customers. Even though we’ve been through a period of significant change for the business and we’re facing challenging market conditions, we’re delighted that brokers, partners and customers continue to rate the high level of service we provide especially to customers in their time of need.”
The adverse weather conditions impacted our results in the UK, but once more the business rose to the challenge of assisting customers during this devastating period. In 2015 the UK continued to reap the benefit of working in partnership, establishing a new relationship with Virgin Money and extending its partnership with Age UK.
Our business in the UK operated in a challenging market environment in 2015. And following the sale of Ageas Protect, we began the year exclusively focused on Non-Life and continuing our multi-channel approach supporting brokers, partners and our own retail business.
It’s been a tough few years for motor insurers, with prices falling against the backdrop of increased claims costs linked to the emergence of a compensation culture. We began to see an increase in prices during the course of last year in reaction to claims trends, which is encouraging for the market. But at the same time we also saw a higher number of motor accident claims due to more traffic on Britain’s roads as a result of the improved economy. To manage our position in this market, we took deliberate pricing action and were among the first insurers to increase premiums, which the market has now followed.
Household insurance premiums have also been falling during this same period, and this looks likely to continue among very competitive market conditions.
2015 was also a year in which the important role that our partners play in our success was reinforced. We agreed a 10 year extension to our contract with Age UK, a relationship that will span an unprecedented three decades. Agreements of this tenure are rare in the world of insurance, and it is a reflection of the trust and confidence both parties have in one another. We also launched a new insurance proposition with Virgin Money, a significant consumer brand in the UK with values that are closely aligned with those of Ageas. For the customer, this will mean, for instance, the same pricing irrespective of the channel they use.
Alongside our partnerships, the broker community is absolutely critical to our success. We do everything we can to support brokers, and our relationship was given an important boost in 2015 when we received our first interactive financial rating from Standard and Poor’s and Fitch. This is particularly important when trading with Commercial brokers who seek to work with A-rated insurers. The initial A positive rating awarded to us by Standard and Poor’s in March was subsequently improved to A stable in November, providing further affirmation of our financial strength and giving our brokers and partners the confidence that we’ll be able to meet their customers’ needs.
At the end of 2015, we saw once more the devastation that can be created as a result of heavy flooding. It’s at times like these that the customer needs us the most, and we’re extremely proud of the work of our claims handlers during these difficult periods. Many of the team received specific flood training or re-training in the past year to ensure they understand the impact of such events on the customer. We aim to focus on managing the predicament of our customers from finding alternative accommodation to accessing emergency funds.
In the Commercial lines sector, our efforts to increase our profitability started to pay off, particularly in our fleet and SME business. This followed a strategic review of how we underwrite and distribute these products and, as a result, we have been more disciplined and targeted in selecting customers and have also developed our digital capability to make it easier for brokers to work with us.
We’re proud of our position as the No.2 specialist in the over 50’s market, and we look to support this demographic in a number of ways. Our on-going work with the Department of Transport and the Road Safety Foundation led to our support for a Taskforce that will examine how we can keep older drivers on the road safer and longer. The results of this will be reported in Spring 2016.
We concluded the integration of Groupama Insurances into Ageas Insurance as part of a three year programme that saw the insurance businesses merge, with the delivery of cost savings on target and on schedule. We also simplified our Retail business, consolidating a number of legal entities into one, and migrating different IT systems onto one single IT platform.
Our relationship with Tesco Underwriting continues to perform very well, following the extension of our motor and home insurance arrangements with this important strategic partner.
As a business, we constantly aim to distinguish ourselves through customer service - and 2015 was no exception. This year in household insurance we achieved 91.9% rating in the Institute of Customer Service survey versus 77% for the insurance industry as a whole, and with our nearest insurance competitor rated 83.5%. Our motor and travel business was also accredited with the Institute of Customer Service Servicemark based on customer feedback.
The digital world is becoming increasingly important to customers as they become more savvy with technology and look for convenience and personalised services. As we aim to get closer to our customers, be they brokers, partners or the end-consumers, we need to better understand their behaviours. We view digital as part and parcel of an omni-channel approach and a reflection of the fact that customers want to deal with us on the phone, through the website, through mobile applications in whichever way they choose. It’s also important to them that this is seamless, meaning that they can change the way they deal with us and still have a consistent service. In the longer term, with the connected world gaining pace, we’re also staying close developments around driverless cars and connected homes to understand the impact on customers and the insurance model, as well as to identify the potential opportunities.
“Vision 2015 brought us focus. Ambition 2018 encourages us to think about the future and the trends that will be important as we move forward.”
CEO Continental Europe
2015 was a year in which the operations in Continental Europe needed to respond to a number of external challenges including volatile market conditions, regulatory change and increased competition. But the announcement of our intention to acquire AXA in Portugal was the most important strategic development of the year, which should propel Ageas to the No.3 position in Non-Life.
As we look back at 2015, the biggest ‘game changer’ in Continental Europe was the announcement of our intention to acquire the activities of AXA in Portugal. This represents an important milestone in the development of our activities in Portugal and one that should provide us with a strong platform for future growth supported by expanded distribution capabilities that include a countrywide agency network, affinities, distribution partners and a small direct channel. This acquisition, which is expected to be completed in the first half of 2016, also aligns with our goal to grow further in Non-Life, as established in Vision 2015 and now Ambition 2018.
More broadly, the region has faced a number of challenges, not least of which are a volatile market environment, regulatory turmoil in some markets and increasing competition. Over the past year, we have shown our ability to adapt as we try to turn challenges into new opportunities. As a result of our actions, we remained profitable across all of our entities, and we are well-positioned when markets return.
2015 was also the year that we completed two major rebranding projects. Our Portuguese business was successfully rebranded to Ocidental, and in Italy UBI Assicurazioni became CARGEAS.
In the past year we have put our network to work on a number of projects outside of business as usual. Through several cross-country programmes, we are leveraging the power of knowledge transfer to explore how we can stay competitive in a digitised world, recognising that we need a digital approach to customers to fulfil their expectations in the future.
In Turkey, for the first time we are promoting motor pricing through WhatsApp. As we move forward, this will be expanded to incorporate claims and straight through processing. In a young market with an average age of 28, customers expect mobile solutions and this is what we are providing. In France, we have created a digital signature allowing people to sign using their tablets and other devices. In Italy, we are working with UBI Banca on a digital platform to boost sales, and we have introduced three new customer-focused apps.
Volatile European equity markets and the continuation of low interest rates had a negative impact on what otherwise was a solid operating performance in Life. In Portugal, a market that has been contracting, we managed to significantly out-perform the market with 13% growth in Life. In Non-Life, Portugal and Italy contributed an excellent operating performance. Driven by a solid performance in Accident and Health and helped by benign weather conditions, the results improved compared to the previous year.
As the clear No. 2 in the Portuguese market, Médis is a stand-out performer and Health was a major driver of growth. Médis is also well developed in terms of digitisation, including segment-specific websites that are well known and accessed for information.
In those markets that have faced difficult operating conditions, we have taken pro-active and decisive actions to maintain our profitability. A number of regulatory changes in Turkey, fierce competition and the level of pricing in Motor impacted negatively on our business. We have deliberately refocused our agency network on more profitable areas, such as Fire and Accident, until such time as the Motor market returns to more normal levels of pricing and profitability. And longer term, as stability returns, we believe that the measures we have taken will serve us well. In Italy, we are strengthening our distribution, introducing City Agents targeted to professionals and SMEs. In France and Luxembourg, we continue to be challenged by low interest rates. In Luxembourg, we continue to make a strategic shift towards Unit-Linked products versus savings; and in France, we have strengthened our IFA platform, allowing us to boost the sale of wealth management products.
As we look to the future, we want to strengthen our bank relationships particularly in Portugal and Italy, where we see a lot of potential to grow. We have established a special workgroup to explore ways of leveraging the bank channel further, taking it to the next level.
We will continue to focus heavily on product design, particularly in the context of low interest rates. And we will continue to invest in our digital capabilities, as we become increasingly customer-centric. We will look to grow in the markets in which we operate and we will look at new distribution channels of importance for our customers. And finally, we will maintain a focus on innovation, particularly in high-growth areas such as Health, where Ageas has considerable experience and expertise.
“2015 was another strong year for Asia. Each country contributed to this success. Thanks to distribution developments, our profitable product mix, good underwriting and persistency management in both Life and Non-Life, as well as high investment results in volatile financial markets, we achieved a strong net result. 2015 was also a year of strategic alignment of the Asian business. We announced to divest the Hong Kong operations, and entered into two greenfield partnerships in The Philippines and Vietnam. As we move forward we will further build our success in the region leveraging on our unique approach to partnerships.”
Asia was once more a strong contributor to the Group in 2015 with China and Thailand outpacing market growth and delivering solid returns. 2015 was also the year in which Ageas extended its reach into two new growth markets, Vietnam and the Philippines, while announcing the divestment of the Hong Kong life business.
2015 was a year in which our Asian business once again delivered a strong return for Ageas. Even with some economic slowdown, particularly in China, the long-term economic fundamentals remain very strong for the region. A fast-growing middle class and low penetration rates in the insurance markets make Asia an attractive region for Ageas and one in which we will continue to invest. With our exceptionally strong local distribution platforms and the power of our Partnership model, we are very well positioned for the long term.
2015 represented a fundamental shift in our business in Asia. We established two important new joint ventures in Vietnam and the Philippines − both exciting growth markets − and we are in the process of closing the sale of our business in Hong Kong, which is expected to be completed in the first half of 2016.
In bringing these Greenfield operations to fruition, we have taken time to get to know our new partners and to understand the long-term ambitions and expectations of all parties. The focus is now on execution.
We also took the strategic decision to exit Hong Kong, selling our only wholly-owned subsidiary in Asia to JD Capital. This was a significant transaction for Ageas that reflects our ambition to realign our operations towards the fast-growing emerging markets of Asia. We are proud of the business we have built over the past 8 years, and we are grateful to the management team, the staff, and the agency force for their commitment throughout.
Our businesses performed well in 2015, with China and Thailand exceeding expectations, outpacing market growth and delivering solid returns. We saw some exceptional results in China, and we managed our way through the market volatility very well. Despite the slowdown in the overall economy in China, GDP growth is still close to 7%. But clearly, the impact of this downtrend is also felt across borders.
In Thailand, we solidified our position as No. 1 for new business, No. 2 in the overall market, and No. 4 in Non-Life with strong fundamental results. In Malaysia, we faced some challenges as financial markets continued to be difficult. We performed well in Non-Life, and we saw a return to growth in the bancassurance Life channel through the sale of regular premium products. In India, we gained market share with a new management team in place providing strong momentum. We are seeing increased productivity, expansion of the branch network, and a return to the launch of new products.
Across the region we are investing in our digital capabilities, responding to an increasing demand by our customers for omni-channel access. This will be increasingly important in the future, alongside the ability to leverage data. We have established a regional office for analytics so that we can understand and use data more effectively. And as we look to further strengthen our position, we are also focused on building a stronger digital proposition with the customer.
As we look forward, we can expect a more difficult economic and political environment in the region, but reflecting also the wider volatility of the financial markets globally. We are moving into a period of greater uncertainty but there will continue to be growth. We remain well positioned to outperform and outgrow the market. With the new investments we have in Vietnam and the Philippines − alongside our strong positions in Thailand, Malaysia and China, and the emerging stronger position in India − we are excited and confident about the future. We will continue to look for in-market growth and inorganic growth opportunities in the region, including Indonesia.
The initiatives we have undertaken in the past 12 months reflect our strategic ambitions. The repositioning of Asia through the announced sale of Hong Kong, which we expect to be closed in the first semester of 2016, and the opening up of Vietnam and the Philippines, contribute to our goal of 25% being invested in the emerging markets. And the proportion of protection in our Life portfolio is quite high, as the composition of that portfolio extends beyond traditional savings including critical illness, mortality risk, etc. We are also continuing to invest in our people − adding new skills at the regional level as well as within our joint ventures. And it is the exceptional talent that we enjoy as a Group that has allowed us to successfully conclude two new joint ventures and one major divestment − in addition to an exceptional business performance − in the past 12 months.