Message to shareholders
2015 was a year in which we delivered for our shareholders. Almost EUR 3 billion in market value was created. Ageas has quadrupled its market capitalization compared to 2009. We announced a smooth transition to Solvency II and a strong solvency ratio target of 175%. A 5th consecutive share buy-back programme was launched for EUR 250 million. Based on our 2015 results we will propose to shareholders a 6.5% increase in the gross cash dividend to EUR 1.65 per share.
Gross cash dividend 2015 proposal
But just as the ink began to dry on our 2015 performance, we made an important announcement related to the Fortis legacy. Together with a number of claimant organisations we have reached an agreement on what we believe is a fair and reasonable settlement of EUR 1,204 million to compensate those impacted by the Fortis events of 2007 and 2008. This is an important step forward for shareholders but also for our company. It allows us to regain full strategic and financial flexibility, and it means we can get back to focusing on the core insurance business and the delivery of our strategy. Whilst the process itself may take at least 2 years of years to complete, we are hopeful that this agreement will finally help draw a line under these legal proceedings.
New JV’s in high growth markets and M&A transactions reflect Ageas’s strategic choices
Looking back at our actual performance in 2015, it is fair to say it was a busy year for Ageas. In line with our Vision 2015 choices, we announced the divestment of our Hong Kong activities for EUR 1.2 billion, one of the biggest deals made by a Belgian company last year, and our intention to acquire AXA Portugal for EUR 191 million that should propel Ageas to No. 3 in the Non-Life market in Portugal. We expect both transactions to be completed in the first half of 2016. We also entered two new markets in Asia. New Life partnerships were set up with Military Bank and Muang Thai in Vietnam, a highly populated country with low insurance penetration rates, and with EastWest Bank in the Philippines, one of the fastest growing economies in Asia. And the creation of Intreas, an internal Non-Life re-insurance vehicle, illustrates how we are leveraging the power of the Group.
Our financial results in 2015 demonstrate the underlying strength of our insurance business with both net profit and inflows evolving positively with good overall momentum across both Life and Non-Life. The results were underpinned in particular by a record performance in Asia and solid results in Belgium. We achieved these results against a backdrop of volatile markets in both Asia and Europe and the negative impact of the UK December floods. We reported an insurance net profit of EUR 755 million and Group inflows increased some 16% to EUR 29.8 billion. At the same time we have made important progress in our operating performance reaching a combined ratio of 96.8% supported by an excellent operating performance in Belgium and Continental Europe. Importantly we ended the year with a strong balance sheet including EUR 11.3 billion in Shareholders’ Equity, and a Solvency I Insurance ratio at 226%. Under the new Solvency II regime, the ratio for insurance stands at 182%, which is above our target of 175%.
Insurance net result
Life: EUR 573 million
Non-Life: EUR 182 million
“Teamwork was the essence of our Vision 2015 strategy, and you will see that it is also deeply engrained in our Ambition 2018 strategy as a differentiator: we are creating synergies, bringing knowledge together from our various regions, while recognizing the power of local autonomy. The ability to successfully share best practices between markets and to learn from the experience of quite different worlds is fundamental to our strategic approach.”Read the full quote
Jozef De Mey
Chairman of Ageas
As we look back at Vision 2015, we view it as a success: first and foremost, it brought more financial focus across the Group at a time when it was really needed. It allowed us to align everyone around a set of clear targets and choices. And while, for various reasons, we have today not yet reached all of those targets, we have made significant progress. We have seen double-digit growth, but more importantly sustainable growth. We have continued to demonstrate our ability to work in successful collaboration with our commercial partners, and we know from positive customer feedback that we are doing the right things.
Never change a winning strategy
The cliché “Never change a winning strategy” is very true. It was one of our early conclusions when setting out to develop the Ambition 2018 strategy. There was no need to suddenly change everything and throw overboard all the good things that have been done. To do so would have suggested our Vision 2015 strategy was wrong. We firmly believe that it was the right approach, and it provided us with the ideal platform to launch Ambition 2018. We also believe that consistency will pay off. And while our targets will be fine-tuned where needed, and our focus will be sharpened in certain areas, the main challenge is to prepare the company for the fast-changing world around us.
Nobody can predict with certainty how fast things will change, but one thing’s for sure: there is no way back and the genie is well and truly out of the bottle. This will also be a cultural change for our company, of course, requiring additional skills, new ways of working, the identification of different types of partners, and the challenge of competing against new competitors. Therefore, as of 2016, Ageas has made a commitment to invest an extra EUR 25 million per year, on top of the EUR 50 million already committed, in innovative technology projects. It is a challenge − but exciting at the same time − and it is this more qualitative aspect of the strategy that is the differentiator between Vision 2015 and Ambition 2018. We’re building on our Ageas strengths and adding a new dimension to our story.
A commitment to innovative technology
A strong platform for growth
We officially closed out Vision 2015 on 31 December, but our plans for Ambition 2018 started much earlier. We view it as the next leg in a journey we began in 2012. We are on the same road but with renewed strategic choices and extended financial targets. It is a long-term approach, not one focused on short-term wins. It’s a marathon, not a sprint. We are proud of what has been achieved on our Vision 2015 journey. It provided us with a strong platform for growth.
We are grateful to the entire management committee for their strong and determined leadership and to every single person in the company who has contributed towards our success. As we look forward over the next 3 years, we do so knowing that our shareholders are relying on us to do the right thing. We know what is expected of us and we will not disappoint. Consistency matters. Performance matters. We will turn our ambition into a reality.
CEO Ageas Chairman Ageas