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ageas SA/NV — Interim / Quarterly Report 2011
Aug 24, 2011
3905_ir_2011-08-24_ef1731c9-d89b-4ecc-9e83-00463ef49d08.pdf
Interim / Quarterly Report
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Consolidated Interim Financial Statements for the first half-year of 2011
| Report of the Board of Directors of Ageas5 | ||
|---|---|---|
| Report of the Board of Directors of Ageas 6 | ||
| Consolidated Interim Financial Statements for the first half-year of 20119 | ||
| Consolidated statement of financial position 10 | ||
| Consolidated income statement 11 | ||
| Consolidated statement of comprehensive income 12 | ||
| Consolidated statement of changes in equity 13 | ||
| Consolidated cash flow statement 14 | ||
| General Notes15 | ||
| 1 | Summary accounting policies and principles of consolidation 16 | |
| 2 | Acquisitions and disposals 21 | |
| 3 | Outstanding shares and earnings per share 25 | |
| 4 | Supervision and solvency 27 | |
| Explanatory notes to the Consolidated statement of financial position31 | ||
| 5 | Cash and cash equivalents 32 | |
| 6 | Investments 33 | |
| 7 | Loans 38 | |
| 8 | Investments in associates 39 | |
| 9 | Reinsurance and other receivables 40 | |
| 10 | Call option BNP Paribas shares 41 | |
| 11 | Liabilities arising from Life insurance contracts 43 | |
| 12 | Liabilities arising from Life investment contracts 43 | |
| 13 | Liabilities related to Unit-linked contracts 43 | |
| 14 | Liabilities arising from Non-life insurance contracts 44 | |
| 15 | Debt certificates 44 | |
| 16 | Subordinated liabilities 45 | |
| 17 | Borrowings 47 | |
| 18 | Deferred tax assets and liabilities 48 | |
| 19 | RPN(I) 49 | |
| 20 | Provisions 52 | |
| Explanatory notes to the Consolidated income statement 55 | ||
| 21 | Insurance premiums 56 | |
| 22 | Interest, dividend and other investment income 58 | |
| 23 | Result on sales and revaluations 58 | |
| 24 | Insurance claims and benefits 59 | |
| 25 | Finance costs 60 | |
| 26 | Change in impairments 60 |
| Explanatory note on segment reporting61 | ||
|---|---|---|
| 27 | Information on segments 62 | |
| 28 | Contingent liabilities 75 | |
| 29 | Events after the date of the statement of financial position 81 | |
| Statement of the Board of Directors 82 | ||
| Review report83 |
All amounts in the tables of these Consolidated Interim Financial Statements are denominated in millions of euros, unless stated otherwise.
Report of the Board of Directors of Ageas
Report of the Board of Directors of Ageas
Results and developments
Ageas reported a Group net loss of EUR 59 million for the first half year with a net profit of EUR 111 million for the Insurance operations, offset by a net loss of EUR 170 million in the General Account.
The Insurance net result after non-controlling interests amounts EUR 111 million compared to EUR 181 million last year, broken down as EUR 23 million in Belgium, EUR 30 million in the United Kingdom, EUR 4 million in Continental Europe, EUR 54 million in Asia. This result includes an impairment charge on Greek sovereign bonds of EUR 328 million gross corresponding to a net charge of EUR 150 million after profit sharing, tax and non-controlling interests. The impairment breaks down into EUR 143 million in Life and EUR 7 million in Non-Life and impacts especially the results of Belgium and Continental Europe. Excluding the impairment charge, the total Insurance net result would have been 44% up on the same period last year to EUR 261 million.
The General Account's net result amounted to EUR 170 million negative for the first half year of 2011 driven by a net negative impact of the legacy issues of EUR 130 million. The latter includes a provision of EUR 40 million, a charge related to the obligation to acquire the Fortis Bank Tier 1 bond at par following the non-call by Fortis Bank SA/NV and the consent provided by the National Bank of Belgium on 18 August 2011. The provision represents the difference between the fair value and the acquisition cost of the Fortis Bank Tier 1 bond.
The value of the call option on the BNP Paribas shares evolved positively and rose EUR 85 million in value to EUR 694 million mainly thanks to the BNP Paribas share price increase and lower dividend yield expectations.
The fair value of the RPN(I) liability increased by EUR 118 million to EUR 583 million in the first half year of 2011, mainly due to an increase in the market value of the CASHES financial instrument.
Ageas' share in the net result under IFRS of Royal Park Investments (RPI) amounted to EUR 57 million negative, driven by lower USD interest rates and exchange rates. The value of the equity investment in Royal Park Investments, including fair value movements of interest rate swaps, decreased from EUR 933 million end 2010 to EUR 899 million end of June 2011.
Continued streamlining, selective expansion insurance activities
Ageas further progressed in the first six months of this year with a continuation of selective expansion of its Insurance activities. In February Ageas announced the agreement with Haci Omer Sabanci Holding to acquire 31% of Aksigorta A.S., the 4th Non-Life insurer in Turkey and this transaction was closed at the end of July. Ageas paid a total consideration of EUR 1531 million in cash. At the end of March, Ageas acquired Castle Cover Limited, a UK based intermediary specialising in the over 50s insurance sector, consolidating Ageas n°2 position in this fast growing market segment. Ageas paid a total consideration of EUR 63 million.
1 Based on currency rates at which the transaction was hedged
With respect to the streamlining and simplification of the insurance portfolio, Ageas announced two transactions in the course of June. In Luxembourg, Ageas Insurance International and BGL BNP Paribas, each holding 50% of the shares of Fortis Luxembourg Vie, signed a transaction with Cardif Lux International to merge their activities. The new entity will be held by Ageas, BGL BNP Paribas and BNP Paribas Cardif for 33.33%, 33.33% and 33.4% respectively. The transaction is subject to regulatory approvals and expected to be closed by the end of 2011. Secondly, Ageas entered into an agreement with Swiss Re to transfer the run-off business of Intreinco N.V., the former reinsurance captive of the Fortis Group. This transaction envisages a further simplification of the corporate structure. Completion is expected before the end of 2011.
Contingent liabilities
Please refer to note 28 for the entire section of 'Contingent liabilities'. No material new elements emerged since the publication of Ageas's annual report on the 17 March 2011.
Dividend
On 27 and 28 April 2011 the respective General meetings of shareholders of ageas SA/NV and ageas N.V. approved the proposal submitted by the Board of Directors to adopt a gross dividend of EUR 0.08 per ageas Unit (approximately EUR 197 million in total). The dividend is payable as from 31 May 2011.
Ageas Board of Directors and Executive Committee
On 27 and 28 April 2011 the respective General meetings of shareholders of ageas SA/NV and ageas N.V. approved the nomination of Mr. Ronny Bruckner as non executive director until the end of the Ordinary General Meetings of Shareholders in 2014 and the re-appointment as independent non-executive members of the Board of Directors of the companies, of:
- Mr. Frank Arts, for a period of two years, until the close of the Ordinary General Meetings of Shareholders in 2013;
- Mr. Shaoliang Jin, for a period of two years, until the close of the Ordinary General Meetings of Shareholders in 2013;
- Mr. Roel Nieuwdorp, for a period of three years, until the close of the Ordinary General Meetings of Shareholders in 2014;
- Mr. Guy de Selliers de Moranville, for a period of four years, until the close of the Ordinary General Meetings of Shareholders in 2015;
- Mr. Lionel Perl, for a period of four years, until the close of the Ordinary General Meetings of Shareholders in 2015;
- Mr. Jan Zegering Hadders, for a period of four years, until the close of the Ordinary General Meetings of Shareholders in 2015;
- Mr. Jozef De Mey as a non-executive member of the Board of Directors of the company, for a period of four years, until the close of the Ordinary General Meetings of Shareholders in 2015.
Outlook
For 2011 and based on our experience in the first half year, we expect inflows to be close to the level of last year. Taking into account the first half year impairment charge related to the Greek sovereigns and barring any other significant events outside of our control, the financial performance of the Insurance operations for the full year is expected to be in line with 2010. The result of the General Account is expected to remain volatile.
Brussels/Utrecht, 23 August 2011
Board of Directors
Consolidated Interim Financial Statements for the first half-year of 2011
Consolidated statement of financial position
| 30 June | 31 December | ||
|---|---|---|---|
| Note | 2011 | 2010 | |
| Assets | |||
| Cash and cash equivalents | 5 | 1,805.0 | 3,258.3 |
| Financial investments | 6 | 54,881.5 | 56,232.5 |
| Investment property | 1,972.2 | 1,900.3 | |
| Loans | 7 | 5,969.6 | 4,528.2 |
| Investments related to unit-linked contracts | 14,091.7 | 21,747.3 | |
| Investments in associates | 1,731.5 | 1,732.5 | |
| Reinsurance and other receivables | 9 | 4,265.9 | 3,828.5 |
| Current tax assets | 85.1 | 71.5 | |
| Deferred tax assets | 18 | 631.2 | 465.1 |
| Call option BNP Paribas shares | 10 | 694.0 | 609.0 |
| Accrued interest and other assets | 2,176.7 | 2,042.5 | |
| Property, plant and equipment | 1,093.6 | 1,065.0 | |
| Goodwill and other intangible assets | 1,664.0 | 1,686.0 | |
| Assets held for sale | 8,413.8 | ||
| Total assets | 99,475.8 | 99,166.7 | |
| Liabilities | |||
| Liabilities arising from life insurance contracts | 11 | 23,957.7 | 23,938.4 |
| Liabilities arising from life investment contracts | 12 | 26,925.3 | 26,913.8 |
| Liabilities related to unit-linked contracts | 13 | 14,170.3 | 21,830.9 |
| Liabilities arising from non-life insurance contracts | 14 | 5,761.2 | 5,448.6 |
| Debt certificates | 15 | 340.7 | 548.9 |
| Subordinated liabilities | 16 | 2,880.2 | 2,926.9 |
| Borrowings | 17 | 2,307.9 | 2,141.7 |
| Current tax liabilities | 66.5 | 46.4 | |
| Deferred tax liabilities | 18 | 681.9 | 682.3 |
| RPN(I) | 19 | 583.0 | 465.0 |
| Accrued interest and other liabilities | 2,263.8 | 1,947.0 | |
| Provisions | 20 | 2,448.2 | 2,407.6 |
| Liabilities related to assets held for sale | 8,184.7 | ||
| Total liabilities | 90,571.4 | 89,297.5 | |
| Shareholders' equity | 3 | 7,477.2 | 8,247.1 |
| Non-controlling interests | 1,427.2 | 1,622.1 | |
| Total equity | 8,904.4 | 9,869.2 | |
| Total liabilities and equity | 99,475.8 | 99,166.7 |
Consolidated income statement
| First | First | Second | Second | First | ||
|---|---|---|---|---|---|---|
| Note | half-year 2011 | half-year 2010 | quarter 2011 | quarter 2010 | quarter 2011 | |
| Income | ||||||
| - Gross premium income 1) | 4,850.4 | 5,113.9 | 2,233.4 | 2,552.6 | 2,617.0 | |
| - Change in unearned premiums | ( 395.1 ) | ( 144.3 ) | ( 128.0 ) | ( 2.2 ) | ( 267.1 ) | |
| - Ceded earned premiums | ( 141.7 ) | ( 122.9 ) | ( 61.5 ) | ( 54.8 ) | ( 80.2 ) | |
| Net earned premiums | 21 | 4,313.6 | 4,846.7 | 2,043.9 | 2,495.6 | 2,269.7 |
| Interest, dividend and other investment income | 22 | 1,536.6 | 1,512.6 | 786.0 | 775.7 | 750.6 |
| Unrealised gain (loss) on Call option BNP Paribas shares | 85.0 | ( 121.0 ) | 83.0 | 99.0 | 2.0 | |
| Unrealised gain (loss) on RPN(I) | ( 118.0 ) | ( 24.0 ) | 139.0 | 102.0 | ( 257.0 ) | |
| Result on sales and revaluations | 23 | 88.3 | ( 51.6 ) | 27.7 | ( 126.2 ) | 60.6 |
| Investment income related to unit-linked contracts | 72.1 | 202.2 | ( 46.5 ) | ( 360.5 ) | 118.6 | |
| Share of result of associates | ( 8.1 ) | 48.3 | ( 24.1 ) | 29.2 | 16.0 | |
| Fee and commission income | 220.9 | 205.4 | 107.3 | 106.2 | 113.6 | |
| Other income | 111.6 | 96.8 | 61.3 | 55.5 | 50.3 | |
| Total income | 6,302.0 | 6,715.4 | 3,177.6 | 3,176.5 | 3,124.4 | |
| Expenses | ||||||
| - Insurance claims and benefits, gross | ( 4,359.4 ) | ( 5,022.6 ) | ( 2,004.4 ) | ( 2,492.7 ) | ( 2,355.0 ) | |
| - Insurance claims and benefits, ceded | 72.7 | 55.0 | 22.6 | 21.1 | 50.1 | |
| Insurance claims and benefits, net | 24 | ( 4,286.7 ) | ( 4,967.6 ) | ( 1,981.8 ) | ( 2,471.6 ) | ( 2,304.9 ) |
| Charges related to unit-linked contracts | ( 66.7 ) | ( 171.8 ) | 50.5 | 373.6 | ( 117.2 ) | |
| Finance costs | 25 | ( 156.4 ) | ( 143.6 ) | ( 77.6 ) | ( 73.5 ) | ( 78.8 ) |
| Change in impairments | 26 | ( 362.9 ) | ( 24.0 ) | ( 356.7 ) | ( 20.7 ) | ( 6.2 ) |
| Change in provisions | 20 | ( 40.2 ) | 2.5 | ( 40.6 ) | 0.6 | 0.4 |
| Fee and commission expense | ( 592.8 ) | ( 522.9 ) | ( 290.1 ) | ( 258.9 ) | ( 302.7 ) | |
| Staff expenses | ( 366.1 ) | ( 334.9 ) | ( 186.1 ) | ( 166.9 ) | ( 180.0 ) | |
| Other expenses | ( 414.6 ) | ( 393.8 ) | ( 222.3 ) | ( 212.1 ) | ( 192.3 ) | |
| Total expenses | ( 6,286.4 ) | ( 6,556.1 ) | ( 3,104.7 ) | ( 2,829.5 ) | ( 3,181.7 ) | |
| Profit before taxation | 15.6 | 159.3 | 72.9 | 347.0 | ( 57.3 ) | |
| Income tax expenses | ( 48.1 ) | 345.5 | 3.5 | 324.2 | ( 51.6 ) | |
| Net profit for the period | ( 32.5 ) | 504.8 | 76.4 | 671.2 | ( 108.9 ) | |
| Attributable to non-controlling interests | 26.3 | 49.8 | ( 18.4 ) | 15.1 | 44.7 | |
| Net profit attributable to shareholders | ( 58.8 ) | 455.0 | 94.8 | 656.1 | ( 153.6 ) | |
| Per share data (EUR) | ||||||
| Basic earnings per share | ( 0.02 ) | 0.18 | ||||
| Diluted earnings per share | ( 0.02 ) | 0.18 |
1) Gross inflow (sum of gross written premiums and premium inflow of investment contracts without Discretionary Participation Features) can be calculated as follows.
| First | First | Second | Second | First | |
|---|---|---|---|---|---|
| half-year 2011 | half-year 2010 | quarter 2011 | quarter 2010 | quarter 2011 | |
| Gross premium income | 4,850.4 | 5,113.9 | 2,233.4 | 2,552.6 | 2,617.0 |
| Inflow deposit accounting (directly recognised as liability) | 1,062.7 | 1,298.0 | 513.7 | 598.7 | 549.0 |
| Gross inflow | 5,913.1 | 6,411.9 | 2,747.1 | 3,151.3 | 3,166.0 |
Consolidated statement of comprehensive income
| First | First | Second | Second | First | |
|---|---|---|---|---|---|
| half-year 2011 | half-year 2010 | quarter 2011 | quarter 2010 | quarter 2011 | |
| Net profit attributable to shareholders | ( 58.8 ) | 455.0 | 94.8 | 656.1 | ( 153.6 ) |
| Changes in revaluation of investments | |||||
| Reclass revaluation investments available for sale to held to maturity, gross | 175.0 | 175.0 | |||
| Related tax Reclass revaluation investments available for sale to held to maturity, net |
( 43.8 ) 131.2 |
( 43.8 ) 131.2 |
|||
| Change in amortisation of investments held to maturity, gross | 1.7 | 1.7 | |||
| Related tax | ( 0.4 ) | ( 0.4 ) | |||
| Change in investments held to maturity, net | 132.5 | 132.5 | |||
| Change in revaluation of investments available for sale, gross | ( 720.2 ) | 126.9 | 331.5 | ( 414.7 ) | ( 1,051.7 ) |
| Related tax | 189.6 | ( 67.1 ) | ( 150.6 ) | 108.3 | 340.2 |
| Reclass revaluation investments available for sale to held to maturity, gross | ( 175.0 ) | ( 175.0 ) | |||
| Related tax | 43.8 | 43.8 | |||
| Reclass revaluation investments available for sale to held to maturity, net | ( 131.2 ) | ( 131.2 ) | |||
| Change in revaluation of investments available for sale, net | ( 661.8 ) | 59.8 | 49.7 | ( 306.4 ) | ( 711.5 ) |
| Share of other comprehensive income of associates, gross | ( 0.6 ) | 85.1 | 29.0 | 61.7 | ( 29.6 ) |
| Related tax | |||||
| Share of other comprehensive income of associates, net | ( 0.6 ) | 85.1 | 29.0 | 61.7 | ( 29.6 ) |
| Change in revaluation of investments, gross | ( 719.1 ) | 212.0 | 362.2 | ( 353.0 ) | ( 1,081.3 ) |
| Related tax | 189.2 | ( 67.1 ) | ( 151.0 ) | 108.3 | 340.2 |
| Change in revaluation of investments, net | ( 529.9 ) | 144.9 | 211.2 | ( 244.7 ) | ( 741.1 ) |
| Change in foreign exchange differences, gross | ( 157.7 ) | 287.5 | ( 48.4 ) | 189.2 | ( 109.3 ) |
| Related tax | 0.5 | ( 0.9 ) | 0.4 | ( 0.9 ) | 0.1 |
| Change in foreign exchange differences, net | ( 157.2 ) | 286.6 | ( 48.0 ) | 188.3 | ( 109.2 ) |
| Other comprehensive income for the period, net of tax | ( 687.1 ) | 431.5 | 163.2 | ( 56.4 ) | ( 850.3 ) |
| Revaluation of investments attributable to non-controlling interests | ( 171.9 ) | ( 26.8 ) | 26.4 | ( 116.2 ) | ( 198.3 ) |
| Foreign exchange differences attributable to non-controlling interests | ( 3.4 ) | ( 1.7 ) | ( 1.7 ) | ||
| Attributable to shareholders | ( 511.8 ) | 458.3 | 138.5 | 59.8 | ( 650.3 ) |
| Total comprehensive income for the period, attributable | |||||
| to shareholders | ( 570.6 ) | 913.3 | 233.3 | 715.9 | ( 803.9 ) |
Consolidated statement of changes in equity
| Share | Currency | Net profit | Unrealised | Share | Non | ||||
|---|---|---|---|---|---|---|---|---|---|
| Share | premium | Other | translation attributable to | gains | holders' | controlling | Total | ||
| capital | reserve | reserves | reserve shareholders | and losses | equity | interests | equity | ||
| Balance at 1 January 2010 | 2,114.0 | 14,278.4 | ( 9,871.0 ) | ( 71.1 ) | 1,209.8 | 770.9 | 8,431.0 | 1,654.0 | 10,085.0 |
| Net profit for the period | 455.0 | 455.0 | 49.8 | 504.8 | |||||
| Revaluation of investments | 171.7 | 171.7 | ( 26.8 ) | 144.9 | |||||
| Foreign exchange differences | 286.6 | 286.6 | 286.6 | ||||||
| Total non-owner changes in equity | 286.6 | 455.0 | 171.7 | 913.3 | 23.0 | 936.3 | |||
| Transfer | 1,209.8 | ( 1,209.8 ) | |||||||
| Dividend Increase of capital |
( 188.1 ) | ( 188.1 ) | ( 0.4 ) | ( 188.5 ) | |||||
| Treasury shares | 0.3 | 0.3 | 0.3 | ||||||
| Other changes in equity | ( 3.4 ) | ( 3.4 ) | 5.9 | 2.5 | |||||
| Balance at 30 June 2010 | 2,114.0 | 14,278.4 | ( 8,852.4 ) | 215.5 | 455.0 | 942.6 | 9,153.1 | 1,682.5 | 10,835.6 |
| Balance at 1 January 2011 | 2,203.6 | 14,394.7 | ( 8,877.4 ) | 81.9 | 223.1 | 221.2 | 8,247.1 | 1,622.1 | 9,869.2 |
| Net profit for the period | ( 58.8 ) | ( 58.8 ) | 26.3 | ( 32.5 ) | |||||
| Revaluation of investments | ( 358.0 ) | ( 358.0 ) | ( 171.9 ) | ( 529.9 ) | |||||
| Foreign exchange differences | ( 153.8 ) | ( 153.8 ) | ( 3.4 ) | ( 157.2 ) | |||||
| Total non-owner changes in equity | ( 153.8 ) | ( 58.8 ) | ( 358.0 ) | ( 570.6 ) | ( 149.0 ) | ( 719.6 ) | |||
| Transfer | 223.1 | ( 223.1 ) | |||||||
| Dividend | ( 196.5 ) | ( 196.5 ) | ( 45.3 ) | ( 241.8 ) | |||||
| Increase of capital | |||||||||
| Treasury shares | |||||||||
| Share based compensation | 2.2 | 2.2 | 2.2 | ||||||
| Other changes in equity | ( 5.0 ) | ( 5.0 ) | ( 0.6 ) | ( 5.6 ) | |||||
| Balance at 30 June 2011 | 2,203.6 | 14,396.9 | ( 8,855.8 ) | ( 71.9 ) | ( 58.8 ) | ( 136.8 ) | 7,477.2 | 1,427.2 | 8,904.4 |
Consolidated cash flow statement
| First half-year 2011 | First half-year 2010 | |
|---|---|---|
| Profit before taxation | 15.6 | 159.3 |
| Adjustments to non-cash items included in profit before taxation: | ||
| Call option BNP Paribas shares | ( 85.0 ) | 121.0 |
| RPN(I) | 118.0 | 24.0 |
| Result on sales and revaluations | ( 87.0 ) | 109.3 |
| Share of profits in associates | 8.1 | ( 48.3 ) |
| Depreciation, amortisation and accretion | 321.9 | 268.8 |
| Impairments | 363.0 | 24.0 |
| Provisions | 40.2 | ( 2.5 ) |
| Share-based compensation expense | 2.2 | 2.7 |
| Changes in operating assets and liabilities: | ||
| Derivatives held for trading (assets and liabilities) | ( 35.2 ) | 33.7 |
| Loans | ( 1,446.0 ) | ( 513.8 ) |
| Reinsurance and other receivables | ( 423.8 ) | ( 731.4 ) |
| Investments related to unit-linked contracts | 142.5 | ( 508.6 ) |
| Borrowings | 178.3 | ( 794.4 ) |
| Liabilities arising from insurance and investment contracts | 1,034.4 | 2,374.7 |
| Liabilities related to unit-linked contracts | ( 130.8 ) | 487.6 |
| Net changes in all other operational assets and liabilities | 24.4 | 180.4 |
| Dividend received from associates | 7.6 | 4.6 |
| Income tax paid | ( 59.9 ) | ( 81.3 ) |
| Cash flow from operating activities | ( 11.5 ) | 1,109.8 |
| Purchases of financial investments | ( 5,898.4 ) | ( 15,992.3 ) |
| Proceeds from sales and redemptions of financial investments | 5,346.2 | 14,006.2 |
| Purchases of investment property | ( 89.6 ) | ( 53.3 ) |
| Proceeds from sales of investment property | 139.3 | |
| Purchases of property, plant and equipment | ( 45.1 ) | ( 19.1 ) |
| Proceeds from sales of property, plant and equipment | 0.7 | 39.5 |
| Acquisition of subsidiaries and associates | ( 112.4 ) | ( 129.4 ) |
| Divestments of subsidiaries and associates (including cash in assets held for sale) | ( 135.8 ) | 58.0 |
| Purchases of intangible assets | ( 16.4 ) | ( 5.0 ) |
| Cash flow from investing activities | ( 950.8 ) | ( 1,956.1 ) |
| Payment of debt certificates | ( 207.1 ) | ( 26.5 ) |
| Proceeds from the issuance of other borrowings | 2.2 | 14.6 |
| Payment of other borrowings | ( 20.7 ) | ( 29.1 ) |
| Proceeds from sales of treasury shares | 0.3 | |
| Dividends paid to shareholders of the parent company | ( 196.5 ) | ( 193.3 ) |
| Dividends paid to non-controlling interests | ( 45.3 ) | ( 0.4 ) |
| Repayment of capital (including minority interests) | ||
| Cash flow from financing activities | ( 467.4 ) | ( 234.4 ) |
| Effect of exchange rate differences on cash and cash equivalents | ( 23.6 ) | 33.0 |
| Net increase (decrease) of cash and cash equivalents | ( 1,453.3 ) | ( 1,047.7 ) |
| Cash and cash equivalents as at 1 January | 3,258.3 | 5,635.7 |
| Cash and cash equivalents as at 30 June | 1,805.0 | 4,588.0 |
| Supplementary disclosure of operating cash flow information | ||
| Interest received | 1,345.6 | 1,207.3 |
| Dividend received from financial investments | 48.9 | 30.7 |
| Interest paid | ( 207.2 ) | ( 244.4 ) |
General Notes
1 Summary accounting policies and principles of consolidation
1.1 Basis of accounting
The Ageas Consolidated Interim Financial Statements for the first half-year of 2011, including the 2010 comparative figures, have been prepared in accordance with IAS 34 Interim Financial Reporting and include condensed consolidated financial statements (statement of financial position, income statement, statement of changes in equity, cash flow statement), consolidated statement of comprehensive income and selected explanatory notes. Ageas applies International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU'). The Ageas Consolidated Interim Financial Statements for the first half-year of 2011 should be read in conjunction with the audited Ageas Consolidated Financial Statements 2010 (including the accounting policies) which are available at: http://ar.ageas.com/.
1.2 Changes in accounting policies
The accounting policies used to prepare the Consolidated Interim Financial Statements for the first half-year of 2011 are consistent with those applied in the Ageas Consolidated Financial Statements for the year ended 31 December 2010.
The following relevant new or revised standards, interpretations and amendments to standards and interpretations have become effective on January 1st, 2011 (and are endorsed by the EU):
IAS 1 Presentation of financial statements (amendment)
The amendment clarifies that, for each component of equity, an entity may present the breakdown of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements.
IAS 24 Related-party disclosures (amendment)
The definition of a related party has been amended to remove inconsistencies and to make it simpler to apply. Some entities will be required to make additional disclosures under this new definition. The entities that are most likely to be affected are those that are part of a group that includes both subsidiaries and associates, and entities with shareholders that are involved with other entities. For example, a subsidiary is now required to disclose transactions with an associate of its parent. Similarly, disclosure is required of transactions between two entities where both entities are joint ventures (or one is an associate and the other is a joint venture) of a third entity. In addition, an entity that is controlled by an individual that is part of the key management personnel of another entity is now required to disclose transactions with that second entity.
IAS 27 Consolidated and separate financial statements (amendment)
It states that loss of control over a subsidiary, the loss of significant influence over an associate and loss of joint control over a jointly controlled entity are similar events and should therefore be accounted for similarly. Such an event should be recognised and measured at fair value and any gain or loss is recognised in the profit or loss.
IAS 32 Financial Instruments: Presentation (amendment)
The IASB recognised that classifying foreign-currency-denominated rights issued to all existing shareholders on a pro rata basis as derivative liabilities was not consistent with the substance of the transaction, which represents a transaction with owners acting in their capacity as such. The amendment therefore created an exception to the 'fixed for fixed' rule in IAS 32 and required rights issues within the scope of the amendment to be classified as equity. Rights issues are now required to be classified as equity if they are issued for a fixed amount of cash regardless of the currency in which the exercise price is denominated, provided they are offered on a pro rata basis to all owners of the same class of equity. Unlike derivative liabilities, equity instruments are not subsequently re-measured at fair value through profit or loss. The accounting is therefore less complex, and there is less volatility in profit or loss.
IAS 34 Interim Financial Reporting (amendment)
Greater emphasis has been placed on the disclosure principles for significant events and transactions. Additional requirements cover disclosure of changes to fair value measurements (if significant), and the need to update relevant information from the most recent annual report.
IFRS 3 Business Combinations (amendment)
Contingent consideration arrangements arising from business combinations with acquisition dates preceding the application of IFRS 3 (2008) are accounted for in accordance with the guidance in the previous version of IFRS 3 (as issued in 2004). This amendment clarifies that the guidance in IAS 39, IAS 32 and IFRS 7 will not apply to contingent consideration arising from business combinations with an effective date prior to the application of the revised version of IFRS 3.
The choice of measuring non-controlling interests at fair value or at the proportionate share of the acquiree's net assets applies only to instruments that represent 'present' ownership interests and entitle their holders to a proportionate share of the net assets in the event of liquidation. All other components of non-controlling interest are measured at fair value unless IFRS requires another measurement basis. This amendment will reduce diversity in practice and provides clearer guidance on how to measure non-controlling interests.
The application guidance in IFRS 3 applies to all share-based payment transactions that are part of a business combination, including unreplaced and voluntarily replaced share-based payment awards. IFRS 3 did not previously provide guidance for situations where the acquirer does not have an obligation to replace an award but replaces an existing acquiree award that would otherwise have continued unchanged after the acquisition. This amendment addresses this gap in the previous guidance. The amendment made to IFRS 3 results in the accounting for these awards being the same as for awards that the acquirer is obliged to replace.
IFRS 7 Financial Instruments: Disclosures (amendment)
Amendments to IFRS 7 concerning 'Nature and extent of risks arising from financial instruments'. These are amendments to the disclosure of financial assets, including the financial effect of collateral held as security.
IFRIC 14 The limit on a defined benefit asset, minimum funding requirements and their interaction (IAS 19) (amendment)
This amendment only applies to companies that are required to make minimum funding contributions to a defined benefit pension plan and choose to pre-pay those contributions. Those affected are companies that have a defined benefit pension plan that is subject to a minimum funding requirement and have prepaid (or expect to prepay) the minimum funding requirement in respect of future employee service, leading to a pension surplus. Such entities should reconsider their accounting in the light of the revised guidance to determine whether an asset for the pre-paid contributions should be recognised.
IFRIC 19 Extinguishing financial liabilities with equity instruments
IFRIC 19 considers that equity instruments issued to settle a liability represent 'consideration paid'. It therefore requires a gain or loss to be recognised separately in profit or loss when a liability is settled through the issuance of the entity's own equity instruments. This is consistent with the general approach to derecognition of financial liabilities established by IAS 39. The amount of the gain or loss recognised in profit or loss is determined as the difference between the carrying value of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments cannot be reliably measured, the fair value of the existing financial liability is used to measure the gain or loss and to record issued equity instruments.
1.3 Accounting estimates
The preparation of the Consolidated Interim Financial Statements in conformity with IFRS, requires the use of certain measurement estimates at the end of the reporting period. In general these estimates and the methods used are consistent since the introduction of IFRS in 2005. Each estimate by nature introduces a significant risk of material adjustments (positive or negative) to the carrying amounts of assets and liabilities within the next financial year.
The key measurement estimates at the reporting date are shown in the table below.
| 30 June 2011 | |
|---|---|
| Assets | Estimation uncertainly |
| Available for sale securities - Corporate dept securities - Structured credit instruments |
|
| Level 2 | - The valuation model - Inactive markets |
| Level 3 | - The valuation model - Use of not market observable input - Inactive markets |
| Investment property | Determination of the useful life and residual value |
| Associates | A mix of uncertainties depending on the asset mix |
| Goodwill | - The valuation model - Financial and economic variables - Discount rate |
| Other intangible assets | - The inherent risk premium of the entity - Determination of the useful life and residual value |
| Deferred tax assets | - Interpretation of complex tax regulations - Amount and timing of future taxable income |
| Liabilities Liabilities for Insurance contracts |
|
| Life | - Actuarial assumptions - Interest rate used in liability adequacy test |
| Non-life | - Liabilities for (incurred but not reported) claims - Claim adjustment expenses |
| Pension obligations | - Actuarial assumptions - Discount rate |
| Provisions | - The likelihood of a present obligation due to events in the past - The calculation of the best estimated amount |
| Deferred tax liabilities | - Interpretation of complex tax regulations |
For more detailed information on the application of these estimates, reference is made to the applicable notes in the Consolidated Financial Statements 2010.
1.4 Segment reporting
The primary format for reporting segment information is based on operating segments. Ageas's reportable operating segments represent groups of assets and operations engaged in providing financial products or services, which are subject to different risks and returns and whose operating results are regularly reviewed by the CEO.
Ageas is organised into five operating segments (for details see below):
- Belgium
- United Kingdom
- Continental Europe
- Asia
- General Account
To align the reporting structure with the management structure Ageas has adapted the reporting structure. From 1 January 2010 onwards, the reporting segments were changed in accordance with IFRS 8 Operating Segments.
Ageas decided that the most appropriate way of reporting operating segments under IFRS is per region in which Ageas operates, meaning Belgium, United Kingdom, Continental Europe and Asia. In addition, Ageas will report activities not related to the core insurance business such as group finance and other holding activities within the General Account that will be presented as a separate operating segment.
Ageas's segment reporting reflects the full economic contribution of the businesses of Ageas. The aim is direct allocation to the businesses of all statements of financial positions and income statement items for which the businesses have full managerial responsibility.
Segment information is prepared based on the same accounting policies as those used in preparing and presenting Ageas's Consolidated Interim Financial Statements for the first half-year and by applying appropriate allocation rules.
Transactions between the different businesses are executed under standard commercial terms and conditions.
1.5 Scope of consolidation
The Consolidated Interim Financial Statements for the first half-year include ageas SA/NV and ageas N.V. (the 'Parent Companies') and their subsidiaries. In combining the financial statements of ageas SA/NV and ageas N.V., Ageas applies consortium accounting in order to reflect its activities in the most reliable manner in accordance with the EU 7th Directive, dated 13 June 1983 (83/349/EEC).
Investments in associates – investments whereby Ageas has significant influence, but does not control – are accounted for using the equity method.
2 Acquisitions and disposals
The following significant acquisitions and disposals were made in 2011 and 2010. Details on acquisitions and disposals, if any, which took place after the date of the Statement of financial position are included in the note Events after the date of the statement of financial position.
2.1 Acquisitions in 2011
2.1.1 Castle Cover Limited
Ageas acquired Castle Cover Limited for a total consideration of GBP 54.6 million (EUR 62.5 million). Castle Cover is a UK based intermediary specialising in the over 50's insurance sector. The initial goodwill amounts to EUR 52.2 million while the intangible assets amount to EUR 8.8 million. Castle Cover is included in the consolidation scope as of the first quarter 2011.
The impact of the acquisition on the Ageas's consolidated statement of financial position at acquisition date was as follows:
| Assets | Liabilities | ||
|---|---|---|---|
| Cash & cash equivalents | 7 | Borrowings | 1 |
| Receivables | 11 | Accrued interest and other liabilities | 17 |
| Property, plant and equipment | 1 | ||
| Deferred charges and other assets | 1 | ||
| Goodwill and intangible assets | 61 | ||
| Total liabilities | 18 | ||
| Cost Price | 63 | ||
| Total Assets | 81 | Total liabilities and cost price | 81 |
Founded in 2006 and located in Poole Dorset, close to Ageas UK's operation centre in Bournemouth, Castle Cover Limited is the third largest specialised over 50 years of age broker, providing home, car and other personal products through its Castle Cover and Regal Insurance brands. The company serves more than 280,000 policyholders and employs around 300 staff in the UK. It is based on a similar business model to RIAS, an Ageas UK subsidiary, which is currently the second largest intermediary in the over 50 years of age sector. Together with RIAS, Ageas will serve 1.3 million customers in this attractive market segment, currently accounting for 38% of the UK population and presenting above average growth rates and relatively high retention rates.
The acquisition of Castle Cover further consolidates Ageas as the fourth largest personal lines intermediary distributor in the UK. Castle Cover generated a net loss of EUR 0.1 million, including amortisation of intangible assets of EUR 0.4 million.
2.1.2 Acquisitions AG Real Estate
AG Real Estate, a part of the Belgium activities dedicated to the real estate and parking business, has concluded some acquisitions in 2011. The largest ones are Westland (acquired for 46% for an amount of EUR 31.5 million) and Regatta (acquired for 50% for an amount of EUR 8.4 million).
2.2 Disposals in 2011
2.2.1 Intreinco N.V.
Ageas announced on 23 June 2011 that it has entered into an agreement to transfer all of the run-off business of Intreinco N.V. (Intreinco), the former reinsurance captive of the Fortis Group, to Swiss Re. Between 2000 and 2008, Intreinco has underwritten reinsurance liabilities of current and former Ageas insurance subsidiaries, including AG Insurance SA/NV, Ageas Insurance Ltd, Amlin Corporate Insurance N.V. and ASR Schadeverzekering N.V. Intreinco has not underwritten any new business since 2009. The completion of the transaction is subject to certain approvals and is expected to be finalized before year end 2011.
The assets and liabilities of Intreinco N.V. are in accordance with with IFRS classified as assets and liabilities held for sale.
2.2.2 Fortis Luxembourg Vie
Ageas Insurance International (Ageas) and BGL BNP Paribas (BGL BNPP), which hold 50% each of the shares in Fortis Luxembourg Vie, have signed an agreement with BNP Paribas Cardif, parent company of Cardif Lux International to merge their activities. This agreement will allow the newly merged entity to distribute life and protection insurance products in the Luxembourg market. Shareholdings in this entity are divided as follows: Ageas 33.33%, BGL BNP Paribas 33.33% and BNP Paribas Cardif 33.34%. The assets and liabilities of Fortis Luxembourg Vie are in accordance with IFRS classified as assets and liabilities held for sale from Q2, 2011 onwards. The completion of the transaction is subject to certain approvals and is expected to be finalized before year end 2011.
2.2.3 Details of assets and liabilities held for sale
The assets and liabilities of Intreinco N.V. and Luxembourg Vie classified as held for sale can be detailed as follows:
| Assets | Liabilities | ||
|---|---|---|---|
| Cash & cash equivalents | 138 | Liabilities arising from insurance and investment contracts | 621 |
| Financial investments | 703 | Liabilities related to unit-linked contracts | 7,499 |
| Investments related to unit-linked contracts | 7,482 | Accrued interest and other liabilities | 65 |
| Accrued income and other assets | 91 | ||
| Total liabilities | 8,185 | ||
| Equity | 229 | ||
| Total assets | 8,414 | Total liabilities and equity | 8,414 |
2.3 Acquisitions in 2010
2.3.1 Kwik-Fit Insurance Services
On 2 July 2010, Ageas signed an agreement with PAI Partners to acquire Kwik-Fit Insurance Services (KFIS), a UK insurance intermediary servicing more than 600,000 customers, for a total consideration of EUR 260 million based on exchange rates at the acquisition date (GBP 215 million). The initial goodwill amounts to EUR 207 million while the intangible assets amount to EUR 20 million.
The impact of the acquisition on the Ageas's consolidated statement of financial position at acquisition date was as follows:
| Assets | Liabilities | ||
|---|---|---|---|
| Cash & cash equivalents | 19 Current and deferred tax liabilities | 9 | |
| Receivables | 55 Accrued interest and other liabilities | 45 | |
| Property, plant and equipment | 9 | ||
| Accrued income and other assets | 4 | ||
| Goodwill and intangible assets | 227 | ||
| Total liabilities | 54 | ||
| Cost Price | 260 | ||
| Total Assets | 314 Total liabilities and cost price | 314 |
The acquired activities of Kwik-Fit Insurance Services (KFIS) generated a net profit of EUR 3.2 million, including amortisation of intangible assets of EUR 3.4 million in 2011.
KFIS is an insurance intermediary, which sells predominantly personal line insurance products directly to customers, primarily through the internet, leveraging the Kwik-Fit brand and two other brands owned by KFIS: 'The Green Insurance Company' and 'Express Insurance'.
2.3.2 Acquisitions AG Real Estate
AG Real Estate, a part of the Belgium activities dedicated to the real estate and parking business, has concluded some acquisitions in 2010. The largest ones are Venti M (a real estate fund acquired for 60% in the fourth quarter of 2010) and Metropark (parking business, acquired in the first quarter of 2010).
2.4 Disposals in 2010
2.4.1 Fortis Luxembourg Non-vie
On 6 October 2009, Ageas announced the sale of its Luxembourg Non-Life activities to La Bâloise, for a total consideration of EUR 23.0 million. The sale took effectively place in January 2010. The realised capital gain amounted to EUR 12.4 million.
2.4.2 Fortis Emeklilik ve Hayat (Pension and Life activities in Turkey)
Ageas sold its Pension and Life activities in Turkey to BNP Paribas Assurance in the last quarter of 2010. This transaction was closed on 12 October 2010 and resulted in a capital gain of EUR 8.5 million.
2.4.3 Fortis Life Insurance Ukraine
Ageas Insurance International sold Fortis Life Insurance Ukraine to US based investment company Horizon Capital. The transaction was closed on 17 November 2010 and resulted in a capital loss of EUR 13.9 million.
3 Outstanding shares and earnings per share
The following table shows the number of outstanding shares.
| Shares | Treasury | Shares | |
|---|---|---|---|
| issued | shares | outstanding | |
| Number of shares as at 31 December 2010 | 2,623,380,817 | ( 40,508,465 ) | 2,582,872,352 |
| Balance (acquired)/sold | |||
| Number of shares as at 30 June 2011 | 2,623,380,817 | ( 40,508,465 ) | 2,582,872,352 |
Shares issued and potential number of shares
In addition to the shares already outstanding, Ageas issued options or instruments containing option features, which could upon exercise lead to an increase in the number of outstanding shares. Shares can also be issued due to the socalled Alternative Coupon Settlement Method (ACSM), included in certain hybrid financial instruments (for details see the note on Contingent liabilities).The table below shows an overview of the shares issued and the potential number of shares as at 30 June 2011.
| Number of shares as at 30 June 2011 | 2,623,380,817 |
|---|---|
| Shares that may be issued: | |
| - in connection with option plans | 24,547,266 |
| Total potential number of shares as at 30 June 2011 | 2,647,928,083 |
The Board of Directors of Ageas is authorised by the annual shareholders' meetings to increase the capital through the issuance of 200 million shares of Ageas. In addition the Board of Directors of Ageas and the Boards of its direct subsidiaries are authorised to acquire Ageas units representing up to a maximum of 10% of the issued share capital, for a consideration equivalent to the closing price of the Ageas unit on Euronext on the day immediately preceding the acquisition, plus a maximum of 15% or minus a maximum of 15%.
Fortis Bank has issued a financial instrument called CASHES in 2007. One of the features of this instrument is that it can only be redeemed through conversion of the instrument into 125,313,283 Ageas shares. Fortis Bank has acquired all necessary Ageas shares to redeem the CASHES (consequently they are included in the number of shares outstanding of Ageas). However, Fortis Bank and Ageas have agreed that these shares will not receive dividend nor will they have voting rights as long as these shares are pledged for the CASHES (see Earnings per share and note 28 Contingent liabilities).
The number of shares issued includes also shares that were issued related to the convertible instrument FRESH (39,682,540). The FRESH is a financial instrument that was issued in 2002 by Ageasfinlux. One of the features of this instrument is that it can only be redeemed through conversion of the instrument into 39,682,540 Ageas shares. Ageasfinlux has acquired all necessary Ageas shares to redeem the FRESH (consequently they are included in the number of shares outstanding of Ageas). However, Ageasfinlux and Ageas have agreed that these shares will not receive dividend nor will they have voting rights as long as these shares are pledged for the FRESH. As Ageasfinlux is a subsidiary of Ageas, the shares related to the FRESH are treated as treasury shares and eliminated against shareholders' equity (see Earnings per share and note 16 Subordinated liabilities).
In the second quarter of 2011, Ageas created a restricted share program for its senior management. Dependent on the relative performance of the Ageas share in relation to a peer group over the next three years and some additional conditions, the senior managers will be awarded, in total, between zero and 1.6 million existing Ageas shares for free on April 1, 2014. Ageas has decided to hedge this commitment by purchasing the maximum number of shares to be awarded in the third quarter of 2011.
Earnings per share
The following table details the calculation of earnings per share.
| First half-year 2011 | First half-year 2010 | |
|---|---|---|
| Net profit attributable to shareholders | ( 58.8 ) | 455.0 |
| Elimination of finance costs on convertible debt (net of tax impact) | ||
| Net profit used to determine diluted earnings per share | ( 58.8 ) | 455.0 |
| Weighted average number of ordinary shares for basic earnings per share | 2,582,872,352 | 2,475,108,943 |
| Adjustments for: | ||
| - restricted shares | 107,475 | 457,401 |
| Weighted average number of ordinary shares for diluted earnings per share | 2,582,979,827 | 2,475,566,344 |
| Basic earnings per share (in euro per share) | ( 0.02 ) | 0.18 |
| Diluted earnings per share (in euro per share) | ( 0.02 ) | 0.18 |
In the first half-year of 2011 weighted average options on 24,547,266 shares (first half-year of 2010: 32,036,277) with a weighted average exercise prices of EUR 20.09 per share (first half-year of 2010: EUR 21.61) were excluded from the calculation of diluted EPS because the exercise price of the options was higher than the average market price of the shares. During 2011, 39,682,540 Ageas shares (first half-year of 2010: 39,682,540) arising from the FRESH, were excluded from the calculation of diluted earnings per share because the interest per share saved on these securities was higher than the basic earnings per share.
Ageas shares totalling 125,313,283 (first half-year of 2010: 125,313,283) issued in relation to CASHES are included in the ordinary shares although they do not bear dividend nor voting rights until the moment of conversion of the CASHES (see also note 28 Contingent liabilities).
4 Supervision and solvency
Ageas is designated as Insurance Group by its lead supervisor. As such, Ageas is subject to supervision at the consolidated level. The operating companies are subject to local supervision.
4.1 Ageas consolidated supervision
At the Ageas consolidated level, the National Bank of Belgium supervises Ageas. The regulators in the countries in which the subsidiaries are located supervise the subsidiaries of Ageas in those countries, using their own solvency measures and based on local accounting principles.
Based on the rules and regulations for Insurance Groups applicable in Belgium, Ageas reports on a quarterly basis to the National Bank of Belgium (NBB) its available regulatory capital and required solvency. This prudential supervision includes quarterly verification that Ageas, on a consolidated basis, meets the solvency requirements. In June 2011, the NBB requested to adjust the calculation and limit the amount of subordinated funding and Hybrid capital to 50% of the minimum solvency requirements. The comparative figures for the year 2010 have been restated accordingly.
The reconciliation of the Shareholders' capital to the available regulatory capital and resulting solvency ratio's is as follows:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Share capital and reserves | 7,672.8 | 7,802.8 |
| Net profit attributable to shareholders | ( 58.8 ) | 223.1 |
| Unrealised gains and losses | ( 136.8 ) | 221.2 |
| Shareholders' equity | 7,477.2 | 8,247.1 |
| Non-controlling interests | 1,427.2 | 1,622.1 |
| Total equity | 8,904.4 | 9,869.2 |
| Subordinated liabilities | 2,880.2 | 2,926.9 |
| Prudential filters | ||
| Local required equalisation reserves for catastrophes | ( 130.9 ) | ( 113.6 ) |
| Pension adjustment | ( 18.2 ) | ( 14.1 ) |
| Revaluation of investment property, net of tax (at 90%) | 698.2 | 562.0 |
| Adjustment valuation of available for sale investments | ( 15.5 ) | ( 26.1 ) |
| Cash flow hedge | 2.7 | 1.3 |
| Goodwill | ( 835.1 ) | ( 819.9 ) |
| Other intangible assets | ( 406.5 ) | ( 406.4 ) |
| Expected dividend | ( 197.0 ) | |
| Expected dividend, related to Call option BNP Paribas shares | ( 694.0 ) | ( 609.0 ) |
| Limitation subordinated debt to 50% of required solvency | ( 1,197.6 ) | ( 1,300.2 ) |
| Regulatory capital | 9,187.7 | 9,873.1 |
| Solvency ratio's | ||
| Solvency requirements | 3,365.0 | 3,253.3 |
| Solvency excess | 5,822.7 | 6,619.8 |
| Solvency ratio | 273.0% | 303.5% |
4.2 Ageas capital management
Ageas considers a strong capital base in the individual insurance operations a necessity, on the one hand as a competitive advantage and on the other hand as being necessary to fund the planned growth.
For its capital management, Ageas has therefore developed its own view on the available capital and related required solvency of its insurance entities. The main differences with the rules of the National Bank of Belgium for insurance holdings are:
- investments in regulated equity associates and RPI are deducted from Total capital in the Ageas approach as Ageas is of the opinion that the capitalisation levels must reflect appropriately the specific characteristics of the business including the commitments resulting from agreements with its partners.
- unrealised losses on debt instruments remain deducted from Total capital on a segment level in the Ageas approach (this is determined on a segment level), while for the reporting to the National Bank of Belgium this is determined on a consolidated approach. In both approaches unrealised gains on debt securities are deducted from Available capital.
The required solvency for the insurance operations is equal to the requirements as defined by the National Bank of Belgium except for the requirements for regulated equity associates. In the Ageas approach, the investment in regulated equity associates are deducted from the available capital, instead of a proportional inclusion of the solvency requirements. In the regulated approach the pro-rata part of the local solvency requirements of the regulated equity associates are included in the total solvency requirements.
Ageas targets a minimum aggregate solvency ratio of 200% of the minimum regulatory requirements at the Total Insurance level. Ageas will review the minimum targets at the latest at the time of the introduction of Solvency II.
The General Account comprises the group functions, financing transactions, the internal reinsurance vehicle (in run off) as well as the so-called legacy related issues. For the General Account, Ageas has introduced the concept Discretionary Capital to determine the free available capital in the General Account. The Discretionary Capital is the net of the available capital less the investments in non-current assets, less commitments and contingencies and the result must be available in Cash.
Capital position Insurance
At 30 June 2011, the total capital of the insurance operations stood at EUR 6.4 billion (31 December 2010: EUR 6.8 billion), 207.4% of the required minimum (31 December 2010: 227.3%). The solvency ratio of Belgium amounted to 187.1% (31 December 2010: 197.7%).
| Continental | Consolidation | Insurance | |||
|---|---|---|---|---|---|
| Belgium | UK | Europe | Asia | adjustments | total |
| 4,134.1 | 766.3 | 967.1 | 477.5 | 42.9 | 6,387.9 |
| 2,210.0 | 316.2 | 499.0 | 55.0 | 3,080.2 | |
| 1,924.1 | 450.1 | 468.1 | 422.5 | 3,307.7 | |
| 187.1% | 242.3% | 193.8% | 868.2% | 207.4% | |
| 4,276.0 | 684.1 | 1,188.9 | 498.3 | 109.0 | 6,756.3 |
| 2,162.7 | 191.7 | 562.4 | 55.9 | 2,972.7 | |
| 2,113.3 | 492.4 | 626.5 | 442.4 | 3,783.6 | |
| 227.3% | |||||
| 197.7% | 356.9% | 211.4% | 891.4% |
Capital position General Account
The capital position for the General Account based on discretionary capital is determined as follows:
| Assets | 30 June 2011 31 December 2010 | Liabilities | 30 June 2011 31 December 2010 | ||
|---|---|---|---|---|---|
| Cash & Deposits at banks | 2,376.4 | 2,759.4 | Short Term (EMTN & Bank) | 340.7 | 548.9 |
| Due from FBB/AG Insurance | 1,643.0 | 1,685.1 | NITSH I, II & Hybrone | 1,643.0 | 1,685.1 |
| Other | 8,753.2 | 691.0 | Other | 8,720.6 | 720.7 |
| Claims on ABN AMRO | 2,362.5 | 2,362.5 | Provision dispute Dutch State | 2,362.5 | 2,362.5 |
| Royal Park Investments | 899.0 | 933.2 | RPN(I) | 583.0 | 465.0 |
| Call Option BNP | 694.0 | 609.0 | FRESH | 1,250.0 | 1,250.0 |
| Loans to Opco's | 417.5 | 485.1 | Net equity | 2,245.8 | 2,493.0 |
| Total | 17,145.6 | 9,525.3 | Total | 17,145.6 | 9,525.3 |
| Net equity, FRESH & RPN(I) | 4,078.8 | 4,208.0 | |||
| Invested in non current assets on statement of financial position | ( 2,010.5 ) | ( 2,027.3 ) | |||
| Total Capital | 2,068.3 | 2,180.7 | |||
| Contingent assets off balance (Fortis Bank Tier 1 loan, due Sep 11) | ( 960.0 ) | ( 1,000.0 ) | |||
| Delta dividend upstream versus outflow | ( 65.4 ) | ||||
| Commitments with regard to M&A | ( 153.0 ) | ( 172.0 ) | |||
| Discretionary Capital (available in cash) | 955.3 | 943.3 |
Explanatory notes to the Consolidated statement of financial position
5 Cash and cash equivalents
Cash includes cash on hand, current accounts and other financial instruments at central banks with a term of less than three months from the date on which they were acquired. The composition of cash and cash equivalents is as follows:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Cash on hand | 1.9 | 1.7 |
| Due from banks | 1,708.8 | 3,213.1 |
| Other | 94.3 | 43.5 |
| Total cash and cash equivalents | 1,805.0 | 3,258.3 |
The decrease in Due from banks is mainly explained by the fact that an amount of around EUR 1.1 billion has been placed on an interest bearing deposit with a term longer than three months (see also 7.1 Loans to banks). The line Other includes EUR 57.7 million (31 December 2010: EUR 11.1 million) relating to money market paper.
6 Investments
The composition of financial investments is as follows:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Financial investments | ||
| - Held to maturity | 501.0 | |
| - Available for sale | 54,593.6 | 56,133.7 |
| - Held at fair value through profit or loss | 207.6 | 210.3 |
| - Derivatives held for trading | 78.8 | 56.1 |
| Total, gross | 55,381.0 | 56,400.1 |
| Impairments: | ||
| - of investments available for sale | ( 499.5 ) | ( 167.6 ) |
| Total impairments | ( 499.5 ) | ( 167.6 ) |
| Total | 54,881.5 | 56,232.5 |
In 2011 there were no material changes in the valuation methods (the 'level classification') of the investments.
6.1 Investments held to maturity
| 30 June 2011 | 31 December 2010 | |||||
|---|---|---|---|---|---|---|
| Government | Corporate debt | Government | Corporate debt | |||
| bonds | securities | Total | bonds | securities | Total | |
| Historical/amortised cost at recognition | 481.3 | 18.0 | 499.3 | |||
| Amortisation | 1.6 | 0.1 | 1.7 | |||
| Total investments held to maturity | 482.9 | 18.1 | 501.0 | |||
| Fair value | 442.1 | 17.2 | 459.3 |
On 1 June 2011, Ageas reclassified in accordance with IFRS some investments from Available for sale to Held to maturity. The reclassification took place against the fair value of the investments as at 1 June. The difference between the fair value and the amortised cost, which amounts to EUR 179 million, remains included in Unrealised gains and losses in Shareholders' equity and will be amortised over the remaining maturity of the investments. The amortisation is offset in the income statement against the amortization of the difference between the book value and the nominal value of the bonds leading to a very limited impact in the income statement.
The Government bonds that are classified as held to maturity are Portuguese Government bonds.
6.2 Investments available for sale
The fair value and amortised cost of available-for-sale investments including gross unrealised gains and gross unrealised losses, and impairments are as follows:
| Historical/ | Gross | Gross | ||||
|---|---|---|---|---|---|---|
| amortised | unrealised | unrealised | Total | Fair | ||
| cost | gains | losses | gross Impairments | value | ||
| 30 June 2011 | ||||||
| Government bonds | 32,499.9 | 750.7 | ( 1,642.0 ) | 31,608.6 | ( 322.2 ) | 31,286.4 |
| Corporate debt securities | 19,549.6 | 631.8 | ( 361.7 ) | 19,819.7 | 19,819.7 | |
| Structured credit instruments | 415.6 | 14.8 | ( 10.2 ) | 420.2 | 420.2 | |
| Available for sale investments in debt securities | 52,465.1 | 1,397.3 | ( 2,013.9 ) | 51,848.5 | ( 322.2 ) | 51,526.3 |
| Private equities and venture capital | 9.7 | 0.8 | ( 0.2 ) | 10.3 | ( 1.3 ) | 9.0 |
| Equity securities | 2,621.1 | 175.0 | ( 67.1 ) | 2,729.0 | ( 176.0 ) | 2,553.0 |
| Other investments | 5.8 | 5.8 | 5.8 | |||
| Available for sale investments in equity securities and other investments | 2,636.6 | 175.8 | ( 67.3 ) | 2,745.1 | ( 177.3 ) | 2,567.8 |
| Total investments available for sale | 55,101.7 | 1,573.1 | ( 2,081.2 ) | 54,593.6 | ( 499.5 ) | 54,094.1 |
| 31 December 2010 | ||||||
| Government bonds | 32,841.9 | 824.1 | ( 1,363.9 ) | 32,302.1 | 32,302.1 | |
| Corporate debt securities | 20,415.2 | 821.9 | ( 334.8 ) | 20,902.3 | ( 2.5 ) | 20,899.8 |
| Structured credit instruments | 426.3 | 16.8 | ( 12.6 ) | 430.5 | ( 6.3 ) | 424.2 |
| Available for sale investments in debt securities | 53,683.4 | 1,662.8 | ( 1,711.3 ) | 53,634.9 | ( 8.8 ) | 53,626.1 |
| Private equities and venture capital | 7.6 | 0.7 | 8.3 | ( 1.3 ) | 7.0 | |
| Equity securities | 2,344.9 | 184.9 | ( 45.8 ) | 2,484.0 | ( 157.5 ) | 2,326.5 |
| Other investments | 6.5 | 6.5 | 6.5 | |||
| Available for sale investments in equity securities and other investments | 2,359.0 | 185.6 | ( 45.8 ) | 2,498.8 | ( 158.8 ) | 2,340.0 |
| Total investments available for sale | 56,042.4 | 1,848.4 | ( 1,757.1 ) | 56,133.7 | ( 167.6 ) | 55,966.1 |
Government bonds detailed by country of origin
Government bonds detailed by country of origin are as follows:
| Historical/ | Gross | |||
|---|---|---|---|---|
| amortised | unrealised | Fair | ||
| cost | gains (losses) | Impairments | value | |
| 30 June 2011 | ||||
| Belgian national government | 11,134.4 | 3.6 | 11,138.0 | |
| Dutch national government | 1,182.5 | 24.7 | 1,207.2 | |
| German national government | 2,565.0 | 97.7 | 2,662.7 | |
| Italian national government | 3,571.6 | ( 149.6 ) | 3,422.0 | |
| French national government | 4,296.4 | 18.5 | 4,314.9 | |
| Great Britain national government | 615.3 | 14.1 | 629.4 | |
| Greek national government | 1,741.8 | ( 491.6 ) | ( 322.2 ) | 928.0 |
| Spanish national government | 1,721.7 | ( 126.4 ) | 1,595.3 | |
| Portuguese national government | 758.3 | ( 175.4 ) | 582.9 | |
| Austrian national government | 2,232.5 | 42.4 | 2,274.9 | |
| Finnish national government | 614.8 | 2.0 | 616.8 | |
| Irish national government | 570.2 | ( 178.6 ) | 391.6 | |
| Slovenian national government | 227.8 | 4.1 | 231.9 | |
| Czech republic national government | 346.2 | 11.2 | 357.4 | |
| Slovakian national government | 212.4 | 7.1 | 219.5 | |
| United States of America national government | 271.4 | 10.3 | 281.7 | |
| Other national governments | 437.6 | ( 5.4 ) | 432.2 | |
| Total | 32,499.9 | ( 891.3 ) | ( 322.2 ) | 31,286.4 |
| 31 December 2010 | |
|---|---|
| Belgian national government | 9,948.1 | 128.0 | 10,076.1 |
|---|---|---|---|
| Dutch national government | 1,288.2 | 48.0 | 1,336.2 |
| German national government | 2,628.8 | 149.9 | 2,778.7 |
| Italian national government | 3,683.4 | ( 110.3 ) | 3,573.1 |
| French national government | 4,069.6 | 92.4 | 4,162.0 |
| Great Britain national government | 600.4 | 12.8 | 613.2 |
| Greek national government | 1,832.0 | ( 624.1 ) | 1,207.9 |
| Spanish national government | 1,730.0 | ( 129.0 ) | 1,601.0 |
| Portuguese national government | 1,654.2 | ( 142.4 ) | 1,511.8 |
| Austrian national government | 2,543.2 | 81.4 | 2,624.6 |
| Finnish national government | 740.5 | 14.8 | 755.3 |
| Irish national government | 599.1 | ( 109.7 ) | 489.4 |
| Slovenian national government | 227.4 | 7.5 | 234.9 |
| Czech republic national government | 346.3 | 12.5 | 358.8 |
| Slovakian national government | 211.6 | 9.5 | 221.1 |
| United States of America national government | 308.8 | 12.7 | 321.5 |
| Other national governments | 430.3 | 6.2 | 436.5 |
| Total | 32,841.9 | ( 539.8 ) | 32,302.1 |
Net unrealised gains and losses on Available for sale investments included in equity
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Available for sale investments in debt securities: | ||
| Carrying amount | 51,526.3 | 53,626.1 |
| Gross unrealised gains and losses | ( 616.6 ) | ( 48.5 ) |
| - Related tax | 163.3 | 4.5 |
| Shadow accounting | ( 6.3 ) | ( 76.1 ) |
| - Related tax | 5.1 | 22.0 |
| Net unrealised gains and losses | ( 454.5 ) | ( 98.1 ) |
| Available for sale investments in equity securities and other investments: | ||
| Carrying amount | 2,567.8 | 2,340.0 |
| Gross unrealised gains and losses | 108.5 | 139.8 |
| - Related tax | ( 18.7 ) | ( 18.9 ) |
| Shadow accounting | ( 21.4 ) | ( 19.1 ) |
| - Related tax | 7.6 | 6.8 |
| Net unrealised gains and losses | 76.0 | 108.6 |
Available for sale investments in equity securities and other investments also include private equities and venture capital and all other investments, excluding debt securities.
6.3 Investments held at fair value through profit or loss
The following table provides information about the Investments that are held at fair value, for which unrealised gains or losses are recorded through profit or loss.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Corporate debt securities | 102.4 | 103.7 |
| Structured credit instruments | 94.5 | 96.3 |
| Debt securities | 196.9 | 200.0 |
| Equity securities | 10.7 | 10.3 |
| Equity securities and other investments | 10.7 | 10.3 |
| Total investments held at fair value through profit or loss | 207.6 | 210.3 |
6.4 Real estate
The fair value of Real estate, held as investment as well as for own use, is set out below.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Fair value: | ||
| Investment property | 2,725.7 | 2,455.4 |
| Land and buildings held for own use | 1,448.7 | 1,385.2 |
| Total fair value | 4,174.4 | 3,840.6 |
| Carrying amount: | ||
| Investment property | 1,972.2 | 1,900.3 |
| Land and buildings held for own use | 1,006.9 | 974.4 |
| Total carrying amount | 2,979.1 | 2,874.7 |
| Gross unrealised gain / loss | 1,195.3 | 965.9 |
| Taxation | ( 391.7 ) | ( 314.0 ) |
| Net unrealised gain / loss (not recognised in equity) | 803.6 | 651.9 |
7 Loans
The composition of loans is as follows:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Loans to banks | 3,336.0 | 2,068.8 |
| Loans to customers | 2,643.8 | 2,469.3 |
| Total | 5,979.8 | 4,538.1 |
| Less impairments: | ||
| - specific credit risk | ( 9.3 ) | ( 9.0 ) |
| - incurred but not reported (IBNR) | ( 0.9 ) | ( 0.9 ) |
| Total loans | 5,969.6 | 4,528.2 |
7.1 Loans to banks
Loans to banks consist of the following:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Interest-bearing deposits | 2,255.6 | 946.4 |
| Subordinated loans | 899.4 | 942.3 |
| Reverse repurchase agreements | 66.6 | |
| Other | 114.4 | 180.1 |
| Total | 3,336.0 | 2,068.8 |
| Less impairments: | ||
| - specific credit risk | ( 1.1 ) | ( 1.2 ) |
| Loans to banks | 3,334.9 | 2,067.6 |
7.2 Loans to customers
The composition of loans to customers is as follows:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Government and official institutions | 0.2 | 0.2 |
| Residential mortgage | 1,601.8 | 1,625.7 |
| Consumer loans | 4.4 | 5.4 |
| Commercial loans | 82.9 | 116.9 |
| Policyholder loans | 162.3 | 158.5 |
| Other loans | 792.2 | 562.6 |
| Total | 2,643.8 | 2,469.3 |
| Less impairments: | ||
| - specific credit risk | ( 8.2 ) | ( 7.8 ) |
| - incurred but not reported (IBNR) | ( 0.9 ) | ( 0.9 ) |
| Loans to customers | 2,634.7 | 2,460.6 |
Other loans mainly relates to loans to regional authorities and Governmental organisations.
8 Investments in associates
As a result of the transactions closed on 12 May 2009, Ageas acquired, for the total sum of EUR 760.0 million, a 44.7% stake in Royal Park Investments (RPI), a special purpose vehicle that acquired part of the structured credit portfolio of Fortis Bank. This stake has been accounted for using the equity method.
RPI acquired from Fortis Bank on the closing date a portfolio of structured credits for an agreed purchase price of EUR 11.7 billion. The corresponding face value of the portfolio amounted to EUR 20.5 billion at 12 May 2009. This purchase was funded by EUR 1.7 billion equity, EUR 5 billion super senior debt and EUR 5 billion senior debt; the senior debt includes a loss absorption mechanism. The senior debt was provided by BNP Paribas and by Fortis Bank. The funding provided by Fortis Bank is guaranteed by the Belgian government. Any cash generated by RPI will first be used to repay the super senior debt.
The initial recognition of the investment under the equity accounting method is at cost, followed by an impairment test of the carrying amount. Ageas has requested RPI to draw up financial information based on Ageas IFRS accounting policies. RPI has recorded the acquisition of the portfolio, related funding and people and processes as a business combination under IFRS. At acquisition the asset portfolio is recorded at market value (EUR 8.2 billion) and the difference between the purchase price (EUR 11.7 billion) and the market value amounting to EUR 3.5 billion was recorded in the IFRS statement of financial position of RPI as a deferred tax asset (EUR 1.2 billion: 33.9% of 3.5 billion) and goodwill of EUR 2.3 billion.
RPI manages the portfolio to maximise the value for its shareholders as defined in the management guidelines drawn up by the RPI Board. In the current circumstances, this implies a run off scenario. In such case IFRS requires amortised cost as subsequent measurement of the asset portfolio. IFRS requires for variable rate instruments, an instrument by instrument re-computation of the amortised cost based on actualised cash flow information per asset. However, RPI does not have such information available and to produce this information would require undue cost and efforts. In the absence of such information and taking into consideration that management is also using fair value information in the context of periodically monitoring the asset portfolio, Ageas decided to use for subsequent measurement of the asset portfolio the fair value through profit or loss.
To determine the cash flows of the portfolio and related funding several assumptions were made such as loss given default, probability of default, pre-payment speed, housing price evolutions, additional sector and geographical data when needed. Given the fact that the uncertainties were taken into consideration when determining the cash flows, and the fact that the funding of RPI is guaranteed, the expected cash flows have been discounted at 7.8% (31 December 2010: 7.8%) being the risk free interest rate for Belgium plus the normal equity premium.
Since RPI is in fact a portfolio in run-off, the profits included in the portfolio and related funding will be realised over time and will not be replaced by profits from new transactions, the goodwill will need to be impaired in the period the portfolio runs off. The goodwill recognised by RPI represents for a significant part the future profits of this business.
Using the above mentioned Ageas accounting principles per the end of each quarter, RPI performed an impairment test on the goodwill recognised by RPI on the acquisition of the loan portfolio and related funding. The outcome was that an impairment of EUR 585.8 million on goodwill was necessary in 2011. RPI reported an IFRS profit before goodwill impairment of EUR 458.2 million. As a consequence, Ageas accounted for a negative contribution of EUR 57.0 million (31 December 2010: EUR 131 million profit) to the net result, in line with our stake in RPI, and reported under 'share in result of associates'. In addition, RPI concluded a number of interest rate swaps early 2010, exchanging variable interest streams into fixed interest streams. Ageas decided to apply cash flow hedge accounting on these swaps. All fair value movements flow through equity (first half-year 2011: EUR 51.6 million of which EUR 23.1 million for Ageas). As a result of both events, Ageas's equity investment in RPI decreased from EUR 933 million end of 2010 to EUR 898.9 million.
At the end of the first half-year of 2011, the fair value of the investment portfolio under IFRS amounts to EUR 6.6 billion (31 December 2010: EUR 7.0 billion), the goodwill EUR 0.8 billion (31 December 2010: EUR 1.4 billion) and the deferred tax asset EUR 0.4 billion (31 December 2010: EUR 0.7 billion). The funding measured at amortised cost, amounts to EUR 6.1 billon (31 December 2010: EUR 7.1 billion) and the equity amounts to EUR 2.0 billion (31 December 2010: EUR 2.1 billion).
9 Reinsurance and other receivables
Included under Reinsurance and other receivables are the claims on Fortis Capital Company Limited, ABN AMRO and the Dutch State related to the FCC transaction and the MCS conversion. The first claim is for full compensation for the payment (EUR 362.5 million) made by Ageas to Fortis Capital Company Limited (a subsidiary of ABN AMRO N.V.) to allow it to pay the above amount to the holders of preference shares. Ageas decided to include this claim in the assessment of the provision for disputes with the Dutch State (see also note 20 Provisions).
The second claim relates to the MCS conversion. On 7 December 2010, Ageas issued 106.7 million shares in relation to the conversion of the MCS. Since ABN AMRO was the beneficiary of the proceeds of the MCS issue and the existence of the 4 party agreement granted Ageas a claim on ABN AMRO at the moment of conversion, Ageas recorded a receivable for an amount of EUR 2 billion with ABN AMRO as debtor at the moment of conversion. The Dutch State has made a statement that based on the terms and conditions on the sale of Fortis Bank Nederland, Fortis Verzekeringen Nederland and Fortis Corporate Insurance, they are entitled to this claim. Ageas has taken this into account for the set up of a provision for disputes with the Dutch State (see also note 20 Provisions).
10 Call option BNP Paribas shares
Description of the options
Under the agreement signed on 12 May 2009, Ageas was granted a cash-settled call option by the Federal Holding and Investment Corporation (Société Fédérale de Participations et d'Investissement/Federale Participatie- en Investeringsmaatschappij – SFPI/FPIM) that allows Ageas to benefit from any appreciation in the value of 121,218,054 BNP Paribas shares held by the SFPI/FPIM. These shares were acquired by the SFPI/FPIM in return for selling 75% + 1 share of Fortis Bank. This option entitles Ageas to the difference between the strike price of EUR 68 and the market price of the BNP Paribas shares at the time of exercise, or the selling price of the underlying BNP Paribas shares, at the discretion of SFPI/FPIM. These rights have replaced the 'coupon 42'. After the Rights Issue of BNP Paribas on 29 September 2009, the exercise price was reduced to EUR 66.672.
The granted rights include some non-standard features that differ from standard ISDA based option protocols, such as restrictions on transferability, limitations on freedom of exercise, forced exercise under specific circumstances and specific adjustment mechanics such as dilution and claim issues.
Ageas can exercise the options up to 10 October 2016, after a lock-up period expired on 10 October 2010. Ageas also investigated various alternatives to monetise the options, but decided to move to a gradual exercise strategy in accordance with a disciplined methodology, once the options are in the money.
The options are recorded at fair value, with subsequent revaluations recorded in the income statement under unrealised gain (loss) on Call option BNP Paribas shares.
Value calculation
The theoretical value of an individual option can be calculated based on Black-Scholes option valuation techniques. Besides market observable data on the reporting date, such as interest yield, actual and strike price of the share and the remaining duration of the option, the calculation needs to include assumptions regarding future dividend and volatility. Non-standard features should also be taken into account.
The following data were used for the valuation:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| BNP Paribas shareprice | EUR 53.23 | EUR 47.685 |
| Strike price | EUR 66.672 | EUR 66.672 |
| Volatility | 30% | 33% |
| Dividend yield | 4.95% | 5.29% |
| Price per option up to 10 October 2016 | EUR 8.177 | EUR 7.180 |
| Theoretical value of 121.2 million options | EUR 991 million | EUR 870 million |
| Estimated value, after adjustment for non standard features (30%) | EUR 694 million | EUR 609 million |
Volatility
Given the very large number of options on BNP Paribas shares carried by Ageas, representing 10.12% of the BNP Paribas outstanding shares, the monetisation of the options is expected to have an effect on the value of traded options and hence the implied volatility. Ageas therefore decided to move to a gradual exercise strategy in accordance with a disciplined methodology to minimise the impact of the implied volatility of the shares on the value of the call option. Following the move towards a gradual exercise strategy, Ageas decided to base the used volatility on extrapolated implied volatility observed in the market. The value of the call option at the end of the first half-year of 2011 amounted to EUR 694 million, after adjustment for non-standard features.
Sensitivity valuation for assumption changes
Both the applied volatility and the dividend yield assumption have a significant influence on the value of the options: a decrease of the volatility by 5% on 30 June 2011 results in a 26.3% decrease in the theoretical value of the option; an increase of the volatility by 5%, all other input variables equal, results in a 26.7% increase of the theoretical value. A 1% decrease of the dividend yield, keeping other input variables equal, results in an 11.9% increase of the theoretical value, while a 1% increase of the dividend yield, all other input variables kept equal, results in a 10.4% decrease of the theoretical value of the options.
Adjustment for non standard features
Given the unusual features of the option, professional market parties will apply a significant discount to the theoretical valuation. Ageas has decided to lower the theoretical value by 30% for these non-standard features, based on indications from professional market parties ranging from 10% to 50%.
Pay out of proceeds
Ageas has undertaken to propose to pay out as dividend the benefits of exercises, monetisation or any other contemplated structure, to the extent permitted by law and taking into account practical constraints.
The Belgian Ruling Commission has confirmed that the grant of the BNP Paribas option is not itself a taxable event for ageas SA/NV. Ageas tax carry forward losses will avoid payment of corporate income tax when the gains on the option are realised. Ageas is thus be able, to the extent permitted by law, to propose to dividend out the gross proceeds.
11 Liabilities arising from Life insurance contracts
The following table provides an overview of the liabilities arising from Life insurance contracts.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Liability for future policyholder benefits | 23,624.9 | 23,556.9 |
| Reserve for policyholder profit sharing | 338.0 | 323.0 |
| Shadow accounting adjustment | ( 2.5 ) | 61.1 |
| Before eliminations | 23,960.4 | 23,941.0 |
| Eliminations | ( 2.7 ) | ( 2.6 ) |
| Gross | 23,957.7 | 23,938.4 |
| Reinsurance | ( 30.9 ) | ( 25.2 ) |
| Net | 23,926.8 | 23,913.2 |
12 Liabilities arising from Life investment contracts
The following table provides an overview of the liabilities arising from Life investment contracts.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Liability for future policyholder benefits | 26,809.2 | 26,667.6 |
| Reserve for policyholder profit sharing | 85.8 | 212.0 |
| Shadow accounting adjustment | 30.3 | 34.2 |
| Gross | 26,925.3 | 26,913.8 |
| Reinsurance | ||
| Net | 26,925.3 | 26,913.8 |
13 Liabilities related to Unit-linked contracts
The liabilities related to Unit-linked contracts are broken down into insurance and investment contracts as follows:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Insurance contracts | 1,675.6 | 1,711.6 |
| Investment contracts | 12,494.7 | 20,119.3 |
| Total | 14,170.3 | 21,830.9 |
The decrease in the total Liabilities related to Unit-linked contracts is due to the decision to put Fortis Lux Vie as Held for sale (EUR 7.5 billion).
14 Liabilities arising from Non-life insurance contracts
The following table provides an overview of the liabilities arising from Non-life insurance contracts.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Claims reserves | 4,246.7 | 4,377.4 |
| Unearned premiums | 1,510.4 | 1,155.4 |
| Reserve for policyholder profit sharing | 4.1 | 6.2 |
| Before eliminations | 5,761.2 | 5,539.0 |
| Eliminations | ( 90.4 ) | |
| Gross | 5,761.2 | 5,448.6 |
| Reinsurance | ( 392.3 ) | ( 334.7 ) |
| Net | 5,368.9 | 5,113.9 |
15 Debt certificates
The following table shows the types of Debt certificates (EMTN) issued by Ageas and the amounts outstanding.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Held at amortised cost | 233.1 | 365.7 |
| Held at fair value through profit or loss | 107.6 | 183.2 |
| Total debt certificates | 340.7 | 548.9 |
16 Subordinated liabilities
The following table provides a specification of the Subordinated liabilities.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| FRESH | 1,250.0 | 1,250.0 |
| - Hybrone | 495.8 | 495.4 |
| - Nitsh I | 527.7 | 571.3 |
| - Nitsh II | 538.7 | 540.3 |
| Ageas Hybrid Financing | 1,562.2 | 1,607.0 |
| Other subordinated liabilities | 68.0 | 69.9 |
| Total subordinated liabilities | 2,880.2 | 2,926.9 |
FRESH
On 7 May 2002, Ageasfinlux S.A. issued undated Floating Rate Equity-linked Subordinated Hybrid capital securities (FRESH) for a total principal amount of EUR 1,250 million and with a denomination of EUR 250,000 each. Coupons on the securities are payable quarterly in arrears, at a variable rate of 3 month Euribor + 135 basis points.
The FRESH was issued by Ageasfinlux S.A., with ageas SA/NV and ageas N.V. acting as co-obligors. The principal amount of the securities will not be repaid in cash. The sole recourse of the holders of the FRESH against any of the coobligors with respect to the principal amount are the 39,682,540 Ageas shares that Ageasfinlux S.A. pledged in favour of such holders. Pending the exchange of the FRESH against Ageas shares, these Ageas shares do not have any dividend rights or voting rights (the reported number of outstanding Ageas shares as at 30 June 2011 already includes the 39,682,540 Ageas shares issued for the purpose of such exchange).
In the event that dividends are not paid on the Ageas shares, or that the dividends to be declared are below a threshold with respect to any financial year (dividend yield less than 0.5%) and in certain other exceptional circumstances, payment of coupons will be made in accordance with the so-called Alternative Coupon Settlement Method (ACSM). The ACSM implies that new Ageas shares will be issued and delivered to the holders of the FRESH. To date all coupons have been paid in cash. If the ACSM is triggered and there is insufficient available authorised capital to enable ageas N.V. and ageas SA/NV to meet the ACSM obligation, the coupon settlement will be postponed until such time as the ability to issue shares is restored. Because of these characteristics the FRESH is treated as part of Ageas's regulatory qualifying capital.
The FRESH has no maturity date, but may be exchanged for Ageas shares at a price of EUR 31.50 per share at the discretion of the holder. The FRESH will automatically be converted into Ageas shares if the price of the Ageas share is equal to or higher than EUR 47.25 on twenty consecutive stock exchange business days.
Ageas Hybrid Financing
In 2006, Ageas incorporated a special purpose company named Ageas Hybrid Financing S.A., which issued perpetual deeply subordinated and pari passu ranking securities, and invested the proceeds thereof in instruments issued by (former) Ageas operating companies which qualified as solvency for those entities. The securities issued by Ageas Hybrid Financing have the benefit of a support agreement and a subordinated guarantee entered into by ageas SA/NV and ageas N.V.
Ageas Hybrid Financing issued EUR 500 million of securities called 'Hybrone' in 2006, at an interest rate of 5.125% until 20 June 2016 and 3 month Euribor + 200 basis points thereafter. In 2008 it issued USD 750 million of securities called 'Nitsh I' at an interest rate of 8.25% and EUR 625 million of securities called 'Nitsh II' at an interest rate of 8.0%. The first call date of these two instruments is in 2013.
The proceeds of these securities were on-lent to AG Insurance for EUR 750 million and to Fortis Bank SA/NV for EUR 375 million and USD 750 million. Under the support agreement ageas SA/NV and ageas N.V. are obliged to contribute to Ageas Hybrid Financing such funds as are necessary to allow it to pay the coupon in any year that Ageas declares a dividend or, alternatively, to pay the coupon through the ACSM if the entities which received the proceeds fail to pay the coupons on their on-loans in cash due to a breach of the applicable regulatory minimum solvency levels.
In the event that Ageas fails to achieve the regulatory minimum solvency level or if consolidated assets are less than the sum of liabilities, excluding liabilities not considered senior debt, or if Ageas Hybrid Financing so elects, the cash coupon will be replaced by settlement through the ACSM.
Other subordinated liabilities
The EUR 68.0 million reported under other subordinated liabilities (31 December 2010: EUR 69.9 million) includes an amount of EUR 26.1 million related to subordinated private loans, maturing in 2012 and a perpetual subordinated loan in the amount of EUR 38.9 million to Tesco Bank.
17 Borrowings
The table below shows the components of borrowings.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Due to banks | 2,063.3 | 1,898.5 |
| Due to customers | 114.2 | 91.5 |
| Other borrowings | 130.4 | 151.7 |
| Total borrowings | 2,307.9 | 2,141.7 |
17.1 Due to banks
The table below shows the components of Due to banks.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Deposits from banks: | ||
| - Demand deposits | 15.4 | 54.2 |
| - Other deposits | 62.4 | 37.1 |
| Total deposits | 77.8 | 91.3 |
| Repurchase agreements | 1,438.7 | 1,262.8 |
| Other | 546.8 | 544.4 |
| Total due to banks | 2,063.3 | 1,898.5 |
17.2 Due to customers
The table below shows the components of Due to customers.
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Deposits | 0.6 | 0.6 |
| Other borrowings | 5.9 | 5.1 |
| Funds held under reinsurance agreements | 107.7 | 85.8 |
| Total due to customers | 114.2 | 91.5 |
18 Deferred tax assets and liabilities
The components of deferred tax assets and liabilities are shown below.
| Statement of financial position | Income statement | |||
|---|---|---|---|---|
| 30 June 2011 | 31 December 2010 | First half-year 2011 | First half-year 2010 | |
| Deferred tax assets related to: | ||||
| Financial investments (available for sale) | 95.5 | 131.1 | 31.9 | 13.5 |
| Investment property | 6.4 | 7.4 | ( 1.0 ) | 1.4 |
| Property, plant and equipment | 43.5 | 41.7 | ( 0.6 ) | 7.8 |
| Intangible assets (excluding goodwill) | 30.1 | 29.8 | 0.2 | |
| Insurance policy and claim reserves | 266.0 | 288.1 | ( 2.6 ) | ( 5.8 ) |
| Provisions for pensions and post-retirement benefits | 44.1 | 44.0 | 0.1 | ( 0.3 ) |
| Other provisions | 7.9 | 6.7 | 1.1 | 0.5 |
| Accrued expenses and deferred income | 4.6 | 4.3 | 0.3 | 2.9 |
| Unused tax losses | 166.8 | 174.6 | ( 7.9 ) | ( 9.7 ) |
| RPN(I) | 198.0 | 158.1 | ||
| Other | 89.6 | 85.1 | 2.3 | 396.0 |
| Gross deferred tax assets | 952.5 | 970.9 | 23.8 | 406.3 |
| Unrecognised deferred tax assets | ( 117.2 ) | ( 114.1 ) | ( 2.2 ) | 10.9 |
| Net deferred tax assets | 835.3 | 856.8 | 21.6 | 417.2 |
| Deferred tax liabilities related to: | ||||
| Derivatives held for trading (assets) | 2.0 | 1.2 | ( 0.7 ) | 8.6 |
| Financial investments (available for sale) | 13.5 | 130.4 | ( 22.7 ) | ( 23.3 ) |
| Investment property | 118.9 | 113.6 | ( 5.3 ) | ( 4.3 ) |
| Loans to customers | 3.0 | 3.0 | ||
| Property, plant and equipment | 211.7 | 208.7 | 1.0 | ( 7.6 ) |
| Intangible assets (excluding goodwill) | 141.6 | 145.7 | 4.1 | ( 2.4 ) |
| Other provisions | ( 0.8 ) | ( 0.8 ) | ||
| Deferred policy acquisition costs | 48.6 | 46.3 | ( 3.2 ) | ( 4.3 ) |
| Deferred expense and accrued income | 1.6 | 1.6 | ||
| Tax exempt realised reserves | 44.3 | 45.4 | 1.1 | 0.9 |
| BNP Paribas call option | 236.0 | 207.0 | ||
| Other | 64.8 | 171.8 | ( 11.7 ) | ( 2.1 ) |
| Total deferred tax liabilities | 886.0 | 1,073.9 | ( 38.2 ) | ( 34.5 ) |
| Deferred tax income (expense) | ( 16.6 ) | 382.7 | ||
| Net deferred tax | ( 50.7 ) | ( 217.1 ) |
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same taxation authority. The amounts offset in the statement of financial position are:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Deferred tax asset | 631.2 | 465.2 |
| Deferred tax liability | 681.9 | 682.3 |
| Net deferred tax | ( 50.7 ) | ( 217.1 ) |
19 RPN(I)
The RPN(I) is a financial instrument that results in quarterly payments being made to, or received from, Fortis Bank SA/NV.
Mechanism
Each quarterly payment is determined as the average over the quarter of the interest payments at an annual rate of 3-month EURIBOR plus 20 basis points to be made on a reference amount as calculated on each trading day.
The reference amount is defined as:
- the difference between EUR 3,000 million and the market value of the CASHES as quoted by the Luxembourg stock exchange, less
- the difference between EUR 2,350 million and the market value of 125,313,283 Ageas shares.
If the reference amount is positive, Fortis Bank SA/NV pays interest on the reference amount to Ageas. If it is negative, Ageas pays interest on the reference amount to Fortis Bank SA/NV.
State guarantee
The Belgian state has issued a state guarantee on the RPN(I) interest paid by Ageas, to the benefit of Fortis Bank SA/NV. The annual guarantee fee amounts to 70 basis points to be paid on the reference amount. To secure the payment of the fee and recourse of the Belgian State in case of default Ageas, granted the Belgium State a pledge on a maximum of 20% of the shares of AG Insurance.
Fair value of RPN(I)
For the calculation of the fair value of the RPN(I), Ageas adopted a level 3 valuation model based on valuation techniques for financial derivative instruments, introduced at the end of 2009. At 30 June 2011 the total liability for RPN(I) amounted to EUR 583 million (out of which EUR 501 million related to the RPN(I) liability itself and EUR 82 million related to the guarantee arrangements between Ageas, the Belgium State and Fortis Bank) compared to EUR 465 million at the end of December 2010, or a negative impact on results of EUR 118 million. This amount can be broken down as (i) EUR 102 million reflecting the increase in the net discounted value of the estimated quarterly interest payments under the RPN(I) mechanism and (ii) an additional liability increase of EUR 16 million related to the guarantee agreement between the Belgian State and Ageas. Ageas pays 70bps (annual rate) guarantee fee on the average reference amount of the RPN(I). Ageas decided to include the value of the future guarantee payments in the fair value of the RPN(I).
The increase in fair value since the beginning of the year resulted from (i) an increase of the reference amount between end 2010 and 30 June 2011 (increase of 91 EUR million), (ii) higher spreads (+15bps and including a change in the discounting methodology by using a constant spread instead of forward spreads above BBB ) on perpetual debt instruments (increase of EUR 34 million) (iii) different market conditions, including higher interest rates (decrease of EUR 7 million).
Reference values
On 30 June 2011, the CASHES closed at 57.8% and the Ageas's share price at EUR 1.87. This resulted in a decrease of the reference amount's (the so called Relative Performance Note or RPN accounted at Fortis Bank) absolute value to (negative) EUR 849 million, from (negative) EUR 642 million on 31December 2010 (+32.24%).
On 30 June 2011, 3-month EURIBOR stood at 1.55%. The total interest payment to Fortis Bank over the first half-year amounted to EUR 6.5 million. The total amount paid to the Belgian State in accordance with the guarantee agreement between the two parties amounted to EUR 3.1 million.
Assumptions
Ageas made the following key assumptions to determine the fair market value of the RPN(I) and of guarantee payments as per 30 June 2011:
- Ageas's share prices have been projected using the standard geometric Brownian motion model, assuming an initial share price of EUR 1.87, the closing price of 30 June 2011, an average dividend yield of 4.3% over the expected term of the instrument and consistent with a dividend yield derived from the dividend paid in 2010 based on the closing share price of 30 June 2011. The share price volatility used amounted to 41% and is based on the implied volatility of 3-months options observed at the end of June 2011;
- The price of CASHES has been projected based on forward spread curves applicable to CASHES with an additional stochastic perturbation, with a risk free interest rate model calibrated on the market, and with initial spread curves calibrated on the value of the CASHES of 57.8% at the end of June 2011. For modelling purposes, the CASHES have been assumed to have a constant maturity of 50 years at any point in the future, beyond which the contribution of discounted free cash flows becomes negligible;
- The current and future risk-free rates have been calibrated on market data as at 30 June 2011 and projected through a standard arbitrage-free interest rate model;
- The valuation model also accounts for the conversion option embedded in the CASHES at prices of EUR 23.94 (optional) and EUR 35.91 (automatic). The payment of extraordinary dividends corresponding to the value of the BNP Paribas option has a negligible impact on value and has been ignored;
- Projected future interest payments and the projected cost of the guarantee have been discounted along yield curves reflecting the risk associated with Ageas's liabilities such as RPN(I), based on a constant spread of 410 bps, calibrated to reflect a rate that is relevant for perpetual senior Ageas liabilities.
Sensitivities
The sensitivity of the fair value of the RPN(I) to changes in the parameters can be summarised as follows, assuming that other parameters remain unchanged:
- An increase in the initial price of the Ageas's share to EUR 2.25 decreases the fair value by EUR 23 million to EUR 560 million; a decrease of the starting value to EUR 1.50, increases the fair value by EUR 22 million to EUR 605 million;
- An increase of the market value of the CASHES to 66% increases the fair value by EUR 131 million to EUR 714 million; a decrease to 50% reduces the value by EUR 124 million to EUR 459 million;
- An increase of the risk-free interest rates by 50 basis points along the yield curve increases the fair value by EUR 16 million to EUR 599 million; a decrease by 50 basis points reduces the value by EUR 20 million to EUR 563 million;
- A decrease in the discount rate of 100 basis points increases the fair value by EUR 78 million to EUR 661 million;
- An increase of 100 basis points reduces the fair value by EUR 66 million to EUR 517 million.
Assuming more favourable conditions for the four key parameters in the model (initial Ageas share price of EUR 2.25, CASHES at 50%, risk-free yield curve shifted downward by 50 basis points and discount rate 100 basis points higher), the fair value of the RPN(I) decreases to EUR 377 million.
Assuming less favourable conditions for the four key parameters in the model (initial Ageas share price of EUR 1.50, CASHES at 66%, risk-free yield curve shifted upward by 50 basis points and discount rate 100 basis points lower), the fair value of the RPN(I) would increases to EUR 859 million.
The fair value of the RPN(I) shows no material sensitivity to the assumed share price volatility and dividend yield of the Ageas share.
20 Provisions
Provisions consist of provisions for tax disputes and legal litigations. The provisions are based on best estimates available at period-end based on management judgement and in most cases the opinion of legal and tax advisors. The timing of the outflow of cash related to these provisions is by nature uncertain given the unpredictability of the outcome and the time involved in concluding litigation/disputes.
Changes in provisions during the year are as follows:
| 30 June 2011 | 31 December 2010 | |
|---|---|---|
| Balance as at 1 January | 2,407.6 | 34.2 |
| Acquisition and divestment of subsidiaries | 3.0 | |
| Increase in provisions | 41.9 | 2,381.6 |
| Reversal of unused provisions | ( 1.6 ) | ( 3.0 ) |
| Utilised during the year | ( 0.3 ) | ( 8.6 ) |
| Foreign exchange differences | ( 0.2 ) | 0.4 |
| Other | 0.8 | |
| Closing balance | 2,448.2 | 2,407.6 |
In 2010, Ageas has set up a provision, amounting to EUR 2,362 million, for the disputes with the Dutch State. These disputes arise from the differences in interpretation of the terms and conditions of the sale of Fortis Bank Nederland, Fortis Verzekeringen Nederland and Fortis Corporate Insurance from Ageas to the Dutch State in October 2008. The Dutch State is of the opinion that based on the term sheets underlying the sale, they are:
- the owner of the EUR 2 billion claim on ABN AMRO related to the conversion of the MCS (see also note 9);
- the owner of the EUR 362 million claim on FCC/ABN AMRO related to FCC transaction (see also note 9);
- entitled to some EUR 885 million related to a capital guarantee included in the sales documentation (see note 28).
As communicated by the Dutch State and Ageas, both parties aspire to reach an amicable settlement. In this settlement the dispute over the ownership of claims on ABN AMRO related to the FCC transaction and the MCS transaction as well the capital guarantee will be resolved. Ageas believes that the provision of EUR 2,362 million is sufficient to cover the outflow of benefits related to the potential settlement.
Debt Securities
Fortis Bank SA/NV issued EUR 1,000 million of redeemable perpetual cumulative coupon debt securities in 2001 at an interest rate of 6.50% until 26 September 2011 and 3 month Euribor +2.37% thereafter. These securities benefit from a support agreement entered into by the former Fortis parent companies now ageas SA/NV and ageas N.V.
Fortis Bank decided not to call the securities at 26 September 2011; the instrument remains callable at every quarterly coupon date after the first call date. According to the support agreement, holders had the option to ask ageas SA/NV and ageas N.V. to exchange the instrument against newly issued Ageas shares up to 15 August 2011; Ageas in turn had the option to exchange the instrument for cash in stead, provided that the regulator (NBB) would consent to such cash exchange. Given the number of holders that opted for exchange, the absence of authorised share capital and given the granted consent by the NBB, ageas SA/NV and ageas N.V. are forced to buy 95 % of the securities at par for cash on 26 September 2011.
Given the fact that the financial markets took into account the cash exchange of the securities by Ageas on 26 September 2011, the current market price is not a good representation of the fair value for Ageas once Ageas becomes owner of these securities as result of the exchange. Ageas therefore determines the fair value of the securities by using valuation techniques based on a net present value calculation, using the 237 bps spread paid on these securities after the first call date, the forward rate curve and an estimation of the yield to call date based on observed spreads for similar Fortis Bank/BNP Paribas Tier 1 instruments per 30 June and the expected call date of the securities as most important inputs. Ageas estimated that the yield to call at 30 June amounted to 7% and that the securities will be called early 2013, as Basle III grandfathering guidelines suggest that the securities will be derecognized as regulatory capital as of 1 January 2013. After this de-recognition the securities represent relatively expensive funding for Fortis Bank, which justifies a call-expectation at that moment in time. Based on these parameters Ageas assumes that the fair value of the securities will amount to 96% of par value; Ageas therefore has set up a provision of EUR 40 million for the difference between the exchange value at par and the fair value of the securities to be acquired.
Sensitivity of valuation for the parameters used
This valuation is sensitive with regard to the above mentioned factors. A 1% increase in the yield to call reduces the valuation by 1,3% and vice versa. A change of the assumed maturity date to 2018 (halfway the CRD IV grandfathering period), all other input variables kept equal, would results in a valuation at 88% of par value, while a maturity in 2022 (full CRD IV grandfathering period) would result in a valuation at 86% of par value. Assuming no call at all, the perpetual securities would have a value of approximately 75%, all other input variables kept equal.
Explanatory notes to the Consolidated income statement
21 Insurance premiums
The following table provides an overview of gross-insurance premiums earned.
| First | First | |
|---|---|---|
| half-year 2011 | half-year 2010 | |
| Gross inflow Life | 3,790.7 | 4,793.1 |
| Gross inflow Non-life | 2,123.3 | 1,618.9 |
| General and eliminations | ( 0.9 ) | ( 0.1 ) |
| Total gross inflow | 5,913.1 | 6,411.9 |
In the first half-year of 2011 the amount that relates to inflow from deposit accounting, directly recognised as a liability, is EUR 1,062.7 million (first half-year of 2010: EUR 1,298.0 million). The premium income accounted for in the Consolidated income statement amounts for the first half-year of 2011 to EUR 4,850.4 million (first half-year of 2010: EUR 5,113.9 million).
Life
The table below shows the details of Life-insurance premiums.
| First | First | |
|---|---|---|
| half-year 2011 | half-year 2010 | |
| Unit-linked insurance contracts | ||
| Single written premiums | 3.1 | 2.3 |
| Periodic written premiums | 43.1 | 45.6 |
| Group business total | 46.2 | 47.9 |
| Single written premiums | 41.0 | 27.4 |
| Periodic written premiums | 17.6 | 19.8 |
| Individual business total | 58.6 | 47.2 |
| Total unit-linked insurance contracts | 104.8 | 95.1 |
| Non unit-linked insurance contracts | ||
| Single written premiums | 152.0 | 156.7 |
| Periodic written premiums | 385.5 | 379.6 |
| Group business total | 537.5 | 536.3 |
| Single written premiums | 314.8 | 423.7 |
| Periodic written premiums | 365.3 | 361.2 |
| Individual business total | 680.1 | 784.9 |
| Total non unit-linked insurance contracts | 1,217.6 | 1,321.2 |
| Investment contracts with DPF | ||
| Single written premiums | 1,190.8 | 1,870.9 |
| Periodic written premiums | 214.8 | 207.9 |
| Total investment contracts with DPF | 1,405.6 | 2,078.8 |
| Gross premium income Life insurance | 2,728.0 | 3,495.1 |
| Single written premiums | 987.0 | 1,183.9 |
| Periodic written premiums | 75.7 | 114.1 |
| Premium inflow deposit accounting | 1,062.7 | 1,298.0 |
| Total gross inflow Life | 3,790.7 | 4,793.1 |
Total premium inflow Life insurance is gross premiums received by insurance companies for issued insurance and investment contracts. Premium inflow of insurance contracts and investment contracts with DPF is recognised in the income statement. Premium inflow of investment contracts without DPF, mainly unit-linked contracts, is – after deduction of fees – directly recognised as a liability (deposit accounting). Fees are recognised as fee income in the income statement.
Non-life
The table below shows the details of Non-life insurance premiums for the period. Premiums for Motor, Fire and other damage to property and Other, are grouped in Property & Casualty.
| Accident & | Property & | ||
|---|---|---|---|
| Health | casualty | Total | |
| First half-year 2011 | |||
| Gross written premiums | 423.6 | 1,699.7 | 2,123.3 |
| Change in unearned premiums, gross | ( 35.9 ) | ( 359.2 ) | ( 395.1 ) |
| Gross earned premiums | 387.7 | 1,340.5 | 1,728.2 |
| Ceded reinsurance premiums | ( 14.0 ) | ( 87.1 ) | ( 101.1 ) |
| Reinsurers' share of unearned premiums | ( 0.1 ) | 4.7 | 4.6 |
| Net earned premiums Non-life insurance | 373.6 | 1,258.1 | 1,631.7 |
| First half-year 2010 | |||
|---|---|---|---|
| Gross written premiums | 412.9 | 1,206.0 | 1,618.9 |
| Change in unearned premiums, gross | ( 42.5 ) | ( 101.9 ) | ( 144.4 ) |
| Gross earned premiums | 370.4 | 1,104.1 | 1,474.5 |
| Ceded reinsurance premiums | ( 15.8 ) | ( 68.5 ) | ( 84.3 ) |
| Reinsurers' share of unearned premiums | 0.4 | 1.9 | 2.3 |
| Net earned premiums Non-life insurance | 355.0 | 1,037.5 | 1,392.5 |
Below is a breakdown of the Non-life net earned premiums by Insurance operating segment.
| Accident & | Property & | ||
|---|---|---|---|
| Health | casualty | Total | |
| First half-year 2011 | |||
| Belgium | 231.0 | 564.0 | 795.0 |
| UK | 29.7 | 612.6 | 642.3 |
| Continental Europe | 112.9 | 81.5 | 194.4 |
| Net earned premiums Non-life insurance | 373.6 | 1,258.1 | 1,631.7 |
| Net earned premiums Non-life insurance | 355.0 | 1,037.5 | 1,392.5 |
|---|---|---|---|
| Continental Europe | 100.1 | 81.8 | 181.9 |
| UK | 26.5 | 420.3 | 446.8 |
| Belgium | 228.4 | 535.4 | 763.8 |
| First half-year 2010 |
22 Interest, dividend and other investment income
The table below provides details of Interest, dividend and other investment income.
| First | First | |
|---|---|---|
| half-year 2011 | half-year 2010 | |
| Interest income | ||
| Interest income on cash equivalents | 15.2 | 21.8 |
| Interest income on loans to banks | 53.1 | 45.5 |
| Interest income on investments | 1,082.7 | 1,091.2 |
| Interest income on loans to customers | 63.5 | 63.4 |
| Interest income on derivatives held for trading | 23.4 | 28.4 |
| Other interest income | 4.8 | 4.8 |
| Total interest income | 1,242.7 | 1,255.1 |
| Dividend income from equity securities | 48.5 | 30.7 |
| Rental income from investment property | 83.6 | 70.5 |
| Revenues parking garage | 131.2 | 124.8 |
| Other investment income | 30.6 | 31.5 |
| Total interest, dividend and other investment income | 1,536.6 | 1,512.6 |
23 Result on sales and revaluations
The table below provides details of the Result on sales and revaluations.
| First | First | |
|---|---|---|
| half-year 2011 | half-year 2010 | |
| Debt securities classified as available for sale | 35.2 | ( 142.7 ) |
| Equity securities classified as available for sale | 37.9 | 24.9 |
| Derivatives held for trading | ( 6.0 ) | ( 53.4 ) |
| Investment property | 27.6 | |
| Capital gain on sale of shares of subsidiaries | 21.2 | |
| Property, plant and equipment | 0.2 | 7.6 |
| Assets and liabilities held at fair value through profit or loss | 20.6 | 3.5 |
| Hedging results | ( 0.2 ) | ( 0.2 ) |
| Other | 0.6 | 59.9 |
| Total Result on sales and revaluations | 88.3 | ( 51.6 ) |
Derivatives held for trading are initially recognised at acquisition cost, including any transaction costs to acquire the financial instrument. Subsequent measurement is at fair value with changes in fair value recorded in the income statement.
All changes in fair value of the assets and liabilities held at fair value through profit or loss are reported above. This includes unrealised gains and losses from revaluations and realised gains and losses upon derecognition of the assets or liabilities.
Hedging results contain the changes in fair value attributable to the hedged risk – mainly interest-rate risk – of hedged assets and liabilities and the changes in fair value of the hedging instruments.
24 Insurance claims and benefits
The details of insurance claims and benefits for the period are shown in the table below.
| First | First | |
|---|---|---|
| half-year 2011 | half-year 2010 | |
| Life insurance | 3,159.4 | 3,958.4 |
| Non-life insurance | 1,129.5 | 1,009.8 |
| General account and eliminations | ( 2.2 ) | ( 0.6 ) |
| Total insurance claims and benefits, net | 4,286.7 | 4,967.6 |
Details of Life insurance claims and benefits, net of reinsurance, are shown below.
| First | First | |
|---|---|---|
| half-year 2011 | half-year 2010 | |
| Benefits and surrenders, gross | 2,541.0 | 1,818.3 |
| Change in liabilities arising from insurance and investment contracts, gross | 642.8 | 2,157.7 |
| Total Life insurance claims and benefits, gross | 3,183.8 | 3,976.0 |
| Reinsurers' share of claims and benefits | ( 24.4 ) | ( 17.6 ) |
| Total Life insurance claims and benefits, net | 3,159.4 | 3,958.4 |
Details of Non-life insurance claims and benefits, net of reinsurance, are shown in the following table.
| First | First | |
|---|---|---|
| half-year 2011 | half-year 2010 | |
| Claims paid, gross | 1,088.3 | 979.0 |
| Change in liabilities arising from insurance contracts, gross | 83.1 | 68.4 |
| Total Non-life insurance claims and benefits, gross | 1,171.4 | 1,047.4 |
| Reinsurers' share of change in liabilities | ( 5.6 ) | ( 6.2 ) |
| Reinsurers' share of claims paid | ( 36.3 ) | ( 31.4 ) |
| Total Non-life insurance claims and benefits, net | 1,129.5 | 1,009.8 |
25 Finance costs
The following table shows the breakdown of Finance costs by product:
| First | First | |
|---|---|---|
| half-year 2011 | half-year 2010 | |
| Finance costs | ||
| Debt certificates | 11.7 | 24.9 |
| Subordinated liabilities | 77.9 | 78.0 |
| Borrowings - due to banks | 27.4 | 12.2 |
| Borrowings - due to customers | 3.7 | 0.1 |
| Other borrowings | 4.6 | 10.4 |
| Derivatives | 8.3 | 5.1 |
| Other liabilities | 22.8 | 12.9 |
| Total finance costs | 156.4 | 143.6 |
26 Change in impairments
Change in impairments for the period is as follows:
| First | First | |
|---|---|---|
| half-year 2011 | half-year 2010 | |
| Change in impairments of: | ||
| Investments in debt securities | 328.8 | ( 2.0 ) |
| Investments in equity securities and other | 46.1 | 22.7 |
| Investment property | ( 12.4 ) | 1.6 |
| Loans to customers | 0.5 | ( 0.4 ) |
| Reinsurance and other receivables | ( 0.4 ) | 1.2 |
| Property, plant and equipment | ( 1.4 ) | 0.9 |
| Goodwill and other intangible assets | 1.7 | |
| Total change in impairments | 362.9 | 24.0 |
The impairments on investments in debt securities primarily relate to the Greek bonds with maturities up to 31 December 2020. Greek bonds maturing after 31 December 2020 are not impaired.
Explanatory note on segment reporting
27 Information on segments
27.1 General information
Ageas announced in September 2009 a new organisational structure based on a lean Executive Committee and a Management Committee consisting of the ExCo, the CEO's of the four geographical regions and the CFO. This structure is operational from 1 January 2010 on.
Ageas is now organised into five operating segments (for details see below):
- Belgium;
- United Kingdom (UK);
- Continental Europe;
- Asia;
- General Account.
To align the reporting structure with the management structure Ageas has adapted the reporting structure. From 1 January 2010 onwards the reporting segments were changed in accordance with IFRS 8 Operating Segments.
Ageas decided that the most appropriate way of reporting operating segments under IFRS is per region in which Ageas operates, meaning Belgium, United Kingdom, Continental Europe and Asia. In addition, Ageas will report activities not related to the core insurance business such as group finance and other holding activities within the General Account that will be presented as a separate operating segment. Following the change of the composition of the reportable segments, Ageas restated the corresponding items of segment information for earlier periods.
Ageas's segment reporting reflects the full economic contribution of the businesses of Ageas. The aim is direct allocation to the businesses of all statements of financial positions and income statement items for which the businesses have full managerial responsibility.
Transactions between the different businesses are executed under standard commercial terms and conditions.
Allocation rules
In accordance with Ageas's business model, insurance companies report support activities directly in the business.
When allocating items from the statement of financial position to operating segments, a bottom-up approach is used based on the products sold to external customers.
For the items of the statement of financial position not related to products sold to customers, a tailor-made methodology adapted to the specific business model of each reportable segment is applied.
27.2 Belgium
The Belgian insurance activities, operating since June 2009 under the name of AG Insurance, have a longstanding history. Total gross inflows in 2010 amounted to EUR 6.7 billion and the company serves more than 2.5 million customers. 75 to 80% of total inflow relates to Life insurance while 20 to 25% to Non-Life. It offers a comprehensive range of Life and Non-Life products sold to private individuals and SMEs. It operates a multichannel strategy with distribution via more than 3,000 independent brokers and via the bank channels of BNP Paribas Fortis Bank and its subsidiaries. AG Employee Benefits is the dedicated business unit selling group life and health care products, mainly to larger enterprises. Since May 2009, BNP Paribas Fortis Bank owns 25% of AG Insurance.
27.3 United Kingdom (UK)
Ageas's business in the UK is a leading national provider of Non-Life insurance solutions and a related Life protection business launched in 2008. The UK business has a strong presence in the Personal lines market and is continuing to expand its Commercial lines proposition. The split is around 82% Personal lines, 16% Commercial lines and 2% Life. The UK business is the affinity partner of a number of very strong brands including Tesco Bank, John Lewis Partnership, Age UK and Toyota (GB) Limited. The UK business adopts a multi-channel distribution strategy across brokers, affinity partners and own distribution. Its 100% owned subsidiaries include RIAS and Castle Cover which have over a million customers in the growing +50 age market segment and Ageas Insurance Solutions which provides white label solutions to affinity partners, outsourcing services as well as direct internet promotion of its own brands. The successful start-up of Tesco Underwriting, the partnership with Tesco Bank (49%) and the integration of the acquired business of Kwik-Fit Insurance Services will further strengthen Ageas's respective market positions in the UK.
In order to provide transparency in respect of the contribution from its various business segments, Ageas took the decision to break down the UK results in three sub-segments – Life, Non-Life and Other Insurance, which includes the results of its retail operations.
27.4 Continental Europe
Continental Europe consists of the European insurance activities, excluding Belgium and the United Kingdom. It includes five countries and is a mix of leading positions in mature markets such as Portugal (51% owned by Ageas) and Luxembourg (50% owned by Ageas) and smaller positions in France (100% owned by Ageas) and Germany (100% owned by Ageas) or the new partnership in Non-Life in Italy (25% owned by Ageas). In 2010, about 89% of total inflows were Life related complemented with a Non-Life activity in Portugal and Italy. As part of the strategic review in 2009, the Continental Europe segment took a number of initiatives to align its portfolio which led to the decision to sell the Non-Life activities in Luxembourg, the Turkish and Ukrainian Life operations and to place the Russian operations in run-off.
27.5 Asia
Ageas is active in five countries in Asia with its regional office based in Hong Kong and the subsidiary in Hong Kong being fully-owned. The other activities are organised in the form of joint ventures with leading local partners and financial institutions in China (8-24.9% owned by Ageas), Malaysia (30.95% owned by Ageas), Thailand (8-31% owned by Ageas) and India (26% owned by Ageas). In terms of reporting, Ageas reports on a consolidated basis on Hong Kong while the other stakes are accounted for as associates.
27.6 General Account
The General Account comprises activities not related to the core Insurance business, such as group finance and other holding activities. In addition, the General Account also includes the investment in Royal Park Investments, the call option on BNP Paribas shares, the liabilities related to CASHES (RPN(I)), Intreinco N.V. (formerly named Ageas Reinsurance N.V.) and the claims on ABN AMRO.
27.7 Statement of financial position by operating segment
| 30 June 2011 | |||||||
|---|---|---|---|---|---|---|---|
| Continental | General | ||||||
| Belgium | UK | Europe | Asia | Account Eliminations | Total | ||
| Assets | |||||||
| Cash and cash equivalents | 412.3 | 269.6 | 180.9 | 165.8 | 776.4 | 1,805.0 | |
| Financial investments | 43,800.2 | 1,939.9 | 8,151.7 | 979.9 | 21.9 | ( 12.1 ) | 54,881.5 |
| Investment property | 1,946.6 | 25.2 | 0.4 | 1,972.2 | |||
| Loans | 2,747.4 | 682.1 | 111.2 | 3,660.5 | ( 1,231.6 ) | 5,969.6 | |
| Investments related to unit-linked contracts | 6,409.3 | 7,377.4 | 385.8 | ( 80.8 ) | 14,091.7 | ||
| Investments in associates | 147.4 | 5.5 | 647.0 | 922.5 | 9.1 | 1,731.5 | |
| Reinsurance and other receivables | 940.6 | 687.8 | 229.0 | 45.1 | 2,368.2 | ( 4.8 ) | 4,265.9 |
| Current tax assets | 36.6 | 14.8 | 33.7 | 85.1 | |||
| Deferred tax assets | 249.9 | 10.0 | 135.4 | 235.9 | 631.2 | ||
| Call option BNP Paribas shares | 694.0 | 694.0 | |||||
| Accrued interest and other assets | 1,373.2 | 319.7 | 287.5 | 158.3 | 50.7 | ( 12.7 ) | 2,176.7 |
| Property, plant and equipment | 1,032.4 | 49.2 | 7.6 | 2.7 | 1.7 | 1,093.6 | |
| Goodwill and other intangible assets | 382.4 | 287.0 | 519.1 | 475.5 | 1,664.0 | ||
| Assets held for sale | 8,413.8 | 8,413.8 | |||||
| Total assets | 59,478.3 | 3,578.0 | 17,635.1 | 2,971.7 | 17,145.6 | ( 1,332.9 ) | 99,475.8 |
| Liabilities | |||||||
| Liabilities arising from life insurance contracts | 20,381.8 | 2,584.5 | 994.1 | ( 2.7 ) | 23,957.7 | ||
| Liabilities arising from life investment contracts | 21,850.9 | 5,073.3 | 1.1 | 26,925.3 | |||
| Liabilities related to unit-linked contracts | 6,409.3 | 7,375.2 | 385.8 | 14,170.3 | |||
| Liabilities arising from non-life insurance contracts | 3,193.4 | 1,930.7 | 637.1 | 5,761.2 | |||
| Debt certificates | 340.7 | 340.7 | |||||
| Subordinated liabilities | 893.7 | 149.2 | 28.0 | 70.4 | 2,919.1 | ( 1,180.2 ) | 2,880.2 |
| Borrowings | 1,719.5 | 124.4 | 445.2 | 68.9 | 82.2 | ( 132.3 ) | 2,307.9 |
| Current tax liabilities | 38.6 | 18.7 | 3.8 | 5.4 | 66.5 | ||
| Deferred tax liabilities | 341.4 | 35.8 | 68.8 | 235.9 | 681.9 | ||
| RPN(I) | 583.0 | 583.0 | |||||
| Accrued interest and other liabilities | 1,521.1 | 385.5 | 180.7 | 47.6 | 146.5 | ( 17.6 ) | 2,263.8 |
| Provisions | 17.8 | 4.8 | 17.9 | 2,407.7 | 2,448.2 | ||
| Liabilities related to assets held for sale | 8,184.7 | 8,184.7 | |||||
| Total liabilities | 56,367.5 | 2,649.1 | 16,414.5 | 1,573.3 | 14,899.8 | ( 1,332.8 ) | 90,571.4 |
| Shareholders' equity | 2,233.6 | 858.6 | 773.5 | 1,398.4 | 2,213.2 | ( 0.1 ) | 7,477.2 |
| Non-controlling interests | 877.2 | 70.3 | 447.1 | 32.6 | 1,427.2 | ||
| Total equity | 3,110.8 | 928.9 | 1,220.6 | 1,398.4 | 2,245.8 | ( 0.1 ) | 8,904.4 |
| Total liabilities and equity | 59,478.3 | 3,578.0 | 17,635.1 | 2,971.7 | 17,145.6 | ( 1,332.9 ) | 99,475.8 |
| Number of employees | 5,700 | 5,147 | 1,133 | 343 | 88 | 12,411 |
| 31 December 2010 | |||||||
|---|---|---|---|---|---|---|---|
| Continental | General | ||||||
| Belgium | UK | Europe | Asia | Account Eliminations | Total | ||
| Assets | |||||||
| Cash and cash equivalents | 389.3 | 184.8 | 270.8 | 154.0 | 2,259.4 | 3,258.3 | |
| Financial investments | 44,191.0 | 1,741.1 | 9,010.2 | 1,014.6 | 307.0 | ( 31.4 ) | 56,232.5 |
| Investment property | 1,874.2 | 25.7 | 0.4 | 1,900.3 | |||
| Loans | 2,563.0 | 447.9 | 121.5 | 2,670.1 | ( 1,274.3 ) | 4,528.2 | |
| Investments related to unit-linked contracts | 6,687.2 | 14,747.9 | 390.3 | ( 78.1 ) | 21,747.3 | ||
| Investments in associates | 104.6 | 5.4 | 660.2 | 954.0 | 8.3 | 1,732.5 | |
| Reinsurance and other receivables | 712.4 | 477.9 | 275.5 | 52.2 | 2,405.8 | ( 95.3 ) | 3,828.5 |
| Current tax assets | 34.5 | 2.6 | 34.4 | 71.5 | |||
| Deferred tax assets | 145.5 | 11.3 | 95.0 | 213.3 | 465.1 | ||
| Call option BNP Paribas shares | 609.0 | 609.0 | |||||
| Accrued interest and other assets | 1,269.6 | 244.3 | 301.5 | 155.3 | 105.9 | ( 34.1 ) | 2,042.5 |
| Property, plant and equipment | 1,019.5 | 35.4 | 6.8 | 2.6 | 0.7 | 1,065.0 | |
| Goodwill and other intangible assets | 388.0 | 241.2 | 535.1 | 521.6 | 0.1 | 1,686.0 | |
| Assets held for sale | |||||||
| Total assets | 59,378.8 | 2,938.6 | 25,756.2 | 3,072.7 | 9,525.3 | ( 1,504.9 ) | 99,166.7 |
| Liabilities | |||||||
| Liabilities arising from life insurance contracts | 20,077.8 | 2,835.7 | 1,027.5 | ( 2.6 ) | 23,938.4 | ||
| Liabilities arising from life investment contracts | 21,433.9 | 5,478.6 | 1.3 | 26,913.8 | |||
| Liabilities related to unit-linked contracts | 6,687.2 | 14,753.4 | 390.3 | 21,830.9 | |||
| Liabilities arising from non-life insurance contracts | 3,141.4 | 1,602.2 | 617.9 | 177.5 | ( 90.4 ) | 5,448.6 | |
| Debt certificates | 548.9 | 548.9 | |||||
| Subordinated liabilities | 892.8 | 156.5 | 28.0 | 76.3 | 2,961.1 | ( 1,187.8 ) | 2,926.9 |
| Borrowings | 1,766.3 | 125.5 | 240.5 | 74.4 | 99.6 | ( 164.6 ) | 2,141.7 |
| Current tax liabilities | 34.2 | 3.1 | 4.5 | 4.6 | 46.4 | ||
| Deferred tax liabilities | 359.7 | 32.9 | 73.0 | 216.7 | 682.3 | ||
| RPN(I) | 465.0 | 465.0 | |||||
| Accrued interest and other liabilities | 1,328.2 | 164.2 | 263.2 | 58.0 | 195.8 | ( 62.4 ) | 1,947.0 |
| Provisions | 16.8 | 6.3 | 16.8 | 2,367.7 | 2,407.6 | ||
| Liabilities related to assets held for sale | |||||||
| Total liabilities | 55,738.3 | 2,090.7 | 24,311.6 | 1,632.4 | 7,032.3 | ( 1,507.8 ) | 89,297.5 |
| Shareholders' equity | 2,632.0 | 776.1 | 893.1 | 1,440.3 | 2,502.7 | 2.9 | 8,247.1 |
| Non-controlling interests | 1,008.5 | 71.8 | 551.5 | ( 9.7 ) | 1,622.1 | ||
| Total equity | 3,640.5 | 847.9 | 1,444.6 | 1,440.3 | 2,493.0 | 2.9 | 9,869.2 |
| Total liabilities and equity | 59,378.8 | 2,938.6 | 25,756.2 | 3,072.7 | 9,525.3 | ( 1,504.9 ) | 99,166.7 |
| Number of employees | 5,705 | 4,327 | 1,270 | 320 | 85 | 11,707 |
27.8 Income statement by operating segment
| First half-year 2011 | |||||||
|---|---|---|---|---|---|---|---|
| Continental | General | ||||||
| Belgium | UK | Europe | Asia | Account | Eliminations | Total | |
| Income | |||||||
| - Gross premium income 1) | 3,070.4 | 1,015.9 | 658.0 | 107.0 | ( 0.7 ) | ( 0.2 ) | 4,850.4 |
| - Change in unearned premiums | ( 73.8 ) | ( 310.3 ) | ( 11.0 ) | ( 395.1 ) | |||
| - Ceded earned premiums | ( 32.5 ) | ( 46.8 ) | ( 51.7 ) | ( 10.8 ) | 0.1 | ( 141.7 ) | |
| Net earned premiums | 2,964.1 | 658.8 | 595.3 | 96.2 | ( 0.6 ) | ( 0.2 ) | 4,313.6 |
| Interest, dividend and other investment income | 1,212.2 | 29.7 | 186.8 | 29.1 | 114.1 | ( 35.3 ) | 1,536.6 |
| Unrealised gain (loss) on Call option BNP Paribas shares | 85.0 | 85.0 | |||||
| Unrealised gain (loss) on RPN(I) | ( 118.0 ) | ( 118.0 ) | |||||
| Result on sales and revaluations | 85.7 | 1.5 | ( 1.6 ) | 3.0 | ( 0.3 ) | 88.3 | |
| Income related to investments for unit-linked contracts | ( 20.8 ) | 93.3 | ( 0.4 ) | 72.1 | |||
| Share of result of associates | 4.1 | 43.2 | ( 55.6 ) | 0.2 | ( 8.1 ) | ||
| Fee and commission income | 48.4 | 60.4 | 92.9 | 19.2 | 220.9 | ||
| Other income | 63.5 | 48.8 | 2.6 | 2.2 | 0.8 | ( 6.3 ) | 111.6 |
| Total income | 4,357.2 | 799.2 | 969.3 | 192.5 | 25.4 | ( 41.6 ) | 6,302.0 |
| Expenses | |||||||
| - Insurance claims and benefits, gross | ( 3,155.2 ) | ( 516.0 ) | ( 601.4 ) | ( 82.6 ) | ( 4.4 ) | 0.2 | ( 4,359.4 ) |
| - Insurance claims and benefits, ceded | 0.6 | 39.0 | 24.2 | 2.5 | 6.4 | 72.7 | |
| Insurance claims and benefits, net | ( 3,154.6 ) | ( 477.0 ) | ( 577.2 ) | ( 80.1 ) | 2.0 | 0.2 | ( 4,286.7 ) |
| Charges related to unit-linked contracts | 20.4 | ( 86.6 ) | ( 0.5 ) | ( 66.7 ) | |||
| Finance costs | ( 53.8 ) | ( 8.9 ) | ( 2.1 ) | ( 6.9 ) | ( 119.7 ) | 35.0 | ( 156.4 ) |
| Change in impairments | ( 297.8 ) | ( 64.6 ) | ( 0.3 ) | ( 0.2 ) | ( 362.9 ) | ||
| Change in provisions | ( 1.1 ) | 1.3 | ( 0.4 ) | ( 40.0 ) | ( 40.2 ) | ||
| Fee and commission expense | ( 314.4 ) | ( 150.8 ) | ( 94.1 ) | ( 32.7 ) | ( 0.8 ) | ( 592.8 ) | |
| Staff expenses | ( 213.2 ) | ( 84.6 ) | ( 43.8 ) | ( 12.4 ) | ( 10.7 ) | ( 1.4 ) | ( 366.1 ) |
| Other expenses | ( 284.9 ) | ( 38.4 ) | ( 68.1 ) | ( 4.7 ) | ( 24.8 ) | 6.3 | ( 414.6 ) |
| Total expenses | ( 4,299.4 ) | ( 758.4 ) | ( 936.9 ) | ( 137.6 ) | ( 194.2 ) | 40.1 | ( 6,286.4 ) |
| Profit before taxation | 57.8 | 40.8 | 32.4 | 54.9 | ( 168.8 ) | ( 1.5 ) | 15.6 |
| Income tax expenses | ( 24.0 ) | ( 10.6 ) | ( 12.3 ) | ( 1.2 ) | ( 48.1 ) | ||
| Net profit for the period | 33.8 | 30.2 | 20.1 | 53.7 | ( 168.8 ) | ( 1.5 ) | ( 32.5 ) |
| Attributable to non-controlling interests | 10.7 | ( 0.2 ) | 16.4 | ( 0.6 ) | 26.3 | ||
| Net profit attributable to shareholders | 23.1 | 30.4 | 3.7 | 53.7 | ( 168.2 ) | ( 1.5 ) | ( 58.8 ) |
| Total income from external customers | 4,351.0 | 799.2 | 969.3 | 190.6 | ( 8.1 ) | 6,302.0 | |
| Total income internal | 6.2 | 1.9 | 33.5 | ( 41.6 ) | |||
| Total income | 4,357.2 | 799.2 | 969.3 | 192.5 | 25.4 | ( 41.6 ) | 6,302.0 |
| Non-cash expenses (excl. depreciation & amortisation) | ( 298.2 ) | ( 103.0 ) | ( 0.8 ) | ( 40.0 ) | ( 442.0 ) |
1) Gross inflow (sum of gross written premiums and premium inflow of investment contracts without Discretionary Participation Features) can be calculated as follows.
| First half-year 2011 | |||||||
|---|---|---|---|---|---|---|---|
| Continental | General | ||||||
| Belgium | UK | Europe | Asia | Account | Eliminations | Total | |
| Gross premium income | 3,070.4 | 1,015.9 | 658.0 | 107.0 | ( 0.7 ) | ( 0.2 ) | 4,850.4 |
| Inflow deposit accounting | 188.9 | 823.4 | 50.4 | 1,062.7 | |||
| Gross inflow | 3,259.3 | 1,015.9 | 1,481.4 | 157.4 | ( 0.7 ) | ( 0.2 ) | 5,913.1 |
| First half-year 2010 | |||||||
|---|---|---|---|---|---|---|---|
| Continental | General | ||||||
| Belgium | UK | Europe | Asia | Account | Eliminations | Total | |
| Income | |||||||
| - Gross premium income 1) | 3,122.9 | 549.5 | 1,335.5 | 106.1 | ( 0.1 ) | 5,113.9 | |
| - Change in unearned premiums | ( 63.5 ) | ( 60.3 ) | ( 20.5 ) | ( 144.3 ) | |||
| - Ceded earned premiums | ( 27.5 ) | ( 33.1 ) | ( 50.7 ) | ( 11.6 ) | ( 122.9 ) | ||
| Net earned premiums | 3,031.9 | 456.1 | 1,264.3 | 94.5 | ( 0.1 ) | 4,846.7 | |
| Interest, dividend and other investment income | 1,189.0 | 27.0 | 178.2 | 29.8 | 121.5 | ( 32.9 ) | 1,512.6 |
| Unrealised gain (loss) on Call option BNP Paribas shares | ( 121.0 ) | ( 121.0 ) | |||||
| Unrealised gain (loss) on RPN(I) | ( 24.0 ) | ( 24.0 ) | |||||
| Result on sales and revaluations | ( 123.0 ) | 2.8 | 13.1 | 36.4 | 19.1 | ( 51.6 ) | |
| Income related to investments for unit-linked contracts | 120.5 | 100.1 | ( 18.4 ) | 202.2 | |||
| Share of result of associates | 2.9 | 25.2 | 20.6 | ( 0.4 ) | 48.3 | ||
| Fee and commission income | 45.2 | 40.9 | 99.8 | 19.5 | 205.4 | ||
| Other income | 88.7 | 4.2 | 3.6 | 1.6 | 8.6 | ( 9.9 ) | 96.8 |
| Total income | 4,355.2 | 531.0 | 1,659.1 | 188.6 | 24.8 | ( 43.3 ) | 6,715.4 |
| Expenses | |||||||
| - Insurance claims and benefits, gross | ( 3,246.9 ) | ( 361.8 ) | ( 1,335.1 ) | ( 79.6 ) | 0.7 | 0.1 | ( 5,022.6 ) |
| - Insurance claims and benefits, ceded | 10.3 | 20.2 | 22.3 | 2.4 | ( 0.2 ) | 55.0 | |
| Insurance claims and benefits, net | ( 3,236.6 ) | ( 341.6 ) | ( 1,312.8 ) | ( 77.2 ) | 0.5 | 0.1 | ( 4,967.6 ) |
| Charges related to unit-linked contracts | ( 121.1 ) | ( 68.1 ) | 17.4 | ( 171.8 ) | |||
| Finance costs | ( 45.1 ) | ( 1.9 ) | ( 2.9 ) | ( 6.1 ) | ( 120.5 ) | 32.9 | ( 143.6 ) |
| Change in impairments | ( 23.2 ) | ( 0.7 ) | ( 0.5 ) | 0.4 | ( 24.0 ) | ||
| Change in provisions | ( 0.6 ) | 0.5 | 2.6 | 2.5 | |||
| Fee and commission expense | ( 300.5 ) | ( 96.7 ) | ( 98.4 ) | ( 27.3 ) | ( 522.9 ) | ||
| Staff expenses | ( 209.2 ) | ( 53.4 ) | ( 50.9 ) | ( 11.3 ) | ( 7.3 ) | ( 2.8 ) | ( 334.9 ) |
| Other expenses | ( 263.5 ) | ( 28.3 ) | ( 66.7 ) | ( 16.3 ) | ( 28.9 ) | 9.9 | ( 393.8 ) |
| Total expenses | ( 4,199.8 ) | ( 521.4 ) | ( 1,597.9 ) | ( 121.3 ) | ( 156.2 ) | 40.5 | ( 6,556.1 ) |
| Profit before taxation | 155.4 | 9.6 | 61.2 | 67.3 | ( 131.4 ) | ( 2.8 ) | 159.3 |
| Income tax expenses | ( 36.6 ) | ( 2.7 ) | ( 22.2 ) | ( 0.2 ) | 407.2 | 345.5 | |
| Net profit for the period | 118.8 | 6.9 | 39.0 | 67.1 | 275.8 | ( 2.8 ) | 504.8 |
| Attributable to non-controlling interests | 30.9 | ( 1.4 ) | 21.8 | ( 1.5 ) | 49.8 | ||
| Net profit attributable to shareholders | 87.9 | 8.3 | 17.2 | 67.1 | 277.3 | ( 2.8 ) | 455.0 |
| Total income from external customers | 4,345.0 | 531.0 | 1,659.0 | 186.6 | ( 6.2 ) | 6,715.4 | |
| Total income internal | 10.2 | 0.1 | 2.0 | 31.0 | ( 43.3 ) | ||
| Total income | 4,355.2 | 531.0 | 1,659.1 | 188.6 | 24.8 | ( 43.3 ) | 6,715.4 |
| Non-cash expenses (excl. depreciation & amortisation) | ( 80.8 ) | ( 96.5 ) | ( 23.4 ) | ( 200.7 ) |
1) Gross inflow (sum of gross written premiums and premium inflow of investment contracts without Discretionary Participation Features) can be calculated as follows.
| First half-year 2010 | |||||||
|---|---|---|---|---|---|---|---|
| Continental | General | ||||||
| Belgium | UK | Europe | Asia | Account | Eliminations | Total | |
| Gross premium income | 3,122.9 | 549.5 | 1,335.5 | 106.1 | ( 0.1 ) | 5,113.9 | |
| Inflow deposit accounting | 379.8 | 873.8 | 44.4 | 1,298.0 | |||
| Gross inflow | 3,502.7 | 549.5 | 2,209.3 | 150.5 | ( 0.1 ) | 6,411.9 |
27.9 Statement of financial position split into Life and Non-life
| 30 June 2011 | ||||||
|---|---|---|---|---|---|---|
| Other | ||||||
| Life | Non-life | Insurance | General | Eliminations | Total | |
| Assets | ||||||
| Cash and cash equivalents | 687.5 | 278.3 | 62.8 | 776.4 | 1,805.0 | |
| Financial investments | 49,339.3 | 5,532.4 | 21.9 | ( 12.1 ) | 54,881.5 | |
| Investment property | 1,760.1 | 212.1 | 1,972.2 | |||
| Loans | 3,264.8 | 275.9 | 38.3 | 3,660.5 | ( 1,269.9 ) | 5,969.6 |
| Investments related to unit-linked contracts | 14,172.5 | ( 80.8 ) | 14,091.7 | |||
| Investments in associates | 681.3 | 118.6 | 922.5 | 9.1 | 1,731.5 | |
| Reinsurance and other receivables | 712.5 | 976.1 | 323.7 | 2,368.2 | ( 114.6 ) | 4,265.9 |
| Current tax assets | 69.8 | 6.3 | 9.0 | 85.1 | ||
| Deferred tax assets | 319.8 | 72.1 | 3.4 | 235.9 | 631.2 | |
| Call option BNP Paribas shares | 694.0 | 694.0 | ||||
| Accrued interest and other assets | 1,738.0 | 388.8 | 15.4 | 50.7 | ( 16.2 ) | 2,176.7 |
| Property, plant and equipment | 938.6 | 137.9 | 15.4 | 1.7 | 1,093.6 | |
| Goodwill and other intangible assets | 1,205.7 | 182.8 | 275.5 | 1,664.0 | ||
| Assets held for sale | 8,413.8 | 8,413.8 | ||||
| Total assets | 74,889.9 | 8,181.3 | 743.5 | 17,145.6 | ( 1,484.5 ) | 99,475.8 |
| Liabilities | ||||||
| Liabilities arising from life insurance contracts | 23,960.4 | ( 2.7 ) | 23,957.7 | |||
| Liabilities arising from life investment contracts | 26,925.3 | 26,925.3 | ||||
| Liabilities related to unit-linked contracts | 14,170.3 | 14,170.3 | ||||
| Liabilities arising from non-life insurance contracts | 5,761.2 | 5,761.2 | ||||
| Debt certificates | 340.7 | 340.7 | ||||
| Subordinated liabilities | 890.4 | 178.9 | 110.3 | 2,919.1 | ( 1,218.5 ) | 2,880.2 |
| Borrowings | 2,006.0 | 284.6 | 67.4 | 82.2 | ( 132.3 ) | 2,307.9 |
| Current tax liabilities | 34.3 | 13.4 | 18.8 | 66.5 | ||
| Deferred tax liabilities | 389.4 | 56.8 | ( 0.2 ) | 235.9 | 681.9 | |
| RPN(I) | 583.0 | 583.0 | ||||
| Accrued interest and other liabilities | 1,403.4 | 544.5 | 300.3 | 146.5 | ( 130.9 ) | 2,263.8 |
| Provisions | 21.8 | 18.5 | 0.2 | 2,407.7 | 2,448.2 | |
| Liabilities related to assets held for sale | 8,184.7 | 8,184.7 | ||||
| Total liabilities | 69,801.3 | 6,857.9 | 496.8 | 14,899.8 | ( 1,484.4 ) | 90,571.4 |
| Shareholders' equity | 4,072.9 | 944.5 | 246.7 | 2,213.2 | ( 0.1 ) | 7,477.2 |
| Non-controlling interests | 1,015.7 | 378.9 | 32.6 | 1,427.2 | ||
| Total equity | 5,088.6 | 1,323.4 | 246.7 | 2,245.8 | ( 0.1 ) | 8,904.4 |
| Total liabilities and equity | 74,889.9 | 8,181.3 | 743.5 | 17,145.6 | ( 1,484.5 ) | 99,475.8 |
| Number of employees | 4,728 | 4,520 | 3,075 | 88 | 12,411 |
31 December 2010
| Other | ||||||
|---|---|---|---|---|---|---|
| Life | Non-life | Insurance | General | Eliminations | Total | |
| Assets | ||||||
| Cash and cash equivalents | 680.0 | 282.8 | 36.1 | 2,259.4 | 3,258.3 | |
| Financial investments | 50,659.0 | 5,297.9 | 307.0 | ( 31.4 ) | 56,232.5 | |
| Investment property | 1,657.1 | 243.2 | 1,900.3 | |||
| Loans | 2,966.8 | 165.5 | 40.2 | 2,670.1 | ( 1,314.4 ) | 4,528.2 |
| Investments related to unit-linked contracts | 21,825.4 | ( 78.1 ) | 21,747.3 | |||
| Investments in associates | 655.1 | 115.1 | 954.0 | 8.3 | 1,732.5 | |
| Reinsurance and other receivables | 501.1 | 938.3 | 181.4 | 2,405.8 | ( 198.1 ) | 3,828.5 |
| Current tax assets | 67.7 | 10.1 | 2.3 | ( 8.6 ) | 71.5 | |
| Deferred tax assets | 199.3 | 49.6 | 2.9 | 213.3 | 465.1 | |
| Call option BNP Paribas shares | 609.0 | 609.0 | ||||
| Accrued interest and other assets | 1,572.7 | 393.4 | 6.3 | 105.9 | ( 35.8 ) | 2,042.5 |
| Property, plant and equipment | 906.5 | 142.1 | 15.7 | 0.7 | 1,065.0 | |
| Goodwill and other intangible assets | 1,264.0 | 190.1 | 231.8 | 0.1 | 1,686.0 | |
| Assets held for sale | ||||||
| Total assets | 82,954.7 | 7,828.1 | 516.7 | 9,525.3 | ( 1,658.1 ) | 99,166.7 |
| Liabilities | ||||||
| Liabilities arising from life insurance contracts | 23,941.0 | ( 2.6 ) | 23,938.4 | |||
| Liabilities arising from life investment contracts | 26,913.8 | 26,913.8 | ||||
| Liabilities related to unit-linked contracts | 21,830.9 | 21,830.9 | ||||
| Liabilities arising from non-life insurance contracts | 5,361.5 | 177.5 | ( 90.4 ) | 5,448.6 | ||
| Debt certificates | 548.9 | 548.9 | ||||
| Subordinated liabilities | 897.0 | 181.0 | 115.7 | 2,961.1 | ( 1,227.9 ) | 2,926.9 |
| Borrowings | 1,870.0 | 245.0 | 91.7 | 99.6 | ( 164.6 ) | 2,141.7 |
| Current tax liabilities | 39.3 | 4.0 | 11.7 | ( 8.6 ) | 46.4 | |
| Deferred tax liabilities | 408.8 | 51.6 | 5.2 | 216.7 | 682.3 | |
| RPN(I) | 465.0 | 465.0 | ||||
| Accrued interest and other liabilities | 1,176.4 | 610.8 | 130.9 | 195.8 | ( 166.9 ) | 1,947.0 |
| Provisions | 21.5 | 18.2 | 0.2 | 2,367.7 | 2,407.6 | |
| Liabilities related to assets held for sale | ||||||
| Total liabilities | 77,098.7 | 6,472.1 | 355.4 | 7,032.3 | ( 1,661.0 ) | 89,297.5 |
| Shareholders' equity | 4,616.5 | 963.7 | 161.3 | 2,502.7 | 2.9 | 8,247.1 |
| Non-controlling interests | 1,239.5 | 392.3 | ( 9.7 ) | 1,622.1 | ||
| Total equity | 5,856.0 | 1,356.0 | 161.3 | 2,493.0 | 2.9 | 9,869.2 |
| Total liabilities and equity | 82,954.7 | 7,828.1 | 516.7 | 9,525.3 | ( 1,658.1 ) | 99,166.7 |
| Number of employees | 4,838 | 4,145 | 2,639 | 85 | 11,707 |
27.10 Income statement split into Life and Non-life
| First half-year 2011 | ||||||
|---|---|---|---|---|---|---|
| Other | ||||||
| Life | Non-life | Insurance | General | Eliminations | Total | |
| Income | ||||||
| - Gross premium income 1) | 2,728.0 | 2,123.3 | ( 0.7 ) | ( 0.2 ) | 4,850.4 | |
| - Change in unearned premiums | ( 395.1 ) | ( 395.1 ) | ||||
| - Ceded earned premiums | ( 45.3 ) | ( 96.5 ) | 0.1 | ( 141.7 ) | ||
| Net earned premiums | 2,682.7 | 1,631.7 | ( 0.6 ) | ( 0.2 ) | 4,313.6 | |
| Interest, dividend and other investment income | 1,337.9 | 128.7 | ( 7.7 ) | 114.1 | ( 36.4 ) | 1,536.6 |
| Unrealised gain (loss) on Call option BNP Paribas shares | 85.0 | 85.0 | ||||
| Unrealised gain (loss) on RPN(I) | ( 118.0 ) | ( 118.0 ) | ||||
| Result on sales and revaluations | 79.2 | 9.4 | ( 0.3 ) | 88.3 | ||
| Income related to investments for unit-linked contracts | 72.1 | 72.1 | ||||
| Share of result of associates | 38.4 | 9.0 | ( 55.6 ) | 0.1 | ( 8.1 ) | |
| Fee and commission income | 151.6 | 10.5 | 84.2 | ( 25.4 ) | 220.9 | |
| Other income | 45.1 | 31.6 | 46.5 | 0.8 | ( 12.4 ) | 111.6 |
| Total income | 4,407.0 | 1,820.9 | 123.0 | 25.4 | ( 74.3 ) | 6,302.0 |
| Expenses | ||||||
| - Insurance claims and benefits, gross | ( 3,183.8 ) | ( 1,171.4 ) | ( 4.4 ) | 0.2 | ( 4,359.4 ) | |
| - Insurance claims and benefits, ceded | 24.4 | 41.9 | 6.4 | 72.7 | ||
| Insurance claims and benefits, net | ( 3,159.4 ) | ( 1,129.5 ) | 2.0 | 0.2 | ( 4,286.7 ) | |
| Charges related to unit-linked contracts | ( 66.7 ) | ( 66.7 ) | ||||
| Finance costs | ( 57.0 ) | ( 8.0 ) | ( 7.9 ) | ( 119.7 ) | 36.2 | ( 156.4 ) |
| Change in impairments | ( 346.3 ) | ( 16.4 ) | ( 0.2 ) | ( 362.9 ) | ||
| Change in provisions | 1.0 | ( 1.2 ) | ( 40.0 ) | ( 40.2 ) | ||
| Fee and commission expense | ( 264.5 ) | ( 352.9 ) | ( 0.8 ) | 25.4 | ( 592.8 ) | |
| Staff expenses | ( 178.8 ) | ( 127.6 ) | ( 47.6 ) | ( 10.7 ) | ( 1.4 ) | ( 366.1 ) |
| Other expenses | ( 246.3 ) | ( 103.6 ) | ( 52.3 ) | ( 24.8 ) | 12.4 | ( 414.6 ) |
| Total expenses | ( 4,318.0 ) | ( 1,739.2 ) | ( 107.8 ) | ( 194.2 ) | 72.8 | ( 6,286.4 ) |
| Profit before taxation | 89.0 | 81.7 | 15.2 | ( 168.8 ) | ( 1.5 ) | 15.6 |
| Income tax expenses | ( 20.9 ) | ( 23.3 ) | ( 3.9 ) | ( 48.1 ) | ||
| Net profit for the period | 68.1 | 58.4 | 11.3 | ( 168.8 ) | ( 1.5 ) | ( 32.5 ) |
| Attributable to non-controlling interests | 16.6 | 10.3 | ( 0.6 ) | 26.3 | ||
| Net profit attributable to shareholders | 51.5 | 48.1 | 11.3 | ( 168.2 ) | ( 1.5 ) | ( 58.8 ) |
| Total income from external customers | 4,391.1 | 1,819.2 | 100.0 | ( 8.3 ) | 6,302.0 | |
| Total income internal | 15.9 | 1.7 | 23.0 | 33.7 | ( 74.3 ) | |
| Total income | 4,407.0 | 1,820.9 | 123.0 | 25.4 | ( 74.3 ) | 6,302.0 |
Non-cash expenses (excl. depreciation & amortisation) ( 384.9 ) ( 17.1 ) ( 40.0 ) ( 442.0 )
1) Gross inflow (sum of gross written premiums and premium inflow of investment contracts without Discretionary Participation Features) can be calculated as follows.
| First half-year 2011 | |||||
|---|---|---|---|---|---|
| Other | |||||
| Life | Non-life | Insurance | General | Eliminations | Total |
| 2,728.0 | 2,123.3 | ( 0.7 ) | ( 0.2 ) | 4,850.4 | |
| 1,062.7 | 1,062.7 | ||||
| 3,790.7 | 2,123.3 | ( 0.7 ) | ( 0.2 ) | 5,913.1 | |
First half-year 2010
| Other | ||||||
|---|---|---|---|---|---|---|
| Life | Non-life | Insurance | General | Eliminations | Total | |
| Income | ||||||
| - Gross premium income 1) | 3,495.1 | 1,618.9 | ( 0.1 ) | 5,113.9 | ||
| - Change in unearned premiums | 0.1 | ( 144.4 ) | ( 144.3 ) | |||
| - Ceded earned premiums | ( 40.9 ) | ( 82.0 ) | ( 122.9 ) | |||
| Net earned premiums | 3,454.3 | 1,392.5 | ( 0.1 ) | 4,846.7 | ||
| Interest, dividend and other investment income | 1,305.3 | 127.5 | ( 8.8 ) | 121.5 | ( 32.9 ) | 1,512.6 |
| Unrealised gain (loss) on Call option BNP Paribas shares | ( 121.0 ) | ( 121.0 ) | ||||
| Unrealised gain (loss) on RPN(I) | ( 24.0 ) | ( 24.0 ) | ||||
| Result on sales and revaluations | ( 33.9 ) | ( 36.8 ) | 19.1 | ( 51.6 ) | ||
| Income related to investments for unit-linked contracts | 202.2 | 202.2 | ||||
| Share of result of associates | 22.8 | 5.3 | 20.6 | ( 0.4 ) | 48.3 | |
| Fee and commission income | 153.0 | 14.8 | 59.4 | ( 21.8 ) | 205.4 | |
| Other income | 67.4 | 30.6 | 2.3 | 8.6 | ( 12.1 ) | 96.8 |
| Total income | 5,171.1 | 1,533.9 | 52.9 | 24.8 | ( 67.3 ) | 6,715.4 |
| Expenses | ||||||
| - Insurance claims and benefits, gross | ( 3,976.0 ) | ( 1,047.4 ) | 0.7 | 0.1 | ( 5,022.6 ) | |
| - Insurance claims and benefits, ceded | 17.6 | 37.6 | ( 0.2 ) | 55.0 | ||
| Insurance claims and benefits, net | ( 3,958.4 ) | ( 1,009.8 ) | 0.5 | 0.1 | ( 4,967.6 ) | |
| Charges related to unit-linked contracts | ( 171.8 ) | ( 171.8 ) | ||||
| Finance costs | ( 48.8 ) | ( 6.2 ) | ( 1.0 ) | ( 120.5 ) | 32.9 | ( 143.6 ) |
| Change in impairments | ( 21.0 ) | ( 3.4 ) | 0.4 | ( 24.0 ) | ||
| Change in provisions | 2.9 | ( 0.4 ) | 2.5 | |||
| Fee and commission expense | ( 251.8 ) | ( 292.9 ) | 21.8 | ( 522.9 ) | ||
| Staff expenses | ( 181.0 ) | ( 119.6 ) | ( 24.2 ) | ( 7.3 ) | ( 2.8 ) | ( 334.9 ) |
| Other expenses | ( 238.9 ) | ( 121.4 ) | ( 16.7 ) | ( 28.9 ) | 12.1 | ( 393.8 ) |
| Total expenses | ( 4,868.8 ) | ( 1,553.7 ) | ( 41.9 ) | ( 156.2 ) | 64.5 | ( 6,556.1 ) |
| Profit before taxation | 302.3 | ( 19.8 ) | 11.0 | ( 131.4 ) | ( 2.8 ) | 159.3 |
| Income tax expenses | ( 68.6 ) | 10.0 | ( 3.1 ) | 407.2 | 345.5 | |
| Net profit for the period | 233.7 | ( 9.8 ) | 7.9 | 275.8 | ( 2.8 ) | 504.8 |
| Attributable to non-controlling interests | 55.3 | ( 4.0 ) | ( 1.5 ) | 49.8 | ||
| Net profit attributable to shareholders | 178.4 | ( 5.8 ) | 7.9 | 277.3 | ( 2.8 ) | 455.0 |
| Total income from external customers | 5,153.2 | 1,530.7 | 37.7 | ( 6.2 ) | 6,715.4 | |
| Total income internal | 17.9 | 3.2 | 15.2 | 31.0 | ( 67.3 ) | |
| Total income | 5,171.1 | 1,533.9 | 52.9 | 24.8 | ( 67.3 ) | 6,715.4 |
Non-cash expenses (excl. depreciation & amortisation) ( 196.2 ) ( 4.5 ) ( 200.7 )
1) Gross inflow (sum of gross written premiums and premium inflow of investment contracts without Discretionary Participation Features) can be calculated as follows.
| First half-year 2010 | ||||||
|---|---|---|---|---|---|---|
| Other | ||||||
| Life | Non-life | Insurance | General | Eliminations | Total | |
| Gross premium income | 3,495.1 | 1,618.9 | ( 0.1 ) | 5,113.9 | ||
| Inflow deposit accounting | 1,298.0 | 1,298.0 | ||||
| Gross inflow | 4,793.1 | 1,618.9 | ( 0.1 ) | 6,411.9 | ||
27.11 Technical result insurance
To analyse the insurance results, Ageas uses the concept of technical result and operating margin.
Technical result mainly includes premiums, fees and allocated financial income, less claims and benefits and less operating expenses. Realised capital gains and losses on investments backing certain insurance liabilities, including separated funds, are part of the allocated financial income and thus included in the technical result. Financial income, net of the related investment costs, is allocated to the various Life and Non-life branches based on the investment portfolios backing the insurance liabilities of these branches.
Realised and unrealised capital gains and losses on investments recognised in the income statement, backing the insurance liabilities of the various branches and not allocated to the technical result are included in the operating margin.
The reconciliation of the operating margin to the profit before taxation, includes all income and costs, not allocated to the insurance or investment contracts and thus not reported in the operating margin.
Within its insurance segments Ageas manages its Life and Non-life businesses separately. Life business includes insurance contracts covering risks related to the life and death of individuals. Life business also includes investment contracts with and without discretionary participation features (DPF). Non-life comprises four lines of business: Accident & Health, Motor, Fire and other damage to property (covering the risk of property losses or claims liabilities) and other.
The technical results for the different segments and lines of business and their reconciliation with profit before taxation are shown below.
| First half-year 2011 | |||||||
|---|---|---|---|---|---|---|---|
| Continental | General | Total | |||||
| Belgium | UK | Europe | Asia | Account | Eliminations | Ageas | |
| Gross inflow Life | 2,361.2 | 22.1 | 1,250.0 | 157.4 | ( 0.2 ) | 3,790.5 | |
| Gross inflow Non-life | 898.1 | 993.8 | 231.4 | ( 0.7 ) | 2,122.6 | ||
| Operating costs | ( 228.5 ) | ( 76.1 ) | ( 92.4 ) | ( 16.7 ) | ( 413.7 ) | ||
| Life technical result | 109.3 | ( 2.1 ) | 16.5 | 14.3 | 138.0 | ||
| -Accident & Health | 17.1 | ( 0.5 ) | 13.1 | 29.7 | |||
| - Motor | 21.2 | 22.9 | 0.6 | 44.7 | |||
| - Fire and other damage to property | ( 10.4 ) | ( 2.9 ) | 2.0 | ( 11.3 ) | |||
| - Other | 9.3 | 0.7 | ( 2.1 ) | 7.9 | |||
| Non-Life technical result | 37.2 | 20.2 | 13.6 | 71.0 | |||
| Total technical result | 146.5 | 18.1 | 30.1 | 14.3 | 209.0 | ||
| Capital gains (losses) allocated to operating margin | ( 64.7 ) | 1.1 | ( 0.9 ) | 2.5 | ( 62.0 ) | ||
| Operating margin | 81.8 | 19.2 | 29.2 | 16.8 | 147.0 | ||
| Share of result of associates | 4.1 | 43.2 | ( 55.6 ) | 0.2 | ( 8.1 ) | ||
| Other result, including brokerage | ( 28.1 ) | 21.6 | 3.2 | ( 5.1 ) | ( 113.2 ) | ( 1.7 ) | ( 123.3 ) |
| Profit before taxation | 57.8 | 40.8 | 32.4 | 54.9 | ( 168.8 ) | ( 1.5 ) | 15.6 |
| Key performance indicators | |||||||
| Expense ratio | 36.6% | 27.0% | 29.3% | 31.9% | |||
| Claims ratio | 65.6% | 74.2% | 67.5% | 69.3% | |||
| Combined ratio | 102.2% | 101.2% | 96.8% | 101.2% | |||
| Life cost ratio in % of Life FUM (annualised) | 0.38% | 0.57% | 2.42% | 0.50% | |||
| Funds under management | 51,835.4 | 1,930.7 | 15,670.1 | 1,381.0 | ( 2.7 ) | 70,814.5 |
| First half-year 2010 | |||||||
|---|---|---|---|---|---|---|---|
| Continental | General | Total | |||||
| Belgium | UK | Europe | Asia | Account | Eliminations | Ageas | |
| Gross inflow Life | 2,650.9 | 11.2 | 1,980.5 | 150.5 | ( 0.1 ) | 4,793.0 | |
| Gross inflow Non-life | 851.7 | 538.3 | 228.9 | 1,618.9 | |||
| Operating costs | ( 220.2 ) | ( 56.8 ) | ( 98.0 ) | ( 18.4 ) | ( 393.4 ) | ||
| Life technical result | 186.9 | ( 3.2 ) | 39.2 | 11.1 | 234.0 | ||
| - Accident & Health | 11.0 | ( 6.1 ) | 6.3 | 11.2 | |||
| - Motor | ( 3.3 ) | ( 5.3 ) | ( 5.1 ) | ( 13.7 ) | |||
| - Fire and other damage to property | ( 3.7 ) | 5.8 | 3.8 | 5.9 | |||
| - Other | 0.8 | 2.1 | 2.0 | 4.9 | |||
| Non-Life technical result | 4.8 | ( 3.5 ) | 7.0 | 8.3 | |||
| Total technical result | 191.7 | ( 6.7 ) | 46.2 | 11.1 | 242.3 | ||
| Capital gains (losses) allocated to operating margin | ( 104.5 ) | 2.1 | 4.4 | 34.0 | ( 64.0 ) | ||
| Operating margin | 87.2 | ( 4.6 ) | 50.6 | 45.1 | 178.3 | ||
| Share of result of associates | 2.9 | 25.2 | 20.6 | ( 0.4 ) | 48.3 | ||
| Other result, including brokerage | 65.3 | 14.2 | 10.6 | ( 3.0 ) | ( 152.0 ) | ( 2.4 ) | ( 67.3 ) |
| Profit before taxation | 155.4 | 9.6 | 61.2 | 67.3 | ( 131.4 ) | ( 2.8 ) | 159.3 |
| Key performance indicators | |||||||
| Expense ratio | 36.6% | 30.1% | 27.5% | 33.3% | |||
| Claims ratio | 70.5% | 76.4% | 71.6% | 72.5% | |||
| Combined ratio | 107.1% | 106.5% | 99.1% | 105.8% | |||
| Life cost ratio in % of Life FUM (annualised) | 0.39% | #DIV/0! | 0.56% | 2.96% | 0.52% | ||
| Funds under management | 50,008.1 | 1,478.8 | 23,059.4 | 1,371.3 | 185.2 | ( 92.0 ) | 76,010.8 |
Claims ratio: the cost of claims, net of reinsurance, as a percentage of the net earned premiums, excluding the internal costs of handling claims.
Expense ratio: expenses as a percentage of the earned premiums, net of reinsurance. Expenses include internal costs of handling claims, plus net commissions charged to the year, less internal investment costs.
Combined ratio: the sum of the claims ratio and the expense ratio.
28 Contingent liabilities
28.1 Contingent liabilities relating to legal proceedings
Like any other financial institution, Ageas is involved as a defendant in various claims, disputes and legal proceedings arising in the ordinary course of its business, which since the divestment of its banking activities in October 2008 is limited to insurance activities.
In addition, as a result of the events and developments occurred in respect of the former Fortis group between May 2007 and October 2008 (a.o. capital increase and acquisition of parts of ABN AMRO in October 2007, announcement of the accelerated solvency plan in June 2008, divestment of banking activities and Dutch insurance activities in September/October 2008), Ageas is involved or may still become involved in a number of legal proceedings as well as administrative and criminal investigations in Belgium and the Netherlands, some of which could result in substantial but currently unquantifiable future liabilities for Ageas.
The ongoing investigations do not have immediate (material) monetary consequences for Ageas, but it cannot be ruled out that they could lead to such negative impact at a later stage. This is the case for (i) the investigations conducted by court-appointed experts in Belgium to report on the September/October 2008 transactions, (ii) investigations conducted by the Belgian Financial Services and Markets Authority (FSMA), as well as (iii) the criminal investigation conducted in Belgium. Any negative findings of these ongoing investigations may impact existing legal proceedings and lead to new proceedings against Ageas, including claims for compensatory damages being initiated against Ageas at a later stage.
On 5 February 2010, the AFM levied a fine on ageas SA/NV and ageas N.V. of EUR 288,000 each for breaches of the Dutch Securities Act ('Wet op het financieel toezicht'). The AFM alleges that on 5 June 2008 certain statements would have been incorrect or misleading in respect of the solvency situation of Fortis and that on 14 June 2008 Fortis should have made public that the required EC remedies would imply that the financial objectives for 2008 and later could not be achieved without additional measures. This might imply that, for the period of 5 to 25 June 2008, investors may allege to have traded on not fully correct information. Ageas challenges any allegations of wrongdoing. After rejection of the administrative appeal, Ageas has appealed the decision of the AFM before the District Court in Rotterdam. On 4 May 2011 the District Court of Rotterdam confirmed the decision of the AFM. Ageas has filed an appeal against this decision with the competent court in the Netherlands.
On 16 June 2010, the expert report commissioned by the Ondernemingskamer in Amsterdam was filed for public inspection. A copy of the report can be downloaded from the Ageas website. Among other things the experts are critical of the way in which Fortis informed its investors over time and conclude that the information provided by Fortis to investors in a number of areas was incorrect or at least incomplete. In particular, they refer to : (i) the information on the position and exposure of Fortis in relation to the subprime situation in the trading update of 21 September 2007 and in the prospectus for the rights issue (which incorporated the trading update) effectuated on 9 October 2007 (although the experts acknowledge that information has not been manipulated or willingly misrepresented); (ii) information on the sale of certain parts of ABN AMRO as required by the EC competition authorities and solvency position of Fortis, in the period as of 21 May 2008 until 26 June 2008; (iii) the communication of certain facts to investors in the subsequent period and more specifically on 26 September 2008.
On 16 August 2010, VEB and certain other parties filed a request with the Ondernemingskamer (i) to start legal proceedings aimed at establishing that certain facts mentioned in the expert report should be deemed 'mismanagement' ('wanbeleid') by Fortis and (ii) to annul the discharge granted to Fortis directors on 29 April 2008. The findings of the Dutch experts have led and may still lead to new claims and proceedings being filed against Ageas, including claims for compensatory damages.
The experts' findings may also impact existing legal proceedings. Although Ageas will challenge any allegations of wrongdoing, such actions if successful may ultimately have a severe material impact on Ageas. At this point however it is not possible to assess the chances that such actions would succeed, nor to quantify the damages which may have to be paid if that would be the case.
On 19 August 2010, the AFM levied an additional fine on ageas SA/NV and ageas N.V. of EUR 144,000 each for breach of the Dutch Securities Act. The AFM alleges that Fortis did not timely inform investors on its subprime position and should have published information on its subprime position and exposure (both overall and in the US, as well as a break down) in the trading update published on 21 September 2007 in the context of the rights issue effectuated on 9 October 2007. This might imply that, for the period as of 21 September 2007, investors may allege to have traded on incomplete information. Ageas challenges any allegations of wrongdoing. After rejection of the administrative appeal, Ageas has appealed this decision of the AFM before the District Court in Rotterdam. As indicated before, this may lead to new claims and proceedings being filed against Ageas, including claims for compensatory damages. Although, if successful, such actions may ultimately have a severe material impact on Ageas, it is not possible at this point to assess whether and how many such actions might be started or to assess the chances that such actions would succeed, nor to quantify the damages which may have to be paid if that would be the case.
Ageas is also involved or may still become involved in legal proceedings directly or indirectly resulting from events and developments occurred in respect of the former Fortis group between May 2007 and October 2008:
- Various proceedings have been initiated by individual shareholders and shareholder organisations in Belgium and the Netherlands (in)directly aiming at (i) the annulment of decisions taken by the Fortis Board in September/October 2008 or alternative compensatory damages and/or (ii) the payment of monetary damages based on alleged miscommunication and/or market abuse committed by Fortis over the period between May 2007 and October 2008. Such proceedings include:
-
a) proceedings initiated before the Brussels Commercial Court:
- by a number of individuals represented by Mr. Modrikamen initially demanding the annulment of the sale of ASR to the Dutch State and the sale of Fortis Bank to SFPI (and subsequently to BNP Paribas), or alternatively damages; the request for provisional measures against Ageas was dismissed on 8 December 2009. On 26 April 2011, Mr. Modrikamen filed (i) an appeal against this decision, to the extent it decides lack of jurisdiction regarding the Dutch State and the DNB and (ii) a trial brief on the merits regarding the sale of the Belgian bank. The claim now focuses on damages asked from the Dutch State, DNB, the Belgian State and BNP;
- by a number of individuals gathered around Deminor International, demanding damages because of alleged lack of or misleading information by Fortis in the period May 2007 until October 2008; these proceedings are pending;
-
b) proceedings initiated before the Amsterdam District Court:
- by VEB and Deminor demanding to condemn the Dutch State to pay damages due to its alleged wrongful behaviour in the context of the nationalisation of the Dutch activities, or alternatively, to oblige Ageas to take legal action vis-à-vis the Dutch State; on 18 May 2011 the court dismissed all claims. The VEB has announced it will not appeal this judgment;
- by the Stichting FortisEffect and a number of individuals represented by Mr. De Gier demanding to invalidate the decisions taken by the board of directors in October 2008 and unwind the transactions, or alternatively, to pay damages; on 18 May 2011 the court dismissed all claims; Stichting FortisEffect has filed an appeal;
- by VEB demanding to establish that various communications of Fortis in the period September 2007 to 3 October 2008 constitute a breach of law by Fortis and certain of its former directors and top executives; that each of these breaches is an unlawful act of all or certain defendants and that these defendants are consequently liable for damages suffered by those who bought shares in the relevant period; This includes a claim (vis-à-vis Fortis, certain of its former directors and top executives and the financial institutions acting as global coordinators and lead managers in connection with the rights issue) that the information on the position and exposure of Fortis in relation to the subprime situation in the prospectus of 24 September 2007 for the rights issue effectuated on 9 October 2007 was incorrect and incomplete;
- by the Dutch State claiming an amount of EUR 210 million from the Ageas parent companies and EUR 674 million from Ageas Insurance International N.V. The Dutch State bases these alleged claims on the application of certain provisions allegedly agreed by Fortis Insurance N.V., Fortis Insurance International N.V. and Fortis FBN(H) Preferred Investments B.V. in the context of the sale of the Dutch banking and insurance activities on 3 October 2008.
- c) proceedings initiated before the Utrecht District Court:
- by a number of individuals represented by Mr. Bos demanding damages due to alleged miscommunication, which are also still pending. In this context, some former directors and top executives of Fortis have requested the court to acknowledge the alleged obligation of Ageas, under termination agreements entered into in 2008 and/or rules of Dutch civil law, to hold such persons harmless against damages resulting from or relating to the legal proceedings initiated against them and which would originate from their functions within the Fortis group. Ageas is contesting the validity of the mentioned statutory and contractual hold harmless commitments;
- By a Stichting under Dutch law, called 'Investor Claims Against Fortis' alleging miscommunication by Fortis on various occasions in the period 2007-2008. This includes a claim (vis-à-vis Fortis and two of its financial advisors) that the information on the position and exposure of Fortis in relation to the subprime situation in the prospectus of 24 September 2007 for the rights issue effectuated on 9 October 2007 was incorrect and incomplete.
As said above Ageas denies any wrongdoing and will challenge any allegations thereof in court. However, if successful this may ultimately have a severe material impact on Ageas. At this point however it is not possible to assess the chances that such actions would succeed, nor to quantify the damages which may have to be paid if that would be the case.
Should any of these proceedings result in the annulment of (part of) the decisions taken by the Fortis Board and of the resulting agreements and transactions (which is highly unlikely also taking into account that neither the Belgian experts appointed by the Brussels Court of Appeal on 12 December 2008 nor the Dutch experts appointed by the Dutch Ondernemingskamer have criticised these transactions), this would have consequences on the financial position of Ageas that are unquantifiable at this stage. In the event that any court decisions were to order Ageas to pay monetary damages, this could have a severe negative impact on its financial position.
Legal proceedings have also been initiated related to a hybrid instrument called Mandatory Convertible Securities (MCS) for which ageas SA/NV and ageas N.V. acted as co-obligors.
The Mandatory Convertible Securities (MCS) issued in 2007 by Fortis Bank Nederland (Holding) N.V. (now ABN AMRO Bank N.V.), Fortis Bank SA/NV, ageas SA/NV and ageas N.V., were mandatorily converted on 7 December 2010 into 106,723,569 Ageas shares. Before 7 December, certain MCS holders unilaterally decided at a general MCS holders' meeting to postpone the maturity date of the MCS until 7 December 2030. The effects of this decision were however suspended by the President of the Commercial Court of Brussels at the request of Ageas. After 7 December, the same MCS holders contested the validity of the conversion of the MCS by claiming the annulment of the conversion or, alternatively, damages for an amount of EUR 1.75 billion, before court. Ageas is convinced, after consultation with its legal advisors that this claim is without merits.
Following the conversion of the MCS, Ageas has initiated a claim against ABN AMRO Bank and ABN AMRO Group in relation to the failure of ABN AMRO Bank to issue shares in its capital to Ageas for the amount of EUR 2 billion, in accordance with an agreement between the four MCS issuers. A party representing certain MCS holders levied an attachment on the claims of Ageas against ABN AMRO Bank and ABN AMRO Group as well as the Dutch State to secure payment of their potential damages. At the request of Ageas the Utrecht District Court decided on 8 June 2011 that this attachment should be lifted.
Finally, the Dutch State has joined these proceedings. The Dutch State alleges that Ageas, by pursuing its claim against ABN AMRO Bank is acting in violation with the Term Sheet entered into upon the sale of Fortis Bank Nederland (Holding) N.V. to the Dutch State on 3 October 2008. The Dutch State alleges that Ageas has waived its right to the claim and that to the extent that Ageas would prevail in its claim against ABN AMRO Bank, such claim should be transferred to the Dutch State pursuant to the legal title of damages or the terms of the Term Sheet. Before having initiated the litigation, the Dutch State had levied a conservatory attachment on Ageas's claims against ABN AMRO Bank.
In respect of all legal proceedings and investigations of which management is aware, Ageas will make provisions for such matters if and when, in the opinion of management, who consult with legal advisors, it is probable that a payment will have to be made by Ageas and the amount can be reasonably estimated.
Without prejudice to any specific comments made above, given the various stages and continuously evolving nature as well as inherent uncertainties and complexity of the current proceedings and investigations, management is not in a position to determine whether any claims or actions brought against Ageas in connection with these proceedings and investigations are without merit or can be successfully defended or whether the outcome of these actions or claims may or may not result in a significant loss in the Ageas Consolidated Financial Statements. Therefore, no provisions have been set apart, other than a provision of EUR 2.4 billion in relation to the disputes with the Dutch State, as mentioned in Note 20.
In 2008, the Fortis parent companies granted to some former executives and directors at the time of their departure a contractual hold harmless protection covering legal expenses and, in some cases, also the financial consequences of any judicial decisions in the event that legal proceedings were brought against such persons on the basis of their mandates exercised in the company. In respect of some of these persons, Ageas is contesting the validity of the contractual hold harmless commitments to the extent they relate to the financial consequences of any judicial decisions.
28.2 Contingent liabilities for hybrid instruments of former subsidiaries
Ageas's former operating entities issued a number of hybrid instruments that have created a contingent liability for ageas N.V. and ageas SA/NV, because these former parent companies acted as guarantor, co-obligor or provided support agreements. The following chapters describe the contingent liabilities linked to these instruments.
1. CASHES
CASHES (Convertible And Subordinated Hybrid Equity-linked Securities) is a EUR 3 billion instrument issued by Fortis Bank SA/NV, with ageas SA/NV and ageas N.V. acting as co-obligors. According to the terms and conditions of this instrument it will only be reimbursed by Fortis Bank by means of an exchange against already issued Ageas shares, owned by Fortis Bank (the reported number of outstanding Ageas shares as at 30 June 2011 already includes the 125,313,283 Ageas shares issued for the purpose of such exchange). Pending the exchange of the CASHES against Ageas shares, these Ageas shares do not have any dividend rights or voting rights.
The principal amount of the CASHES will not be repaid in cash. The sole recourse of the holders of the CASHES against any of the co-obligors with respect to the principal amount are the 125,313,283 Ageas shares that Fortis Bank pledged in favour of such holders.
The CASHES have no maturity date, but may be exchanged for Ageas shares at a price of EUR 23.94 per share at the discretion of the holders. From 19 December 2014, the CASHES will be automatically converted into Ageas shares if the price of the Ageas share is equal to or higher than EUR 35.91 on twenty consecutive stock exchange business days. Coupons on the securities, in principle payable by Fortis Bank, are payable quarterly, in arrears, at a variable rate of 3 month Euribor + 2.0%.
In the event that dividends are not paid on the Ageas shares, or that the dividends to be declared are below a threshold with respect to any financial year (dividend yield less than 0.5%), and in certain other circumstances, coupons will mandatorily need to be settled by ageas SA/NV and ageas N.V. in accordance with the so called Alternative Coupon Settlement Method (ACSM), while Fortis Bank would need to issue instruments that qualify as hybrid Tier 1 instruments to Ageas as compensation for the coupons so paid by ageas SA/NV and ageas N.V. If the ACSM is triggered and there is insufficient available authorised capital to enable ageas SA/NV and ageas N.V. to meet the ACSM obligation, the coupon settlement will be postponed until such time as the ability to issue shares is restored.
2. Fortis Bank Tier 1 debt securities 2001
Fortis Bank SA/NV issued EUR 1,000 million of redeemable perpetual cumulative coupon debt securities in 2001 at an interest rate of 6.50% until 26 September 2011 and 3 month Euribor +2.37% thereafter. These securities benefit from a support agreement entered into by the former Fortis parent companies now ageas SA/NV and ageas N.V.
Fortis Bank decided not to call the securities at 26 September 2011; the instrument remains callable at every quarterly coupon date after the first call date. According to the support agreement, holders had the option to ask ageas SA/NV and ageas N.V. to exchange the instrument against newly issued Ageas shares up to 15 August 2011; Ageas in turn had the option to exchange the instrument for cash in stead, provided that the regulator (NBB) would consent to such cash exchange. Given the number of holders that opted for exchange, the absence of authorised share capital and given the granted consent by the NBB, ageas SA/NV and ageas N.V. are forced to buy 95 % of the securities at par for cash on 26 September 2011.
3. Fortis Bank Tier 1 debt securities 2004
Fortis Bank SA/NV issued EUR 1,000 million perpetual securities in 2004, which benefit from a support agreement entered into by the former Fortis parent companies now ageas SA/NV and ageas N.V., at an interest rate of 4.625% until 27 October 2014 and 3 month Euribor + 1.70% thereafter.
Under the parental support agreement if Fortis Bank's solvency drops below the threshold level or if Fortis Bank so elects, the coupon will be settled through the issue of ordinary shares by ageas SA/NV and ageas N.V. in accordance with a so-called Alternative Coupon Settlement Method (ACSM), for which Fortis Bank would need to compensate ageas SA/NV and ageas N.V. by issuing new shares.
4. FRESH litigation
On 11 February 2011 the Commercial Court of Brussels dismissed the claims of two Luxembourg funds who demanded that the FRESH securities they held would be declared null and void and that the nominal value thereof would be reimbursed. This court decision is final.
29 Events after the date of the statement of financial position
There have been no material events since the date of the Consolidated statement of financial position that would require adjustment or disclosures in the Ageas Consolidated interim Financial Statements as at 30 June 2011.
Aksigorta A.Ş
On 18 Februari 2011, Ageas announced that it has signed an agreement with Hacı Ömer Sabancı Holding A.Ş. ("Sabanci"), Turkey's leading industrial and financial conglomerate, to acquire a 31% stake in Aksigorta A.Ş. ("Aksigorta") through the sale by Sabanci of half its stake in the company. Following the transaction, Sabanci and Ageas will have equal shareholdings in Aksigorta. The remaining shares (38%) will continue to be traded on the Istanbul Stock Exchange. As part of the transaction, Ageas will pay Sabanci a total consideration of USD 220 million (EUR 162 million) in cash upon completion. This implies a 53% premium on Aksigorta's market capitalisation dd. 17 February 2011.
The transaction has been closed on 27 July 2011 and consequently the acquisition will be consolidated in the third quarter 2011.
Greek bonds
On July 21, the Private Sector Initiative to support Greece was announced. This involves a voluntary exchange of existing Greek government bonds into a combination of four instruments together with a Greek Buyback Facility.
Ageas is currently assessing the potential consequences for the above matter.
Statement of the Board of Directors
The Board of Directors of Ageas is responsible for preparing the Ageas Consolidated Interim Financial Statements for the first half-year of 2011 in accordance with International Financial Reporting Standards as adopted by the European Union as well as with the European Transparency Directive (2004/109/EC).
The Board of Directors of Ageas declares that, to the best of its knowledge, the Ageas Consolidated Interim Financial Statements for the first half-year gives a true and fair view of the assets, liabilities, financial position, profit or loss of Ageas and the undertakings included in the consolidation as a whole and that the information contained herein has no omissions likely to modify significantly the scope of any statements made. In addition the Report of the Board of Directors for the first half-year of 2011 includes the information required pursuant to section 5:25d subsections 8 and 9 of the Dutch Financial Markets Supervision Act.
The Board of Directors reviewed the Ageas Consolidated Interim Financial Statements for the first half-year of 2011 on 23 August 2011 and authorised their issue.
Brussels/Utrecht, 23 August 2011
Board of Directors
Chairman Jozef De Mey Chief Executive Officer Bart De Smet Directors Frank Arts
Vice-Chairman Guy de Selliers de Moranville Ronny Bruckner Bridget McIntyre Roel Nieuwdorp Lionel Perl Belén Romana Jin Shaoliang Jan Zegering Hadders
Review report
To the Board of Directors of ageas SA/NV and ageas N.V.
Introduction
We have reviewed the accompanying consolidated statement of financial position of Ageas as at 30 June 2011, the consolidated income statement and consolidated statements of comprehensive income for the six and three month period then ended, changes in equity and cash flows for the six month period then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information ("the condensed consolidated interim financial information"). The Board of Directors is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of condensed interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information as at 30 June 2011 is not prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the European Union.
Emphasis of Matter
We draw attention to note 28 to the condensed consolidated interim financial information for the six months period ended 30 June 2011 in which is described that Ageas is involved in a number of legal proceedings as well as administrative and criminal investigations in connection with certain events and developments having occurred between May 2007 and October 2008, some of which could result in financial liabilities for the company. However, the ultimate outcome of these matters cannot presently be determined. Our opinion is not qualified in respect of this matter.
| Amstelveen, 23 August 2011 | Brussels, 23 August 2011 | ||
|---|---|---|---|
| KPMG ACCOUNTANTS N.V. | KPMG Réviseurs d'Entreprises/ | ||
| Bedrijfsrevisoren | |||
| Represented by | Represented by | ||
| W.G. Bakker RA | M. Lange | ||
| Réviseur d'Entreprises/Bedrijfsrevisor |