Ageas SA (AGS), the majority owner of Belgium’s biggest life insurer, will return an additional 200 million euros ($264 million) to investors through share buybacks after reporting second-quarter profit that exceeded estimates.
Insurance profit in the three months through June rose 16 percent to 171.9 million euros, led by lower taxation of investment returns in Belgium and a property gain in Turkey, the Brussels-based company said today in a statement. Net income of 178.6 million euros surpassed the 155.4 million-euro average estimate of seven analysts in a Bloomberg survey and included an additional 42 million euros from the sale of Royal Park Investments.
Ageas said it will start buying back as much as 200 million euros of stock, in addition to an extraordinary distribution of 1 euro a share to be paid in December, and will give an update at a Sept. 18 investor meeting on the planned use of its cash, which had increased to 2.06 billion euros after the almost full settlement of the Royal Park sale. Ageas will have returned about 1.7 billion euros to investors since emerging from the breakup of Fortis in 2009 following the buybacks and spent about 1 billion euros so far to expand its insurance businesses in the U.K., Italy, Turkey and Asia.
“Given the size of the cash balance, we expect a further return of capital,” Albert Ploegh, an analyst at ING Bank NV in Amsterdam, wrote in a note to clients. “Ageas’s shares continue to trade at a large discount to book and the self-imposed return hurdle on future investments of at least 11 percent means there is no straightforward attractive alternative.”
Ageas rose as much as 3 percent on Euronext Brussels and traded 73 cents higher at 31.08 euros by 9:21 a.m. local time. A close at this value would be the highest since October 2009. The stock has more than doubled in the past 12 months, the best performance among the 35 companies in the Stoxx Insurance Index.
The operating margin on contracts with guaranteed return in Ageas’s life businesses improved to 0.93 percent in the second quarter from 0.68 percent in the preceding three-month period. The gain was driven by dividend income in Belgium as AG Insurance SA increased its investments in equities.
The combined ratio in the property and casualty business improved to 96.1 percent from 99.5 percent in the preceding quarter on a seasonal drop in claims, offsetting higher expenses in both Belgium and the U.K.
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