Ageas Keeps Dividend, Seeks Corporate Loans to Boost Yield

Ageas, the majority owner of Belgium’s biggest life insurer, maintained its dividend after writedowns of Greek bonds and a decline in equity markets wiped out insurance profit last year.

The loss from insurance operations was 104.4 million euros ($138.5 million) in the fourth quarter compared with profit of 57.6 million euros a year earlier, Ageas, based in Brussels and the Dutch city of Utrecht, said today in a statement. The loss included an additional 125 million-euro value reduction of Greek bonds and impairments of the equity portfolio, mainly in Asia, and of goodwill in Hong Kong.

Ageas faced a 0.6 percent decline in funds under management last year, not taking into account disposals, as its life business had to compete with banks seeking to attract more deposits amid tightening credit markets. The insurer also risks lower investment yields after reducing its holdings of Italian and Spanish government bonds and said it plans to start buying as much as 3 billion euros of corporate loans from banks.

“We are actively working with the banks to take part of their portfolio of loans under certain conditions,” Chief Financial Officer Christophe Boizard told analysts and investors on a conference call today. “It’s an attractive way of increasing the yields of the portfolio.”

Asset Allocation

Boizard said Ageas seeks to allocate 5 percent of its investment assets to corporate loans and is also considering stepping up purchases of equities this year. Government bonds currently account for 53 percent of its investments and corporate bonds for an additional 36 percent.

Ageas had paper profits on the fixed-income securities of about 600 million euros on Dec. 31, a decrease from 1.4 billion euros at the end of September. Its equity investments were almost breaking even.

The insurer no longer discloses unrealized gains or losses on 4.37 billion euros of Belgian government bonds, which are no longer classified as assets held for sale. Ageas earlier shifted 494 million euros of Portuguese debt to bonds that are held to maturity.

Ageas declined as much as 2 percent on Euronext Brussels and traded 1.8 cents lower at 1.696 euros by 12:45 p.m. local time. The shares have gained 41 percent since the start of the year, the best performance among the 32 companies in the Stoxx 600 Insurance Index.

Investment Margin

The insurer had an investment margin of about 90 basis points in its Belgian life-insurance business last year and is pricing its guaranteed products to keep that margin stable this year, Chief Executive Officer Bart De Smet said on today’s call. He had previously set a target for a margin of about 100 basis points.

Shareholders will receive an unchanged dividend of 8 cents a share following approval at the annual meetings to be held in Brussels and Utrecht at the end of April.

Ageas will have 1.1 billion euros of cash left after the distribution and its top spending priorities are business investment, shareholder distributions and debt buybacks, in that order of importance, De Smet said on today’s call.

Shareholders’ equity increased to 3.23 euros a share on Dec. 31 from 3.15 euros at the end of the third quarter, reflecting a lower share count following stock buybacks. Ageas completed a 250 million-euro stock buyback on Jan. 25 and plans to cancel the shares it acquired.

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