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Ageas’s Embedded Value Drops on Bond Spreads, Lower Returns

Ageas said the embedded value of its life insurance business fell last year because of a decline in the value of government bonds, a drop in risk-free rates and lower returns on new contracts.

Embedded value, an estimate of a life insurer’s worth based on its net assets and current sales, dropped to 3.69 billion euros ($4.81 billion) from a restated 5.4 billion euros at the start of the year, the insurer, based in Brussels and the Dutch city of Utrecht, said today in a statement. The value added by new business declined 50 percent to 32 million euros.

Ageas calculates reinvestment yields by applying a liquidity premium to risk-free rates for various maturities in various currencies, which are derived from forward swap curves and declined for maturities exceeding three years. The internal rate of return on new contracts dropped to 8.2 percent last year from 10.1 percent in 2010, led by declines in Portugal and Hong Kong.

The estimated embedded value excludes the value of Ageas’s minority stakes in Taiping Life Insurance Co., Etiqa Insurance Bhd., Muang Thai Life Assurance Co. and IDBI Federal Life Insurance Co. The value of those holdings in China, Malaysia, Thailand and India was about 817 million euros at the end of 2010, Ageas said on Sept. 29.

Former Directors

Separately, Ageas said today it will ask shareholders’ approval in Brussels to take “any conservative measure” including judicial action against former directors who were in office during 2007 or 2008.

Ageas risks losing the right to file claims against former directors in the future because of the five-year statute of limitations. Some former directors have not granted a waiver of the acquired time bar, Ageas said today in the invitation for the annual meeting on April 25 in Brussels, without naming the directors.

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