Ageas Posts Loss on Cost of Unwinding Ties With Fortis Bank

Ageas, the insurer formerly known as Fortis, posted a third straight quarterly loss after sharing the cost of unwinding debt ties with its former banking unit and the value of an option on Belgium’s stake in BNP Paribas SA fell.

The first-quarter net loss narrowed to 83.8 million euros ($108 million) from 153.6 million euros a year earlier, the company, based in Brussels and the Dutch city of Utrecht, said today in a statement. Profit from insurance operations rose 15 percent to 154.8 million euros. That beat the 127.7 million-euro average of eight analyst estimates compiled by Bloomberg.

Ageas compensated BNP Paribas, which bought control of Fortis Bank SA in May 2009, for the value loss resulting from the conversion of hybrid capital notes into Ageas shares following a discounted tender for the securities by France’s largest bank. The settlement, which also involved reimbursement of other debt securities by Fortis Bank, gave the insurer 666 million euros of additional cash to spend on acquisitions, shareholder distributions, debt buybacks or keep as a cushion against legal claims from investors who suffered losses in the Fortis collapse.

“Insurance earnings were better than expected, supported by strong performance in Asia and Belgium and by recovering financial markets,” Dirk Peeters, an analyst at KBC Securities NV in Brussels, wrote in a note to clients. “Life activities contributed with good margins, but also overall higher net realized capital gains.”

Capital Gains

Capital gains boosted first-quarter insurance profit by about 43 million euros, a 12 million-euro increase from the same period a year earlier, Chief Executive Officer Bart De Smet told analysts on a conference call.

Ageas fell 3.5 cents, or 2.6 percent, to 1.319 euros by 1:01 p.m. on Euronext Brussels, trimming gains so far this year to 9.9 percent. The 32-company Stoxx 600 Insurance Index fell 2.9 percent.

Profit from Ageas’s life insurance businesses rose to 125.5 million euros from 105.7 million euros in the same quarter a year earlier. Life funds under management rose to 65.6 billion euros from 64.4 billion euros at the end of last year.

First-quarter earnings in the non-life business increased to 26.2 million euros from 24.8 million euros a year earlier as gains and lower motor-insurance claims in the U.K., as well as an expansion into Turkey, compensated for weather-related claims in Belgium.

Combined Ratio

The combined ratio, which shows costs and claim payments as a percentage of premium income, rose to 101.9 percent from a restated 101.5 percent in the first three months of 2011.

Shareholders’ equity increased to 8.3 billion euros, or 3.48 euros a share, as of March 31 from 7.76 billion euros, or 3.23 euros, at the end of last year as narrowing corporate and sovereign bond spreads offset the first-quarter loss.

Ageas sold almost all of its remaining Greek sovereign debt following the debt restructuring, netting a gain of 5 million euros, and took advantage of the narrowing spreads to reduce holdings of Spanish and Italian bonds by 28 percent and 12 percent respectively at a combined loss of 62 million euros.

Chief Financial Officer Christophe Boizard reiterated his Feb. 20 comments that Ageas is in talks to take over corporate loans from undisclosed banks to increase investment yields following the reduction of higher-yielding southern European government bonds.

Ageas seeks to reach an agreement with the banks by the end of the second quarter and plans to allocate as much as 5 percent of investment assets to corporate loans, Boizard said on the conference call.

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