Ageas to Return $334 Million as Insurance Profit Beats Estimates

Ageas SA, the insurer that emerged from the collapse of Fortis, will return more cash to shareholders through buybacks after being found liable to compensate Fortis investors as insurance profit beat estimates.

Second-quarter profit from insurance operations rose 14 percent to 195.2 million euros ($260.9 million), the Brussels-based company said today in a statement. That beat the 159 million-euro median estimate of three analysts in a Bloomberg survey. Ageas will spend 250 million euros on buybacks in the next 12 months and said it will receive about 195 million euros from the sale of its unprofitable U.K. life business.

“Capital generation was strong in the first half,” Albert Ploegh, an analyst at ING Groep NV in Amsterdam, wrote in a note to investors. “The decision to announce a new and even higher buyback program is a very strong sign of confidence.”

The insurer needs to convince investors that shareholder litigation related to the Fortis collapse won’t wreck regular payouts of cash generated by its insurance businesses in Europe and Asia as it seeks to bolster profitability by allocating more capital to property and casualty insurance and its Asian partnerships.

The shares rose as much as 5.2 percent to 27.20 euros on Euronext Brussels, marking a recovery from a 13 percent plunge last week following an Amsterdam appeals court verdict that left Ageas liable to unspecified compensation for misinformation by its predecessor Fortis in the few days between two government rescue attempts in late September and early October 2008. Ageas set aside 130 million euros to cover litigation for the first time after the ruling.

Dividend Income

Ageas got 374 million euros in dividend income from its insurance operations in the first half and had 1.64 billion euros of net cash available at the end of June, not including 117 million euros held in marketable securities with a maturity of more than one year.

Together with its partner, BNP Paribas Cardif, the insurer agreed to take over the remaining 50 percent stake in a non-life insurance joint venture with UBI Banca in Italy for about 75 million euros, according to a statement today. Earlier this year, Ageas agreed to buy the remaining half of a Portuguese joint venture with Banco Comercial Portugues SA.

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