Ageas, the international insurance group, reported strong first-half 2024 results. Total inflows reached €10 billion, a notable 14% increase at constant foreign exchange rates and scope.
The net operating result for the period stood at €613 million, and the company anticipates its full-year results to be between €1.2 billion and €1.25 billion.
Ageas also announced a €200 million share buyback program and an interim dividend of €200 million from its Belgian operations. The company's solvency ratio remains robust at 219%.
Key Takeaways
- Ageas reported a 14% increase in inflows at constant FX and scope, reaching €10 billion.
- Non-life inflows grew by 23%, with significant contributions from the UK and Portugal.
- Life inflows doubled, with strong sales in Portugal and Belgium.
- The net operating result for H1 2024 was €613 million, with a full-year expectation between €1.2 billion and €1.25 billion.
- A €200 million share buyback program was announced alongside a €200 million interim dividend from Belgium.
- The solvency ratio is healthy at 219%.
Company Outlook
- Ageas expects continued growth in Europe and Asia and is open to mergers and acquisitions to expand its footprint.
- The company will provide an outlook for the new strategic cycle in the coming weeks.
- Regulatory developments in China could impact market dynamics, with changes expected in product offerings and pricing mechanisms.
Bearish Highlights
- The combined ratio for H1 2023 was above 100% but has since improved.
- Lower interest rates in China are impacting solvency and cash flow.
- The real estate market in Belgium is experiencing fewer transactions.
Bullish Highlights
- Reinsurance protection volumes more than doubled.
- The U.K. business is seeing improvements, with a combined ratio of 95.1%.
- Profitability has returned to required levels in Portugal's health insurance business after repricing.
Misses
- The company did not provide guidance on full-year operational capital generation.
- There is uncertainty regarding the timing and impact of regulatory changes in Asia on solvency and payouts.
Q&A Highlights
- Ageas remains confident in its growth potential without the need for M&A but is open to opportunities.
- Discussions included the impact of regulatory changes in China and the company's dividend policy.
- The company is considering asset management actions based on market conditions and the solvency position of their Chinese entity.
Ageas (AGS.BR) has demonstrated a robust performance in the first half of 2024, with strong growth in inflows and a solid solvency ratio. The company's strategic initiatives and disciplined approach to profitability are reflected in the positive outlook for the remainder of the year.
While there are challenges in certain markets, such as regulatory changes in Asia and a softer real estate market in Belgium, Ageas's proactive measures in areas like pricing and product offerings are indicative of its adaptability in a dynamic industry.
The announcement of a share buyback program and interim dividend further underscores Ageas's commitment to shareholder returns, reinforcing the company's positive narrative as it moves into the second half of 2024.
Full transcript - None (AGESF) Q1 2024:
Operator: Welcome to today's Ageas Conference Call. I am pleased to present Mr. Hans De Cuyper, Chief Executive Officer; and Mr. Wim Guilliams, Chief Financial Officer. [Operator Instructions] Please note that conference is being recorded. I would now like to hand over to Mr. Hans De Cuyper and Mr. Wim Guilliams. Gentlemen, please go ahead.
Hans De Cuyper: Good morning, ladies and gentlemen. Thank you all for dialing into this conference call and for being with us for the presentation of Ageas' results for the first half of 2024. I'm joined here in the room by the new executive committee that we have installed in the first half of this year. I'm happy and proud to report that Ageas continues to deliver against the Impact24 growth strategy with inflows up 14% at constant FX and scope on scope the divestment of our French operations last year. Our inflows reached for the first time ever, the €10 billion mark over only half year. We achieved a remarkable growth in non-life with inflows up 23%, mainly driven by the U.K. and Portugal. In Reinsurance protection, so not the part related to the internal capital management, volumes more than doubled. Last year, the portfolio was well skewed towards not cut with an emphasis on diversification, the range of products is now more balanced between property and casualty lives. Part of the non-life growth was driven by tariff increases and you can see this already running through in the combined ratio improvement in the Europe segment but more than half was realized by new business growth and customer acquisition. In Life, inflows benefited from a strong recovery of sales in Portugal. Product features were adapted in response to the changed interest rate environment, leading to a more than doubling of inflows compared to the first 6 months of last year. Also in Belgium, life inflows returned to growth, mainly driven by Group Life. And the growth in Asia was realized with strong persistency rates, building on the new business that was sold last year in China. In terms of net operating results, we arrived at €613 million over the first half year. Belgium has ever played its role as a solid performer with a combined ratio of 91.2% and a live guaranteed margin at 100 basis points. The net operating result in Europe was very strong, both in Life and Non-Life. The combination of growth and improved profitability makes us confident for the future and we look forward to confirmation of these results already in the second half of this year. In Asia, the net operating result benefited from a strongly improved insurance results, showing the quality of the business which was offset by a negative impact from the tax accounting. I would like to stress the good quality of these results expressed by these Life margins and Non-Life combined ratio, making our net operating result less reliant on the realization of capital gains. The strong operational performance is also reflected in the group operational capital generation which amounted to a high €1.2 billion. It shows the resilience and agility of our companies in adapting to external conditions, such as evolving customer demands, moving sector dynamics and a changed macroeconomic environment. With tight focus on the plan we deliver against the Impact24's targets and the strong ambition it included. And so we expect our 2024 results to end up between €1.2 billion and €1.25 billion, exceeding the initial addition of €1.2 billion included in the plan. In line with what we communicated earlier, our cash position now stands at €1.3 billion. Belgium will upstream another €200 million interim dividend during the second half of the year, bringing the results related to cash upstream for the year above €800 million. This timing for the upstream is aligned with our policy to pay a fixed interim dividend of €1.5 per share that you can expect to be paid out early December, exactly 6 months after the payment of the final dividend over last year. The Board of Directors also has considered the Solvency II ratio of 219% entered a strong cash position, including the €350 million related to the reimbursement of an internal debt and has decided to launch a share buyback program for an amount of €200 million, corresponding to around 2.5% of our market cap and beginning on 16th of September. I now give the floor to Wim, who will go further into the performance of each of the segments.
Wim Guilliams: Thank you, Hans and good morning, ladies and gentlemen. The strong net operating result was driven by an excellent insurance result in both Life and Non-Life which translated into a Life group-wide guaranteed margin at 164 basis points and a group-wide combined ratio at 94.1%. Insurance result is before tax and is the total of the operating insurance result and the investment result, excluding the result on surplus assets and the results on the general accounts. In Life, we recorded an excellent insurance result, up 47% compared to last year, showing the quality of the business written in the first half of 2024 in all countries. Belgium showed an increased investment result with similar realized net capital gains as last year, while in Europe, both Portugal and Turkey showed a strong recovery versus last year, resulting in a strong increase in the result on short-term Life. Asia recorded a strong increase in the insurance result driven by a strong result on short-term Life, resolving last year's negative experience variances by improved expense in claims management and an increased investment result, thanks to higher realized net capital gains. This was, however, more than offset by an elevated deferred tax in China. This translated into a group life net operating result at €460 million, down 4% compared to last year. Since the new IFRS 17/9 accounting standards have only been recently adopted in China and only by a small number of large Chinese insurers, to date, the taxation aspects have not yet been fully aligned between IFRS and regulatory tax account. The results Taiping Life was still in the process to adequately reflect the difference between the local and the IFRS result in deferred taxes, explaining the elevated tax rate in the first half of 2024. At the end of this year, Taiping Life should have aligned the calculations in a way that is more appropriate for the new dynamics between accounting regulation and taxation. And we expect by the end of the year, the full year tax rate moving closer to the Chinese corporate tax rates. Moving now to the Non-Life activity. Non-Life performance was strong across all segments, resulting in a group-wide combined ratio of 94.1%. This translated into a net operating result of €200 million, up 9% compared to last year. Important to note that last year was exceptionally benign in terms of weather, especially in Belgium, the first half of 2024 recorded a weather impact in line with the long-term average. Significant improvement was recorded in Europe thanks to the strong technical performance in both the U.K. and Portugal. Regarding the balance sheet evolution, the CSM roll-forward of the group showed a positive operating CSM movement of €276 million. This positive evolution corresponding to a 5.9% growth on an annualized basis was supported by a significant contribution from new business which was higher than the CSM release. CSM release amounted to €435 million, translating into an annualized release of 9%, while the new business reached a high €538 million. This positive operational CSM movement, along with a solid group net operating result, supported the comprehensive equity which amounted to €15.9 billion, up 2% compared to year-end of 2023. Our cash position increased from €959 million to above €1.3 billion. This includes €350 million from Belgium related to the previously announced reimbursement of an internal debt and €601 million dividends received from our operating entities. Previously mentioned by Hans, an additional €200 million interim dividend related to the H1 2024 result is expected to be received from Belgium in the second half of this year, increasing the total cash upstream from the entities to above €800 million in 2024. To conclude, I would like to add a word on solvency and free capital generation. Mentioned by Hans, the solvency of the Solvency II scope companies stood at 219%, up 2 percentage points, was mainly driven by a strong 10 percentage point of operational contribution above the accrued dividends. Solvency of the non-Solvency II scope was slightly down to 276%, driven by strong operational performance offset by regulatory-driven model movements and the buyback of supplementary bonds in China. Important to mention that the previously discussed elevated tax in China has no impact on the solvency ratio and deferred taxes are not recognized in the Solvency calculation. The operational capital generation of the group amounted to a strong €1.2 billion, up 19% versus last year and the operation of free capital generation of the group amounted to €934 million. The operational free capital generation included €401 million from the Solvency II scope companies which is a strong increase compared to last year. Increase was driven by strong improvement in Europe, partially offset by a lower contribution from the Reinsurance segment. Both operational free capital generation of U.K. and the Reinsurance segment reflect a higher required capital following the significant realized profitable growth. The non-Solvency II scope, the operational free capital generation increased significantly to €630 million, driven by the growth in China, increasing the available capital. Additionally, the focus on value and the divestments from equity during the first half of 2024, considerably lower to required capital compared to the same period of last year. I have now reached the end of my presentation and we are ready to answer any questions you may have.
Operator: [Operator Instructions] We will now take our first question from David Barma with Bank of America (NYSE:BAC).
David Barma: The first I have is on Chinese remittances. Are there any implications from Taiping moving to IFRS 17 better than we thought? Is the regulator now taking a more realistic view when considering payout ratios? That's my first question. And then secondly, on Europe. So you're targeting a below 95% on discounted combined ratio for the U.K. What did you achieve in the first half?
Hans De Cuyper: Okay. Thank you, David. Well, both questions, I will ask Wim, CFO to respond on this.
Wim Guilliams: On your first question on IFRS 17 and linked to the dividend policy of CTIH. Now it's important to mention that as a reference performance management framework CTIH and also Taiping Life has already moved to IFRS 17/9 as a reference. So that is already what was driving also the cash upstream decisions of this year. Now you will have seen probably the communication of CTIH on the dividend policy that they will apply going forward. which, as we also explained in the past, that creates a nice alignment of interest with us because that also means that, of course, Taiping Life has to upstream to CTIH to live up to that commitment going forward. On the cash upstream as such, we confirm also what we said in the past, that the biggest constraint looking forward remains, of course, that solvency framework. It's less the earnings and so the IFRS 17 and what they do there. But it's more the solvency ratio which is now at a very comfortable level. But of course, the outlook, what could happen and what could be the sensitivity of that solvency ratio going forward. I then take your second question on the combined ratio, U.K., indeed, U.K. is part of Europe and there you see a nice improvement of our combined ratio to 95.1% compared to 98.1% last year which is a nice improvement that's, of course, driven by the improvement of the U.K. and by the improvement of Portugal. Remember, last year for Portugal, we made reference to that health issue that has been fully resolved and that you see in that performance. Now in the combined ratio of Europe, you also have Turkey and there you know that Turkey is a bit more difficult market, especially on the third-party liability products. So what we said at beginning of the year because we don't disclose the individual numbers that Europe was a good guidance for what you would see as a combined ratio in the U.K. Now we can say that U.K., Portugal are slightly below and Turkey and Non-Life is higher but due to a known impact in the market linked to Taiping Life to third-party liability, same abbreviation difference explanation, sorry.
David Barma: Just a follow-up on the first one. So when thinking about the Chinese business sensitivity to lower interest rates there, should we mostly be thinking about the impact on solvency then when thinking about the impact with cash ultimately?
Wim Guilliams: That's correct to look at it in that way. You remember that solvency in China is still driven either local accounting results which create net asset value which is a big component of that solvency. And so you will get, over time, of course, still that 750-day moving average that will run through the local result and through the solvency.
Operator: We will now take our next question from Farooq Hanif with JPMorgan (NYSE:JPM).
Farooq Hanif: Congratulations on your results. Just firstly, could you just give a little bit more detail around the CTIH policy on dividends and kind of what you would expect Taiping to have to do to meet that? And maybe just kind of a little bit more on the current solvency position and where that might move given what we know about the yield curve. It feels like Taiping, it feel that solvency is -- I just want to check what that would mean for cash upstream going forward? Second question is on the holding -- holdco cash result which dropped a lot. So there's a central cost that dropped in the holdco. Is that sustainable? I think it was €76 million in the first half. Is that kind sustainable reduction? And maybe last question, just on what you're seeing in terms of outlook for stability in the U.K. business and those Motor pricing is probably now reducing a little bit but it feels like it is still improving. So if you could comment on what you see in sustainability, I guess, of combined ratio in Europe in light of this.
Wim Guilliams: So, I think first -- second question on the holding cost drop. The holding cost, it's good to re-explain that this is a cash outflow metric. So there is no accrual of costs in there. If you want to see more accrued metric, it's better to look at the general account results. Now this cash flow metric holding cost has been positively influenced by the improvement in the net interest results. So we have, of course, the benefit on the cash that we're investing that is creating higher yield and that's translating in a lower holding cost level. Now part of that was structural. Half of that was structural. Half of that was timing related because in that number, we have also the payment on the debts, the sub-debt that we have outstanding in the market. And because the end of June was over a weekend, where last year, we were paying that out in the first half. Now we have paid that out in the second half. So there's a part which is structural, there's a part which is not structural. But if you want to see more how the run rate will be evolving, the general account result is a good reference which has also the accruals in there.
Hans De Cuyper: On the dividend, no, I think we explained in the first.
Wim Guilliams: Yes. Now on the dividend, CTIH, I can repeat, they have communicated to the market that they have the ambition to have a stable dividend. Going forward, CTIH is the mother company of Taiping Life, in CTIH; they have debt which they have to remunerate. And of course, they need the upstream of the dividends of the entities for which Taiping Life is the most important to be able to live up to that commitment of their dividend at the CTIH level. So on that, we always say that we have an alignment of interest that we are both interested, of course, to have the maximum cash upstream that we can have out of the Chinese Taiping Life operations.
Hans De Cuyper: Okay. Let me share with you, if I look the outlook on U.K. Maybe first, the market, I think we have to make a split here between Motor and Household there, our 2 main business lines. If you look year-on-year, 12 months, the market has seen in Motor pricing increase of 14% but you also see that the last 2 quarters, we see that the market is already softening and we see a slight decrease in pricing coming into the market. That is also, by the way, what we expect to continue in the second half of the year. If you look at households, I would say in household, profitability has not yet been fully restored. So pricing increases are still ongoing also on our side, by the way, we think we are approaching potentially a tipping point here on hardening of the market but I do not see the softening coming in so significantly already in the second half of the year. I would say, we are still a little bit earlier here in the cycle, what you could call the cycle than we see in Motor. If I look at our business, well, first of all, we are -- we have seen significant growth and that came partially from being an early mover in this cycle. I remember what we announced in the end of '22 and '23 results on this topic. So I think we are still benefiting from that position. Secondly, I think we are also well equipped to face a potential change or softening in the cycle for 2 main reasons, I would say, first of all, we have a more agile pricing and underwriting methodology in place. We have said that in the transformation in the U.K. that we were building that, that is now live both for Motor and Household. So that means we can position our more, what I would say, finally in the market and we can adjust to the price cycle a lot faster than we used to do. Second, the U.K. transformation program on the operational side is, I think, also making good process and you see that in expense ratio in U.K. coming down. So with a lower expense ratio, I think we are also better positioned to face the potential change in competitiveness in the market.
Operator: And our next question comes from Michael Huttner with Berenberg.
Michael Huttner: I'm afraid I'm going to ask again on China because I don't think, I don't have the impression that you answer the questions and I'm really sorry to say that normally. So if I remember from previous -- you actually gave the solvency number for China in the past from memory, it was dipping to 270 or 260 or something. So I just wondered if you can give an update on that and the drag on that number which forecast how much it could go down. And also on the cash from China because I hadn't my model previously, the cash figures from Malaysia, Thailand and China. And I can't find them in environment. I just wondered maybe -- maybe it's interesting, Filip but apologies for that. The second is congratulations on your fantastic growth. And here, the 2 kind of questions linked to that. The first one is strategic. Does it mean that you're happy with the business model as it is, you don't need another strategic kind of fourth leg or whatever? And the second is the operating profit, it's actually going to be the same second half or first half as I judge by your numbers. So when will that growth come through into the operating profit?
Hans De Cuyper: Thanks, Michael. Well, let me introduce you to the new CRO, Christophe Vandeweghe, who took position on June 1 and we will follow everything on solvency. So I'll give your first question to Christophe.
Christophe Vandeweghe: Yes. So perhaps this is straight to explain a bit the dynamics there is to look also what happened since the end of last year to mid this year. So what you see is in China, we have a core solvency ratio of 147 that went to 154. and we have a comprehensive solvency ratio that went from 285 to 278. So the dynamics that you have in there is that, first, there was a regulatory change that has a influenced on the core solvency also which is called the cap on the future policy surplus. So I think that was something that was also mentioned end of last year that, that would be coming. And that's also what you see in our free capital generation reflected in terms of model change. So that had a negative one. But what you also see, of course, is that your accounting net assets are increasing. And the driver of that is also the unrealized gains because now in the solvency, the assets are put at AFS. So the market value flows into the solvency. And that of course, gives a positive upside, what you see there on the solvency, while on the liability side, as Wim mentioned, this is a mechanic that average is over 750 days. So that only gradually goes into the solvency. So that were the main dynamics. And then on the comprehensive solvency also dropped but that was linked to what Wim also mentioned which is the bond buyback and the supplementary capital that was cancelled.
Hans De Cuyper: Okay. Wim, on the cash flow.
Wim Guilliams: Yes, Michael, if you look at the table that we published, the Excel, you will have there holding cash and there you have the overview of the net dividend upstreams per segment and then also per entity. And there you see, for example, in China, upstream 78 in the first half of the year. We have there also the history going back to '22 because that's the year we did the IFRS 17/9 transition. If you need more historical data, I refer to the colleagues of Investor Relations.
Hans De Cuyper: Okay. Your last question, Michael, on the growth and I would say, the profile of the group going forward. Well, first of all, we are quite confident on this growth potential to continue in the second half of the year and after with our current footprint. Of course, as you see, inflation starting to soften like in Europe, the same inflationary effect in non-Life is not to be expected to continue. But the business growth that we have seen, I think we are very confident with the quality of the business that we have in Europe and the focus on building and driving customer satisfaction, I'm quite confident here on the quality of the business. Adding a fourth leg, well, first of all, let me repeat that we always give you a growth story without the need of M&A and that has not changed. The growth potential is there in our footprint in Europe and Asia. But at the same time, there is no change on our vision on the future M&A that we would like to see. So if we see opportunities even when they would come, we would look at cash generating controlled entities and then automatically, you can potentially easier in Europe. So there was actually no change there in the ambition to continue gradually building the footprint of the group.
Operator: And we will now take our next question from Anthony Yang with Goldman Sachs (NYSE:GS).
Anthony Yang: The first question is coming back to China. I think there is a new regulatory pricing going on or will happen in China. Can you guide when that will happen and how Taiping Life is prepared for that? And second question, is coming to the Non-Life, should we regard the combined ratio in Europe and Belgium as a normalized level going forward?
Hans De Cuyper: Okay. Thank you, Anthony. Well, your first question is very China specific. So I'd love to give it to our China expert, Filip.
Filip Coremans: Thank you so much, Hans. Yes, there is quite, I would say, a healthy dose of regulatory developments at this moment in China which will have a material impact on the market dynamics which we feel are all for the better. First and foremost, of course, the regulator end of the first half stimulated a restraint in the par bonuses which has been quite helpful in managing customer expectations looking forward on that, then most importantly, we have freight reductions coming up. Other than last year, they will be with almost immediate effect which avoids the fire sale that we saw last year. So nonpar guarantees will be lowered from 3 to 2.5 percentage over the 1st of September. And in the participating and universal Life books also rate reductions are there from the 1st of October. Par will come down from 2.5% to 2% and universal life from 2% to 1.5%. Next to that, there is a more structurally important initiative that the regulator is taking. They have requested the China Insurance Association to come up with a dynamic price adjustment mechanism linked to 10-year bond yields and 5-year loan prime rate which obviously, will install hygiene and agility, I would say, discipline and more professionalism in pricing in the market which is a very welcome initiative as well. And then finally, they have also requested the sector to look at the mix between -- over their product mix, bringing more participating products and universal Life into the mix next to non-par which, as you know, gives more flexibility in managing customer returns through a low interest rate cycle. So adding that all up, that should be a benign certainly in the midterm for the volumes and interest rate agility management. In the short term, it may impact briefly the new business volumes we will see. The Taiping Life is well prepared. I think training has been provided to all channels on how to guide customers in that transition. Operationally, they are ready. And actually, as from the 1st of September, we will see the shift in the product mix happen.
Hans De Cuyper: Well, maybe a word on combined ratio.
Wim Guilliams: Thanks Anthony, for the question. I find it always difficult to talk in a combined ratio of a normalized run rate. You know that inherent volatility in our Non-Life business. What I can say is that if you look at the numbers, what you see now is that we had a weather impact which is in line with the long-term average. So that's important to note. What I can also say is that for Europe, we are confident in the future. We see the improvements in U.K., Portugal compared to last year. As I explained, we have a combined ratio already slightly below what you see for Europe and it's Turkey which brings it to the 95%. And I think I can repeat what also Filip has mentioned in the past on Asia. We're very pleased with the improvements we see there but there's still a lot of initiatives which are planned to further improve that to a lower level.
Anthony Yang: If I may just follow up on the first question which is which really, really helpful on the comments. I think theoretically, say, if we see a higher value of new business going forward, given all these measures to improve economic value. But at the same time, say, if the China government bond yield still decline, theoretically, how would that impact the IFRS earnings, would that still -- will that increase given the release from the CSM new business? Or would that decrease given the lower yield?
Filip Coremans: Yes. There are 2 effects in there. And then you have to keep in mind that although we talk about big balance sheets in China, they are still relatively young. So new business discipline and pricing is extremely important because that still drives the new business CSM as we saw in the figures on Taiping or China and even on Ageas this year. It's an important source of capital generation for the future. So installing that pricing discipline that the regulator is pushing for on new business is critical to guide the market forward to rate cycles. And that is the essence of what they try to do. On the back book, there are ALM gaps in China and that way but that slowly impacts the result. So agility in new business is the essence of what they try and will achieve.
Operator: And we will now take our next question from Nasib Ahmed with UBS.
Nasib Ahmed: First one on IFRS Solvency II reform, what's the expected impact on the Solvency II entities from that reform? And then secondly, on the holdco cash position, very strong but the interim dividend and the share buyback is coming off it. I know you don't typically give a range of whether you're comfortable but typically, companies are looking at 1 year's dividend holding company costs. Is that the way we should look at your kind of holding company cash range where you'll be comfortable with that position?
Hans De Cuyper: Okay. First question, I'd love to give to Christophe again.
Christophe Vandeweghe: So on the 2027 Solvency II review, we do expect an overall slight positive impact. This would be mainly coming from the reduction of what we call the cost of capital rate that is used in the risk margin calculation. So the risk margin is sort of a buffer on top of our best estimate of our liabilities. And this cost of capital rate drives the size of it. So it's sort of an approach to say what is the cost that you need to set aside the risk other and the provisions. So this is supposed to drop and that should normally be the one that is the most positive for us. So overall, a slight positive impact when we will put everything together.
Wim Guilliams: On the second question, we don't give clear guidance on that because we don't want to be tied to a specific number, neither because it depends on a lot of circumstances and that we have also other measures in place, if you would have a lower cash position to manage that going forward. So the guardrail that you make a reference to sounds a very financially sound guardrail. So that's also some that we see with peers. So that's something that we also have in mind when we look at the cash base.
Operator: And we will now take our next question from Steven Haywood with HSBC.
Steven Haywood: Two questions from me. The first one is on the Non-Life businesses, in particular, Portugal, we have the change in trends in the past, maybe it was on the Health side of things here. I was just wondering if you have any update or any new trends that are coming out of here and how the pricing is developing versus any concerns that you're having in Portugal? And also how the change of tax on the Taiping Re side of things, that seems to have improved. Can you give us a bit of information about the sort of trends you're seeing on Taiping Re. And then secondly, obviously, you've announced a very impressive share buyback today. But can you remind us what the group policy is on excess capital and shareholder remuneration. I know you've got an Investor Day coming up very soon but if you can sort of discuss what your thought processes are around sort of capital management and returning further excess capital to shareholders in the medium term?
Hans De Cuyper: Thanks, Steven, for your questions. Well, the first one is, I would say, more strategy and operations in Portugal. So let me introduce you, Ben Coumans who is now heading the Europe segment for us in the Executive Committee. So Ben, please?
Ben Karel Coumans: Yes. So last year, in Portugal, the Health business suffered a bit from the fact that National Health Service was a little bit in trouble. And we were confronted also with increased prices of Health providers. But in this year, we have actually managed to compensate that increased cost by repricing the book. And we have been able to do that without any loss of market share. It's a little bit a market phenomenon where the whole market has had to react in a similar way. So health insurance has become a bit more expensive in Portugal but profitability is now back within our required levels.
Hans De Cuyper: Thank you, Ben. And you all know Emmanuel. Emmanuel is now heading the reinsurance and investment segment. So I give your question on Taiping Re to Emmanuel.
Emmanuel Van Grimbergen: Thank you, Hans. So on Taiping Re, you are right to say that the profitability is increasing. The combined ratio H1 '23 was well above 100%, 105%, decreasing now to below 100%. The answer is -- and the reason is very simple. It's focus on profitability, on margin, if you look at the inflow of Taiping Re compared to H1 '23, the inflow decrease of Taiping Re. So the focus is really on further diversifying the book profitability and margin.
Hans De Cuyper: Thanks, Emmanuel. But your last question and I think underneath your already a little bit forward looking at towards the end of September. Let me repeat what it is today our shareholder remuneration is based on a DPS growth story and we think we are still very much on track to deliver on this for the full Impact24 cycles. So that's number one. Two, we have always said and I think we are very consistent over the last 3 years about share buyback. We have said if we have the cash and the solvency position and taking into account all the other elements on the group going forward, we have excess capital. There is an option to do share buyback. And we feel that after the repayment of the debt that was held from the group at AG that we are in such a situation today and that's why we have announced the €200 million share buyback today. And going forward, I would say I don't see a change in that statement for this cycle. And what we will bring to the market for the next cycle, I hope you have patience for another 4 weeks. We will come back to you and share with you our outlook for the new strategic cycle.
Operator: And we will now take a follow-up question from David Barma of Bank of America.
David Barma: I just have a few small follow-ups. Firstly, on the combined ratio of Europe and sorry, if I'm a bit slow on this but the -- you're targeting below 95 discounted for the U.K. You were at 98 for the whole of Europe, you're saying Portugal has fixed the issues in Health and Portugal used to do high 80s or 90s. I understand there's a drag from Turkey but this would suggest the U.K. is still at very high levels. Could you give us a bit of color and the number would be great to the U.K. given you have a target for that? And then secondly, on Belgium Non-Life, the prior year releases were a bit lower than your normal run rate. Is there anything special in there? And then lastly, on Asia on the investment results which was very strong even adjusting for the capital gains. Do you think that's a recurring level.
Hans De Cuyper: This, I think, are 3 questions for Wim on combined ratio and investment results.
Wim Guilliams: Yes. On the combined ratio, maybe have a look at Page 28 for Europe. The 98 is the number of last year and we're now going to the 95 level. So you see there the improvement in that combined ratio which is driven by both the improvement in the U.K. and the improvement in Portugal.
David Barma: The discounted...
Wim Guilliams: That is discounted numbers, so including that discounting effect of 3.8%. If you look at the -- you want to have a guidance of the U.K., we confirm the guidance that we have given in the November Investor Day, where by '27, the ambition is 94%, below 94% on undiscounted basis.
David Barma: This year, did you have below 90 or 95 undiscounted for this year. Is that still relevant?
Wim Guilliams: We were not disclosing that number separately because it's grouped in the full Europe results. On the second one, the prior year in Belgium, there you have some impacts which are more one-off related to 1 product group which meant that we went from minus 2, if I'm correctly, to minus 1. but they had more to do with last year where you had in workers' comp, if I remember correctly, some exceptional releases. So that is driving the element there. On the Asia element, the third one, it's a bit following of the explanation that Filip has given. It's very important to have that pricing agility because that will drive the value of new business going forward and that value of new business will translate in that CSM release as part of the operating insurance service result. Of course, your investment results will be driven by the lower yield compared to the yields we have offered in the past but you have to, of course, imagine that you're going to have a combined effect here of the margin as such and the volume development because this portfolio continues growing, of course. The lower rate will make that it will be difficult to have a growth rate of the investment results in line with that growth rate of the assets under management but you have to look at it dynamically going forward.
Operator: And we will now take our next follow-up question from Michael Huttner of Berenberg.
Michael Huttner: And thanks for being so clear on the answers. On the tax in China, could you give a figure and I'm not sure whether the figure I should ask for is the full year or the half year. I don't know which is the most relevant. And the second is on real estate. Can you give us an update of what's happening in the market in Belgium?
Wim Guilliams: On the tax rate, Michael, thanks for asking the question and you will have noticed that when I did the introduction, it's here about deferred taxes. It's a difference between a local result and an IFRS result which translate in deferred taxes. You will see in the Asia result, a total tax amount of €200 million approximately €200 million, we can say that the majority of that is, of course, China and the majority of that is deferred taxes. We don't have separate disclosures on that because that's also the agreement with a partner company what they disclosed this morning, yesterday evening, you will see that also for them, it's mostly the deferred tax that they are mentioning there.
Michael Huttner: And that's just in the first half? Or is there more to come in the second half?
Wim Guilliams: That all depends on the evolution of that local result compared to the IFRS result. And as you know, the local results are still impacted by that revaluation of the non-participating business, that 750-day moving average which continues increasing these liabilities. That means that the local result is much lower than the IFRS result. And the difference between that generates deferred taxes. So you can expect that, that will still continue towards the next half year. But as I mentioned in introductory speech, we are expecting that the combined effect will bring us to an effective tax rate which will move closer to the Chinese corporate tax rate.
Michael Huttner: On real estate?
Wim Guilliams: Yes. On real estate, maybe a question on the real estate portfolio in Belgium. What you see in the numbers is, of course, the revaluation exercise we do every quarter because that's also an accounting obligation that you have to revalue your real estate every quarter. And in Q2, we do a more thorough analysis, where we run through all the different investments. And you see that we confirm the same amount of unrealized capital gains before tax, we mentioned €1.3 billion. You see it also in the comprehensive equity of the €1.2 billion after tax. And that exercise has been confirmed. So what you see happening in the market of real estate is, of course, less transactions. We were coming when we had a low negative interest rates in a very supportive market for real estate. The transactions happened after a couple of weeks, that you don't no longer have. There's still transaction in the market but they will take a bit more time. Why is that unrealized capital gains in real estate holding up better? Of course, what we repeated in the past, we have a low leverage portfolio. We have diversified that portfolio over time. So we have regional exposures and we have exposures over different sector levels. So going forward, to complete the answer, I think on the realized capital gains, we can be more selective because with the strong insurance results that we have today, we are less dependent on these realized capital gains going forward.
Operator: And we will now take our next question from Michele Ballatore with KBW.
Michele Ballatore: Yes. I have just one question about the -- going back to the operational capital consumption in the first half of 2024 versus last year, I mean, obviously a material improvement -- I mean, how much of this improvement, let's say, is nonrecurring? And how should we look at this factor going forward, second half but also in the next years. Can you guide us in terms of also thinking about this factor modelling it.
Christophe Vandeweghe: So perhaps the easiest way to follow this is on Page 17 of the presentation that was shared. You see basically the details of this free capital generation. So you see the operational capital generation there. You see the operational capital consumption and the operational free capital generation. So you see a little bit of dynamics there. So we have a part which is our Solvency II scope. So within our Solvency II scope, you see a clear improvement of the operational capital generation. This is mainly driven by a profitable growth. So I think you have the details also further in the pack. So you can see that on all of the segments, we are actually increasing our operational capital generation. So -- but what you then also see indeed, compared to last year, we see that we also lock in €86 million of capital, that's actually mainly driven by Europe and reinsurance and that brings us to a figure of operational free capital generation which is -- which goes from 368 to 401 for the solvency scope. So basically, that is driven by the growth. You get the profitability in there but you also have a capital charge that comes with it. So it's driven by the growth that we have there. Then on the non-Solvency II scope, what you see on the operational capital generation is that we go from 700 to 754, this is mainly driven by strong sales in China in the first half of the year. But what you then see and that was also mentioned in the intro by Wim, is last year, we had much higher operational capital consumption that we have this year. So by definition, if you grow, you will lock in capital. But what we also have is we had a derisking of the investment portfolio. So due to the drop in the equity portfolio in China, we see that now this year, we have a much lower operational capital consumption. So that is the driver. It's asset management driven and that is the main reason why when you look to operational free capital generation of the non-Solvency II scope that you go there, more than €400 million up and that our overall operational free capital generation is much higher than last year. In terms of outlook, well, we do not give any guidance on full year operational capital generation because as you hear in the explanation, there can be some temporary volatility which can be due to the movements of the capital consumption and the required capital like we had this time with asset management actions and also, of course, the new business that we generate during the period.
Michele Ballatore: So the effect of these asset management actions will be -- I mean, will continue.
Christophe Vandeweghe: The asset management action is a one-off that offsets a growth figure. So if we do not further derisk, it will not be recurring.
Operator: And we will now take our next question from Jason Kalamboussis with ING.
Jason Kalamboussis: First thing, just a follow-up question on what you just discussed. So could you -- if you cannot give an outlook, can you at least give us a split or how much is the element that was driven to the asset management changes in the first half, so that at least we know which is a more normalized level for -- excluding this and if you can also tell us if it's something that we think will continue in the second half. The second thing is coming back to the U.K. I mean you have merged essentially the U.K. to Europe and you don't disclose it separately but then you try to do a mega deal in the U.K. which means that we'll go back to separate disclosure. So here, it's less of a question but it would be great to consider, again, showing more disclosure of the U.K. essentially because you want to do possibly a bigger deal there and it's important for us to have the granularity and to see the progress you are making more specifically. And so my second question is on Asia. Thank you for walking us through all the regulatory changes that are being considered. Could you tell us when this will actually happen on the solvency side because -- when do you think that there is going to be an outcome because that essentially will crystallize that side and essentially, if I understand it well, that should also free up CTIH to possibly increase its payout.
Hans De Cuyper: Jason, well, I think you make a lot of assumptions here going forward. But okay, let's see whether we can at least give you a little bit of insight on the first one. The second one, I'll respond in a minute. Third one, Filip will come back, Christophe on the first one.
Christophe Vandeweghe: Yes. Well, just to come back on the comments we made before. So we will not give any full year guidance on the operational free capital generation, so whether there will be other asset management actions in the second half of the year will depend on the markets and the solvency position of our Chinese entity.
Hans De Cuyper: The second one, well, we love to report on segments that are sizable and relevant. And that's why we have gone to Belgium, Europe and Asia and reinsurance, of course, is separate. I cannot comment on what you call a mega deal. But today, I think we have a very fair representation of our business performance. So at this moment, no, we do not plan to bring the U.K. back to a separate segment. And then...
Filip Coremans: Yes. Just to dot the I -- I did not mention any regulatory action on the solvency front, just to be clear, what I mentioned was guarantee reductions on all the product lines which will come in September and October and are already being implemented. Then product mix changes will effectively start from September as well. And the dynamic pricing mechanism has not been announced but is in under discussion. So I do expect that before the end of the year, that also will be finalized. But all these relate actually to pricing, let's say, hygiene factors on new business. On solvency, there is no public announcement by NAFR on any C-ROSS II revision for the time being.
Operator: As there are no further questions, I would like to return the conference call back to the speakers.
Hans De Cuyper: Ladies and gentlemen, thank you for your questions. And to end this call, let me summarize the main conclusions. We are delivering on our growth ambition embedded in our Impact24 strategy through significant organic growth in all our entities. And next to this outstanding commercial performance, our operations also delivered an excellent insurance results, giving us confidence for the future. In the shorter term, we expect the net operating result for this year in the range of €1.2 billion to €1.25 billion. And the Board has carefully considered the capital and cash position at the end of this first half year and has decided to launch a new share buyback of €200 million, around 2.5% of our market cap on top of the €1.5 interim dividend per share. With this, I would like to bring this call to an end. Don't hesitate to contact our IR Team should you have outstanding questions. Thank you for your time and I would like to wish you a very nice day. Thank you.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for attending. You may now disconnect your lines.
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