Utrecht,
30
August
2017
|
07:00
Europe/Amsterdam

a.s.r. reports solid results in first half of 2017

Strong operating performance continues to drive financial results in first six months

  • The operating result rose by 28.8% to € 385 million in H1, with all business units contributing positively. Operating result of the Non-life segment was up 71.0% to € 106 million; Life segment up 14.6% to € 314 million.
  • Operating return on equity stood at 17.4% in H1, well above the target of ‘up to 12%’.
  • Combined ratio was 93.6% in H1, 2.8%- points better than in H1 2016, mainly due to a clear improvement in P&C.
  • Operating expenses decreased by € 1 million to € 283 million, which includes the additional cost base of acquisitions.
  • Profit for the period (on IFRS basis) increased by 4.2% to € 397 million.

Strong Solvency II ratio and robust balance sheet

  • Solvency II ratio (standard formula) was 194%, which was 5%-points higher than at the end of 2016.
  • Strong organic capital creation (€ 193 million) and the effect of favourable financial markets (including the revaluation of the Unilever preference shares of circa € 100 million) exceeded the impact of the re-risking of the investment portfolio (-7%-points), the lower volatility adjustment (-4%-points) and the buybacks of own shares (-5%-points) in H1.
  • Financial leverage was 23.5% (target <30%), with double leverage landing at 103.2%.
  • Buyback of 6 million shares (€ 153 million) in H1 was in keeping with the commitment to support the Dutch State in scaling back its equity interest in a.s.r.
  • a.s.r. considers, on top of the earlier commitment, to buy back an additional amount up to € 100 million own shares if the Dutch State should decide to undertake a final placement of its remaining equity interest in the second half of this year. This intention is dependent on the then prevailing market conditions and undiminished strong solvency.

Commercially sound results: increase in gross written premiums in Non-life segment and new mandates for Asset Management

  • Gross written premiums in the Non-life segment increased in H1 by 5.6% to € 1,474 million, mainly in P&C and Health as a result of both higher volumes and premium increases.
  • Gross written premiums in the Life segment fell to € 848 million, mainly because a large single premium (€ 323 million) was credited in 2016 following the acquisition of NIVO last year. Excluding one-off items, gross written premiums rose 3.4%, while recurring premiums remained virtually stable.
  • Bank and Asset Management segment welcomed new asset management clients in H1 worth a total of € 0.7 billion in mandates (excluding real estate).
  • ASR Hypotheekfonds (mortgage fund), which was launched in the second quarter, met with positive initial response and has already attracted mandates for more than € 0.3 billion of AuM.
  • Real Estate Investment Management won asset management contracts to the tune of € 0.2 billion. The increase was largely attributable to large institutional mandates for the ASR Dutch Core Residential Fund and a placement in the ASR Dutch Mobility Office Fund and will partly be booked in the second half of the year.
  • The General Pension Fund (APF) established by a.s.r. obtained a mandate of € 1.1 billion from Arcadis Pension Fund.

Jos Baeten, CEO: ‘Following our strong first quarter, I am proud to say that we also turned in a very good performance in the second quarter with a solid capital generation. The rise in the operating result in the first half of the year by nearly 29% to € 385 million was attributable to the efforts of all business units. As the operating return on equity is over 17%, we are clearly making profitable use of our capital.

Our Solvency II ratio, based on the standard formula, remains solid at 194%. The increase by 5%-points in the first six months of this year is the figure after absorption of the repurchase of shares and the expansion of the market risk budget. The continued increase in Solvency II capital reflects our sound insurance results, higher investment yields and the favourable state of the financial markets.

In the first half of the year, the Dutch State successfully reduced its equity interest in a.s.r. to circa 20% in three steps. We supported this process by repurchasing own shares for a total of € 153 million in two transactions. In order to best facilitate the full privatization, we consider, on top of our earlier commitment, to buy back an additional amount of circa € 100 million own shares if the Dutch State should decide to undertake a final placement of its remaining equity interest in the second half of this year. Including dividend, the total distribution to shareholders would in such case amount to approximately € 440 million in 2017. This intention is dependent on the then prevailing market conditions and undiminished strong solvency.

Our ‘value-over-volume’ focus is reflected, for example, in the excellent combined ratio of the Non-life segment. Although various factors, including the mild winter weather, have had a favourable effect on the combined ratio, the underlying result is better than the target figure and reflects our underwriting skill and discipline in minimizing costs. Nonetheless, the market remains competitive and we will have to remain alert to the evolving needs of clients and market trends. The improved results of the Life segment are attributable to higher direct investment returns thanks to adjustments to our asset mix and increased release of gains realized in previous years.

I am pleased to report increased sales of P&C policies The interest in our Non-life ‘voordeelpakket’ remains high. The number of the ‘Vernieuwd Voordeel’ packages sold increased by 33% compared to the first half year in 2016. We have also achieved success with our asset management and real estate property funds in winning institutional mandates. Our financial solidity gives our clients the confidence that we will be able to meet our obligations and enables us to continue developing products tailored to their needs.’

Key figures (€ million, unless per share or expressed as a percentage)

H1 2017

H1 2016

restated1

Change (%)

Operating result2

385

299

28.8%

Operating return on equity3

17.4%

14.9%

2.5%-p

Profit/(loss) for the period (on IFRS basis)

397

381

4.2%

Return on equity

19.2%

20.9%

-1.7%-p

Gross written premiums

2,233

2,667

-16.3%

Operating expenses

-283

-284

-0.4%

Combined ratio (Non-life segment)

93.6%

96.4%

-2.8%-p

New production (Life segment (APE))

26

81

-67.9%

 

 

 

 

 

30 June 2017

31 Dec. 2016

Change (%)

Total equity

4,835

4,471

8.1%

Total equity attributable to shareholders

4,144

3,780

9.6%

Solvency II ratio (standard formula)

194%

189%

5%-p

Financial leverage

23.5%

25.2%

-1.7%-p

Cash position at holding level

202

354

-42.9%

Number of FTEs (internal)

3,481

3,461

0.6%

 

 

 

 

 

H1 2017

H1 2016

restated

Change (%)

Operating earnings per share4

1.85

1.38

34.1%

Ordinary earnings per share (on IFRS basis)5

2.70

2.54

6.3%

Number of shares issued and outstanding at end of period (m)

147.0

150.0

-

Weighted average number of issued and outstanding shares (m)

146.9

150.0

-

Further explanatory notes

  1. The IFRS figures for 2016 have been restated to take account of acquisitions of Dutch ID and De Eendragt within the one-year window. In addition, property development has been reclassified from discontinued operations to continuing operations. Operating result is restated for the recognition of a.s.r.’s own pension scheme.
  1. Operating result represent profit or loss before tax adjusted for (i) investment income of an incidental nature (including realized capital gains, impairment losses and realized and unrealized changes in value) and (ii) incidental items not relating to ordinary activities, e.g. as a result of accounting changes, consulting fees for acquisitions, restructuring expenses, start-up costs and shareholder-related expenses.
  2. The operating return on equity is calculated by dividing the operating result before tax net of interest on hybrid capital and taxes (tax rate: 25%) by the annual average equity attributable to shareholders net of the reserve for unrealized gains and losses and the equity for real estate development (operations in run-off).
  3. Operating earnings per share are calculated by dividing the operating result before tax net of interest on hybrid capital and taxes (tax rate: 25%) by the weighted average number of outstanding shares.
  4. The ordinary earnings per share are based on the weighted average number of issued and outstanding ordinary shares.

Financial calendar 2017

Publications

29 November: Trading Update Q3 2017

The figures contained in this press release have not been audited.