In its 2012 Investor Day, Ageas focused on the non-life activities world-wide. What we retain from the presentations are the strong franchises, brand names and partnerships from which to grow the business and earnings.
In Belgium, the main growth drivers are further improvements from investment income and from technical results in Fire and Workmen’s Compensation whereas Motor has already been turned around. Ageas can also tap capital gains from its real estate development portfolio which generates c. € 60m of capital gains per annum on average. Growth in non-life premiums (15.7% market share) should be in line with GDP or can exceed it if Ageas grabs market share from its competitors.
In the UK, the acquisition of Groupama’s non-life activities serves as a growth accelerator for the existing franchise. It will also trigger a capital gain (c. € 107m gross) to be recorded upon closing which is expected for 4Q12E. The introduction of RDR in the UK should have a limited impact on Ageas’ business model. Growth should be realised on an organic basis and by add-on acquisitions (e.g. Groupama) with a strong distribution reach, above market norms in terms of claims, service and underwriting performance and a strong position in the insurance value chain with cost efficient operations.
In Continental Europe, Ageas has established strong positions in Turkey and Italy. The situation in Portugal is more challenging but so far Ageas was able to establish a modest single-digit growth in GWP in the past two years vs. GDP and the insurance market that both contracted.
In Asia, drivers for growth are GDP (6-9% on average), growth in the SME sector, people moving up the personal transportation ladder (bicycle -motorbike - car) and an emerging middle class and wealth accumulation. The region already counts more high net worth individuals than in any other region of the world.
Our View:
Ageas investor day presentations left a good impression about the growth potential of its non-life activities world-wide and the strong partnerships, brands and franchises it has established in the markets it operates in. Valuation remains undemanding whereas the share buy-back that started a month ago and the dividend yield should support the share price.
Conclusion:
We maintain our Buy recommendation and € 28.5 target.