Earnings Transcript for AGESY - Q1 Fiscal Year 2022

Operator: Welcome to the Ageas Conference Call for the first three months of 2022. I am pleased to present Mr. Hans De Cuyper, Chief Executive Officer; and Mr. Christophe Boizard, Chief Financial Officer. For the first part of this call, let me remind you that all participants will remain on the listen-only mode and afterwards there will be a question-and-answer session. Please also note that this conference is being recorded. I would now like to hand over to Mr. Hans De Cuyper and Mr. Christophe Boizard. 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 the results of Ageas for the first quarter of 2022. As usual, I am joined in the room by my colleagues of the Executive Committee, Christophe Boizard, CFO; Emmanuel Van Grimbergen, CRO; Antonio Cano, the Managing Director of Europe; and Filip Coremans, the Managing Director of Asia. We faced a turbulent start to the year. First, with the severe windstorms that hit Europe in February, quickly followed by the Russian invasion in Ukraine. We have no direct exposure to the region, neither in terms of underwriting activity nor investment but this event unsettled financial markets across regions. Additionally, the worsening of the COVID situation in China weighted heavily on the domestic stock markets. Nevertheless, in this challenging environment, we managed to post solid results, demonstrating once again the resilience of our diversified business model. The net result, excluding RPN(i), amounted to EUR 210 million. It includes EUR 65 million negative impact from the storms in Belgium and the U.K. and a positive EUR 45 million contribution from the sale of our commercial lines business in the U.K., which was completed in March. In Life, we had a contrasting performance in the consolidated and non-consolidated entities. First, in the consolidated entities, the result benefited from the realization of a high level of capital gains in Belgium driving the guaranteed margin to a strong 109 basis points. The Unit-Linked margin amounted to 40 basis points, continuing its steady improvement, thanks to increased volumes and an evolving product mix in Portugal. In Asia, on the other hand, the realization of net negative capital gains in a downward equity market weighted on the net result, masking a strong underlying performance. In Non-Life, the combined ratio of the consolidated entities stood at a solid 96.7% despite an impact from the storms accounting to 8.5%. This shows a strong underlying performance compared to last year, which still benefited from lower claims frequency in Motor. In Asia, combined ratios improved across regions. In terms of commercial performance, we are also off to a good start with inflows up in both Life and Non-Life and across all segments. Our solid start to the year based on a strong underlying performance gives us confidence to confirm again our guidance for 2022 of EUR 1 billion net results, excluding the impact from RPN(i). As usual, this guidance comes with a reserve of an extreme worsening of the financial markets. A comment on our cash and solvency position. Our cash position remained at EUR 1.1 billion, guaranteeing us great financial flexibility. In the first quarter, EUR 87 million have been upstreamed from our Reinsurance segment, which corresponds to 100% of the net results realized in 2021. Additionally, we received in the second quarter, EUR 60 million from Malaysia, while more than EUR 625 million dividends have been approved in Belgium, Portugal, the U.K. and China, which we should receive later this year. So in total, we are on track to exceed the record level of last year, which amounted to EUR 725 million. As for our solvency, it increased to a strong 203%, largely above our target of 175%. And lastly, I would like to add a quick word on our nonfinancial report. For the past three years, we have been actively working on improving our ESG disclosures and we are happy to see this reflected in the steady improvement of our ESG ratings. The latest development has been the upgrade of our MSCI ESG rating from BB three years ago to A today. Ladies and gentlemen, I will now hand over to Christophe for more comments on the segments.

Christophe Boizard: Thank you, Hans, and good morning, ladies and gentlemen. Our net results amounted to EUR 272 million this quarter or EUR 210 million if you exclude the EUR 62 million positive contribution from the RPN(i) revaluation this quarter. When considering the underlying performance by excluding mainly the capital gains and the impact of the storm, we can see a firm increase in the result mainly driven by Belgium and Asia. As usual, I will give you some additional comments per segment, starting with Belgium. But before, I would like to draw your attention on the change of definition on inflows now taken at our share instead of at 100% before. So the segments now. In Belgium, on Slide 4, we recorded a strong result amounting to EUR 122 million firmly up compared to last year as good timing of net capital gain realized on equity and real estate in Life compensated for the lower result in Non-Life due to the February storms. Excluding weather and lower claims frequency in motor last year, our Non-Life activity showed a strong underlying performance in all business lines. On the commercial front, we enjoyed a solid growth in both Life and Non-Life with Life inflows benefiting from excellent sales of Unit-Linked products, up 11% over the quarter. In Europe, which now combines the previous Continental Europe and the U.K. segment, I am on Slide 5. The net result of EUR 74 million includes EUR 45 million capital gain realized from the sale of the commercial line renewal right in the U.K. Excluding this, the Non-Life result is down due to the impact of the storm in the U.K. and to claims recency being now back to a normal level in motor. In Life, the result was in line with last year. The guaranteed margin stood at 98 bps, a strong level above our group target range, but below last year due to the nonrenewal of a large contract, whereas the Unit-Linked margin continued its steady improvement following higher volume and the change in product mix. The unit-linked margin stood at 36 bps, well within our target range. In Turkey, the Non-Life business was impacted by inflation and adverse regulatory constraints, whereas on the contrary, the recently acquired Life business continued to perform well and contribute positively to the results. The commercial performance remained solid with Life inflows up thanks to a strong performance in Unit-Linked products and the contribution of AgeSA, while Non-Life inflows benefited from a positive trend in Portugal and high growth in Turkey at constant exchange rate. In Asia, Slide 6, the result amounted to EUR 39 million compared to EUR 148 million last year. This sharp decline is a consequence of unfavorable equity market especially in China, which resulted in EUR 19 million negative net capital gains this quarter against a positive contribution of EUR 101 million for the same period of last year. Moreover, the evolution of the discount rate curve in China continued to negatively impact the result, but with an amount in line with what we had last year. However, on an underlying basis, if you exclude these two elements, the result is 19% up and shows a solid operating and underlying performance. Inflows called resilient despite a later than usual start of the New Year opening campaign in China. Inflows increased by 7%, supported by the evolution of the Chinese renminbi. Whereas at constant exchange rate, we were broadly flat. In Life, new business was strong in China, driven by high-value regular premium. In Non-Life, the commercial trend was very positive with inflows up 15%, driven by high growth in Malaysia and in Taiping Reinsurance. The reinsurance segment on Slide 7 was impacted by the storms in Belgium and the U.K. This was partially compensated in the protection business by an additional reserve release following a reserve review in the U.K. Moving now to the solvency and capital position. As mentioned by Hans, our group Solvency II ratio, on Slide 9, stood at a strong 203%. It was up by 6 percentage points this quarter following increasing interest rate and a good operational performance. We have included in the presentation, the updated sensitivities for full-year 2021 including sensitivity to inflation, which amounts to a negative 5 percentage points for a 50 bps increase of inflation. The solvency of the non-Solvency II scope entities increased by 10 percentage points to 231%, following the positive impact of the new solvency regime in China. The operational free capital generation for Solvency II scope, I am on Slide 10 now, amounted to a strong EUR 197 million or EUR 243 million if you exclude the negative EUR 46 million contribution of the general account. No dividend was received this quarter from the noncontrolled participations. These figures include the benefit coming from the decision to no longer underwrite commercial lines business in the U.K., which compensated for the global impact of the storms. Additionally, the evolution of the equity portfolio led to a lower SCR. For the operational free capital generation, the contribution per segment, please be aware that we have adapted the methodology to reflect the contribution at Ageas share. Compared to the previous methodology, this translates into lower contribution per segment, fully compensated by lower group eliminations. In one sentence, we have reallocated to the segments most of these eliminations. For those of you who attended the last deep dive event on Asia, you will remember that we presented our future new disclosures on capital generation. As from Q2 and on a half year basis, we will provide you with the group operational capital generation and the free capital generation for the Solvency II and the non-Solvency II scope companies. I am now at the end of my presentation. Thank you very much for your attention.

Operator: Ladies and gentlemen, this concludes the introduction and we now open the call for questions. [Operator Instructions] And our first question is coming from Farooq Hanif from JPMorgan. Please go ahead.

Farooq Hanif: Good morning everybody. Thanks very much. I'd just like to dig into your kind of excellent combined ratio performance on an underlying basis. So if we take out the weather, here it can be adjusted reserve releases, you've had a really good kind of movement in the underlying loss ratio, and that's in spite, obviously, of higher claims frequencies. So I wonder if you could comment on what's driving that. Is it the sale of the U.K. commercial business? Or what's really sort of driving that move? And then secondly, can you talk a little bit about the change in C-ROSS in China and what it might mean for future dividend streams up to you. Thank you very much.

Hans De Cuyper: Okay. I'll give the first question to Antonio because you talk, I assume mostly about Belgium, U.K. and Portugal, and then Filip will take the second question.

Antonio Cano: Yes, hello. Good morning. So indeed the combined ratio is quite healthy. Certainly, we exclude the weather events, the storms in the first quarter. And it's actually good across the line. It's difficult to point out to one particular item. It's fair to say that in terms of frequency in Motor insurance, it has crept up, but it's still below the levels we saw in 2019, which you could consider as the last normal pre-COVID year. So I guess that the -- and that's not only for us. I think it's for the entire market that the margins in Motor are still keeping up. And then in household, outside weather, also in health, working has gone overall, it's quite benign. If you ask me what's the more macroeconomic underlying reason, this is a bit of an activity slowdown, less traffic on the roads, et cetera. So a lot of things. Having said that, I think, it will continue to be quite resilient to combined ratio looking forward this year even if the weather particularly in Belgium will be getting very bad because our aggregate powerful Belgium starts to kick in. So we're quite comfortable that any weather events in Belgium will not have a major impact. So the outlook for the rest of the year is quite good.

Farooq Hanif: May I just quickly come back on one point. So the reserve releases seem to be sort of in line and average. Would you say these are a decent level to expect going forward?

Antonio Cano: I think our reserve releases is something that you'll see in all our numbers in the past. There's nothing really special extraordinary neither up or down. It is quite a standard release level.

Farooq Hanif: Thank you.

Operator: So we have another question from David Barma from BNP Paribas Exane.

Filip Coremans: Sorry, sorry. I still have -- sorry to interrupt. I still have to answer the second question, I believe, on C-ROSS II introduction in China and potential impact on future dividends. So first and foremost, indeed, the transition, I must say to C-ROSS II in China has been a relative, I think smooth transition. And when you see our -- the solvency ratio, that Taiping Group reported, a 223%, it gives us comfort, and they have no change, obviously in their dividend policy. But there is a particular threat of C-ROSS II, which is important, and that is, in fact, that what the policymaker is driving for is that companies indeed strengthened, let's say, their Tier 1 and Tier 1 like capital components, quality open capital. And you are without any doubt aware that their caps have been introduced on the recognition of this or future surplus as part of core. So whereas the ratio comes in very solid to start, the volatility of this ratio indeed is higher and depends on the quality of the capital more than before. Now in terms of dividend policy, there is no sign that Taiping Group would have any changes in that. But indeed, it is a new reality. You will also have noted that not only the own funds came down a bit, that is because of the introduction of the caps. But also, the SCR reduced substantially. And the SCR may also be slightly more volatile, but it is lower. And the main component in there and that is certainly good to know is the quite significant reduction in the interest rate shock. Reason being that from now on, also the HTM portfolios in China are taken mark-to-market into account when looking at the asset liability management position and the related interest rate shock. That is the main reason why the SCR reduced. So we have more focus on core capital, and we have more focus on the asset liability management situation of the company. But of course, let's say, the very prudent standard was there with not recognized an unrealized capital gains on HTM portfolios and there. So we expect a slightly more full-time solvency ratios because of this. But the intrinsic focus on quality, both at the asset side and solid asset liability management is certainly something we will also with our partner focused on looking forward. But we do not see any change in the dividend policy as such. It's also confirmed by this year's payout ratio which has been maintained at the same level of last year. So 35% has been the board-approved payout ratio in China for 2021 results to be back in 2022.

Farooq Hanif: Thanks very much, very comprehensive. Thank you.

Operator: So now we have another question from Mr. David Barma from BNP Paribas Exane. Please go ahead.

David Barma: Good morning and thank you for the presentation. Just to come back on your answer just now on the Asian -- the Chinese solvency and your comment about more focus being put on the high-quality buckets of the capital stack. Does this imply we need to pay a bit more attention to the core capital ratios that CPL publishes? Or how should we interpret those? That's my first question. And then secondly, on the business performance in Asian Life. If I look at the underlying result as a margin on liabilities, for instance, it's coming down a bit in the last few years and the first quarter. Is there anything in the product set that is sold in the first quarter that could explain that? Or maybe if you could give us a quick update on the business performance especially in China. Thank you.

Filip Coremans: Okay, so on the first point, yes -- well, there is also -- and I think that is what you're pointing at. A new type of definition of the core solvency ratio that has been introduced so where you have the 223% comprehensive solvency ratio. And by the way, that is still the one that drives most of the capital management decisions, dividend, et cetera. There is also this core solvency ratio. The core solvency ratio before was virtually equal with small differences to the comprehensive one. But now the core solvency ratio they report is at 112%. Now the benchmark for that 100% -- 112% is 50% solvency ratio because that's actually only focused to the minimum solvency requirements. So that is not to be compared with the 100% target necessarily. The regulator looks there whether they are sufficient to support the minimum solvency requirements. So there the hurdle is 50%. But indeed, for instance, Taiping issued subordinated Tier 2 at the end of last year. With hindsight, probably we would have issued Tier 1 equal instruments rather than Tier 2. So there will be definitely more focus on, let's say, Tier 1 or Tier 1-like instruments to fund Taiping Life and then on all the Chinese operators, by the way, looking forward because the industry is still young. And so the balance between how much they have in value in force in their comprehensive solvency and what they have in core capital is still a lot still to future profit. Now the regulator has introduced for most companies as far as I'm aware, it's not 100% transparent there, a kind of transitional arrangement. They put in a cap of 35% on the future profits to be recognized as part of Tier 1 core. But they started at least for Taiping Group and quite a few others as far as I'm aware, with 50% and that will taper down to 35% by 2025. This will allow these Chinese entities to strengthen the core solvency -- the core capital actually, over these years to make that transition at full. On the business development, in fact, I'm actually quite positive with what we saw coming out of the region and certainly in China. You know, of course, that last year, we pushed very hard, and our partners certainly pushed very hard to come up with solid year-end results and a solid year-end campaign. And they could not prepare usually for the beginning of the year. But when we look at the figures end of quarter, they almost called up. In fact, in China, we have in total premium 7% growth, minus 2% at constant FX. But in the APE in the new business lines, we saw actually a 12% -- 13% increase and actually at constant at 3% growth. So despite having this delayed campaign and despite the reemergence of COVID, they did pretty well on the new business sales. It's about at the same level of last year. The rest of the region, by the way, in Southeast Asia, they are back in business because I saw some very, very strong figures coming out of Malaysia. It may be masked a little bit by the fact that we are scaling down, let's say saving business in Singapore. But when I look at what we have in the countries that really came out of COVID. This is very promising. Take Thailand, we had a 34% increase in APE over the first quarter. India Life went up 14% at constant effects. Philippines 26%; and Vietnam, even over 100%. So we see a strong -- I would say, Southeast Asia is back in business. China, obviously, now has to deal with the lockdown still at this moment. But they are also -- I already have the April figures. I don't think they have been released yet to the market, but they will come soon. But they show a similar trend. They do not fall back because of the COVID restrictions, they are concentrated in -- mostly around Shanghai, but there the situation is slightly improving and in the Jilin province. These two provinces, by the way for Taiping of only 10% of premium in there. So we see strong resilience despite the COVID and we say they are keep calm and they carry on writing the right business, I think, and focusing on quality. I take a bit more time to answer this, but also, the agency development because that's also been a focal point over the last months. We saw that they maintained -- actually, they grew a little bit their agency force. They're now at 379,000 at the end of first quarter. So all that shows a strong resilience and a payoff of focusing on the right thing. The underlying result, indeed, you noticed in the first quarter is always a bit lower. That is because of the type of business that is being sold during this opening campaigns. Both in [indiscernible] and agency, these businesses have typically lower margin than what is sold throughout the rest of the year. And we also noticed that last year because Christophe mentioned it, on an underlying basis, the first quarter this year versus last year, it's about 19% up. But it is not the average of what we saw last year because we ended the year underlying last year at EUR 500 million, and the first quarter is close to EUR 100 million. So it is depending on the type of business that is being sold during the start of the year campaigns. I hope this answers your question more or less.

David Barma: Thank you.

Operator: So we have another question from Vikram Gandhi from Societe Generale. Please go ahead.

Vikram Gandhi: Hi, good morning everybody. I hope you can hear me all right. Two quick ones from me. First of all, I just wanted to check what the latest management thinking is on M&A, especially given the way the asset prices are correcting, which probably makes the potential targets more reasonable, more within reach. And then how does the group weigh this against future share buybacks even that looks like a good option given where the share price is. Secondly, can you update us on the reinsurance protection in place for the rest of the year? I'm aware you kind of alluded to a good review of protection for Belgium. But if you can break it down by segments. And also, how should we think in terms of internal versus external protection, please? That would be helpful. Thank you.

Hans De Cuyper: Okay. Thank you, Vikram. Well, on your first one, I think the M&A strategy that we have explained in detail on the Impact24 has not changed. Of course, you look at market circumstances when you look at M&A. First of all, our cash position is still roughly at the same level. So in that sense, I would say, we have no concerns. First priority, where we always will keep some cash available is for a potential in-market strengthening of our position and consolidation or we did an optimization, be it the opposite in the U.K., where we have sold the commercial lines, I think that will always remain an option. Secondly, we have spoken, of course, about the potential fourth market in Europe. And there, we do see that the M&A activity is slowing down in the current market substances in Europe. So please do not expect, I think anything there in the short-term. And of course, we are very, I would say, agile but at the same time resilient in our cash and capital positions in these turbulent times. So no change on the strategy. But as always, priority would go to in market. And on a big transaction for Ford market, I think, we are a little bit more careful, and there is not a lot of M&A activity going on at the moment. On the reinsurance side, I'll pass it to Antonio.

Antonio Cano: I think -- well, allow me that I will not give you all the details of all our local reinsurance programs. So I'm leaving aside the quota share and the LPT, what we call the capital management side. So on the protection business, the only thing that is a bit special to our program, and which I mentioned in the previous question, is this aggregate cover we have in Belgium against, say, multiple weather-related events. And then we have our normal cottage sale starting around EUR 50 million to EUR 60 million retention. That will be, obviously, the main program. And then maybe you just give a bit more highlight on Motor TPL. Typically, our retention is around EUR 3 million per case. I think that's in a nutshell, the reinsurance program, very high level. Nothing really changed compared to what it was the previous years.

Vikram Gandhi: Okay, thank you very much.

Operator: So next question from Michael Huttner from Berenberg. Please go ahead.

Michael Huttner: Good morning and thank you very much. And congratulations, you seem to be training through all these difficult times. And a quick question, please. One, you didn't change your guidance for the year, even though Q1 was much better than we had expected, and obviously, something not better than you had expected. But -- and I just wondered what you're seeing that we may not be seeing, the BTA is significant enough, it's about EUR 50 million or something. My second question is going back to that question on the combined ratio and how sustainable. Could you maybe explain a little bit more how you see that develop? The reason I say that is here in the U.K., it feels like traffic is back to normal. I may be overstating it a bit, but it does feel very, very close. And I just wondered whether you're, very good combined ratio in Belgium, the underlying in Motor or over 91.7% is really just part of the transition back to normal back to pre-2020. I don't know how you see that. And then I was just wondering maybe you could give us two numbers. You spoke about C-ROSS and the transition period to 2025. Is there a number in terms of how much bonds, Tier 1, you need to issue or something for Taiping Life. And the second is on the aggregate cover, I'd say, well, it's kicked in. So the more claims coming through from large events in Belgium. And I just wondered what the limit is, in other words, where would it start. Thank you.

Hans De Cuyper: Okay, Michael. Well, on your first question, I'm sure that you will see more or less the same that we see. So there is nothing here special. I think it's a little bit the same story as every year, in the third quarter. That means we still have nine months to go. We live in very volatile market circumstances and financial markets. And so we are also, I think realistic, but also not overpromising on what we aim to achieve. If I take the caveats in our guidance, which is also not so different as from every year. First of all, of course, it's cap net. As you know, when the budget and the forecast we do take into account already, I would say, normal cap net retentions. Only conclusion we can make is that, of course, most of these retentions in Belgium and U.K. have been consumed now in Q1. But we have no reason to adjust the guidance not upwards, not downwards because of this situation because that's also what we foresee throughout the year, not always in the first quarter, but we do foresee that throughout the year. Second effect is financial markets. First of all, you have seen consolidated entities, mainly Belgium. I think we had a very good first quarter on capital gains, but markets do stay volatile. And so we should not exclude. There is always the risk on certain impairments on the equity book going forward. We are not yet at the end of the capital gain season in Belgium. There is still a bit more to come also from real estate throughout the year. But again, this is fully in line with the guidance. The only conclusion I can make is that specifically on the equity portfolio, the timing chosen in Belgium was I think, well spotted. And then you have China, where of course, we do see a negative impact of 15% in the stock market in the first quarter. There was another 7% already happening in the second quarter. So that is something we should take into account. And you know that in China, we have a little bit that mechanism between on the one hand, variable interest rate impact and then the compensations with cap gains. But at this moment, what we see is that, this also stays within our guidance. So also there are no reason to adjust it not upwards, not downwards. And capital gains, as I just said, there is a second negative impact to be expected in the second quarter. And then we have still another six months to go. So that brings us, why we feel we are on track but I do not see any indication why we would hire the guidance right now. On combined ratio, I'll -- Antonio can continue his response.

Antonio Cano: Yes, good morning. So on the combined ratio, first comment, claims frequency is not back to where it was pre-COVID. Maybe I gave the impression in my previous answer, that's the case. It has, obviously, crept up from the, say, the very lows of the last two years, but it's still around 80% of the frequency we saw in 2019. That's true. In Belgium, as far as we can see in our book in the U.K., that's also there the case. So -- and maybe this is the new normal, by the way, because we believe there are -- there have been changes in the behavior of people in home working, just name one example. And the way they use cars, et cetera, that might stay with us for a very long time. So this might be the new normal. Then also you had a comment on our aggregate cover. Again, there probably I was not very clear. I said that the aggregate cover in Belgium was nearly it. There's still some room. And the cover of these aggregates, that's a few hundred million. So -- and be aware this aggregate cover works for, say, the medium to small-sized weather events, if there will be a large weather event above our retention level in a normal cut, that would fall into the normal cut cover. So the aggregate, again, is a protection against frequency of small, medium-sized weather events. And you heard me before being quite confident on the combined ratio for this year. So yes, and I thought I gave the explanation for that confidence. If we take a more longer-term view, a lot will depend on where inflation is going to be next year, thinking inflation on spare parts, so attritional damage and the measure in which we can reprice our products and control the costs of those material damages, which is something that we're working very, very hard. And I think that would be the main factor for -- certainly for next year.

Michael Huttner: That is so helpful, thank you.

Filip Coremans: Yes. I have to answer that a bit circumstantial, obviously. So first and foremost, it is a transition over four years. And so it's by 2025 that, that will happen. And indeed, as any good parent, there is a series of measures that are on the shelf. Obviously, looking at Tier 1 is an option, but it is clearly on the shelf. It's not something that necessarily is going to be executed immediately. There is also no immediate need. But it is an option. And of course, this where low interest rates may be beneficial. The rates are low, so it could be that we make the tactical decision. But the first action points relate more to working on quality of the results. So the management is focusing on reducing the expense gap on continuing good quality sales there. So keeping the value new business margins up to decent levels, despite the lower interest rate. And of course, looking at all opportunities to offset very impact, but as Hans indicated, it's not obvious at this moment for obvious reasons then to do that with equity capital gains. But by half year, we probably will see clearer on the result development for this year. And so because the first and foremost, the focus on cost results to get that to a decent level. That's obvious for our partner and for us, the most important one. And China, as you know, they closed their books really on half year. So I think the half year results announcement will be very important in this context. But there is no immediate need to act on issuance. So we have time to take action, and we will take action when required.

Michael Huttner: Very helpful, thank you.

Operator: So there is another question from Steven Haywood from HSBC. Please go ahead.

Steven Haywood: Good morning. Thank you very much. Can you remind us the guidance you provided for the VIR impact in Asia and the capital gains guidance for Asia and Belgium for 2022? That's my first question. My second question is on inflation. Obviously, you provided the new sensitivity. And I guess it's more based on long-term expectations of inflation. How have you seen these move year-to-date? And what sort of rate increases are you putting through in the Non-Life businesses in Belgium, U.K., Portugal, Turkey are to offset any potential impact of this inflation? Thank you.

Hans De Cuyper: Okay. Well, the first part, capital gains in Belgium, I think, is not something we disclose separately, yes? So as you know, we always have a specific volume on equities and real estate, but we do not disclose that number. On guidance for VIR, to give you a little bit more detail, but I explained you already. I have said that it would be again this year somewhere between EUR 150 million to EUR 200 million. We are at EUR 38 million for the first quarter. We had a run rate of approximately EUR 40 million per quarter. So we are within that range, and Filip already explained about the capacity to compensate with capital gains in China or not. So I don't think we can add a lot more to, I think, what we have answered already. Sensitivity on inflation, while in U.K., we have taken into account the 10% in inflation, but we also take that into account in premium with adjustments. So that should be absorbed in the premium setting in the U.K. business. On inflation assumptions, we use the guidance of National Bank. Manu can elaborate on that one.in a second. Belgium, there, I can say that you have to look at, on the one hand, salaries. We have an automatic indexation system expenses in Belgium. So there we can expect some impact. But that we only do once a year. So if that materializes, that would be more towards end of the year, beginning of next year. Then we have the home book, the fire insurance there. We have an automatic system of premium indexation. So that means with some time delay that should be translated in premium increases. And in more the short-term liabilities and claims, no worrisome impact. We also see that in our liability adequacy testing and our provisioning that actually the prudency with these new assumptions, the prudency in our reserving have stayed at level and is still very comfortable. So we are not extremely worried about how inflation might impact on our results and our solvency and the setting of the assumption, I'll give it to Manu, maybe one is Turkey. Okay, Turkey is not our biggest investment, but there, of course, inflation is very similar. I think we are on the way for 100% inflation towards the end of the year. But in the total of Ageas Group, these numbers are not so material. I don't know, Manu, you want to say something on solvency?

Emmanuel Van Grimbergen: Yes. So thank you, Hans. One word on the impact of inflation on solvency. So we are using -- it's a guidance from the National Bank of Belgium, we are using the implied market inflation curve that you can read in the market data. It's basically for the very short term, an inflation close to 7% at the end of Q1 and moving at the tenor of 10 years, close to a level of 3%. So we are using that inflation curve for our Solvency II calculation and the impact of that curve and the increase compared to the end of Q4 was a negative of 4.5% on our solvency in Q1. That impact -- that negative impact was more than offset by the increase in interest rate that we observed in the first quarter, an increase that was close to 70, 80 basis points. That increase in interest rate more than offset the increase in inflation over the first quarter.

Hans De Cuyper: To conclude maybe -- because I forgot one portfolio, which is, of course, Life and workmen's compensation. These are the long term liabilities that I can make two comments. First of all, there was also a link with the evolution of interest rates. So inflation goes up and the interest rate goes up. We are not materially impacted, and that's a little bit what we saw in the first quarter. Secondly, we have some inflation-linked bonds on the asset side and also do not forget that we have approximately 10% in real estate, and we see that real estate also gives us quite a good natural hedge against the inflation.

Steven Haywood: Okay. That's very helpful. Did you just remind -- just confirm that the inflation impact in the first quarter had 4.5% negative percentage points on solvency? Did you say that?

Emmanuel Van Grimbergen: Yes, yes, correct. So it was 4.5% negative in Q1.

Steven Haywood: And can you tell us what was the impact in the fourth quarter last year, if possible?

Emmanuel Van Grimbergen: Well, in the fourth quarter of 2021, it was a similar impact, and we observed a similar type of increase in the fourth quarter of 2021.

Steven Haywood: Okay, that's brilliant. Thank you very much.

Operator: So we have another question from Fulin Liang from Morgan Stanley. Please go ahead.

Fulin Liang: Thank you very much. I have three questions. Actually, the first one is just a confirmation of the numbers. Two numbers, can I confirm, did you just say that the Malaysia cash remittance is EUR 60 million, 60 or was it 16? Because if it's 60, that will be extremely high. And I wonder why is the high kind of remittance from Malaysia?

Emmanuel Van Grimbergen: No. For sure, it's 16.

Fulin Liang: Okay. That makes much more sense. And also, the total remittance you're expecting to exit last year. Does that include the disposable proceeds from U.K. as well or exclude that?

Hans De Cuyper: Okay, Fulin. Good morning. No, the total limit is exceeding. Well, we do include the normal dividend of the U.K., but the EUR 45 million capital gain from the sale of commercial lines, which will be upstreamed, but is not part of what we just said. So that would come on top of it.

Fulin Liang: Okay. Thank you. So my formal question would be then, if you're expecting like extra EUR 45 million plus your upstream is about maybe EUR 200 million higher than your cost of dividends. And then typically, you would do like review your capital return policy in the middle of the year in the past and then, but where you're entering the new strategic period, is that the same thing we should expect a review of your capital decision, basically, your buyback announcement in the middle of the year? That's the first question. And I'm sorry, the last -- the next question is the -- on the Asia Re, the Non-Life business. It doesn't -- is there any kind of negative impact on the quarter -- the first quarter results? And what would be the normalized Non-Life contribution from Asia, especially considering the Taiping Re contribution?

Hans De Cuyper: Okay. The first one, I'll give it to Christophe to give you a little bit of insights on upstreaming and dividend on total amounts.

Christophe Boizard: Okay, Fulin. So Hans already flagged the level of expected incoming dividend. So it will be higher than that we had last year, which was already at a record level, so in excess of EUR 725 million. Then what we have. And if we follow what was explained in our Impact24 strategy, we have to cover the dividend. The dividend is slightly below EUR 500 million, EUR 490 million something, the holding cost. And then what remains is subject to maybe share buyback, but you know that the share buyback decision is made in August. So we need a little bit more data and we need to be furthering the year to make this take -- this kind of statement. But indeed, we will reassess the net cash flow, as we said, but further information will be given in August.

Hans De Cuyper: And maybe full in one additional, because I hear you mentioning EUR 200 million excess, but do take into account that we also have the corporate center cost and operating cost around the EUR 165 million. And we still have a running share buyback, which is another EUR 95 million. So you will not arrive at the EUR 200 million excess. I think on reinsurance, Antonio, for Asia.

Antonio Cano: So I think the question was overall the Non-Life business in Asia, but that's two parts. It's the reinsurance part and then there are normal Non-Life activities. Just on the reinsurance, its Taiping Re suffered in Q1 from the Malay floods, which was -- there was a bit in December, but the bulk of it was in the first weeks of the year. And our run rate for Taiping Re is still about this EUR 20 million on a yearly basis. And I think this year, we're well on track.

Filip Coremans: Now of course, Taiping Re is both Life and Non-Life and they keep each other in balance in the results for the first quarter. So it is indeed in line with [indiscernible]. The overall of Non-Life pure side from Taiping Re, we saw an improvement in the region combined from 112.5% to 100.8%, but that is still not stellar. Part is explained by indeed the Malay flood impact in Taiping Re. If I look at the other two markets, Malaysia, Thailand, which are doing very well actually, coming out of COVID despite that, we had combined ratios around 88% in both. I think year-to-date, we were at 88.6% in Malaysia, 88% in Thailand. So very much solid and resilient as usual, I would say. But India remains an attention point as well. There the combined ratio also noticeably improved, but it's still at 120%. And the main challenge in India is the tariff market on Motor third-party liability, where we see that indeed now just recently and because this is not reflected in these figures, the government has approved an increase of the rates because it's a tariff market. But the increase is captured, I think, at the highest layers around 6%, where we see claim inflation being more around 8%. So it does not completely over the inflation. So India remains in an attention pension point in Non-Life. The result for Non-Life underlying was not so much impacted by capital losses. In fact, we reported, I think, EUR 7 million result underlying. We had about EUR 8 million. The difference is not big. That's roughly -- it remains, of course, a smaller portion of the Asian result, that being said, and that is something that Antonio certainly can comment upon if you wish. We see that in Taiping Re really shifting to protection on Non-Life in the mix. So we see there very strong growth in the top line figures actually in the new underwritten business. Where we're scaling down on the Life business, which is quite capital intensive. But that's a good development, but that's not reflecting in the results yet. That's too recent. That's what maybe I could add.

Fulin Liang: Thank you. That's helpful.

Operator: So we have another question from Robin van den Broek from Mediobanca. Please go ahead.

Robin van den Broek: Yes, good morning everybody. Thank you for taking my questions. The first one is on higher rates. I think in the past, when it comes to free capital generation, you highlighted that the equity withhold of the equity withholding period -- holding period that you were using as a capital arbitrage measure to re-risk your book was not coming through with FCG upgrades because rates were low and you had an uptake in your corporate center costs. I was just wondering how to think about that now that rates have moved up. Could we expect an upgrade there? Or is the reason de-risking there offsetting that dynamic? And if there would be scope for an FCG upgrade, does it matter? I mean does -- would it affect your remittances given that cash [indiscernible] is probably more a local gap. So maybe more on -- an abortive answer about how our rates basically could move the Dow on those two factors. So FCG and on remittances mainly from Belgium. And secondly, in relation to that, I think, quarter-to-date, your Solvency II ratio stands to benefit a little bit more from higher rates. I'm just wondering to what extent is that fungible for you. What can we expect you to do with that solvency ratio that's well above the 175% mark for buybacks? Thank you.

Christophe Boizard: Okay. So I would answer all these questions. On OFCG, a lot of different aspects. So first, on the interest rate, this is mainly recognized in the market impact and not in the operational impact. And this time, I think, it is worth giving you the total figures, the free capital generation, all in all, so adding up the market impact and the operational impact. And this quarter, we are at EUR 266 million, which is very high. But if I do the breakdown of this EUR 266 million. You have EUR 140 million coming from market impact and a positive impact this time. And there you have, on the one hand, the higher interest rate who plays a whole plus the exceptional capital gain that we mentioned on equity and on real estate because you will remember that in OFCG, we are for the so-called risk assets, real estate and equity, we are with standardized global return. So 5% on real estate and 7% on equity. So that is the first answer. So interest rate in market and then on operational. I guess you would like to have more detail on the OFCG, which stands at a high level, indeed much higher than the kind of soft guidance we give on a quarterly basis. The soft guidance is around EUR 130 million, EUR 135 million a quarter. We are at EUR 197 million. As I said in my speech, we chose, and it was an option to include the sale of the renewal rights of the U.K. We didn't exclude this as we usually do for M&A because it was more portfolio management, and it was a decision made by the U.K. management and proposed by the U.K. management, but you are free to restate and the amount at stake is around EUR 50 million. For the OFCG, we already mentioned the EUR 45 million coming from the capital gain. This goes to the own fund generation. But then there is a small impact on SCR, rather complicated, by the way, because we have a small release in SCR, not a full release because we keep the runoff. But then we have a small loss on diversification because it's a Non-Life. And as you know, Non-Life is a diversifying factor in the solvency ratio of the group. So we have to -- we can restate this. So the EUR 50 million to be deducted from the EUR 197 million. And then we have two other one-off that we can mention, the storm, which are a negative element, let's say, around 43%. And then the -- some release. It was a little bit cryptic what I said, lower SCR due to some equity changes, to be more specific. We take advantage of the regulation regarding long-term equity. And this was done by Age. And on this, we managed to have a release all in all of EUR 49 million. So with this, you have the full picture. And the EUR 50 million of the U.K.; the storm, EUR 43 million; the long-term equity, EUR 49 million. If you restate all this, we are in the guidance. We are in the zone of the guidance, which means that I don't feel we should change the guidance and the view is that we keep it for the time being. As Hans already stated in Q1, that's really too early in the year to make any review. But let's have a real update at the end of Q2, where, as said in my speech, you will have a real change with the inclusion of Asia. So you will be provided with the full group consolidated view on the free capital generation. And after this long explanation, I stop here.

Hans De Cuyper: For your remittance from Belgium, they already do pay 100% of the IFRS net profit. You can also see that they still have a very comfortable unrealized capital gain position. So there was actually no change, I think, not in the financial strength, not in the remittance policy for the Belgian entity.

Robin van den Broek: And on the high solvency ratio?

Emmanuel Van Grimbergen: So about the -- so that the high solvency ratio of 203% -- but for me, the way that you have to read it is the fact that it gives us more flexibility and to manage also our business moving forward. So we have less pressure and it gives us simply more flexibility moving forward. So that's a good sign. And we -- and again, also that the positive evolution moving forward that we see in Europe is that the -- and if it continues, so the increase in interest rates is more than offsetting the increase in inflation that we are observing and the impact -- the net impact is positive. If I may, just coming back on the question of Steven, on inflation a few minutes ago. So you asked me and what is -- what was the impact of inflation in Q4, and I gave you an answer of 4.5% in Q4. That was for the full-year 2021, so I checked afterwards. So for the full-year 2021, the impact of inflation was negative 4.5%. For Q4 2021, the impact of inflation was negative 1.5%. And for Q1 2022, the impact of inflation was negative 4.5% again. So that's I wanted to come back on that question.

Robin van den Broek: Okay guys. Thanks for the color.

Operator: So we have another question from Benoit Petrarque from Kepler Cheuvreux. Please go ahead.

Benoit Petrarque: Just a remaining question on my side. On the cap gains and your budget for the end of the year, so you've done quite a lot on real estate. And I was wondering what you see on the ground in Belgium on your real estate portfolio. And I mean, obviously, interest rates are going up quite fast now, and we have also a slowdown of the activity. So any thoughts on, well, basically, capacity to generate still large cap gains for the remaining of the year? Or do you see any signs of pressure on this real estate book? And just also can you clarify how much impairment you expect in the second quarter so far? Thank you very much.

Hans De Cuyper: Okay. Well, first of all, Benoit, thank you for your question. But you do know that we do not give any guidance on numbers for GAAP gains because this is, of course, highly depending on deals as well as on the capacity. What I can say is that the unrealized capital gains position in Belgium because that's not we mostly talk about has very well stayed at level. So we have 1 billion position approximately in equities, and we still have a EUR 2 billion position in real estate. The real estate, I think, is holding up quite well. And as I said in an earlier question, real estate for us is also a fairly good natural hedge for inflation. So we are actually quite pleased with the real estate portfolio and also its quality, meaning that if we do transactions, we also, most of the time, replenish with new investments so that we keep on having a solid unrealized capital gains margin going forward. So for Belgium, actually, the only thing I can say is we are on track. But how much there is more to come is not something we disclosed in the beginning of the year. By the way, you started with a solid capital gains realization in real estate in Q1, but that was not only real estate. There was also, I think, a nice part from the equities mainly done in January, what we would call good timing of realization of capital gains. Last maybe that might interest you is Interparking. We have seen the recovery of Interparking post-COVID been going on. So we still have a slight negative impact in Q1, but I can tell you already that April is the first month where revenues will be higher than the comparable month pre-COVID. So April 22 is higher than April 2019. So I'm fairly confident that we can say in Q2 also that also there COVID is behind us, and so we are positive on the further evolution of the parking business. And then on the impairment, same, we actually had no comments on cap gains also not on impairments for the second quarter or following quarters.

Benoit Petrarque: Thank you.

Operator: So as there are no further questions, I would like to return the conference call back to the speakers.

Hans De Cuyper: Okay. Thank you. Ladies and gentlemen, thank you for your questions. To end this call, let me summarize the main conclusions. In a challenging environment, we managed, I think, to report solid results, supporting by strong underlying performance. Also on inflows, we're up in all segments and this is both in life as well as in Non-Life. And giving this a solid start of the year, we do confirm our guidance for 2022 of EUR 1 billion net result, excluding the impact from RPN(i). With this, I would like to bring this call to an end. Do not hesitate to contact our IR team should you have any outstanding questions. Thank you for your time, and I would like to wish you a very nice day.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for attending. You may now disconnect your lines.