Real assets, an insurer’s perspective

2. | 2 | 18/05/2017 | AG Insurance in a nutshell Market share #1 Life 27.9% Source: Assuralia, 2015 #1 Total 21.4% #2 Non-Life 16.1% Total inflow EUR 5.7 billion Life EUR 3.8 billion Non-Life EUR 1.9 billion Net profit EUR 512 million Life assets under mgmt EUR 56.3 billion Solvency margin (Solvency II) 237% Headcount 4,422 employees Key Figures (2015) • Servicing clients since 1824 • Market leader in Belgium • About 50% of Belgian households are client • Insuring 1 out of every 7 cars & 1 out of 4 homes in Belgium • Integrated distribution model with bankinsurance, brokers and B2B • Strong Solvency II margin • Shareholders • 25% BNPP Fortis • 75% Ageas

3. | 3 | 18/05/2017 | Investment portfolio > More investments in loans ► higher yielding alternative in corporates and sovereigns ► diversification in infra loans, real estate loans and mortgage loans 55% 6% 22% 1% 2% 2% 8% 3% 1% Sovereign Bonds Sovereign loans Corporate bonds Corporate loans Infra & RE loans Mortgage loans Real estate Equities Cash

4. | 4 | 18/05/2017 | Sovereign loans • Underlying risk is sovereign but illiquidity creates extra return • Sovereign solvency II capital charge for most European government guaranteed, regional and local issuers • For regional or local guaranteed issuers, capital charge is not reduced compared to corporates but overall cost is limited given high external credit ratings 38% 1% 3%1% 4%18% 35% 0% Agencies Hospitals and health care Local authorities Nature Public water companies Regional authorities Social Housing Waterboards

5. | 5 | 18/05/2017 | Corporate loans Examples of issuers: • Private placements: funding of corporates in loan format (private placements) – Similar risks as corporates but illiquidity and unfamiliarity of lender generates extra return • Receivables: financing of account receivables of high quality corporates – Illiquidity premium • Loan funds : managed by specialized asset managers – Corporate loan & direct lending funds – Lower credit quality (sub investment grade) but security package increases recovery rate. – Higher return for a higher but (controlled) risk.

6. | 6 | 18/05/2017 | Mortgage loans • Mortgages : asset class with interesting risk/return/ cost of capital characteristics – Low credit losses – Extra yield pick up – Low solvency charge – BUT : no good ALM matching, so only limited part of portfolio • Three ways of assessing this asset class: – Via long established direct channel (within AG’s broker channel) – Take over of a seasoned portfolio – Via coinvestment 76% 6% 18% Existing activity Takeover portfolio Dutch mortgages funds

7. | 7 | 18/05/2017 | Infrastructure loans • Underlying is an essential asset for the community which offers strong cash flow predictability in the long run • Asset risks are usually isolated in a distinct legal entity which allocates the risks to the parties that are most suitable to manage them • Revenues are usually secured with long term contractual arrangements • Debt covenants protect lenders against a decrease in the project’s cash flows • Lenders have step in rights, which allow them to take control of the project company in case things go wrong • Lenders are senior to equity providers which take first loss

8. | 8 | 18/05/2017 | Infrastructure loans A portfolio of 25 projects, totalling 1,200 mio € of commitments of which 869 mio € are already drawn

Real assets, an insurer’s perspective

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Real assets, an insurer’s perspective

Similar to Real assets, an insurer’s perspective (20)

Recently uploaded

Recently uploaded (20)

Real assets, an insurer’s perspective