2016 The Growth
Journey Continues

billion EUR for the Fortis Settlement

The Fortis settlement will allow Ageas to regain its full flexibility and to focus entirely on insurance

Message to Shareholders

As we look back at 2016 we are pleased with our performance achieved during the year. With the exception of the UK, we have delivered some strong results and we are making progress against many of our Ambition 2018 objectives.

Annual reports naturally focus the mind on short term achievements. The Ageas philosophy however reflects a longer term view. Our culture supports sustainable and predictable growth and value creation for every stakeholder from employees and partners to customers and investors. And this mind-set underpins every decision we take.

Our culture supports sustainable and predictable growth and value creation for every stakeholder

Eventful year, solid performance

In the past year we have achieved some important milestones on the path to sustainable growth: we closed the sale of our Hong Kong subsidiary; we started new activities in the Philippines and Vietnam and we completed the acquisition of AXA’s insurance business in Portugal; we accomplished a smooth transition to Solvency II; and we agreed a legal settlement with the most significant claimants' organisations.

2016 was a year of steady growth in the insurance net result across Life and Non-Life supported by a solid operating performance overall. The net insurance result increased to EUR 821 million, boosted by the proceeds of the sale of the Hong Kong activities, but reflecting also a resilient performance in Belgium and improved results in Asia and Continental Europe. Inflows have continued to grow to EUR 31.7 billion driven in particular by the Asian and Belgium Life businesses but also by Continental Europe. However the full year results were impacted in the fourth quarter by some exceptional charges related to restructuring plans and reserve strengthening in the UK and equity impairments in Asia. The balance sheet remained solid with shareholders’ equity at EUR 9.7 billion and strong insurance solvency well ahead of target at 182%. And based on these solid fundamentals the Board proposed to shareholders a total gross cash dividend of EUR 2.10 over 2016, which includes an exceptional component of EUR 0.40 related to the Hong Kong divestment. 2016 was a year in which our choice to create a well-balanced and diversified business model across different markets, different products and different channels has been well proven.

The right choices for a promising future

At the same time many of our predictions about the future of the market and customer’s expectations are being validated on a daily basis. We see this in the way our own business is evolving but also in the actions of our competitors. We believe we have made the right strategic choices within Ambition 2018 and this will help us to participate in this evolution.

We have consistently proven that we are ready to take tough and often courageous decisions. Nowhere was this more evident than in the agreement reached with claimants’ organisations. Whilst we could have continued to defend the various legal actions brought against Ageas case by case over a protracted period of time, we had to consider whether this was in the best interests of the Group and its stakeholders.

We can now look to a future where the uncertainties from the past are almost removed. We are regaining our full financial and strategic flexibility allowing us to focus on the development of our insurance activities. And we are confident that in time this will make Ageas an increasingly attractive investment opportunity.

Naturally there will always be new challenges on the horizon. But the one positive from a crisis is that you emerge stronger from it and with valuable experience to call upon. Crises force you to act, to leave your comfort zone and to reflect on how you will continue. We did just that and this is what drove us towards the path of sustainable growth.

But that’s the past. Companies are never rewarded for past achievements, but only for what they do in the future. We need to constantly deliver, perform, and adjust to the market reality whatever that is. Ageas has proven repeatedly its ability to do just that. For good reason the DNA of our company is to “do” and then “talk.” Delivering what we say we will do is all that matters. 2016 was a year that proved this.

The DNA of our company is to “do” and then “talk”

million insured motor vehicles drive growth in UK inflows

We are strongly focused on doing the right things for our customers, our brokers and our distribution partners

A year of transition for Ageas UK towards a strong unified business model

2016 has been a year of transition for Ageas in the UK. Separate underwriting and retail businesses have been brought together into a single insurance business with three distinct channels to market: brokers, partners and direct. Through this transition, a redesigned governance model and a new centralised organisational structure has been put in place that helps us to improve our efficiency while allowing us to focus on the distinct dynamics of each channel. The changes bring economies of scale for the business and an opportunity to reinforce our single company culture.

Over the last few years, the UK market has experienced regulatory and insurance distribution changes, as well as changes in the way that price comparison sites display their prices. This has caused some pressure on part of our business, and while we have taken robust steps to stem the decline, this has not been sufficient to improve performance. Regrettably, this has meant that three operational sites were no longer sustainable and, after consultation with our employees, we have made the decision to reduce this to two operational sites and close our Glasgow office. Additionally, we took one-off charges related to exceptional underwriting losses in Special Risks and we strengthened reserves in anticipation and also after the announcement of the Ogden discount rate review related to personal injury claims. The combined impact of these events led to an overall negative result in the UK in 2016.

In our continued efforts to simplify our face to the market, we have taken steps to rationalise our brand portfolio, withdrawing smaller brands such as Castle Cover, Auto Direct, Cover Direct and Done Deal from the market. This allows us to focus more on the development of our core brands in the UK.

Significant growth in specialist portfolios

Despite a year of transition, revenues have grown in Motor, Home and Commercial. Across the market, motor pricing has increased, while household premiums continue to fall, despite ongoing impact from weather events. We have made good progress in the broker channel with brokers increasingly likely to choose Ageas because they value our personal touch, our attention to detail and our excellent claims service. But more than anything they know that we will support them to grow their business. This is evidenced by an increase in the Net Promoter Score that measures how likely it is that brokers will recommend us, rising to +55 from +47 in 2014. We were also voted by brokers as Personal Lines Insurer of the Year at the Insurance Times Awards in December. Outside of conventional insurance, specialist portfolios including motorbikes, classic cars, caravans and thatched properties have grown 40%, and this is set to continue.

Good progress is being made in the SME sector through initiatives like Darwinsure, a bespoke online product developed alongside broker Darwin Clayton, and through a major new strategic partnership with Towergate providing underwriting capacity of EUR 71 million each year for the next five years in the area of Commercial Motor, property and liability products.

Ageas explores innovative digital solutions

In the context of Ambition 2018 we are continuously exploring and evolving new innovative customer solutions including among others Back Me Up, a direct digital proposition targeted to and co-created with millennials.

We are also looking into modernising our marketing capabilities illustrated by the Back Me Up approach, reflecting increased demand for digital solutions and the need for stronger social media engagement to reach customers.

Partnerships remain central to our strategy in the UK and in 2016 a new proposition with Age UK was launched in support of the extended 10 year relationship and we have secured a new five year partnership with Connells Estate Agency.

Within the framework of Ambition 2018, we are paying special attention to the trends likely to impact our role as insurer in the future. Ageas UK was engaged early on in the evolution of telematics technology, and today it is taking steps to ensure it is well positioned to respond to developments and opportunities in the connected cars space. Separately we are also making progress in other areas such as connected homes alongside established players and start-ups.

Doing what it takes to stay competitive

The UK market will continue to evolve, and we anticipate the role of the aggregators will grow in both the Motor and household sectors. We will continue to compete hard and fair in our chosen markets through new propositions, and with ongoing focus on cost efficiencies and underwriting and pricing capabilities. We will continuously look at the efficiency of our systems, our processes, our use of data and the investment needed in new skills.

We will continue to compete hard and fair in our chosen markets

Andy Watson, CEO United Kingdom

Ultimately customers judge insurers on the quality of their claims service, and we are proud of our record in this area which is consistently rated highly by our customers and the industry.

Insurance is fundamentally a person to person business, despite technological developments, and it is our focus on people that will continue to be the bedrock of our success.

financial targets as part of Ambition 2018

Working towards delivery of Ambition 2018

% of Group gross inflows through Asian JV's

Increase in inflows through Asian JV's validates our choice to expand further in these growth markets

A year of change in a region that continues to deliver

2016 was another strong year for Ageas in the region in spite of significant volatility in financial markets as well as global political uncertainty. It was also a year of quite radical change in the region. We completed the sale of our Hong Kong insurance activities and segregated the shared services creating a stand-alone regional office. We launched a new business in the Philippines under the name of Troo, and alongside our Malaysian partner, Maybank, we have established a Life operation in Singapore which is showing promising early results. At the same time we have been laying the foundation for the launch of our business in Vietnam in early 2017.

The Hong Kong sale and new market expansion reflect our focus on profitable and sustainable growth. New sales, excellent persistency, and a strong team performance led to another strong year

Gary Crist, CEO Asia

A strong performance in tough market conditions

In China, Taiping Life once more performed very strongly in difficult conditions. This is underpinned by continued focus on disciplined execution and a market leading performance in terms of agency retention, activation and productivity of a force that has now grown to more than 250,000 agents. Persistency rates have also been exceptional across both the agency and bank channels. As we look forward, the market will evolve due to planned regulatory changes around short term high guarantee return products and single premium products in the bancassurance platform.

Another good year in Thailand saw Muang Thai retain its position as the market leader in new business, with persistency rates that are the best in the market, and good solvency levels. Whilst the country is going through a transition in terms of the political and social environment, the business continues to outperform.

Malaysia has also been operating against the backdrop of tough financial conditions, but by focusing on the core bancassurance platform, we are seeing very strong growth in terms of regular premium new sales versus the market. A lot of preparatory work has been done in readiness for the detariffication of the Motor market in Malaysia, including among other things the development of new pricing models. When motor detariffication will come into effect, it is expected to have an impact on the market as insurers can freely tailor their products and price them according to risk profile and customer preferences leading to greater choice for customers.

And in India we continue to reap the benefit of a strong banking platform which has seen an increase in sales in 2016.

Growing alongside our partners

Partnerships sit at the heart of our success in Asia, and these tend to be longstanding relationships that run deep. In addition to our move into Singapore in support of Maybank, we have also extended our geographic reach by working alongside our Thai partner, Muang Thai launching Life operations in Cambodia and Life and Non-Life businesses in Laos.

In line with Ambition 2018, we are also working alongside our partners on a range of digital initiatives. We have established a regional analytics team that is providing support across the whole region on a range of special projects ranging from retention, cross selling, fraud and new customer acquisition. Our new business proposition in the Philippines is another example of our digital strategy in action. The approach is allowing us to be more communicative and responsive to the customer in what is a young, dynamic, tech savvy market. The Ageas Academy has also provided an important framework for Ageas to explore untapped customer driven opportunities in both the Philippines and Thailand.

Continued focus on flawless execution will be important in 2017

As we look to the future, we must be ready for the unexpected and continue to focus on what we do well. Ageas remains well positioned across the region and we have a strong fundamental base. We have started well in Singapore and the Philippines and we have a good launch platform in Vietnam. The priority now is to continuing to execute well, ensuring that we are focused on the fundamentals of our business. At the same time we will continue to look carefully at potential market opportunities in markets like Indonesia as an example, provided they meet our strict criteria for market entry and M&A.

% solid combined ratio in Continental Europe’s Non-Life business

Continental Europe achieved strong results in 2016 while continuing to focus on operational excellence

A strong performance and transformational year for the region

When Ageas completed the acquisition of the Portuguese AXA insurance business in the spring of 2016 it was propelled to the No.2 position in the Portuguese insurance market. Added to the existing businesses of Ocidental and Médis, Ageas has achieved a business of significant scale and a strong base from which to grow in the future.

Ageas Seguros gains traction as new brand

The newly acquired business was rebranded to Ageas Seguros and after only 6 months, brand awareness reached 32% thanks to some highly innovative campaigns. This new and differentiated insurance brand is resonating well with employees, customers, agents and partners; a brand built on shared values, a spirit of entrepreneurship, innovation and customer service.

Continental Europe achieved strong results in 2016 while continuing to focus on operational excellence

Steven Braekeveldt, CEO Continental Europe

Sales increased more rapidly than expected and customer satisfaction has started to improve. However, the rebranding to Ageas Seguros is part of a longer journey. A complex process of disentanglement, transformation and integration will continue throughout 2017 including a major upgrade of the IT infrastructure necessary to support the business and customer requirements of the future.

Adding value to the customer experience

In terms of performance, all entities achieved solid operational results. In particular the Portuguese businesses Médis and Ocidental continued to perform very strongly.

In Portugal and Turkey we undertook an analysis of the Motor and Healthcare businesses to identify ways of adding greater value to the customer. The outcome of this work is now being baked into our processes to improve the customer experience. In France we are successfully implementing a new strategy with a major digital component that targets the important IFA market.

Digitalisation is gaining ground in most of our markets. In the future customers of Médis in Portugal will have their own webpage related to the products they have with us. In Italy we continue to look for ways of improving our efficiency, and reflect on extending our bancassurance distribution channel. Turkey kicked off an integrated customer journey process, and the focus has been on the sale of profitable products in a market where certain lines are loss making. Turkey has also benefited from efforts to deepen the relationship with the banking channel.

In our efforts to put Ageas Seguros on the map with customers, we are linking various initiatives to the positioning of the brand. This differentiated approach is gaining traction and helping to position the brand as something very different. Sponsorship of the 5km breast cancer run achieved nationwide TV coverage of the brand. An innovative campaign supported by agents to create greater health awareness during the summer months was successfully rolled out on the beaches of Portugal. Continental Europe is also a very active user of social media with highly developed campaigns in many markets leading to a healthy rise in the number of followers. Winning the 2016 Grand Prize of the Portuguese Association of Corporate Communication (APCE) in the Social Media category is a tremendous recognition for all the efforts and creativity of the Ageas Seguros’ team in this domain.

As part of the effort to increase customer centricity and in line with Ambition 2018, Ageas is institutionalising the tracking of our Net Promoter Scores across all entities, including the ones from Continental Europe, on a monthly basis.

As we look to the future, the environment is expected to remain volatile exacerbated by the prospect of political uncertainty in some markets and continued regulatory changes. One of our top priorities as a business will be to continue the integration of the Portuguese business in an orderly manner while increasing customer satisfaction. We will continue to demonstrate our ability to innovate and we will take steps to increase customer satisfaction across all markets. We will continuously screen the market for potential opportunities to grow organically or through the right transactions.

new schools opened in Schools of Tomorrow project

million people in the Philippines, a promising Life insurance market for Troo

million EUR net profit shows resilience of AG Insurance

Once again the AG team delivered a strong performance in what was a very turbulent year

A solid foundation supporting future opportunities

As we look back at our performance in 2016 it is impossible to ignore the challenges posed by the tough economic environment. But despite this, we maintained our profitability levels against a backdrop of low interest rates, and we achieved a combined ratio below 97%, helped by our well-diversified business model.

We have taken a number of actions this year and in prior years to ensure that we remain efficient and competitive, developing an attractive product offering at the right price for the market, while paying special attention to cost management. Today we enjoy a clear market leading position in Belgium and one of the best expense ratios in the market.

At a business level, we have faced challenges in Non-Life including emerging risks such as terrorism, which became a harsh reality for Belgium in the early part of 2016, and incidents of severe flooding. While growth has been somewhat moderate this year, the portfolios remain structurally very healthy.

AG Insurance enjoys a clear market leading position in Belgium

Hans De Cuyper, CEO Belgium

In Life, we've seen good results and growth in inflows, despite the lowering of the guaranteed interest rates at various times throughout the year. Despite the low returns these products remain attractive to customers even in a low interest rate environment.

In independent studies with brokers including those by IMCA and Bent Hurst, AG has achieved the highest scores for both its product range and for services towards partners and customers. This recognises AG Insurance's efforts to collaborate with partners and its strong commitment towards customers over many years.

Digitisation as a route to customer proximity

AG Insurance has embraced Ambition 2018, accelerating the digital transformation, engaging with the customer in a true omni-channel experience, and embedding data analytics into key processes. We are delivering real digital solutions for distribution partners including our banking partner, the broker channel and large corporate clients. And this is just the start; a pipeline of additional initiatives is planned in 2017. Thanks to new digital platforms, bank clients can now consult their insurance portfolio through their online banking application. Brokers will in the future be able to offer the same insights into insurance contracts to their clients through their own website. And in the corporate Employee Benefits market “My Global Benefits” was launched as a platform that allows corporate clients to offer their employees online access to their pension status.

Developments in Data Analytics are allowing us to better manage costs whilst improving customer service. By building robust statistical models based on our historical claims experience and other available known data we are vastly improving accuracy with respect to car and property repairs.

Well positioned for new opportunities

We are not expecting any turnaround in the environment in the short term, but we have taken the right steps to ensure we are strategically well positioned. We anticipate potential new opportunities emerging from pension reforms, and in the Employee Benefits space, changing regulation alongside the work we do in healthcare should also help us to get closer to corporate employees. Digital is also facilitating the potential for new eco-systems whereby we will in future be able to create innovative product and service offerings and a new form of customer engagement beyond traditional insurance.

Playing our role in the wider community

AG Insurance prides itself on being "Supporters of your Life" and this starts with the commitment of staff to go the extra mile for customers. But it extends also to the involvement of our people in solidarity programmes that are supported by hundreds of employee volunteers. AG Insurance, through its subsidiary AG Real Estate, is also playing an increasingly important role in infrastructure finance. This year we delivered our 100th school within the “Scholen Van Morgen” programme on time and on budget and we are on track to deliver the full 200 schools by 2018. AG Insurance also supported the Belgian Olympic and Paralympic teams at the Rio Olympics.

As market leader we have a responsibility to contribute in a positive way to the evolution of the insurance market. We are proud therefore that our CEO chairs Assuralia, the Belgian insurance industry association, which plays such an important role in this time of change for the insurance market.

employees join Ageas in Portugal to shape Ageas Seguros

million EUR Insurance net profit achieved by 40,000 employees

a year of recognition for CEO Bart De Smet and GRO Emmanuel Van Grimbergen

million EUR returned to shareholders since 2009

3,743 million returned to shareholders since 2009

take up the challenge to help prevent breast cancer

Chinese agents deliver another market leading performance

Thank you to the 38,000,000 customers who help us
to continue to grow