U.S. Markets open in 51 mins

Edited Transcript of AGS.BR earnings conference call or presentation 6-Nov-19 8:30am GMT

Q3 2019 Ageas SA Earnings Call

1000 Brussels Nov 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Ageas SA earnings conference call or presentation Wednesday, November 6, 2019 at 8:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Antonio Cano Y Bosque

ageas SA/NV - COO & Executive Director

* Bart De Smet

ageas SA/NV - CEO & Executive Director

* Christophe Boizard

ageas SA/NV - CFO & Executive Director

* Emmanuel Van Grimbergen

ageas SA/NV - Chief Risk Officer & Executive Director

* Hans J. J. De Cuyper

AG Insurance SA/NV - CEO & Director

================================================================================

Conference Call Participants

================================================================================

* Albert Ploegh

ING Groep N.V., Research Division - Research Analyst

* Ashik Musaddi

JP Morgan Chase & Co, Research Division - Executive Director and Co-Head of European Insurance Equity Research

* Bart Jooris

Banque Degroof Petercam S.A., Research Division - Analyst

* Benoit Petrarque

Kepler Cheuvreux, Research Division - Head of Benelux Equity Research

* Colm Kelly

UBS Investment Bank, Research Division - Director, Co-Head of European Insurance & Equity Research Insurance Analyst

* Farquhar Charles Murray

Autonomous Research LLP - Partner, Insurance and Banks

* Fulin Liang

Morgan Stanley, Research Division - Former Research Associate

* Jason Kalamboussis

KBC Securities NV, Research Division - Executive Director Research

* Matthias De Wit

Kempen & Co. N.V., Research Division - Analyst

* Robin van den Broek

Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst

* Steven Haywood

HSBC, Research Division - Analyst

* Vikram Gandhi

Societe Generale Cross Asset Research - Equity Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, welcome to the Ageas Conference Call for the First 9 Months of 2019. Today, I am pleased to present Mr. Bart De Smet, Chief Executive Officer; Mr. Christophe Boizard, Chief Financial Officer; Mr. Emmanuel Van Grimbergen, Chief Risk Officer; Mr. Antonio Cano, Chief Operating Officer; Mr. Filip Coremans, Chief Development Officer; and Mr. Hans De Cuyper, Chief Executive Officer Belgium. (Operator Instructions) And afterwards, there will be a question-and-answer session. Please also note that this conference is being recorded.

I would like now to hand the call over to Mr. Bart De Smet, CEO; and Mr. Christophe Boizard, CFO. Gentlemen, please go ahead.

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [2]

--------------------------------------------------------------------------------

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 9 months of 2019. Ladies and gentlemen, Ageas has achieved a strong performance this quarter, confirming the positive trend recorded in the first half of the year. The net result over the first 9 months is at a very high EUR 877 million. This represents a 34% increase compared to last year. Results were driven by a solid operating performance in both life and non-life and benefited from the positive evolution of the RPN(i), which contributed EUR 106 million as well as from a substantial amount of EUR 193 million capital gains over the first 9 months. These capital gains are the result of our prudent approach in the way we value our assets.

Our impairment rules led us to take a significant amount of impairments in Asia last year, it had a positive effect on our results this year as it enabled us to record nearly EUR 100 million net capital gains in Asia. Whereas the Life activity drove strong result in Asia, in Europe, the strong performance came to a large extent from the Non-Life business. The current year performance in Belgium and Portugal resulted in a strong combined ratio of 94.7%, comfortably below our target level. In the U.K., the motor market remains difficult with pricing trends in the market not following the witnessed claims inflation, and this translated in our results. The impact of the large losses we mentioned during the 6-month results communication has proven to be of lower magnitude than initially foreseen. The Life activity in Europe was relatively resilient, considering the continued low interest rate environment.

As you can see on Slide 30, the evolution of the fixed income portfolio in our Belgium business is very close to the evolution of the accounting reserve in runoff. As indicated by rating agencies, the situation of AG Insurance is a relatively unique position on the European market and is a result of a strict and consistent investment in ALM strategy applied over the years. This consistent, adequate, and efficient ALM consists of managing the interest rate risk through cash flow matching in combination with duration matching, with both indicators closely monitored on a monthly basis. We can say that the existing Life portfolio in Belgium is very well matched and holds very limited reinvestment risk.

In Portugal, in order to alleviate the pressure from the low interest rates on our margin, we adapted our product strategy and reduced the guaranteed rates to 0. Overall, our 9-month group operating margin for guaranteed products stood at 81 bps, and we are confident that we are on track to reach our group target range of 85 to 95 bps at the end of the year.

This quarter, we also continued on the growth path recorded in the first half of the year, with an increase of 11% since the start of the year, scope-on-scope, when excluding the divested activity in Luxembourg and our new Non-Life entity in India. The growth was driven by both the Life and Non-Life activities and spread across almost all the regions. In the U.K., the inflow started to stabilize in the third quarter after recording a decline in the first half of the year, following the strategic decision we took to prioritize pricing discipline in a highly competitive market.

In Asia, we pursued the solid sales momentum with a profitable regular premium contracts still accounting for more than 90% of the Life inflows. We received this quarter an additional EUR 4 million dividend upstream, leading to a total of EUR 633 million coming from our operating companies since the start of the year. This amount was enough to cover not only the dividend paid to our shareholders and our holding cost, which is our strategic intent, but also the cash outs related to the share buyback programs since the beginning of the year. Our total liquid assets amounted to EUR 1.6 billion, including EUR 0.6 billion, which remains ring-fenced for the settlement.

Ladies and gentlemen, I will now hand over to Christophe for more details on the results.

--------------------------------------------------------------------------------

Christophe Boizard, ageas SA/NV - CFO & Executive Director [3]

--------------------------------------------------------------------------------

Thank you, Bart, and good morning, ladies and gentlemen. As mentioned by Bart, we booked another strong quarter, driven by a solid operating performance and supported by financial results. As usual, I will give you some comments per segment.

Slide 5. In Belgium, our strong result this quarter was supported by the performance of both our Life and Non-Life activities. In Life, the quarterly result benefited from real estate capital gains, which compensated for a lower underwriting result. The 9 months guaranteed operating margin recovered to 81 bps. The additional expected capital gains on real estate planned for the fourth quarter should enable us to end the year within our target range of 85 to 95 bps. The unit-linked operating margin, which amounted to 39 bps was in line with our target range, which is between 30 and 40 bps. In Non-Life, we achieved this quarter an excellent result. After a first quarter impacted by weather events, we have continuously improved our combined ratio over the year and recorded an excellent 90% in the third quarter. On a year-to-date basis, we reached 95%, which is better than our target of 96%. Through the new internal reinsurance agreement, EUR 1 million of the Belgian Non-Life result was transferred to the reinsurance segment during this quarter. The commercial performance in Belgium is strong since the start of the year, with double-digit growth in Life and a steady increase across all business lines in Non-Life. During the [third] quarter, Life inflows were stable compared to last year, with increased inflows in guaranteed products, compensating for lower unit-linked sales, while Non-Life products continued their growth path.

In the U.K. now, so I am on Slide 6, our net result was impacted by higher claim inflation in Motor, which is a market-wide phenomenon. This offsets the continued strong operating performance recorded in household. Please also note that the new internal reinsurance program had a negative impact of EUR 4 million on the quarter. The year-to-date combined ratio stood at 97% with benign weather mitigating the adverse claim development in Motor. On the sales side, the direct sales through the aggregators have continued to grow.

Now in Continental Europe on Slide 7. The result over 9 months increased by 6% scope-on-scope, when excluding the contribution from Luxembourg, which was sold last year. The Non-Life had a strong performance, offsetting a lower Life result in a challenging environment marked by low interest rates. The 9 months guaranteed operating margin was impacted by a reserve strengthening in Portugal in the second quarter that was already reported in the Q2 results. Excluding this, the operating margin guaranteed would be in line with high levels recorded last year.

In Non-Life, the result was strongly up, thanks to the continued solid performance in all business lines, both in Portugal and in our nonconsolidated partnership in Turkey. The combined ratio in the consolidated entities stood at 90.4%, well below the group target. An increase in top line was also observed in both Turkey and Portugal. The internal reinsurance agreement had a negative impact of EUR 2 million on the result of this quarter.

In Asia, on Slide 8, we had a very high result this quarter, thanks to a solid operating performance supported by a EUR 30 million net capital gain compared to a EUR 40 million loss last year due to equity impairment, and see for this slide 19, where you have more details. The result still benefited from the positive evolution of the discount rate curve in China. This curve used in China to assess the level of the liabilities is based on the 750-day moving average of the Chinese government bond yield. We have included in the presentation, Slide 42, a graph showing the curve in comparison with the evolution of the 10-year Chinese government bonds. The sales dynamic continued in Asia with double-digit growth recorded in both Life and Non-Life segments.

In the reinsurance segment, on Slide 9, we had a positive result of EUR 10 million this quarter, thanks to the strong Non-Life performance in Belgium and Portugal. But this quarter, all the segments positively contributed to this result.

The General Account on Slide 10 generated a positive net result following the positive contribution of the RPN(i) of EUR 106 million, which was already mentioned by Bart in his introduction.

The group shareholder equity on Slide 11 increased by 19% to EUR 11.2 billion in the first 9 months of 2019, supported by the high net result and by unrealized capital gain, especially in Thailand, where interest rates are at historical lows and where there is no shadow accounting on the liabilities. This adjustment, the shadow accounting would have dampened the increase.

Our group Solvency II ratio on Slide 12, stood at a strong 199% and was only 2 percentage points down over the quarter despite a continuing drop in the yield curve. This is explained by the mitigating impact of a correction on the treatment of the minority interest related to intragroup subordinated loans. The impact was positive by roughly 4 -- 5 sorry, percentage points. The contribution of the operation to the solvency ratio covers the expected dividend over the quarter.

The operational free capital generation on Slide 13, amounted to EUR 391 million for the first 9 months of the year, including EUR 98 million dividend upstream from the Non-European nonconsolidated participation. In the third quarter, our business operations generated EUR 134 million of free capital, of which EUR 4 million of dividend collected during the quarter, this was already mentioned by Bart as well. This is a solid number in the current continuing low interest rate environment. And this is the end of my presentation.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

[Operators Instructions) We have the first question from Ashik Musaddi from JPMorgan.

--------------------------------------------------------------------------------

Ashik Musaddi, JP Morgan Chase & Co, Research Division - Executive Director and Co-Head of European Insurance Equity Research [2]

--------------------------------------------------------------------------------

Bart, Christophe, just a few questions. First of all, can you give us some clarity on what's going on in Slide #43, which is the China discount rate thing? I mean, I think we are aware of this thing, but can you give us some numbers as to what would be the tail -- headwind next year compared to the tailwind this year? And related to that is, how should we think about your guidance of EUR 275 million to EUR 325 million, which was given for this year, how should we think about for next year? So what should be our expectation for Asian earnings? I can see that you have given some additional earnings split in the tables, in the Excel tables, but that still goes to only six months. So any clarity on what should be the expectation for next year for Asian earnings would be really helpful.

Secondly, on Belgium, I mean, you have crystallized some capital gains as of 9 months, which is more or less in line with last year. So how should we think about capital gains for fourth quarter. So that would be a bit more important as well, just given that volumes have -- are coming down slightly just because of low interest rates. So how should we think about that for fourth quarter?

And thirdly, is U.K. P&C I mean, it looks like there is a big reserve release there, about 12%. On a clean basis, your combined ratio is like 110%. What's the trajectory of that? I mean, how -- where do we stand on that EUR 65 million to EUR 75 million of clean U.K. profits going forward? These 3 questions would be very helpful.

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [3]

--------------------------------------------------------------------------------

Okay. Ashik, thank you for the 3 questions. I will take the first one and then hand over to Hans for the Belgium one and Antonio for the one from the U.K. So with respect to Slide 43, we have indeed produced let's say, the graph for the past. And if you would extrapolate you can expect, indeed, that in 2020, that curve will have an opposite movement, that will come down, but remind that there are also elements like the volatility adjuster in China, where China Taiping Life always has been more on the conservative prudent side. So I think it's quite difficult to project or to predict what the real impact will be. Coming to the guidance we have given in the past for the Asian segment in terms of profit, where we have always put that in the last quarters between EUR 275 million and EUR 325 million, I believe you can note that we moved this up now to EUR 300 million to EUR 350 million, which also means that the total group -- target group profit, including General Account, where we had an EUR 800 million to EUR 900 million guidance, you can move that up to EUR 850 million to EUR 950 million.

--------------------------------------------------------------------------------

Hans J. J. De Cuyper, AG Insurance SA/NV - CEO & Director [4]

--------------------------------------------------------------------------------

Yes, Ashik, Hans De Cuyper for your question on Belgium. Indeed, we did realize the part of the capital gains in the third quarter. So year-to-date, I think the operating margin is positively impacted by 14 basis points coming from real estate compared to 10 basis points last year. So it's slightly higher as you can see, as well, our operating margin in total is at 81 basis points. We are working on one more real estate transaction to conclude actually this month. Once this transaction is concluded, we should enter the year within our ambition of 85 to 90 basis points.

--------------------------------------------------------------------------------

Antonio Cano Y Bosque, ageas SA/NV - COO & Executive Director [5]

--------------------------------------------------------------------------------

Yes. Ashik, Antonio here on the U.K. So the 12.5% that you noticed on previous year's releases, actually, it makes a bit more sense to look at on a year-to-date basis, because this 12.5% relate actually also to taking back part of the increase of provisions we had in the first half year related to these large losses. So we had a review of all these claims. So part of that 12.5%, you should actually net out with the previous year's releases of first half year, that should have been higher.

On the targets. So the target is still the numbers that you mentioned, what do we see this year. So we still have year-to-date negative impact of these large claims. So these releases of previous years, large claims releases, do not compensate overall the increase we see in large claims. And then a new phenomena that we see picking up in Q3, particularly, is claims inflation on more on the, call it, attritional claims, mostly related to third-party damage. And there we see inflation edging up and some of our other U.K. insurance colleagues, competitors have pointed to that. And we see that type of inflation for those claims as attritional third-party damages, actually edging up more close to the 10%, which is a bit worrying, looking to next year, combined with the fact that premium rates in the U.K. are stable or maybe only slightly increasing while they actually take into account this claims inflation, this should be higher.

--------------------------------------------------------------------------------

Ashik Musaddi, JP Morgan Chase & Co, Research Division - Executive Director and Co-Head of European Insurance Equity Research [6]

--------------------------------------------------------------------------------

Okay. So it looks like for next year, U.K. P&C, would be a bit struggling. Is it fair to say that? Or do you think there is enough in the reserving to offset that higher claims inflation?

--------------------------------------------------------------------------------

Antonio Cano Y Bosque, ageas SA/NV - COO & Executive Director [7]

--------------------------------------------------------------------------------

So we have reserved these attritional claims considering the current inflation. So that should be enough. I think for next year, particularly on the top line, a lot will depend on this famous FCA review on general insurance pricing. And we do expect that rates will go up. Some of the leading insurers have already announced that. So rationality would expect us to see higher premium rates in Q4, which would translate back to next year. But it looks for now like a difficult year next year.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

Next question from our Albert Ploegh from ING Groep.

--------------------------------------------------------------------------------

Albert Ploegh, ING Groep N.V., Research Division - Research Analyst [9]

--------------------------------------------------------------------------------

Two questions from my end. Yes, first one is on the dividend outlook. Obviously, 2019 is shaping up to be a very good year for Ageas. I think, yes, looking at where things may end, you will have quite a nice -- quite a good increase in your absolute level of dividends. I think consensus is around EUR 2.50. When looking at your guidance for next year. I think Ashik also alluded to that already on Asia, I mean, because I think that's on the investors' minds, how to look at the dividend for -- progression from here because this year, it will clearly be high, but is it acceptable or flattish kind of dividend?

Is that something you are okay with or you like to grow the dividend every year because I think that's an important thing also for the outlook for 2020? And the second question I had is on the EIOPA review of the Solvency II framework, probably not very impactful for you, but maybe you can share some thoughts on that, how that may impact Ageas? And finally, on the Solvency II roll forward in the quarter. I saw something like a 5-point from model refinements with treatment of minorities. Can you explain a little bit what happened there in the quarter?

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [10]

--------------------------------------------------------------------------------

Okay. I will pass question 2 and 3 to Manu, but on the dividend, as we promised and what is in part of our strategic plan is that we pay at least 50% of the result. We have -- or we move towards an excellent result this year, if nothing, I would say, strange happens in the coming 2 months on the financial markets. But normally, the dividend will be at a quite high level. We will, of course, honor that promise. And as we stated before, it's also the ambition of the Board to maintain a stable to growing dividend. So we will, of course, see what next year will bring. But that -- the one is a clear promise, and the other is a clear ambition.

--------------------------------------------------------------------------------

Emmanuel Van Grimbergen, ageas SA/NV - Chief Risk Officer & Executive Director [11]

--------------------------------------------------------------------------------

Okay. Albert, Emmanuel, so on your first question, what we can expect on the 2020 review coming from EIOPA, but let me just highlight a couple of topics that are on the table today. You know the most important one for AGS is the volatility adjuster and, okay, the volatility adjustor as it is designed today by EIOPA is not working very well because we have a reference portfolio that differs quite materially from the reference portfolio of EIOPA. So I've seen a proposal on the table. And looking at the proposal on the table, the impact should be neutral to positive for Ageas in Pillar I. So I want also to remind you that in our Pillar II, we have our own expected gross model, which do not have any importance for the EIOPA review. Do not have any impact on our Pillar II numbers. The other important topics that are on the table, like the last liquid point, that's one that is not impacting materially Ageas. Also, the UFR, it's also one that is not impacting us very materially. If you look at our sensitivity, on Page 58 or 59, we show one on the UFR even [decreasing] by 45 basis points. The impact on our solvency is minus 3%. On the risk margin, also there, we don't have very long tail business. We don't have annuity type of business or not too material portfolio annuity type of business. So the risk margin is also not impacting materially Ageas. So to summarize on the 2020 review. Last liquid point UFR risk margin, no material impact. But depending on the outcome, and on the VA, we have a hope that it can have a slight positive impact on Pillar I.

And then on your last question, related indeed to the model correction. We have -- indeed, it's linked to subordinated debt that we on-lent to operating companies. To AG insurance and to MBCP Ageas. So -- and there, there was in the minority, third-party minority interest, there was a mistake in the elimination.

If we think about it before Q1, we had only 2 loans that were on-lent, one to AG and one to MBCP Ageas and then we underestimated before Q1, the solvency by between 2% and 3%. And if you remember, in Q2, we on-lent a third loan to AG insurance. And then we noticed that error and the 3% together is underestimation of the solvency of 5%. And that's what we have corrected for the Q3 results.

So before Q2, it was an underestimation between 2% and 3%. And with the new on-lent of Q2, it end up with underestimation of the solvency ratio of 5% that we have corrected now.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

Next question from Vikram Gandhi from Societe Generale. Next question is from Vikram Gandhi.

--------------------------------------------------------------------------------

Vikram Gandhi, Societe Generale Cross Asset Research - Equity Analyst [13]

--------------------------------------------------------------------------------

Hello, can you hear me?

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [14]

--------------------------------------------------------------------------------

]

Yes, yes, we can hear you. Yes, we can hear you.

--------------------------------------------------------------------------------

Vikram Gandhi, Societe Generale Cross Asset Research - Equity Analyst [15]

--------------------------------------------------------------------------------

Can I just ask, what's your outlook for the Chinese Life business over the next 2 to 3 years in terms of the volume and profitability? And secondly, can you remind us on the reasons for the weak underwriting profitability in Belgium Life? And lastly, in the nearly EUR 870 million of the net insurance result over the 9-month period, how would you characterize the genuine one-offs, i.e., it would be great if you can break this -- these one-offs in terms of positive and negative. But I mean, at EUR 870 million on a reported basis? In your view, what's the -- what's the number X one-offs. That's all from my side.

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [16]

--------------------------------------------------------------------------------

Okay. For your first questions -- question. I want to limit it to the Asian contribution. However, of course, China, itself is of importance. As I mentioned in another -- as an answer to another question, we expect for the coming years, the profit contribution from the Asian segment to be between EUR 300 million and EUR 350 million compared to the EUR 275 to EUR 325 million guidance we gave before. So we lifted up with EUR 25 million. In terms of volumes, we believe that the growth profile that we are in will continue. Main contributor to that next to the new business is, the very solid portfolio of regular premium with very high persistency rates. And as a consequence, a strong growth of the renewals. So from that side, we don't expect an evolution that is not going in the same direction as in the past, meaning going up as well, profit as a premium. Knowing that this year, of course, and that's maybe the link to your third question, that we have a number of exceptionals in Asia in the first 9 months of this year.

But before coming to that third question, I propose to hand over to Hans for the question on the underwriting risk result in Belgium.

--------------------------------------------------------------------------------

Hans J. J. De Cuyper, AG Insurance SA/NV - CEO & Director [17]

--------------------------------------------------------------------------------

On the Life risk margin, well, there are a few elements that are into play. Some of them, already we spoke -- already about in the second quarter. The first one is on mortality. Mortality, I think, 2 elements there. The first one is on the unit-linked business. We have some old unit-linked business where mortality guarantee was given on your initial investment, like a minimum guaranteed paid out of your minimal investment in case of death. We modeled this risk and with the correction that we saw in the stock markets by the end of last year, we had to make appropriate provisioning for the risk capital that popped up. We are using our Black and Scholes methodology. We are actually not too happy with this methodology because we believe it brings unnecessary volatility. So we are looking into that going forward. But that's the first element in the unit-linked. Second element is in the generic MRTA business with the bank. We have seen a slight worsening of the claims performance. We do not see that as structural. We see that it seems to be a more difficult year compared to last year and previous years, but we do not -- we see it more as a one-off and not being structural. And then the final element I would like to mention is that in a segregated portfolio of the Group Life insurance, we have done some minor reserve strengthening because -- to face the low interest rate environment. But there, again, nothing structural.

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [18]

--------------------------------------------------------------------------------

Third question on the, third question on the one-offs in the year-to-date results. Let's say, I exclude weather because we consider weather as being part of the normal business. When we look in blocks at the U.K., you could say there is overall a positive EUR 30 million from Ogden and negative EUR 40 million from the large losses, which mainly relate to previous years and also restructuring costs. So if you net it out, you could say, it's something like EUR 10 million negative in U.K. so that you should -- if you want to go to an underlying -- adds to the result.

In Asia, we have a combination of what you know, the tax relief, where it's important to mention that the major part that we've taken of [debt] in the 2019 year-to-date results is the one result for last year. But this year, the major part of the tax advantage will be in the fourth quarter. So it was a very low number now. You then have the point that is referred to on Slide, I think, 43 with (inaudible) that has an impact of some EUR 30 million, EUR 35 million. So if that you take those 2 and together, you could say that we have something like an EUR 85 million positive in Asia and a EUR 10 million negative exceptional in the U.K., so it's something like EUR 75 million exceptional. Next to that, of course, you have the whole issue on capital gains. For the last year, the capital gain impact was -- impairment impact was quite huge. We are now at the level -- a total of Ageas at EUR 193 million capital gains, wherein the previous years, and I exclude year like 2018, which was exceptionally low, you should see that we have, on average, between EUR 185 million and EUR 200 million capital gains on a yearly base. So you could say we are close to the normal run rate. And with the capital gain that will be realized in Belgium on the real estate, we will probably exceed that, not taking into account potential impairments in the last 2 quarters of the year. So I would say on capital gains, it's not that exceptional. So you could say that out of the results that you've seen here, as I said, something like EUR 75 million is exceptional.

--------------------------------------------------------------------------------

Vikram Gandhi, Societe Generale Cross Asset Research - Equity Analyst [19]

--------------------------------------------------------------------------------

Okay. If I can just come back on the point about Asia, the guidance of -- is the level of capital gains that (inaudible) ? Or 0 is the baseline for that? And what do you get this on top of that?

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [20]

--------------------------------------------------------------------------------

Let's say, the capital gains in Asia is a very particular one also. And we -- I think we referred in the past to the fact that we use our IFRS impairment rules for equities everywhere. It's also in Asia where locally, shares are not always impaired at the same level. To give the most clear example, we impair when the share is dropped 25% or is below acquisition price on a year-after-year. In China, that 25% is [50%.] So what happened in the first 9 months of this year that a number of shares that we had impaired have been sold in the trading portfolio at a price higher than our impaired price, and that gave this capital gain. So -- and for the rest, you could say the only amount of capital gains, where we have a kind of, let's say, a regular amount in our budget is in Belgium. If you look to the past years. It's always something between EUR 80 million and EUR 90 million cap gains on real estate, partly on equities, exactly to reflect the return that we expect from these assets in our strategic asset allocation.

When we give the guidance of when -- sorry, when we gave the guidance of EUR 300 million and EUR 350 million for the Asian region, you should see it without an expected impact from capital gains [on] equities.

--------------------------------------------------------------------------------

Vikram Gandhi, Societe Generale Cross Asset Research - Equity Analyst [21]

--------------------------------------------------------------------------------

Okay. Okay. That's very useful. And on the second question on the Life risk margin, will unit-linked business, you already said there was a mortality guarantee and then you've corrected it, I'm just wondering, it's a case where the approach under IFRS versus Solvency II wasn't consistent before, but now you've corrected so that it's lining -- in line with what you have on Solvency II? Or I'm just reading it wrong, and these two are completely unrelated? And maybe if it's too technical, like I'm ready to take it offline.

--------------------------------------------------------------------------------

Hans J. J. De Cuyper, AG Insurance SA/NV - CEO & Director [22]

--------------------------------------------------------------------------------

So no, what I was talking about on the unit-linked risk margin has nothing to do with a mistake. It has to do with market evolution. It also has, as such, no impact on our Solvency II calculations, it is IFRS related. We have an old book of unit-linked business, where a mortality guarantee was given to your investment. So it means that when the value of your investments is above your initial investment, there is no risk to capital. There is also no mortality charge. But if it would fall below, and that's some of the effects we have seen from the last quarter last year, then there is a risk capital popping up in case -- only in case of mortality, and not in case of surrender. And of course, we need to make appropriate provisions where we use a forward-looking Black and Scholes model to quantify the mortality risk of that risk capital appearing. And that is the effect that you have seen on the unit-linked side. When I say we are looking into the methodology that is because we feel that our current methodology calculating this brings some unnecessary volatility, and that's something we will look into for the future. But so it is -- that's nothing to do with a mistake. It is just the evolution of the financial markets. It's also a closed book, by the way. It's an old book we are [having], and it has no Solvency II impact as such.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

Next question from Farquhar Murray from Autonomous Research.

--------------------------------------------------------------------------------

Farquhar Charles Murray, Autonomous Research LLP - Partner, Insurance and Banks [24]

--------------------------------------------------------------------------------

Just 2 questions, if I may. Firstly, on Continental European solvency ratio. Could you just explain and ideally decompose the Q-on-Q fall in solvency from 160% to 142%, in particular, is that being driven by interest rates or some model changes or perhaps something I've missed earlier? And then secondly, just coming back to the U.K. can you just explain which elements of the claims space are driving the claims inflation being there. You mentioned third-party attritional claims. But is that coming from repair costs or bodily injury settlements? I'm just trying to understand the driver there, please.

--------------------------------------------------------------------------------

Emmanuel Van Grimbergen, ageas SA/NV - Chief Risk Officer & Executive Director [25]

--------------------------------------------------------------------------------

Okay. Emmanuel, I'll take your first question on the evolution of solvency in Continental Europe. So we have a decrease from 160% to 142%, which is almost a 20% decrease, and the decrease is, let's say, completely allocated to market movements. And in the market movement what you have to see is certainly the decrease in interest rates, but also there are some other equity movements. But mainly, it is a decrease in interest rates. So for continental Europe Q3 spread, it's minus 20% due to market share, then we have the normal operational performance of the business and the expected dividend that we subtract from our solvency that explains then the evolution from 160% to 142%.

--------------------------------------------------------------------------------

Farquhar Charles Murray, Autonomous Research LLP - Partner, Insurance and Banks [26]

--------------------------------------------------------------------------------

Just as a follow-on, on which geographies or business units is that focused on? Is that Portugal or...

--------------------------------------------------------------------------------

Emmanuel Van Grimbergen, ageas SA/NV - Chief Risk Officer & Executive Director [27]

--------------------------------------------------------------------------------

It is Portugal and France. And indeed, as you -- you probably know, in France, we have also an annuity portfolio which at Ageas level is not material, but for our entity in France, it's certainly a reasonable part of the business, which means that France is certainly quite sensitive on interest rate movement. I just want to remind you that over the quarter, Q3, the swap rate decreased by more than 30 basis points. But today, since the end of Q3, the swap rate increased again by 25 basis points. So we are almost back to the level of the end of the second -- by the end of Q2 from an industry perspective.

--------------------------------------------------------------------------------

Farquhar Charles Murray, Autonomous Research LLP - Partner, Insurance and Banks [28]

--------------------------------------------------------------------------------

Is it then fair to summarize that a large part of that fall in the third quarter is reversed then?

--------------------------------------------------------------------------------

Emmanuel Van Grimbergen, ageas SA/NV - Chief Risk Officer & Executive Director [29]

--------------------------------------------------------------------------------

So yes, can you repeat the question?

--------------------------------------------------------------------------------

Farquhar Charles Murray, Autonomous Research LLP - Partner, Insurance and Banks [30]

--------------------------------------------------------------------------------

Sorry, is it then fair to assume that a large part of that fall in Q3 was therefore reversed already?

--------------------------------------------------------------------------------

Emmanuel Van Grimbergen, ageas SA/NV - Chief Risk Officer & Executive Director [31]

--------------------------------------------------------------------------------

It is, that is, -- okay, certainly, partially, it will be recovered. Again, we have now 25 basis point increase back on the swap compared to the 33 decrease in the Q3 spread. Of course, there are other spread movement, et cetera. But the most important element will be the recovery of solvency based on the current swap rates, but there I don't know what will be the rest of the quarter. So based on the current situation, big part will be recovered.

--------------------------------------------------------------------------------

Farquhar Charles Murray, Autonomous Research LLP - Partner, Insurance and Banks [32]

--------------------------------------------------------------------------------

Okay. Super. And then on the U.K., please?

--------------------------------------------------------------------------------

Antonio Cano Y Bosque, ageas SA/NV - COO & Executive Director [33]

--------------------------------------------------------------------------------

Yes. On the U.K., so the claims inflation, I was talking about, it's not bodily injury or indemnity claims. It's really third-party material damage. How does it work? It is when actually this the insurance company of the other party that manages the claim. And then invoices us or the insurer of the guilty party for the damage.

And typically, you see that there is a kind of claims inflation there that this third-party insurer kinds of top ups -- tops up the claim cost. We don't see that level of inflation when it's about accidental damage, when it's like our own damage, [there] you see a lower inflation. In U.K., I believe, this is called the so-called Coles model, whereby actually insurance companies make a margin on handling claims.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

Next question from Fulin Liang from Morgan Stanley.

--------------------------------------------------------------------------------

Fulin Liang, Morgan Stanley, Research Division - Former Research Associate [35]

--------------------------------------------------------------------------------

I have 3 one. And the first one is there you're talking about the Motor inflation in the U.K.? And can we have some numbers in terms of the inflation? And how much you have in your setting pricing? How much kind of have you kind of incorporate into it? And will you increase pricing to adjust for the higher inflation? And that's the first one. And then the second one, it seems like your Belgium unit-linked margin expansion comes largely from some expense, higher expense margin. Is that so? Can we actually assume this is more sustainable in the future? And then lastly, on Portugal. So there is a double-digit kind of growth in Portugal inflow. Is that something you see over -- across the whole market? Or is it because of you, something you've done specifically? And also because you mentioned that you cut the guarantee rates to 0% in Portugal. So all this being achieved together with your lowering your guarantee rate, maybe some dynamics in the Portugal market would be great.

--------------------------------------------------------------------------------

Antonio Cano Y Bosque, ageas SA/NV - COO & Executive Director [36]

--------------------------------------------------------------------------------

So I'll come back to the Motor claims inflation for this third party. So I mentioned this number of 10%. That's actually the assumption that we're using today, both in our reserving and our pricing assumptions. And in fact, that we have moved this inflation expectation has also led to a slight deterioration of the overall claims ratio this year. In terms of -- to the extent that the market is willing to absorb this inflation or this rate increases, to a certain extent. So we do increase rates. It's very difficult to speak about what is the average increase in rates because of the complexity of the market, but we are definitely increasing prices. I think we and the market should probably try to have a slightly higher price rate. Putting this in perspective, so this impacts only a part of the claims. So it's not about the bodily injury or accidental damage. And this high inflation is, to some extent, also compensated by a lower frequency. So the so-called burned cost is not increasing [at] 10%. That will be more in the order of 6%.

--------------------------------------------------------------------------------

Hans J. J. De Cuyper, AG Insurance SA/NV - CEO & Director [37]

--------------------------------------------------------------------------------

Your question related to expense margin unit-linked. As you can see, the year-to-date expense margin unit-linked is actually stable at 39 basis points. But indeed, you're right. You see an uptick in the first quarter with some of these, also a few exceptional elements. Also, last year, you should be aware that it was actually lower because of some commission payments from a sales campaign that ran over the quarter. And that is something we are not seeing. So this is more an exceptional event. But your question about sustainability, I would say what you see at the 39 basis points. I think that is a fair assumption, that range is a fair assumption going forward. Despite the fact that competition on this element, with the low interest rate environment is heating up a little bit. We are confident on the margin.

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [38]

--------------------------------------------------------------------------------

Okay. With respect to Portugal, the double-digit growth. If you look to the 9 months, you see, indeed, a 16% increase in Life and a 9% in Non-Life. But if you would dive into the figures of the third quarter, it's clear that the growth is mostly in Non-Life and less in Life. So part of that double-digit growth was in the first half of the year. While on one side, the rates were still higher. And in the meantime, we've reduced them to 0, the guarantee trade. And so I don't think you can use double-digit growth in Life in Portugal as an indicator for the future. It should be coming down and [main], let's say, targeting more a flat level with the normal inflows in Portugal. Whereas in Non-Life, we, of course, do work towards a growth scenario.

--------------------------------------------------------------------------------

Fulin Liang, Morgan Stanley, Research Division - Former Research Associate [39]

--------------------------------------------------------------------------------

Are you actually gaining market share in Portugal Life or Non-Life segment or…

--------------------------------------------------------------------------------

Emmanuel Van Grimbergen, ageas SA/NV - Chief Risk Officer & Executive Director [40]

--------------------------------------------------------------------------------

In Life, not -- we are not really gaining much in Life, the question is also whether you look to market share in gross written premium or in less technical liabilities. And of course, as profitability in Life is more based on technical liabilities. There, our market share has always been higher than the market share in gross written premium. In Non-Life, we, of course, have the ambition to further grow our market share, which has been happening in the past years.

--------------------------------------------------------------------------------

Operator [41]

--------------------------------------------------------------------------------

Next question from Steven Haywood from HSBC Research.

--------------------------------------------------------------------------------

Steven Haywood, HSBC, Research Division - Analyst [42]

--------------------------------------------------------------------------------

I see that in your general account, you have [dropped] a bit of disclosure, so I can't really reconcile between the net income result and what you disclosed on the RPN(i) and the expenses in there. Can you tell me what is driving the difference between when you reconciled the third quarter, whether it was an impairment or provisioning that was coming through that was a negative to account for the difference between the net result and the expenses in the RPN(i)? Thanks on that. And then secondly, on your solvency, again, are there any other areas of concerns or weaknesses or mistakes that you are looking into currently that we could expect to see another positive 5 percentage points to come through in the quarter?

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [43]

--------------------------------------------------------------------------------

Thanks for your question. Relating to the general account, I can tell you that the gap that you're probably looking for is about EUR 15 million that you cannot reconcile, and that is entirely related to what we hope is a final addition to the provision related to the WCAM settlement. Of course, and then I'll quickly give also the update on that. In July, we terminated the claim filing period. And so we now have a better view on the administrative task ahead, and we have provided the total expected expenses for administration of that process until, I would say, mid-2020, when we hope to terminate it. So that is the main component that you miss in the reconciliation.

--------------------------------------------------------------------------------

Antonio Cano Y Bosque, ageas SA/NV - COO & Executive Director [44]

--------------------------------------------------------------------------------

So on your question, okay, my answer will be not that I know. So that's very clear. And also, I want to reinforce the point that in the previous quarter, it was an underestimation of 2% to 3%. And due -- thanks to the new on lending, we detected that error. And then we end up now with the 5% that is correct now. It's also not -- it's really in the intercompany elimination. It is also not in the actuarial valuation models that we have detected. The error is in the intercompany elimination. But to conclude, I don't -- we are not aware of any material correction that we can expect moving forward.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

Next question from Jason Kalamboussis from KBC Securities.

--------------------------------------------------------------------------------

Jason Kalamboussis, KBC Securities NV, Research Division - Executive Director Research [46]

--------------------------------------------------------------------------------

A couple of questions. So if you could give as you -- can you give us the explanation on Continental Europe on the drop of Solvency II? If you could please do the same for Belgium. Sorry, my computer crashed. I don't have the figures in front of me, but I think it was substantial. The second thing is on Asia. A couple of things, if you could specifically address the third quarter, it seems that it was on an underlying basis, it was a lower quarter. So I just would like to understand the seasonality of it, especially looking at 2018, the evolution. And on the discount rate, you gave us the EUR 35 million, I think 9 months or year-to-date, could we have the second -- the third quarter? And also, could we have, if possible, the 2018 number to have a better perspective of it. Thank you.

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [47]

--------------------------------------------------------------------------------

So on your question on the drop of solvency in Belgium. So we had a drop from 200 -- I'm taking [no] Q3 [except for] 223% to 209%. And there, we have a market impact of minus 13% NAND. And the rest is then supported by the operational performance of the business. So the market impact of minus 13% is also almost completely explained by a drop in the swap curve over Q3, again, minus 33 basis points, which recovered with 25 basis points since the end of Q3.

--------------------------------------------------------------------------------

Operator [48]

--------------------------------------------------------------------------------

Next question from Matthias De Wit from Kempen.

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [49]

--------------------------------------------------------------------------------

Sorry, I still have one question to answer for exportation. So the Asian Q3, first of all, the question with respect to the impact of the [reserving] in Q3, it was EUR 17 million, where it was last year EUR 4 million. So it's EUR 13 million more. And over the total of the year is EUR 35 million compared to EUR 9 million last year. So EUR 26 million more than last year. In terms of capital gains, you have it on the slides with the details of the net realized capital gains. Last year, the quarter was minus EUR 40 million. This year, it's plus EUR 30 million. So if you would correct and the question is always -- because if -- also you have provisions for profit sharing that sometimes follow also the financial results.

So if you would take out the capital gains, this year's result would be EUR 82 million, last year's EUR 80 million. The EUR 82 million of this quarter containing as I said, EUR 17 million of that correction. So it brings you to EUR 65 million. Last year, EUR 4 million brings you to EUR 76 million. So you could say there is a delta of some EUR 10 million less than last year. But again, we really do -- cannot and don't want to manage the business on a purely quarterly level and definitely not in Life, where we also have, indeed, sometimes differences in what I would call in volumes, in commission payments. So we are not at all worried about the underlying of this quarter. And as mentioned, we lift the expectation for the Asian region from [EUR 300] million to $350 million. And that expresses our belief in the strong underlying of the region.

--------------------------------------------------------------------------------

Operator [50]

--------------------------------------------------------------------------------

So now we'll take the next question from Matthias De Wit from Kempen.

--------------------------------------------------------------------------------

Matthias De Wit, Kempen & Co. N.V., Research Division - Analyst [51]

--------------------------------------------------------------------------------

I've got 3 small questions. The first is on the guidance upgrade. So at group level, it was EUR 50 million compared to EUR 25 million at the level of Asia. So where is the difference coming from, please? And yes, can you maybe share something on the main assumptions and building blocks, like, for example, what's the contribution from the U.K., you're expecting, like what's the combined ratio Non-Life you're putting into -- yes, you're assuming for that number?

And then just on capital generation, is there anything you can share on the impact of low rates and spreads on your guidance? Are you still confident with previous target, or is that no longer the case? And lastly, on the new money fixed income yields 1.73%. It looks very high to me considering that approximately half of your reinvestments are in core sovereigns. So that implies like a fixed income yield of 4% for the other assets. So yes, maybe I'm missing something, but can you provide more color on that, please?

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [52]

--------------------------------------------------------------------------------

Okay. On the first question, to give a range [as per the] segment, you could say, Belgium is between EUR 400 and EUR 420 million, U.K. between EUR 70 million and EUR 90 million, compare Europe EUR 120 million to EUR 150 million, Asia EUR 300 million to EUR 350 million and reinsurance EUR 10 million to EUR 15 million, brings you to a range of EUR 900 million to EUR 1,020,000,000. If you then deduct the regional office costs, the corporate center cost because the regional office costs are already deducted in the Asian result, you come to a range of, let's say, EUR 850 million to EUR 950 million.

--------------------------------------------------------------------------------

Christophe Boizard, ageas SA/NV - CFO & Executive Director [53]

--------------------------------------------------------------------------------

So on the new money yield, please note that 1.73% is a year-to-date figure. If we take Q3 alone, it is much lower, and I can read that it is 1.08%, which is much lower. And the reason for this small figure, 2 things: First, the decrease in the rate, and that's an obvious explanation. But then you know that we have a lot of, let's say, innovative idea about infrastructure, the Dutch mortgages, and we had kind of holiday effect. And during Q3, you have July, August, and we didn't put in place a lot of this kind of business which is the reason why it is rather low at 1.08%. But in the future, the 1.73% will go down on a yearly basis. So that's for the new year. Then on the free capital generation, you have noticed that this quarter, we achieved on the operating impact EUR 134 million of which we have to flag the EUR 4 million of dividends. So the right number to look at is EUR 130 million which is, I would say, within the quarterly guidance, but in the low end. And again, the low interest rates by tier, because in the operating components you have the value of new business, which is one component and the interest rates play a role too. So at this stage, we think that it is fair to say that the guidance won't be achieved this year in 2019. But let's see the fourth quarter. And on the guidance, we will come back a bit with the annual results.

--------------------------------------------------------------------------------

Matthias De Wit, Kempen & Co. N.V., Research Division - Analyst [54]

--------------------------------------------------------------------------------

Okay. And just one very small follow up, if I may. On the Group Life guarantees in Belgium, can you remind me what you're currently offering? And what's, yes, what you committed to for the coming years towards the employers?

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [55]

--------------------------------------------------------------------------------

Yes. Okay. Sorry. Well, we have not lowered the guaranteed rates yet. We are investigating that, and it's highly likely that we will take some action at the beginning of next year, if yields stay low as today. And the guarantee we have given is for next year, the minimum the [VOB] guarantee of 175. And that is already provisioned. So every time we communicate something to the market that is immediately provisioned in the books and should not have any impact. We have not decided yet on another announcement at the end of this year.

--------------------------------------------------------------------------------

Operator [56]

--------------------------------------------------------------------------------

Next question from Benoit Petrarque from Kepler Cheuvreux.

--------------------------------------------------------------------------------

Benoit Petrarque, Kepler Cheuvreux, Research Division - Head of Benelux Equity Research [57]

--------------------------------------------------------------------------------

So yes, 2 questions on my side. The first one is on the Belgium cap generation coming at EUR 90 million in Q3, it's [under] 100%. If I kind of annualize this figure and take the minorities into account, I get to about EUR 340 million cap generation, I mean, own funds cap generation for Belgium. This is much lower than the dividends payout of Belgium in 2019. So how do you see the dividend capacity of Belgium going forward. We have seen Solvency II, I mean, the PIM is at 181%. Solvency II came down a lot. So do you still go for a 100% payout ratio out of Belgium? Or do you think that could be maybe on the high side? And you might go back to what you've been paying historically, say, more 75% level? So that's the first question. And the second question was on the -- just Non-Life Belgium? What is the outlook for 2020? Very strong year, obviously, '19. Could you maybe comment a bit on the volatility you have seen on the Motor side, I think [commercial] has been a bit more volatile there?

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [58]

--------------------------------------------------------------------------------

Well, for the first question, we expect, of course, Belgium to continue to pay 100% of the profit as dividend. And the solvency ratio is above 200%. So no reason to question that. With respect to capital generation, again, remind that the capital generation is not equal to cash generation. And so we have no reasons if you look in the future to doubt on the capacity of the Belgium entity to pay the profit in form of dividend. You want to take the second one?

--------------------------------------------------------------------------------

Antonio Cano Y Bosque, ageas SA/NV - COO & Executive Director [59]

--------------------------------------------------------------------------------

Okay. Combined ratios for Belgium, well, first of all, this year maybe a few trends, you see indeed that the situation is less positive on the Motor side, that is predominantly coming from lower prior year releases on this segment compared to last year, but we are still at a comfortable 96.2%, which I think is very close to our overall ambition. If I look at household, there we have a slight improvement compared to last year. Last year as well as this year, we have already fully consumed our retention of the reinsurance. So we are in the reinsurance of CatNat and that is actually something in our plans that we assume every year to happen. So that should not have a negative impact if we would look forward to next year. [Retention] point for our market remains excellent [and held in] specifically worker's compensation, where the low -- well, the worsening combined ratio is still compensated by the investment return of this portfolio, but of course, in the low-yield environment, that starts building up more pressure, and that is actually an issue for the whole market, the whole Belgium market. So with these trends, extrapolating forward at this moment, we have no reason to assume that our addition of 96% combined ratio would not be -- not be sustainable for the future.

--------------------------------------------------------------------------------

Operator [60]

--------------------------------------------------------------------------------

Next question from Robin van den Broek from Mediobanca.

--------------------------------------------------------------------------------

Robin van den Broek, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [61]

--------------------------------------------------------------------------------

My line dropped off during the Q&A, so if I'm repeating questions I'm very sorry for that. What I understood is that you've raised your Asia guidance to EUR 300 million to EUR 350 million, and the group guidance to EUR 850 million to EUR 950 million. I was just wondering if you could very clearly specify what kind of capital gains are embedded in that number and what kind of previous year releases you are including in there? I thought in the past, capital gains were EUR 120 million, EUR 140 million, and previous year releases, 4 to 5 points. Could you just confirm that it's still valid? And then maybe for Asia, specifically. Can you already comment on what kind of tax benefits you are expecting on the commission expenses side in Q4 and whether that run rate will continue going forward as well? Then the second question is more in connection to your quickly rising dividend on the back of your strong EPS performance this year. This quarter, you basically show that you're operational cap generation is equal to your dividend reservation. So should we assume that your buyback basically becomes fully reliant on your existing reserves? Or are there some dynamics coming through that will strengthen the operational cap gen going forward?

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [62]

--------------------------------------------------------------------------------

Okay. On the first question, when we give guidance for Asia EUR 300 million to EUR 350 million that is, let's say, on a normal basis without taking into account capital gains. And so the lifting then for the group guides to EUR 850 million, EUR 950 million is based on -- in any case, for the European entities on the -- what we call more the normalized capital gains, and you could say that there's something like EUR 100 million altogether. And for the Asian market, it's, again, not really accounting many capital gains. So you could say it's including something like I would around EUR 120 million cap gains for the whole group. On the tax benefit, as mentioned, the impact of this year so far was mostly the recovery of 2018, a very small amount for 2019 so far. We expect a higher amount in the fourth quarter because, let's say, a lot of the incentives to sales people are paid in the fourth quarter, and that triggers a bit the tax advantage. But of course, that depends on the volumes we will produce in the course of the fourth quarter. And so it's difficult to put an amount on it.

Then the third question, the expected dividend. And the reference to the free capital generation. Also keep in mind that what we taking to roll forward as expected dividend is based on the current profit so far. But that as most of the increase of the profit so far comes from Asia, and in Asia comes from China. We also can expect next year in absolute terms, higher dividend coming from the noncontrol participation. So the part of the dividend to be paid next year will be funded by a higher, in absolute terms, pay dividends by the -- mainly the Chinese joint venture. And to make it very clear with respect to the buyback, and I can't repeat enough, we have always, since the first launch of the buyback, said that our ambition is that we cover with the upstream dividends, the dividend we paid to shareholders plus the corporate center costs. We always position the buyback as coming out of the excess cash in the general account. But fortunately, over the past years, and it will be no different this year, part of that share buyback is funded by excess upstream dividend compared to the dividends we paid plus the corporate cost. So the buyback is not planned to be coming out of the upstream dividends.

--------------------------------------------------------------------------------

Robin van den Broek, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [63]

--------------------------------------------------------------------------------

Okay. That's clear. And then the previous year release assumption in your guidance?

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [64]

--------------------------------------------------------------------------------

Okay. The -- I forgot that point. We don't have, let's say, changes, and it's always based on the, let's say, the historical experience. It's not that we say, okay, we will push up this result by releasing more than what we believe is justified.

--------------------------------------------------------------------------------

Robin van den Broek, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [65]

--------------------------------------------------------------------------------

And what is that historic trend according to you?

--------------------------------------------------------------------------------

Christophe Boizard, ageas SA/NV - CFO & Executive Director [66]

--------------------------------------------------------------------------------

The release is around 6% of the combined ratio, around 6%. And this is, I would say, structural. It relates to the way the reserving is done. So this could be seen as a sustainable level, 6% on the combined ratio and consolidated accounts.

--------------------------------------------------------------------------------

Operator [67]

--------------------------------------------------------------------------------

Next question from Bart Jooris from Degroof Petercam.

--------------------------------------------------------------------------------

Bart Jooris, Banque Degroof Petercam S.A., Research Division - Analyst [68]

--------------------------------------------------------------------------------

A lot of my questions have been answered. Just a few follow-ups on the U.K. First of all, I still want to go in on that [30] third-party material damage claims. If I have understood it well, that comes from other insurance companies making a margin of the claims they pass on from their clients. I would think that you could do just the same thing, and that should have no impact. What am I getting wrong here? And then secondly, there has been some rumors in the market that Tesco would like to get out of the JV, can you give us your thoughts on that? If you don't want to comment on how that will happen or not, give us maybe some explanations on how the JV is structured, how one of the parties can get out at what date.

--------------------------------------------------------------------------------

Antonio Cano Y Bosque, ageas SA/NV - COO & Executive Director [69]

--------------------------------------------------------------------------------

So on the third-party damages. The model is indeed, as you describe it, it is insurance companies managing claims and passing on the cost, plus a markup. Indeed, you're right. We could do the same thing. We do that also, to some extent. But bear in mind, this claims management activity, it's easier to do when you are a direct company. And in the case that you work with insurance brokers, which is still, in our case, the largest distribution channel, it's much more complicated to do so because there are quite some brokers that do that themselves. So the possibility for us to play this strategy is more limited than, say, the usual names that are big in the direct, so the Admiral, [Hastings]. That just give a bit of color on how that works.

--------------------------------------------------------------------------------

Bart Jooris, Banque Degroof Petercam S.A., Research Division - Analyst [70]

--------------------------------------------------------------------------------

If I can follow up on that, that means that those larger players have less of a tendency to increase premiums to compensate for that.

--------------------------------------------------------------------------------

Antonio Cano Y Bosque, ageas SA/NV - COO & Executive Director [71]

--------------------------------------------------------------------------------

That is -- I'm not sure if you can really translate that because the larger players also claim costs towards the other large players. So also Admiral will be confronted with higher claims costs coming from other competitors, Direct Line, et cetera. I'm not sure if that has a direct impact on our premium. On the Tesco rumors, well, these are indeed rumors. Bear in mind that the existing agreement which was prolonged a few years ago lasts until end 2021 in principle.

--------------------------------------------------------------------------------

Operator [72]

--------------------------------------------------------------------------------

Next question from Colm Kelly from UBS.

--------------------------------------------------------------------------------

Colm Kelly, UBS Investment Bank, Research Division - Director, Co-Head of European Insurance & Equity Research Insurance Analyst [73]

--------------------------------------------------------------------------------

Just questions on the Continental Europe solvency ratio. If we think about the remittance here, I think it constitutes about 15% of the group cash upstreaming. If the solvency of Continental Europe does not improve either in aggregate or within some of the subsidiaries, is there any risk to be cash upstreaming for next year? And if we think about the coverage of the dividend and the holding company costs, excluding Continental Europe upstreaming, it will be quite tight. So is there any risk around dividend holding company costs in that scenario? Can you also update on the French solvency ratio specifically, given you've mentioned that. And just lastly, on this point, if we look at the year-on-year movement in Continental Europe solvency, it's down 70 percentage points, which is a very, very large move. Appreciate it's interest rate driven, but it does indicate the need to increase the level of hedging across those subsidiaries, particularly at this level of solvency. So is this something that's being considered? Can we expect something around this going forward?

--------------------------------------------------------------------------------

Christophe Boizard, ageas SA/NV - CFO & Executive Director [74]

--------------------------------------------------------------------------------

Okay. So on Continental Europe on your question related to the upstream, let's also keep in mind that you have to make a distinguished difference between the Life companies and the Non-Life companies. Of course, the Life companies are much more impacted by the market and the interest rate movement that we have observed in so far. The Non-Life company are still very strong and generating a very strong capital. So that's something that you have to keep in mind. Okay. And also that by the -- as of today compared to the end of Q3, which was probably one of the lowest point of the year, the swap recovered by 25 basis points. On the risk of -- on the management actions that we can take, we took already a couple of management actions in the course of the year. We also communicated them in Q2. We also took a few additional ones in Q3 on the asset side of the balance sheet, but also on the liability side of the balance sheet, what I mean by this, by redesigning products. So we already mentioned that [guarantee] in Portugal that we decreased the guaranteed rate to 0%, but other actions has been also taken in the Life business from a product perspective. Then I'm not sure whether you had still another question. Did I cover all your questions?

--------------------------------------------------------------------------------

Colm Kelly, UBS Investment Bank, Research Division - Director, Co-Head of European Insurance & Equity Research Insurance Analyst [75]

--------------------------------------------------------------------------------

Can you -- is it possible...

--------------------------------------------------------------------------------

Antonio Cano Y Bosque, ageas SA/NV - COO & Executive Director [76]

--------------------------------------------------------------------------------

There was a specific point on the French side, so maybe I can also give a couple of words on France. So first France doesn't pay dividend. So there is no risk that there is a decrease coming from France, because it has been set to 0, and this is the case, and this has been the case for many years. Because the solvency position, as Manu mentioned previously, due to the annuity book is not extremely high. But on the other side, France benefit from the so-called transitional on the solvency side, which set the Pillar I solvency at such a level that there is no risk of a capital increase. So no dividend and no capital increase, that's the French position.

--------------------------------------------------------------------------------

Operator [77]

--------------------------------------------------------------------------------

We don't have any more questions. So back to you for the conclusion.

--------------------------------------------------------------------------------

Bart De Smet, ageas SA/NV - CEO & Executive Director [78]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for your questions and to end this call, let me summarize the main conclusions. We achieved record results, thanks to a solid operating performance supported by exceptional elements. Our strong sales momentum continued with double-digit growth, driven by both life and nonlife. We generated a solid creation of free capital generation this quarter in a challenging environment of very low interest rates, and we reviewed our guidance for the future to bring it to EUR 850 million to EUR 950 million on a yearly basis. And with this, I would like to bring this call to an end. Do not hesitate to contact our Investor Relations team, should you have outstanding questions. Thanks for your time, and would like to wish you a very nice day. Thank you.

--------------------------------------------------------------------------------

Operator [79]

--------------------------------------------------------------------------------

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for participation. You may now disconnect.