Hi, good morning, everybody. Thanks for dialing in to this call. Last late-moment invitation. Happy that you are so plenty to dial in. I'll give the word immediately to our CEO, Hans De Cuyper. Just want to flag you that there is a chat in this Teams call where you can either put some logistic problems that you want to flag to us, and also potentially put in some of your questions. We will see if we can tackle them in this call. Otherwise, IR team will get back to you afterwards. Leaving the word to Hans. Go ahead.
Thank you, Veerle. Good morning, ladies and gentlemen. Thank you for joining us on this call. Today, I'm pleased to announce that we have reached an agreement with our long-standing partner, Maybank in Malaysia, to sell our 31% stake in Etiqa to them. After more than 25 years of close collaboration with Maybank, having created a national insurance champion in Malaysia, we have jointly decided that now is the right moment to conclude our journey and for Maybank to take over full ownership of Etiqa. A successful collaboration it has been. As the terms of the transaction show, we are able to monetize the value that we have created together over the last 25 years, providing us with EUR 1.1 billion of cash proceeds. I would like to take a moment to reflect on what this 25 years partnership has delivered.
Together with Maybank, we have taken Etiqa from a startup to a true national champion, a true market leader in Takaful and non-life, and a strong multi-line insurer across life and non-life, active in both Malaysia and Singapore. This success stems from a powerful combination. Maybank's unmatched distribution and customer reach paired with Ageas' deep expertise in bancassurance, insurance risk, financial management capabilities, and product expertise. That's how we have consistently outperformed the market. I would like to take this opportunity to warmly thank our partner, Maybank, for the collaboration in building this success story together. It has been an exciting journey also for me personally, as I look back with very positive memories on the time I was on the ground in Malaysia. Between 2007 and 2013, I was able to actively contribute myself to the development of Etiqa, first as the CFO and later as the CEO.
Financially, the partnership has also been highly attractive for Ageas. The company became profitable, and it started paying dividends as from year seven, up to a total of EUR 316 million, leading to a positive cumulative cash flow of EUR 83 million and a double-digit return on investment. A tangible demonstration of the strength, resilience, and value delivered by our partnership. This divestment allows us to realize the significant value created together with Maybank over the past 25 years. It exemplifies how our unique partnership model allows to build value, creating market-leading positions. As you are aware, we operate a model where we partner up with a strong local player who knows the market dynamics and has customer access, while we add our deep insurance and bancassurance expertise.
It has proven to be the best way to enter a market and get commercial traction to build the activity and build out national champions, as you see in Malaysia, but also in all the other Asian markets we operate in. How the partnership potentially evolves in a later stage of maturity depends on the specific situation. As you remember, in our Indian life entity, Ageas Federal Life Insurance, for instance, we stepped up to control, now owning 70%. As we show today, our partnership model is not only designed to build value for the long term and create, in partnership, national champions, but also to realize the value when the moment is right. This transaction is another step in the development of our business portfolio. Recently, we have invested some EUR 3.5 billion in further strengthening our operations in Belgium and Europe through in-market consolidation.
While we now divest one of our activities in Asia, this will have no impact on the diversification strategy of Ageas. As part of our balanced profile and business model, focusing on both European and Asian markets, we will continue to further build on and invest in our partnerships in the Asian region. We are present in Asian markets that are sizable, and our strong market positions will allow us to capture the continued long-term growth potential in the region. We will further develop our existing operations according to their needs and stage of maturity. In reinsurance, we continue our organic growth with focus on profitability and diversification. Let me now turn to the impact on our financial metrics. Our initial guidance for the full year 2026 net operating result, including Etiqa's expected full year 2026 contribution.
With this divestment, we anticipate a lower contribution of around EUR 30 million in 2026 from Malaysia, which is quite limited in the total group results. Additionally, we expect to recognize a net capital gain of around EUR 450 million from this transaction. At the half year 2026 results publication, we will provide you with an updated guidance for the full year 2026 net operating result. Going forward, when all recent transactions will be closed and coming to full contribution to the group net operating result, our profile will be made of 1/3 Asian partnerships, and 2/3 Belgian, Europe, and reinsurance. Regarding the recurring cash upstream, this transaction doesn't affect the expectations going forward. The cash received from Malaysia represented only about 2% of the total cash upstream over 2025, hence, a very limited contribution in our broader cash generative profile.
This divestment will also have a positive impact of some 25 percentage points on our Solvency II ratio. The one-on-one translation of the increase in own funds to be recognized at closing of the transaction. Before taking your questions, let me summarize the key highlights of this deal. The transaction delivers a very attractive financial return of around two times price-to-book, generating EUR 1.1 billion in cash proceeds, and resulting in an estimated net capital gain of around EUR 450 million, hence crystallizing the substantial value created throughout the partnership over the past 25 years. This transaction further validates our value creation story and demonstrates that our partnership approach creates long-term value while remaining flexible to seize opportunities that reinforce shareholder interests. We reaffirm our strong belief in the growth potential of the Asian market, a region that remains a core pillar of our long-term growth strategy.
I've now reached the end of my presentation, and I'm happy to take any questions you might have.
Yeah, if you want to ask a question, please raise your hand and I will unmute you. Please also unmute your mic before asking your question. Just to remind you one thing, we are currently in closed period, so it would be appreciated if you only ask questions that are related to this transaction. Farquhar, I will unmute you now. Wait.
He's already.
Okay.
We can unmute him.
You can unmute yourself, Farquhar, and ask your questions.
Thanks. Morning, all. Just two questions, if I may. Firstly, I wondered if you might help us understand how the consideration of EUR 1.1 billion was arrived at. In particular, was that the kind of mechanical outcome of the exit terms within the original JV agreement, or perhaps some kind of agreed benchmarking exercise in terms of arriving at that number? Secondly, with regards to the ultimate likely use of the proceeds, my understanding is obviously you'd naturally prefer to reinvest back into the business if opportunities arose. Is there still kind of a geographic preference within that? Obviously in recent times there's been more rebalancing towards Europe. Would that still be maybe the bias of preference at the moment? Or maybe here, would it be better to recycle back into Asia?
I just wonder if there's any kind of bias in terms of what might be preferred, though ultimately everything will depend on the opportunities that come. Thanks.
Thanks, Farquhar. Well, on your first part, of course, these numbers, and I cannot go into detail about what the shareholders' agreement had prescribed, but of course, these numbers are part of a negotiation between a buying and a selling party. I cannot zoom in much more in the details. Again, if you look at the multiples price-to-book and price-to-earnings, I think we managed to achieve, I think, a very attractive valuation, showing also, once again, that mature company that we have been able to build with our partner, Maybank, in Malaysia. On your second part, the proceeds, well, I think the response will not surprise you. Of course, we are a group that we prefer, if we can, to invest in growth, and that will definitely be the first opportunity. Before I start, first things first. We are announcing a deal now.
Your detailed question here on geography is a very relevant one. You have seen us making EUR 3.5 billion investments, I would say on the European, the continent and the U.K. This is a divestment in Asia, but I've shown you also in the speech how it further optimizes the balance of the group, which is roughly a third, a third, a third. Asia probably just below a third. Let me state again that with the aging population, I do believe in the mid and long term that the growth of Asia will outperform the other regions. We also see the GDP in the Asian countries above the GDP growth we see, for instance, in Europe.
In that respect, I expect actually Asia to continue growing further in the mid to long term compared to the other regions. That being said, Asia is a key region for us, and it can also be a region where we further invest. The proceeds can be used both for Belgium or Europe or Asia, because I believe that the balance in the net operating result composition of the group is close to optimal if you take into account the different regions we are active in.
Okay. Many thanks.
You're muted, Veerle.
Thank you, Hans. May I pass the word to Nasib, please? Go ahead with your questions.
Thanks, Veerle. Thanks, Hans. Different question on divestments. You mentioned that this crystallizes value and shows us the value in the Asian JVs. Are there any others where you've achieved that level of growth where you can potentially, without front-running, where you can potentially crystallize some value? I guess second question may be a Wim-type question on M&A power pro forma. Of course, you get the EUR 1.1 billion, but what's the debt capacity to add on to that? Finally, I don't know if you can give the moving parts on the EUR 1.5 billion net operating result target for this year. You lose maybe EUR 30 million from this transaction, Portugal losses and Belgium. What was in the guidance and what's not, and thinking about that for this year? That's it from me. Thank you.
Okay. Well, on your first question, every country in Asia is in a very different stage of development. I always say we talk about the Asian region, but there is no such thing as an Asian region. Every country is very different, very different characteristics. As I said with the previous question, is that we strongly believe in the further growth potential in all the countries where we are. In that sense, remember, we are predominantly active on the life side, aging population. I don't have to repeat myself. These are regions which materialize a significant growth potential. Regions and countries also where we have great partners. Partners who have a good customer reach, and where we also continue contributing expertise, and that is the strategy going forward for Ageas into the Asian region. Second one on firepower, I cannot comment right now too much.
First things first, we need to close this transaction, and that would be at EUR 1.1 billion to the potential firepower of the group. All the other areas like cash and debt capacity are topics that we can talk about and update potentially at the results announcement end of August. The same one goes for your third question, guidance on net operating result. Remember that we have said that our ambition is to exceed the EUR 1.5 billion. What is changing here? Well, first of all, the capital gain we expect, of course, to close before the end of the year. In that case, the capital gain can be added to the net operating result for the Asian region. On the other hand, we will miss approximately EUR 30 million of profit coming out of Malaysia for the second half of the year.
That will be two elements that influence the guidance of the group. An updated guidance taking into account with everything what happened in the first half of the year, we will share with you by the end of August.
Thank you.
Let's move on to Michael.
Yeah, I did it. Good morning. Fantastic. Well done for the deal. I have four questions. One is, how long did it take? I think there was a first mention of a figure of $4 billion, which isn't very different from the current price back in November 2024. The second is on solvency. Can you give us the moving parts? I have updated my solvency. To get there, I had to make some heroic assumptions on the reduction in SCRs. I just wanted maybe a bit of a help here. The third one is on the Asia growth. You kind of answered. What's your own personal view of what the growth profile of the region means for Ageas? Remind us maybe of the, I don't mind, top line or whatever's in the plan. Just as a reminder, I've completely forgotten, I must be honest on this one.
The last one is on, can you outline what was the business profile of the business you're selling? How much was life, non-life, et cetera? Thank you.
Okay, Michael. Thank you for your question. First, how long it takes, I don't think is so relevant for the topic of today. You're right. Since November 2024, there was a little bit of rumors in the market, of valuations in the market. I cannot zoom in, I think, on how both partners. As you know, I know our Malaysian partner very well. I had the luck and the opportunity to work together with them for more than seven years. Of course, we have a continuous dialogue on the partnership and what the best future for the partnership would be. I don't think I would be able to give you even a starting date when the discussions would come in. Second, on solvency, you talk about SCR and so on. Be aware that Malaysia was non-consolidated, so that was out of the Solvency II scope.
In that sense, on our Solvency II, on solvency ratio of the group, you just add the EUR 1.1 billion on the assets. Because it is just cash coming in, which was fully deducted from the equity of the company. In that sense, on the Solvency II scope, there is no direct SCR impact. Asian growth, well, I must say my rule of thumb is always a little bit, if you grow 1%, 2%, 3% above GDP growth of the countries in life insurance, that's probably a good ambition. That varies also within the Asian region, by the way. That varies from country to country. If you look at India where you see GDP numbers 7%, 8%, other countries are a little bit more struggling in the current geopolitical situation. Life insurance penetration does remain low in the region.
Social security systems in many countries are not developed in a way as we know them in Europe. Aging, as you know, in some countries more than others. It's a very extreme issue in China, for instance, it is an issue across the board. That's what I can give you on growth. As you know, we do not give any guidance on growth. You asked a little bit more detail on the composition of the business. I do not want to go too much in detail now, if you want to have a more detailed profile, I think Veerle and the team can provide you. First of all, there was Malaysia and Singapore. That's the first element you have to take. Within Malaysia, you had actually four activities.
You had life and non-life, both on the conventional side and on the Takaful side. We have market-leading positions. In number life, we were number five, where we had 7% market share. In family, which is the life Takaful, we were second with 15% market share. In general, we were also second with 10% market share, and we were market leader in general Takaful, where we even had 40% of the market share. In Singapore, we did not have leading positions, and we were number eight in life and number 27 in non-life, with a market share of respectively 3% and 1%. That's I think what I want to share with you now, but if you would like to have more details on the composition of the business size in those countries, I think Veerle can give you a little bit more details.
Good. Thank you.
Move on to Farooq. You also have a question.
Yeah. Hi, everybody. Thank you very much. First question is why now? What is it that's kind of driving you to do this? Obviously the multiples are good, but it's also a growth business and a business that you're very familiar with and you found to be very attractive, as you commented on. My second question is, clearly you want to reinvest in the business, but when does plan B and plan C come in when you think, right, okay, this is a lot of surplus capital on our balance sheet. We do need to distribute this at some point to create accretions. What are the kind of existing capital management frameworks, your thoughts around that? Thank you.
Thanks, Farooq. First of all, why now? I think indeed, if you look at valuation, it is an attractive moment to do so. Luckily, I think the business also still has growth potential because that growth potential, of course, is reflected in the way we valued that company. Of course, that also has to do with the view of your partner, who is keen and has announced that they would love to have that 100% of the insurance entity in the group. Again, after 25 years, when a partnership has, as I would say, fully matured and valuations are right, then I think at that moment, the moment is also right. Let me reiterate, this was not related to the EUR 3.5 billion we invested in Europe. This was not about cash needs or divesting. That was not the driver of this transaction.
You should look at this transaction on a standalone basis, where both partners found each other and an attractive future for Etiqa on the one hand, and an attractive valuation for us on the other hand. That's what drives, eventually, timing and making agreements between partners. On the capital base, indeed, it's a significant strengthening of our capital. That only happens at closing, so not yet at signing. Let's wait for the closing. You also know that M&A cannot be timed in the future.
Those things come and happen at a certain moment in time, I think we have been able to build over the years a very strong track record to be active in the M&A opportunities, both, of course, in line with group strategy, which is known very well to you, and also with respecting the financial discipline that we always apply as a group. That's, as always, also our first intention. To look at opportunities that match our strategy, that match our financial industry, and to continue that growth story that Ageas has been writing for many years now. We also have the reinsurance segment. Remember, we have committed to invest a little bit more than EUR 200 million in the reinsurance segment by the end of this strategic cycle, EUR 200 million to the third-party reinsurance segment.
To be clear, we are perfectly on track to do so, we have also, of course, designed together with the new strategy, also the new future for the reinsurance, that's the second element. Thirdly, that's I think also you know from us, that if we truly believe that we have excess capital that we cannot immediately deploy within our criteria, then a share buyback can also be an option. All this, of course, we first need to close the transaction.
Just actually, I just want to confirm that historically, you said that in reinsurance it's an organic strategy.
Indeed. Our strategy in reinsurance is organic. Yeah.
Thank you.
Okay. Thank you very much all for your interest and the good questions. If you have any further questions, please contact the IR team. We'll be happy to further guide you if there would be need for it. Wishing you a very nice day. Goodbye