Fortis Inc. · TSX:FTS
Fortis — Q1 2008 Earnings Presentation
61 slides from Fortis's earnings presentation, May 13, 2008
Slide 1: First Quarter 2008 Results
Getting you there. First Quarter 2008 Results Net profit of EUR 808 million driven by resilient operational performance 13 May 2008
Slide 2: Disclaimer
Disclaimer These pages are intended to provide investors with financial information about Fortis’s business plans. The financial information contained in this presentation has been prepared by Fortis and has not been audited. The figures are provided for information purposes only and are subject to
Slide 3: Agenda
Agenda 1 Overview first quarter 2008 results 2 Banking 3 Insurance 4 Capital Management Additional Information Fortis first quarter 2008 results │13 May 2008 │ 3
Slide 4: Highlights of first quarter 2008 results
Highlights of first quarter 2008 results 9 Resilient operational performance Net profit of EUR 808 million, incl. EUR 380 million net impact of credit market turmoil, driven by sustained operational growth and strict cost management - Banking net profit of EUR 721 million, including EUR 231 millio
Slide 5: Resilient Q1 results despite challenging financial markets
Resilient Q1 results despite challenging financial markets Q1 '08 Q1 '07 % Chg. Q1 '08 Q4 '07 % Chg. Net profit before results on divestments 808 1,167 (31%) 808 (533) - Banking 721 903 (20%) 721 (881) - Insurance 219 352 (38%) 219 529 (58%) General (132) (88) 50% (132) (181) (27%) Results on divest
Slide 6: Contribution to Q1 2008 net profit
Contribution1 to Q1 2008 net profit Insurance 22% Insurance International 3% Insurance Netherlands 7% Insurance Belgium Retail Banking 12% 27% Private Banking & Asset Management 5% Merchant Banking Banking 78% 46% 1 Fortis Q1 2008 net profit, excluding Other Banking and General Fortis first quarter
Slide 7: Sustained commercial momentum
Sustained commercial momentum Customer Deposits Underlying lending growth EUR (2%) EUR Stable +2% bn bn +14% 208.0 212.5 207.9 264.8 269.6 236.1 Q1 2007 Q4 2007 Q1 2008 Q1 2007 Q4 2007 Q1 2008 Funds under Management Insurance - Gross Inflow Net intake 3.3 13.9 1.8 Life Non-life EUR EUR (4%) bn bn +1
Slide 8: Robust standalone underlying net profit
Robust standalone underlying net profit Adjustments Reported Reported Impact of Impact1 of Aggregate Underlying Q1 ’07 Q1 ’08 credit market credit hedge impact of Q1 ’08 turmoil reval. gain ABN AMRO (EUR 380m) (EUR 151m) (EUR 85m) Total 1,167 808 1,122 57 149 (151) Insurance 352 28 231 368 219 Net p
Slide 9: Agenda
Agenda 1 Overview first quarter 2008 results 2 Banking 3 Insurance 4 Capital Management Additional Information Fortis first quarter 2008 results │13 May 2008 │ 9
Slide 10: Banking results
Banking results Q1 ’07 Q1 ’08 Total Income Credit Loss Ratio (excl. impairments on structured credits1) 3,178 12bp +17% 2,716 5bp Total Expenses Net Profit 1,690 721 +2% (20%) 1,650 903 1 Related Q1 ’08 impairments EUR 366 million (EUR 231 million post-tax), no impact in Q1 ’07 Fortis first quarter
Slide 11: Solid 17% growth in total income
Solid 17% growth in total income Net Net Capital Treasury Dividend & Other interest commissions gains & financial other income income & fees markets investment income 3,178 +23 +76 Up +437 17% 2,716 (60) (3) (10) Up 6% excl. YoY impact ABN AMRO ABN AMRO credit hedge contribution financing costs EUR
Slide 12: Cost containment measures delivering results
Cost containment measures delivering results ABN Scope change Underlying growth Investments AMRO & one-offs in growth 10 16 15 1,690 1,650 45 (70) (9) (3) 2% 36 Integration Scope One-offs1 Wage Organic Legal & Strategic FTE costs change drift growth Compliance initiatives increase +2.7% +0.6% (4.2%)
Slide 13: Update on structured credit portfolio
Update on structured credit portfolio Total net exposure of EUR 43.3 billion, down EUR 4.9 billion over Q1 ’08 due to: - additional write-downs of EUR 572 million - the impact of repayments, changes in exchanges rates and selective sales ► EUR 2.3 billion net exposure (52% total coverage ratio) -
Slide 14: Credit spread portfolio - Overview
Credit spread portfolio - Overview Marked at 94% first order securitizations End-Q1 - Gross (EUR) 38.6 bn (% of par) Majority in most senior positions CDOs 2.9 bn 93% 82% AAA-rated (from 84% end-07) US RMBS 10.5 bn 84% 93% AA-rated or better (from 94% end-07) EU RMBS 9.7 bn 98% Limited imp
Slide 15: US RMBS stress tests reflect portfolio resilience
US RMBS stress tests reflect portfolio resilience Alt-A / Jumbo EUR 1.7 bn Sub-/Mid-prime EUR 1.9 bn Vintage AAA Super <AAA Redemp. CPR Current Cumul. Vintage AAA <AAA Redemp. CPR Current Cumul. Senior Senior Factor Speed CE* Loss Senior Factor Speed CE* Loss 2002 0% 100% 0% - 13% 15% 7% 0.01% 2005
Slide 16: ABN AMRO underlying net profit at EUR 319 million
ABN AMRO underlying net profit at EUR 319 million ABN AMRO acquired activities (pro forma) EUR million Q1 ’08 Q1 ’07 Delta Netherlands net profit down 2% - Netherlands 206 233 (12%) when excluding the impact of - Private Clients 72 78 (7%) integration costs (EUR 22 million) - Asset Management 0 50
Slide 17: Agenda
Agenda 1 Overview first quarter 2008 results 2 Banking 3 Insurance 4 Capital Management Additional Information Fortis first quarter 2008 results │13 May 2008 │ 17
Slide 18: Life recording a strong and profitable production
Life recording a strong and profitable production Q1 ’07 Q1 ’08 Gross inflow +5% New business life - APE +18% 3,157 884 4,041 129 147 128 403 GWP Investm. contracts w/o DPF BE NL INTL1 3,003 851 3,853 163 90 90 342 Pre-tax result (33%) Net Profit1 (40%) 82 77 36 195 92 52 18 162 BE NL INTL BE NL INT
Slide 19: Non-life combined ratio improving to 96.6%
Non-life combined ratio improving to 96.6% Q1 ’07 Q1 ’08 Gross written premiums +3% Gross written premiums breakdown Other 12 (17) 17% (20) A&H 83 41% 1,856 Fire 19% 1,799 A&H Other Motor Fire +12% +4% (4%) (5%) Motor 23% Technical result Combined Net Profit (28%) (EUR m) ratio (%) 101.2% 96.6% 27 1
Slide 20: Agenda
Agenda 1 Overview first quarter 2008 results 2 Banking 3 Insurance 4 Capital Management Additional Information Fortis first quarter 2008 results │13 May 2008 │ 20
Slide 21: Sound solvency position
Sound solvency position Banking Insurance General Fortis Tier 1 Solvency Leverage Core Equity Actual Target Actual Target Actual Target EUR 5.5 billion BIS I BIS II BIS I BIS I BIS II BIS I above BIS I target 26.5 26.0 2.4 19.9 20.5 26. 2.8 1 19.0 15.2 5.7 24.1 8.9 9.1 17.0 1.1 2.0 11.4 3.0 7.1 7.8
Slide 22: Group capital remained stable over Q1 2008
Group capital remained stable over Q1 2008 Non-Innovative T1 Innovative T1 - NITSH 1 0.5 Non-Innovative T1 Financing Retained Revaluations Other Equity after Transactions Profit prudential filters 0.8 Tier 1 3.5 0.5 (1.2) (0.2) 3.5 Tier 1 29.6 5.7 6.2 29.5 Core Core Equity Equity 26.1 26.0 20.4 19.8
Slide 23: EUR 26.1 billion Core Equity
Fortis has a sound capital structure Mix Instruments Timing Amount Issued Hybrone 2006 0.5 EUR 3.5 billion 12% Fortis Bank Tier 1 1999/2001/2003 2.4 Innovative Tier 1 TOPRS 1999 0.6 Tier 1 EUR 29.5 billion FRESH: sub-convertible loan 2002 1.2 * EUR 6.2 billion MCS: sub-convertible loan 200
Slide 24: Solid pro forma look-through capital ratios
Solid pro forma look-through capital ratios Group Solvency Projections – Basel I Interparking JV Deduction of Goodwill, Fortis Ping An Intangibles & Revaluations after Investments JV ABN AMRO consolidation ~2.6 ~(7.0) Core Equity 26.0 will occur Actual in 2009 21.6 Actions taken Solvency targets
Slide 25: Conclusion
Conclusion 1. Q1 2008 net profit of EUR 808 million, including EUR 380 million net of tax impact of the credit market turmoil 2. Resilient operational performance in banking and insurance supported by sustained commercial momentum and strict cost management 3. ABN AMRO underlying net profit remained
Slide 26: Getting you there.
Getting you there.
Slide 27: Annex - Additional information on Q1 2008 Results
Annex - Additional information on Q1 2008 Results 1 ABN AMRO 2 Fortis Group Banking Insurance Fortis first quarter 2008 results │13 May 2008 │ 27
Slide 28: ABN AMRO Netherlands: underlying net profit down 2%
ABN AMRO Netherlands: underlying net profit down 2% ABN AMRO activities Netherlands Net interest income down due to higher pro forma results funding costs and lower income from EUR million Q1 ’08 Q1 ’07 Delta savings products (shift from regular savings Net interest income 651 715 (9%) products to t
Slide 29: ABN AMRO Private Clients: underlying net profit down 7%
ABN AMRO Private Clients: underlying net profit down 7% ABN AMRO Private Clients activities pro forma results Net interest income down due to a shift EUR million Q1 ’08 Q1 ’07 Delta from regular savings products to time deposits, offsetting growing volumes Net interest income 124 129 (4%) Net commis
Slide 30: ABN AMRO Asset Management: lower underlying net profit
ABN AMRO Asset Management: lower underlying net profit ABN AMRO Asset Mgmt. activities pro forma results Net commissions and fees down due to EUR million Q1 ’08 Q1 ’07 Delta lower management fees, resulting from of Net interest income (3) (6) * the decline in funds under management. Net commissions
Slide 31: Annex - Additional information on Q1 2008 Results
Annex - Additional information on Q1 2008 Results 1 ABN AMRO 2 Fortis Group Banking Insurance Fortis first quarter 2008 results │13 May 2008 │ 31
Slide 32: Enhanced disclosure in Fortis financial and operational review
Enhanced disclosure in Fortis financial and operational review Retail Banking Belgium Retail Retail Banking Netherlands Banking Retail Banking Luxembourg Retail Banking International & Consumer Finance Corporate & Public Banking Merchant Commercial & Investment Banking Banking Markets Full Income Sp
Slide 33: Acquisitions and Disposals
Acquisitions and Disposals Main Acquisitions 2007-2008 – Dominet as of Q1 2007 – Fortis Insurance Company Asia (Pacific Century Insurance) as of Q2 2007 – ABN AMRO (tracking share in RFS Holdings) as of Q4 2007 Main Disposals 2007-2008 – CaiFor in of Q4 2007 Fortis first quarter 2008 results │13 May
Slide 34: Ratings
Ratings Fitch S&P Moody's Core Bank Ratings Long-term AA- AA- Aa2 Short-term F1+ A-1+ P-1 Outlook Stable Negative Negative Last change 18-Mar-03 30-Jan-08 05-Mar-08 Core Insurance Ratings Insurance Financial Strength AA AA- Aa3 Outlook Stable Negative Negative Last change 25-Jul-06 30-Jan-08 05-Mar-
Slide 35: Fortis Investment Portfolio at 31 March 2008
Fortis Investment Portfolio at 31 March 2008 Bank Investment Portfolio Insurance Investment Portfolio EUR 130 billion EUR 66 billion 5% 5% 1% 10% Equities 2 Other Real Estate Equities 22% Other1 73% 84% Debt Securities Debt Securities 1 Including the EUR 24 billion investment related to the 2 Real E
Slide 36: Quality Debt Securities Portfolio at 31 March 2008
Quality Debt Securities Portfolio at 31 March 2008 Insurance Banking Fortis1 Rating Category AAA 32% 54% 46% AA 26% 32% 30% A 37% 12% 21% BBB 3% 1% 2% Investment grade 98% 99% 99% Below investment grade - 1% 1% Unrated 2% - - Total 100% 100% 100% Portfolio (EUR billion) 55 95 149 1 After elimination
Slide 37: Quarter on quarter results analysis
Quarter on quarter results analysis Q1 '08 Q4 '07 % Change Net profit bef. Divestments 808 (533) * Banking 721 (881) * Insurance 219 529 (59%) General (132) (181) (27%) Results on divestments - 947 * Net profit 808 414 95% – Banking results were largely impacted by impairments on the US subprime CDO
Slide 38: Annex - Additional information on Q1 2008 Results
Annex - Additional information on Q1 2008 Results 1 ABN AMRO 2 Fortis Group Banking Insurance Fortis first quarter 2008 results │13 May 2008 │ 38
Slide 39: Banking - Q1 '08 vs. Q1 '07 analysis
Banking - Q1 ’08 vs. Q1 ’07 analysis Q1 '08 Q1 '07 Chg. % Total income up 17%, with: Total income 3,178 2,716 17% • Net interest income down 5%, but up 6% when excluding financing Change in impairments (448) (26) * costs related to ABN AMRO Total expenses (1,690) (1,650) 2% • Strong Treasury and fin
Slide 40: Strong underlying loan portfolio growth
Strong underlying1 loan portfolio growth Residential Consumer Commercial Others 2 Mortgages Loans Loans 2,823 +15% 269,597 26,010 +14% +22% (1,076) 5,696 (10%) 236,144 +6% Q1 ’07 Q1 ’08 1 Underlying loan portfolio = total loans to customers excluding Reverse Repo’s and Securities Lending 2 Governmen
Slide 41: Stable deposits supported by successful retail campaigns
Stable deposits supported by successful retail campaigns Demand Saving Time Other Deposits Deposits Deposits Deposits (2,399) 5,961 (4%) +8% (3,773) (5%) 89 Stable 207,987 +31% 207,865 Total Total Customer Customer Deposits Deposits Q1 ’07 Q1 ’08 Fortis first quarter 2008 results │13 May 2008 │ 41
Slide 42: Banking Treasury and financial markets results - Breakdown
Banking Treasury and financial markets results - Breakdown Total Banking Q1 '08 Q1 '07 Change Comments Treasury and financial markets - Reported 826 389 112% Grossing-up (116) 41 * Higher non-deductible losses on equities ►Treasury and financial markets - Underlying 709 430 65% ▪ Trading 298 270 10%
Slide 43: Banking Total Income - Q1 '08 vs. Q4 '07 analysis
Banking Total Income - Q1 ’08 vs. Q4 ’07 analysis Q1 '08 Q4 '07 % Change Net interest income on interest-margin products 1,250 1,304 (4%) Net commissions and fees 723 833 (13%) Capital gains on investment portfolio 182 220 (17%) Treasury and financial markets 826 85 * Dividend and other investment i
Slide 44: Banking - Q1 '08 vs. Q4 '07 analysis
Banking - Q1 ’08 vs. Q4 ’07 analysis Q1 '08 Q4 '07 Chg. % Total income up 13% with strong Total income 3,178 2,816 13% treasury and financial markets Change in impairments (448) (2,635) (83%) offsetting the impact of the global credit market turmoil and ABN Total expenses (1,690) (1,866) (9%) AMRO-r
Slide 45: Loans to Customers - Business view (Q1 '08 vs. Q4 '07)
Loans to Customers - Business view (Q1 ’08 vs. Q4 ’07) EUR million Q1 '08 Q4 '07 Δ QoQ Retail Banking 85,944 85,174 1% Private Banking & Asset Management 9,736 9,685 1% Merchant Banking 205,744 191,219 8% Other Banking 32,058 31,225 3% Total 333,481 317,303 5% – Loans to customers were up 5% in the
Slide 46: Loans to Customers - Product view (Q1 '08 vs. Q4 '07)
Loans to Customers - Product view (Q1 ’08 vs. Q4 ’07) EUR million Q1 '08 Q4 '07 Δ QoQ Loans to Customers 333,481 317,303 5% Government and official institutions 5,168 5,343 (3%) Residential mortgages 96,241 95,445 1% Consumer loans 9,747 9,774 (0%) Commercial loans 142,461 138,696 3% Reverse repurch
Slide 47: Corporate loan portfolio by sector
Corporate loan portfolio by sector EUR billion Q1 '08 Q4 '07 Agriculture, forestry and fishing 0.7 0.7 Automotive 1.1 0.6 Basic Metals 2.9 2.7 Chemicals, Rubber & Plastic products 4.0 3.8 Construction: Materials & Engineering 2.6 2.9 Consumer goods 2.5 2.1 Electricity, Gas & Water (supply) 5.2 4.9 F
Slide 48: Annex - Additional information on Q1 2008 Results
Annex - Additional information on Q1 2008 Results 1 ABN AMRO 2 Fortis Group Banking Insurance Fortis first quarter 2008 results │13 May 2008 │ 48
Slide 49: Fortis Insurance Overview
Fortis Insurance Overview Q1 ’07 Q1 ’08 Gross inflow +4% Gross Inflow Q1 ’08 Life Non-life 4,041 1,856 5,897 27% 38% 30% 23% Life +5% Non-life +3% 35% 47% 3,853 1,799 5,652 Belgium Netherlands International Operating Margin (33%) Net Profit (38%) 88 103 190 162 58 219 Life (57%) Non-life +29% Life (
Slide 50: Fortis Insurance - Technical Reserves
Fortis Insurance - Technical Reserves EUR billion Q1 '08 Q4 '07 % Change Gross Technical Reserves Life 90.3 89.8 1% Insurance Belgium 42.3 42.1 1% Insurance Netherlands 27.4 27.6 (1%) Insurance International 20.6 20.1 2% Gross Technical Reserves Non-life 9.1 8.6 5% Insurance Belgium 2.9 2.8 5% Insur
Slide 51: Insurance Life - Q1 '08 vs. Q1 '07 analysis
Insurance Life - Q1 ’08 vs. Q1 ’07 analysis Q1 '08 Q1 '07 Chg. % Gross inflow 4,041 3,853 5% Gross inflow up 5% due to robust growth at Insurance International Technical result (12) 159 * (34%) and in the Netherlands Allocated capital gains 100 47 * (19%), more than offsetting timing Operating margi
Slide 52: Insurance Life - Q1 '08 vs. Q4 '07 analysis
Insurance Life - Q1 ’08 vs. Q4 ’07 analysis Q1 '08 Q4 '07 Chg. % Gross inflow 4,041 3,251 24% Gross inflow up 24%, supported Technical result (12) (204) * by strong inflow in the Netherlands Allocated capital gains 100 292 (66%) (led by Group Life) and in Belgium Operating margin 88 88 0% Non-alloca
Slide 53: Insurance Life - Premiums Q1 '08 (EUR 4,041m)
Insurance Life - Premiums Q1 ’08 (EUR 4,041m) International Regular 27% Belgium 30% 38% 70% 35% Single Netherlands Investment Group contracts without DPF Unit-linked 24% 22% 37% 76% 41% Individual Non unit-linked Fortis first quarter 2008 results │13 May 2008 │ 53
Slide 54: Insurance Life - Overview Results
Insurance Life - Overview Results Q1 '08 Q1 '07 % Change Net Earned Premiums 3,128 2,980 5% Allocated financial income (1,304) 1,127 * Allocated other income 26 46 (43%) Income 1,850 4,153 (55%) Net benefits & surrenders (1,411) (1,251) 13% Net change in liabilities (148) (2,452) * Operating expense
Slide 55: Insurance Non-life - Q1 '08 vs. Q1 '07 analysis
Insurance Non-life - Q1 ’08 vs. Q1 ’07 analysis Q1 '08 Q1 '07 Chg. % Gross inflow 1,856 1,799 3% Gross written premiums up 3% Technical result 107 71 50% driven by product innovation in all Allocated capital gains (4) 8 * countries, while maintaining healthy margins. GWP up 7% in Belgium Operating m
Slide 56: Insurance Non-life - Premiums
Insurance Non-life - Premiums Q1 '08 Q1 '07 P&C A&H Total Total Gross written premiums 1,088 768 1,856 1,799 Change in provision for unearned premiums (178) (297) (475) (512) Gross earned premiums 910 471 1,381 1,287 Outward reinsurance premiums (115) (83) (198) (214) Reinsurance share provision for
Slide 57: Insurance Non-life - Overview Results
Insurance Non-life - Overview Results Q1 '08 Q1 '07 % Change Net Earned Premiums 1,256 1,162 8% – Claims ratio Allocated financial income 66 73 (10%) Cost of claims, net of Allocated other income (1) 12 * reinsurance in non-life, as Income 1,321 1,247 6% percentage of the earned Net claims paid (780
Slide 58: Insurance Non-life - Technical Results
Insurance Non-life - Technical Results Q1 ’07 Q1 ’08 58 – Down 12%, but actually up 7% when taking into account A&H the timing difference of a positive profit-sharing 66 reinsurance settlement (EUR 12 million) in Q1 ’07 25 – Down 13%, due mainly to lower results in Belgium, more Motor than offsettin
Slide 59: Insurance Non-life - Q1 '08 vs. Q4 '07 analysis
Insurance Non-life - Q1 ’08 vs. Q4 ’07 analysis Q1 '08 Q4 '07 Chg. % Gross inflow 1,856 1,167 59% Gross written premiums up 59% Technical result 107 55 96% benefiting from seasonal effects, Allocated capital gains (4) 60 * especially in the Dutch Accident & Health market and in the Belgian Operating
Slide 60: Fortis Investor Relations Team
Fortis Investor Relations Team Robert ter Weijden +31 30 226 32 11 Olivier Delval +32 2 565 57 48 Dies Donker +31 30 226 69 31 Marc Peelen +31 30 226 30 46 Frank Vandenborre +32 2 565 57 49 Fax numbers: +31 30 226 99 33 +32 2 565 58 25 E-mail: [email protected] Fortis first quarter 2008 results │13 May
Slide 61: Getting you there.
Getting you there.