Ageas' First-Half Results Driven by Nonoperating Items

While Ageas reported quite a strong bottom line for the first half of 2022—at EUR 563 million versus EUR 407 million in the same period last year—we think that most of this performance was driven by nonoperating items. Ageas’ interest, dividends, and other investment income rose by close to EUR 139 million, understandable in the context of available higher rates of return. However, what we think are by and large non-technical-driven elements of these results are a EUR 107 million gain on the revaluation of the relative performance note and EUR 249 million on the sale of Ageas’ stake in Tesco insurance. We argue that these largely appear to be nonrecurring and irregular items and are not part of the business’ normal operations. This means Ageas is likely to deliver a long-term annual earnings power of something in the region of EUR 410 million, substantially below the current profile. We maintain our EUR 36.50 fair value estimate and no-moat rating.