Fitch Ratings has affirmed ageas SA/NV's Insurer Financial Strength (IFS) Rating at 'AA-' (Very Strong). ageas SA/NV is the ultimate holding company of the Ageas group (Ageas).
Fitch has also affirmed AG Insurance NV's and Ageas Insurance Limited's IFS Ratings at 'AA-'. The Outlooks are Stable. A full list of rating actions is below.
The ratings reflect Ageas's very strong company profile and capitalisation and its strong financial performance.
Key Rating Drivers
Very Strong Company Profile: Fitch ranks Ageas's business profile as 'favourable' compared with other Belgian insurance groups, due to its favourable competitive position, diversification and business risk profile. As a result, Fitch regards Ageas's company profile as very strong. Ageas is the leading insurance group in Belgium and has operations in continental Europe, the UK and Asia, which to varying degrees, have strong local market positions and contribute to the group's earnings.
Very Strong Capitalisation: We expect Ageas to maintain its very strong capitalisation. We expect Ageas to score at least 'Very Strong' under Fitch's Prism Factor-Based Capital Model (Prism FBM) at end-2022. It scored 'Extremely Strong' based on end-2021 results.
Ageas's very strong capitalisation is also supported by our financial capital ratios of non-life net written premium to capital and life operating leverage, which we regard as extremely strong. The group's Solvency II (S2) ratio was extremely strong at 225% at 9M22 and we expect the Fitch-calculated financial leverage ratio (FLR) to be stable at 14% at end-2022, which the agency regards as very strong.
Strong Profitability: We expect the Fitch-calculated net income return on equity (ROE) to be about 8% in 2022 (2021: 7.2%) because we expect a proportional decline in Ageas's net income and its averaged shareholders' funds. Shareholders' funds decreased due to unrealised losses resulting from the increase in interest rates in 2022, while net income suffered from EUR173 million net capital losses in Asia. We forecast Ageas's ROE to be above 7% in 2023. Ageas reported a slightly improved net combined ratio of 94.4% for 9M22 (9M21: 95.2%) benefiting from much stronger profitability in its core market, Belgium.
Strong Investment Risk Management: Ageas has a prudent but balanced investment policy, with a high share of investment-grade fixed-income investments. The group's risky assets ratio was strong at 100% at end-2021. It includes a 14pp reduction from loss sharing of participating life business.
Ageas's risky asset ratio is constrained by a fairly high exposure to investments in affiliates (38% of capital at end-2021). We do not regard these investments as being highly risky because the majority represents long-term strategic investments in Asian insurance operations. Ageas's insurance expertise and experience are beneficial for reducing the risk of these investments. Ageas has a relatively high exposure to Belgian sovereign investments, although it declined to 145% of capital at end-2021 from 161% at end-2020.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Ageas's ROE improving to more than 12% combined with a group S2 ratio of more than 200% and an FLR below 15%
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A sustained ROE below 8%
Prism FBM declining to the low end of the 'Very Strong' category
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
AGEAS SA/NV 
