AGEAS - China: Challenges & untapped value AGS BB

In this note we dig into Ageas’ Chinese business, specifically from a macro point of view, given that this is a core aspect to our investment case. We also provide an 1Q22 preview and our view for FY22 & beyond.

• We continue to see China as a positive and key aspect to the investment case. Although the Chinese economy & demographic is facing some challenges, we maintain a positive outlook on future growth.
• Even if some of the headwinds currently facing China aren’t adequately met by the Chinese government, we believe the current dividend upstream from China has enough buffer to mitigate this. Current remittances are very conservative, allowing for increases if growth would slow down.
• For 1Q22 we expect some headwinds from BE & UK storms, weak Chinese financial markets, normalization of claims level post Covid and drop of VIR. Though headline figure supported by a +62m RPN(i) impact.
• For FY22 we expect the retention limit of reinsurance on non-life to kick in, avoiding further weather claims; pressure from continued volatile markets and dropping VIR. Though continued strong underlying growth.
• Based on our SOTP we maintain our €57 target price, which implies 24% upside, warranting a Buy recommendation. Peer multiples put Ageas slightly below average valuation compared to Benelux & European peers.