Operating Profit Before Fair Value Adjustments up 13.1%
Net Profit Before Fair Value Adjustments up 16.6%
PARIS, September 26 -
Summary
CNP Assurances turned in a very good performance in the first half of 2006. Premium income rose by over 20%, reflecting the buoyant conditions in the French life insurance market and strong performances by the Group's international subsidiaries. Underlying operating profit and net profit (before the impact of fair value adjustments to securities) rose by 13.1% and 16.6%, respectively. Due to negative fair value adjustments to certain balance sheet items, recorded in accordance with IFRS, which were unrelated to the Group's underlying performance, consolidated profit attributable to equity holders of the parent contracted by 30.4% to EUR269.1 million from EUR386.8 million in first-half 2005. Lastly, CNP Assurances' estimated European embedded value rose 2.3% to EUR60.8 per share at 30 June 2006.
Key figures
- Consolidated premium income: EUR16,311.9 million, up 20.5% on a reported basis and 18.5% pro forma at constant exchange rates.
- Underlying operating profit (before fair value adjustments to securities): EUR710.6 million, up 13.1%.
- Underlying profit attributable to equity holders of the parent (before fair value adjustments to securities): EUR334.5 million, up 16.6%.
- Reported operating profit: EUR595.6 million compared with EUR782 million in first-half 2005 including fair value adjustments of EUR154 million.
- Reported profit attributable to equity holders of the parent: EUR269 million versus EUR387 million in first-half 2005 including fair value adjustments of EUR100 million.
- Insurance and financial liabilities at 30 June 2006: up EUR217.4 billion (7%).
- Estimated European embedded value: EUR60.8 per share at 30 June 2006.
- Value of new business in first-half 2006: EUR145 million.
- 2006 target: more than 10% growth in consolidated premium income.
Note: CNP Assurances has adopted IFRS as its primary basis of accounting. Since the end of 2005, embedded value is calculated in accordance with the European Embedded Value (EEV) principles issued by the CFO Forum.
CNP Capitalia Vita has been consolidated as from 18 February 2005. In addition to reported results, this press release includes pro forma information prepared as if CNP Capitalia Vita had been consolidated as from 1 January 2005.
Lastly, the new distribution agreements with the networks were not approved under the related party agreement process until after the period-end, and the financial statements have therefore been prepared on the basis of the former agreements. Information is also provided about the impact of the new agreements on the first-half 2006 accounts.
1) Revenue (IFRS)
As announced in the 4 August press release, consolidated premium income for first-half 2006 totalled EUR16,311.9 million, up 20.5% over the year-earlier period on a reported basis and 18.5% pro forma at constant exchange rates.
2) Results (IFRS)
2. 1) Overview
Insurance and financial liabilities at 30 June 2006 totalled EUR217.4 billion, an increase of 7% over the 30 June 2005 figure.
Deferred participation amounted to EUR9.5 billion.
Underlying operating profit (before fair value adjustments to securities) rose 13.1% to EUR710.6 million, including contributions of EUR453.7 million from the Savings business (up 8.9%), EUR63.5 million from the Pensions business (up 15.5%) and EUR167.3 million from the Personal Risk business (up 16.8%).
Underlying profit attributable to equity holders of the parent (before fair value adjustments to securities) for first-half 2006 totalled EUR334.5 million, an increase of 16.6% over the year-earlier period.
2.2) Effect of changing financial market conditions on fair value adjustments to securities
Higher interest rates in first-half 2006 led to the recognition of negative fair value adjustments to securities, trimming EUR115 million from operating profit and EUR65.4 million from profit attributable to equity holders of the parent. This is in contrast with first-half 2005, when fair value adjustments had a positive impact of EUR144 million and EUR100 million, respectively. The EUR65.4 million negative impact on attributable profit mainly concerned fair value adjustments to securities classified as held-for-trading under IFRS. It breaks down as follows:
- Nearly half of the total (EUR27 million) was due to the recognition under IFRS of interest rate swaps on the subordinated notes issued by the Group since 2004.
- One third (EUR21 million) stemmed from profit-taking on the equity portfolio, which had the effect of reducing the portfolio's market value.
- The balance was mainly due to the performance of the held-for-trading portfolio.
These effects on profit of changing financial market conditions were not smoothed by additional profit-taking on equities. Realised gains contributed EUR44 million (after tax) to first-half profit attributable to equity holders of the parent, compared with EUR50 million in the year-earlier period.
The dividend used to calculate ANAV and embedded value (which are generally presented after dividends) was based on underlying profit attributable to equity holders of the parent (before fair value adjustments to securities) and a 36% payout rate.
Fair value adjustments nonetheless had a EUR12 million positive impact on equity under IFRS at 30 June 2006.
2.3) Impact of the new distribution agreements on profit attributable to equity holders of the parent
The effect of the new distribution agreements, which was not recognised in first-half 2006, would have been a EUR1 million decrease in underlying and reported profit for the period.
3) ANAV
ANAV per share after dividends at 30 June 2006 amounted to EUR46.6, an increase of 1.6% compared with EUR45.8 at 31 December 2005. The increase reflects the positive impact of underlying net profit after dividends (EUR1.50 per share), partly offset by the negative impact of changing market conditions (EUR0.67 per share), due to higher interest rates.
4) European embedded value
Estimated European embedded value (after dividends), calculated according to CFO Forum principles, amounted to over EUR60.8 per share at 30 June 2006, an increase of 2.3% compared with the 31 December 2005 figure of EUR59.4 per share.
The estimated value of new business in first-half 2006, based on the new distribution agreements in France, amounted to EUR145 million (EUR1.05 per share), representing a margin rate of 11% (9.7% in France, 12.6% in Italy and 20.1% in Brazil) versus 10.5% at 31 December 2005. The annual premium equivalent (APE) at 30 June 2006 stood at EUR1,324 million.
In France, the impact of the new distribution agreements was a 1-point decline in the margin on new business, which was almost entirely offset by the effect of increased unit-linked business in first-half 2006.
Based on the previous agreements, the value of new business for the whole of 2005 was EUR231 million.
5) Solvency capital
The solvency capital requirement at 30 June 2006 after dividends was covered 27.5 times in total and 11.0 times before taking into account unrealised capital gains. During the first half of the year, the Group issued EUR160 million worth of subordinated debt.
6) Targets and outlook for 2006
Considering the strong dynamic in the French life insurance market, CNP Assurances stands by its target of achieving over 10% growth in premium income in 2006.
Appendix I
IFRS (in EURm) First-half First-half Change Pro forma
2006 2005 change at
constant
exchange rates
Premium income 16,311.9 13,531.8 +20.5% +18.5%
Underlying operating
profit (before fair
value adjustments) 710.6 628.6 +13.1%
Underlying profit
attributable to equity
holders of the parent
(before fair value
adjustments) 334.5 287 +16.6%
Estimated underlying
profit attributable to
equity holders of the
parent after the effect
of the new distribution
agreements 333.5 +16.2%
Number of shares 138,285,302(1) 138,373,472(1)
(1) Number of shares excluding treasury stock (350,000 shares in treasury stock at 30 June 2006)
First-half 2005 First-half
2005 2006
Underlying net profit 287 752 334.5
Fair value adjustments +100 +200 -65.4
Reported net profit 387 952 269.1
First-half 2005 First-half
2005 2006
Underlying operating profit 628 1,409.7 710.6
Fair value adjustments +154 +275 -115
Reported operating profit 782 1,684.7 595.6
European Embedded Value(1) (in EUR per 30 June 31 December
share) (2) 2006 2005
Adjusted NAV 46.6 45.85
EEV per share 60.8 (3) 59.4
after dividends
Value of new 1.05 (4) 1.7
business per share
(1) Embedded value calculated according to CFO Forum principles (EEV) since 31 December 2005.
(2) Number of shares: 138,635,302
(3) Estimated
(4) After the effect of the new distribution agreements
Disclaimer: Some of the statements contained in this press release may be forward-looking statements referring to projections, future events, trends or objectives which, by their very nature, involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated in such statements by reason of factors such as changes in general economic conditions and conditions in the financial markets, legal or regulatory decisions or changes, changes in the frequency and amount of insured claims, particularly as a result of changes in mortality and morbidity rates, changes in surrender rates, interest rates, foreign exchange rates, the competitive environment, the policies of foreign central banks or governments, legal proceedings, the effects of acquisitions and the integration of newly-acquired businesses, and general factors affecting competition.
Further information regarding factors which may cause results to differ materially from those projected in forward looking statements is included in CNP Assurances' filings with the Autorite des Marches Financiers. CNP Assurances does not undertake to update any forward-looking statements presented herein to take into account any new information, future event or other factors.
The English language version of this press release is a free translation from the original, which was prepared in French. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions expressed therein, the original language version of the press release in French takes precedence over the translation.
Press relations
Sophie Messager
Tel. +33-1-42-18-86-51
E-mail: servicepresse@cnp.fr
Investor and Analyst Relations:
Brigitte Molkhou
+33-1-42-18-77-27
E-mail: infofi@cnp.fr
