Eureko strengthens capital position and updates 2008 full year results
- Eureko's capital position strengthened with a capital increase of € 1.0 billion from Achmea Association (€ 600 mln) and Rabobank Group (€ 400 mln).
- Group solvency ratio improves to 175 per cent after capital increase
- Preliminary and unaudited 2008 full year results € 2.1 billion negative
Eureko announced today that it has reached agreement with its major shareholders, Achmea Association and Rabobank Group on the issuance of € 1.0 billion of common equity, to strengthen its capital base. The capital increase supports the Eureko Group’s current A+ rating as well as its competitive position within the European insurance industry. The transaction will not affect the current ownership proportions of its major shareholders, Achmea Association and Rabobank Group. In the coming period Eureko’s minority shareholders will also be offered to participate in the capital increase.
Update results 2008
Based on preliminary and unaudited figures, Eureko expects to report a negative net result of € 2.1 billion for 2008. The turmoil in the equity and credit market is an important reason for the net loss, specifically developments in the second half of 2008.The estimated total effect on Eureko's profit before tax amounts to € 2.9 billion. This was partly compensated by operational results. The most significant items causing this negative effect are:
Impairments of € 1,054 million on Eureko's equity portfolio.
In May 2008, Eureko hedged its listed equity portfolio via a collar against significant decreases in share prices. A positive contribution of € 251 million on the hedge is included in the results as well. This partly mitigates the impairments on equity investments.
Realised losses on equity instruments of € 429 million and on fixed income investments of € 71 million.
Impairments were also booked on investments in associated companies. As a consequence of declining share prices of associated companies, Millennium BCP (Portugal) and F&C Asset Management Plc (UK). Eureko had to take impairment charges of € 693 million and € 103 million (net of tax) respectively.
Part of Eureko’s annuity portfolio is valued at fair value through profit and loss. The related investments are also valued at fair value through profit and loss. Part of this investment portfolio consists of corporate bonds. Due to the widening of the credit spreads the value of the credit portfolio decreased more than the related insurance liabilities and therefore Eureko recognised losses to the amount of € 462 million.
In the Life segment there is a large number of segregated investment accounts in the Dutch market. On these accounts a minimum annual return is guaranteed to customers. As a result of declining interest rates, Eureko had to take a provision of € 136 million for these guarantees.
Eureko´s capital position declined in 2008, by € 2.9 billion to € 7.5 billion. This decline is primarily due to the net loss, and to a lesser extent due to negative developments in the revaluation reserves as Eureko had a negative revaluation reserve on equity investments in the beginning of 2008. The solvency ratio decreased in 2008 as a result of this. At year-end the solvency ratio stood at 150% at Group level. As a consequence ofthe capital increase, the group solvency ratio improves to 175%, based on preliminary year-end figures.
In mid-January 2009, Eureko filed a Call for Settlement Attempt in the hope of ending the long-lasting conflict on the privatisation of PZU by finding an amicable solution. Poland's Ministry of State Treasury has recently invited Eureko to start negotiations which had been terminated in 2008. Eureko intends to accept the invitation but the framework for the negotiations is still under consideration.
Eureko’s Chief Financial Officer, Gerard van Olphen said: “We are pleased that we have been able to draw capital support from within our existing group of shareholders as a clear sign of confidence in our company and its strategy. Also, we have taken additional measures to decrease our risk in our investment portfolio by, amongst others, significantly reducing our exposure to equity markets. Internally, we will focus on optimising our processes and achieving more efficiency in order to reduce our cost base.”
Based on the preliminary figures, all members of the Executive Board have agreed to renounce all performance-related bonuses for 2008.
More details will be provided when Eureko publishes its 2008 full year results on March 17, 2009.
For further information, please join the conference call with CFO Gerard van Olphen on Monday February 16th.
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For more information call David van Eeghen, media relations officer Eureko: +31 6 13646878 / firstname.lastname@example.org or Sandra van Gils, investor relations officer Eureko: +31 6 13628423 / email@example.com.
Eureko B.V. is a privately-owned financial services group whose core business is insurance. The company is registered in The Netherlands. With operations in 12 countries, the Eureko Group has more than 20,000 employees and offers a full range of insurance products – Life and Non-Life and pension products, health insurance and services, asset management and banking. The Group's direction is firmly focused on building a European financial services group based on its core business of insurance, which can provide a competitive proposition to its stakeholders.
1. The figures quoted in this statement are preliminary and unaudited.