Athora Holding Ltd. publishes its Half Year 2023 results
Pembroke, Bermuda, 28 September 2023 – Athora Holding Ltd. (Athora or the Group), a leading European savings and retirement services group, today announces its unaudited financial results for the six months to 30 June 2023.
Highlights
- Operating Capital Generation: €198m (HY 2022: €172m1)
- Group BSCR2 Solvency ratio (estimated): 194% (FY 2022: 183%)
- AuMA: €72.4bn (FY 2022: €72.0bn3); after announced acquisitions, pro forma AuMA: €85bn4
- IFRS Profit before tax5: €59m (HY 2022: loss of €1,253m)
- IFRS Equity6: €3.9bn (FY 2022: €4.0bn)
- Financial Leverage: 27% (FY 2022: 23%7); after expected drawing of equity for announced acquisitions, pro forma Financial Leverage: 25%
- Credit Rating: “A” (Stable)8
Strategic progress
- Higher capital generation supported by continued repositioning of the Athora Netherlands investment portfolio to drive increased risk-adjusted returns.
- Successful inaugural listed debt issuance from Athora Holding Ltd. of €600m9 senior unsecured fixed rate notes, which qualify as eligible Tier 3 regulatory capital for Group Solvency.
- The previously announced acquisition of a €13bn10 Assets under Management and Administration (AuMA) closed-life portfolio from AXA Germany is targeted to complete in Q1 2024.
- Completion of the acquisition of the Willis Towers Watson (WTW) €1.3bn11 Premium Pension Institute (PPI) in the Netherlands, alongside the signing of two Pension Risk Transfer transactions totalling €0.4bn.
- Onboarding of Banca Popolare di Bari as a new distribution partner in Italy.
- Agreement to transfer the Athora Netherlands individual life portfolio management and certain Group IT activities to Tata Consultancy Services (TCS).
- Key strategic hires announced in Germany, Belgium and at Group level to support the next phase in Athora’s growth journey, including the appointment of Todd Solash as Deputy CEO and President of Athora Group, subject to requisite approvals.
Financial performance
- Operating Capital Generation (OCG) of €198m (HY 2022: €172m). The increase in Operating Capital Generation was supported by the ongoing repositioning of the Athora Netherlands asset portfolio and partially offset by adverse performance in Athora Italia.
- Group IFRS profit before tax of €59m (HY 2022: loss of €1,253m). These results reflect the adoption of IFRS 9 “Financial Instruments” and IFRS 17 “Insurance Contracts” from 1 January 2023, with comparative figures restated. The IFRS profit for the period reflects a positive Insurance Service and Net Financial Result, which includes a negative one-off impact of €96m (before tax) relating to changes in a group life reinsurance contract in the Netherlands. However, this change had a meaningful positive impact on the reinsurance Contractual Service Margin (CSM). The loss at HY 2022 was mainly as a result of rising interest rates.
- Total IFRS equity of €3.9bn (FY 2022: €4.0bn). IFRS Equity has remained stable during the first half of the year. During the period, Athora issued €300m of common equity. Athora also redeemed €116m of preference shares and bought back €300m of common equity, of which €184m is held as treasury shares. A CSM of €2.5bn has been recognised following the implementation of IFRS 17, which represents future profits of the business.
- Financial Leverage Ratio of 27% (FY 2022: 23%), proforma Financial Leverage of 25%12.With the introduction of IFRS 9/17, Athora expects to re-evaluate its Financial Leverage methodology while continuing to target a leverage ratio that is aligned with Fitch’s expectations for an ‘A’ rating. This work is expected to be completed for FY 2023 reporting. For HY 2023, Athora has applied an interim methodology, including CSM net of tax, and restated the HY 2022 comparative. The increase in the Financial Leverage ratio is primarily due to the €600m bond issuance, partially offset by repayment of a €250m bank loan. The bond issuance has secured the intended debt capital financing for the AXA Germany acquisition whilst the equity will be drawn shortly before closing. Pro-forma for the expected equity to be drawn for the acquisition, Financial Leverage would stand at 25%.
- Assets under Management and Administration (AuMA) of €72.4bn (FY 2022: €72.0bn13), proforma AuMA of €85bn. AuMA has remained broadly flat compared to FY 2022 reflecting the stable market conditions experienced in the first half of 2023. Growth in pro forma AuMA is supported by previously announced acquisition of €13bn AuMA from AXA Germany.
Financial strength
- Undrawn Equity Capital of €2.2bn (FY 2022: €2.5bn): reduced marginally due to the capital drawn down for a €300m common share repurchase.
- Group BSCR ratio of 194% (FY 2022: 183%). The increase in solvency was driven by positive operating capital generation, management actions (including changes to a group life reinsurance contract in the Netherlands) and the impact of a net €350m increase in Tier 3 capital, partially offset by the repurchase of preference share capital. Athora continues to work towards implementation of the Bermuda Monetary Authority’s consultation papers issued in February and August 2023, with impacts being quantified.
- Strong Business Unit solvency ratios. Netherlands 214% (FY 2022: 205%), Belgium 163% (FY 2022: 150%), Germany 277% (FY 2022: 346%)14, Italy 239%15(FY 2022: 197%), Reinsurance 229% (FY 2022: 210%).
- Credit Rating maintained at A (Stable) by Fitch. In September 2023, Fitch maintained the Insurer Financial Strength Ratings of Athora’s rated Business Units at ‘A’. The Issuer Default Ratings for Athora Holding Ltd. and Athora Netherlands N.V. were also held at ‘A-’. All ratings are on Stable Outlook.
- Financing activity. Increase in Borrowings due to issuance of a €600m Tier 3 bond partially offset by repayment of €250m of Tier 3 bank debt. Additionally, Athora refinanced its existing senior bank debt at Athora Holding Ltd. and Athora Europe Holding (Bermuda) Ltd. into one single bank loan at Athora Holding Ltd., continuing the journey to centralising all financing at the holding company.
Group Chief Executive Officer Statement
Mike Wells, Group Chief Executive Officer, said:
Our focus for 2023 has been on the continued delivery of our business plans in each market, supported by a strengthening in our executive management teams, alongside the successful closing and integration of transactions across Belgium and Italy.
During the first half of 2023, we have made significant strategic progress – most notably from a growth and operations standpoint – while maintaining strong investment performance and robust capitalisation amidst continued macroeconomic volatility. This has translated into a 15% increase in Operating Capital Generation (OCG), a strong 30 June 2023 estimated Group BSCR ratio of 194% and robust inaugural IFRS 9/17 financial results.
Business performance in 2023 has been notably strong in our largest Business Unit, Athora Netherlands, with solvency coverage increasing to 214% supported by a 14% positive contribution from OCG in the period. The strong turnaround in solvency capital and OCG at Athora Netherlands since acquisition (1H 2020 solvency coverage of 160% and negative OCG) is testament to the strength of our business model and delivery of the local team.
The momentum in capital generation, combined with positive management and financing actions, has supported an overall increase in the Group BSCR ratio to 194%. Financing actions in the period included the successful completion of our inaugural listed debt offering, comprising €600m of senior unsecured fixed rate notes, which qualify as Tier 3 regulatory capital.
Accessing public debt capital markets is an important step in Athora’s business plan, providing longer-term financing and aligning the Group’s capital structure with our long-term savings and retirement services strategy. The issuance also provides appropriate debt capital funding for the upcoming acquisition from AXA Germany, with accompanying equity issuance due to be completed shortly before closing via the drawing of further equity capital.
Looking ahead, we will continue to focus on our strategy of disciplined growth, careful asset underwriting and effective expense management, alongside strategic investments in our infrastructure, all underpinned by strong risk and capital management. We maintain significant undrawn equity capital, totalling €2.2 billion at 30 June 2023, allowing us to execute on our long-term growth strategy.
I would like to thank all our employees for their continued efforts and contribution in the first half of the year and, as always, we remain focused on the delivery of our mission: to deliver more value to our customers in fulfilling their long-term insurance needs.
Unaudited interim consolidated income statement for the half year ended 30 June 2023
|
€m |
Half year ended 30 June 2023 |
Half year ended 30 June 2022 (Restated) |
|||
|
Insurance contract revenue |
1,095 |
1,137 |
|||
|
Insurance service expense |
(989) |
(921) |
|||
|
Insurance service result before reinsurance contracts held |
106 |
216 |
|||
|
Allocation of reinsurance premium |
(284) |
(306) |
|||
|
Amounts recoverable from reinsurers for incurred claims |
273 |
280 |
|||
|
Net expense from reinsurance contracts held |
(11) |
(26) |
|||
|
Insurance service result |
95 |
190 |
|||
|
Net investment income |
2,433 |
(12,018) |
|||
|
Net finance (expense)/income from insurance contracts |
(1,558) |
9,724 |
|||
|
Net finance (expense)/income from reinsurance contracts |
(113) |
314 |
|||
|
Change in investment contract liabilities |
(94) |
201 |
|||
|
Investment return attributable to third parties |
(424) |
594 |
|||
|
Net financial result |
244 |
(1,185) |
|||
|
Fee and commission income |
31 |
22 |
|||
|
Other income |
12 |
17 |
|||
|
Other expenses |
(221) |
(218) |
|||
|
Acquisition costs |
(14) |
(16) |
|||
|
Other finance costs |
(86) |
(63) |
|||
|
Impairments |
(2) |
- |
|||
|
Profit/(Loss) before taxes |
59 |
(1,253) |
|||
|
Taxation charge |
(36) |
371 |
|||
|
Profit/(Loss) for the period |
23 |
(882) |
|||
|
Attributable to shareholders of the Company |
13 |
(899) |
|||
|
Attributable to non-controlling interest |
10 |
17 |
|||
Unaudited interim consolidated statement of other comprehensive income for the half year ended 30 June 2023
|
€m |
Half year ended 30 June 2023 |
Half year ended 30 June 2022 (Restated) |
|
Profit/Loss for the period |
23 |
(882) |
|
Other comprehensive expense for the period: |
|
|
|
Net change in foreign currency translation reserve |
2 |
(2) |
|
Actuarial gain arising from defined benefit plans |
8 |
143 |
|
Other comprehensive (expense) / income for the period, net of tax |
10 |
141 |
|
Total comprehensive (expense) / income for the period, net of tax |
33 |
(741) |
|
Attributable to shareholders of the Company |
23 |
(758) |
|
Attributable to non-controlling interest |
10 |
17 |
Unaudited interim statement of financial position as at 30 June 2023
|
€m |
As at 30 June 2023 |
As at 31 December 2022 (Restated) |
|
Intangible assets |
119 |
126 |
|
Property and equipment |
52 |
72 |
|
Investment properties |
1,107 |
2,214 |
|
Financial assets |
75,647 |
78,063 |
|
Investments attributable to policyholders and third parties |
6,817 |
5,903 |
|
Investments in associates |
46 |
41 |
|
Reinsurance contract assets |
15 |
12 |
|
Deferred taxation assets |
1,049 |
1,079 |
|
Income tax receivable |
47 |
38 |
|
Receivables and other assets |
862 |
1,035 |
|
Cash and cash equivalents |
2,219 |
1,315 |
|
Total assets |
87,980 |
89,898 |
|
Equity Share capital and share premium |
|
|
|
Share capital and premium |
4,022 |
3,833 |
|
Treasury shares |
(184) |
- |
|
Retained earnings |
(892) |
(884) |
|
Other reserves |
5 |
4 |
|
Common shareholders' equity |
2,951 |
2,953 |
|
Preference shares |
700 |
800 |
|
Total shareholders' equity |
3,651 |
3,753 |
|
Non-controlling interests |
245 |
267 |
|
Total equity |
3,896 |
4,020 |
|
Insurance contract liabilities |
56,741 |
56,551 |
|
Reinsurance contract liabilities |
207 |
97 |
|
Investment contract liabilities attributable to policyholders |
1,958 |
1,795 |
|
Liabilities for account of third parties |
4,859 |
4,108 |
|
Pension scheme liabilities |
531 |
546 |
|
Financial liabilities |
19,201 |
22,084 |
|
Deferred taxation liabilities |
5 |
31 |
|
Income tax payable |
3 |
10 |
|
Other liabilities and accruals |
544 |
620 |
|
Provisions |
35 |
36 |
|
Total liabilities |
84,084 |
85,878 |
|
Total equity and liabilities |
87,980 |
89,898 |
Disclaimer
This press release contains summary information only and does not purport to be comprehensive and is not intended to be (and should not be used as) the sole basis of any analysis or other evaluation and should be read in conjunction with the annual report 2022 of Athora Holding Ltd.
Consistent accounting policies were applied in preparing the unaudited results to 30 June 2023 as those applied in preparing the annual report 2022 of Athora Holding Ltd, with the exception of the implementation of accounting standards IFRS 9 and IFRS 17 from 1 January 2023 (as disclosed in the 2022 annual report). Comparative figures have been restated where applicable for the implementation of IFRS 9 and 17.
All figures quoted in this document are unaudited.
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1 Athora’s definition of Operating Capital Generation (“OCG”) is defined as the expected return on investments, less the cost of liabilities (including the Ultimate Forward Rate (“UFR”) drag), expense /experience variances (including profit-sharing impacts), Solvency Capital Requirement (“SCR”) unwinds, Risk Margin unwinds and new business impacts. It excludes the UFR stepdown. Comparative figure for OCG at 30 June 2022 restated due to a change to the group methodology.
2 Bermuda Solvency Capital Requirement (“BSCR”) ratio is considered an estimate given only Year-End ratios are considered actuals by the Bermuda Monetary Authority.
3 AuMA is calculated by Athora as the sum of investment properties, financial assets, cash and cash equivalents, loans and advances due from banks, investments attributable to policyholders and third parties, net of derivative liabilities. The comparative figure has been updated to reflect valuation changes resulting from the adoption of IFRS 9/17.
4 The pro forma number comprises AuMA at 30 June 2023 for Athora’s existing business units and estimated AuMA for the acquisition of a closed-life portfolio from AXA Germany (subject to regulatory approvals and completion).
5 IFRS Profit before tax has been restated for comparative periods to reflect the transition to IFRS 9/17 accounting standards.
6 IFRS Equity has been restated for comparative periods to reflect the transition to IFRS 9/17 accounting standards.
7 The Financial Leverage ratio has been calculated using an interim methodology, including CSM net of tax and the comparative has been restated accordingly. Pro forma for the equity expected to be called shortly before the acquisition of a closed-life portfolio from AXA Germany (subject to regulatory approvals and completion).
8 Fitch Insurer Financial Strength Rating of rated Business Units.
9 €600 million senior unsecured fixed rate notes, due in 2028 and listed on Global Markets Exchange of Euronext Dublin. The notes are recognised as Tier 3 Ancillary Capital by the Bermuda Monetary Authority. The notes received a BBB+ rating from Fitch Ratings on issuance.
10 Previously disclosed as €19bn, with the drop in value being principally due to market impacts since announcement.
11 Updated for Q1 2023, as per closing.
12 The financial leverage ratio has been calculated using an interim methodology, including CSM net of tax and the comparative has been restated accordingly. Pro forma for the equity expected to be called shortly before the acquisition of a closed-life portfolio from AXA Germany.
13The comparative figure has been updated to reflect valuation changes resulting from the adoption of IFRS 9/17.
14 Solvency ratio including transitional measures for technical provisions.
15 Italy solvency ratio includes the impact of an external lapse reinsurance treaty.