Annual report 2006 - Dexia.com

INSURANCE SERVICES
MANAGEMENT REPORT
Personal Financial Services, the leading collector of premiums
in the Group, generated 64% of the total. Public/Project
Finance and Credit Enhancement collected 16% of total premiums
among the institutional clients, local authorities and
other local public sector organizations. The remaining 20%
came directly from the Insurance Services segment as it stands
currently.
The commercial activity was essentially focused on life
insurance premiums (up 3.9%), while nonlife premiums
growth was more limited (+2.8%). Globally, Dexia produced
more Branch 21 products premiums and less Branch 23 products
(unit-linked contracts) premiums in 2006 compared to
2005. This trend has to be correlated to the active commercial
campaigns realized throughout the year, the successful training
programs conducted with the Dexia Bank Belgium agents
and DEP very good performances.
Geographically, 61% of life insurance premiums have been
collected in Belgium and 39% came essentially from France
and Luxembourg. The percentage of premiums collected outside
Belgium rose from 30% in 2005 to 39% in 2006, with
volumes growing by more than 30% in one year. The progression
was particularly strong in France, with the expansion of
Dexia Epargne Pension (+64%).
The weight of Belgium in DIS life production generates a
discrepancy when looking at both the premium and the revenue
progression on 2005, because the Belgian business had
to cope with the introduction of a new tax since January 1,
2006. For the same reason, the production in Personal Financial
Services decreased by EUR 192 million compared to 2005,
as clients anticipated the new 1.1% tax on insurance products,
which has boosted the production in the fourth quarter
of 2005. The commercial campaigns conducted at the end
of 2006 were efficient but not sufficient to match the exceptional
level of production of Q4 2005. The expansion of the
nonlife production was mitigated by the sale of Flexia in the
third quarter of 2006.
The premiums collected in Public/Project Finance remained
stable compared to 2005. Consequently, it is in the Insurance
Services segment itself that the increase in premiums was the
highest (+80.4% or EUR 335 million). This is attributable to
the peaking production of DEP thanks to its very successful
partnership strategy.
In 2006, DIS generated EUR 394 million of total revenues, up
3.8% on 2005 despite the negative impact of the introduction
of the new 1.1% on life insurances in Belgium which
caused revenues to come down 4 percentage points (as the
entry fees were lowered in addition to the incentives offered
during commercial campaigns). Those revenues were further
impacted by several factors in opposite directions of which:
• the strong outstanding increase of Branch 21 products and
the favorable effects of customers’ appetite for some products
(e.g. Safe Invest Bonus);
• the positive influence of low nonlife claims;
• lower commission income on Branch 23 products as the
outstanding amounts decreased in 2006;
• higher technical provisions in order to cover and guarantee
the reserves dedicated to the discretionary participation
features of the contracts, so as to be in line with competition
– this last item explains the steep reduction of the income in
the fourth quarter of 2006.
The increase of the costs reflects both higher staff numbers in
the French operations, linked to the strong business developments
made within Dexia Epargne Pension, and the various
investment projects conducted through Dexia Insurance Belgium,
notably a new IT platform in the nonlife activity. Taxes
decreased in 2006 (EUR -11 million) partially due to the lower
effective tax rate.
The net income – Group share reached EUR 142 million, a
satisfying 10.3% progression in one year.
UNDERLYING RESULTS OF DEXIA INSURANCE SERVICES
(in millions of EUR) 2005 2006 Variation
Revenues 379 394 +3.8%
Costs (220) (233) +5.5%
Taxes and other (31) (20) -35.3%
NET INCOME – GROUP SHARE 128 142 +10.3%
92 | Dexia / Annual Report 2006