KBC: Life insurance revenues impacted by drop in sales of unit-linked products

KBC has reported sales of life insurance products in the second quarter of 2018, at €426m, were 14% lower than in the previous quarter, mainly due to a drop in sales of unit-linked products - which include structured products. However, year-on-year, sales of life products increased by 3% with the drop in sales of unit-linked products offset by increased sales of guaranteed-interest products. Sales of unit-linked products, at €165m, accounted for 39% of total life insurance sales, according to the bank-insurer.

Net fee and commission income, at €438m was down by 3% from the previous quarterand by 4% year-on-year, as a result of lower entry fees from mutual funds and unit-linked life insurance products; lower securities-related fees; slightly lower management fees and stable management fee margin; and higher commissions paid on insurance sales, according to KBC.

In Belgium, KBC distributed 15 structured products worth an estimated €250m during the second quarter (compared to €480m from 14 products in the same quarter of 2017), according to SRP data. Issuance this quarter included eight structured funds, six unit-linked life insurance (Class 23) products and one medium-term note. The latter, a three-year US dollar denominated structure linked to the Libor, which was issued via KBC's international finance company, sold US$27.3m (€23.9m) during the subscription period.

The bank's best performing product in Belgium during the quarter was MI Security Asian Winners 7, a 7.5-year Class 23 product that sold €21m at inception. The product, which was linked to a basket of 20 equally weighted shares returned 185% in June, or 8.5% per annum.

Just one product, Informační technologie 2, a 5.8-year structured fund with an estimated volume of CZK200m (€7.8m), was sold by the bank via its ČSOB subsidiary in the Czech Republic in 2Q18 compared to nine products (CZK2.6bn) during the same period last year while in Hungary two reverse convertible products, both distributed via K&H Bank and issued via Societe Generale, collected sales of HUF1.6bn (€4.8m).

At the end of June 2018, KBC's assets under management stood at €214bn, stable quarter-on-quarter and up 1% year-on-year. Securities (equity and debt instruments) registered €63.9bn on the balance sheet on June 30, down from €66m in the previous quarter, and also down from €70.8bn on June 30, 2017.

KBC posted a net result of €692m in 2Q18, which, broken down by business unit, can be split between Belgium (€437m), Czech Republic (€145m), international markets (Bulgaria, Hungary, Ireland and Slovakia - €163m) and group centre (-€45m).

'Yet again a good result,' said Johan Thijs (pictured), chief executive officer. 'Thanks, among other things, to a sound level of net interest income, a strong non-life insurance result and seasonally high dividend income, which partly offset the decrease in trading and fair value income, the slight drop in fee and commission income and the negative one-off impact related to the settlement of a legacy legal case.'

Click the link to view the KBC 2Q18 results, presentation and report.

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