Fortis posts $1.26-bn profit after selling assets

Written by Bloomberg | Updated: Aug 28 2009, 03:36am hrs
Fortis, the insurer that sold its banking businesses in October to avert a collapse, reported a first-half profit, helped by proceeds from a divestment. Net income amounted to 886 million euros ($1.26 billion), Fortis, based in Brussels and the Dutch city of Utrecht, said on Thursday in a statement. The insurer had a 697 million-euro gain on the sale of 25% of AG Insurance NV, Belgiums biggest life insurer, to Paris-based BNP Paribas SA.

Fortis, Belgiums biggest financial-services company before it was forced to sell most of its assets last year because of the credit crisis, said it will publish the results of a review on September 25 that aims to streamline the organisation. The company has cut jobs at its headquarters and repurchased debt to lower costs since emerging from its breakup as an insurer.

We remain cautious, CEO Bart De Smet said in a televised interview. We all know the economic uncertainties were living in and this will have an impact on the insurance industry.

Fortis fell 1.7% to 3.16 euros at 10:06 am in Brussels trading, after rising as much as 3.1% earlier on Thursday. It has gained 240 percent this year, valuing the insurer at about 7.4 billion euros. Fortis had net income of 1.64 billion euros in the first half of last year, which included a profit on discontinued operations of 1.61 billion euros related to the banking operations and the Dutch insurance activities sold in the second half of 2008.

I would like to see some concrete plans for divestments and more information on the business they like to keep, said Benoit Petrarque, an Amsterdam-based analyst at Kepler Capital Markets who rates Fortis buy. Petrarque estimated first-half net income to be 1.09 billion euros.

Fortis, which sold its Dutch businesses and its stake in ABN Amro Holding NV to the Netherlands for 16.8 billion euros, booked a one-time charge of 301 million euros after a court forced it to pay its former banking unit 362.5 million euros to redeem preference stock issued a decade ago.

Profit from the insurance businesses fell 29% to 228 million euros ($325 million), as the financial crisis hurt life insurance earnings. The results showed the clear signs of the challenging conditions, Ivan Lathouders, a Brussels-based analyst at Bank Degroof, wrote in a note to investors. Lathouders rates Fortis reduce.

Earnings were helped by a gain of 482 million euros on a call option on BNP Paribas shares, which Fortis had received from the Belgian government to win over investors for its state-organised breakup. Belgium had nationalised Fortiss banking unit in the country for 9.4 billion euros in cash before selling a 75% stake to Frances largest bank in an all-stock transaction valuing Fortis Bank SA/NV at 11 billion euros.