This is Fortis

Profile
Fortis is an international provider of banking and insurance services to personal, business and institutional customers. We deliver a total package of financial products and services through our own high-performance channels and via intermediaries and other partners.

Fortis is a leader in financial services in the Benelux region – one of Europe’s wealthiest. Building on that leadership, we have developed an extensive European footprint in the retail banking market, operating through a variety of distribution channels. We offer financial services to companies, institutional clients and high net worth individuals and provide integrated solutions to the enterprise and the entrepreneur. 

Our unique expertise has made us a regional and in some cases global leader in niche markets, such as energy, commodities and transportation, and fund administration. We successfully combine our banking and insurance skills in growth markets in Europe and Asia, and we excel in bancassurance in several countries, like Belgium, Portugal and Malaysia.

Fortis ranks among Europe’s top 20 financial institutions, with a market capitalisation of EUR 40 billion at year-end 2007. Together with ABN AMRO, we have a presence in over 50 countries and a dedicated, professional workforce of more than 85,000. All this makes us a leader in financial services in Europe, a top 3 private banker and a top tier asset manager.

Our vision
In a more complex yet more convergent world, innovation, speed and agility will be as crucial as scale, track record and reach. Fortis will stand out as a professional international financial services brand, recognised for its ability to deliver superior and sustainable stakeholder value by constantly anticipating and surpassing the needs of customers, investors, employees, partners and communities wherever we do business.

Our mission
Fortis provides compelling customer solutions creatively. One of Europe’s most dynamic and sustainable financial services brands, we deliver specialised, innovative and pragmatic customer solutions, across a network of channels and by leveraging our operational and entrepreneurial expertise.

Read Fortis 2007 Annual Report Online

An Extraordinary Year

• Net profit came in at EUR 4.0 billion on continued strong commercial activity in banking and insurance. Total banking income went up 10%, supported by strong underlying growth in lending, deposits and funds under management. Gross inflow at Life and Non-Life advanced 9% on increases in all major revenue lines

• Fortis was not immune to the impact of the turmoil in global credit markets, but we demonstrated our strength and resilience. Our strong balance sheet, robust recurrent earnings and sustained client activity have proved a diversifi ed mix, confi rming the validity of our business model and strategic direction

• Acquisition of ABN AMRO by a consortium of Fortis, Royal Bank of Scotland and Banco Santander. Our shareholders overwhelmingly supported the bid and subscribed to a rights issue of EUR 13.4 billion, one of the largest ever in Europe. This deal makes us a European leader in fi nancial services set for sustained international growth

Download Fortis 2007 Annual Review

PDF format, 4.3MB, 98Pages.

Financial performance 2007
An overview

Net profit attributable to shareholders reached EUR 4.0 billion, 8% lower than in 2006 and including a realised capital gain of EUR 947 million on the sale of CaiFor. We applied a prudent approach, using stringent assumptions, and took an impairment of EUR 2.4 billion pre-tax on our super senior subprime CDO exposure, which mainly impacted the Banking segment result.

Revenue
Total income at Banking climbed 10% to EUR 11.2 billion, with more than half the increase coming from the rise in net interest income and net commissions and fees and the rest from capital gains and the ABN AMRO businesses acquired.

At Insurance, total gross inflow grew by 9% to EUR 18.7 billion. Life advanced 9% to EUR 13.2 billion, thanks to robust growth of bancassurance sales and the inclusion of the newly acquired Hong Kong life insurance business. Non-Life gross written premiums increased by 9% to EUR 5.5 billion, based on sound margins and driven by product innovation across all countries.

Efficiency
Total expenses at Banking went up 12% to EUR 6,928 million in 2007. Two-thirds of this growth was fuelled by business developments at Merchant & Private Banking while the remainder stemmed from Retail Banking and Asset Management. Various investments in growth accounted for 6%, while underlying cost growth was 4%. The cost/income ratio for 2007 stood at 61.9%.

At Insurance, our continued drive to enhance efficiency improved the expense ratios, with the 5% increase in operating costs being offset by 9% premium growth. Strict cost control programmes compensated for start-up costs of new product-market combinations in Europe. The effects of Windstorm Kyrill and floods in the UK and, to a lesser extent, of global capital markets almost halved the technical result to EUR 319 million (down 44%), with the combined ratio amounting to 100%. Excluding the natural disasters, the combined ratio remained at 95.7% versus 96.1% in 2006.

Credit quality
The change in provisions for impairments reached EUR 2.8 billion in 2007, mainly due to the impairments we took on US subprimerelated investments (EUR 2.7 billion) at Banking. Fortis applied a prudent approach to impairments, using strict assumptions on the super senior CDO portfolio with subprime exposure. The credit loss ratio – calculated as a percentage of average credit risk-weighted commitments – came in at 116 basis points. Excluding the subprime super senior CDO-related impairments, the overall credit loss ratio arrived at 5 basis points, reflecting strong overall credit quality.

Adjusting for the change in IBNR methodology, the credit loss ratio stood at 13 basis points, in line with earlier guidance and still well below the cross-cycle credit loss ratio of around 25 basis points.

Solvency
The amount of our core equity above target increased by EUR 4.4 billion from EUR 1.8 billion to EUR 6.2 billion at year-end 2007. The Tier 1 ratio strengthened from 7.1% to 9.5%, and the core equity ratio improved from 6.0% to 8.6%. The total capital ratio decreased to 10.1% from 11.1% at year-end 2006. Fortis Insurance’s core equity ratio and total solvency ratio declined from 233.5% to 209.2% and from 269.3% to 235.1% respectively. Both ratios are still well above the respective targets of 175% and 225% of the required minimum.

Contribution of ABN AMRO
Net underlying profit of the acquired ABN AMRO activities, excluding a number of one-offs and integration costs, amounted to EUR 1,355 million in 2007, up 17% from EUR 1,158 million in 2006. The ABN AMRO activities acquired in mid-October 2007 contributed EUR 179 million to Fortis’s net profit.

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