Corporate Results for 2017 and strategic ambitions for 2020

Very strong activity, with assets under management rising to €1.426tn and results up significantly thanks to the integration of Pioneer and to robust activity

In 2017, Amundi saw stronger growth relative to the previous year, with €70.6bn in net inflows ^[10] and adjusted net income ^[10][11] of €918m, an increase of 14.1%.

All the targets announced at the time of the IPO in November 2015 have been surpassed:

• Activity: inflows[10] of €131bn in two years (2016–2017), above the target of €120bn in three years.
• Operational efficiency: cost/income ratio of 52.4% ^[11] in 2017, below the announced maximum of 55% and one of the best in the industry.
• Profitability: average Earnings per Share growth of +12.5% between 2015 and 2017 ^[12], which is higher than the target (+5% per year) despite the capital increase carried out in April 2017.
• Dividends: pay-out ratio of 65% in 2017, above the announced target of 60%.

These results generated significant value creation for the shareholders of Amundi, whose market capitalisation (€14.1 bn on 6 February 2018) has doubled since the IPO on 11 November 2015. Amundi has become the largest listed asset manager in Europe in terms of market capitalisation and the fourth in the world.

Combined assets under management reached €1.426tn on 31 December 2017, benefiting from the contribution of Pioneer's assets (+€242.9bn; consolidated from H2 2017), strong inflows (+€70.6bn ^[10]) and a favourable market effect (+€26.7bn), particularly in equities.

Note: all AuM and inflows below are presented as combined.

Net inflows were strong and diversified. Each client segment, management expertise and region recorded positive net inflows. These were largely driven by strong trends in Retail (70% of the total), the International segment (73%) and medium/long-term products (51%).

Indeed, the Retail segment has seen substantial activity, with net inflows in 2017 of +€49.6bn, achieved across all distribution channels, compared to +€31.5bn in 2016.

• Inflows were robust in the French networks, particularly in medium/long-term products (+€4.4bn), largely thanks to unit-linked life insurance policy subscriptions. This confirms the positive trend observed since the second half of 2016.
• Activity in the international networks (+€10.2bn) was up significantly. This was particularly true in Italy (+€9bn), where large inflows were recorded in the UniCredit networks (+€6.5bn), reflecting an excellent start to the partnership.
• Excellent trends were also observed for third-party distributors (+€17.6bn vs. +€7.3bn in 2016), primarily in Europe, Japan and the United States.
• Regarding joint ventures, inflows remained satisfactory (+€17.8bn) and were particularly strong in China and India.

The Institutionals and Corporates segment recorded solid net inflows (+€21bn in 2017). This figure nonetheless represents a decline from 2016 level (+€28.9bn), a fact attributable to the €6.9bn mandate reinternalized by the ECB in Q1 2017. Excluding this impact, net inflows were almost stable.

All asset classes contributed to net inflows in 2017. Medium/long-term assets represented +€36.2bn (+€43.1bn excluding the ECB mandate). The trends were particularly favourable in the following areas of expertise: ETFs (+€10.2bn^[13]), where Amundi has grown two times more than the market ^[14] in terms of inflows in 2017, real estate (+€4.9bn), emerging market assets (+€7.4bn[13]) and diversified products (+€18.9bn).

Finally, the majority of net inflows continued to come from the international segment (73% of total inflows), encompassing all the regions. Activity was robust in Europe (particularly France, Italy and Germany), the United States and Asia.

a) Accounting income^[15]

Accounting income rose sharply in 2017, benefiting from the contribution of Pioneer (consolidated in H2) and the Group's financial performance: accounting net income, Group share (including integration costs and the amortisation of distribution contracts) amounted to €681m, an increase of 19.9% over 2016. Adjusted net income Group share[16] was €800m, up +38% vs. 2016.

b) Combined results^[17]

The combined results, which are used to appraise the Group's performance on a comparable basis, increased significantly thanks to solid gains in revenues (including a high level of performance fees and financial revenues) and the improved cost/income ratio.

• Net revenues^[18] amounted to €2,722m, up +7.5% on 2016, in line with the increase in assets under management. Performance fees (€180m) recorded strong growth amidst a particularly favourable market environment. Amundi also benefited from considerably high financial revenues (€95m) associated with asset disposals.
• Operating expenses^[19] remained under control, increasing only +2.1%; the result was a cost/income ratio[16] of 52.4%, a 2.8-point improvement which included the initial impacts of synergies.
• The share of net income of equity-accounted entities (essentially Asian joint ventures) rose significantly (+16%, in line with assets under management), to €33m.
• Taking into account a tax charge[16] of €393m, adjusted net income, Group share amounted to €918m, an increase of +14.1% on 2016.

Business activity

Net inflows were strong (+€13.1bn), led by Retail and MLT Assets (+€10.4bn). By client segment, performance was uneven:

• Robust net inflows in Retail (+€14.2bn, o/w +€8.3bn excl. JVs), driven by growth in the international networks (particularly Italy) and third-party distributors (Europe, Japan). Net inflows from the French networks (+€1.0bn) and joint ventures (+€6.0bn) remained strong.
• Slight net outflow in the Institutionals segment (-€1.1bn) attributable to outflows in treasury products (seasonality effect) after significant net inflows recorded in the third quarter (+€18bn).

Results

• Accounting figures:

Accounting net income, Group share (including integration costs and the amortisation of distribution contracts) amounted to €209m, a 37% increase vs. 2016. Adjusted net income, Group share^[20] was €269m, a 72.6% increase vs. 2016.

• Combined figures

At €751m, net revenues[21] were up 11.6%. This result is linked to growth in assets under management and strong results for performance fees (€82m) and financial revenues (€34m, attributable to disposals of minority interests). Thanks to a moderate increase in operating expenses[22] (+2.9%), the cost/income ratio^[20] improved by 4.3 points to 50.8%. After tax^[20], adjusted net income, Group share was €269m (+22%).

The Board of Directors has decided to propose a dividend of €2.50 per share in cash at the General Meeting to be held on 15 May 2018, i.e. an increase of +13.6% vs. 2016.

This proposed dividend represents a pay-out ratio of 65% of the Group's share of net income excluding integration costs (based on the number of shares at end-2017), and a 3.6% yield based on the share's closing price on 6 February 2018. Shares shall be designated ex-dividend on 22 May 2018 and dividends will be paid out as from 24 May 2018.

Amundi's ambition is to become one of the leaders in the global asset management industry, based on:

• the quality of the expertise and services it offers to its clients,
• its strong growth and profitability trends,

its position as a committed financial player.

Strategic priorities

Amundi's successful growth momentum since its creation and its profitability reflect the effectiveness of its business model, which is based on the following principles:

a client-centric organisational structure, both global and local,

a policy of innovation allowing to bring to customers a wide range of expertises matching their expectations,

robust infrastructure (particularly in IT),

an entrepreneurial spirit.

For the 2018 to 2020 period, this strategy and this organization are confirmed. The integration of Pioneer has reinforced this business model in three key dimensions: distribution capabilities, expertises and talents.

Amundi is thus well positioned to continue its profitable growth, with two priorities:

Consolidate its position as a reference partner in the Retail segment through its savings solutions for networks and distributors. Amundi will leverage on new growth drivers: partnership with the UniCredit networks (particularly in Italy, Germany, Austria and Eastern Europe), strong prospects in the French market, capacity to provide expertise in order to strengthen its relations with third-party distributors and joint venture.

Accelerate its development in the Institutionals segment. Amundi seeks on one hand to increase its penetration rate on all geographic areas (Europe, Asia, US), and on the other hand to increase its market share leveraging its broad range of expertise, notably in US equities and emerging markets assets.

Moreover, Amundi also plans to strengthen its service provider positioning (IT, market access platform…) in order to cover the entire value chain.

As a responsible and recognized financial player, Amundi has made of social commitment one of its fundamental pillars since its creation in 2010. This policy will be continued in 3 directions:

Mainstreaming ESG criteria in its investment policies, in addition to financial criteria. Socially Responsible Investing (SRI) AuM already amount to €168bn at end 2017, making Amundi one of the leaders in Europe.

Strengthening its Impact Investing policy, notably via the fund Finance & Solidarités which AuM are expected to grow from €160m to €500m.

Continuing its engagement approach towards issuers and its specific initiatives focused on climate change: JV with EDF for Energy transition financing, partnership with IFC^[23] on green bonds…

As in previous years, Amundi’s strategy is based on organic growth, which explains most of the AuM increase since 2010.

However, targeted acquisition opportunities may be seized, provided they strengthen the business-model and meet the Group's financial criteria.

The financial objectives set for the 2018–2020 period are upgraded versus those announced at the IPO, and are the following:

• Activity: total net inflows of at least €150bn over 3 years (vs. €120bn for the previous period of 2016–2018), of which €60bn in Retail, €60bn in Institutionals and €30bn in JVs;
• Operational efficiency: cost/income ratio ≤ 53% (vs ≤ 55% previously), which includes some reinvestments aimed at fuelling future growth;
• Profitability: double the 2015 net income (the year of the IPO):
  • accounting net income ≥ €1bn in 2020,
  • adjusted net income ≥ €1.05bn, amounting to average annual growth of approximately 7% between 2017 [24] and 2020, vs.+5% before.
• Financial structure and dividend:
  • Pay-out ratio at 65% of net income (excluding integration costs).
  • CET1 ratio significantly above the regulatory minimum

Capital increase reserved for employees

A capital increase reserved for employees is planned for mid-2018^[25]. This operation, meant to strengthen employees’ corporate spirit following the Pioneer acquisition, will be carried out in the context of existing legal powers as approved by the General Shareholders’ Meeting of May 2017.

The impact of this capital increase on net earnings per share should be negligible: the maximum number of shares to be issued is 900,000 (i.e., less than 0.5% of capital and voting rights), and the discount offered to employees is expected to be similar to that offered during the first capital increase reserved for employees in December 2015 (20%).

Nomination of a new member at the Board

Amundi’s Board has decided to appoint Gianni Franco Papa, General Manager of UniCredit, as non-voting member, representing UniCredit, the new partner network of Amundi. He is taking over from François Veverka.  

Financial disclosure schedule

• 27 April 2018:               Publication of first-quarter 2018 results
• 15 May 2018:               General Shareholders’ Meeting
• 22 May 2018:               Ex-dividend date
• 24 May 2018:               Dividend pay-out date
• 2 August 2018:             Publication of first-half 2018 results
• 26 October 2018:          Publication of results for the first nine months of 2018