Investor Day 2012 - Continental Europe

Continental Europe

-

From a disparate to a

coherent portfolio of

activities

Steven Braekeveldt

CEO Ageas Continental

Europe

INVESTOR DAY 2012

Focus on core entities

Clear focus on partnerships

Strategic shift towards Protection

(Non-Life and Life risk)

Integrated approach: tight internal cooperation

From a disparate to a coherent portfolio of activities Continental Europe in 2009 vs. today

1 Investor Day 24&25 September 2012 - Andaz Liverpool Street London

Portfolio of entities with small market positions

Mix of wholly-owned subsidiaries, greenfield,

partnerships,…

Dominance Life savings (35%Life inflow)

Portfolio of entities (geographic approach)

(94%) Life (EUR 1.6 bn)

(6%) Non-Life (EUR 0.1 bn)

*incl. non-consolidated partnerships at 100%

Life

Non-Life

Mixed

Inflows* 6M 2009: EUR 1.7 bn

Life

Non-Life

Mixed

Non-Life (EUR 0.5 bn)

(75%) Life (EUR 1.6 bn)

Inflows* 6M 2012: EUR 2.1 bn

Transformation from a Sell & Hold strategy towards a Buy & Build strategy

Focus switch from portfolio restructuring to supporting growth of local operating companies


Portugal (Life + Non-Life)

Ownership: 51%

#2 overall insurer (Life + NL)

Inflows 2011: EUR 1,308 mio

- Life: EUR 1,071 mio

- Non-Life: EUR 237 mio

France (Life)

Italy (Non-Life)

Ownership: 25%

#3 Non-Life insurer

GWP 2011: EUR 216 mio

Luxembourg (Life)

Turkey (Non-Life)

Ownership: 36%

#3 Non-Life insurer

GWP 2011: EUR 177 mio*

EUR 537 mio

Portugal (24%)

Italy (20%)

Turkey (56%)

* Consolidated amount – GWP 2011:

TRY 1,137 mio (EUR 486 mio)

GWP 6M 2012

Continental Europe today Zoom in on Non-Life activities


Portugal JV with MBCP (N°2 bank in Portugal - 880 branches - 3 million clients)

Partnership in bancassurance

25 years exclusive distribution agreement with MBCP

Italy Strategic partnership in Non-Life bancassurance with BNP Paribas Cardif and UBI Banca

(N°4 bank in Italy – 2,000 branches – 4 million clients)

10 years exclusive distribution agreement with UBI Banca

Turkey Acquisition of a 36% stake in Aksigorta, the N°4 Non-Life insurer at that time (N°3 today)

Distribution: combination of agency network (1,600 agents) with bancassurance through

Akbank (N°4 bank in Turkey - 900 branches - 8 millions clients)

15 years exclusive distribution agreement with Akbank

Continental Europe today Zoom in on Non-Life activities

Insurance environment Non-Life Insurance: present challenges


Economic slowdown

in Europe (esp.

Portugal & Italy)

Volatile capital

markets

Better informed and

demanding

Hybrid customers

More price focus and more

selective

Raising claims frequency

and fraud

Lower credit

production by banks

impacts associated

sales

Increasing diversity

and competition

between distribution

channels(affinities,

retailers,

aggregators…)

Increasing new

regulations (Solvency II,

Gender Ban, Worker

Compensation Act in

Portugal, Bersani and

Monti laws in Italy, Turkish

rules re. calculation of

reserves, …)

Economic

environment Customers

Distribution Regulation

Insurance environment Non-Life Insurance: opportunities


Young and dynamic

population in Turkey

Decline in investment

income drives focus

on underwriting

performance

Aging population in

Europe creates

potential in Health

New technologies’

availability enable new

approaches:

Personalized, pro-active

and real-time

communication via social

media

Tailor-made Motor

products via Telematics

Banks increased focus

on fee and

commission income

Opportunities to

further grow non-

associated sales in the

bank channels

Turkey: introduction of a

compulsory insurance

disaster policy

Economic

environment Customers

Distribution Regulation


Organic growth External growth

Add-on acquisitions in

existing markets to reinforce

our position

New markets

− Preferably Emerging

markets

− Partnership model

− Leading market position

− Meaningful contribution

− ROE > 11%

Focus on sustainable profitability

3 entities with specific skills, know-how and stage of

development

Integrated approach with tight internal cooperation

Pool of people and technical skills available

Products

• Portugal: New

P&C products

• Italy & Turkey:

Increase non-

Motor contribution

Operational Excellence

• Portugal: Medis

• Italy & Turkey:

- Pricing,

- Segmentation,

- Reserves methodology,

- Claim process,

- Fraud prevention

Distribution

• Portugal: New

P&C products

• Italy & Turkey:

Increase non-

Motor

contribution

Strategy for Non-Life

Road map prioritizing our actions for external growth

7

Process and value chain optimized for new partnerships

Allows immediate roll-out of best practices and transfer of knowledge

Three distinct phases with clear priorities :

LT development

Projects(>18months)

Improving the financials :

•Active management of

Investment portfolio

•Balance sheet analysis

Integration in Knowledge

Sharing Platform (Fraud,

Claims, Cross selling,

Bancassuance, Agents,…)

Governance and reporting

standards

Improving business case

(6-18 months) Quick wins

(0-6 months)

Co-development of new,

complementary products

Introduction of additional

distribution channels

IT systems

Advanced Risk Management

Advanced Capital Management

(e.g. Solvency II)

Portfolio optimization

• Diversification of product mix

• Improving existing products

(if relevant)

Distribution optimization

• Bancassurance

• Agents

Technical performance:

• Underwriting

• Pricing

• Segmentation

• Claims

• Fraud

• Reinsurance (insourcing vs.

outsourcing of risks)

Investor Day 24&25 September 2012 - Andaz Liverpool Street London

Ensure sustainable profitability Portugal (1/3)


In a context of economic recession (-1.6%

GDP growth in 2011*) and contracting

insurance market (-0.9% in 2011), Mbcp

Ageas increased its Non-Life premiums by 2%

Health dominates, representing 59% of the

total Non-Life portfolio and a market share of

25% (Medis business model)

In total Non-Life, Mbcp Ageas remains a

modest player (market share of 5.5%)

A business transformation plan is set up to

increase P&C and Motor contributions

Strategic priorities aim at :

(i) ensuring profitability drivers defending the

product margin while balancing the portfolio

(ii) growing in stand-alone sales

(iii) operating simple and efficient processes

31 %

)

11% 10% 10%

58% 60% 59%

31% 30% 31%

2009 2010 2011

CAGR: +2.9%

58 %

11 %

60 %

10 % 10 %

Mbcp Ageas Portuguese Market

GWP

June 2012 Evolution

Market share

June 2012*

GWP

June 2012 Evolution

Total Non-Life 125.9 1.0% 5.6% 2,058.7 (3.90)%

Health 78.7 (1.8)% 24.7% 315.9 0.00%

Personal Accidents 7.5 7.4% 9.3% 65.2 (4.30)%

Worker

Compensation 3.8 25.7% 1.2% 295.5 (10.30)%

Fire 22.4 4.5% 6.9% 400.3 (1.50)%

Motor 9.9 (4.1)% 1.3% 822.7 (4.60)%

Other 3.6 30.0% 2.3% 159.1 (0.80)%

Note: market share are calculated over the rolling last 12 months *Source: World bank

GWP breakdown – Evolution 2009-2011 (in EUR mio)

214 231 237

P&C business

Health

Motor

Evolution of Mbcp Ageas compared to the market (current year vs. prior year, GWP in EUR mio)

7.9

9.5

6M 11 6M 12

Ensure sustainable profitability Portugal (2/3)

Motor WC Fire Health PA PPP Other

6M 2009

6M 2010

6M 2011

6M 2012

In EUR mio

CAGR 2009-2012:

+5.8%

In EUR mio - 100% figure

CAGR: +20.3%

H1 2011: Total Non-Life operating margin = EUR 32 mio

H1 2012 : Total Non-Life operating margin = EUR 35 mio

2011: Measures taken to improve technical

margins (e.g. Non-Life Claims platform)

Strong MS in Health and PA but still modest

position in the Non-Life market (5.5%)

13.2

3.7

5.5

9.1

13.1

5.1

7.5 8.8

Health Motor Fire Other P&C

Evolution of Non-Life operating margin, 6M 2011-2012

In EUR mio – before costs allocation

17.1% 47% 33.3% nc Op margin/GWP

24.7% 1.3% 6.9% nc Market share (6M 2012)

Evolution of GWP per business line, 6M 2009-2012

2.6 1.6 1.8 4.1 12.1 10.9

3.6 7.5 3.8

19.2 22.4

64.9

76.8

7.1

Evolution of Net profit in Non-Life, 6M 2011-2012

CAGR

2009-2012:

-3.4 %

CAGR

2009-2012:

+5.3%


Ensure sustainable profitability Portugal (3/3) - Focus on Health


Health Insurance Market in Portugal:

National Healthcare Service (NHS) is mainly public and Financing

is done through taxes

Quality of logistics and speed to access health services are poor

Private health insurance plans covers 10% of population

Private provision of healthcare is focused on Hospitalization,

Specialist care and Pharmacy

Based on the characteristics of Health

insurance Market in Portugal, Mbcp Ageas

launched its Health insurance platform in

1996: Medis.

Innovating business model : the first to

introduce a managed care system in

Portugal providing high quality health care

Operating model based on an integrated

system, a strong network of providers and

a multi-channel approach

2008: Medis grows twice the market and

registers the best satisfaction index for

customers and providers (97% customer

satisfaction in 2010 in Nielsen survey)

2010: Medis represents EUR 136 mio

GWP

2012: with a strong 25% market share,

Medis ranks 2nd on the Health insurance

market in Portugal (N° 1 = CGD with 33%)

Healthcare is a business in which Ageas

has competences and expertise and in

which we believe we can grow

Operating Model :

Customers are identified via their Medis card

The system validates eligibility for medical act

Through Medis site, Provider introduces the medical act code and

diagnosis

The system informs the Provider of (i)the amount to be paid by the

customer and (ii) the amount to be paid to the Provider

Medis pays directly to the Provider

69,5%

MBCP

Branches

20,5%

Distribution

Agreements

3% Direct Sales 7% Agents

2009 2010 2011

Ensure sustainable profitability Italy (1/2)


Strong performance in CPI Core

and Non-Motor

Focus on profitable growth (product

mix switch to more profitable LoB)

Better segmentation in Motor

Reduction of Loss ratio on Motor

business (Over 3 points improvement

as lack of big claims in H1 2012)

Others 213 mio 210 mio

CAGR 2009-2011: +1,3%

15,5 %

11%

36% 11%

216 mio

Fire

Motor

Accident &

Health 30,5%

43,5%

36%

38%

10,5%

10%

39%

35,5%

11,5%

14%

GWP breakdown: Evolution 2009-2011

In EUR mio

(129) (376)

(429)

(78)

312

439

(638)

(376)

(322)

123

(99)

203

Jan Feb Mar Apr May Jun

2011

2012

Auto excluded South 2012 net production in #

Ensure sustainable profitability Italy (2/2)


Actions taken in 2011 to improve business

and redress profitability (a.o. banc

assurance product offer simplification)

Portfolio being pruned, now set for growth:

New products to increase non-Motor

contribution (BluFamily, new CPI, new

Household policies)

Operations optimization:

− Claims management (rationalization of

claims settlement center)

− Implementation of a successful Fraud

Prevention Program (Black box)

Introduction of a new Health product, Blu

Family, launched in Jan. 2012 and leading

to increased sales in Health

479

838 913 933

1501

1377

455

393

830

352 290 476

Jan Feb Mar Apr May Jun

2011

2012

Health 2012 total net production in #

Leverage growth potential & enhance profitability Turkey (1/2)

6M 11 6M 12

16%

38%

15%

31%

21%

45%

8%

18%

13% 14%

43%

3%

22% 23%

19%

10%

15%

55%

2%

22% 22%

TotalGWP

Fire Marine Motor Other Generallosses

Health

Aksigorta Market Top 10


Gen. losses

14%

706

607

Fire Marine

Motor

Other

Health

2% 2%

17%

51% 47%

8%

9%

16%

8%

11%

15%

65% 59%

Evolution of GWP per business line (Ytd)

In TRY mio

Focus on profitable growth – Market GWP Analysis

Phase 1 “Quick wins” realized in 2011 (a.o.

financials improved via active management of

the investment portfolio, workshops on

Knowledge Sharing)

Now: Phase 2 “Improving business case”:

Strategic shift towards non-Motor

Agency channel profit and effectiveness

optimization

Underwriting / Pricing / Reserves Methodologies

Claims process reengineering (Claim

Management, Fraud prevention, IT systems, …)

Bancassurance

June 2012


Banks (13%)

Brokers (9%)

Direct sales (13%)

Agencies (65%)

6M 11

6M 12

Agencies (59%)

Direct sales (11%)

Brokers (13%)

Banks (14%)

Evolution of GWP per distribution channel (Ytd) Evolution of combined ratio

106.5

101.6

99

108 107

106

2009 2010 2011

Market (Non-Life)

Aksigorta

Leverage growth potential & enhance profitability Turkey (2/2)

In %

EUR 275

mio

EUR 302

mio

81

170 12

197

27

87

10

83

6M 09 6M 12

Conclusion: Robust Performance of Ageas Continental Europe Non-Life activities


Blueprint set up and ready for deployment Vision 2015

Pool of people with technical skills available for execution

Accident & Health

Motor

Other

Fire

In EUR mio

CAGR: +61% *

62.4%71.0% 66.4% 70.1% 67.3% 64.9% 61.0%

27.6%

30.3%30.3%

29.2% 29.3%25.4% 27.5%

90.0%

101.3%96.7% 99.3% 96.6%

90.3% 88.5%

2009 2010 2011 3M 11 6M 11 3M 12 6M 12

claims ratio expense ratio

** excluding Turkey * integration Turkey as of end 2011

Non-Life – evolution of GWP Combined ratio CEU** 2009 – 6M 12

128

537

Disclaimer


Certain of the statements contained herein are statements of

future expectations and other forward-looking statements

that are based on management's current views and

assumptions and involve known and unknown risks and

uncertainties that could cause actual results, performance or

events to differ materially from those expressed or implied in

such statements. Future actual results, performance or

events may differ materially from those in such statements

due to, without limitation, (i) general economic conditions,

including in particular economic conditions in Ageas’s core

markets, (ii) performance of financial markets, (iii) the

frequency and severity of insured loss events, (iv) mortality

and morbidity levels and trends, (v) persistency levels, (vi)

interest rate levels, (vii) currency exchange rates, (viii)

increasing levels of competition, (ix) changes in laws and

regulations, including monetary convergence and the

Economic and Monetary Union, (x) changes in the policies of

central banks and/or foreign governments and (xi) general

competitive factors, in each case on a global, regional and/or

national basis. In addition, the financial information

contained in this presentation, including the pro forma

information contained herein, is unaudited and is provided

for illustrative purposes only. It does not purport to be

indicative of what the actual results of operations or financial

condition of Ageas and its subsidiaries would have been had

these events occurred or transactions been consummated

on or as of the dates indicated, nor does it purport to be

indicative of the results of operations or financial condition

that may be achieved in the future.

Investor Relations

Investor Day 2012 - Continental Europe