ras group 2004 full year results and 3-year progress
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Ras Group 2004 Full Year Results
and 3-year progress
Mario Greco
March 10th, 2005
3-year plan progress Group
1
Action taken in first year of plan brought better than expected results ...
… and positioned Ras one year ahead of schedule in achieving its 3-year plan
targets
2004 results vs 3-year plan goals Group
2003
(1) Excluding BNLi in 2004; (2)120 mln excluding Life, Personal Financial Services only
2004 growth 2006E
Premiums
P+C combined ratio (%)
Life NBV
RasBank gross ordinary result
Group net income
ROE (%)
RORAC (%)
Dividends (PS)
16,569 16,123 -2.7%
70 88 +26%
161 182 +13%
100.8 98.9 -190bp
554 691 +25%
12.9 15.2 +230bp
15.7 20.2 +450bp
0.60 0.80 +33%
19,300
170
205
98.0
820
16.5
17.5
CAGR>20%
(2)(1)
2
Value creation plan progress
3
2004 FY results Group
Strong Premiums growth in high value proprietary channels (Agents and FAs) countered by weak performance of bancassurance channel in Life
Improvement in Group Net Income driven by a strong technical result in both Life and P+C
First time disclosure of Group Shareholder Value and Value Added, with strong growth on all indicators
First Italian insurance company to disclose European Embedded Value, in compliance with CFO forum principles
4
Gross premiums written
Mln euro - Direct and Indirect Business
Italy
Abroad
Group
2003
7,017
2004
7,290
3,794
3,223
3,948
3,342
+4.1%
+3.7%
P+C GPWYoY growth
+ 3.9%
2003
9,552
2004
8,833
7,646
1,906
6,984
1,850
- 8.7%
- 3.0%
Life GPWYoY growth
- 7.5%
5
Net income growth GroupMln euro
FY net income YoY growth
+25%
2003 2004Full Year
691
554
2003 20044th Quarter
12190
4Q net income YoY growth
+34%
6
FY04 results: statutory accounts
2003 2004Mln euro
Group
39Technical Result
-68107
P+C
Life
YoY growth
N.s.
The new DAC accounting policy had an impact of 91 mln euro on the technical result (before minorities and tax)
313
55258
937
634
Realised gains and write-down(1)
264
The decrease in financial income due mainly to the cancellation of dividend tax credit (101 mln euro) was offset by a correspond-ing decrease in tax, giving a neutral final effect
+15%1,079
532
234
Ordinary financial income
Ordinary Result
36%Tax rate
Net Income 554 +25%
30%
691
(1) including other non-technical items 7
Shareholder Value: brief description Group
Group Shareholder Value is the sum of Life and PFS Embedded Value, plus P+C Net Asset Value
Annual Value Added is calculated as the sum of EV-earnings for Life and PFS, plus net income adjusted for change in unrealised capital gains and others for P+C
Italian In-force Value is net of cost of time value of financial options and guarantees
Tillinghast has provided an independent opinion on and review of the EEV and Shareholder Value
Shareholders equity
NAV adjustments
Total Net Asset Value
In-force Value
Shareholder Value
+
+
=
+
=
P+C Life PFS
New segment introduced
8
Shareholder Value movements Group
Group Shareholder Value increased despite high dividend distribution during 2004:
•Life and PFS: Shareholder equity growth is driven by net income; Net asset value reduction is due to real estate transfer from Life to P+C at book value, goodwill write-off (BNLI acquisitions) and DAC write-off; Strong growth in Italian In-force Value is partially offset by Switzerland In-force value reduction (due to a review of EV analysis)
•P+C: Shareholder equity growth is driven by net income; Net asset value increase is due to real estate transfer from Life to P+C at book value, growth of real estate portfolio value and strong increase of Italian bond portfolio, where duration is equal to 4 years
9
Total Shareholder Value Group
2003 2004
473
….
1,607
3,849
143
Life and PFS Embedded Value
1,745
3,825
1,869In-force Value
Net Adjustments
Shareholders equity
2003 2004
332
2,783
663
2,868
2003 2004
805
….
4,391
7,381
807
4,705
1,745
6,9401,869
P+CNet Asset Value
Total Shareholder Value
+6.3%
1,837
3,1153,532
(1)
(1) Transfer of 128 mln euro of Real Estate from Life to P+C(2) Total BNLI/BNLVita acquisitions impact: 54 mln euro: increase of In-force 95 mln; decrease of Adjustments 117; Reduction of Shareholder equity 32
(1)
(2) (2)
Mln euro - net of minority interests, taxes and cost of capital
10
2004 Value added Group
Annual Value Added is increasing driven by achieved net income and growing new business value:
•Life and PFS: Net Income increase is due to a strong technical and financial result in all countries; Delta Adjustments to Net asset gave negative contribution mainly due to DAC write-off, and realised capital gain (like Mediobanca); Delta In-force Value recorded a strong increase in Italy, and a decline in Switzerland
•P+C: Net Income growth driven by a better technical development in all countries; Delta Adjustments to Net asset had positive growth both for real estate and Bond portfolio unrealised capital gain increase
11
Life and PFS value added Group
2003 2004
6
….
204
298
-86
353
Value added
12%
ROEV
Italy 307
-16%Switz.-89
28%Austria 36
16%Spain 21
Country
137
348
30
DeltaIn-force
Delta Adjustments
Net Income
(1)
(1) Excluding Participation Exemption for 126 mln euro, (2) Excluding BNLI integration effect for -54 Mln euro; Net Income including BNLI integration cost would have been 321
(2)
Mln euro - net of minority interests, taxes and cost of capital
12
Delta Adjustments
Net Income
P+C value added Group
2003 2004
89
439
350
573
203
370
Value added
18%
Return on NAV
Italy 332
14%Switz. 73
14%Austria 27
50%Spain 105
Country
(1)
(1) Excluding Participation Exemption for 136 mln euro, (2) Delta adjustments includes real estate unrealized capital gain increase for 52 Mln euro
(2)
Mln euro - net of minority interests, taxes and cost of capital
13
GroupValue added by line of business
ROEV%
2003 2004
348
298
8.5
Total Life and PFS
9.6
2003 2004Total value
added
439
573
18.412.9
2003 2004
786
871
12.9
Total P+C
11.2
(1) Excluding Participation exemption effects for 262 mln euro. Of which 126 in Life and 136 in P+C (2) Excluding BNLI impact for -54 mln euro
(1) (1) (1)(2) (2)
Mln euro - net of minority interests, taxes and cost of capital
14
Life Business development
15
Life 2004 FY results Group
Increasing market share for proprietary channels in Italy, driven by strong internal growth in new business volumes
Continuation of agency reorganisation, with strong growth by top agencies and high-potential agencies
Significant results recorded by FAs in terms of volumes and quality mix
Weak bancassurance performance, with a recovery in the last quarter
Strong increase in New Business Value. Higher incidence of proprietary channels. Improvement of global margins in Italy
16
Mln euro - Individual policies
420
Ras
517
Growth %
Life new business volumes A
gen
tsItaly
FAs
Ban
ks
2003
2004
252
327
2003
2004
5,221
4,368
2003
2004
Mkt (1) 2003
Mkt share %
2004
+23 +15 6.2 6.6
+30 -17 4.9 7.8
-16 +2 15.1 12.4
(1) Source: ANIA new business premium 17
Agents: new business premiums Italy
Recurrent Premium
Single Premium
2003 2004
109420
311
517
128
389
25%
17%
Mln euro - Individual business
Life NB Premiums +23%
(1) Ras spa - 850 agencies
227
+18%
+40%
82
114
Top Agencies (25% of total agencies) (1)
High potential (30% of total agencies) (1)
2003 2004
192
18
RasBank FAs: new business premiums Italy
Recurrent Premium
Single Premium
2003 2004
37
252
215
327
52
275
28%
42%
Mln euro - Individual business - excluding 35 mln euro of group policies for 2004
67
26
7
57
12
31
100% 100%
Life Premium mix by type of product - individual business
FAs MktRasBank
Life NB Premiums +30%
Unit Linked
Index LinkedTraditional
Mkt data source: Ania statistics as of Dec. 2004, (1) Issued by ex-BNLI FAs
(1)
19
Bancassurance new business volumes
2003
Mln euro - individual business
Italy
2004
Monthly new business premiums
209241
Jan.
510
Feb.
711
Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
363
412
593
469551
400513
341
538
298213
313
402 402
263210
360
447
FY04 volumes 4.37 bn euro -16%
4Q04 volumes 1.27 bn euro +19%
423
20
Life Embedded ValueMln euro - net of minority interests, taxes and cost of capital, Embedded Value earnings analysis may not be completely consistent, as 2003 has not been restated for cost of options
Group
ROEV
(73)Change in EV
329
7.5%
Dividends and capital movements
EV Earnings 256
3,409
2003
3,336
2004
• 2003: 7% for all Italian businesses, and 6.25% for Switzerland
• 2004: 6.30% for Italian traditional products, 6.55% for Italian unit-linked, 6.1% for Switzerland
• 2004 data are net of cost of time value of financial option and guarantees for Italy
Discount rates
(1)
(1) Last year reported EV was 3,073, the new methodology calculates EV starting from consolidated figures 21
Life In-force Value Group
2003
1,530
2004
1,5752004
1,289Italy
Foreign countries
286
1,126
404
2003
Life In-force ValueYoY growth
+4%
Mln euro - net of minority interests, taxes and cost of capital
(1) Including BNL Life portfolio acquisition, with an impact of 35 mln euro
(1)
22
Switzerland In-force Value GroupMln euro - net of minority interests, taxes and cost of capital
2004
2003
2002 236
303
162
In-force value DiscountRate
6.10%
6.25%
5.00%
Lower persistency ratio in the Group Business, consistent with the underway portfolio reform, caused by the introduction of new profit test process
Combined effects of a reduction in financial returns (-50 bp) and a new min. guaranteed in the Group business to 2.50% (+25 bp)
Improvement of cost ratio due to the decrease of the cost base by 12%
Stronger focus on Unit Linked in new business value (+57% vs. 2003)
Due to recent Mgmt changes, 2004 has been an year of review for EV analysis:
23
Life Embedded Value earnings Group
ExpectedProfit
Variance from
Assumptions
Change in Assumptions
New Business
Value
Embedded Value
Earnings
198
182
36
256
160
Change in assumption: mainly driven by Switzerland (-180 mln); no significant from other countries
Variance from assumption: Positive impact from Austria (investment variance), Spain (higher laps margins), Portugal (better mortality experience for risk products), partially offset by Italy (due to higher lapse rate for Unit Linked)
(1) all assumptions are detailed in the EV disclosure document available on the Ras web site
Mln euro - net of minority interests, taxes and cost of capital
24
Life New Business Value by country Group
NBV
182
Spain
Austria
Switzerland
2004
NBValue
5 8
5 5
4 5
Italy Foreignbusiness
161
21
NBV 2004 YoY growth+13% +12%
2003
Portugal 3 3
Mln euro - net of minority interests, taxes and cost of capital
25
Life New Business margins on APE Italy
FAs
Banks
2003 2004
11.0%
NBV/APE (1)
27.4%
(1) 100% recurring premiums + 10% single premiums, Individual policies only for 2003, including group polices for 2004
Mln euro - net of minorities, taxes and cost of capital at year-end
67.8%
48.3%Agents
2004
144
2003
161
51%
19%
50%
26%
24%
2004 YoY growth
Life NBVYoY growth
+12%
28.5%
9.1%
65.4%
51.6%
-14%
+32%
+14%
30%
26
RasBank FAs performance
27
RasBank 2004 FY results Italy
Fastest growing FAs network in terms of assets under administration, in part thanks to recent acquisitions
Further enhancement of average FAs profile through selective recruitment
Positive net inflows with significant growth in value products
Strong progress in gross operating result, thanks to gross margin increase and cost containment
Boost in Embedded Value and New Business Value for both Life and Asset Mgmt
28
FAs assets under administrationYoY growth rate
(1) Assoreti data as of December 2004
Italy
Assets Under Administration -mln euro
+37%
2,182
2003
9,867
3,084
15,132
AuM
Banking
Life
2,835
13,480
4,400
20,715
2004
Assets Under Administration Market comparison -bn euro
YoY growth
Fideuram
Mediolanum
RasBank
B. Generali
Xelion
Azimut
(1)
+2%
+9%
+37%
+6%
+23%
+22%
58.9
20.8
20.7
15.4
12.1
8.4
29
RasBank: high-profile FAs network Italy
Fideuram
Azimut
RasBank excl.BNLI (2)
Generali
Xelion
Mediolanum
Former BNLI
Assets under administration per FA - mln euro
YoY growth(1)
+7%
(1) 2004 Assoreti data, (2) excluding FAs working in agencies for RasBank
+8%
+20%
+18%
+34%
+9%
+43%
13.8
9.5
5.1
5.8
6.4
8.9
5.8
• RasBank FAs at the end of 2004 totalled 2,928, with a net increase of 556 people
• The BNLI merger brought in more than 700 FAs, after a reorganisation to remove small and unproductive FAs (total asset retention 95%)
• The lower-end network reorganisation involved the entire RasBank structure, with no impact on total assets but strong increase of AuM per FA
30
2004 Inflows development Mln euro - YoY growth rate
(1) Net Inflows: Assets under Management and banking assets
Italy
-24%FY04
981
624
FY03
357
252
1,233
578
388
190
362
940
3,584
AuM
Banking
Life
…while asset mgmt gross inflows grew sharply
FY04FY03
Net Inflows focused on high value products...
+67%
(1)
5,973
31
RasBank FAs results ItalyMln euro - RasBank PFS and Life sold through FAs - Excl. BNLI merger
FY gross operating result YoY growth (1)
+26%
39
70 49
2003 2004
•Net income reached 64 mln euro (+43%) excl. BNLI merger
• Including BNLI merger, net income amounted to 33 mln euro
•G&A cost ratio decreased from 55% to 52%
Main trends
(1) Including RasBank, RAM, Investitori Sgr, Rasfin, RBVita, Darta Savings - Excluding BNLI Merger
88
PFS only Including Life
32
RasBank FAs results by LoB Italy
2003 2004
Mln euro - Including Life business through FAs and before BNLI merger
210Gross margin
115Asset mgmt commission margin
238
133
YoY growth
43Banking margin 46Life technical margin
General expenses
Sales & marketing expenses and others
Gross operating result 88
45Net income 65
53 59
13%
-115 -125
-25 -25
26%
43%
8%
-1%
11%
7%
16%of which performance
fees 13 9 -28%
70
33
RasBank FAs Embedded Value Italy
2003
811
2004
416
395480
513
Life FAs
Asset Mgmt
NBV ‘04
49 +32%
28 +75%
304
294
In-force Value ‘04 growth
Embedded ValueLife through FAs and Asset Mgmt
+13%
Mln euro - Life FAs EV already included in Life Embedded Value as disclosed in EV section - net of minorities, taxes and cost of capital at year-end
+34%
+37%
growth993
(1)
(1) Excluding BNLI switches 34
RasBank FAs EV-earningsMln euro - net of minority interests, taxes and cost of capital
Italy
ROEV
182Change in EV
-142
12%
Dividends and capital movements
EV Earnings 94
Change 2004/2003
NBV
Change in assumptions
Variance from assumptions
Expected profit
2004
77
54BNLI acquisition one off impact
47
-21
-7
40EV earnings incl. BNLI acquisition
35
P+C Business development
36
P+C 2004 FY results Group
Continuous improvement in combined ratio in all countries, in presence of a stable reserve ratio
Italian P+C premiums growth driven by increase in retail and SME segments
Combined ratio improvement in Italy driven by both motor and general liability
Genialloyd reported strong growth, to enhance positioning and benefit from economies of scale
37
P+C profitability improvement
Combined ratio
2003
Reserve Ratio
(1) On NEP including “other technical items” excluding equalisation reserves (2) Net Technical Reserves/Net Premiums
(1)
(2)162.1
Group
2004
162.3
Combined ratio by country (%)
100.8%
98.9%Italy
Spain
Austria
Switzerland
20042003
%
99.199.5
101.4105.9
100.0104.8
92.696.2
38
P+C GPWMln euro - direct business
Italy
Motor
Non Motor
2003
3,763
2004
3,920
1,401
2,362
1,472
2,448
+5.1%
+3.6%
By client segment
Retail
SMEs
Commercial lines
2004 growth
+8.7%187
+4.4%359
P+C GPWYoY growth
+4.2%
+4.1%3,095
Public entities +7.8%124
Large Corporate -1.9%156
39
P+C combined ratio by Lob
Combined ratio in %
Focus by Lob (%)
Motor
Non motor
Of which General liability
2003 2004
99.8103.3
114.8127.3
99.5
20042003
97.197.799.1
Reserve Ratio157.9 159.0
Italy
40
Mln euro - Direct Business
Genialloyd performance
170
203
2003 2004
Italy
Technical results
Combined ratio 101.5% 96.5%
2003 2004
Expense ratio 19.0% 17.0%
Net income 3.5 12.0
Number of clients 320,000 366,000
GPWYoY growth
+19%
41
Return on invested capital
42
Capital Management Group
Slight increase in risk capital on Life and PFS mainly due to business growth
Reduction in P+C risk capital thanks to a new Cat-coverage reinsurance contract
Strong improvement in RORAC and ROE due in part to greater capital efficiency
High dividend policy in order to limit capital retention
43
Capital Requirement
Mln euro
Italy
Other Countries
2000
3,984
2004
3,441
2,534
1,450
20042003
Life
P+C
Group
2,390
1,051
Strategic Inv.
PFS
Diversif.
TOTAL
185
706
1,340
653
(494)
2,3902003
3,386
2,282
1,104
104
547
1,379
855
(603)
2,282
44
Return on invested capital
2004
20.2
Group
RORAC%
2003
15.7
2004
15.2
ROE%
2003
12.9
45
Dividend policy
Dividend Per ShareYoY growth
Euro
Group
+33%
2002
0.44
0.60
2003
0.80
2004
+36%
•Euro 0.80 DPS will be distributed on ordinary shares in May 2005, for a pay-out of 538 million euro
•the dividend policy is consistent with the 3-year plan value creation program
Dividend policy
46
2005 outlook
47
Outlook Group
Life: continuous investment in proprietary channels will drive high volumes and a good quality mix. Good start for bancassurance, but focus is on value rather than volumes
PFS: cost synergies and strong volumes growth expected after completion of the BNLI merger
P+C: cycle is peaking, but current level of profitability can still be maintained for a while
Economic results are expected to reflect positive business trends, with key contributions from Life and PFS segments
48
Certain of the statements contained herein may be 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. In addition to statements which are forward-looking by reason of context, the words “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue” and similar expressions identify forward-looking statements. 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 RAS Spa’s core business and core markets, (ii) performance of financial markets, including emerging 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 including the Euro - U.S. dollar exchange rate, (viii) changing levels of competition, (ix) changes in law and regulations, including monetary convergence and the European Monetary Union, (x) changing in the policies of central banks and/or global basis.The matters discussed in this release may also involve risks and uncertainties described from time to time in Allianz’s filings with the U.S. Securities and Exchange Commission Allianz assumes no obligation to update any forward-looking information contained in this release.
Cautionary Note Regarding Forward-Looking Statements
49
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