investor day 2009 - regional business presentation belgium
DESCRIPTION
Presentation about AG InsuranceTRANSCRIPT
AG Insurance
FORTIS I 9/25/2009 I page 2
Agenda
1. Profile and track record
2. The market and the competition
3. Strategic initiatives
4. Conclusion
FORTIS I 9/25/2009 I page 3
Profile AG Insurance
* Before minority interest of 10 EUR mio to Fortis Bank
Key financial data Mission/strategy
Key competences Product and distribution mix
FY 08 H1 09Gross inflow (EUR bn)
LifeNon-Life
Operating costs (EUR mio)Net profit (EUR mio)
LifeNon-Life
Combined ratio (%)APE (EUR mio)EV (EUR bn)VANB (EUR mio)
6.34.81.5
(405)6
(85)91
100.94193.853
3.52.70.8
(209)20418123
105.6223n.a.n.a.
The mission of AG Insurance is: To be the leading and most profitable multi-distribution
service provider of insurance products To strengthen our market leadership position in our three
main market segments: Life, Group Life, and Non-Life
By focusing on the following strategic levers: Multi-channel distribution Product innovation Operational excellence
Market leader in Belgium, with total market share of 22.3% in FY 08�N�1 in Life: 26.3% �N�2 in Non-Life: 14.8% Integrated multi-channel operating model
(Brokers, Bancassurance and Assurfinance) Full product range, covering the needs of all market
segments Customer and channel centric organisation
FY 08 Inflow: 100% = EUR 6.3 bn
(24%) Non-Life
(76%) Life (33%) Broker (48%) Bank
(19%) Employee Benefits
FORTIS I 9/25/2009 I page 4
Key figures 06-09
FY 08FY 06 H1 09 FY 07
Gross inflow (EUR mio)LifeNon-Life
Operating costs (EUR mio)Net profit (EUR mio)
LifeNon-Life
Incidentals*:Impact market turmoilDRD tax benefit
Combined ratio (%)FUM Life (EUR bn)APE (EUR mio)EV (EUR mio)VANB ** (EUR mio)Total solvency (EUR mio)
6,7445,4751,269(378)
553434119
0
99.1%38.2511
4,832189n.a.
* Before minority interest to BNP Paribas Fortis Bank. On 12 May ‘09 Fortis sold 25% + 1 share of AG Insurance to Fortis Bank, resulting in a minority interest of EUR 10 mio for the first half of FY 09
** VANB : As of FY 08, VANB is calculated after Result-Related Commission (RRC), therefore, comparable figures on 3 years are not available *** EUR 189 mio before RRC
**** EUR 209 mio before RRC – EUR 151 mio after RRC***** EUR 53 mio after RRC
7,5186,1511,367(389)
52242597
(89)
100.4%42.1585
5,307151
3,682
6,2834,8181,465(405)
6(85)
91
(534)
100.9%41.8419
3,81753
3,536
3,5542,746
808(209)
20418123
(82)94
105.6%43.4223n.a.n.a.
3,732*** **** *****
*
Stable underlying earnings over the past years Commercial momentum maintained
FORTIS I 9/25/2009 I page 5
Combined ratio
* Based on H1 09 results** Based on annualized H1 2009 premiums
Relation between Combined Ratio and Return on Required Capital (EUR mio)
Target is to have a positive underwriting result, but … … high reserve to premium ratio, driven by product mix,
allows to have combined ratios of more than 100% while still having adequate returns
Workmen’s CompProperty
Motor Third-Party Liability
Premiums earned
Required Capital
Reserve /premium
Investment income
Technical result excl fin income
Combined ratio
Net Profit
Return on Required Capital
100
32
40%
2.9
3.0
97.0%
3.9
12.0%
100
32
190%
8.9
(3.0)
103.0%
3.9
12.0%
100
47
550%
23.9
15.4
115.4%
5.6
12.0%
TOTAL Non-Life*726
468**
175%
68
(40)
105.5%
22.8
9.7%
FORTIS I 9/25/2009 I page 6
Agenda
1. Profile and track record
2. The market and the competition
3. Strategic initiatives
4. Conclusion
FORTIS I 9/25/2009
531 544
1,854
651348
495
522 102 110
1,514
117
116
59
60
H1 08 H1 09 H1 08 H1 09 H1 08 H1 09
I page 7
Leading market position in Belgium remains intact
LifeFY 07 market shares (based on FY 08 Assuralia publication*)
Bank Broker Employee Benefits
1,630
1,971
1,206
929
633 654
(28%) AG Insurance
(13% Ethias
(14%) AXA -incl. Winterthur(11%) KBC
(12%) Dexia
(22%) Others
Individual Life
Non-Life
Workmen’s Comp
Group Life
Health Care
(22%) AXA -incl. Winterthur
(16%) AG Insurance
(14%) Ethias(9%) KBC
(6%) P&V
(33%) Others
Inflow per distribution channel (EUR mio)
Non-LifeFY 07 market shares (based on FY 08 Assuralia publication*)
* FY 07 are latest available market shares published in Assuralia newsletter Assurinfo nr 34 -16 October ‘08
FORTIS I 9/25/2009 I page 8
AG Insurance has a major foothold in dominant distribution channels
* Direct includes B2B, B2C, E-commerce, other direct (affinity groups, captives & pools) but also mutuals and cooperatives
Market shares of AG Insurance’s three main channels (Broker, Bancassurance, Assurfinance) are not under pressure
Life market Non-Life market
45
21
6
13
1443
134
22 20
0%
20%
40%
60%
80%
100%
FY 9
4
FY 9
5
FY 9
6
FY 9
7
FY 9
8
FY 9
9
FY 0
0
FY 0
1
FY 0
1
FY 0
3
FY 0
4
FY 0
5
FY 0
6
FY 0
7
Brokers Assurfinance Bancassurance Agents Direct*
6070
41 6
3 1013
2013
0%
20%
40%
60%
80%
100%
FY 9
4
FY 9
5
FY 9
6
FY 9
7
FY 9
8
FY 9
9
FY 0
0
FY 0
1
FY 0
1
FY 0
3
FY 0
4
FY 0
5
FY 0
6
FY 0
7
Non-Life: market share of Brokers, Banks and Assurfinance 70% in FY 07, down 4% vs FY 95
Life: market share of Brokers, Banks & Assurfinance 77% in FY 07, up 12% vs FY 95
FORTIS I 9/25/2009
Competition
Competition with focus on price, new market formulas and distribution approaches
Aggressive niche players attacking specific segments
War for talent and specific profiles
Bundling of products/solutions Shift from 0-% guarantee to
savings products with guaranteed interest rate
Shift to unit-linked products with capital guarantee
Entry of retirement solutions (annuities)
Increasingly vigilant regulators with focus on governance, compliance and transparency
Faster pace of regulatory change, especially in customer protection and transparency
Solvency 2 & IFRS phase 2 leading to a convergence of regulatory and economic capital
Unstable tax environment
Customers becoming more knowledgeable, price conscious, looking for convenience and transparency
Ageing population and wealth shift Increasing Corporate Social
Responsibility (CSR) awareness
I page 9
FORTIS I 9/25/2009 I page 10
Agenda
1. Profile and track record
2. The market and the competition
3. Strategic initiatives
4. Conclusion
FORTIS I 9/25/2009
Key strategic objectives
Non-Life
Retail Life
Group Life
Return to higher profitability (target combined ratio below 100% over next years) while keeping portfolio stable through� Tariff increases where required� Reduction of cost ratio� Adjust product features when needed
Re-entering market of medium sized companies
Simplification of Unit-Linked offer Move to one IST platform in individual life Promote products that are not in direct competition with banking products
(“backwaters”, such as risk, disability, and traditional products)
Further reinforce the embedded customer intimacy strategy Focus on segment below Top 300 companies, currently not being well served Operational excellence with new IST platforms
I page 11
FORTIS I 9/25/2009
Key Strategic Objectives
I page 12
Multi-channel Distribution
Product-market innovation
Operational excellence
Enhance cross-selling strategy and exploit untapped distribution synergies Successfully implement Modulis VIP and ‘Back-to-the-front’� Modulis VIP, exploiting distribution synergies between bank and broker channel� Enhance cross-selling Group Life with Fortis Bank� Back-to-the-front: sales support staff and insurance experts to further increase
insurance sales in the Bank channel
Be recognized as the product champion in the industry Continue high pace of innovation� Strengthen Non-Life offering for Retail & SME market� Pack-strategy: offer extended solutions to specific client segments� Pension@work: Group Life offer for SME market
Continue to be among the most cost efficient multi-channel insurer, while providing best-in-class services to clients and distributors� Non-Life platform integration has been finalized� Reengineering of Group Life and Individual Life platforms
FORTIS I 9/25/2009 I page 13
Non-Life Strategy - Focus on the strengths of both distribution channels and make them work in synergy
Retail market approach Business market approach
Both channels (Bank & Broker) with limited cannibalisation
With one common product set (same products, same acceptation & tarification rules; bank branches can sell these products at the best price a top-broker can get)
On one IT system(costs synergy)
Broker channel only(often deep technical knowledge required)
Specific products (more „tailor made“)
A new synergetic model: Modulis VIP
FORTIS I 9/25/2009 I page 14
Non-Life Strategy - The Modulis VIP Model synergy
Banking Clients Insurance Relationships Modulis VIP strategy will …
Cut the current insurance relationship with the competition (Ethias, KBC, etc.) that might endanger the banking relationship
Propose to these clients without broker the services of a broker
Bank receives lead remuneration plus 2% portfolio commission
Modulis VIP client enjoys higherno-claim bonus
Push the business client to insure his risks with AG Insurance, respecting his current broker relation (if any) Stimulate the client of the broker to
choose BNP Paribas Fortis as banking partner
BNP ParibasFortis
400,000
OtherBanks
800,000
Other CiesThrough Broker
OtherChannels
AG InsuranceThrough Broker
130,000
800,000
FORTIS I 9/25/2009 I page 15
Modulis VIP: First Results
Commercial achievements Contribution in new business and portfolio
Number of leads Modulis VIP Conversion of Leads Modulis VIP
After 16 months, Modulis VIP represents:�8% of the Modulis portfolio�3.6% of the SME portfolio New Modulis VIP = 20% of the new Modulis files
>16,000 leads received by end June ‘09 >6,400 Modulis VIP files in portfolio One offer in 2 is converted into a contract Practically all 1,000 BNP Paribas Fortis branches involved >2,500 brokers involved
(max. 4,000 professional active brokers)
SITUATION 27/06/’09
ExistingModulis files
NewModulis files
Leads/Offersin progress
Leads/Offersnot converted
22%18%
31%
29%
3,4692,928
4,885
4,61640% conversion
3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6FY 08 FY 09
1,500
1,000
500
FORTIS I 9/25/2009 I page 16
Agenda
1. Profile and track record
2. The market and the competition
3. Strategic initiatives
4. Conclusion
FORTIS I 9/25/2009 I page 17
Conclusion
Stable underlying profitability, in a difficult market context, with commercial momentum holding well
Maintain leadership position in Life
Return to higher profitability (target combined ratio <100%) in Non-Life
Still room for further growth through cross-selling and product and service innovation