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Fortis Insurance

VIEWS: 22 PAGES: 14

  • pg 1
									Fortis Insurance
Jozef De Mey


Presentation to the Investment Community
London, 24 June 2005
Disclaimer
These pages are intended to provide investors with some financial information about Fortis’s business
plans. The financial information contained in this presentation has been prepared by Fortis on a pro
forma basis and has not been audited. The figures are provided for information purposes only and
subject to the conditions and restrictions mentioned hereafter.
No warranty can be given by Fortis, neither explicitly nor implicitly, regarding the reasonableness,
correctness or completeness of the information, previsions and assumptions published on these pages.
The information here provided could be subject to changes. This presentation and information
contained herein does not whatsoever replace any formal reporting. In vestment considerations should
continue to be based on the periodical reportings and other information Fortis is required to disclose by
law or stock exchange regulations.
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 as well
as partial information and involve a certain degree of risk and uncertainty that could cause actual
results or performance to differ materially from those expressed or implied in such statements. Actual
results or performance may differ materially from those contained in such statements due to, without
limitation, general economic conditions, market conditions, changes in laws and regulations and
general competitive factors.




                                                                                                            2
Profile & strenghts

Ambitions & profit levers

Main growth initiatives

Long term financial targets

Conclusion




                              3
      Fortis Insurance: profile & strengths

      Fortis Insurance: key figures

                   Major and profitable                                     Strong domestic position -
                   contributor to Fortis                                 platform for international growth

        Insurance contribution to
          Fortis 2004 net profit (1)                                        2004 Gross Inflow Life
                                                                              EUR 8,064 million
                                                                                        1,221
      Banking                                    Insurance
                                       42%
                                                                             2,545                               4,300




      Allocation of ECAP to Insurance                                    2004 Gross Written Premiums
                                                                                  Non-Life
                                                                               EUR 4,611 million
                                                                                     1,423               1,100
                                                   Insurance
                                      24%




                      EUR 13.8 billion                                                          2,088

                                                                               Belgium          Netherlands              International
(1)   Excluding capital gains/losses on divestments of group companies                                                            4
Fortis Insurance: profile & strengths

Existing strengths: building blocks for further growth
                              Belgium                       Netherlands                International
                                                                                   • Primarily life oriented
                                                                                   • UK – excellent
     Products &
                                • Full range of products sold                        combined ratio and
                                                                                     good market position
    Operational                 • Combined ratios below market average               (esp. motor and
    Performance                 • Strong operational performance in (group) life     household)


                         • Fortis AG preferred        • Straight through           • Leadership positions in
                           insurer for brokers          processing developed         bancassurance (Spain,
                           (ICMA International          for brokers                  Portugal, Malaysia)
                           survey)                    • Fortis ASR brands          • UK – excellent position
    Distribution &       • Market leader in             awarded high scores in       in large broker network,
                           Bancassurance                IG&H survey                  affinity marketing groups
   Market Position
                                                                                   • Multi-distribution in
                                                                                     Thailand and China
                                                                                     (both banks and agents)


                         • Opportunity for cost       • The integration enters     • Successful integration of
                           savings from integration     its second phase (2005-      UK insurance business
                         • Combine two market           2006): 475 FTE out of      • Cross-border operation
      Integration          leaders to make a            committed reduction of       of FCI
                           stronger force               750 achieved to date
                                                                                   • Integrated Spanish
                                                                                     group life portfolios
                                                                                                                 5
   Fortis Insurance: Ambitions & profit levers

   Profit levers
 Life           • Accelerate growth in Group Life
                • Leverage Bank van De Post distribution agreement
                • Sustained growth of savings and
                  pensions market (demographics)
                • Continue growth by leveraging existing market position
                • Leverage Bancassurance skills and positions to other
                  distribution channels outside home markets                   Revenue
                                                                               growth
 Non-life       • Growth in Disability Insurance from privatisation plans in
                  Netherlands – a Euro 1bn market opportunity
                • Leverage low cost operations in the UK (affinity groups,                    Profit
                  white labelling and cross–sell wrappers)
                                                                                              growth

• Finalise integration of Fortis Insurance Netherlands by end 2006             Cost
• Integrate Fortis Insurance Belgium
                                                                               Efficiencies
• Maintain cost focus


 Life          •   ALM risk limits in place.
               •   Investment and longevity risk limited                       Risk
 Non-life      •   Strict underwriting discipline                              Mgmt
               •   Claims provisions at 95% confidence interval


                                                                                                   6
            Fortis Insurance: Main growth initiatives - Illustrations

            Profitable Revenue Growth – Non-Life

                Netherlands Disability Insurance                                             UK Motor & Household
                                     2003 Market Share                                                          No.6
                       29%                                                                  GEP
Strong mkt.




                                23%                                 19%                     GBP
  position




                                         16%
                                                           14%                              million                            No.11
                                                                                            2003                353
                                                                                                                                104

                       ING     Fortis Interpolis Achmea             Other                                       Motor            Household
                        104
                               Av. Combined ratio 00-03
Competitive




                                                                                                         Unit cost (1)                Av. Combined ratio
 advantage




                        100    A&H
                                                                                                Unit                                              00-04
                         96                              102%                                  Cost             98                             103
                                                                                               GBP      64                            97
                                96%
                         92                                                                    2003
                                Fortis                    Mkt.                                         Fortis Av. peers              Fortis Av. peers

                       GWP 99-04         GWP                     CAGR 04-09                      120
                CAGR                                                7%                                  UK distribution channels: market
                %
                                         Euro billion
   Growth




                                                                                                  80    overview
                                                                                     CAGR%                                                              Motor
                   11.5       8.5                       0.9               1.3          99-03      40

                                                                                                                Agents               Brokers            Property
                                                                                                   0

                   Fortis     Mkt.                      2004            2009                           Direct           Affinities
                                                                                                 -40


                                                                                (1) Average premium x (Expense
                                                                                        ratio + Commission ratio)


                                                                                  Leverage competitive advantages
                  Reinforce leadership position                                        to extend distribution
                                                                                         and cross-selling
                                                                                                                                                             7
            Fortis Insurance: Main growth initiatives - Illustrations

            Profitable Revenue Growth – Life

                               Belgium Group Life                              Netherlands Group Life
              2003 29%                                              2003      30% 21.4%
Strong mkt.




              FuM                                                   APE
                                 17%    16%
 position




                                               7%                    8.1%                 10.7% 9.4%
                                                      4%      4%                                          2.4% 2.2%
                     Fortis Ethias       Axa   AGF    ING    KBC    Fortis    ING AEGON Achmea Delta SNS Interpolis
                                                                                               Lloyd Reaal
              2004                    1.2%
Competitive
 advantage




              Oper. Cost /
                             0.7%                                           • Fortis ASR has a track record of solid
              FuM
                                                                              operational performance proven by
                                                            CAGR              NBVA/DAK awards won in 2002, 2003
                             Fortis   Mkt.                  04-09             (no 2 in 2004)
                                                             10%                             GWP CAGR
              GWP 99-04
                                                GWP                                               04-09
                             10.9% 7.2%                                                   10%
   Growth




                                                                                                   6%


                             Fortis   Mkt.     2004        2009                           Fortis   Mkt.



                                                                                   Increase scale
                    Strengthen leadership position
                                                                               using competitive edge
                                                                                                                      8
Fortis Insurance: Main growth initiatives - Illutrations

Profitable Revenue Growth – International Life

                 Iberia                                                        Asia

Spain                                             Malaysia
• Market leader with access to large “la          • 2001 No.7 new life business
  Caixa” network (4,845 branches)                 • 2004 No.1 new life business
                                                                                      Real
• Focus on:                                       Thailand                            premium
  - Group Life (17.5% market share)               • No.5 insurer                      growth 10%
  - Pension plans                                 • 496 branches of banking partner 2003 (1)
  - Risk products                                 • Training of 150 dedicated agents
                                                    in Bank and of 1,000 tied agents
Portugal                                          China
• No.1 (22% market share) with access to          • Several distribution agreements with a.o. the
  large Millenniumbcp network (1,008                4 largest banks
  branches)                                       • 133 Tai-Ping Life branches
• Focus on:                                       • 13,000 tied agents
  - Pension plans                                 • Real premium growth of 23% pa (98-04) (1)
  - Risk products                                 • No. 6 insurer (2.06% market share)


     Leverage market position                       Build on Bancassurance position
       to increase share of                               with multi distribution
     Pensions and Group Life
                                                 (1) Source: Swiss Re sigma report Oct.2004   9
  Fortis Insurance: Main growth initiatives - Illustration of cost efficiencies

  Integration of Fortis Insurance Belgium

               Right timing                                Synergies allow stable costs

• Market leadership in the broker and                   • Operating Model remains channel specific
  bancassurance channel limits commercial               • BUT SHARED
  impact                                                    - IT platform
• Standalone efficiency improvements are                    - Product/services strategy
  reaching their limits                                     - Operations
• Both companies make important IT                          - Support functions
  investments that can be leveraged

                                                               Flat costs in real terms
                                                               450
                                                                     CAGR 1.6%     CAGR 1.9%
                                                               400     nominal       nominal
                                                               350
                                                               300

             Share IT platforms                                250

                                                               200


Annual savings of 11% of yearly combined IT                    150
                                                               100


                 spending                                      50
                                                                0
                                                                      2001       2004    2009




                                   Reinforce leadership
                                   within each channel
                                                                                                10
Fortis Insurance: Main growth initiatives – Illustrations of risk management

Profitable, competitive and disciplined

            Investment risk                                                 Non-Life

40% of total life profits not related to            P&C: past 10 years consistent positive run-
investment margin – other loadings (e.g.            offs
mortality) are significant sources of profit
New business guarantee rates are lower and
further reduced by product development              Sustained focus on underwriting: combined
e.g. Fortis AG individual life: about 50% of        ratio well below market average in Be, NL
new business is @ 0% guarantee and no               and UK
guarantee on future premiums
Product<10yr maturity: highly matched                                 Average Combined Ratio 00-03
                                                  110.0
Less than 10% invested in equities
                                                  107.5
                                                          2.0
                                                  105.0
            Longevity risk
                                                  102.5
                                                                                1.5                  4.8
                                                  100.0
More than 85% of life reserves are not
exposed to longevity and exposure is not           97.5

increasing                                         95.0
Provisions set prudently and allow for past                 Belgium                   NL              UK motor

mortality improvement                                                  Fortis              Market Average
                                                                                                                 11
   Fortis Insurance: Long term financial targets

   Net Profit CAGR of 6-8 % from 2004-2009

                 Commentary                                         Financial implications
                                                             Gross Inflow Life                     GWP Non-Life
B • Continued focus on bank and broker
       channels should lead to healthy top                            CAGR 15-20%                                CAGR 5-10%

       line growth                                                    CAGR 2-4%                                  CAGR 4-6%

NL • Focus on profitability combined with
                                                                      CAGR 7-9%                                  CAGR 6-8%
       growth in line with overall market
                                                   2004          2009                     2004           2009
Intl • Both existing & new markets will
       contribute to top-line growth
                                                                               Costs
   • Integration in Belgium and Netherlands        EUR
                                                   million                                    CAGR 12-15%
     will leave costs flat in real terms                        249
   • Insurance International will invest to                                                   CAGR 0%
                                                                559
     accelerate profitable growth                                                             CAGR 2-2.5%
                                                                365
                                                                        2004           2009

   • Sustained focus on underwriting                                     Net Profit
                                                   EUR                                        CAGR 15-20%
     profitability                                 million
   • Insurance RARORAC to improve even                          128                           CAGR 4-6%
                                                                                                                 Total
     further                                                    449
                                                                                                                 CAGR
                                                                                                                 6-8%
   • Both Life and Non-life drive compound                      472
                                                                                              CAGR 4-6%

     annual Net Profit Growth of 6-8%                                   2004         2009
                                                          Belgium           Netherlands          International           12
Conclusion

 •   Opportunities to grow further in the home market will focus on key
     areas - Disability Insurance in the Netherlands and Life products
     in Belgium
 •   Integration in Belgium and Netherlands will leave costs flat in real
     terms
 •   Export skills honed in home market to secure strong footholds in
     other markets internationally
 •   Lever bancassurance skills and positions to access other
     distribution channels
 •   These initiatives will contribute to an organic 6-8% CAGR in net
     profit compared with strong 2004 base



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