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Asia
FORTIS I 9/25/2009 I page 2
Agenda
1. Profile and track record
2. The market, competition and strategic initiatives
3. Conclusion
FORTIS I
59%
42%
25%24%20%
ChinaIndiaMalaysiaThailandHongKong
Why invest in Asia?
I page 3
GDP growth forecast for the next 5 years
Source: IMF
Reasons to move there early FY 00, still trueEmerging middle classStrong growth in GDP and premiumsStrong growth in professional distribution28% of world market in Life, 14% in Non-LifeInterest in Banks for insurance distribution/ possibility to leverage Fortis competenceOpportunity to leverage Fortis skills in Risk Mgt, ALMHigher expected returns/ marginsHigh need for foreign capital and expertise
9/25/2009
FORTIS I
Asian life insurance review, why Asia?
I page 49/25/2009
S. Korea
Malaysia
Hong Kong
India
Taiwan
Vietnam
Thai
land
Philippines
Singapore
PR ChinaIndo
nesi
a
(5,000)
5,000
15,000
25,000
35,000
45,000
0% 5% 10% 15%
Premiums to GDP (%)
GD
P/ca
pita
(USD
)
Life insurance premium growth (%)
9.9
2.6
4.1
14.2
17.6
5.7
12.1
13.9
15.0
15.4
25.6
27.6
12.4
9.8
20.8
6.9
23.7
16.5
9.5
9.3
India
CAGR FY 08A-11E CAGR FY 03-08
Indonesia
China
Hong Kong
Singapore
Philippines
Thailand
Malaysia
Vietnam
South Korea
Life penetration and size (end 08)
Size of bubbles determined by total life premiums in each country
Source: EIU, Swiss Re Sigma 2009, Business Monitor International
FORTIS I I page 5
Fortis’ history in the Asian markets
Fortis invested in Feb 01 in the 7th largest insurance company overall
Current position: #2 overall, market leader in new business, Takaful and Non-LifeLargest foreign investor
Malaysia
Fortis invested in a Greenfield start-up with a national license in Dec 01
Current position: # 7 overall, 2.5% market share2nd largest foreign invested insurer
China
Fortis invested in 04 in the 7th largest life insurer and 15th largest non-life insurer
Current position: # 3 in Life (8.5% market share) and # 5 in Non-Life (3.7%)2nd largest foreign invested Life company behind AIA (in Thailand since FY 38) and largest foreign invested Non-Life company
Thailand
Fortis acquired the 12th largest in new business in FY 07
Current position: #10 in new business10th largest foreign invested life insurance company
Hong Kong
Greenfield start-up in FY 08 which produced the strongest start to any of the joint venture insurers in India
Current position: #15 overall13th largest foreign investor
India
9/25/2009
FORTIS I I page 6
Profile Asia
Key financial data Mission/strategy
Key competences Distribution and regional mix June ‘09 (%) *
H1 08 H1 09Gross inflow* LifeNon-Life
Net profit **LifeNon-Life
FUM
1,7051,525
180
35.731.34.4
10,594
The mission of Asia is to achieve strong growth in shareholder value through the application of Fortis’ core capabilities in selected high growth Asian markets.
The emerging Asian trends (bancassurance, increasing need for higher skill levels in risk management, distribution, product development) continue to provide the opportunity to create value.
Joint venture and partnership managementBancassuranceMulti-Channel distribution‒ Agency management and training‒ Affinity marketing including direct marketing‒ Channel conflict managementProduct developmentALM and Risk management
(11%) Other
(55%) Bancassurance
* Gross inflow and FUM based on 100% of company revenues** Net profit based on Fortis’ stake and excluding
Insurance International holding costs
3,2912,954
337
8.76.02.7
11,986
H2 08 1,5861,429
157
(27.0)(25.2)(1.8)
FY 08 2,1231,909
214
23.918.75.2
15,793
(34%) Agents
June ‘09
China
Malaysia
Thailand
Hong Kong
India
India commenced commercial operations on 8 March ‘08
EUR mio
2%7%
58%
21%13%
9/25/2009
FORTIS I I page 7
Results 2006 - 2009
FY 08FY 06 H1 09FY 07
Gross inflow LifeNon-Life
Net profitLifeNon-Life
Local Solvency (as % of local minimum)ChinaHong KongIndiaMalaysia ***
Mayban LifeeTiQa InsuranceeTiQa Takaful
Thailand ****Muang Thai LifeMuang Thai Insurance
3,2912,954
3378.76.02.7
218%245%210%218%166%220%256%
659%506%
2,1671,878
28917.811.86.1
2,1231,909
21423.918.75.2
219%330%567%216%182%240%184%
726%710%
2,8742,575
29979.973.16.8
* Including allocated capital gains of EUR 18.2 mio ** Including allocated capital losses of EUR 22.4 mio*** Malaysia has adopted a risk based capital regime for solvency **** Thailand’s local solvency margin (726%) equates to approx 250% of EU
Regulations in all markets require a margin above minimum, generally the local minimum is lower than EU standards All entities except Hong Kong are joint ventures, solvency is set in discussion with local partners and considering market dynamics
EUR mio
* **
9/25/2009
FORTIS I I page 8
Agenda
1. Profile and track record
2. The market, competition and strategic initiatives
3. Conclusion
9/25/2009
FORTIS I I page 9
Profile – Taiping Life (China)
Key financial data Mission/strategy
Key features Distribution mix FY 08
FY 06 H1 09EUR mio
Gross inflow LifeNon-Life
FUM
1,1201,120
0
2,900
MissionAttain top 5 position in the China life insurance and pension market; and achieve the status of a well recognized brand name in China and global markets through operational excellence
Actions FY 09 and beyondIntensify cooperation with banksEnhance productivity of bank outlets with improved training & supportFocus on regular premium and risk protection productsIntegrate processes and systems to improve customer services
Key Products: Endowment, Anticipated endowment, followed by Whole Life, Health, Critical illness Distribution: Bancassurance, Agency channel, Alternative (Direct/Tele Marketing)Market position: 7th largest life insurer in China with 2.54% market share as at December ‘08Brands: Taiping Life, Taiping Pension, Taiping Asset ManagementOperational Excellence: Paperless office, central processing, excellent IT
(22%) Agent
1,2291,229
0
8,800
FY 071,5201,520
0
4,250
FY 081,8501,850
0
5,500
(11%) China Construction Bank
Joint venture with Taiping Life since 2001, Fortis owns 24.9% (gross inflow based on 100%)
(33%) ICBC
(15%) Agriculture Bank of China
(6%) Postal Bank
(5%) Broker
(8%) Other Banks
9/25/2009
FORTIS I I page 10
Taiping Life - distribution
Total Gross Inflow Life – H1 09 Gross Inflow H1 09 – Single vs. Regular
Gross Inflow H1 09 – NB Product Mix Sales Force – H1 09
(30%) Universal Life
(69%) Traditional
(1%) Unit linked
(27%) Tied agents
(43%)Banca Single
(25%)Banca Regular
(5%) Group
(58%)Single
(42%) Regular
EUR 1,229 mio
EUR 921 mio
30,000
40,000
50,000
60,000
Jun-
08
Aug
-08
Oct
-08
Dec
-08
Feb-
09
Apr
-09
Jun-
09
TIED
AG
ENTS
2,000
4,000
6,000 BA
NK
AG
ENTS
# tied agents # bank agents
9/25/2009
FORTIS I
Chinese market offers high growth, Taiping Life well placed to benefit given its strong national presence
I page 11
Taiping One of 12 Life insurers with a license to expand and write business on a nationwide basis7th largest life insurer in China with 2.5% market share (end 08), 5th bancassurance player in terms of industry standardized premium income with 7.1% market shareStrong relationships with all major banksOver 55,000 agents and 16,000 bank outlets through 577 TPL officesProven strengths in product and service innovationOperational excellence: state of the art operating platform ‒ Paperless office‒ Centralized back office since 2006‒ Strict quality control, every policy holder is called within 2 days to check if product
meets customer needs and expectations; reduces miss-selling
Higher economic growth relative to other markets, despite slowing world economy (plus government initiatives to stimulate economy)Low life insurance penetration rate (2% in FY 08) implies high growth potential. CAGR Chinese Life market of 15% (FY 03 – FY 08)Increasing need for life and health protection, accelerated by aging population and government subsidiesRegulator efforts to liberalize regulation (e.g. investment and product approval) and to spur growth of the industryRegulators are expected to approve banks owning up to 20% of an insurance company before year end as a first step to banks having significant shareholdings in insurersIncreased risk awareness following major disasters (snow storm and earthquake) in FY 08
Market
9/25/2009
FORTIS I I page 12
Profile Fortis Insurance Co Asia (FICA, Hong Kong)Key financial data
Key features
Mission/strategy
Product mix
FY 06 H1 09EUR mio
Gross inflow LifeNon-Life
FUM
MissionTo be recognized as a leading provider of quality long-term savings, protection and retirement propositions. Continue to strive to enhance the customer experience and to interact with our customers in the most convenient, efficient and cost effective manner.
Key Objectives Build a leading agency sales force in terms of professionalism, productivity and customer focusExtend the multi-channel capability, especially the IFA, bancassurance and private bank channels Ensure the product strategy is aligned to current market demandsincluding: retirement, medical, traditional savings and protection needsProvide “best-in-class” customer serviceIncrease the retail footprint and enhance brand recall
Key Products: Unit-linked, endowments, retirement income plan, protection solutions, such as Critical Illness and Medical Distribution: Agency channel (5th largest sales force in Hong Kong), IFAsMarket position: top 10 in new businessBrands: Fortis, “Fu Tong” in ChineseOperational Excellence: Extensive application of e-solutions at “point-of-sale” and customer e-portals, launch of state-of-the-art core operating systems
(39%) Unit-linked
141141
0
1,343
FY 07226226
0
1,300
FY 08283283
0
1,258
Fortis Insurance Company Asia was acquired in ‘07 and is 100% owned by Fortis
(30%)Whole Life
(17%)Par Products(14%)
Protection
(55%) Unit-linked
(19%)Whole Life
(13%)Par products
(13%)Protection
As of H1 09 As of FY 08
9/25/2009
FORTIS I
Hong Kong, a mature insurance market with strong growth opportunities
I page 13
FICA FICA was acquired in FY 07, just before the financial crisis. In very difficult times FICA has significantly upgraded its operational and distribution base‒ Restructured the investment portfolio to align asset / liability profiles‒ Launched a new core operating system‒ Launched new e-portals for agents and customers as well as a new CRM platform‒ Launched a new performance management platform for the agency force‒ Launched a new distribution channel, Independent Financial Advisors (IFA)FICA will focus on improving operating results in FY 09 - FY 12 as growth returns to the Greater China region‒ Further improve already strong profit margins in the product base through continual adjustment of
existing product terms / pricing and product mix‒ Broader distribution through the expansion of the agency and IFA channels and moves into
bancassurance
The life assurance market is one of the most “mature” in Asia, however, except in FY 08, GWP as a percentage of GDP has shown consistent growth over the last six years with an annual average in excess of 20%Future growth is expected to continue due to‒ Increasing affluence combined with a strong propensity to save‒ Further liberalization and access to Mainland customers‒ Ageing demographics and inadequate Government provision for retirement benefits or healthcare
Market
9/25/2009
FORTIS I I page 14
Profile IDBI Fortis – (India)
Key financial data Mission/strategy
Key features Distribution mix March 2009 (local year-end)
FY 06 H1 09
Gross inflow LifeNon-Life
FUM
-
Mission To be the leading provider of wealth management, protection and retirement solutions that meets the needs of our customers and adds value to their lives.
StrategyOptimize value proposition to the customer via transparency on pricingCost LeadershipFully integrated systems and processesMaximize sales efficiencies and productivity
Key Products: Unit Linked with substantial protection component, regular premium 64% vs single premium 36%Distribution: 70% Banca (1,114 Branches), 30% agency (35 branches, going to 200 by ‘12). Alternative & brokerage under development Market position: Launched in March ’08; as of March ’09, market share 0.93% among private playersBrand: IDBI Fortis
(28%) Agent
(50%) IDBI Bank
33330
104
FY 07
-
FY 08
29290
42
(22%) Federal Bank
Joint venture with IDBI and Federal Bank since ‘08Fortis owns 26% (gross inflow based on 100%)
EUR mio
9/25/2009
FORTIS I I page 15
India - distribution
Gross Inflow* Life H1 09 – Product Mix Gross Inflow* H1 09 – Single vs. Regular
Total number of bank branches Total number of agents
(89%)Unit Linked
(11%)Homesurance
INR 2,167 mio or EUR 33 mio
Agents actual Agents last year
IDBI Federal
* Gross inflow based on 100%
(64%)Regular
(36%)Single
431 7181,2211,986
3,3164,358
5,5826,3936,554
7,239
2,7183,740
4,9995,946
6,937A
pr-'0
9
May
-'09
Jun-
'09
Jul-'
09
Aug
-'09
Sep
-'09
Oct
-'09
Nov
-'09
Dec
-'09
Jan-
'10
Feb-
'10
Mar
-'10
587564
9/25/2009
FORTIS I
India, an exciting growth story in a dynamic insurance market with incredible upside potential
I page 16
IDBI Fortis Life Strong start to operations based on product designs which take advantage of competitive advantages in pricing, expenses and distributionKeys to success will be‒ Moving from easier initial successes in a new bancassurance channel to sustained,
consistent sales based on an integrated, tailored approach to the unique characteristics of each bank
‒ Maintaining the progress in building a productive, efficient agency platform which outperforms the market in terms of productivity and expense ratios
‒ Building an effective direct and telemarketing channel targeting segments within Fortis’banking partner’s customer base
‒ Maintaining cost advantages across the business
IDBI Fortis Life has had the most successful launch in the India market‒ In terms of market share IDBI Fortis is, as of June, 15th out of 21 private sector joint
ventures and the best of five companies which launched operations within fiscal year FY 08 / FY 09
‒ No start up company has achieved the volume of total premiums sold in the first 12 months of operations equal to IDBI Fortis
‒ IDBI Fortis’ first year expense ratio is significantly better than the first year ratio of any established life insurer
The private sector joint ventures, with the exception of IDBI Fortis, SBI Life and HSBC Life, have pursued a strategy of rapid expansion “at any cost” with little attention paid to product differentiation and customer value IDBI Fortis is in a strong position to build a sustainable position as a low cost provider of products which meet targeted customers needs with a strong value proposition to all stakeholders
Market
9/25/2009
FORTIS I
Joint venture with Maybank since 2001, Fortis owns 31%(gross inflow based on 100%)
I page 17
Profile eTiQa (Malaysia)
Key financial data Mission/strategy
Key features Distribution Mix FY 08
FY 06 H1 09
Gross inflow LifeSingle premiumRegular premium
Non-Life
FUM
797548381167249
3,422
MissionBecome the “National Champion” in Insurance and investment management:
#1 insurer by Gross Premium Written in Life and TakafulTransform Mayban Investment Management into a top 2 market player Securing the world’s leading Takaful position
Key Products: Full product range: Life, Non Life, TakafulDistribution: Bancassurance, agency, direct corporate, affinity, Direct MarketingMarket position: 1st Takaful overall, 1st New Business Life/Family, 1st GeneralBrand: eTiQa, Mayban Investment Management
(14%)Enterprise
(30%)Agency
444274169105170
4,046
FY 07
780526328188254
3,884
FY 08
704435250184269
3,830
(2%)3rd Banca
(39%)Maybank
(10%)Alternate
(5%)Other
EUR mio
9/25/2009
FORTIS I I page 18
eTiQa - distribution
Distribution mix – H1 09 Total Premiums* – Conventional vs. Takaful – H1 09
Total Life premiums* – Single vs. Regular – H1 09 Non-Life product mix – H1 09
(38%)Regular
(62%)Single
(19%) Enterprise
(34%)Maybank
(28%)Agency
(4%)Other
(30%) Life Takaful
(32%)Life Conventional
(6%)3rd Party Banca
(9%)Alternate
(29%) Non-Life Conventional
(9%) Non-Life Takaful
* Gross inflow based on 100%** MAT: Marine, Aviation & Transport
(19%)Other
(30%)Motor
(36%)MAT**
(15%)Fire
9/25/2009
FORTIS I
eTiQa is a leading insurer in an attractive market
I page 19
eTiQa Strong growth in late FY 08 and FY 09 as eTiQa has completed the integration of the MNI acquisition and moves back into a growth modeMarket leader in Bancassurance, Takaful and Enterprise generalOne of three insurers, offering a full range of conventional and Takaful products Excellent access to a multitude of powerful databases including Maybank’s corporate and retail database, student loans, and Government housing loan program‒ Also distribute through third party banksWidest “face to face” reach to customers (450 Maybank branches, 14,000 agents)Exclusive access to most successful financial service portal (M2U) in the market with 1 mio sign on sessions per monthVery strong eTiQa brand name and culture
There are 9 life insurers, 26 general insurers, 7 composite insurers and 8 Takaful operatorsMarket growth in Life & Non-Life slowing down, Takaful showing double digit growthThe full implementation of the risk-based capital regime in FY 09 will have a profound impact on the market with eTiQa well positioned to maintain its leadership position due to its strong solvency positionRecently, the government has announced major liberalization measures in the financial sector including ‒ Raising the foreign investment limit in insurance to 70% from 49%‒ The offering of two new family Takaful licenses‒ Locally-incorporated foreign insurance companies and Takaful operators are allowed to
establish branches nationwide without restriction and enter into bancassurance/ bancatakaful arrangements with banking institutions
Market
9/25/2009
FORTIS I
Joint venture with Muang Thai since 2004Fortis owns 40% of Life and 15% of Non-Life
(gross inflow based on 100%)
I page 20
Profile Muang Thai Life and Muang Thai Insurance (Thailand)Key financial data
Key features
Mission/strategy
Distribution mix FY 08
FY 06 H1 09Gross inflow LifeNon-Life
FUM
MissionBe a leading insurance company both in Life andNon-Life insurance by building on a strong multi-channelplatform while expanding the Kasikorn Bank relationship
Strategy 2009 and beyond Further grow life and expand non-life product offerInnovative CRM and Customer Service CentreLaunch Unit Linked productExpand the Takaful product offering and distribution, capitalizing on Malaysia’s expertiseStrengthen technical skills in shared services through development of group capabilities shared amongst the Muang Thai companies Product Innovation - Key Products
Life: Endowment & credit protection single premium for housing and commercial loan, Non-Life: Motor/Fire/PAMulti Channel DistributionAgency, Bancassurance, Broker and Financial Institutions, Direct Marketing/telemarketingStrong Market position#3 on First year premiums & #3 on Total premiums in Life; #5 in Non-LifeStrong BrandsMuang Thai Life and Muang Thai Insurance
(14%)Other
27723244
1,500
FY 0735530649
1,015
FY 0842635868
1,300
48%Agent(38%)
Bank
Life Non-Life
25021040
800
(32%)Agent
(31%)Bank
(10%)Broker
(27%)Other
EUR mio
9/25/2009
FORTIS I I page 21
Thailand – distribution
Total Gross Inflow Life H1 09 (100%) Gross Inflow H1 09 – Life New Business
Product Mix Non-Life H1 09 Distribution Mix Gross Inflow Non-Life H1 09
(51%)Banca(39%)
Tied agents
(5%) Group(5%) Affinity
EUR 232 mio
(75)%Banca
(19%)Tied agents
(2%) Group(4%) Affinity
EUR 98 mio
(55%)Non-Motor
(45%)Motor
EUR 44 mio
(32%)Bank
(49%)Agents
(19%)Other
EUR 44 mio
Note: Agents includes broker business9/25/2009
FORTIS I
Thailand: strong growth through a powerful multi-channel distribution platform
I page 22
Muang Thai Life
Muang ThaiInsurance
Market
Dynamic and effective leadership through a strong management teamStrong balance sheet and solvency marginsPowerful brand with high visibilityEffective use of a deep and diverse multi-channel distribution platform, market leadership in multi channel distributionEffective and growing CRM capability build around an innovative customer loyalty clubMarket leadership in agency productivity
Good reputation, strong capital base, strong brandBalanced portfolio with a good mix of motor and propertyMulti channel distribution platformFramework for national network for service centers and sales offices by co-locating with Muang Thai Life and K-Bank officesNew core operating system to be launched in Q1 2010 will enhanceoperating efficiency
Low insurance penetration rate (Life 3.5% of GDP and Non-Life 1.5% of GDP) with high growth potentialDespite political and economic turmoil the Thai insurance markets have shown strong growth in 2008 / 2009, particularly in the bancassurance channelForthcoming regulatory changes include a move to an RBC solvencyregime, which should benefit Muang Thai given the strong solvency position of both companies
9/25/2009
FORTIS I I page 23
Agenda
1. Profile and track record
2. The market, competition and strategic initiatives
3. Conclusion
9/25/2009
FORTIS I I page 24
Conclusions
Asia is an attractive region for insurance in general and bancassurance in particular
Fortis has been active in Asia for 8 years, creating profit contribution and value, in particular in China, Malaysia and Thailand
The ability to team up with local partners in Asia has created opportunities normally closed to foreign investors and opened additional new opportunities
Several initiatives have been taken to increase the current profitability of FICA and meet required internal targets
The value creation of the Asian activities balances the profit generation of more mature (European) markets
9/25/2009