Christoph Plein, COO Allianz pojišťovna a.s.

Prague, March 25, 2009

How the crisis hits insurance companies and pension funds

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How the crisis hits insurance companies and pension funds

at a glance: Total GWP 2007:

Disclaimer

All statements represent the opinion and viewpoint of Allianz pojišťovna, a.s. The statements can only serve as indication for the situation on the whole Czech insurance market. The opinion, judgments and conclusions of other Czech insurance companies may deviate.

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How the crisis hits insurance companies and pension funds

Czech insurance market 2008:■ 29 insurers (ČAP membership)

■ GWP Non Life: 76 bn CZK (ca. 3.0 bn EUR)

■ GWP Life: 54 bn CZK (ca. 2.0 bn EUR)

Allianz pojišťovna, a.s. at a glance:■ GWP Non Life 2008: 7.2 bn CZK (ca. 288 mio EUR)

■ GWP Life 2008: 2.7 bn CZK (ca. 108 mio EUR)

■ IFRS result 2008: 0.7 bn CZK (ca. 28 mio EUR)

■ Assets under Management: 26.7 bn CZK (ca. 1.0 bn EUR)

■ Market position: 3 NL, 6 L

■ Market share: NL 9,0% ; L 4,8%

■ Distribution channels: Tied agents, brokers, banks, www.allianzdirect.cz

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How the crisis hits insurance companies and pension funds

1. Review EBFF 2008

2. Impacts on insurance business

3. Impacts on pension fund business

4. Outlook and summary

Content

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How the crisis hits insurance companies and pension funds

Review European Banking & Financial Forum 2008

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How the crisis hits insurance companies and pension funds

ڃ General economic slowdown will also hit non-life and life insurance business; reduced business growth and earnings can be expected

ڃ Similarities to the US also exist in the Czech Republic: Strong increase of real estate prices, mortgage lending without downpayment, high leverages through debt financing

ڃ Insurers will not refinance banks if doubts about local asset quality is to arise

Customers who invested in unit linked life insurance are confronted with the capital market’s volatility

Concerns expressed on the EBBF in 2008

Problems to come where already visible one year ago

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How the crisis hits insurance companies and pension funds

Today‘s situation

Concerns 2008

Economic slowdown

Exaggerations on real estate market

Mistrust towards banks

Volatility on capital markets

Negative GDP development cannot be excluded; increase of unemployment rate already visible; pessimistic outlook across the whole economy

Complete stop of new developments; buying prices signifi-cantly dropped (office space multiples 13 vs. 20 before), risk aversion in mortgage business

Inter-banking market dried up; only governmental guarantees avoid bank runs (valid for whole Europe)

Unprecedented simultaneous downturn of all asset classes

Development until 1Q2009

Intensity of the downturn could not be expected

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How the crisis hits insurance companies and pension funds

Impacts on insurance business

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How the crisis hits insurance companies and pension funds

■ Stable development on the claims side – no major natural catastrophes

■ Business results 2008 were partially influenced by write downs or depreciations due to turmoil on the capital markets

■ Economic downturn is having and will have impacts on the top line (e.g. Motor business, entrepreneurial business, industrial business)

■ Cost cutting and (working) capacity adjustments are unavoidable

■ End of the softening market (i.e. price reductions) can be expected – also due to higher premiums for reinsurance

Impacts of the financial crisis on the non-life insurance business

So far moderate impacts, but business environment is challenging

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How the crisis hits insurance companies and pension funds

■ Weak capital markets do not endanger classical life products (e.g. endowment, accidental covers etc.), but...

■ ...volatility in all asset classes makes investment decisions difficult,

■ ...clients invested into unit linked life insurances are confronted with tremendous volatility of capital markets,

■ ...willingness of clients to invest longer term is harmed by unsecurity about further economic development.

■ Same business principles will be applied like in Non Life, i.e. cost cutting and (working) capacity adjustments

Impacts of the financial crisis on the life insurance business

Life business suffers from the turmoil on the financial markets

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How the crisis hits insurance companies and pension funds

Key financial indicators show a gloomy picture for 2008

Impacts of the financial crisis on the pension fund business

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*) before profit participationSource: Association of Czech Pension Funds

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How the crisis hits insurance companies and pension funds

■ First steps for a clearer regulation have been taken in 2008 (e.g. capitalization rules) – but more needs to be done:

− Accounting principles to be reviewed

− Option to change pension fund at any point of time to be reviewed

− Earnings system for pension fund companies to be reviewed

■ Difficulties to earn cost of capital within the current system

■ Willingness of shareholders to invest further into the current system is limited

Impacts of the financial crisis on the pension fund business

Pension fund system is in crisis

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How the crisis hits insurance companies and pension funds

Outlook and summary

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How the crisis hits insurance companies and pension funds

■ Insurers are facing the same difficulties like other industrial sectors, but presumably in a less distinct amplitude

■ Insurers are at this point of time not comparable with banks!

■ There are however factors which can still have severe impacts on the insurance sector

− Mistrust in government bonds and increasing spreads reduces capital position of insurers and pension funds

− Accounting rules can still lead to selfenergizing negative effects

− Imported inflation through unfavourable exchange rates

Outlook – what can be expected

Crisis is by far not over – full attention of all participants is needed

Thank you for your attention