Published on March 6, 2014
Agenda 1. Profile and track record 2. The market, competition and strategic initiatives 3. Conclusion FORTIS I 9/25/2009 I page 2
Why invest in Asia? GDP growth forecast for the next 5 years 59% 42% 20% Hong Kong 24% 25% Thailand Malaysia India China Reasons to move there early FY 00, still true Emerging middle class Strong growth in GDP and premiums Strong growth in professional distribution 28% of world market in Life, 14% in Non-Life Interest in Banks for insurance distribution/ possibility to leverage Fortis competence Opportunity to leverage Fortis skills in Risk Mgt, ALM Higher expected returns/ margins High need for foreign capital and expertise Source: IMF FORTIS I 9/25/2009 I page 3
Asian life insurance review, why Asia? Life insurance premium growth (%) CAGR FY 08A-11E Life penetration and size (end 08) Size of bubbles determined by total life premiums in each country CAGR FY 03-08 27.6 India 45,000 5.7 25.6 Indonesia Singapore 17.6 23.7 China 35,000 14.2 15.4 2.6 15.0 Philippines 9.9 13.9 12.4 Thailand 12.1 9.8 Malaysia S. Korea Taiwan 15,000 5,000 Philippines 9.5 Vietnam 25,000 20.8 9.3 South Korea 6.9 Source: EIU, Swiss Re Sigma 2009, Business Monitor International FORTIS I 9/25/2009 I page 4 0% Indonesia Thailand Singapore 4.1 GDP/capita (USD) Hong Kong Hong Kong 16.5 Malaysia PR China Vietnam India 5% 10% (5,000) Premiums to GDP (% ) 15%
Fortis’ history in the Asian markets Malaysia China Thailand Fortis invested in Feb 01 in the 7th largest insurance company overall Current position: #2 overall, market leader in new business, Takaful and Non-Life Largest foreign investor Fortis invested in a Greenfield start-up with a national license in Dec 01 Current position: # 7 overall, 2.5% market share 2nd largest foreign invested insurer 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 FORTIS I 9/25/2009 I page 5 Hong Kong India Fortis acquired the 12th largest in new business in FY 07 Current position: #10 in new business 10th largest foreign invested life insurance company Greenfield start-up in FY 08 which produced the strongest start to any of the joint venture insurers in India Current position: #15 overall 13th largest foreign investor
Profile Asia Key financial data Mission/strategy EUR mio H1 08 H2 08 FY 08 H1 09 Gross inflow* Life Non-Life 1,705 1,525 180 1,586 1,429 157 3,291 2,954 337 2,123 1,909 214 Net profit ** Life Non-Life FUM 35.7 31.3 4.4 10,594 (27.0) (25.2) (1.8) 8.7 6.0 2.7 23.9 18.7 5.2 11,986 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. 15,793 Key competences Joint venture and partnership management Bancassurance Multi-Channel distribution ‒ Agency management and training ‒ Affinity marketing including direct marketing ‒ Channel conflict management Product development ALM and Risk management Distribution and regional mix June ‘09 (%) * China (11%) Other FORTIS I 9/25/2009 I page 6 Malaysia India Thailand 2% 7% 13% 21% (34%) Agents 58% (55%) Bancassurance * Gross inflow and FUM based on 100% of company revenues ** Net profit based on Fortis’ stake and excluding Insurance International holding costs Hong Kong June ‘09 India commenced commercial operations on 8 March ‘08
Results 2006 - 2009 EUR mio FY 06 FY 07 FY 08 H1 09 Gross inflow Life Non-Life Net profit Life Non-Life Local Solvency (as % of local minimum) China Hong Kong India Malaysia *** 2,167 1,878 289 17.8 11.8 6.1 2,874 2,575 299 79.9 * 73.1 6.8 3,291 2,954 337 8.7 ** 6.0 2.7 2,123 1,909 214 23.9 18.7 5.2 218% 245% 210% 218% 219% 330% 567% 216% 166% 220% 256% 182% 240% 184% 659% 506% 726% 710% Mayban Life eTiQa Insurance eTiQa Takaful Thailand **** Muang Thai Life Muang Thai Insurance 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 * Including allocated capital gains of EUR 18.2 mio *** Malaysia has adopted a risk based capital regime for solvency FORTIS I 9/25/2009 I page 7 ** Including allocated capital losses of EUR 22.4 mio **** Thailand’s local solvency margin (726%) equates to approx 250% of EU
Agenda 1. Profile and track record 2. The market, competition and strategic initiatives 3. Conclusion FORTIS I 9/25/2009 I page 8
Profile – Taiping Life (China) Key financial data Mission/strategy EUR mio FY 06 FY 07 FY 08 H1 09 Gross inflow Life Non-Life 1,120 1,120 0 1,520 1,520 0 1,850 1,850 0 1,229 1,229 0 FUM 2,900 4,250 5,500 8,800 Joint venture with Taiping Life since 2001, Fortis owns 24.9% (gross inflow based on 100%) Key features 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 ‘08 Brands: Taiping Life, Taiping Pension, Taiping Asset Management Operational Excellence: Paperless office, central processing, excellent IT Mission Attain 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 beyond Intensify cooperation with banks Enhance productivity of bank outlets with improved training & support Focus on regular premium and risk protection products Integrate processes and systems to improve customer services Distribution mix FY 08 (5%) Broker (22%) Agent (33%) ICBC (8%) Other Banks (6%) Postal Bank (11%) China Construction Bank FORTIS I 9/25/2009 I page 9 (15%) Agriculture Bank of China
Taiping Life - distribution Total Gross Inflow Life – H1 09 Gross Inflow H1 09 – Single vs. Regular (5%) Group (43%) Banca Single (27%) Tied agents (58%) Single (42%) Regular (25%) Banca Regular EUR 1,229 mio Gross Inflow H1 09 – NB Product Mix Sales Force – H1 09 # tied agents (1%) Unit linked # bank agents (69%) Traditional 6,000 50,000 4,000 40,000 FORTIS I 9/25/2009 I page 10 Jun-09 Apr-09 Feb-09 Dec-08 Oct-08 Aug-08 EUR 921 mio 2,000 Jun-08 30,000 BANK AGENTS (30%) Universal Life TIED AGENTS 60,000
Chinese market offers high growth, Taiping Life well placed to benefit given its strong national presence Taiping Market FORTIS I 9/25/2009 I page 11 One of 12 Life insurers with a license to expand and write business on a nationwide basis 7th 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 share Strong relationships with all major banks Over 55,000 agents and 16,000 bank outlets through 577 TPL offices Proven strengths in product and service innovation Operational 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 subsidies Regulator efforts to liberalize regulation (e.g. investment and product approval) and to spur growth of the industry Regulators 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 insurers Increased risk awareness following major disasters (snow storm and earthquake) in FY 08
Profile Fortis Insurance Co Asia (FICA, Hong Kong) Key financial data Mission/strategy FY 07 FY 08 H1 09 226 226 0 283 283 0 141 141 0 1,300 EUR mio 1,258 1,343 FY 06 Gross inflow Life Non-Life FUM Fortis Insurance Company Asia was acquired in ‘07 and is 100% owned by Fortis Key features 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), IFAs Market position: top 10 in new business Brands: Fortis, “Fu Tong” in Chinese Operational Excellence: Extensive application of e-solutions at “point-of-sale” and customer e-portals, launch of state-of-the-art core operating systems Mission To 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 focus Extend the multi-channel capability, especially the IFA, bancassurance and private bank channels Ensure the product strategy is aligned to current market demands including: retirement, medical, traditional savings and protection needs Provide “best-in-class” customer service Increase the retail footprint and enhance brand recall Product mix As of H1 09 (39%) Unit-linked (14%) Protection FORTIS I 9/25/2009 I page 12 As of FY 08 (19%) Whole Life (30%) Whole Life (55%) Unit-linked (17%) Par Products (13%) Par products (13%) Protection
Hong Kong, a mature insurance market with strong growth opportunities 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 Market 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 FORTIS I 9/25/2009 I page 13
Profile IDBI Fortis – (India) Key financial data EUR mio Gross inflow Life Non-Life Mission/strategy FY 06 - FY 07 H1 09 29 29 0 33 33 0 42 FUM - FY 08 104 Joint venture with IDBI and Federal Bank since ‘08 Fortis owns 26% (gross inflow based on 100%) Key features 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 players Brand: IDBI Fortis 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. Strategy Optimize value proposition to the customer via transparency on pricing Cost Leadership Fully integrated systems and processes Maximize sales efficiencies and productivity Distribution mix March 2009 (local year-end) (28%) Agent (50%) IDBI Bank (22%) Federal Bank FORTIS I 9/25/2009 I page 14
India - distribution Gross Inflow* Life H1 09 – Product Mix (11%) Homesurance Gross Inflow* H1 09 – Single vs. Regular (89%) Unit Linked (36%) Single (64%) Regular INR 2,167 mio or EUR 33 mio Total number of agents Agents actual 7,239 6,393 5,582 6,937 4,358 3,316 * Gross inflow based on 100% FORTIS I 9/25/2009 I page 15 4,999 3,740 Nov-'09 Oct-'09 Sep-'09 2,718 Aug-'09 Jul-'09 Jun-'09 Federal May-'09 IDBI Apr-'09 431 718 1,986 1,221 5,946 Mar-'10 6,554 Feb-'10 587 Jan-'10 564 Agents last year Dec-'09 Total number of bank branches
India, an exciting growth story in a dynamic insurance market with incredible upside potential IDBI Fortis Life Strong start to operations based on product designs which take advantage of competitive advantages in pricing, expenses and distribution Keys 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 Market 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 FORTIS I 9/25/2009 I page 16
Profile eTiQa (Malaysia) Key financial data EUR mio Gross inflow Life Mission/strategy FY 06 FY 07 FY 08 H1 09 Non-Life FUM 780 526 704 435 444 274 381 167 328 188 250 184 169 105 249 254 269 170 3,422 Single premium Regular premium 797 548 3,884 3,830 4,046 Mission Become the “National Champion” in Insurance and investment management: #1 insurer by Gross Premium Written in Life and Takaful Transform Mayban Investment Management into a top 2 market player Securing the world’s leading Takaful position Joint venture with Maybank since 2001, Fortis owns 31% (gross inflow based on 100%) Key features Key Products: Full product range: Life, Non Life, Takaful Distribution: Bancassurance, agency, direct corporate, affinity, Direct Marketing Market position: 1st Takaful overall, 1st New Business Life/Family, 1st General Brand: eTiQa, Mayban Investment Management Distribution Mix FY 08 (10%) Alternate (5%) Other (30%) Agency (14%) Enterprise (2%) 3rd Banca (39%) Maybank FORTIS I 9/25/2009 I page 17
eTiQa - distribution Distribution mix – H1 09 (9%) Alternate Total Premiums* – Conventional vs. Takaful – H1 09 (9%) Non-Life Takaful (4%) Other (32%) Life Conventional (34%) Maybank (19%) Enterprise (30%) Life Takaful (28%) Agency (6%) 3rd Party Banca Total Life premiums* – Single vs. Regular – H1 09 (29%) Non-Life Conventional Non-Life product mix – H1 09 (15%) Fire (30%) Motor (38%) Regular (62%) Single * Gross inflow based on 100% ** MAT: Marine, Aviation & Transport FORTIS I 9/25/2009 I page 18 (19%) Other (36%) MAT**
eTiQa is a leading insurer in an attractive market 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 mode Market leader in Bancassurance, Takaful and Enterprise general One 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 banks Widest “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 month Very strong eTiQa brand name and culture Market There are 9 life insurers, 26 general insurers, 7 composite insurers and 8 Takaful operators Market growth in Life & Non-Life slowing down, Takaful showing double digit growth The 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 position Recently, 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 FORTIS I 9/25/2009 I page 19
Profile Muang Thai Life and Muang Thai Insurance (Thailand) Key financial data EUR mio Mission/strategy FY 06 FY 07 FY 08 H1 09 Gross inflow Life Non-Life 250 210 40 355 306 49 426 358 68 277 232 44 FUM 800 1,015 1,300 1,500 Joint venture with Muang Thai since 2004 Fortis owns 40% of Life and 15% of Non-Life (gross inflow based on 100%) Key features Product Innovation - Key Products Life: Endowment & credit protection single premium for housing and commercial loan, Non-Life: Motor/Fire/PA Multi Channel Distribution Agency, Bancassurance, Broker and Financial Institutions, Direct Marketing/telemarketing Strong Market position #3 on First year premiums & #3 on Total premiums in Life; #5 in Non-Life Strong Brands Muang Thai Life and Muang Thai Insurance Mission Be a leading insurance company both in Life and Non-Life insurance by building on a strong multi-channel platform while expanding the Kasikorn Bank relationship Strategy 2009 and beyond Further grow life and expand non-life product offer Innovative CRM and Customer Service Centre Launch Unit Linked product Expand the Takaful product offering and distribution, capitalizing on Malaysia’s expertise Strengthen technical skills in shared services through development of group capabilities shared amongst the Muang Thai companies Distribution mix FY 08 Life Non-Life (14%) Other (38%) Bank (27%) Other 48% Agent (32%) Agent (10%) Broker (31%) Bank FORTIS I 9/25/2009 I page 20
Thailand – distribution Total Gross Inflow Life H1 09 (100%) (5%) Affinity Gross Inflow H1 09 – Life New Business (5%) Group (4%) Affinity (2%) Group (19%) Tied agents (75)% Banca (51%) Banca (39%) Tied agents EUR 232 mio EUR 98 mio Product Mix Non-Life H1 09 Distribution Mix Gross Inflow Non-Life H1 09 (19%) Other (45%) Motor (32%) Bank (55%) Non-Motor (49%) Agents EUR 44 mio Note: Agents includes broker business FORTIS I 9/25/2009 I page 21 EUR 44 mio
Thailand: strong growth through a powerful multi-channel distribution platform Muang Thai Life Dynamic and effective leadership through a strong management team Strong balance sheet and solvency margins Powerful brand with high visibility Effective use of a deep and diverse multi-channel distribution platform, market leadership in multi channel distribution Effective and growing CRM capability build around an innovative customer loyalty club Market leadership in agency productivity Muang Thai Insurance Good reputation, strong capital base, strong brand Balanced portfolio with a good mix of motor and property Multi channel distribution platform Framework for national network for service centers and sales offices by co-locating with Muang Thai Life and K-Bank offices New core operating system to be launched in Q1 2010 will enhance operating efficiency Market FORTIS I 9/25/2009 I page 22 Low insurance penetration rate (Life 3.5% of GDP and Non-Life 1.5% of GDP) with high growth potential Despite political and economic turmoil the Thai insurance markets have shown strong growth in 2008 / 2009, particularly in the bancassurance channel Forthcoming regulatory changes include a move to an RBC solvency regime, which should benefit Muang Thai given the strong solvency position of both companies
Agenda 1. Profile and track record 2. The market, competition and strategic initiatives 3. Conclusion FORTIS I 9/25/2009 I page 23
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 FORTIS I 9/25/2009 I page 24
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