Published on March 6, 2014
Agenda 1. Profile and track record 2. Strategic update 3. Conclusion FORTIS I 9/25/2009 I page 2
Multi-channel distribution in 8 countries Luxembourg (50% Life; 100% Non-Life): Life + Non-Life Inflow* FY 08: 1,055; H1 09: 288 Market share of 11% Top 2 player in Life FOS market France (100%): Life Inflow* FY 08: 433; H1 09: 153 Own agency force, IFA’s Portugal (51%): Life + Non-Life Inflow* FY 08: 2,430; H1 09: 1,282 16% market share in Life Market leader in pension funds Millenniumbcp Fortis Turkey (100%): Life Inflow* FY 08: 82; H1 09: 35 Bancassurance via Fortis Bank and agents Germany (100%) Start-up in FY 07 Credit Life and Unit Linked products Von Essen Bank / Fortis Finanz Russia (100%) Start-up in FY 07 Term Life/savings Bancassurance and agents Ukraine (100%) Acquisition # 7 Life Insurer in FY 06 180,000 customers Life Agent network Italy (50%) Joint acquisition with BNP Paribas Assurance Non-Life Bancassurance Mix of leading positions in mature markets with smaller positions in fast growing markets * Inflow = inflow (Life) or GWP (Non-Life) FY 08 in EUR mio, based on 100%; nr = market ranking; % = % Fortis ownership FORTIS I 9/25/2009 I page 3
Focus on Life, with EUR 19 bn of funds under management Business breakdown (Gross inflows FY 08: EUR 4 bn) (1%) Germany (2%) Turkey France (11%) (5%) Non-Life 0.2 bn Financials EUR mio FY 07 45 3.8 bn (95%) Life (60%) Portugal (26%) Luxembourg VANB Life (5%) Agents (27%) Brokers (6%) Agents 17 190 Life 196 214 128 Non-Life (2%) Other 22 H1 09 Gross inflows (EUR mio) Non-Life Distribution breakdown (Gross inflows FY 08: EUR 4 bn) 747 55 Embedded Value (8) 893 Net profit (excl. general costs FII) FY 08 3,214 3,686 3,819 FY 06 FY 07 FY 08 (4%) Other (9%) Brokers 1,648 H1 09 Funds under Management (EUR bn) 19.3 18.8 19.4 17.4 (66%) Bancassurance (81%) Bancassurance FY 06 FORTIS I 9/25/2009 I page 4 FY 07 FY 08 H1 09
Agenda 1. Profile and track record 2. Strategic update 3. Conclusion FORTIS I 9/25/2009 I page 5
Aligning strategic priorities to a changed (economic) reality Priorities Criteria 1 Focus on core competencies Strengthen partnerships Expand multi-channel distribution Innovate and improve product portfolio Improve operational excellence 2 Assess current portfolio Position in market Critical size Market attractiveness or potential Potential to apply our core skills Pay-back time Other strategic considerations Invest in new markets Leading position Distribution strength Value creating 3 Actively managing for value creation FORTIS I 9/25/2009 I page 6 Illustration Partnership with Millenniumbcp Channel innovation in Turkey Luxembourg FOS business Develop / Reinforce / Divest the existing business Non-Life bancassurance deal with UBI Banca in Italy
1 Millenniumbcp Fortis created in 2005: clear value creation through partnership … Funds under Management (EUR bn) Penetration (clients) (%) CAGR +9% 9.6 6.7 FY 05 FY 04 FY 08 Significant increase in Funds under Management Outperforming the market in FY 08, both in Life and Non-Life Embedded Value – growth since its creation (%) CAGR +12% 32.2 31.3 30.1 FY 06 FY 07 33.0 FY 08 33.2 FY 09 Penetration rates of insurance products in relation to some banking products have increased to levels that are among the European best in class: Mortgage + Life Risk: 90% Mortgage + Fire: 82% Net Profit (EUR mio) Net Profit before VOBA Net Profit after VOBA 995 125 112 626 70 70 87 83 71 63 49 28 FY 04 FY 08 Life insurance business increased its value by in 4 years by 59% FORTIS I 9/25/2009 I page 7 FY 04 FY 05 FY 06 FY 07 FY 08
… with leading bank, gaining access to vast network … 9,703 7,833 3,000 2,000 4,074 3,029 1,000 10,000 8,000 6,000 4,000 2,000 0 Lusitânia CA Vida Eurovida 537 911 548 607 60 0 AXA Top 5 banks control 80% of Life insurance distribution, with bancassurance as dominant distribution channel for Life 2.6 mio customers and more than 900 branches 9,585 Açoreana Distribution strength 4,000 Math Reserves (Mar 09) BPI Market with great upside given the low levels of insurance premiums penetration Life insurance as important growth engine Premium income (#) Santander In an insurance market with high growth potential MbcpF: # 2 in Life Insurance (H1 09) BES Immediate gain of critical mass in the Portuguese insurance market, reaching market leadership in Life ‒ Life: market leader with 21% market share ‒ Non-Life: 5% market share ‒ Health: dominant position through Médis MbcpF Leading position through partnership with top league bank CGD (#) Roll last 12 months MbcpF: # 6 in Non-Life Insurance (H1 09) Premium income (#) 1,600 63.8% Gross Claims Ratio (Dec 08) 54.9% 1,200 62.0% 80% 61.0% 61.0% 60% 52.6% 51.4% 800 40% 400 20% 0 FORTIS I 9/25/2009 I page 8 Global Generali Liberty* MbcpF Allianz Açoreana (#) Roll last 12 months Zurich* Axa* CGD 0% BES 1
1 … allowing us to offer innovative products to customers … Innovation at the heart of Marketing / Commercial Strategy … Time to market is critical Structuring and launch of a new unit-linked product in 3 days … delivering results Unit-linked: More volume Gross Written Premiums (EUR mio) -40% New products will account for 15% to 20% of Life inflow in FY 09 Illustrations (H1 09) Innovation pays off, as well in Investment products … H1 09: EUR 1 bn inflow in Investment products 952 577 FY 05 334 FY 07 New Pet Insurance, with innovative features and a new brand 469 214 256 2 Savings products with segment approach … as in Non-Life insurance FY 06 1,235 866 FY 07 FY 08 New offer in Pension Savings: FY 08 Best Year Ever New annualized premiums 36% YoY growth in savings 11 Unit Linked series +44% +48% Special Series weighted 46% in total sales FY 08 Personal Accidents: More Sales at higher Premiums New Policies (+11% YoY) 30,419 Average Premium (+42% YoY) 49 33,631 21 visibility campaigns in the bank in the first six months 27 of FY 09 FY 07 FORTIS I 9/25/2009 I page 9 FY 08 FY 07 FY 08
… and managed in a lean and effective way 1 Operating via lean and effective partnership Fortis is an insurance expert, with extensive bank distribution know-how; Millenniumbcp is a strong retail bank and a strong retail distribution channel in Portugal Fortis fully aligns with the commercial structure of the retail bank by perfectly matching structures at Marketing/Sales levels Mutual advantage of shared and integrated services Perfect matching of the distribution organisation Insurer Lean operations reflected in low cost ratio’s Bank Marketing Life cost ratio (as % of FuM) Network Support & Call Centre Product Units Marketing Segment Units Communication Department 0.28% Management Information Unit 0.21% FY 05 Sales -9% Commercial Manager 4 Coordinating Manager 4 Commercial Consultant 51 Commercial Manager 51 FY 08 Non-Life gross expense ratio 32.2% -4% 28.9% Branches 991 FY 05 FORTIS I 9/25/2009 I page 10 FY 08
1 First mover advantage with new agency channel in Turkey “ Because of chosen approach and selection method, we grow faster than the market in agency business, with focus on high professionals Expanding multi-channel distribution through start-up of agency channel in FY 08 Currently working with about 100 of the top 250 agents of Turkey Working with highly professional sales force ensures quality of customer base and quality of (after) sales process Strongest agents are supported in hiring talented new sales people and in building the necessary infrastructure Agency channel shows better collection and lapse rates, higher retention knowledge is being transferred to bank channel FORTIS I 9/25/2009 I page 11
1 Luxembourg Life FOS activities: leading position in niche activity Cross-border insurance activity FOS: Operating from Luxembourg throughout Europe under Freedom of Services Sophisticated product innovation focusing on providing life insurance solutions for (Ultra) High Net Worth Individuals ((U)HNWI) Focus on estate planning and wealth preservation Leveraging partnership skills with major Private Banks in different geographies Capital efficient operation #2 in highly international market Active in Belgium, Luxembourg, France, Italy, Switzerland, Germany, Spain Strong market positions in France (#1), Belgium (#2), Italy (#3) GWP FY 08 – Freedom Of Services (FOS) (EUR bn) % Market share 2.7 29.5% Lombard 1.0 Fortis 0.9 R+V Lebensvers. 0.7 Cardif Lux Cali Europe FORTIS I 9/25/2009 I page 12 0.4 10.5% 9.8% 7.7% 4.3%
2 1 Assessing current portfolio following a three step approach Analyse current portfolio Portugal Luxembourg France Turkey Germany Ukraine Russia FORTIS I 9/25/2009 I page 13 2 Review of businesses along criteria Position in the market Critical size Market attractiveness Relevance for Fortis Capability to create value for Fortis within 3 to 5 year time frame Potential to apply our core skills in partnership or stand-alone Evaluate any strategic considerations 3 Rebalance the portfolio Develop / reinforce entities’ existing businesses Reconsider and increase sub-scale businesses through partnerships, or divest Selective investments in areas of growth meeting the criteria or for strategic purposes
3 Selectively investing in new markets Invest in new markets, based on 3 criteria Today Obtaining a leading position Gaining access to strong distribution franchise Creating value as of year 3 Profile of targeted markets (Market position) in 3 years time leading small low high (Potential market growth) FORTIS I 9/25/2009 I page 14
3 UBI Banca: international partnership in P&C insurance between Fortis and BNPP Assurance Leading position in Italy # 5 in number of customers # 4 in total loans and deposits 4 mio banking customers Distribution strength Large and growing network of 2,000 branches Well-established operational platform to be used as platform to sell P&C products through other distribution channels Builds on core competencies of Fortis Fortis UK: Strong positions in Motor and Household Non-Life bancassurance in Belgium Value creating Leverage the untapped potential of the relatively underdeveloped Italian non-life bancassurance insurance market Potential upside by broadening the product range with new products Improve UBI Banca’s profitability by increasing the penetration rate of the bank’s customer base and pre-approving bank customers Share investment between Fortis and BNPP Assurance of EUR 120 mio upfront and potentially EUR 40 mio over period of 10 years FORTIS I 9/25/2009 I page 15
Agenda 1. Profile and track record 2. Strategic update 3. Conclusion FORTIS I 9/25/2009 I page 16
Conclusion Fortis Continental Europe will remain an important value contributor within the overall group portfolio Our Portuguese activities are clearly a driver of net profit, and we will tap the upward potential The Non-Life partnership in Italy is of prime strategic importance We will continue to actively manage our portfolio along a three step approach: ‒ Focus on our core competencies ‒ Assessing our current portfolio, where sub-scale activities will be strengthened or divested ‒ Making selective investments in areas of growth – no greenfields, meeting our investment criteria and/or in line with strategic purposes FORTIS I 9/25/2009 I page 17
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