Business Plan

Transcription

1 Ezio Paolo Reggia General Manager BORSA ITALIANA Palazzo Mezzanotte Milan, 27 January 2005 Business Plan

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3 Agenda Introduction and reference scenario 2007 main targets Strategic framework Business Plan s development drivers economic/financial projections IAS IFRS impact simulations Closing remarks and Q&As Attachments 2

4 Agenda Introduction and reference scenario 2007 main targets Strategic framework Business Plan s development drivers economic/financial projections IAS IFRS impact simulations Closing remarks and Q&As Attachments 3

5 Introduction Why a new Business Plan Business Plan Structure Changes in the economic scenario Changes in the competitive context Macroeconomic context Insurance market trends Evolving legislation New opportunities/ business segments Master Plan : organisation and responsabilities Business Plan Group positioning Acceleration, Innovation and Technology Group management tool Financials Group strategy 4

6 Reference scenario Characteristics Integration (M&A) processes and rationalization and concentration in holding structures Financial market recovery expectations, and the resulting impact on the companies asset and financial management Progressive improvement of technical management, through cost reduction and portfolio selection policies Particular focus on product innovation together with customer segmentation Focus on the expected profitability of Life products Strengthening existing channels and consolidating new distribution models Customer need for simplicity and transparency, and an increasing demand for consultancy Volume development trends Reduction in the Life market growth rate Control on claims and expansion of anti-fraud activities, with the resulting reduction in Motor TPL rates Growth in Non-Motor non-life insurance, combined with a growing focus by segment 5

7 Group development since Business Plan Stock performance since 28 November 2002 (1) Cattolica + 67% S&P/MIB + 20% MIB INS. + 26% MIBTEL + 24% Extraordinary dividend 0.70 Dividend per share (Euro) 1freesharefor every F Nov 02 May 03 Jan 04 June 04 Jan 05 Cattolica S&P/MIB MIB INS. MIBTEL DY (2) 2.28% 3.60% 4.59% 3.50% Increase in stock value and dividend (1) asat17/1/2005 Source: Bloomberg (2) Dividend yield: Dividend per share/official price on last day of year 6

8 Agenda Introduction and reference scenario 2007 main targets Strategic framework Business Plan s development drivers economic/financial projections IAS IFRS impact simulations Closing remarks and Q&As Attachments 7

9 Main targets Gross Premiums Technical Reserves Technical Result 6.3% 5, % 21, % 170 4,583 3,168 3,499 15, ,415 2, F Non-life 2007E Life 2004F 2007E 2004F Non-life 2007E Life Pre-tax profit Net profit (1) ROE % % 162 (2) 12.1% 14.9% 2004F 2007E 2004F 2007E 2004F 2007E Legend: CAGR Figures in mln (1) Net of taxes and minority interests (2) Net of capital gains from the sale of strategic shareholdings 8

10 Breakdown of changes in pre-tax profits (46) % 04 Pre-tax profit Non-life technical result Life technical result Investment income (1) Extraordinary items and other items 07 Pre-tax profit CAGR Figures in mln (1) Net income from class C investments, net of the quota transferred to the Life technical account 9

11 Agenda Introduction and reference scenario 2007 main targets Strategic framework Business Plan s development drivers economic/financial projections IAS IFRS impact simulations Closing remarks and Q&As Attachments 10

12 Strategic framework MISSION focus on insurance core business, consolidating current businesses and implementing new growth strategies through flexible development methods STRATEGIC PATHS Organic growth External growth Focused, integrated, open industrial architecture 11

13 Strategic goals STRATEGIC OBJECTIVES Develop current business Develop new markets, products, channels Accelerate development Strengthen controllership Organic growth External growth Focused, integrated, open industrial architecture Service centralisation and cost optimisation Consolidate the insurance business model STRATEGIC PATHS Integrated development of financial services 12

14 Focused, integrated, open industrial architecture Industrial architecture Characteristics Central Management Financial Services Group finance Nuova San Zeno Imm. Insurance Business Non - life Life Claims Administrative Back Offices General Services Verona Servizi Operational services Focused: each unit must focus its activities on its own objectives Integrated: common, standardised, optimised, measurable mechanisms of interaction between the various structures (*) Open: organisational basis for a merging industrial model (*) Joint control with AXA Italia 13

15 Organic growth: multi-channel development CHANNELS Tied agents Banks Brokers Other channels BUSINESS/SERVICE LINES Non-Life Life Financial services and asset management Agency network development Product and channel innovation (TUA) Retail segment Selective corporate expansion Focus on profitability Penetration on preferred segments Social security FAsworkinginside agencies: Cattolica Investimenti SIM Cross-selling at sales outlets Private retail segment Standard products JV with BPVN and other business/ partnerships agreements (OnLine Division) Flexible confirmation of the JV model Protection/development of strategic commercial contracts Product and segment innovation Banking partnerships to increase multi-bank financial products with specific proprietary brands Focus and selection of middle size, highcontribution brokers Re-launch of Cattolica Aziende Axa- Cattolica Middle company segment (B2B2E) Expansion of parent company units for direct assumption of corporate risks Direct channel for corporate contracts Development of preferred multimandatory distribution Development of Cattolica Investimenti SIM model Institutional Asset management: Verona Gestioni SGR 14

16 Agenda Introduction and reference scenario 2007 main targets Strategic framework Business Plan s development drivers Non-Life business Life business Financial and Asset Management services Industrial Architecture: Cattolica IT Services economic/financial projections IAS IFRS impact simulations Closing remarks and Q&As Attachments 15

17 Non-Life Business: Products Actions Motor Customised tariff Product versioning Flexibility of the new Non-Life platform Non Motor Focus on retail segment Private customers: innovation of family products ( easy policy, home insurance), widened range offered to shareholder members SME: new products with a high level of crossselling with the private segment (professional office insurance, hotel insurance, artisan insurance, etc) Health: new, region-specific product with customised tariff (LTC Veneto currently being developed) General TPL: careful selection at profitable quotations Legal Protection: partnership with ARAG Injury 6.7% General TPL 8.2% 2007 PREMIUMS BREAKDOWN Health 3.0% Other damages to property 6.2% Fire 6.1% Land Vehicles 6.8% Other classes 2.7% Motor TPL 60.3% 16

18 Non-Life Business: Tied agencies network development Actions Opening of new agencies ( ) Cattolica: 40 agencies/year Duomo: 33 agencies/year TUA: target of 230 agencies by 2007 New structures for selecting and supporting new agents Verona Servizi Supporting the analysis, evaluation and definition of territorial expansion strategies, with particular focus on the selection of new agents New Agencies Unit Portfolio evaluation Specific training/commercial assistance Minimum portfolio target, incentives linked with technical objectives Special projects Agency segmentation based on performance Service Partners and Club Best agencies Regional and local projects Agency network development 20 (2004F 2007E; number of agencies) 1, F CAGR 04F/07E 12% 1, E n.s. 8% 5% 17

19 Non-Life Business: New non-life IT platform Central Management Users AGENCIES SUB AGENCIES Structure EXAMPLE Other Units Other Channels On-line interview Targets To improve the overall efficiency of sale and post-sale services, through the direct (on line) interaction of Agency and Central Management systems Speed of service Agency and Central Management operational efficiency Information quality Integrable Portable Multi-client Multi-channel Scalable Expandable Main characteristics 18

20 Non-Life Business: Claims Management Actions Expansion and consolidation of di. CA HQ and network organisational development Increase range of action: e.g. injury/health Improve claim manager training and performance Re-internalize a number of currently outsourced administrative activities Consolidate data control and service quality mechanisms Segment claim managers by type of claim, and create competence centres Network of directly communicating fiduciary garages 2007 TARGETS Increase speed of claim settlement and position at top market values Contribute to the reduction of the Group Claim ratio (from 74.9% as at 2004F to 72.9% as at 2007E) Market leadership for service levels Improved quality of service Extend Autotutor Dedicated channels for VIP customers, Shareholders and Agencies enjoying special arrangements 19

21 Non-Life Business: Bancassurance development Actions Non-Life Bancassurance start-up: maximise competitive advantage and optimise the combination of Life Bancassurance experiences and Non-Life technical skills Mission: Meet the increasing demand for Non-Life insurance from the family segment Use the commercial and operative synergies between the insurance and banking partners Guarantee customers consultancy services suitable to different needs Operative context: Motor TPL, fire, theft, general TPL, injury and health Target: Retail New 50/50 JV with the Group Banco Popolare di Verona e Novara 2007 TARGET Gross premiums at 38 mln Extend Non-Life Insurance activities to other Banking Groups Consolidate the operations of the Cattolica Online Division (development of the agreement with ICCREA) 20

22 Non-Life Business: Tua Assicurazioni development Strategies Personal Line target: mass and middle markets 2007 TARGETS A franchising-style innovative distribution model, and a coordinated network image Agencies (no.) 230 Nation-wide presence through an agent training and recruitment program that is consistent with the distribution model Community Management: complete the project, develop the new free assisted sales portal and model Extend product supply through cross-selling which also includes the sale of Life and financial Group products Customers (no.) Non-life Premiums ( mln) 90, Organisational Model based on centralising back office and service activities within the parent company and/or specialised outsourcers, and on a system of procedures focused on valueadding activities Life Premiums ( mln) 90 21

23 Non-Life Business: Combined Ratio 99.8% Evolution of the combined ratio 97.7% 98.5% 97.2% 97.8% 97.6% 95.8% 94.5% 2004F 2005E 2006E 2007E Non-life combined ratio Motor TPL combined ratio Indicators are calculated net of reinsurance 22

24 Life Business: Bancassurance consolidation Strategic policies Strategic agreements preservation Flexible confirmation of the Joint-Ventures model Actions Equity based actions Investing in the banking counterpart s capital (progressive selective reduction) Setting up Joint Ventures Operation based actions Involving partners in asset deposit/management processes Operational model marked by the rapid plug-in of new banks and by continuous training and commercial presence Relational capital of long-term partnerships Full functionality and break even within the first year Consistency with focused architecture Protection and development of commercial agreements Upside and differentiation initiatives Focus on Cattolica s leadership role 2,663 bank branches as at 30 September 2004 Focus on Cattolica s credibility regarding additional social security Systematic development initiatives regarding non-life bancassurance Maintenance and innovation of the product range Widened range of products offered to the corporate and private segments 23

25 Life Business: Agencies Life portfolios development Actions Sales development Initiatives on agencies: regarding non-producing agencies regarding high-potential VIP agencies regarding specific agencies by the means of VIM ( life, injury and health) Commercial Assistants structure Creation of a structured incentives system Initiatives on customers: regarding customers with capital at maturity regarding Company Shareholders regarding Religious Bodies Special Life agencies High-potential areas Exclusive focus on Life insurance Additional social security Launch the Open Pension Fund Develop Individual Pension Plans (PIP) TARGETS Develop the proprietary channel in Life business Progressively lengthen product durations 24

26 Life Business: Eurosav development towards preferred multimandatory Pole Main strategies/integration activities Improve the multi-mandatory agency network in line with the preferred multimandatory model Create a specific platform to combine the non-life and life products of multimandatory agencies TARGET Set up a Cattolica Group Pole for preferred multi-mandatory distribution (see the French experience) Progressively concentrate Group agents in the new specialised multimandatory pole 25

27 Life Business: a Centre of Excellence for additional social security Actions Create a Group Centre of Excellence for additional social security Analyse legislation and the market and set guidelines for the development of new products Develop training packages for partner banks, financial advisers and agents Aid Group Marketing in the development of communication instruments and specific commercial support Develop contacts directly with new or existing pension funds and large companies, for collective memberships of open pension funds Adapt open Group pension funds to new legislation, and define relating product strategies TARGETS Exploit Group resources to create competitive advantages in terms of know-how Achieve economies of scope, avoiding duplicating roles and activities Strengthen the Group image as regards additional social security, and develop business in light of the new opportunities provided by proxy-laws 26

28 Integrated development of Financial and Asset Management services MISSION Jointly manage the real estate of all Group companies Transfer property investments Centralise the supervision and management of Group investments Services offered to institutional customers Integrate the insurance value proposition of agency networks with a homogenous and coordinated multi-bank financial offer Actions Complete divestment of the portfolio property (by 2005 fully owned properties, by 2007 joint owned properties) Investment plan: HQ (in particular for Banking and Financial institutions), commercial (already leased), logistic and residential properties Minimum profitability target 6% Complete Group assets transfer Set up and promote products for captive and non-captive customers Increase risk management services offered to institutional customers Promote agency adherence to the model Increase cross-selling at points of sale, focusing on the current 150 financial advisors Exchange strategies between insurance and financial products 2007 TARGETS Three-year investments 230 mln and disinvestments 168 mln Capital gains over the three years 113 mln Assets Under Management up to 4bn 25% non-captive 350 Financial advisors Asset Under Management up to 440 mln 27

29 Industrial Architecture: Cattolica IT Services and the development of Group information systems Establishment of Cattolica IT Services Technological unit for developing growth and creating Group value Group IT Company that centralises: IT Facility and Application Management General IT services Processes Group IT Governance Industrialisation of IT operational procedures Training of internal IT experts Investment Plan: ~ 50 mln Rationalise organisational structures and increase the efficiency and effectiveness of IT systems Rationalise/prioritise IT expenditure Increase the effectiveness of business IT support Increase controls concerning costs and the level of service to Group companies Development of information systems 2004 General Platform: Motor Establish Cattolica IT Services Rat. Life Systems IT Transformation (centralisation and optimisation) Evolving maintenance Upgrade basic hardware and software systems Tactical projects General Platform: Basic branches New Life Platform New Reinsurance system Management Tab.de Bord IFRS adaptation Re-eng. Claims Bancassurance System Development Management information system development New accounting system Review overall IT Architecture hardware 28

30 Agenda Introduction and reference scenario 2007 main targets Strategic framework Business Plan s development drivers economic/financial projections IAS IFRS impact simulations Closing remarks and Q&As Attachments 29

31 economic/financial projections ( mln) 2004F 2005E 2006E 2007E CAGR% Total Gross Premiums 4,583 4,803 5,064 5, % Non-Life Gross Premiums 1,415 1,564 1,776 2, % Claims ratio 74.9% 74.5% 73.5% 72.9% - Expense ratio 20.3% 21.0% 20.6% 20.0% - Combined ratio 97.7% 97.2% 95.8% 94.5% - Non-Life Technical Result (A) % Life Gross Premiums 3,168 3,239 3,289 3, % Expense ratio 0.216% 0.219% 0.208% 0.203% - Life Technical Result (B) % Total Technical Result (A)+(B) % Ordinary Income % Consolidated Profit % Net Profit (*) % (*) Net of taxes and minority interests 30

32 Consolidated Profit trend Consolidated Profit ( mln) % 2004F 2005E 2006E 2007E Var.% +4.9% +4.5% +12.2% +13.8% CAGR

33 ROE development ROE % 13.5% 12.1% (1) 13.1% 13.8% 2004F 2005E 2006E 2007E (1): Net of capital gains deriving from the transfer of shareholdings in Banca Carige 32

34 Embedded Value estimate as at Group Embedded Value ( mln) 194 1,219 FORECAST 1,052 1,025 (27) Shareholders equity Adjustments N.A.V. Value of Life in force Embedded Value business 2004/ 2003 Variance Delta ,052 (27) 1, (32) ,177 1, EV/ Share ( ) Note: 2004 figure is pre distribution of dividends. 50% Eurosav. All components are net of: taxes, reinsurance, policyholders interests and minorities Source: internal analyses 33

35 Agenda Introduction and reference scenario 2007 main targets Strategic framework Business Plan s development drivers economic/financial projections IAS IFRS impact simulations Closing remarks and Q&As Attachments 34

36 Transition to IAS IFRS and impacts of first time adoption Project guidelines The original aim was to transform the adoption of IAS/IFRS into an opportunity for reviewing management best practices, improving risk management and developing internal resources Key elements within the Group: an appreciation of IAS/IFRS issues throughout all management an awareness of IAS/IFRS impacts on the development of new products and on strategic decisions training of all Group resources a more careful measurement and management of profit and risk volatility Key elements outside the Group: market sensitivity and transparency, to clarify the new methods for determining Group performance Impacts of first time adoption Analysis areas Consolidation area Technical reserves and DAC Financial investments Business combinations Land and buildings Intangible assets Group shareholders equity Impacts = The impact on Group shareholders equity will be positive Premium and net profit simulations give rise to non-significant impacts 35

37 Agenda Introduction and reference scenario 2007 main targets Strategic framework Business Plan s development drivers economic/financial projections IAS IFRS impact simulations Closing remarks and Q&As Attachments 36

38 Final Comments Expansion of proprietary distribution networks Consolidation of the bank branches network Constant premium growth Strong growth of non-life technical result 1,523 agencies by 2007 CAGR 04/07: +12% Network of over 2,600 bank branches CAGR 04/ % Non-life business: CAGR 04/ % CAGR 04/07 +50% Improvement of Combined Ratio Constant growth of Group profit Constant ROE growth Dividend growth From 97.7% in 2004 to 94.5% in 2007 CAGR 04/ % ROE by 2007:14.9% Progressive per share dividend growth 37

39 Agenda Introduction and reference scenario 2007 main targets Strategic framework Business Plan s development drivers economic/financial projections IAS IFRS impact simulations Closing remarks and Q&As Attachments 38

40 Upcoming events 2005 events 29 March 2005 Approval of the 2004 Annual Report and consolidated Annual Report April 2005 Shareholders Meeting 29 April First call 30 April Second call 11 May 2005 Approval of the quarterly report as at 31 March September 2005 Approval of the half-year report as at 30 June November 2005 Approval of the quarterly report as at 30 September

41 Definitions Ratio Claims Ratio Calculation method Claims incurred/earned premiums, net of reinsurance Expense Ratio (non-life) Operating expenses/ Earned premiums, net of reinsurance Combined Ratio (1-non-life technical result/net earned premiums) Expense Ratio (Life) ROE Group EV Other administrative expenses/ average Life Technical Reserves Group net profit for year n / Semi-sum of shareholders equities (excluding net profit) Group Embedded value (life + non-life): sum of adjusted shareholders equity and value of life activities in closed-end portfolios, including the value arising from new life policies in the year. 40

42 Embedded Value Assumptions Variables Discount Rate Life Products Investment Return Solvency Margin Taxation on Profit Assumption 7.25% 4.5% 100% ISVAP Minimum 38.25% 41

43 DISCLAIMER This document has been prepared by Cattolica Assicurazioni based on data from internal sources (year-end financial statements, consolidated group financial statements, internal reporting and other company documentation, etc.) for the sole purpose of providing information on the group s results and future operating strategies. Given this, it can in no way be used as a basis for possible investment decisions. It is not asolicitation to buy or sell shares. No part of the document can be taken to be the cause of or reason for agreements or commitments of any type or kind whatsoever, nor can it be relied upon for agreements and commitments.information contained in the document concerning forecasts has been prepared according to various assumptions and/or elements that might ultimately materialise differently to present expectations. Results might therefore change. Cattolica therefore in no way provides any guarantee, either explicit or tacit, as regards the integrity or accuracy of the information or opinions contained in the document, nor can any degree of reliability be attributed to the same, inasmuch as it has not been subjected to independent verification. Responsibility for use of the information and opinions contained in the document lies solely with the user. In any case Cattolica, within legally admissible limits, will not consider itself liable for any damages, direct or indirect, that third parties might claim due to utilisation of incomplete or inaccurate information. For any further information concerning Cattolica Assicurazioni and its related group, reference must be made exclusively to the information given in the annual, quarterly, and interim reports and financial statements. The full versions of these documents, which constitute the factual basis and proof for all legal purposes, are lodged at the company s registered offices and are available to anyone requesting them. Reproduction or full or partial publication and distribution of the information contained herein to third parties is prohibited. Acceptance of the present document automatically signifies recognition of the aforesaid constraints. 42

44 Ezio Paolo Reggia General Manager BORSA ITALIANA Palazzo Mezzanotte Milan, 27 January 2005 Business Plan

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