Bancassurance Agreement With Zurich Financial Services in Latin America. 22 nd February 2011

Transcription

1 Bancassurance Agreement With Zurich Financial Services in Latin America 22 nd February 2011

2 Disclaimer 2 This presentation contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward-looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance resulting from and following the implementation of the proposed transaction. These statements are based on information available to management only as of the date of this presentation and management's current expectations with respect to the business; accordingly, these forward-looking statements are inherently subject to uncertainties and changes in circumstance. We caution against placing undue reliance on forward-looking statements, as assumptions, expectations, projections, intentions and beliefs about future events or results may and often do vary from actual results and such differences can be material. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are factors relating to Santander's ability to successfully realise expected synergies from the proposed transaction and changes in global, political, economic, business, competitive, market and regulatory forces, as well as those factors described under the headings 'Risk Factors' and 'Operating and Financial Review and Prospects' in Santander's annual report on Form 20-F for the year ended December 31, 2009, as filed with the U.S. Securities and Exchange Commission (the SEC ). Santander assumes no obligation to update or otherwise revise forward-looking statements contained in this presentation to reflect future events, changes in circumstances or changes in beliefs. Statements as to historical performance are not intended to mean that future performance for any period will necessarily match or exceed those of any prior period. Nothing in this presentation should be construed as a profit forecast. There can be no assurance that the proposed transaction described in this presentation will be consummated. The proposed transaction remains subject to the completion of definitive transaction documentation and any consummation of the proposed transaction will be subject to the receipt of all required regulatory approvals and the satisfaction of certain other conditions. The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information published by Santander, including all filings made by Santander with the SEC, which are accessible at and which you are advised to consult. This presentation does not constitute an offer or a solicitation to sell or purchase any securities. In making this presentation available, Santander gives no advice and make no recommendation to buy, sell or otherwise deal in shares of Santander or in any other securities or investments whatsoever. Any person at any time acquiring securities must do so only on the basis of such person s own judgement as to the merits of the suitability of the securities for its purpose and only after having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in this presentation. This presentation is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.

3 3 Business Overview and Description of the Transaction Strategic Rationale Financial Impact Summary and Next Steps

4 Transaction Summary 4 Scope and structure* Zurich Financial Services acquisition of 51% and management control of a newly created holding company integrating Santander insurance business in Brazil, Mexico, Chile, Argentina and Uruguay 25-year exclusive distribution agreement in these territories Business overview (1) Key financial terms Leading banking franchise with >10% market share in core markets Leading bancassurer in the region: 22.4 million insurance policies, US$4.8bn Gross Written Premiums & Savings Contributions, US$412mn PBT and US$12.9bn Technical Reserves in 2010 Up-front payment of US$1,670mn (2) for 51% of the insurance business, underpinning value of the business US$420mn (2) net present value of earn-outs to be calculated on a cumulative basis every five years Total implied value for Santander: upfront + earn-outs = US$4.1bn (3) * Capitalizaçao business is excluded from the perimeter of this transaction (1) 2010 average exchange rates local currency & USD for GWP & Savings Contributions and PBT. 31/12/2010 local currency & USD spot rates for Technical Reserves (2) Based on 31/12/2010 local currency & USD spot rates (3) Implied for 100%

5 Targeted Transaction Structure 5 ZFS Joint Venture Agreement Stock Purchase Agreement 51% 49% Santander Zurich Santander Insurance America, S.L. 100% Local Santander Insurance Entities 25-year Distribution Agreement Local Santander Bank / Broker Zurich Santander Insurance America (Holding), which will be located in Spain, acquires 100% of local insurance entities Santander sells 51% of Zurich Santander Insurance America to ZFS Santander and ZFS enter into a Joint Venture Agreement and a Stock Purchase Agreement Local insurance entities will enter into long term distribution agreements with the broker in countries where a separate broker exists, and with local bank where it does not Note: Brokers will continue to be owned by Santander. Adjustments to proposed generic structure may be required in each country due to local laws and other considerations

6 Perimeter of the Agreement - Key Figures 2010* 6 US$1.9bn Gross Written Premiums US$2.9bn Savings Contributions US$412mn PBT in insurance companies US$328mn PAT in insurance companies US$12.9bn Technical Reserves 22.4mn policies in force Argentina 3.6% Mexico 14.2% 2010 GWP Countries in the perimeter Chile 24.3% Brazil 58.0% * Capitalizaçao business is excluded from the perimeter of this transaction Note: 2010 average exchange rates local currency & USD for GWP, Savings Contributions, PBT and PAT. 31/12/2010 local currency & USD spot rates for Technical Reserves

7 7 Business Overview and Description of the Transaction Strategic Rationale Financial Impact Summary and Next Steps

8 Rationale for the Transaction 1 Insurance partner accelerates growth into next development phase Increasingly important business, which will benefit from having a partner to accelerate further growth Next bancassurance development phase in Latin America benefits from the sophistication and product know how of an insurance partner Santander has strong distribution capabilities and branch network reach as well as a large customer base 8 2 ZFS - Right partner to unlock future growth potential #3 European insurer and #5 globally, fully committed to bancassurance and the region Wider product range with simple commercial processes Build insurance proposition to unexplored segments Extensive expertise in ALM & risk management and operations Single partner for the region, simplifying interaction 3 We continue to rebalance our business portfolio We sell businesses / seek partnerships where we feel a partner can add value...and we acquire businesses where we can generate significant extra value (e.g. retail and commercial banking in Poland, UK, Germany )

9 1 Insurance Partner Accelerates Next Step of Growth 9 Leading distribution capabilities in the region Low Insurance penetration GWP / GDP >10% banking market share in perimeter contemplated ~5,600 branches 3.9% LatAm Avg. = 2.6% 3.1% 2.6% 2.0% 1.6% 9.5% ~36 million clients Strong GDP growth expected (Avg. 10E 12E) The Brazil example room for growth LatAm Avg. = 5.3% 2010 Insurance PAT (R$mn) 2, % 5.7% 5.6% 5.5% 3.9% 1, % 436 SAN Brasil Brasil (1) Itau (2) Bradesco Leverage on complementary skills and economies of scale to accelerate growth Source: EIU, Local insurance regulators, 2009 Swiss Re report, Company Data (1) Includes insurance, previdencia and capitalizaçao segments (2) Annualised based on 3Q 2010 results. Includes contribution of 30% stake in Porto Seguro

10 2 ZFS is the Right Partner to Unlock Future Growth Potential 10 #3 European insurer and #6 globally, fully committed to bancassurance and the region Extensive experience in bancassurance partnerships Complementary presence in Latin America Single partner for the region, simplifying interaction The business will benefit from having a partner to accelerate further growth Wider product range with US$mn Life GWP & Savings 4, Countries with Santander & Zurich presence simple commercial processes Non-Life GWP 573 1,376 Countries with ZFS presence Build insurance proposition to unexplored segments

11 11 Business Overview and Description of the Transaction Strategic Rationale Financial Impact Summary and Next Steps

12 Financial Impact 12 Deal multiples Earnings impact Tangible shareholders equity Net income after tax 2010 Figures* (100%) US$1,461mn US$328mn Implied multiples based on total consideration NPV (US$4,100mn) 2.8x 12.5x Impact of reduced contribution of insurance companies (net of yield of proceeds) on SAN Group EPS (2012E): ~0.7% We expect to achieve EPS breakeven within three years through higher commissions to the network (as a result of increased sales on the back of this partnership) - Capital gains (net of tax) of US$1,210mn used to reinforce balance sheet * 2010 average exchange rates local currency & USD for net income after tax; 31/12/2010 local currency & USD spot rates for tangible shareholders equity

13 13 Business Overview and Description of the Transaction Strategic Rationale Financial Impact Summary and Next Steps

14 Summary 14 Bancassurance Agreement with ZFS in Latin America First pan Latin-America bancassurance agreement with the best possible partner fully committed to the region and bancassurance High complementarity allowing to leverage on Santander strong distribution capabilities and ZFS proven track record in bancassurance in terms of new products, distribution management and risk-based return culture Very attractive consideration with an upfront payment that underpins the quality of the business and potential of the region Crystallizes value for Santander and brings its Latin America Bancassurance operations to the next level of development

15 Next Steps 15 Key milestones* 21st February: Signature of binding Memorandum of Understanding with ZFS The parties currently intend to sign definitive transaction agreements in the first half of 2011 The transaction is currently expected to close by the first quarter of 2012 (subject to antitrust and insurance regulatory approvals and other conditions) * Dates are tentative and subject to change

16 Appendix 16

17 Association Joint Venture: Banco Santander and Zurich Financial Services in Brazil 17 Transaction Specifics from Brazils Perspective Transfer only of insurance underwriting activities and its related core risks. Insurance distribution activities are maintained by the bank. Also the current commission framework between the bank and insurance companies is preserved after the deal As of 2010, 70% of the insurance related IFRS results were booked in the bank and 30% at the insurance arm Financials Transaction leads to a 21% (1) capital gain Accretive transaction: Proceeds imply a price to book value equal to 2.3x (2) (1) Capital gain calculated based on the terms of the insurance deal that took place by the time of Santander Brasil IPO (refer to page 7 in the IPO prospect) (2) Proceeds /(Equity Goodwill). Equity and Goodwill in BRGAAP as of Dec/2010. Adjusted for spin-off of Capitalizaçao

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