Meritz F&M. FY2012 Financial Results & Embedded Value. FY2012 Financial Results & FY2013 Business Forecast FY2012 Embedded Value Q & A 2013.

Transcription

1 Meritz F&M FY2012 Financial Results & Embedded Value FY2012 Financial Results & FY2013 Business Forecast FY2012 Embedded Value Q & A

2 FY2012 Financial Results & FY2013 Business Forecast

3 This material has been prepared based on internally audited figures and final figures may change due to the results of an independent audit without notice. This presentation includes forward-looking statements regarding the company s outlook for FY2013 and beyond, including projected premium and net income. These forecasts are subject to unknown risks and uncertainties that may cause actual figures to differ from those stated or implied by such statements. We have no obligation or responsibility regarding investment made based on such forward-looking statements.

4 1. FY2012 Financial Results

5 Great leap in 90th Anniversary 5/ Vision The Greatest Insurance Company in Korea 3 Big New Growth Momentum Differentiated Strategy in Accordance with Market Condition Maintain LT health high marginfocused strategy Expansion of Auto Insurance Maintain commercial insurance remodeling 4 Adopt new sales channel 5 Regional differentiation growth strategy 6 Stabilized investment strategy

6 Major Outcomes 1. Solid Competitiveness in LT Health Insurance 6/43 LT Health insurance-focused growth(m-basket launch, etc) M/S 12.7% (+0.3%p ) Long-term L/R #1 in the industry 6%p lower than Top 4 Monthly Earning Power M/S 11.1% 10.5% 11.6% +0.3%p 12.4% 12.7% 5.6bn Long-term L/R 79.7% 83.2% 82.4% 82.2% 85.2% 85.8% 4.6bn 4.9bn 3.9bn 4.0bn 78.8% 77.5% 79.5% 80.1% 79.7% (K-GAAP 78.8%) Meritz Top 4 FY2008 FY2009 FY2010 FY2011 FY2012 FY2008 FY2009 FY2010 FY2011 FY2012 G/R 26% 8% -20% 3% 39%

7 2. Secure Growth Momentum by On-line Auto Increase 7/69 Growth of auto insurance by on-line channel M/S 6.4%, improved 0.3%p YoY Sales 815.6bn(G/R 2.4%), M/S 6.4%(+0.3%p ) Online Portfolio 18.5% (+7.2%p ) 6.6% Sales M/S 726.7bn 6.2% 6.3% 692.2bn 776.8bn 6.1% 6.4% 796.4bn 815.6bn Sales 151.2bn(G/R 67.3%), M/S 4.2%(+1.5%p ) Sales M/S 4.2% 2.8% 151.2bn 2.3% 1.8% 1.1% 90.4bn 63bn 34.3bn 42.5bn FY2008 FY2009 FY2010 FY2011 FY2012 Increase of resources on online channel Online P/F FY2008 FY2009 FY2010 FY2011 FY % 6.1% 8.1% 11.3% 18.5% FY11 FY12 Growth # of Call Centers # of TMs

8 3. Improvement of Commercial Insurance Transit to Earnings Growth Model 8/69 FY12 higher growth in the market, turn-around to evident growth model U/W profit margin improvement by remodeling and profit-focused U/W Meritz G/R Industry G/R 12.0% 8.0% 6.9% Rapid Growth 0.6% -6.9% -10.7% 321.9bn 299.7bn 267.7bn 11.2% 8.7% 297.7bn U/W Margin beyond 2 nd tier Meritz 2nd Tier 50.3% 45.3% 39.4% 37.6% 36.3% 37.8% 34.4% 32.4% FY2009 FY2010 FY2011 FY2012 FY2009 FY2010 FY2011 FY2012 M/S 7.8% 6.8% 5.4% 5.5% * Profit Margin : U/W Profit / Earned Premium U/W Profit = Earned P Losses Sales expense(excluding general administrative cost) FY2012: As of

9 4. Recruitment of New Sales Channel & Active Personnel Increase 9/69 Best recruit achievement Monthly Avg. new recruitment +116(69% ) YoY, Active Personnel over 8,000 Highest Recruitment Qualified M/S 11.1% (+1.8%p YoY) 9.0% 9.5% 9.3% Qualifed M/S % Active Personnel over 8,000 Rapid Increase of Elite Personnel Ratio 40.2% 42.4% 43.0% Elite Personnel Ratio +1,551 6,200 6,361 6,586 8, % FY2009 FY2010 FY2011 FY2012 FY2009 FY2010 FY2011 FY2012

10 5. Expand Base Focused on Core Regions 10/69 Secure competitiveness by expansion in core region(capital area) 256 branches, up 26 branches YoY Regional marketing reinforcement, LT Health M/S improvement in core region : 12.7%, up 2.6%p YoY Capital Area Gangwon (Unit : %, Branches) (0) (+1) (+15) Chungcheong Daegyeong (+1) Honam Bugyeong (+8) 28 29(+1) LT Health Branches Jeju (0) * FY11 As of FY12.12

11 6. Invested Asset Portfolio :Focus on fixed income assets 11/69 Total assets 10.1trn, Invested assets 8.0trn 80.2% mix of Fixed income assets (KRW Bn) Fixed-income asset Performancebased asset Stock-type asset Mix Mix Mix G/R Profit Yield 3, % 5, % 6, % 27.4% % % % % 74.2% % % % % -57.0% % Other % % % 45.0% % Freely invested Assets Equity-method & real estate Total investment asset 4, % 5, % 7, % 21.8% % % % % 9.2% % 5, % 6, % 7, % 20.4% % Total Asset 6, , , % - - Note) Fixed income = deposit, AFS bond, overseas bond, loan / performance based = trading bond, alternative investment / Stock = outsourced investment, trading stock, stock-type AI / Other = Non-operating deposit, Property management fees

12 Conclusion : FY2012, Expansion of future value & Strengthened Value Creation Capability 12/69 Rapid growth of LT Health which has high future profitability : 67.4bn(11.4bn compared to plan) Future value of LT 376.9bn, Future value of LT Health 315.9bn Built infra for increasing future value : Organization/regions expansion, displayed value increase FY2012 LT NBV 376.9bn(e), G/R 37% bn (37.3% ) 376.9bn Large new recruitment Active personnel 8, bn 674 억 LT Health New Biz bn 233.9bn Multiple 47.6x 3,208bn Profit Margin 9.8% Future Total Prm. Income 274.4bn FY2008 FY2009 FY2010 FY2011 FY bn New Biz. Value 84%(e) of NBV 90 th anniversary events, advertisement Customer Satisfaction Hall of Fame Brand awareness Head Branch : 1 Foundation Branch : 14 Foundation, 13 Partition

13 Report Net Profit : 130.7bn due to external influence : 24.3bn (38% of Gap btw Plan & Actual) 13/69 Alternation in valuation method of beneficiary certificates 25.1 Retirement benefit actuarial P&L 6.9bn Actual profit 206.6bn Pre-payment of selling expense (additional amortization 68.1bn) 195bn -24.3bn -51.6bn Excluding 75.9bn (external / strategical influence) External influence +11.6bn 130.7bn Strategic decision P&L increase Plan Report profit Actual profit

14 RBC Ratio : 16%p for Last 2 Years by Changed Regulation, etc 14/ RBC Ratio 183.1% Main factor : regulation change ( 62%p) +46.4%p -62.2%p 199% 183% Earned surplus - RBC regulation change - Adopted IFRS - Cost of Business & System Renovation

15 Overview 15/69 (Unit: KRW Bn) FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Direct premium 2, , , , , ,780.4 U/W Profit , Combined Ratio 102.8% 108.7% 100.1% 102.4% 101.2% 103.6% L/R 78.9% 82.5% 75.4% 79.3% 80.4% 80.6% E/R 23.9% 26.2% 24.7% 23.1% 20.8% 23.0% Net investment profit Investment Yield 5.6% 2.8% 4.9% 5.3% 4.6% 4.8% Net Profit ROE 18.6% -16.1% 26.2% 18.7% 20.8% 13.2% Solvency Ratio (RBC Ration) - (235.8%) - (189.9%) 269.7% (230.9%) 198.9% (162.9%) 176.1% % - Note) FY2008 Unusual factors: RG loss bn / bad investments write-off -60.2bn / additional DAC amortization -30.2bn

16 2. FY2013 Business Forecast

17 FY2013 Business Environment Forecast 17/69 Growth rate decrease Prolonged low interest Shrinking consumption RBS, RAAS improvement Strict supervision of sales channel Reinforcement of consumer protection Slow growth due to base effect Competitive LT Health Competitive On-line auto Medical expense regulation Installment of sales commission Engagement of costumer protection law

18 FY2013 Strategery 18/ bn YoY Recover RBC ratio of 200% FY 2013 is ~12 (9months) due to change in Insurance Business Act

19 4 Tactics 19/ Internal stability growth 02. Efficiency/Retrenchment Continue LT Health growth (reinforce base for retention ratio, continuous prem.) Expansion of auto insurance (Online, offline growth) Core business focused commercial insurance growth Sustain core region competiveness Maximizing Profit Sustain expense retrenchment Sales expense balance, efficiency reinforcement Enhance Auto insurance efficiency (Improve C/R, indemnity innovation, exit strategy Branch & elite channel reinforcement, Emphasize on communication & responsibility 03. Optimization of asset management Risk management reinforcement Defend against low interest risk with ALM focused asset management Efficient management of expanded capitals Invest on new low-risk profit source Preemptive risk control Consumer protection risk reinforcement (Civil petitions, customer info. protection, etc) Enhance individual info. protection

20 FY2013 Management Targets 20/ bn (G/R 24.2%) 104.6bn 103.4% 1.1%p +0.3%p 14.6% FY FY2013 Target FY FY2013 Target FY FY2013 Target 55.5bn capital increase reflected FY 2013 is ~12 (9months) due to change in Insurance Business Act

21 Divisional Business Plan 1 LT Insurance : Sustain LT Health growth strategy & improve profitability 21/69 Sales Vs. Sales expense balance : LT Health sales 44.8bn ( 4.9bn YoY) Sales expense ratio 14.2% ( 1.8%p YoY) C/R 101.1% ( 1.3%p YoY) Sales Sales Expense Balance Sustain LT Health Growth U/W P&L Stabilization Stabilize commission allocation Exclusive channel portfolio improvement Switch to growth after 2Q due to regulation revision Interest Rate Risk Management Pricing strategy in accordance with market environment Stabilizing sales E/R with adequate sales Sales LT Health (M/S) New contract (M/S) FY2012 FY2013 Growth 49.7bn (14.3%) 66.8bn (7.9%) 44.8bn (13.1%) 64.4bn (8.0%) -4.9bn (-1.2%p) -2.4bn (+0.1%p) Sales E/R 16.0% 14.2% -1.8%p Additional depreciation 68.1bn 12.3bn -55.8bn E/R 22.6% 21.4 % -1.2%p L/R 79.8% 79.7% -0.1%p Risk L/R 84.0% 83.5% -0.5%p C/R 102.4% 101.1% -1.3%p FY2012: As of / New Contract : Monthly Equivalent Prem standard

22 2 Auto Insurance : Sustain Expansion Stance 22/69 Competitiveness focused on exclusive channel(branches+online) Sustain online-focused growth Secure M/S of 7% Online 5.9% (+1.0%p) Exclusive channel(online+branches) Portfolio Expansion : FY % FY % [FY2012] Online 17.1% [FY2013] AG AG 45.5% Branch Branch 39.6% 37.4% 34.3% Online 26.1% 584.7bn 6.4% 2.1% 43.4bn 606.3bn 6.2% 2.7% 66.4bn 673.7bn 622.7bn 7.0% 6.4% 4.9% 5.9% 176bn 106.2bn Increase online resource investment FY2012 FY2013 Growth # of Centers # of TMs FY10 FY11 FY12 FY13 Target Online Total Online M/S Total M/S FY2012 FY2013 Growth L/R 85.6% 84.8% -0.8%p E/R 24.8% 24.4% -0.4%p C/R 110.4% 109.2% -1.2%p FY2012: As of Sales, M/S : As of Dec. of each year

23 2 Auto Insurance : Improve Business Efficiency 23/69 Arrange virtuous cycle of business efficiency by reducing C/R by 1.2%p(min.) - Reducing C/R gap b/w 2 nd tier Secure scale merit Reduce expense, claim survey fee Target : reducing C/R by 1.2%(min.) General Expense 일반경비 Sales Expense 판매비 Survey Fee 손해조사비 손해율 L/R 110.4% FY % FY2013 L/R 0.9%p Improve business efficiency with total directional L/R management Exclusive channel (Online+Branches) portfolio Expansion : FY % FY % - Supply branch-specialized product Indemnification efficiency - Optimizing emergency service - Improve management process for hospital & repair shop Enhance risk management (heavy snow, etc) - Control P&L variability by reforming X/L program L/R : Based on K-GAPP

24 3 Commercial Insurance : Core Business Growth Based on Remodeling 24/69 Sales 252.5bn (+23.3bn YoY, G/R 10.2%, M/S 5.6%) Net premium written 111.3bn (G/R 11.6%) Remodeling stabilization Higher G/R than the market Maintain 2 digits G/R (G/R 10.2) FY2012 FY2013 G/R Sales 229.2bn 252.5bn +10.2% M/S 5.5% 5.6% +0.1%p Sustain retention growth Net premium written G/R 11.6% (+11.5bn) L/R 54.5% 63.6% +9.1%p E/R 33.4% 33.9% +0.5%p Minimizing P&L variability by huge losses Total analysis on huge losses C/R 87.9% 97.6% +8.4%p Based recent 5y L/R & remodeling effect (Rare low L/R until FY ) FY2012: As of

25 4 Investment Profit : Focus on Risk Management & New profit Source under Low Interest 25/69 Target Profit : 273.6bn(min.) +15.3bn, G/R 5.9% YoY Investment yield 4.3% ( 0.6%p) - Focus on fixed income assets & maintain LT Duration 85% [Portfolio] [Investment Profit] Invest on overseas structured securities Increased invest on KP-focused structured product Maintain 85% matching ratio for LT Duration New investment +1,443.1bn Fixed Income Assets 7,671.2bn 76.1% bn 9,114.3bn 77.9% ( ) :Investment yield +15.3bn ( 0.6%p) 258.3bn (4.9%) 273.6bn (4.3%) Chance of business recovery in 2H Flexibility b/w LT investment for dividend & time-trading Performance Based Assets 13.2% etc 10.7% 12.8% 9.3% FY2012 FY2013 Target FY2012 FY2013 Target FY2012: As of

26 5 Expense Ratio : Efficiently Execute Expenses 26/69 E/R 22.3% : Sales E/R 1.5%p YoY, General E/R +0.4%p YoY Enhancing profitability based on effective expense - Minimize unnecessary new business, invest on core business Net Operation 23.2% E/R (779.3bn) 22.3% (816.1bn) 1.0%p (+36.8bn) General E/R 8.6% 9.1% 335.4bn 0.5%p +45.9bn 289.5bn Sales E/R 14.6% (489.8bn) 13.1% (480.7bn) 1.5%p ( 9.1bn) General 174.7bn Administrative Costs BRS stabilization Regional differentiation strategy Continuous on- Line business 197.7bn +23bn General E/R 8.6% (289.5bn) 9.1% (335.4bn) +0.5%p (+45.9bn) Labor Costs 114.8bn 137.7bn +22.9bn FY2012 FY2013 FY2012 FY2013 FY2012: As of

27 6 Settlement of Recruited Sales Channel 27/69 Increase settlement ratio & settlement of 2012 recruits Focus on settlement of new recruits, due to slow growth of the market in 2013 Combined settlement ratio : 263.0% (min.) / 15.1%p [13 th month S/R, No. of Settled] 48.4 (Unit: %, %P) ,162 S/R 45.7 정착대상 # of Subject 1, 정착인원 # of Settled 2,080 3,263 Increase S/R by 3% 100 more settled recruits Month YoY nd 4th 7th 13th Total FY2010 FY2011 FY2012 FY2013 Selective introduction, training center reinforcement, strict evaluation

28 FY2013 Business Plan Summary 28/69 Sales Plan (Profit & Loss) Longterm (KRW Bn) FY2013 G/R M/S Difference Initial Premium (monthly equivalent) % 8.0% +0.1%p Protection % 11.1% -0.6%p (Health) % 13.1% -1.2%p Savings % 4.5% +0.8%p Initial Premium % 6.2% - Continuous Prem 2, % 9.0% +0.2%p Sub total 2, % 8.9% +0.2%p Off-line % 7.4% +0.2%p Loss ratio (KRW Bn) FY2013 YoY Long-term 79.7% -0.1%p (Risk) 83.5% -0.5%p Auto 84.8% -0.8%p Commercial 63.6% +9.1%p Total 80.1% - Expense ratio 22.3% -1.0%p Combined ratio 102.3% -1.0%p Auto On-line % 5.9% +1.0%p Sub total % 7.0% +0.5%p Commercial % 5.6% +0.1%p One-time payment % Total 3, % 8.2% +0.3%p Investme nt Investment profits % (Yield) 4.3% -0.6%p Net Profits % ROE 14.9% +0.3%p Note) New Monthly Equivalent Premium : Excludes One-time payment and Annuity / New Premium: Includes Annuity, but excludes one-time payment

29 FY2013 Business Plan Summary 29/69 Balance Sheet Assets (KRW Bn) FY2013 YoY Invested assets 9, % Non-invested assets 2, % Total 11, % Policy reserve 9, % Liability Total Shareholder s Equity Other liability % Total 9, % Capital stock % Capital surplus % Retained earnings % Cat reserve % Capital Adjustment Other comprehensive income % Total 1, % FY2013 YoY : As of

30 Long Term Business Plan 30/69 Beyond Great Leap in 90 th anniversary, Top Insurer & Leading Financial Company Prepare groundwork for growth Switch to a holding company system Acknowledgement of Meritz s potentials FY2011 Great leap in 90 th anniversary Best LT Health competiveness in the market Improve future value FY2012 Countdown 100years Secure riskless constitution with management stability Best auto insurance company Best profitability, growth, stability in the industry FY2013 ~ 100 th Anniversary Sales exceed 4trn Improve profit strength Lead the market with differentiated strategy (LT Health, core regions, etc) Secure 2 LT Health M/S exceed 13% 산 10조원돌파 nd tier level LT Health M/S Secure economies of scale for auto insurance The recordable recruitment Maintain RBC ratio 200%, ROE 15%(min.)

31 3 Year Forecast 31/69 (Unit : KRW Bn) CY2013 CY2014 YoY CY2015 Yoy Direct Premium 5, , % 6, % Combined Ratio 102.8% 102.0% -0.8%p 1,01.1% -0.9%p L/R 80.6% 79.9% -0.7%p 79.6% -0.3%p E/R 22.2% 22.1% -0.1%p 21.5% -0.6%p Net Profit % % Total Assets 11, , % 14, % Total Invested Assets 9, , % 11, % CY : Jan. ~ Dec.

32 FY2012 Embedded Value

33 Disclaimer Certain of the statements contained herein are statements of future expectations and other forward looking statements that are based on management's current view and assumptions and involve known and unknown risks and uncertainties. In addition, expressions and words which are forwardlooking by reason of context identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to general economic conditions, performance of financial markets, the frequency and severity of insured loss events, mortality and morbidity levels and trends, persistency levels, interest rate levels, general competitive factors, changes in laws and regulations, changes in the policies of governments and/or regulatory authorities. Although the embedded value and value of new business results presented in this document are based on a traditional embedded value methodology calculated on a deterministic basis, alternative valuation methodologies and approaches to calculate these results have emerged. Meritz Insurance assumes no obligation to update any forward-looking information contained in this report. We also have no obligation or responsibility to investment made based on such forward looking statements.

34 Contents Ⅰ. Embedded Value Ⅱ. Value of New Business (VNB) Ⅲ. Movement of EV Ⅳ. P/EV Ⅴ. Sensitivities Ⅵ. Review Statement

35 35 Ⅰ. Embedded Value 1. Embedded Value results 2. Adjusted Net Worth (ANW) 3. Value of in-force business (VIB) 4. RoEV

36 Ⅰ- 1. Embedded Value results 36/69 FY2012 Embedded Value : 2,490.2 bn (increased by bill (15.6%) from FY11) 2, % Unit : KRW bn 2, % Embedded Value 1, , % 1, % Value of in-force business 1,041.7 Adjusted Net Worth % % FY2010 FY2011 FY2012

37 Ⅰ- 2. Adjusted Net Worth (ANW) 37/69 FY2012 ANW : bn (increased by KRW bn (19.0%) from FY11) Unit : KRW bn Gain from valuation of AFS Dividend Intangible Asset 2.5 Other Net Income FY2011 FY2012

38 Ⅰ- 2. Adjusted Net Worth (ANW) 38/69 FY2012 ANW Unit : KRW bn Category FY2012 (A) FY2011 (B) YoY (A-B) Note Shareholder s Equity (a) 1, Net Income : Gain from valuation of AFW : Dividend : Intangible Asset : Declared dividend of 29.0 is included Adjusted Capital (b) Allowance for Bad Debt Intangible Asset Prepaid Expense Adjusted Net Worth (a+b)

39 Ⅰ- 3. Value of in-force business - Assumptions 39/69 Operational Assumption Lapse - Based on experience analysis of 3 years data by product type and channel Loss Ratio (L/R) - Analyze past 6 years data by 17 benefit categories - Inforce Business s PV L/R : FY %, FY % - Commission : Applied Meritz s payment schedule Expense - Expense cost excluding commission : Experience study on one year s experience data Crediting Rates - Separately applied for traditional /ISP Crediting rates for ISP are applied by interest type (declared rates., policy loan, etc)

40 Ⅰ- 3. Value of in-force business - Assumptions 40/69 Economic Assumption Investment return : 4.10% (FY %) - Recent 3 years investment experience (Unit : %) FY2010 FY2011 FY2012 Investment return Crediting rate Spread Govt Bond (3 yrs)* Recent 3 years spread used for EV (Unit : %) FY2010 FY2011 FY2012 Investment return Crediting rate Spread * Govt Bond (3 yrs): 1 year average preceding to valuation date Meritz s investment return actual experience in the spread increased by 20bp from last year, but taking into account the current low yielding environment, this year s investment return and crediting rate decreased by 75bps and by 26 bps respectively from last year.

41 Ⅰ- 3. Value of in-force business - Assumptions 41/69 Economic Assumption Cost of Capital (Required Capital) : Based on RBC requirement x 150% RBC required capital changes Long-term insurance price risk Long-term insurance price risk Mar 2012 Mar 2013 Category Product type Benefit type Confidence level 95% 99% Risk factor 26.6% 30.0% Change 27.7 KRW bn Interest risk negative spread Formula (Investment return crediting rate) * 0.5 Investment return : 5 yr govt bond s average over the last year + risk spread (5 yr average) Change 4.6 KRW bn (Mar 2013) Risk Discount Rate): 10.0% (FY %) Type FY2010 FY2011 FY2012 Remark Risk Free Rate (govt bond) Continuous market interest rate RDR 11.5% 11.0% 10.0% trend is reflected. * Risk Free Rate (govt bond): as at the end of valuation year Inflation Rate : 3.0%, Tax : 24.2%

42 Ⅰ- 3. Value of in-force business (VIB) 42/69 VIB = Present Value of Future Profit Cost of Capital = 1,493.6 KRW bn Category FY2012 FY2011 YoY Unit : KRW bn PV of Future Premium (a) 16, , , % PV of Future Profit (b) 1, , % Margin (b/a) 11.1% 11.1% +0.0%p Cost of Capital (c) % (c/a) 2.1% 1.6% +0.4%p Value of In-force Business (d = b - c) 1, , % Value Margin (d/a) 9.1% 9.5% -0.4%p

43 Ⅰ- 3. Value of in-force business (VIB) 43/69 VIF comparison before and after economic assumption and RBC regulation changes Unit : KRW bn Changes in VIF due to economic assumption Change in RBC policy RDR 1,697.4 and RBC regulation changes Decrease - A decrease in investment return and spread : KRW bn 1,493.6 Investment return - RBC regulation impact : KRW bn Increase - lowered RDR : KRW bn Comparison before and after assumption changes Unit : KRW bn Category Current Before changes VIB 1, ,697.4 Current (after changes) Before changes YoY 13.4% 28.9%

44 Ⅰ- 4. RoEV 44/69 RoEV 31.3% 8.4%p 22.9% 4.5%p 18.4% FY2010 FY2011 FY2012 EV(KRW bn) 1, ,706.9 EV(KRW bn) , EV : Adjusted EV at BOP

45 Ⅱ. Value of New Business (VNB)

46 Ⅱ. Value of new business (VNB) 46/69 Value of 1-year new business : KRW bn Category FY2012 FY2011 YoY Unit : KRW bn PV of Future Premium (a) 4, , % Annualized Premiums equivalent (b) 1, , % PV of Future Profit (c) % Margin (c/a) 9.2% 8.5% +0.7%p Cost of Capital % Value of 1-year New Business (d) % Profit Margin (d/a) 7.9% 7.3% 0.6%p Profit Margin on ANP (d/b) 29.1% 23.8% +5.3%p ANP : Annualized premiums equivalent

47 Ⅱ. Value of new business (VNB) 47/69 Value of 1-year new business variance Persistency rate Sales effect Loss ratio Expense Economic assumption Unit : KRW bn Others FY2011 FY2012 Variance Category FY2011 Sales effect Persistency rate Loss ratio Expense Economic assumption Others FY2012 Cumulative Change Value % % 39.1% 58.3% 46.7% 35.3% 37.3% 37.3% Value % % 6.3% 19.2% -11.6% -11.4% 2.0% 37.3% Sales effect : sales increase/product Mix, Economic assumption : Discount rate/investment return/cost of capital, Others : Dividend/Tax

48 Ⅲ. Movement of EV 48

49 Ⅲ. Movement of EV 49/69 2,490.2 KRW bn, increased by KRW bn General Discount Account Unwinding investment (new biz) Income Variances P&C Operating Profit 28.4 Change in Net Asset Value Unit : KRW bn Non operating profit 2, Value of New Business Changes in NAV - Dividend : -532 KRW bn - AOCI: 1,101 KRW bn - Adjusted Capital : -285 KRW bn 2,154.0 FY Model Change 2,147.7 Operational Assumption Change Adjusted EV at BOP Economic Assumption Change RBC & Tax (in-force) 86.5 RDR Discount Unwinding (in-force) FY2012

50 Ⅳ. P/EV 50

51 Ⅳ. P/EV 51/69 Stock price, EVPS (EV per share), P/EV P/EV 0.63x W 19, x W 22, x W 24,575 W 12,500 W 12,900 W12,350 Stock Price FY2010 EVPS Stock Price EVPS Stock Price EVPS Current FY2011 ( )

52 Ⅴ. Sensitivities 52

53 Ⅴ. Sensitivities ( In-force business ) 53/69 Unit : KRW bn Lapse Expense 75.0(5%) 61.2 (4%) +10% +10% -10% -10% -70.4(-5%) -61.1(-4%) Interest (12%) Loss ratio 287.0(19%) -50bp +10% +50bp -10% (-13%) Expense sensitivity does not apply to commission and other expenses. Interest sensitivity includes changes in crediting rate (-19%)

54 Ⅴ. Sensitivities ( New Business ) 54/69 Unit : KRW bn Lapse Expense 26.4(7%) 27.9 (7%) +10% +10% -10% -10% -24.6(-7%) (-7%) Interest Loss ratio 62.7 (17%) 26.6 (7%) -50bp +10% +50bp -10% (-9%) Expense sensitivity does not apply to commission and other expenses. Interest sensitivity includes changes in crediting rate (-17%)

55 Ⅴ. Sensitivities ( Others ) 55/69 Unit : KRW bn Category Risk Discount Rate 9.0% 10.0% 11.0% Adjusted Net Worth Shareholder s Equity 1,086.7 Adjusted Capital Value of In-force Business 1, ,364.1 PV of future profit 1, , ,721.8 Cost of Capital Embedded Value 2, , ,360.7 Value of 1-year New Business PV of future profit Cost of Capital

56 Ⅵ. Review Statement 56

57 Ⅵ. Review Statement - Towers Watson 57/69 Towers Watson has reviewed the methodology and assumptions used to determine the results of Meritz s Embedded Value as at 31 March 2013 and the value of new business written in the twelve months to 31 March 2013 for the long-term insurance business. Towers Watson has concluded that: The methodology used is consistent with recent industry practice for traditional deterministic embedded value reporting in Korea. In particular the values have been based on a deterministic projection of future profits, with allowance for risk through the use of a risk discount rate specified by Meritz and an explicit adjustment for the cost of holding an amount of solvency capital. While this is in line with recent industry practice as regards traditional deterministic embedded value calculations, this may not correspond to a capital markets valuation of such risk (so called market consistent valuation ); The operating assumptions have been set with appropriate regard to past, current and expected future experience; and The economic assumptions used have made allowance for the company's current and expected future asset mix and investment strategy and are internally consistent. Towers Watson has reviewed the results of the calculations made by Meritz, given the methodology and assumptions set out in this document, by undertaking a number of high-level checks of the models, processes and model outputs, and has confirmed that any issues discovered do not have a material impact on the disclosed embedded value as at 31 March 2013 or the disclosed value of new business written in the twelve months to 31 March 2013 for the long-term insurance business. In arriving at these conclusions, Towers Watson relied on data and information provided by Meritz. This opinion is made solely to Meritz in accordance with the terms of Towers Watson's engagement letter. To the fullest extent permitted by applicable law, Towers Watson does not accept or assume any responsibility, duty of care or liability to anyone other than Meritz for or in connection with its review work, the opinions it has formed, or for any statement set forth in this opinion.

58 Appendix - FY2012 Financial Results

59 Appendix : Sales 59/69 (KRW BN) FY2012 FY2011 FY2010 FY2009 Mix G/R Mix G/R Mix G/R G/R Commercial % 11.0% % -10.7% % -6.9% % Auto % 2.5% % 2.6% % 12.2% % Long-term 3, % 14.4% 3, % 16.6% 2, % 19.2% 2, % New % 12.8% % 16.8% % -6.7% % Recurring 3, % 14.5% 3, % 16.6% 2, % 20.2% 2, % One-time pymt % 41.9% % -19.5% % 242.9% % Total 4, % 12.4% 4, % 10.9% 3, % 16.7% 3, % M / S FY2012 FY2011 FY2010 FY2009 G/R G/R G/R G/R Commercial 5.5% 0.0%p 5.5% -1.3%p 6.9% -0.9%p 7.8% -0.6%p Auto 6.4% 0.3%p 6.1% -0.2%p 6.3% 0.1%p 6.2% -0.4%p Long-term 8.7% -0.1%p 8.8% -0.2%p 9.0% -0.1%p 9.1% -0.2%p New 5.8% -1.0%p 6.8% -1.1%p 7.8% -1.3%p 9.1% -0.4%p Recurring 8.8% -0.1%p 8.9% -0.2%p 9.1% 0.0%p 9.1% -0.1%p One-time pymt 5.3% 2.9%p 2.4% -7.2%p 9.6% 1.3%p 8.3% 4.8%p Total 7.8% 0.2%p 7.6% -0.5%p 8.1% 0.0%p 8.1% -0.2%p

60 Appendix : Loss Ratio 60/69 (KRW Bn) FY2012 FY2011 FY2010 FY2009 G/R G/R G/R G/R Com - mercial Auto Longterm Losses % % % % Earned prem % % % % Loss ratio ( w/o RG) 71.9% 7.1%p 64.8% -4.9%p 69.7% 10.4%p 59.3% (38.6%) -1.8%p (-151.3%p) Losses % % % % Earned prem 7, % % % % Loss ratio 86.5% 2.6%p 83.9% -3.6%p 80.3% 4.8%p 75.5% 5.6%p Losses 2, % 2, % 2, % 1, % Earned prem 3, % 3, % 2, % 2, % Loss ratio 79.7% -0.4%p 80.1% -0.2%p 79.5% 2.0%p 77.5% -1.3%p LT risk L/R (w/ IBNR) 84.0% -3.1%p 87.1% 1.1%p 86.0% 1.8%p 84.2% 3.6%p LT risk L/R (w/o IBNR) 81.8% -2.1%p 83.9% % 5.7%p 77.5% 2.2%p Total Losses 3, % 4, % 2, % 2, % Earned prem 4, % 3, % 3, % 3, % Loss ratio 80.6% 0.2%p 80.4% -1.2%p 79.3% 3.9%p 75.4% -7.1%p Note1) Commercial L/R in ( ) includes RG losses, Note2) FY2011, FY2012 figures are based on K-IFRS

61 Appendix : Expense Ratio 61/69 (KRW Bn) FY2012 FY2011 FY2010 FY2009 G/R G/R G/R G/R Expenses 1, % % % % Wages & benefits % % % % Administrative % % % % Sales-related % % % % Other expenses % % % % Expenses recovered % % % % Net expenses % % % % Gross premium earned 4, % 4, % 3, % 2, % Expense Ratio 23.0% 2.2%p 20.8% -2.3%p 23.1% -1.6%p 26.2% -1.5%p Admin Expense Ratio Sales Expense Ratio 8.8% -0.2%p 9.0% -2.0%p 11.0% -0.1%p 11.9% -0.8%p 14.2% 2.4%p 11.8% -0.3%p 12.1% -1.5%p 14.3% -0.7%p Combined Ratio 103.6% 2.4%p 101.2% -1.2%p 102.4% 2.3%p 100.1% -8.6%p Note1) FY2011, FY2012 figures are based on K-IFRS Note2) Sales-related expenses: acquisition cost/collection fees, commissions paid to agencies, acquisition cost, amortization, deferred acquisition cost, etc Note3) Other expenses: loss adjustment expenses, co-insurance paid, reinsurance commission paid, etc Note4) Expenses recovered: claim service fee recovered, R/I commission received, etc Note5) Sales expenses: collection fees and agencies commissions/ Admin cost: Labor cost excluding sales cost, maintenance cost

62 Appendix : Long-term Product Portfolio 62/69 (KRW Bn) FY2012 Mix FY2011 Mix FY2010 Mix FY2009 Mix Protection-type 2, % 2, % 2, % 1, % Accident 2, % 1, % 1, % 1, % Drivers % % % % Property % % % % Disease % % % % Bundle % % % % Personal annuities % % % % Savings % % % % Total 3, % 3, % 2, % 2, % Risk+loading premiums 1, % 1, % 1, % 1, % Savings premiums 2, % 1, % 1, % 1, % 13 th month persistency 76.1% -3.5%p 79.6% +0.4%p 79.2% -0.4%p 79.6% 6.0%p 25 th month persistency 67.0% +2.9%p 64.1% -5.8%p 69.9% 12.4%p 57.5% -5.3%p Note) Including one-time payment. Persistency: 6 month average

63 Appendix : Long-term Product Portfolio 63/69 Category FY2012 FY2011 FY2010 FY2009 L/R Mix L/R Mix L/R Mix L/R Mix Death coverage 42.6% 19.7% 39.6% 20.9% 38.0% 22.0% 34.6% 22.4% Living benefits 97.4% 65.2% 103.8% 62.2% 105.6% 60.4% 102.2% 60.1% Medical treatment 108.2% 38.4% 114.1% 36.3% 113.0% 35.5% 108.7% 35.4% Daily allowance 90.0% 12.0% 99.5% 12.3% 111.3% 12.3% 101.1% 12.8% Disease 83.3% 10.1% 90.2% 9.2% 88.4% 8.4% 90.4% 8.0% Other 58.1% 4.7% 59.1% 4.4% 60.3% 4.1% 70.6% 3.9% Property/other 45.6% 15.1% 49.7% 16.9% 55.1% 17.7% 56.5% 17.6% Total 78.8% 100.0% 81.2% 100.0% 81.8% 100.0% 79.1% 100.0% Note1) Loss Ratio: As of Gross Premiums Written, excluding IBN Note2) Death coverage: death/disablement (total disablement, disease death) / Medical treatment: accident treatment, disease treatment Daily allowance: accident daily allowance, disease daily allowance / Disease: cancer, other diseases, CI Other: other accident (fracture/burn, etc), other disease (food poisoning, etc), Property/Other: Driver expenses, liabilities, property loss, fire

64 Appendix : Long-term Funding Cost & ALM 64/69 Long-term FY2012 FY2011 FY2010 FY2009 Funding Cost 3.94% 4.21% 4.19% 4.34% Fixed 4.06% 5.14% 5.19% 5.36% Variable 3.88% 4.12% 4.06% 4.16% Fixed mix 33.2% 9.1% 11.4% 15.3% Variable mix 66.8% 90.9% 88.6% 84.7% Investment yield 5.7% 5.6% 5.6% 5.8% Spread 1.7%p 1.4%p 1.4%p 1.5%p ALM FY2012(E) FY2011 FY2010 FY2009 Asset Duration Bond Duration Liability Duration Matching ratio 83.9% 84.2% 83.5% 80.0% Note1) Subject : LT/Pension account, Funding cost: Monthly basis, Investment yield is YTM Note2) RBC Duration : : FY2009 Asset 4.34, Liability 4.08 FY2011 Asset 4.02, Liability 3.35 FY2010 Asset 4.73, Liability 4.16 FY2012 Asset 4.68, Liability 4.23

65 Appendix : Investment Assets Portfolio 65/69 (KRW Bn) FY2012 FY2011 FY2010 FY2009 G/R Mix YTD Mix Mix Mix Cash & equivalents % 5.8% -0.2%p % % % Equities % 2.2% -0.3%p % % % Trading % 0 0.0% Available-for-sale % 2.2% -0.2%p % % % Equity-method stakes % 0.1% 0.1%p % % % Domestic bonds 3, % 39.0% 0.2%p 2, % 1, % 1, % Investment funds 1, % 13.3% 2.2%p % % % Overseas securities % 9.1% -0.1%p % % % Other % 1.5% -0.8%p % % % Loans 1, % 18.8% 0.2%p 1, % % % Real estate % 10.3% -1.1%p % % % Investment assets 7, % 100% - 6, % 5, % 4, % Investment yield 4.8% 0.2%p % - 5.3% - 4.9% - Note) FY2011, FY2012 figures are based on K-IFRS

66 Appendix : Loan Quality 66/69 (KRW Bn) FY2012 FY2011 FY2010 FY2009 Retail loan Credit Secured Policyholder Corporate loan Note1) Credit Secured SOC related PF Total , Discounts difference in Present value Bad debt Allowance Note2) Additional deferred loan income Note3) Net Total Loan 1, , ,902 FY2011, FY2012 is based on K-IFRS, others are K-GAAP Note1) Corporate Credit : Including Unsecured private placement bonds Note2) Corporate secured : Including mortgage bond, RP, CP Note3) SOC related : including development enterprise loan (KRW Bn) FY2012 FY2011 FY2010 FY2009 Normal 1, , Precautionary Substandard Doubtful Estimated Loss Total 1, , Note1) NPL ratio 0.94% 2.12% 3.22% 1.14% Note2) Provisions Note3) Coverage ratio 162.6% 97.2% 62.6% 144.6% Delinquency ratio Note4) 0.28% 0.74% 1.45% 2.45% Retail 0.57% 0.79% 0.98% 1.02% Corporate 0.07% 0.68% 2.12% 4.67% Note1) NPL ratio = Substandard & below /Total Note2) Based on K-IFRS Note3) Coverage ratio = Total Provision / substandard & below Note4) FSB Standard (including retirement accounts, 30 days Overdue principal and interest, Delinquency on Policyholder loan)

67 Appendix : PF Loan 67/69 Debtor Site/Project Constructor Saenal, Co. N-mode House, Co. C-First, LLC Song-do Global Complex Development, Co. S.L D&C, Ltd White Korea, Ltd Digiprism Co., Ltd Karkas Ⅰ, LLC SC Co., Ltd Central Janggyo Co., Ltd Minrak District 2 House Development REITs JWL Co., Ltd Gimpo apartment Wonhyo-ro Complex (Office & apartment) Chong-na Complex (Office & apartment) PF ABL Song-do A3 block apartment Chun-ho Dong Complex (Office & apartment) Kangseo Kayang GS Xi mixed-use development Uiwang Poil Information Technology Center Cheon-an Sungsung-dong City Development Yongin Dongbaek Healthcare Town Janggyo District 4 Hotel Development Minrak District 2 Block 8 Development Gwangju Dochuck Distribution Center Development Shindongah, NamKwang, Chonggu Prime Construction, Dongah Construction Loan amount Maturity NPL Remark Precautionary, fixed Precautionary POSCO Engineering Normal Lotte Engineering & Construction Normal (KRW Bn) 81.8% is reserved in bad debt allowance As of Mar 74.6% in process (Planned process 81.5%) / 93.7% Contracted As of Mar 100% in process (Planned process 100%) / 96.5% contracted Samsung C&T Corporation Normal Permit in progress GS Cons Normal Samsung Heavy Indurtries Normal Daewoo E&C Normal Permit in progress GS Cons Normal Total Daelim Normal Permit in progress Daewoo E&C Normal Permit in progress LSIS Normal Permit in progress As of Mar 87.29% in process (Planned process 87.32%) / 85.1% contracted As of Mar 81% in process (Planned process 78.4%) / 68.69% contracted As of Mar 37.4% in process (Planned process 38.8%) / 10.4% contracted Start constructing and contracting in 1H of 2013

68 Appendix : P & L 68/69 (KRW Bn) FY2012 FY2011 FY2010 FY2009 G/R G/R G/R G/R Net premium earned 4, % 4, % 3, % 3, % Gross premium written 4, % 4, % 3, % 3, % Net premium written 4, % 4, % 3, % 3, % Incurred losses % 1, % 2, % % Refund of LT insurance polices % % % % Net operating expenses 1, % % % % Incr in premium reserves for LT savings Net incr in policyholders dividend reserves 1, % 1, % % % % % % % Incr in catastrophe reserves % Underwriting income Investment income % % % % Non-operating income % Ordinary income % % % Incurred tax expenses % % % Net income % % % Note) FY2011, FY2012 figures are based on K-IFRS

69 Appendix : B/S 69/69 (KRW Bn) FY2012 FY2011 FY2010 FY2009 G/R G/R G/R G/R Total assets 10, % 8, % 6, % 6, % Investment assets 7, % 6, % 5, % 4, % Non-invested assets 2, % 2, % 1, % 1, % Total liabilities 9, % 7, % 6, % 5, % Policy reserves 8, % 7, % 5, % 4, % Cat reserves % % % % Other liabilities % % % % Total shareholders equity 1, % % % % Capital stock % % % % Capital surplus % % % % Retained earnings % % % % Capital adjustment % Solvency margin ratio % -68.0%p 230.9% 41.0%p RBC Ratio 183.1% 7.0%p 176.1% -22.8%p 198.9% -70.8%p 269.7% - Note) FY2011, FY2012 figures are based on K-IFRS

70 Thank you!! Investor Relations Contacts: , 1156,