Società Cattolica di Assicurazione - Società Cooperativa Sede in Verona, Lungadige Cangrande n.16 C.F. 00320160237 Iscritta al Registro delle Imprese di Verona al n. 00320160237 Società iscritta all'albo delle Società Cooperative al n. A100378 PRESS RELEASE CATTOLICA GROUP 2007-2010 BUSINESS PLAN - Unification and enhancement of Group s agency networks: the Compagnia del Territorio is born - Mapfre Cattolica Auto: a new specialised and distinctive competitor in the Italian Motor market - Confirmation of the life bancassurance model and development of the property & casualty model - Focus on sustainable value growth based on a rationale of technical profitability and operating efficiency - Evolution of investment policies KEY TARGETS FOR 2010 - Consolidated premiums = 5.3 billion (2006-2010 CAGR = 4.1%) - Combined ratio = 93% - Consolidated net income = 195 million (2006-2010 CAGR = 6%) - Group net income = 170 million (2006-2010 CAGR = 6% Milan, March 1st 2007. Confirm the group as the benchmark insurance player in the personal and small business customer segments, developing internal growth paths based on (a) product specialisation, (b) exploitation of the Group s system of relations, and (c) focus on growth of value created in terms of innovation, operating efficiency, and management of risks and capital. In parallel, flank this with the systematic quest for external growth opportunities in Italy and abroad. This, in a nutshell, is the orientation of The Cattolica Way, the Cattolica Group s 2007-2010 Business Plan, approved yesterday evening by the Board of Directors under the chairmanship of Paolo Bedoni. The CEO, Ezio Paolo Reggia, will present the plan to the financial community today, in Milan. After a peak in consolidated and Group (i.e. parent company shareholders ) net income projected for FY2007 as a result of major capital gains stemming from the extraordinary operations planned, the consolidated targets set for 2010 are:
- Consolidated net income of 195 million (mn) (2006 preliminary = 156 mn, CAGR = 6%) - Group net income of 170 mn (2006 preliminary = 134 mn, CAGR = 6%) - Technical profitability of the P&C business showing tangible improvement, also by virtue of rebalancing of portfolio mix: combined ratio = 93% - Premiums will grow from the 2006 preliminary figure of 4.5 billion (bn) to 5.3 bn at the end of 2010, with 4.1% CAGR. The 2010 portfolio breakdown projects 1.3 bn in P&C business and 4 bn in life business: o Life premiums will progress at 8% CAGR, with a growing contribution from the agency network, where life business will grow at a rate of over 11% o Development of consolidated figures for the P&C business, where there will be a growing weight of non-motor classes, feels the effects of proportional consolidation of the motor business, net of which 2006-2010 CAGR for P&C would be 4.5%. The business model on which the Group s evolution is based envisages concentration and verticalisation of operating units under the parent company s governance, specialisation of product factories by sales channel, sharing of efficient operating services, and development of an investment and financial services management platform. In practical terms, the business model will be created via a series of extraordinary operations to achieve legal entity simplification and rationalisation, including: - Sale of the Motor business branches by Cattolica Assicurazioni and DuomoUniOne to CIRA, which will then be renamed Mapfre Cattolica Auto (MCA) - Sale of CIRA s corporate/broker business branch to Cattolica Assicurazioni - Merger by incorporation of DuomoUniOne, Duomo Previdenza and Persona Life in Cattolica Assicurazioni. Aided by the legal entity simplification operations described, above, an integrated business unit will be created in Cattolica Assicurazioni under the name of Compagnia del Territorio The Territorial Insurer the main strategic pillars of which are: - Unification and enhanced exploitation of the Group s agency networks, with extensive on-the-ground coverage of the Italian market - Growth of the value and quality of service in the Motor business via the specialised business partnership with the Mapfre Group. In the banking channel, the plan s strategic guidelines confirm the Group s determination to strengthen and expand partnerships with regional banks, intensify its longstanding relationship with Banca Lombarda, and strongly develop the new strategic agreement with Banca Popolare di Vicenza.
Action on shared operating platforms will aim to maximise efficiencies stemming from legal entity simplification and tighter focusing of the organisational model. Such efficiencies will, in turn, come consequent revision of the Group s human resources setup, technological turnaround and centralisation of procurement activities for the entire Group. The Compagnia del Territorio The Territorial Insurer With the strength of over 1,400 agencies, 250 brokers, and 2 million customers, the Territorial Insurer La Compagnia del Territorio will aim to increase the rate of penetration of non-motor P&C and life products in the agency network, whilst, with Mapfre s distinctive support, it will achieve selective growth and increased profitability in the motor business. Legal entity integration and consequent unification of agency networks will enable the Group to maximise economies of scale and scope in the product factories serving one of the largest agency networks in the Italian insurance market. The network consists of 1,426 agencies spread extensively throughout Italy, prevalently in the North Italian regions, headed by Lombardy (over 260 agencies), Veneto (some 150 agencies), Emilia Romagna (about 150 agencies), and Piedmont (about 100 agencies). The network features strong local territorial roots, as 58% of agencies are located in towns with 10,000-100,000 inhabitants. These towns are outside the major metropolitan areas and therefore feature a very strong system of relations with personal and small business customers. The agencies strong roots in local markets increase opportunities to extend customer relationships to a broader range of insurance and financial products and services. The network will be reinforced with the targeted introduction in agencies, during the plan s time span, of 350 insurance advisors (with the objective of developing new customers) and of 350 life assurance and pension-planning advisors (with the objective of cross-selling to existing customers). It will be assisted by a major training & development programme and by upgraded support and commercial monitoring tools. The network will be guided by a new unified commercial unit in the parent company, consisting of new, upgraded marketing, sales, and operational skills. On-the-ground territorial units will also be upgraded. Development of the motor business will be verticalised and accelerated by start-up of the new joint venture Mapfre Cattolica Auto (MCA). The latter, thanks to selective introduction in the Italian market of the business capabilities and skills of Mapfre leader of the insurance and motor sectors in Spain will enable the group to combine the market s regulatory evolution with the rationale and approach of a new specialised competitor. The salient features of MCA s business development also benefiting from the results of realignment of the motor portfolio initiated in early 2006 will be:
- A broad product range - High standards of quality - Growing service content - Process innovation - A technical underwriting approach with careful selection of risks - Customisation of tariffs - Multichannel assistance for customers. Claims management will be the subject of some important initiatives designed to increase the focus on (a) customer service and (b) integrated management of the aftersales process. The aim is to facilitate customer relations and integration of the entire business chain from underwriting of risks up to claims settlement thereby triggering both reduction of operating and claims settlement costs and synergies arising from unification of the Group s three claims adjustment networks. To do this, the plan envisages reinforcement of di.ca already the call centre for opening and managing claims as the Group s claims management company, enshrining all central and field claims adjustment facilities. The 2010 target for the agency channel envisages CAGR for non-motor P&C premiums of 8.8% and growth of life premiums at 11.4% CAGR. In the Motor segment the overall target CAGR for premiums is 2% with reduction of the claims ratio by over 4% points vs. the normalised 2006 level (2010 target = 76%). In order to round off insurance channels offered to customers, a dedicated Key Accounts organisational unit will be set up. This unit will provide qualified risk-analysis advisory services and services in general to corporate customers, entities and institutions in the protection and pension area. This will be achieved thanks to integration within Cattolica of CIRA s facilities and also via strengthening of specialist in-house skills and of the capacity to interact with and serve the agency network and brokers. Bancassurance Today the life and P&C bancassurance segment is firmly anchored to agreements of varying and growing intensity with some 30 banking groups and banks with over 2,700 branches spread throughout Italy. The Group intends to confirm its alliance-oriented model (commercial agreements, focused partnerships, and joint ventures), consolidate life business, and develop P&C business, also maximising the opportunities provided by the new strategic banking & insurance agreement with Banca Popolare di Vicenza (BPVI). In the life business the objective is to progress from 2006 premiums of some 2.5 bn (preliminary figure) to premiums of over 3.1 bn in 2010.
This will be achieved thanks to BPVI s significant growth potential in life bancassurance (BPVI s average life premiums per branch are 0.9 vs. an average for comparable banks of 1.6 mn), to the focus on supplementary pension planning, and to selective introduction of innovative elements and target commercial initiatives. In P&C business the target is to achieve 2010 premiums of 82 mn, growing at 32% CAGR. This will be done thanks to activation of the product range in all the main partner networks, increased penetration of existing partnerships, maintenance of the focus on personal protection, and inclusion of insurance solutions for credit protection to be combined with banking products. Corporate, organisational, and operating integration The Group s new model and underlying legal entity rationalisation will lead to improvements in terms of operating effectiveness and reduction of the cost structure. This will be achieved by a programme of transformation and chain, which will start from the legal entity simplifications already highlighted, following those already completed at the end of 2006 1, and from related evolution of the organisational model. This will require: - Unification and evolution of operating and IT platforms - Consequent revision of the human-resources set-up - Rationalisation of outsourced activities - Profound revision of the operating cost structure stemming, in particular, from the introduction of new, centralised cost-management processes. As specifically regards information technology, which will be of fundamental importance in the Group s transformation programme, the plan envisages investments of some 60 mn in evolutionary technological and applications projects in the plan time span, a new management team for the Group s IT company, and the quest for a technology and applications partner capable of accelerating and enabling the programme s execution. Organisational evolution will lever a new Group training school. The latter will be a driver of change and a means of spreading the enterprise culture among resources and agencies. The objective is to achieve total normalised annual cost savings of some 35 million compared with a normal inertial trend. Investment policies and capital management Investment policies will be differentiated between the segments of life (liabilitydriven), P&C (total return) and free capital so as to exploit opportunities in terms of 1 Merger by incorporation of UniOne Assicurazioni in Duomo Assicurazioni and of Eurosav in Risparmio & Previdenza
return, also in the medium term. This will be done using upgraded investment and risk management and monitoring tools. Free capital will be directed towards (i) the systematic quest for external growth opportunities in Italy and abroad, (ii) maintenance of rating levels at present or higher levels, and (iii) progressive growth of the total dividend payout and of the per-share dividend. In the absence of growth opportunities or for alternative utilisation of capital, capital management actions can be hypothesised in the medium term. SOCIETA CATTOLICA DI ASSICURAZIONE