Analyst & Investor Briefing Irish Life Retail Denis Casey, CEO London, 16 November 2004
Irish Life Retail Market overview Retail Business profile & performance Horizon Transformation Programme 2
Market Overview Positive operating environment supports growth Demographics Economy Pensions Low Interest Rates 3
Ireland s Population Structure 90-94 75-79 A G E 60-64 45-49 30-34 Demographic Dividend 15-19 0-4 0 100000 200000 300000 400000 4
Strong Economy Creating Profits & Wealth GDP growth estimated at 5.2% in 2004 and 5.4% in 2005 5% GDP growth over medium term achievable Full employment High disposable incomes High levels of consumer confidence 5
Pensions Irish Population Projections 2002-2050 2002 2025 2050 Total Population 3.88m 4.55m 4.62m Population aged 65 + 0.43m 0.79m 1.27m % aged 65 + 11% 17% 27% Pensioner support ratio falls from 6 : 1 to just 2 : 1 6
Pensions 50% of Irish workers have no pension Annual savings gap estimated at 6 billion* Equates to 3,300 per worker per annum Growing public awareness SSIA reinvestment opportunity?? * Source : Life Strategies Actuarial Consultants - April 2004 7
Pensions Strong public policy support for Private Pension funding Policy objective to increase coverage from 50% to 70% Generous Tax Breaks ARF Initiative PRSA Initiative Age Up to 30 30 to 40 40 to 50 50 plus % of Earnings 15% 20% 25% 30% Freedom to recapture pension fund at retirement No requirement to purchase an annuity Low cost simple pension Mandatory employer designation Worksite access to employees 8
Low Interest Rates Now a permanent feature of Irish economy A headache for savers Traditional deposits not providing a real rate of return Shift to broader range of investment products inevitable But low level of customer confidence in equities 9
Market Overview Trends The rise of Bancassurance Now 40% of Retail market Consolidation Top 4 control 67% of Retail market Top 2 control 45% Margin Pressure Price capped pensions (PRSA) Competition Consumer / media pressure 10
Retail Market Overview Company Retail Market Retail & Distribution Method Irish Life Share * 20.4% Corporate Share 26.7% Bancassurance IFA DSF BoI Life 25.0% 23.6% Bancassurance IFA DSF Ark Life 10.9% 8.0% Bancassurance Hibernian (Aviva) 10.7% 11.0% IFA Eagle Star (Zurich) 8.1% 7.8% IFA Canada Life 5.9% 5.5% IFA DSF Friends First 5.5% 7.2% IFA First Active Standard Life 4.3% 3.6% IFA Royal Liver 4.2% 3.0% IFA DSF Anglo Irish 3.6% 2.5% Bancassurance Others 1.4% 1.1% * Based on H1 2004 Retail Sales 11
Irish Life Retail OUT-PERFORM TRANSFORM 12
Irish Life Retail An unrivalled array of high performing Distribution Channels Bancassurance via permanent tsb Direct salesforce Brokers (IFA) franchisees Institutional partnerships 13
Irish life Retail An unrivalled array of high performing Distribution Channels 2004 31% 31% 30% 8% 2003 32% 32% 26% 10% 2002 35% 31% 25% 9% 2001 29% 33% 29% 9% 2000 18% 45% 26% 9% 1999 16% 42% 26% 16% Bancassurance IFA DSF Partnerships 14
Irish Life Retail Bancassurance Largest and most profitable distribution channel Success factors fully integrated with bank structure core bank activity MIS and reward systems share and acknowledge success dedicated consultants AND branch staff sell prescriptive sales and advice processes attractive, simple products 15
Irish Life Retail Direct Salesforce 250 advisers (one third self employed) Leading edge technology and processes to drive productivity and quality Average productivity per employed adviser 200,000 APE Successful transition into pensions market Pensions now represent 55% of salesforce sales Highly effective in new worksite PRSA market 16
Irish Life Retail Brokerage Fiercely competitive market (product pricing and commission terms) Broker numbers reducing as regulatory environment tightens Highly successful Franchise offering launched for brokers willing to tie to Irish Life 120 franchisees - 11 million APE in 2004 Independent Brokers will remain the gateway to high net worth segment Irish Life strengths include: product innovation open architecture for investments resurgent active management performance 17
Irish Life Retail Institutional Partnerships Unrivalled reputation for service and product quality Ulster Bank National Irish Bank Irish Nationwide HBOS (Ireland) ACCBank 18
Irish Life Retail Advantages of Multi Channel approach Reach - access to all customer / product segments Flexibility to grasp emerging opportunities Choice for our customers Synergy - sharing knowledge and expertise across channels Scale and market share 19
Distribution Reach Customer Reach Product Segment Competitive Levers Brokers High end Pensions Investments Protection Product price/features Service Remuneration Relationship Salesforce Middle & lower middle Pensions (PRSA) Protection Investments Activity micro management Engaging, highly effective sales process Worksite expertise ptsb Branches Middle & lower middle Protection (mort related) Investments Pensions Integration with bank Activity micro management Engaging highly effective sales process Institutions Middle & lower middle Protection (mort related) Investments Product price Service & support Direct High End Investments Protection Product price & features 20
Irish life Retail Flexibility to grasp emerging opportunities 2004 30% 38% 22% 10% 2003 36% 35% 23% 6% 2002 22% 22% 13% 43% 2001 28% 24% 14% 34% 2000 42% 26% 17% 15% Bonds Pension Protection Savings 21
Proven Capacity to Outperform Retail Market Share 22.0% 21.0% 20.3% 20.0% 19.0% 18.0% 17.0% 17.6% 17.6% 18.6% 19.5% 16.0% 15.0% 15.7% 1999 2000 2001 2002 2003 2004 (H1) 22
Horizon - a radical programme to TRANSFORM Retail into a World Class Life Assurer Key Goals Drive significant productivity increases in every business activity Improve service experience for customers Protect profitability as product margins fall Install a leading edge technology platform Self Financing - renewal cost savings pay for capital cost of programme
Siebel Point of Sale System Leading edge point of sale technology Engaging customer experience Collects rich customer data Consistent and compliant advice Higher value higher quality sales Every activity measured 95% of customers would recommend the process UK CRM Industry Award Winner 2003 24
epos Point of Sale fulfilment system Incorporating interactive web enabled underwriting On the spot acceptance High quality service experience for customers Avoids adviser down Time chasing paper Improves data quality Trebling new business processing productivity 25
New Back Office Technology (CLOAS) Moving to a single integrated back office system One and done processing Customer centric data Platform for customer self service Doubling existing business productivity 26
Horizon Components & Outline Timetable Siebel Point of Sale System Cloas Phase 2 NB epos Fulfilment Distribution Overhaul Existing Business Migration Cloas Phase 1 NB Harvesting remaining back office and support function benefits 2002 2003 2004 2005 27
Horizon Benefit Realisation m 150 140 Costs 130 120 110 2002 2003 2004 2005 2006 2002 costs inflated at 5% pa 3 Year Plan Costs 28
Summary Positive Operating Environment Unrivalled Array of high performing distribution channels World Class technology and processes Leading position in a consolidating market Proven ability to execute and drive change A Winning Proposition! 29