La Via Cattolica Searching for new ways to create value and new value to create STRATEGICPLAN 2007-2010 Hotel Principe di Savoia Milan, 1st March 2007
Contents The strategic positioning The business Pillars of Group strategy Economic and financial objectives to 2010 1
A solid base for the generation of value A history of overall growth of premiums 4.5 bn in 2006 (+8.5% CAGR compared to 2000), of which 35% is non-life and 65% is life insurance 6th largest operator in the Italian market, 5th in Motor Strong growth of the agency network From ~550 to ~1,500 agencies during 2000-06 A broad customer base with potential for further development Approximately 2 million direct customers in the agency network alone A successful model in Bancassurance The Group has a firmly rooted system of economic relations Flexibility and financial strength Over 30 agreements with partner banks involving over 2,700 branches ~ 26,000 Shareholder members Network of relations with Ecclesiastic and Non-profit entities A rating from A.M. Best (stable outlook) "A-" rating from Standard & Poors (stable outlook) 2
The strategic concept Strategic objectives Focused, organic growth, with specialization and further development of Group's system of relations Leading insurance company for retail and small business customers Increased value with focus on operating efficiency and risk and capital management Plan perimeter Systematic development of growth opportunities in Italy and abroad 3
The Business Pillars which constitute the Group's strategy Strategic Pillars Unification and development of the Group's agency networks, widespread throughout the country ( Compagnia del Territorio ) Focused, endogenous growth, with specialization and further development of Group's system of relations Growth in value, quality of service and efficiency of the motor business, through the specialized business partnership with Mapfre Group Development of life and non-life bancassurance: reinforcement and extension of the partnerships with regional banks, intensification of the strategic relation with Banca Lombarda and extensive development of the new agreement with Banca Popolare di Vicenza Exploitation of the relations with shareholders Focused action on ecclesiastic and non-profit entities Increased value with focus on operating efficiency and risk and capital management Corporate, organizational and operational integration Development of Group investment policies Strategic risk and capital management 4
The new business and service model Compagnia del Territorio Bancassurance Motor Business (1) A U T O Non Motor P&C Banking and Pension Life financial Life Non-life products planning INSURANCE CHANNEL BANKING CHANNEL (2) Finance and Investments Shared operational services (1) Including Motor FTK, Assistance and all accessories to the overall Motor product, except the business developed with Shareholder members and the banking channel (2) Only the JVs will tend to have an autonomous corporate standing with respect to the parent company 5
Organizational and corporate structure Top Management Governance Functions Pension Planning Ecclesiastic and Non- Profit entities Compagnia del Territorio Life and Non-life Bancassurance Finance and Investments Cattolica Claims Management (new dica) A U T O BPVI FONDI NewCo Bank products (1) ABC Assicura (1) To be established (2) Awaiting authorization Lombarda Assicurazioni (2) Note: The non-life bancassurance sector also includes the Cattolica Online division and Lombarda Assicurazioni, when activated Note: Some transactions require the approval of Cattolica Assicurazioni AGM and the authorization of the competent authorities 6
Corporate simplification Mergers Establishment of MCA Centralization of life and pension planning divisions Corporate Business / brokers MERGER Agency motor classes Agency motor classes New name MERGER A U T O (1) Note: The transactions are subject to the authorization of the competent authorities 7
Contents Strategic positioning The business Pillars of Group strategy - Compagnia del Territorio - The specialized business partnership with Mapfre Group - Life and non-life bancassurance - Corporate, organizational and operational integration - Investment policies - Risk and Capital management Economic and financial objectives to 2010 8
Compagnia del Territorio - Focus on proprietary channel Compagnia del Territorio Drivers of development Unification and integration of the agency networks - Segmentation of agencies into the types and models profiled - Progressive development of range of products and services Increase in commercial efficiency and exploitation of the agency network - New sales structure, unifying and strengthening of the central and local sales structures - Expanding Agency sales force, by introducing Insurance Consultants and Life and Pension Planning Consultants - Intense training program - Incentives aimed at increasing profitability and cross-selling - Development of support and sales monitoring tools Target Increased penetration of non motor and life products in the agency network 9
Unification and integration of the agency networks Compagnia del Territorio A unified agency network Two agency mandates 3 100 48 38 263 15 146 94 148 29.3% 21 53 23 147 54 57 9 81 Number of Agencies (3) 51.8% 14 42 75 1,426 625 569 N: 739 C: 418 S: 269 18.9% Motor (1) Non motor, life, pension planning (2) A U T O A widespread agency network, firmly rooted in the local area, particularly outside the large metropolitan areas 58% of the Agencies are in areas with populations of 10,000 to 100,000 Strong relational system for retail and small business customers Excellent knowledge of the local markets Opportunity to exploit relations with a wider range of insurance and financial products (1) Including Motor FTK, Assistance and accessories to the Motor product (2) Including the entire business portfolio (life and non-life) developed with Shareholders members (3) Updated September 2006 10
Strategic issues of the "Compagnia del Territorio" Compagnia del Territorio Strategic issues Guidelines for intervention on network Compagnia del Territorio focused on developing and exploiting business partnerships with agents Benchmark model for the agencies providing differentiated interaction and support procedures by the Company and defined on the basis of: The organizational structure of the agency Profitability for the company and economic sustainability of the agent Growth potential Profitability for the Company Negative Positive Rationalize and gradually integrate the agencies in the local areas Identify and manage an action plan with agencies that are in the red, with rationalization of those which lack prospects for conversion Agencies in line with the Plan s strategic guidelines Reorientation of the agencies which have potential for development Autonomy of the Agent in terms of implementing the guidelines, according to the profile, "vocation" and specificity of the Agency Negative Economic sustainability for the Agent Positive 11
Strategy of integrated products and services Compagnia del Territorio Retail and Small Business Customers Savings and investments Life and pension planning Personal protection Financing of goods and assets Vehicles Protection Banking services TCM Health products Life financ. Revolving Cash accounts cards also for policies Savings plans Motor TPL Prot. of other damages to goods Funds and management Pension Funds Head of family TPL and activities Motor FTK Credit cards Mortgages Assistance Consumer credit Innovative products Legal advice Integrated safeguarding circuits Long term care. Services Products/services offered in progressive modules "Insurance Account" Innovative initiative to reward loyal customers on the basis of their insurance track record Development of specific offers targeted to certain segments (young people, couples, senior citizens, affluent/private) Product combinations, with multiple guarantee and multiple specialty innovations Development of customer loyalty initiatives 12
Unification and strengthening of the sales process Compagnia del Territorio Action points Sales Division - Agents Unification and strengthening of the sales structure, increasing the duties of the marketing and sales divisions Increasing domestic sales staff (planned increase of 100-120), assigned to boost and support the agency network Sales Planning Marketing Life spec. Sales Division - Agents Sales Area Manager Sales Assistants Network Agents Agents working under an company department 13
Increasing the domestic sales force Compagnia del Territorio Sub-Agent (1) Cattolica Agent 700 Consultants Agency Financial Advisor (2) Business development on new customers Insurance consultant 350 (target for the period in question) Life and pension planning consultant 350 (target for the period in question) Primary focus on portfolios of agency customers Central role of the Agent in the process of integrating and increasing his own sales force Support from the Compagnia del Territorio to Agents for recruiting, training and sales coordination of the sales force (1) The acquisition of new sub-agents with portfolios will not be the main focus over the next few years (2) All the agency staff (Agents, sub-agents, producers) can be Financial Advisors Potential career path 14
Targets of the strategic actions Compagnia del Territorio Non motor premiums Agency channel ( mn) Action points 441 8.8% 617 Increased cross-selling actions aimed at increasing sales incentives for portfolio mix active management of life maturities Support agencies in adding Insurance consultants (focus on new customers): agencies selected according to portfolio size and staff Support agencies in adding Life and pension planning consultants (focus on cross selling): major agencies according to portfolio size and staff (1) Denominator: Aggregated non-life premiums with 100% MCA CAGR 06-10 2006F 2010T Non motor /Non-life (1) 30% 35% Life premium collection Agency channel ( mln) 347 11.4% 534 2006F 2010T New Policies ( mln) 153 345 Life/ (Nonlife+Life) (1) 19% 23% 15
Mapfre Cattolica Auto - targets Business partnership with Mapfre Drivers of development A U T O Company specialized in the Motor segment in a joint-venture with Mapfre Expanding the range of products and services; careful selection of risks and customized pricing Actions focused optimizing claims management, with focus on customer service and profitability over the entire life of the claim Target Increase in profitability of the Motor segment, with increased penetration of coverage with higher added value and improvement in technical results Completion of on-going re-alignment strategy 16
Profile of the joint-venture Business partnership with the Mapfre Group The operation Creating a 50/50 joint-venture called Mapfre Cattolica Auto (MCA) Mapfre purchases 50% of the assets relating to the agency motor business of Cattolica and Duomo/ UniOne The numbers Consolidated gross premiums on an annual basis: > 1 bil (1) Shareholders equity: ~ 400 mn Distribution network 1,426 agencies Joint-venture on an equal basis as defined by IAS 31 (1) Aggregated 2005 Mission Create a corporate vehicle specialized in the Motor segment which, using the contributions of Mapfre, the leader in the motor business in Spain, will provide a suitable response to the competitive and regulatory change underway in the Italian Motor insurance market, by: the provision of high quality service to customers continuous innovation of product and process specific actions aimed at increasing customer appreciation of the value of the service received an integrated distribution network widespread throughout the country technical excellence from underwriting up to claim adjustment optimization of efficiency of operations supporting the entire risk underwriting and claims management processes Cross Fertilization of experiences MAPFRE will take on the role of catalyst and driver for innovation. Both Groups will be able to benefit from the mutual exchange of experience and know-how 17
Mapfre best practice and competitive advantage in the auto business Wide Wide product product range range Tariff Tariff personalization personalization Customer segmentation Customer segmentation Continuous Continuous and and specific specific innovation innovation High quality High quality Strong emphasis on service Strong emphasis on service contents contents and and integrated integrated client-oriented approach. client-oriented approach. Quick reply through multiple Quick reply through multiple channels: agencies, channels: agencies, telephones, internet telephones, internet CUSTOMER SERVICE PRODUCT A U T O Rigorous Rigorous technical technical approach approach to to underwriting underwriting Strong focus on claims Strong focus on claims management ensured by the management ensured by the internalization of key activities internalization of key activities TECHNICAL FUNDAMENTALS COST CONTROL Business partnership with the Mapfre Group Rigorous Rigorous budgets budgets which which are are monitored monitored on on a a monthly monthly basis basis Precise allocation of all Precise allocation of all expenses expenses Expense ratio: below the Expense ratio: below the market average market average Economies of Scale Economies of Scale Decentralized Decentralized Cutting edge Cutting edge Online systems Online systems IT SALES POLICY Discipline Discipline Consistent with Consistent with management policy management policy Transparency towards Transparency towards customers customers Immediate response to Immediate response to agent requirements agent requirements 18
Optimization of claims management Business partnership with the Mapfre Group Action points All Group activities involving claims management centralized in di.ca Development of operating platforms: Industrialization of processes Flexible organization New Technologies Process integration Reduction of management and claim settlement costs (e.g. legal expenses and inspections) Reduction of logistics costs in adjustment centers (unification of adjustment center networks) Centralization and diffusion of information and knowledge Focus on customer service and profitability over the entire claims cycle In cooperation with 19
Targets of the strategic actions Business partnership with the Mapfre Group Premiums - Motor Agents ( mln) Total MCA 1,052 2.0% 1,138 Group share of MCA 569 2006F 2010T Claims ratio MCA (2) (%) 80.3% (1) - 4.3 p.p. 76.0% (1) Normalized value (2) Gross of reinsurance CAGR 06-10 20
Bancassurance - strategic drivers Bancassurance Drivers of development Reconfirmation of the partnership oriented model: sales agreements, focused partnerships, joint ventures Strategic partnership with BPVI Consolidation of life bancassurance Target Consolidation of the life market share and development of non-life bancassurance Development of non-life bancassurance 21
Bancassurance: the "repositioning" of the model Maximum exploitation of the management model for a differentiate portfolio of partnerships Focused partnerships Joint ventures Bancassurance Number of branches Sales agreements 1,539 252 Joint-ventures, with a strategic partnership 946 Product distribution agreements Distribution and product agreements, reinforced by capital investments (in certain cases featuring a cross over) Taking advantage of existing agreements Development of new agreements, aimed at completing geographic coverage Taking advantage of existing agreements Taking advantage of partnerships Business development aimed at selecting new agreements 22
The agreement with Banca Popolare di Vicenza Bancassurance The key points of the agreement Life Bancassurance: acquisition of a 50% share in life assurance companies of Banca Popolare di Vicenza Group: Berica Vita SpA (governed by Italian law) and Vicenza Life Ltd (governed by Irish law) Significant growth potential in Life Bancassurance Average premiums per branch ( mn) 0.9 1.6 Non-life Bancassurance: disposal to BPVI of a 50% share of ABC Assicura SpA Asset management: integration of Verona Gestioni SGR with BPVI Fondi SGR. Equal stakes Newco: Cattolica and Banca Popolare will establish a newco which is equally controlled by both, for placement of bank products across the entire network of Cattolica Group agencies, specifically loans developed by BPVI Group divisions under the Cattolica brand. Some transactions require the approval of Cattolica Assicurazioni AGM and the authorization of the competent authorities BPVI Reserves/AUM (%) 16.4 BPVI Average for comparable banks 22.4 Average for comparable banks 23
Life Bancassurance: action points and objectives Bancassurance Action points Focus on pension planning as a growing business Balanced product mix, to maintain flexibility in relation to market performance Selective introduction of innovative product elements to respond to pension planning challenges (e.g. class I and class III mixed products) Monitoring and, where possible, development of the insurance content of life products with financial content Sales actions focused on medium to high level bank customers (affluent and private insurance, also through Irish operations) and testing of corporate bancassurance products (collective / employee benefit) Maintenance of penetration of current partnerships, with a focus on service and sales support to Partners Continuous search for new partnership opportunities (not taken into account for the Plan) Premiums - Life Bancassurance ( mn) 5.4% 3,107 2,516 BPVN 720 3,107 Other 1,796 partnerships 2006F 2010T MS (%) ~4.9% ~5.0% CAGR 06-10 24
Non-life Bancassurance: action points and objectives Bancassurance Action points Gradual activation of the range of products offered through all major partner networks, with a focus on collective products coupled with banking products (credit protection on personal loans and mortgages, accident and injury coverage for c/a and fire insurance on mortgages) and on stand-alone products Maintenance of wide range of products/services (asset, vehicle, current account, credit line and personal coverage), but with a particular focus on personal coverage for the retail segment Subsequent focus on products for the small business segment, in particular with all risk coverage products (theft, fire, civil liability) Extension of the penetration of current partnerships Continuous exploration of opportunities for new agreements with banks and financial companies Premiums - Non-Life Bancassurance ( mn) 32% 82 27 62 Non motor 24 Motor 3 20 2006F 2010T MS (%) ~4.1% ~7.3% CAGR 06-10 25
Corporate, organizational and operational integration Corporate, organizational and operational integration Drivers of development Corporate simplification Development of the organizational model, in line with the new business model, on the basis of the principles of specialization and responsibility of the business areas Unification and development of operating platforms along the lines of the new corporate structure Development of human resources organization, with freeze on employee turnover, and retraining and reassignment of resources to high potential business areas, hiring of staff with selected specializations Rationalization of management costs Change management program to support the strategic initiatives of the Plan Target New Group Model: improvement of operating efficiency reduction in cost structures 26
IT intervention guidelines Corporate, organizational and operational integration Organizational acceleration strategies Main objectives Support the corporate and organizational evolution expected in the near future Support the operating launch of MCA, through unification of the agency network Unification and innovation of Group systems, rationalizing the platform and facilitating efficiency Support the evolution of the integrated agency network Partnership in IT application and facility management New management team for the IT company Investment Plan for strategic projects 2007/10: ~ 60 mn 27
Operating efficiency Corporate, organizational and operational integration Action points Freeze employee turnover Take advantage of existing skills Reassign staff to areas with greater development, using dedicated training programs Recruitment of staff with selected specializations Insourcing of currently outsource tasks/departments to available staff once the corporate unification is complete actions planned on information systems Acceleration of the optimization and centralization of purchases Compliance with IT budget Gross overall savings of approximately 35 million (1) in operating costs compared to inertial (1) At a perimeter level with 100% aggregated with MCA 28
Increasing value of corporate culture Corporate, organizational and operational integration Group training center Set up of the Group training center A center that will operate as an element spearheading change a driving force for increasing the value of and spreading the corporate culture of Cattolica to staff and networks a hub for the development of technical and professional skills Other change management initiatives Program for human resources management and development following the main governance strategies (valuation, training, internal mobility, development and incentive programs) Program to motivate management towards change Communications aimed at promoting the ongoing changes to the final customer (focus on 2008, with the operating launch of MCA) Synergies with the new specialized graduate course on "Economy of Insurance Companies" at the University of Verona, which is sponsored by Cattolica 29
Evolution of investment policies Evolution of investment policies Investment policies Macro guidelines Infrastructure Life Non-life Liability-Driven approach Liabilities as implicit benchmark of insurance segregated funds ALM analysis to control options implicit in traditional products Total Return approach A quest for absolute performance through strict control of volatility Diversification by Asset Classes, making use of specific expertise Gradual rebalancing of asset allocation to reap the medium-long term benefits Stringent selection/ monitoring of managers Improvement of tools to manage and monitor investments and risks Free Capital 30
Guidelines for capital usage and management Management of risks and capital Systematic development of growth opportunities in Italy and abroad Growth Confirmation of rating target A Solidity Capital availability targets Shareholders Progressive growth in the dividend per share In the medium term with absence of opportunities Capital management actions 31
Contents The strategic positioning The business Pillars of Group strategy Economic and financial objectives to 2010 32
Main targets of the plan: focus on growth aimed at generating value TARGETS Premium collection ( mn) (1) Non-life Combined ratio (%) 4.1% 5,279 ~108% 4,498 -~ 6 p.p Life Non-life 2,906 1,592 3,950 1,330 Normaliz. ~ 99% ~ 93% 2006F 2010T 2006F 2010T (1) Including investment contracts Note: Tua Assicurazioni included in the figures for 2006 (in the one-off item for the combined ratio) F: Forecast; T: Target CAGR 06-10 p.p. 06-10 33
with attention to the technical profitability and operating efficiency levels TARGETS Claims Ratio 2006-2010 change (%) Expense Ratio 2006-2010 change (%) -1.6-1.3-1.8-1.5 Commission ratio 76.8 (1) 70.6 20.8 +1.8-1.7 Pure expense ratio 20.9 2006F Operations involving portfolio realignment Evolution of the portfolio mix with increasing weight on non motor business Portfolio rebalancing effect for the MCA operation Reduction of management claim adjustment costs 2010T 2006F Evolution of the commission mix: increasing weight of non motor business MCA effect Actions involving reduction of of operating costs 2010T (1) Normalized F: Forecast; T: Target 34
Development of consolidated and net Group profits TARGETS Net consolidated profit ( mn) Group net profit ( mn) 156 ~ 6% 195 134 ~ 6% 170 2006F 2010T 2006F 2010T In the interim period significant capital gains are expected from planned extraordinary transactions CAGR 06-10 F: Forecast; T: Target 35
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 a solicitation 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. 36
La Via Cattolica Searching for new ways to create value and new value to create STRATEGICPLAN 2007-2010 Hotel Principe di Savoia Milan, 1st March 2007