Investor Day 2009 - Regional business presentation Asia

FORTIS I 9/25/2009 I page 2

Agenda

1. Profile and track record

2. The market, competition and strategic initiatives

3. Conclusion

FORTIS I

59%

42%

25%24%20%

ChinaIndiaMalaysiaThailandHongKong

Why invest in Asia?

I page 3

GDP growth forecast for the next 5 years

Source: IMF

Reasons to move there early FY 00, still trueEmerging middle classStrong growth in GDP and premiumsStrong growth in professional distribution28% of world market in Life, 14% in Non-LifeInterest in Banks for insurance distribution/ possibility to leverage Fortis competenceOpportunity to leverage Fortis skills in Risk Mgt, ALMHigher expected returns/ marginsHigh need for foreign capital and expertise

9/25/2009

FORTIS I

Asian life insurance review, why Asia?

I page 49/25/2009

S. Korea

Malaysia

Hong Kong

India

Taiwan

Vietnam

Thai

land

Philippines

Singapore

PR ChinaIndo

nesi

a

(5,000)

5,000

15,000

25,000

35,000

45,000

0% 5% 10% 15%

Premiums to GDP (%)

GD

P/ca

pita

(USD

)

Life insurance premium growth (%)

9.9

2.6

4.1

14.2

17.6

5.7

12.1

13.9

15.0

15.4

25.6

27.6

12.4

9.8

20.8

6.9

23.7

16.5

9.5

9.3

India

CAGR FY 08A-11E CAGR FY 03-08

Indonesia

China

Hong Kong

Singapore

Philippines

Thailand

Malaysia

Vietnam

South Korea

Life penetration and size (end 08)

Size of bubbles determined by total life premiums in each country

Source: EIU, Swiss Re Sigma 2009, Business Monitor International

FORTIS I I page 5

Fortis’ history in the Asian markets

Fortis invested in Feb 01 in the 7th largest insurance company overall

Current position: #2 overall, market leader in new business, Takaful and Non-LifeLargest foreign investor

Malaysia

Fortis invested in a Greenfield start-up with a national license in Dec 01

Current position: # 7 overall, 2.5% market share2nd largest foreign invested insurer

China

Fortis invested in 04 in the 7th largest life insurer and 15th largest non-life insurer

Current position: # 3 in Life (8.5% market share) and # 5 in Non-Life (3.7%)2nd largest foreign invested Life company behind AIA (in Thailand since FY 38) and largest foreign invested Non-Life company

Thailand

Fortis acquired the 12th largest in new business in FY 07

Current position: #10 in new business10th largest foreign invested life insurance company

Hong Kong

Greenfield start-up in FY 08 which produced the strongest start to any of the joint venture insurers in India

Current position: #15 overall13th largest foreign investor

India

9/25/2009

FORTIS I I page 6

Profile Asia

Key financial data Mission/strategy

Key competences Distribution and regional mix June ‘09 (%) *

H1 08 H1 09Gross inflow* LifeNon-Life

Net profit **LifeNon-Life

FUM

1,7051,525

180

35.731.34.4

10,594

The mission of Asia is to achieve strong growth in shareholder value through the application of Fortis’ core capabilities in selected high growth Asian markets.

The emerging Asian trends (bancassurance, increasing need for higher skill levels in risk management, distribution, product development) continue to provide the opportunity to create value.

Joint venture and partnership managementBancassuranceMulti-Channel distribution‒ Agency management and training‒ Affinity marketing including direct marketing‒ Channel conflict managementProduct developmentALM and Risk management

(11%) Other

(55%) Bancassurance

* Gross inflow and FUM based on 100% of company revenues** Net profit based on Fortis’ stake and excluding

Insurance International holding costs

3,2912,954

337

8.76.02.7

11,986

H2 08 1,5861,429

157

(27.0)(25.2)(1.8)

FY 08 2,1231,909

214

23.918.75.2

15,793

(34%) Agents

June ‘09

China

Malaysia

Thailand

Hong Kong

India

India commenced commercial operations on 8 March ‘08

EUR mio

2%7%

58%

21%13%

9/25/2009

FORTIS I I page 7

Results 2006 - 2009

FY 08FY 06 H1 09FY 07

Gross inflow LifeNon-Life

Net profitLifeNon-Life

Local Solvency (as % of local minimum)ChinaHong KongIndiaMalaysia ***

Mayban LifeeTiQa InsuranceeTiQa Takaful

Thailand ****Muang Thai LifeMuang Thai Insurance

3,2912,954

3378.76.02.7

218%245%210%218%166%220%256%

659%506%

2,1671,878

28917.811.86.1

2,1231,909

21423.918.75.2

219%330%567%216%182%240%184%

726%710%

2,8742,575

29979.973.16.8

* Including allocated capital gains of EUR 18.2 mio ** Including allocated capital losses of EUR 22.4 mio*** Malaysia has adopted a risk based capital regime for solvency **** Thailand’s local solvency margin (726%) equates to approx 250% of EU

Regulations in all markets require a margin above minimum, generally the local minimum is lower than EU standards All entities except Hong Kong are joint ventures, solvency is set in discussion with local partners and considering market dynamics

EUR mio

* **

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FORTIS I I page 8

Agenda



3. Conclusion

9/25/2009

FORTIS I I page 9

Profile – Taiping Life (China)


Key features Distribution mix FY 08

FY 06 H1 09EUR mio


FUM

1,1201,120

0

2,900

MissionAttain top 5 position in the China life insurance and pension market; and achieve the status of a well recognized brand name in China and global markets through operational excellence

Actions FY 09 and beyondIntensify cooperation with banksEnhance productivity of bank outlets with improved training & supportFocus on regular premium and risk protection productsIntegrate processes and systems to improve customer services

Key Products: Endowment, Anticipated endowment, followed by Whole Life, Health, Critical illness Distribution: Bancassurance, Agency channel, Alternative (Direct/Tele Marketing)Market position: 7th largest life insurer in China with 2.54% market share as at December ‘08Brands: Taiping Life, Taiping Pension, Taiping Asset ManagementOperational Excellence: Paperless office, central processing, excellent IT

(22%) Agent

1,2291,229

0

8,800

FY 071,5201,520

0

4,250

FY 081,8501,850

0

5,500

(11%) China Construction Bank

Joint venture with Taiping Life since 2001, Fortis owns 24.9% (gross inflow based on 100%)

(33%) ICBC

(15%) Agriculture Bank of China

(6%) Postal Bank

(5%) Broker

(8%) Other Banks

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FORTIS I I page 10

Taiping Life - distribution

Total Gross Inflow Life – H1 09 Gross Inflow H1 09 – Single vs. Regular

Gross Inflow H1 09 – NB Product Mix Sales Force – H1 09

(30%) Universal Life

(69%) Traditional

(1%) Unit linked

(27%) Tied agents

(43%)Banca Single

(25%)Banca Regular

(5%) Group

(58%)Single

(42%) Regular

EUR 1,229 mio

EUR 921 mio

30,000

40,000

50,000

60,000

Jun-

08

Aug

-08

Oct

-08

Dec

-08

Feb-

09

Apr

-09

Jun-

09

TIED

AG

ENTS

2,000

4,000

6,000 BA

NK

AG

ENTS

# tied agents # bank agents

9/25/2009

FORTIS I

Chinese market offers high growth, Taiping Life well placed to benefit given its strong national presence

I page 11

Taiping One of 12 Life insurers with a license to expand and write business on a nationwide basis7th largest life insurer in China with 2.5% market share (end 08), 5th bancassurance player in terms of industry standardized premium income with 7.1% market shareStrong relationships with all major banksOver 55,000 agents and 16,000 bank outlets through 577 TPL officesProven strengths in product and service innovationOperational excellence: state of the art operating platform ‒ Paperless office‒ Centralized back office since 2006‒ Strict quality control, every policy holder is called within 2 days to check if product

meets customer needs and expectations; reduces miss-selling

Higher economic growth relative to other markets, despite slowing world economy (plus government initiatives to stimulate economy)Low life insurance penetration rate (2% in FY 08) implies high growth potential. CAGR Chinese Life market of 15% (FY 03 – FY 08)Increasing need for life and health protection, accelerated by aging population and government subsidiesRegulator efforts to liberalize regulation (e.g. investment and product approval) and to spur growth of the industryRegulators are expected to approve banks owning up to 20% of an insurance company before year end as a first step to banks having significant shareholdings in insurersIncreased risk awareness following major disasters (snow storm and earthquake) in FY 08

Market

9/25/2009

FORTIS I I page 12

Profile Fortis Insurance Co Asia (FICA, Hong Kong)Key financial data

Key features

Mission/strategy

Product mix

FY 06 H1 09EUR mio


FUM

MissionTo be recognized as a leading provider of quality long-term savings, protection and retirement propositions. Continue to strive to enhance the customer experience and to interact with our customers in the most convenient, efficient and cost effective manner.

Key Objectives Build a leading agency sales force in terms of professionalism, productivity and customer focusExtend the multi-channel capability, especially the IFA, bancassurance and private bank channels Ensure the product strategy is aligned to current market demandsincluding: retirement, medical, traditional savings and protection needsProvide “best-in-class” customer serviceIncrease the retail footprint and enhance brand recall

Key Products: Unit-linked, endowments, retirement income plan, protection solutions, such as Critical Illness and Medical Distribution: Agency channel (5th largest sales force in Hong Kong), IFAsMarket position: top 10 in new businessBrands: Fortis, “Fu Tong” in ChineseOperational Excellence: Extensive application of e-solutions at “point-of-sale” and customer e-portals, launch of state-of-the-art core operating systems

(39%) Unit-linked

141141

0

1,343

FY 07226226

0

1,300

FY 08283283

0

1,258

Fortis Insurance Company Asia was acquired in ‘07 and is 100% owned by Fortis

(30%)Whole Life

(17%)Par Products(14%)

Protection

(55%) Unit-linked

(19%)Whole Life

(13%)Par products

(13%)Protection

As of H1 09 As of FY 08

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FORTIS I

Hong Kong, a mature insurance market with strong growth opportunities

I page 13

FICA FICA was acquired in FY 07, just before the financial crisis. In very difficult times FICA has significantly upgraded its operational and distribution base‒ Restructured the investment portfolio to align asset / liability profiles‒ Launched a new core operating system‒ Launched new e-portals for agents and customers as well as a new CRM platform‒ Launched a new performance management platform for the agency force‒ Launched a new distribution channel, Independent Financial Advisors (IFA)FICA will focus on improving operating results in FY 09 - FY 12 as growth returns to the Greater China region‒ Further improve already strong profit margins in the product base through continual adjustment of

existing product terms / pricing and product mix‒ Broader distribution through the expansion of the agency and IFA channels and moves into

bancassurance

The life assurance market is one of the most “mature” in Asia, however, except in FY 08, GWP as a percentage of GDP has shown consistent growth over the last six years with an annual average in excess of 20%Future growth is expected to continue due to‒ Increasing affluence combined with a strong propensity to save‒ Further liberalization and access to Mainland customers‒ Ageing demographics and inadequate Government provision for retirement benefits or healthcare

Market

9/25/2009

FORTIS I I page 14

Profile IDBI Fortis – (India)


Key features Distribution mix March 2009 (local year-end)

FY 06 H1 09


FUM

-

Mission To be the leading provider of wealth management, protection and retirement solutions that meets the needs of our customers and adds value to their lives.

StrategyOptimize value proposition to the customer via transparency on pricingCost LeadershipFully integrated systems and processesMaximize sales efficiencies and productivity

Key Products: Unit Linked with substantial protection component, regular premium 64% vs single premium 36%Distribution: 70% Banca (1,114 Branches), 30% agency (35 branches, going to 200 by ‘12). Alternative & brokerage under development Market position: Launched in March ’08; as of March ’09, market share 0.93% among private playersBrand: IDBI Fortis

(28%) Agent

(50%) IDBI Bank

33330

104

FY 07

-

FY 08

29290

42

(22%) Federal Bank

Joint venture with IDBI and Federal Bank since ‘08Fortis owns 26% (gross inflow based on 100%)

EUR mio

9/25/2009

FORTIS I I page 15

India - distribution

Gross Inflow* Life H1 09 – Product Mix Gross Inflow* H1 09 – Single vs. Regular

Total number of bank branches Total number of agents

(89%)Unit Linked

(11%)Homesurance

INR 2,167 mio or EUR 33 mio

Agents actual Agents last year

IDBI Federal

* Gross inflow based on 100%

(64%)Regular

(36%)Single

431 7181,2211,986

3,3164,358

5,5826,3936,554

7,239

2,7183,740

4,9995,946

6,937A

pr-'0

9

May

-'09

Jun-

'09

Jul-'

09

Aug

-'09

Sep

-'09

Oct

-'09

Nov

-'09

Dec

-'09

Jan-

'10

Feb-

'10

Mar

-'10

587564

9/25/2009

FORTIS I

India, an exciting growth story in a dynamic insurance market with incredible upside potential

I page 16

IDBI Fortis Life Strong start to operations based on product designs which take advantage of competitive advantages in pricing, expenses and distributionKeys to success will be‒ Moving from easier initial successes in a new bancassurance channel to sustained,

consistent sales based on an integrated, tailored approach to the unique characteristics of each bank

‒ Maintaining the progress in building a productive, efficient agency platform which outperforms the market in terms of productivity and expense ratios

‒ Building an effective direct and telemarketing channel targeting segments within Fortis’banking partner’s customer base

‒ Maintaining cost advantages across the business

IDBI Fortis Life has had the most successful launch in the India market‒ In terms of market share IDBI Fortis is, as of June, 15th out of 21 private sector joint

ventures and the best of five companies which launched operations within fiscal year FY 08 / FY 09

‒ No start up company has achieved the volume of total premiums sold in the first 12 months of operations equal to IDBI Fortis

‒ IDBI Fortis’ first year expense ratio is significantly better than the first year ratio of any established life insurer

The private sector joint ventures, with the exception of IDBI Fortis, SBI Life and HSBC Life, have pursued a strategy of rapid expansion “at any cost” with little attention paid to product differentiation and customer value IDBI Fortis is in a strong position to build a sustainable position as a low cost provider of products which meet targeted customers needs with a strong value proposition to all stakeholders

Market

9/25/2009

FORTIS I

Joint venture with Maybank since 2001, Fortis owns 31%(gross inflow based on 100%)

I page 17

Profile eTiQa (Malaysia)


Key features Distribution Mix FY 08

FY 06 H1 09

Gross inflow LifeSingle premiumRegular premium

Non-Life

FUM

797548381167249

3,422

MissionBecome the “National Champion” in Insurance and investment management:

#1 insurer by Gross Premium Written in Life and TakafulTransform Mayban Investment Management into a top 2 market player Securing the world’s leading Takaful position

Key Products: Full product range: Life, Non Life, TakafulDistribution: Bancassurance, agency, direct corporate, affinity, Direct MarketingMarket position: 1st Takaful overall, 1st New Business Life/Family, 1st GeneralBrand: eTiQa, Mayban Investment Management

(14%)Enterprise

(30%)Agency

444274169105170

4,046

FY 07

780526328188254

3,884

FY 08

704435250184269

3,830

(2%)3rd Banca

(39%)Maybank

(10%)Alternate

(5%)Other

EUR mio

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FORTIS I I page 18

eTiQa - distribution

Distribution mix – H1 09 Total Premiums* – Conventional vs. Takaful – H1 09

Total Life premiums* – Single vs. Regular – H1 09 Non-Life product mix – H1 09

(38%)Regular

(62%)Single

(19%) Enterprise

(34%)Maybank

(28%)Agency

(4%)Other

(30%) Life Takaful

(32%)Life Conventional

(6%)3rd Party Banca

(9%)Alternate

(29%) Non-Life Conventional

(9%) Non-Life Takaful

* Gross inflow based on 100%** MAT: Marine, Aviation & Transport

(19%)Other

(30%)Motor

(36%)MAT**

(15%)Fire

9/25/2009

FORTIS I

eTiQa is a leading insurer in an attractive market

I page 19

eTiQa Strong growth in late FY 08 and FY 09 as eTiQa has completed the integration of the MNI acquisition and moves back into a growth modeMarket leader in Bancassurance, Takaful and Enterprise generalOne of three insurers, offering a full range of conventional and Takaful products Excellent access to a multitude of powerful databases including Maybank’s corporate and retail database, student loans, and Government housing loan program‒ Also distribute through third party banksWidest “face to face” reach to customers (450 Maybank branches, 14,000 agents)Exclusive access to most successful financial service portal (M2U) in the market with 1 mio sign on sessions per monthVery strong eTiQa brand name and culture

There are 9 life insurers, 26 general insurers, 7 composite insurers and 8 Takaful operatorsMarket growth in Life & Non-Life slowing down, Takaful showing double digit growthThe full implementation of the risk-based capital regime in FY 09 will have a profound impact on the market with eTiQa well positioned to maintain its leadership position due to its strong solvency positionRecently, the government has announced major liberalization measures in the financial sector including ‒ Raising the foreign investment limit in insurance to 70% from 49%‒ The offering of two new family Takaful licenses‒ Locally-incorporated foreign insurance companies and Takaful operators are allowed to

establish branches nationwide without restriction and enter into bancassurance/ bancatakaful arrangements with banking institutions

Market

9/25/2009

FORTIS I

Joint venture with Muang Thai since 2004Fortis owns 40% of Life and 15% of Non-Life

(gross inflow based on 100%)

I page 20

Profile Muang Thai Life and Muang Thai Insurance (Thailand)Key financial data

Key features

Mission/strategy

Distribution mix FY 08

FY 06 H1 09Gross inflow LifeNon-Life

FUM

MissionBe a leading insurance company both in Life andNon-Life insurance by building on a strong multi-channelplatform while expanding the Kasikorn Bank relationship

Strategy 2009 and beyond Further grow life and expand non-life product offerInnovative CRM and Customer Service CentreLaunch Unit Linked productExpand the Takaful product offering and distribution, capitalizing on Malaysia’s expertiseStrengthen technical skills in shared services through development of group capabilities shared amongst the Muang Thai companies Product Innovation - Key Products

Life: Endowment & credit protection single premium for housing and commercial loan, Non-Life: Motor/Fire/PAMulti Channel DistributionAgency, Bancassurance, Broker and Financial Institutions, Direct Marketing/telemarketingStrong Market position#3 on First year premiums & #3 on Total premiums in Life; #5 in Non-LifeStrong BrandsMuang Thai Life and Muang Thai Insurance

(14%)Other

27723244

1,500

FY 0735530649

1,015

FY 0842635868

1,300

48%Agent(38%)

Bank

Life Non-Life

25021040

800

(32%)Agent

(31%)Bank

(10%)Broker

(27%)Other

EUR mio

9/25/2009

FORTIS I I page 21

Thailand – distribution

Total Gross Inflow Life H1 09 (100%) Gross Inflow H1 09 – Life New Business

Product Mix Non-Life H1 09 Distribution Mix Gross Inflow Non-Life H1 09

(51%)Banca(39%)

Tied agents

(5%) Group(5%) Affinity

EUR 232 mio

(75)%Banca

(19%)Tied agents

(2%) Group(4%) Affinity

EUR 98 mio

(55%)Non-Motor

(45%)Motor

EUR 44 mio

(32%)Bank

(49%)Agents

(19%)Other

EUR 44 mio

Note: Agents includes broker business9/25/2009

FORTIS I

Thailand: strong growth through a powerful multi-channel distribution platform

I page 22

Muang Thai Life

Muang ThaiInsurance

Market

Dynamic and effective leadership through a strong management teamStrong balance sheet and solvency marginsPowerful brand with high visibilityEffective use of a deep and diverse multi-channel distribution platform, market leadership in multi channel distributionEffective and growing CRM capability build around an innovative customer loyalty clubMarket leadership in agency productivity

Good reputation, strong capital base, strong brandBalanced portfolio with a good mix of motor and propertyMulti channel distribution platformFramework for national network for service centers and sales offices by co-locating with Muang Thai Life and K-Bank officesNew core operating system to be launched in Q1 2010 will enhanceoperating efficiency

Low insurance penetration rate (Life 3.5% of GDP and Non-Life 1.5% of GDP) with high growth potentialDespite political and economic turmoil the Thai insurance markets have shown strong growth in 2008 / 2009, particularly in the bancassurance channelForthcoming regulatory changes include a move to an RBC solvencyregime, which should benefit Muang Thai given the strong solvency position of both companies

9/25/2009

FORTIS I I page 23

Agenda



3. Conclusion

9/25/2009

FORTIS I I page 24

Conclusions

Asia is an attractive region for insurance in general and bancassurance in particular

Fortis has been active in Asia for 8 years, creating profit contribution and value, in particular in China, Malaysia and Thailand

The ability to team up with local partners in Asia has created opportunities normally closed to foreign investors and opened additional new opportunities

Several initiatives have been taken to increase the current profitability of FICA and meet required internal targets

The value creation of the Asian activities balances the profit generation of more mature (European) markets

9/25/2009

Investor Day 2009 - Regional business presentation Asia

Investor Relations

Transcript of Investor Day 2009 - Regional business presentation Asia