Presentation about AG Insurance

1. AG Insurance

2. Agenda
1. Profile and track record
2. The market and the competition
3. Strategic initiatives
4. Conclusion
FORTIS I 9/25/2009 I page 2

3. Profile AG Insurance
Key financial data
Mission/strategy
FY 08
Gross inflow (EUR bn)
Life
Non-Life
Operating costs (EUR mio)
Net profit (EUR mio)
Life
Non-Life
Combined ratio (%)
APE (EUR mio)
EV (EUR bn)
VANB (EUR mio)
6.3
4.8
1.5
(405)
6
(85)
91
100.9
419
3.8
53
H1 09
3.5
2.7
0.8
(209)
204
181
23
105.6
223
n.a.
n.a.
Key competences
 Market leader in Belgium, with total market share of
22.3% in FY 08
N 1 in Life: 26.3%
N 2 in Non-Life: 14.8%
 Integrated multi-channel operating model
(Brokers, Bancassurance and Assurfinance)
 Full product range, covering the needs of all market
segments
 Customer and channel centric organisation
The mission of AG Insurance is:
 To be the leading and most profitable multi-distribution
service provider of insurance products
 To strengthen our market leadership position in our three
main market segments: Life, Group Life, and Non-Life
By focusing on the following strategic levers:
 Multi-channel distribution
 Product innovation
 Operational excellence
Product and distribution mix
FY 08 Inflow: 100% = EUR 6.3 bn
(24%) Non-Life
(76%) Life
* Before minority interest of 10 EUR mio to Fortis Bank
FORTIS I 9/25/2009 I page 3
(19%) Employee Benefits
(33%) Broker
(48%) Bank

4. Key figures 06-09
FY 06
Gross inflow (EUR mio)
Life
Non-Life
Operating costs (EUR mio)
Net profit (EUR mio)
Life
Non-Life
Incidentals*:
Impact market turmoil
DRD tax benefit
Combined ratio (%)
FUM Life (EUR bn)
APE (EUR mio)
EV (EUR mio)
VANB ** (EUR mio)
Total solvency (EUR mio)

FY 07
FY 08
H1 09
6,744
5,475
1,269
(378)
553
434
119
7,518
6,151
1,367
(389)
522
425
97
6,283
4,818
1,465
(405)
6
(85)
91
3,554
2,746
808
(209)
204 *
181
23
0
(89)
(534)
99.1%
38.2
511
4,832
189 ***
n.a.
100.4%
42.1
585
5,307
151****
3,682
(82)
94
100.9%
105.6%
41.8
43.4
419
223
3,817
n.a.
53 *****
n.a.
3,536
3,732
 Stable underlying earnings over the past years
 Commercial momentum maintained
* Before minority interest to BNP Paribas Fortis Bank. On 12 May ‘09 Fortis sold 25% + 1 share of AG Insurance to Fortis Bank, resulting in a
minority interest of EUR 10 mio for the first half of FY 09
** VANB : As of FY 08, VANB is calculated after Result-Related Commission (RRC), therefore, comparable figures on 3 years are not available
*** EUR 189 mio before RRC
**** EUR 209 mio before RRC – EUR 151 mio after RRC
***** EUR 53 mio after RRC
FORTIS I 9/25/2009 I page 4

5. Combined ratio
Relation between Combined Ratio and Return on Required Capital (EUR mio)
Property
Motor ThirdParty Liability
Workmen’s
Comp
Premiums earned
100
100
100
726
Required Capital
32
32
47
468**
Reserve /premium
40%
190%
550%
175%
Investment income
2.9
8.9
23.9
68
Technical result excl fin income
3.0
(3.0)
15.4
(40)
97.0%
103.0%
115.4%
105.5%
3.9
3.9
5.6
22.8
12.0%
12.0%
12.0%
9.7%
Combined ratio
Net Profit
Return on Required Capital
 Target is to have a positive underwriting result, but …
  … high reserve to premium ratio, driven by product mix,
allows to have combined ratios of more than 100% while
still having adequate returns
* Based on H1 09 results
** Based on annualized H1 2009 premiums
FORTIS I 9/25/2009 I page 5
TOTAL Non-Life*

6. Agenda
1. Profile and track record
2. The market and the competition
3. Strategic initiatives
4. Conclusion
FORTIS I 9/25/2009 I page 6

7. Leading market position in Belgium remains intact
Life
Inflow per distribution channel (EUR mio)
Individual Life
FY 07 market shares (based on FY 08 Assuralia publication*)
Non-Life
(22%) Others
(28%) AG Insurance
Workmen’s Comp
1,971
Group Life
117
(12%) Dexia
Health Care
1,630
(14%) AXA -incl. Winterthur
116
(11%) KBC
1,206
(13% Ethias
60
Non-Life
1,854
FY 07 market shares (based on FY 08 Assuralia publication*)
929
495
1,514
522
(22%) AXA -incl. Winterthur
59
633
654
102
110
531
544
(33%) Others
651
348
(16%) AG Insurance
(6%) P&V
(9%) KBC
H1 08 H1 09
(14%) Ethias
H1 08 H1 09
H1 08 H1 09
Bank
Broker
Employee
Benefits
* FY 07 are latest available market shares published in Assuralia newsletter Assurinfo nr 34 -16 October ‘08
FORTIS I 9/25/2009 I page 7

8. AG Insurance has a major foothold in dominant distribution channels
Market shares of AG Insurance’s three main channels (Broker, Bancassurance, Assurfinance) are not under pressure
Brokers
Assurfinance
Life market
100%
Agents
Direct*
Non-Life market
100%
Bancassurance
20
22
80%
4
80%
13
60%
14
43
13
20
13
3
1
10
6
4
60%
6
40%
40%
70
20%
60
13
45
20%
21
FY 07
FY 06
FY 05
FY 04
FY 03
FY 01
 Non-Life: market share of Brokers, Banks and
Assurfinance 70% in FY 07, down 4% vs FY 95
* Direct includes B2B, B2C, E-commerce, other direct (affinity groups, captives & pools) but also mutuals and cooperatives
FORTIS I 9/25/2009 I page 8
FY 01
FY 00
FY 99
FY 98
FY 97
FY 96
FY 95
FY 07
FY 06
FY 05
FY 04
FY 03
FY 01
FY 01
FY 00
FY 99
FY 98
FY 97
FY 96
FY 95
FY 94
 Life: market share of Brokers, Banks &
Assurfinance 77% in FY 07, up 12% vs FY 95
FY 94
0%
0%

9. Competition

 Increasingly vigilant
regulators with focus on
governance, compliance
and transparency
 Faster pace of regulatory
change, especially in
customer protection and
transparency
 Solvency 2 & IFRS phase
2 leading to a
convergence of
regulatory and
economic capital
 Unstable tax
environment
 Customers becoming more
knowledgeable, price conscious,
looking for convenience and
transparency
 Ageing population and wealth shift
 Increasing Corporate Social
Responsibility (CSR) awareness




FORTIS I 9/25/2009 I page 9
 Bundling of products/solutions
 Shift from 0-% guarantee to
savings products with guaranteed interest
rate
 Shift to unit-linked products with capital
guarantee
 Entry of retirement solutions (annuities)
 Competition with
focus on price, new
market formulas and
distribution
approaches
 Aggressive niche
players attacking
specific segments
 War for talent and
specific profiles

10. Agenda
1. Profile and track record
2. The market and the competition
3. Strategic initiatives
4. Conclusion
FORTIS I 9/25/2009 I page 10

11. Key strategic objectives
Non-Life

 Return to higher profitability (target combined ratio below 100% over next years)
while keeping portfolio stable through
Tariff increases where required
Reduction of cost ratio
Adjust product features when needed
 Re-entering market of medium sized companies
Retail Life

 Simplification of Unit-Linked offer
 Move to one IST platform in individual life
 Promote products that are not in direct competition with banking products
(“backwaters”, such as risk, disability, and traditional products)
Group Life

 Further reinforce the embedded customer intimacy strategy
 Focus on segment below Top 300 companies, currently not being well served
 Operational excellence with new IST platforms
FORTIS I 9/25/2009 I page 11

12. Key Strategic Objectives
Multi-channel
Distribution

 Enhance cross-selling strategy and exploit untapped distribution synergies

Successfully implement Modulis VIP and ‘Back-to-the-front’
Modulis VIP, exploiting distribution synergies between bank and broker channel
Enhance cross-selling Group Life with Fortis Bank
Back-to-the-front: sales support staff and insurance experts to further increase
insurance sales in the Bank channel
Product-market
innovation

 Be recognized as the product champion in the industry
 Continue high pace of innovation
Strengthen Non-Life offering for Retail & SME market
Pack-strategy: offer extended solutions to specific client segments
Pension@work: Group Life offer for SME market
Operational
excellence

 Continue to be among the most cost efficient multi-channel insurer,
while providing best-in-class services to clients and distributors
Non-Life platform integration has been finalized
Reengineering of Group Life and Individual Life platforms
FORTIS I 9/25/2009 I page 12

13. Non-Life Strategy - Focus on the strengths of both
distribution channels and make them work in synergy
 Retail market approach
 Business market approach
 Both channels (Bank & Broker) with limited
cannibalisation
 Broker channel only
(often deep technical knowledge required)
 With one common product set (same products,
same acceptation & tarification rules; bank branches
can sell these products at the best price a topbroker can get)
 Specific products (more „tailor made“)
 On one IT system
(costs synergy)
 A new synergetic model: Modulis VIP
FORTIS I 9/25/2009 I page 13

14. Non-Life Strategy - The Modulis VIP Model synergy
Banking Clients
BNP Paribas
Fortis
400,000
Insurance Relationships
Modulis VIP strategy will …
 Push the business client to insure his
risks with AG Insurance, respecting his
current broker relation (if any)
 Stimulate the client of the broker to
choose BNP Paribas Fortis as banking
partner
AG Insurance
Through Broker
130,000
Other Cies
Through Broker
Other
Banks
Other
Channels
800,000
FORTIS I 9/25/2009 I page 14
800,000

 Cut the current insurance
relationship with the competition
(Ethias, KBC, etc.) that might
endanger the banking relationship
 Propose to these clients without
broker the services of a broker
 Bank receives lead remuneration
plus 2% portfolio commission
 Modulis VIP client enjoys higher
no-claim bonus

15. Modulis VIP: First Results
SITUATION 27/06/’09
Commercial achievements





Contribution in new business and portfolio
>16,000 leads received by end June ‘09
>6,400 Modulis VIP files in portfolio
One offer in 2 is converted into a contract
Practically all 1,000 BNP Paribas Fortis branches involved
>2,500 brokers involved
(max. 4,000 professional active brokers)
 After 16 months, Modulis VIP represents:
8% of the Modulis portfolio
3.6% of the SME portfolio
 New Modulis VIP = 20% of the new Modulis files
Number of leads Modulis VIP
Conversion of Leads Modulis VIP
1,500
29%
40% conversion
1,000
18%
22%
500
31%
4,616
4,885
2,928
3,469
3
4 5
6 7 8 9 10 11 12 1
FY 08
FORTIS I 9/25/2009 I page 15
2 3 4 5
FY 09
6
Existing
Modulis files
New
Leads/Offers Leads/Offers
Modulis files in progress not converted

16. Agenda
1. Profile and track record
2. The market and the competition
3. Strategic initiatives
4. Conclusion
FORTIS I 9/25/2009 I page 16

17. Conclusion
 Stable underlying profitability, in a difficult
market context, with commercial momentum
holding well
 Maintain leadership position in Life
 Return to higher profitability
(target combined ratio <100%) in Non-Life
 Still room for further growth through crossselling and product and service innovation
FORTIS I 9/25/2009 I page 17