Ageas’ Strategy in Portugal
AGEAS INVESTOR DAY 6 TH OF JUNE 2017 I LISBON PORTUGAL • Evolution of Ageas’ presence in Portugal
• Ocidental : A success story since 2005 Agenda • Ageas Seguros : turnaround and independent set-up on track • Strategic priorities for the coming years
• Conclusion
I 2 I Evolution of Ageas’ presence in Portugal
I 3 I 2005
Ageas enters Portugal via Evolution of a partnership with BCP Investment of Ageas’ presence mio in Portugal EUR 510
I 4 I 2005 2014
Ageas enters Portugal via Step-up from 51% to 100% Evolution of a partnership with BCP of Non-Life / Médis Investment of Investment of Ageas’ presence mio mio in Portugal EUR 510 EUR 123 Distribution agreements in Life and Non-Life extended until end 2029
I 5 I 2005 2014 2015
Ageas enters Portugal via Step-up from 51% to 100% Acquisition AXA Portugal Evolution of a partnership with BCP of Non-Life / Médis Investment of Investment of Investment of Ageas’ presence mio mio mio in Portugal EUR 510 EUR 123 EUR 264 Distribution agreements in Life and Non-Life extended until end 2029
I 6 I 2005 2014 2015 2016
Ageas enters Portugal via Step-up from 51% to 100% Acquisition AXA Portugal Portugal new a partnership with BCP of Non-Life / Médis home market to Evolution of Ageas Investment of Investment of Investment of Ageas’ presence mio mio mio in Portugal EUR 510 EUR 123 EUR 264 Distribution agreements in Life and Non-Life extended until end 2029
I 7 I Real GDP Growth (%) Public Deficit and Debt as % Unemployment Rate (%) of GDP (%)
4% -1% 150% 18% 125.7 % 3% 1.4% 16% -3% 2% 120% 14% 11.1% -5% 1% 12% 90% Portuguese 0% -7% 10% -1% 8% -9% 60% -2% 6% -11% Economic Recovery -3% 30% 4% -4% -13% 2% -5% -15% 0% 0% 08A 09A 10A 11A 12A 13A 14A 15E 16E 17E 18E 19E 08A 09A 10A 11A 12A 13A 14A 15E 16E 17E 18E 19E 08A 09A 10A 11A 12A 13A 14A 15E 16E 17E 18E 19E
I 8 I • Strengthen our foothold in a core market we know since more than 10 years Why • Capture the growth opportunities in a recovering Portuguese economy • With Mbcp Ageas, Ageas has showed the capability to generate good returns, Portugal? even in difficult circumstances • Ageas can now operate as a multi-channel insurer, addressing all types of clients
I 9 I
#1 2 corporate names in Life Ocidental Grupo (Existing business) and Ageas Seguros (Acquired Axa Portugal business) #1 in Pensions #2 8 entities Portugal overall insurer active in Life, Non-Life, Pension, Health and new home #2 Direct businesses in Health market to Ageas #3 6 brands in Non-Life Ocidental Seguros, Ocidental Vida, Ocidental Pensões, Medis, Ageas Seguros, Seguro Directo
I 10 I Complementary business mix Ocidental is strong in Life & Health, Ageas Seguros strong in Motor
Omni-channel: Portugal full range of distribution channels (bancassurance, agents, direct, affinities) Distribution network of new home branches market to Ageas 671 3,350 agents and brokers Direct platform 1,233 Médis network employees
I 11 I Premiums Market 4,196 Non-Life 2016 1,132 With the acquisition of AXA, Ageas in EUR mio becomes the 3rd player in the market (From 7% to 14%) 646 N°3 in Non-Life after Better diversified and more balanced 566 portfolio : Motor & Health major Lines acquisition of Business each counting for 33% of Consolidation likely 410 premium volumes
285 New agency & direct distribution to continue channel offers complementary distribution capacity besides existing bancassurance 226 channel
198
129
I 12 I Provisions Market 38.333 Life based 10,120 on technical liabilities 2016 9,505 EUR mio N°1 Position in 4,530 Life confirmed after 3,999
2,461 acquisition Already before acquisition,
1,579 Ocidental market leader
further 1,316 Acquisition Ageas Seguros reinforced market position
883
I 13 I Portugal Portugal Non-Life gross inflows Life gross inflows Market Share Market Share
16% 25% 22.80% 13.5%
17.70% 12% 20% 21.10% Portugal 16.10%
15% 13.00% 7.20% Excl. Ageas Market Share 8% 6.70% 6.80% 11.00% Seguros 6.20% 5.70% Excl. Ageas Seguros 10% 4% 5%
0% 0% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
I 14 I Portugal Net Profit Portugal Net Profit as % of Total Ageas as % of Total CEU Net Profit Insurance Net Profit
52** 50 48 42 6% 40* 39 40 37 Portugal within 30 Ageas & CEU 2016 55% 2016 45% Net Profit 20 10
94% 0
2011 2012 2013 2014 2015 2016 Portugal Other * 2011 adjustment for impairments on ** Excluding EUR 11 mio net impact fixed income investments integration costs Ageas Seguros I 15 I Portugal Portugal Combined Ratio Operating Margin Guaranteed
1.85% Portugal within 105.0% 2.0% 1.66% 1.55% Ageas & CEU 100.0% 1.45% 1.77% 1.5% Excl. Ageas Operating Seguros 93.5% 95.0% 92.9% 92.8%
Performance 90.5% 1.0% 1.09% 90.0% 86.5% 0.5% 85.0% 86.2% Excl. Ageas Seguros
80.0% 0% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
I 16 I Portugal CEU & Portugal CEU Shareholder’s Equity Dividend Upstream Portugal in EUR mio in EUR mio France 160 Italy 150 Turkey Luxembourg 140 132
120 900 803 Portugal within 100 800 744 696 Ageas & CEU 700 80
600 Equity & Dividend 60 53 48 480 491 500 41 40 36 25 400 20 20 19 300 7 7 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2017 estimated
I 17 I Ocidental A success story since 2005
I 18 I Manage well Bancassurance profitability specialist • Track record • Strong capacity to automate, standardize • Diversified mix in Life and simplify processes • Above market average efficiency level • Intimate relationship with main distributor
Success factors Simple products in a nutshell Distinctive value Focus in profitable proposition in Health customer segments • Successful brand – Médis • Innovative • Multi-channel distribution
I 19 I Life Inflows growing Successful strategic effort led to in a declining market stronger operational position in Life
-2.4%
5.3% 33% Life
Growing in a declining 1,090 1,408 7,555 6,676 Weight of Open UL 9% +24% in Life portfolio – 2011 2016 2011 2016 market with strong New business profitability Portugal Guaranteed Margin 1.66% 1.77% Life Net Result 49 +0.11% (before VOBA) in EUR mio OCV OC Pensões
18 2012 2016 5 4
2011 2016 I 20 I Non-Life (incl. health) strongly overperforming the market and growing market share
0.1%
7.5%
92.9% 86.5% -6.3% 227 326 4,133 4,196 Combined Ratio Non-Life 2011 2016 2011 2016 Growing in a flat market Portugal
Non-Life Net Result
in EUR mio OCS Médis
16 15 7 5 2011 2016
2011 2016 I 21 I Vision statement “Be the recommended Insurance Group in Portugal”
Ocidental 4 Strategic Choises Defined a strategic vision with four strategic choices Partners Customers Innovation People Focus on partners as our Exceed expectations with Challenge boundaries to Be a top-notch organization, primary distribution choice the highest efficiency and create innovative value agile and socially committed transparency propositions • Integrated Plug-In concept • Distinctive HR value proposition • Proximity • Innovative value propositions • Learning & mentoring • Operational excellence • Foster entrepreneurial mindset • Empowerment • Understanding customer needs • Shared value approach with social impact
I 22 I Ageas Seguros : turnaround and independent set-up on track
I 23 I 7 Aug. 15 Mar. 1stApr. 26 Apr. 2015 2016 2016 2016 Milestones in Acquisition AXA Portugal Signing Approval from Closing & start of Rebranded into all Regulators Inclusion in Ageas seguros Q2 results
I 24 I 675 > EUR 400 mio Employees premiums Ageas Seguros (May ‘16) (Life + Non-Life) Profile ˃ 650.000 Mainly Motor Customers +/- 60% of business mix
I 25 I 1 2 3 4
Rebranding Managing Business Synergies and and boost towards full transformation Integration Ageas Seguros commercial independence dynamics • Turning unprofitable • Moving towards the Lines Of Business Target Operating • Launch of Ageas • Management and (LOB) into profit Model for Ageas in Key priorities Seguros by the end of monitoring of Portugal April 2016 Temporary Service • Grow the profitable Agreements (TSA) business and extend • Simplify legal structure • Increase proximity with footprint business partners • Execution Carve-out Plan • Reduce costs
As from day 1 Deadline: September 2017 From mid 2016 until 2018 Staged approach starting with top governance and support I 26 I functions Succesful brand launch 1st promising signs of transformation leading to New Business encouraging turnaround in Revenues A fast growing new business sales as from In force Business brand awareness: September ‘16! 10.9% 1 ambitious objectives! 9.5% 60% 6.2% 3.4% 2.2% 2.8% 1.6% Rebranding and 1.2% 45% - 0.1% 0.6% Ageas Seguros -2.9% -1.6% 3.0% boost commercial -0.5% 34% -6.5% -4.9% Key Objectives dynamics 30% -9.0% -11.2% -7.8%
-11.4%
-13.5% -17. 2% -17.7% 1% -17.9% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec March.16 May 16 Nov. 16 2017 2018
I 27 I Extending the distribution footprint to spur growth in Life and Non-Life
Premium Brokers • Brokers grow share through Exclusive Network selective choices. Progressively 20 evolve from 8 to 20 Brokers. Private +150% Multibrand agents 170 • Organic growth of Exclusives and 1 8 increase x-sell in Client base # of agents 300 +25% 160 • Private network size enlargement; Rebranding and focus on growth in Life (protection), Ageas Seguros 240 Health and Home. boost commercial in EUR mio • Multibrand increase share of Key Objectives dynamics 253 +257 PoS “wallet” Non-Life GWP +30% +21% 121 Life GWP CAGR of 374 15% Total 825 1,000 horizon 2019
Figures do not include the 2,015 agents that are not assigned to a commercial manager 2016 2019
I 28 I IT Carve-out program - substantial investment to become fully independent
18 projects, 120 people, many internal and external stakeholders, rebuilding of January 16 most of the IT team, massive data-centre transfer, build up and/or technological September 17 upgrades in most applications… in 18 months, until September 2017 2
Managing towards IT Rebranding & Preparation Data Center Set Up Finance Ageas Seguros full independence New Applications Key Objectives Direct Migration & Set Up & Migration & Risk
Some achievements Integration Costs • Rebranding & Direct business operations integration • 2016 included ~EUR 10 mio integration costs • Aprox. 60 applications updated • Declining costs expected in 2017 – 2018 • New Ageas data center in Portugal • New solutions (eg Finance and call center) implemented from a country perspective I 29 I Comprehensive ... based on ... with diverse ... and Programme ... 3 axes challenges achievements
Improve profit in • Improve granularity • Pruning of the portfolio underperforming and time to market • New tariff in Workers Compensation • • 3 14 areas for Lines of Business Preparing for Claims New Motor tariff improvement upscale • Upgraded claims operating model in property Business Ageas Seguros transformation to 2 years program Growth of • Restore confidence • New Household product Key Objectives become profitable Networks and • Turn from pruning • Strengthening of sales tools and 25 projects profitable business towards growth processes • Extend footprint • Changed sales organization • Growing the exclusive network > 3,000 Expected IT man-days in 2017 Fixing • Optimize cost base • Improved collection process operational setup • Ensure efficient IT • Move towards digital
I 30 I Improve profit underperforming LOB –Motor
Market Context Motor Market Loss Ratio vs. Motor Ageas Loss Ratio*
• +/- 60% of business 73.6% Ageas Market • Motor accounted for 46% of Portuguese Non-Life premiums excluding 69.7%
Health (December 15, Portuguese Insurance Association) 65.8% 3 • Distribution dominated by agents 65.6% • Price competition to capture new business high, price sophistication 64.4% Below 60% Business * Gross Loss Ratio, excluding claims relatively low 60.2% handling costs and investment income. Ageas Seguros transformation to Key Objectives become profitable Actions taken by Ageas 2014 2015 2016 Ambition 2019 Repair with Increase of internal non-OEM parts controls and follow-up Ageas Motor Claims Frequency Launch of granular New Business tariff 11.80% Strengthening of Improve Steering 11.50% technical teams to selected Bodyshops Optimization 10.90% of renewals Innovative covers Reserves on auto insurance strengthening 2014 2015 2016 I 31 I Improve profit underperforming LOB –Workers Compensation
WC Market Loss Ratio vs. 152% Market Context WC Ageas Loss Ratio*
• +/- 15% of business 136.5% • Market has underperformed recently Ageas • Increased pressure & scrutiny from regulator Market
3 * Gross Loss Ratio, excluding claims • Mergers & Acquisitions leading to increased focus on handling costs and investment income. 110.5% underwriting margins Business 100.0% Breakeven Ageas Seguros transformation to 104.2% 91.3% Actions taken by Ageas Key Objectives become profitable 2014 2015 2016 Ambition 2019
Launch of granular Reserves New Business tariff strengthening WC Portfolio composition per Sum Insured Micro in EUR mio Small Optimization Portfolio 3% Medium Dec. of renewals review 20% 20% 19% 30% 7% Large 2014 Self. Employed 4% Underwriting Housemaids Clinical network May 20% 24% 22% 16% 9% focus on more profitable 2016 Sources: Team analysis & Portuguese optimization Insurance Association. micro & small segments I 32 I Strategic priorities for the coming years
I 33 I External Customer focus and emotions in Position Ageas in the the center Inorganic and Ageas Portugal market as distinctive organic growth 3 player (role in society) in each channel Areas of reference: to become a Ageing people, Health, reference in 3 areas Connected homes in the next 5 years Vision Mission Ageas to become a reference in the Deliver an emotional and meaningful Portuguese market, a second home insurance experience into people’s and to operate as market for Ageas Group and a great lives place to work for entrepreneurial people 1 single company Internal 1 Ageas Portugal Boost Innovation Operate as identity, culture and and entrepreneurship 1company spirit Be an outstanding employer with professional people
I 34 I To achieve full integration it is necessary to ensure…
Leadership People Leadership Processes Processes IT Integration speed Integration process One Ageas People IT 100% will run in different 90% speeds along 80% Keys to success 4 main dimensions 60% • Management taking up new responsibilities is a driving force for
the implementation 40% • Focus on non-IT integration first
• Full harmonisation of processes is dependent on disentanglement 20% Ageas Carve-out and IT implementation (tools and core) Dependency • Full synergy potential to be harvested from 2019 0% Dec 2016 Dec 2017 Dec 2018 Dec 2019
I 35 I JV Life Bank Insurance Health & Partnerships Agents & Life / Direct & Non-Life
• Distribution & Sales • Distribution & Sales • Distribution & Sales • Marketing • Marketing • Marketing Non- Life & Life Non-Life One Ageas Life Health Non-Life Integration Program Platform Platform Platform Health Direct
Transversal areas
From 2 groups working on an integrated way To 3 Business Units within Ageas Portugal Group, supported by transversal areas
I 36 I One Ageas - Integration Program
Achieved Ongoing Targets
Wave 1 - 2016 Wave 2 - 2017 Wave 3 - 2018 Wave 4 - 2019 +...
• Country Exco • Launch “One AGEAS Portugal” at • TOM fully operational • One location in both Lisbon/Porto Integration waves • Launch “One AGEAS Portugal” at employees level and launch change • Legal merger Non-Life • Product and process harmonisation as from 2017, critical management level management program • Roll out IT plan • IT core systems roll out • Set up Ageas Portugal Holding (APS) • New governance implementation • First “core IT” ready for roll-out • Capture full potential of synergies to keep the rythm confirmed • IT global planning and first enablers (claims, middle-layer) • Solvency II and capital management to integration at country level • First Integration Masterplan
1st integration wave with 10 2nd synergies wave: all transversal 3rd synergies wave Business Units transversal areas operating for all areas ready for full execution; fully operational companies Business Unit finding shape I 37 I Conclusion
I 38 I • Portugal new “home market” for Ageas
• Ageas may participate to market consolidation in Non-Life
• Work towards “One Ageas Portugal” by 2019
Conclusion Ageas Portugal will reach by 2019 the Group ROE Target of 11%-13%
I 39 I