WWW.EUREKO.COM
EUREKO PRESENTATION
November 2010 2 Content
1. Eureko Group
2. Strategy
3. Financial Review
WWW.EUREKO.COM 3 Eureko in H1 2010
Strong increase net profit helped by PZU settlement
Financial position further strengthened
On track for achieving structural cost reductions and efficiency ambitions
Economies of scale to come from complexity reduction and further streamlining
Restoration of sector confidence remains key; sharper focus on customer needs
WWW.EUREKO.COM 4 Stable and supportive shareholder base
June 2010
Achmea Other Preference Rabobank Association Shareholders1 Shareholders2
55.2% 39.4% 5.4%
Eureko Tussenholding 100.0% Ordinary Shares
94.5% 5.5% Eureko
Strong (proven) support from major existing shareholders Rabobank will lower her capital share in the future to approximately 29%
1 MillenniumBCP (2.7%), Gothaer (1.1%), LF Group (0.9%) and Swiss Mobiliar (0.7%). 2 No voting rights. WWW.EUREKO.COM 5 Rabobank will reduce stake in Eureko to approximately 29%
To enable Rabobank to reduce its stake in Eureko in order to mitigate Overall aim consequences of Basel III, whilst strengthening the commercial and operational partnership as per 1 January 2011
Strengthening of Eureko – Rabobank strategic and commercial partnership, in particular Interpolis – Rabobank distribution agreement (indefinite) Achmea Association buys the shares from Rabobank and Achmea Association takes out a loan to finance this transaction Transaction The share of Rabobank in Eureko is also diluted through the planned merger of Achmea Association and the Health insurance cooperation De Friesland and a proposed share buy-back by Eureko Amendments to governance model; relationship in future on shareholder level Continuation of current dividend policy
New ownership Achmea Association 65%, Rabobank 29.5% and minority shareholders 5.5% structure
WWW.EUREKO.COM 6 Eureko group companies
June 2010 EUREKO
Core countries
Achmea Interamerican Eureko Sigorta1 Oranta Garanti Emeklilik (The Netherlands) (Greece) (Turkey) (Russia) (Turkey) 100% 100% 80% 100% 15%
Market share #2 in the market with Market share Active in Non-Life, Eureko has the right to Non-Life: 20% leading positions in Non-Life: 5% Health. acquire another 35% Health: 29% Non-Life, Health and mid 2010 to mid 2012. Life: 12% Life Garanti Emeklilik is a Life insurance GWP GWP GWP GWP Company. €9,943 mln €223 mln €158 mln €40 mln
Manage for value countries
Friends First Union Interamerican Eureko Asiguari (Ireland) (Slovakia) (Bulgaria) (Romania) 100% 97% 100% 100%
1 Garanti Bank has a put option on of the shares in Eureko Sigorta that can be exercised from July 2010.
WWW.EUREKO.COM 7 Content
1. Eureko Group
2. Strategy
3. Financial Review
WWW.EUREKO.COM 8 Achmea market position1 in the Netherlands
Delta Non-life Achmea Allianz ASR ING Lloyd
Health AchmeaUVIT CZ Group Menzis Fries- land
Delta Income Protection ASRAchmea ING Aegon Lloyd
Pension INGAegon Delta Lloyd Achmea SNS Reaal
Delta Individual Life ING SNS Reaal Achmea ASR Lloyd
Occupational K Arbo Unie Achmea ArboNed Maetis L Health Services M
Mn Aegon APG PGGM Achmea Pension Services Services
0 10 2030 40 50 60 70 80 90 100%
1 In 2009
WWW.EUREKO.COM 9 Strategic choices in the Netherlands
WWW.EUREKO.COM 10 Non-life market
Market trends – Qualitative Market trends – Quantitative Obligation for informed renewal Expected annual growth 2010-2013: 1.1% Information, sales and service increasingly via internet The market for Non-life is expected to remain fairly stable Trend Customer Agreed Remuneration Breaks Ban on commission for more complex Achmea will generate growth above market products (life, pension, income protection) levels (specifically private individuals), as due to operational excellence, more competitive Transparency for non-life products products will be introduced in the market (pro-active)
Market size / market share Customer retention – Ever shorter recovery time acquisition costs SizeNon-life Share Customers increasingly more critical of advisor 25 25 contribution 20 20 Development internet customer services is slow Issues 15 15
10 10
5 5
0 0 20072008 2009 2010 2011 2012
WWW.EUREKO.COM 11 Income Protection market
Market trends – Qualitative Market trends – Quantitative Break into temporary employment sector Expected annual growth 2010-2013: 3.5% (Absenteeism) and potential break into The existing market is expected to shrink; education sector however, this will be out weighted by possible Trend Privatisation WGA opt out privatisations Breaks Customer Agreed Remuneration Achmea’s market share is expected to be around 20%
Market size / market share Economic recovery from 2011/2012 Price effect AOV / Absenteeism development Size Income Share damage is such that price drops / erosion is 25 25 curbed and converted into price increases from 20 20 2011 / 2012 Issues 15 15
10 10
5 5
0 0 2007 2008 2009 2010 2011 2012
WWW.EUREKO.COM 12 Health market
Market trends – Qualitative Market trends – Quantitative Depending on outcome elections and color Expected annual market growth of cabinet 2010-2013: 3.1% Reconsideration could lead to shift in trend The market is expected to grow as a result of Trend Possible transfer AWBZ, but increasingly increasing health care expenses, inflation and Breaks unlikely increased longevity Abolition ex-post compensation Achmea will sustain its market share of around 30% (in 2009 4.8 mln insured), excl. De Friesland (3%)
Market size / market share Competition puts pressure on returns Increased own risk leads to premium pressure Size Health Share and lower supplementary health insurances 60 40 Abolition maximum group discount 50 30 40 Issues Solidarity principle disappears little by little; ex- ante system will have to be improved 30 20 20 Discussions on quality of health care offerings 10 10 0 0 2007 2008 2009 2010 2011 2012
WWW.EUREKO.COM 13 Pension market
Market trends – Qualitative Market trends – Quantitative Shift to Individual Defined Contribution, Expected annual growth 2010-2013: 3.5% Collective Defined Contribution and Defined The Pension market is expected to show some Contribution with payment guarantees growth from 2010 through 2012 More austerity (due to recession) pushed Trend We expect to be able to increase our market back the size of the pension market slightly Breaks share through additional focus on the SME in 2009 / 2010 market (depending on outcome of K2 – See Customer Agreed Remuneration separate presentation on pensions)
Market size / market share Development of the interest-rate curve as a result of issued guarantees SizePensions Share Duration recession and discussion on 25 25 pensionable age of 1st and 2nd tier 20 20 Uncertainty on mortality risk / life expectations Issues 15 15
10 10
5 5
0 0 2007 2008 2009 2010 2011 2012
WWW.EUREKO.COM 14 Individual Life market
Market trends – Qualitative Market trends – Quantitative Regulatory changes, transparency and banks Expected annual growth of GWP 2010-2013: as supplier of Life products have changed and -/- 1.2 % (decline) will continue to change the Life market A steady decline is expected, due to the decline Trend Tax regime on bank ‘savings’ products in mortgage-related products and lower pricing on the new life risk insurance Breaks Customer mistrust of life insurers Achmea expects to be able to retain a market Customer Agreed Remuneration share of around 11% on GWP. Market share on APE will decline to approx 9%
Market size / market share Erosion new production and possible erosion revenue if policies are transferred to bank SizeIndividual Life Share savings products 25 25 Customer preference for transparent (bank 20 20 savings) products Issues 15 15 Customer increasingly more critical of advisor contribution 10 10
5 5
0 0 2007 2008 2009 2010 2011 2012
WWW.EUREKO.COM 15 Our position? The strategy is clear – now the implementation
Most trusted insurer
Short-term profitability Mid-term improvement Long-term strategic improvement initiatives choices
Cost-cutting programme SENS Market segments Complexity reduction Non-life Products Health Processes Income Protection Entities Channels IT Direct Domains Banking Strengthen relationship with social partners
Development of professional skills
The customer is key in “Achmea unburdens”
Revitalise cooperative identity
WWW.EUREKO.COM 16 Progress implementations
Structural cost reduction of 7% achieved or €77 mln in first half of 2010; on track for target of €300 mln end of 2011 Short term Targets for lower expense ratios met: profitability improvement Non-life: expense ratio improved Basic Health: expense ratio is lower than target of 3% FTE reduction of 1,930 since year-end 2008 (target -2,500 end of 2011)
Investments in strategic projects like new IT infrastructure, shared domains, back offices and Solvency II In Q4 2010 roll out of complete new business process in Non-Life, supported Mid term by a new IT system improvement Integration of our Health activities (Achmea Health and Agis) starts one year initiatives earlier than announced at the merger Number legal entities to be strongly reduced Streamlining of Syntrus Achmea
Long term Transforming Dutch broker channel into marketing & sales organisation strategic Focus on Income Protection has resulted in significant growth in H1 2010 choices In Life business focus on profitability instead of growth
WWW.EUREKO.COM 17 Strategic choices for the International portfolio
Other aspects international strategy Focus in short term will not be on international expansion but on developing sound operations in our core activities.
Based on long term strategic focus in core and manage for value countries we sold the activities in Cyprus and the Euroclinic Hospital and Euroclinic Medical Centers in Romania and announced the sale of Avéro Insurance Belgium.
WWW.EUREKO.COM 18 Content
1. Eureko Group
2. Strategy
3. Financial Review
WWW.EUREKO.COM 19 Net profit lifted by PZU, better investment results and 7% structural cost reductions
Key figures (in € mln) H1 2010 H1 2009 Change Net profit to €864 mln. Net profit 864 115 n.m. Net profit higher due to PZU Of which PZU settlement 725 0 n.m. settlement, better investment results but offset by additional Net profit excl. PZU settlement 139 115 +21% provision for unit linked of €143 mln. Profit before tax 835 94 n.m. Profit before tax €835 mln, Gross written premiums 10,713 10,502 +2% including PZU settlement of Operational expenses 1,603 1,599 0% €726 mln.
Gross written premiums up.
Key figures (in € mln) 30-06- 31-12- Change Structural cost reductions of 2010 2009 7% offset by investments in Total equity 10,720 10,127 +6% strategic projects. Solvency 225% 216% +9% pts Solvency improved to 225%.
WWW.EUREKO.COM 20 Profit before tax up corrected for large one-offs in € mln 1,000 Several large items impacted our 835 -726 profit before tax. 800 Corrected for these items profit before tax amounted to €142 mln compared to €94 mln in H1 600 2009.
400 83 -224 143
142 200 32 94
0 0 U A D P P O Z p n in d f e C B i l U r it d na t t o P T o s a h - it r B v li t i n e r H s i n r o im r P e 2 T e s a c 0 1 k n i B c H tt io te a p t 0 2 e a T e 1 l n d g l a 9 0 e l d m i i m c 1 c n t 0 a e p v e r n r k t o s t e je m ts c . t s
WWW.EUREKO.COM 21 Performance business lines: Gross written premiums in € bln 10.7 10.5 Gross written premiums (GWP) up 2% to €10.7 billion. 10 Non-Life achieved 3% growth Non-Life Non-Life despite pressure in some 2.44 2.37 +3% markets.
7.5 Life Life In Life GWP remains under 2.08 2.37 ‐12% pressure, premiums down 12%. GWP Health 7% higher due to higher contributions from 5 government and increased Health Health premiums from customers to 6.19 5.77 cover increased costs of health. +7% 2.5
0 H1 2010 H1 2009
WWW.EUREKO.COM 22 Performance business lines: Profit before tax
Profit before tax H1 2010 H1 2009 Change All business lines report higher results. (in € mln) Non-life 219 103 +116 Results in Non-life boosted by better investment results, lower claims ratio Health 162 143 +19 and lower expenses.
Life -100 -117 +17 Lower operating expenses and growth in premiums resulted higher results in Banking 49 13 +36 Health. Other activities 505 -48 +553 Life results improved due to higher Total 835 94 741 investment results and lower expenses. Negative impact result through provision for unit-linked of €143 million.
Increase in profit in Banking thanks to improved efficiency ratio and lower loan loss provision.
Result in Other activities higher due to PZU settlement, partly offset by investments in strategic projects.
WWW.EUREKO.COM 23 Structural cost savings of 7% achieved
in € mln In € mln H1 2010 H1 2009 Change
Total operating expenses 1,603 1,599 0%
1,300 Commission expenses 442 476 -7% 32 -77 Total operating costs 1,161 1,123 3% 83 1,161 excl. commission exp. 1,123
1,100 Significant investments in strategic projects (€83 mln) obscures achieved structural cost reductions of €77 mln.
900 Commission expenses down 7%, partly due to lower sales.
Other concerns costs made for the 700 IPO of PZU (€12 mln) and a vacancy H In O S H provision (€20 mln). e 1 s t r e 1 x t v h e tr x 2 r e u 2 c a s e d c l 0 r c l 0 . te t u t . c 0 m c u c 1 o 9 g t r o 0 i e i a m o c n o m o Number of FTEs decreased 4%. p n l p m p ts s c m e r o e . r o i . r e a j n s e a x t e t x t p in c p in e g ts e g n n s c s c e o e o s s s s t t
WWW.EUREKO.COM 24 Capital and solvency position further strengthened in € mln 11,000 Own equity position up 6%. 10,720 Net profit and revaluations are main 51 contributors. 10,127 -655 333 In H1 2010 €655 mln paid out in 10,000 864 dividend. Proposal is to pay out an interim dividend in H2 of € 471 mln or €1.15 per ordinary share.
Group solvency improved 9%-pts to 225%. 9,000
8,0000 3 N D R O 3 1 c i 0 e o v e t - t h v h - 1 y u id e 0 2 P a b p e l r 6 - r r o n u 2 o i 2 f d n d a 0 i t 0 0 t c p a io 1 9 a a n n 0 p y d ita m l e n ts
WWW.EUREKO.COM 25 Liquidity: debt position holding decreasing
(€ mln)
3.000 40% Hybrid 36.3% Debt leverage 2.500 35% Max. external debt
1,325 30% 2.000 22.7% 25% 21.4% 1.500 1,325 1,325 20%
1.000 15%
1,425 10% 500 881 851 5%
0 0% 2008 2009 H1 2010 31-12-08 31-12-09 30-06-10
Our external debt position improved slightly to €851 million Debt leverage improved from 22.7% to 21.4% due to increase in net profit and lower debt
WWW.EUREKO.COM 26 Conservative investment portfolio
30 June 2010 2% 5% 1% 6% 4% 5% 1% 6% 4% By credit rating
9% 82%
AAA AA A BBB 1% 3% 5% 11% 75% By instrument 12% 59% Fixed income Deposits/cash Real estate 9% Derivatives Equity Alternatives Government Bond Government related Corporate bonds Loans Asset Backed Sec. Covered Bonds Convertibles WWW.EUREKO.COM 27 Sovereign exposure to GIIPS countries limited (in € mln) 30-06-10 In % of fixed 31-12-09 In % of fixed Total exposure €814 mln or income income 2.5% of total fixed income Portugal 91 0.3% 110 0.4% portfolio. Italy 92 0.3% 205 0.7% Exposure on Greece and Ireland 476 1.5% 538 1.8% Ireland relates to our business Greece 107 0.3% 149 0.5% in those countries. Corrected Spain 48 0.1% 60 0.2% for this, exposure is only 0.7%. Total 814 2.5% 1,062 3.5% Current exposure is in line with our risk profile and no considerable reductions in this portfolio are expected in H2 2010. WWW.EUREKO.COM 28 Uncertainties H2 2010 Uncertainties in the health insurance industry remain. Despite the second final Health settlement for over/under financing for the claim year 2006, the College for Insurance Zorgverzekeringen (CVZ) has decided to reopen this settlement following an appeal. New life expectancy tables have been published by the Dutch Association of Actuaries. The tables project that people will live longer. Exact impact for Eureko Longevity is not known yet because we base our life expectancy table on the Dutch Association of Insurers which will publish their tables later in the year. In July 2010, the Netherlands was hit by several severe storms that Summer caused significant damage to private and corporate property and greenhouses. storms and In addition to storms, our Non-Life business faced some severe fire claims in the major fires corporate segment. Foreign Eureko hedges the foreign exchange risk in its equity investment portfolio exchange rate through foreign exchange derivative contracts. As a consequence there is an exposure Inherent accounting mismatch. WWW.EUREKO.COM 29 Solvency II Because of a strong capital position and relatively low risk profile, the stress test (CEIOPS) on 30 June 2009 numbers showed that Eureko’s solvency levels would remain significantly above 100% in all scenarios. Main concerns on Solvency II: - Linked to the financial crisis CEIOPS has overreacted in its proposals resulting in a significant increase of capital requirements not in accordance with the real risk. - The proposals do not yet reflect the specificities of the Dutch basic health system. However, a European solution is under development, which will offer the opportunity to lower capital requirements. Eureko actively participates in discussions on the development of Solvency II implementing measures and guidelines. Eureko aims at using (partial) internal models and is participating in the pre-application process on internal models from July 2010. Preliminary calculations for Eureko Group per end of 2009 show that even with the proposed higher charges compared to QIS4 and not taking into account the risk mitigating characteristics of the basic health insurance system, Eureko will be able to meet Solvency II capital requirements (own funds/group SCR ~125%). Eureko will participate in QIS5, which takes place from 1 August 2010 until 15 November 2010. National guidance will be delivered on the treatment of Dutch basic health insurance in QIS5. WWW.EUREKO.COM 30 Strong credit ratings Insurer Financial Strength Rating: A+ (negative outlook) Holding Counterparty Credit Rating: A- (negative outlook) S&P has confirmed its ratings on 31st March 2010 Strengths Strong competitive position in all business lines in the Dutch market Strong financial management evidenced by: very strong capitalisation in amount and quality strong and well diversified investment profile and asset-liability management strong liquidity profile based on substantial marketable and near-cash instruments Strong financial flexibility Weaknesses Underperforming life and pensions businesses, particularly in the Netherlands High geographic concentration in the Netherlands WWW.EUREKO.COM 31 Contact details For further information, please contact Investor Relations department: Sandra van Gils Manager Investor Relations Group Balance Sheet Management Capital Management & Investor Relations +31 (0)30 693 7051 Gül Poslu Investor Relations Officer Group Balance Sheet Management Capital Management & Investor Relations +31 (0)30 693 7038 Email: [email protected] Internet: www.eureko.com WWW.EUREKO.COM 32 Disclaimer This document contains certain forward-looking statements with respect to certain plans and objectives of the Company and its subsidiaries (together the “Group”) and to the Group’s current expectations relating to its future financial condition and performance. The Group may also make forward-looking statements in other written materials. In addition, the Group’s senior management may make forward-looking statements orally to analysts, investors, representatives of the media and others. In particular, among other statements, certain statements with regard to management objectives, trends in results of operations and revenues are forward-looking in nature. These forward-looking statements are based on management’s current views, estimates and assumptions about these future events. By their nature, forward- looking statements are subject to certain risks and uncertainty that may cause the Group’s actual results to differ materially from those set forth in the Group’s forward-looking statements. The Company undertakes no obligation to update the forward-looking statement contained in this presentation or any other forward-looking statement made in any form by the Group. The information contained herein is not an offer of securities for sale in the United States of America or any other country. Eureko B.V. has not registered and will not register any securities under the U.S. Securities Act of 1933, as amended, and securities may not be offered, sold or delivered in the United States of America absent registration or an exemption from registration. WWW.EUREKO.COM