UBS - The Italian Financials Conference Rome, February 3rd, 2005 Growth Options for Italian Financials Assicurazioni Generali Giovanni Perissinotto - CEO Agenda 1 2005 Macroeconomic Context & Insurance Trends Outlook and Growth Drivers for Generali Future Growth Options: CEE and China Conclusions Macroeconomic Scenario 2005: Moderate Growth & Inflation Subdued 2 GDP (yoy real growth rate) Equities (Total Return) 29.0 5 28.7 26.5 4 24.0 25.2 3.8 21.5 3.6 19.1 3 19.0 3.0 3.0 16.5 2 14.0 1.6 1.3 11.5 1.5 1 9.0 8.1 8.1 0.5 6.5 6.4 0 4.0 % 2003A 2004E 2005E % 2003A 2004A 2005E World Euro area USA Japan EMU S&P 500 Japan Inflation (yoy real growth rate) 10 year government bond 3.0 5.0 4.7 2.4 4.2 2.4 4.2 2.3 2.3 4.0 2.0 4.0 2.1 1.6 3.0 1.0 2.0 2.1 0.0 0.1 1.0 -0.3 1.0 -1.0 % 2003A 2004E 2005E 0.0 % 2003A 2004A 2005E World Euro area USA Japan Euro area US Japan Source: Generali internal estimates Insurance Sector Themes 2005 3 ¾ Moderate, but profitable growth in Continental Europe ¾ Consolidation of restructuring efforts ¾ Segmentation is key ¾ Lower financial returns mean more emphasis on technical profitability and cost efficiencies ¾ Life gradual slowdown to be boosted by pension reforms in Western and Eastern Europe in the medium term ¾ P&C softening gradually in selected segments towards year end ¾ IAS and EEV principles will force operational changes Agenda 4 2005 Macroeconomic Context & Insurance Trends Outlook and Growth Drivers for Generali Future Growth Options: CEE and China Conclusions Generali Growth Drivers 2005 5 ¾ 2004 exceptional growth year; 2005: a year of consolidation and profitable growth ¾ Growth potential in underinsured markets/businesses lines ¾ Strong networks and effective commercial policies promise higher than market growth rates, taking advantage of market leadership positions ¾ Well positioned to take advantage of upcoming pension reforms ¾ Improved underwriting quality and restructuring efforts give consistent profitability gains ¾ Exciting prospects for Eastern Europe and China ¾ Management changes to add value ¾ IAS and EEV drivers of change for information infrastructure and product design Growth Expectations - Core Countries 6 Italy - Gross direct premiums growth (%) 2000 2001 2002 2003 2004 2005 Non Life 6.2 7.4 8.0 5.5 3.7 3.9 of wich Motor 6.5 7.4 8.0 5.6 2.7 2.7 Non Motor 5.7 7.2 8.8 5.4 5.2 5.6 Life 11.8 16.5 19.4 13.5 6.0 5.0 of wich Tradit. Chan. 7.5 2.7 14.2 12.8 8.0 6.0 Total 9.4 12.7 15.0 10.6 5.2 4.6 Germany - Gross direct premiums growth (%) France - Gross direct premiums growth (%) 2000 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005 Non Life 1.4 2.7 3.8 2.7 1.5 1.5 Non Life 4.7 6.8 7.3 6.2 4.1 4.0 of which Motor 2.9 4.8 2.9 2.0 0.3 0.4 of wich Motor 3.6 5.1 5.9 5.1 3.0 2.0 Non-Motor 0.4 1.5 4.4 3.2 2.4 2.6 Non Motor 4.9 6.2 7.6 8.2 7.4 5.0 Life 4.2 1.9 4.2 4.1 3,5* 1,5* Life 20.9 -6.2 1.0 7.6 10.0 6.0 Health 4.0 4.8 6.3 7.3 6.9 6.4 Health & accident 3.4 2.4 6.1 10.4 12.0 6.0 Total 3.1 2.7 4.4 4.1 3.5 2.5 * because of statistical reasons, there might be a different division of Total 15.2 -2.5 3.1 7.4 8.5 5.5 the 5% growth in the period 2004-2005 Source: Generali Research Department Main Drivers Core Countries - Life 7 Italy ¾ 2004: double digit growth both of new business and of gross written premiums ¾ 2005: all distribution channels to deliver good growth rates, above market average ¾ No downward pressure on margins expected Germany ¾ 2004: exceptional volumes as a build up to fiscal reform introduced 1/1/2005 ¾ 2005: ambitious objective of volumes back to 2003 levels, beating market average growth rate ¾ Corporate pensions offer opportunity Riester products, in which we are leaders, have become more attractive and should show interesting new business growth rates ¾ Potential opportunities arise from the new Rürup policies France ¾ 2004 exceptional volumes, inflated by comparison with 2003 ¾ 2005 production focused on Unit Linked products with higher margins ¾ Positive contribution from former Continent and Zurich distribution networks expected; efficiencies to be derived ¾ We stick to our policy of non aggressive profit participation Main Drivers Core Countries – P&C and Health 8 Italy ¾ 2004: overall premium growth above market even with continued portfolio pruning in Assitalia; strongly improved technical result ¾ In 2005 we expect to continue to beat market growth improving profitability ¾ We will benefit from the restructuring of Generali Spa Commercial Network ¾ Important cross selling actions will take place in the retail sector Germany P&C: ¾ After 3 years of portfolio pruning, in 2005 we intend to grow at least in line with the market ¾ Growth will be concentrated in retail non motor business and in profitable segments of motor business Health: ¾ Network well positioned to increase market share France ¾ 2005 volumes in line with the market ¾ Combined ratio to fall below 100% following focus on profitability Pension Reform in Italy: Medium Term Life Growth from Pension Products? 9 Key Challenge - Capturing Flows from the Pension Reform - TFR annual flow estimated at €13-15 bln - Diversion of TFR into complementary pension products estimated at 50-60% - External flows will be split by an estimate 40% open funds, 40% closed funds, 20% Individual Pension Products - More flows could derive from fiscal benefits on additional voluntary contributions Pension reform to benefit: - companies with existing positions: the Generali Group is market leader in the FIP (Individual Pension Schemes) market (40% market share of new production), manages 4 open pension funds and assets for closed pension funds - companies with distribution capabilities: pension products need to be sold with advice and therefore primarily through Agent and FA channels, where Generali is strongly positioned Distribution power (source of AuM at YE2003) Financial Advisors Agents Banks Open funds IPPs source: COVIP, UBS Pension Reform in Germany: Main Effects on Life Products 10 As traditional life policies are burdened by the introduction of taxation on investment returns and by premiums not being deductible from taxes, pension products should enjoy good growth rates Riester policies ¾ Introduced 2002 ¾ Total contribution (50% insured, 50% State) rising to 8% (in 2008) of gross annual income ¾ Benefit formerly only in form of annuity (non inheritable); as from 2005, up to 30% of the benefit can be taken as lump sum ¾ Difficult application procedures have been substantially removed ¾ Attractive product for distribution networks (part of commission paid upfront) Basis Rente (Rürup policies) ¾ New product to be sold only by insurers ¾ Premiums up to € 12,000 a year can be deducted from taxable income ¾ Attractive product for distribution networks (important amount of commission paid upfront) ¾ Benefit only in form of annuity (non inheritable) and not before the age of 60 Pension Reform in France: PERP Product 11 ¾ PERP is a funded individual retirement saving product ¾ Tailored on private sector employees ¾ It enjoys a tax deferral up to 10% of the aggregate net income (max € 23,769 per person) ¾ Currently the market has been targeting mainly low income segments with negligible margins, if any ¾ We estimate this niche to be “on the move” not before 2006/2007, and are currently witholding a strong entry into this market ¾ We are concentrating our efforts toward upper-income segments, who require more structured products to enter into long-term savings. This is a time-consuming process but more remunerative in the long run ¾ We are market leaders in the “Madeleine” retirement product for the self employed Distribution is Our Strength 12 ¾ Multi-channel distribution ¾ Investment in exclusive distribution channels to: - improve sales effectiveness - present an integrated product offer - redesign administrative processes at the agency ¾ Strong focus on education and training Agents + Subagents + employed part time Banking salesforce salesforce FAs branches Broker Italy 10,829 26,744 5,084 2,940 1,000 Germany 11,200 95,500 30,000 725 15,000 France 3,500 (*) 2,200 3,230 (*) Of which 400 agents from former Le Continent & Zurich operations Bancassurance 13 ¾ We consider bancassurance as a complementary distribution channel to increase customer base and enhance cross selling ¾ Italy – Intesa Vita deal (9/2003) – 2,940 branches; we are confident to outperform our 2004 target of 5 Euro bln ¾ Germany – agreement with Commerzbank – 725 branches: production in line with original target within 2004 ¾ Spain – 2004 joint venture with Cajamar – 751 branches ¾ Partnerships in CEE: - Hungary: CIB (Banca Intesa) - Czech Republic: GE Capital - Slovakia: VUB (Banca Intesa) - Poland: Bre Bank (Commerzbank) - Slovenia: SKB (Societe Generale) Personal Financial Services 14 Generali Group: PFS Structure In Italy Intesa Group Generali Group Assicurazioni Generali Assicurazioni Generali 25% 75% 100% 100% Generali Asset La Venezia Banca Generali Management Assicurazioni Asset Management Insurance company focused PFS distribution platform within Company with a dedicated on the retail business of Banca Generali Group unit to Retail Business Generali Banca Generali ¾ Targeted services to affluent customers ¾ Integration with Banca Primavera has been finalised with success ¾ Positive net inflows: 824 Euro mln in the first 11 months of 2004 ¾ Market share increasing to 12% from 9.5% ¾ 15 Euro bln AUM (ranking 4th in the sector) ¾ Strengthening of top management: appointment of Mr.