Zurich enters into long-term bank distribution agreement with Banco Santander in Latin America. February 22, 2011

Transcription

1 Zurich enters to long-term bank distribution agreement with Banco Santander Lat America

2 Disclaimer and cautionary statement Certa statements this document are forward-lookg statements, cludg, but not limited to, statements that are predications of or dicate future events, trends, plans or objectives of Zurich Fancial Services Ltd or the Zurich Fancial Services Group (the Group ). Forward-lookg statements clude statements regardg the Group s targeted profit improvement, return on equity targets, expense reductions, pricg conditions, dividend policy and underwritg claims improvements, as well as statements regardg the Group s understandg of general economic, fancial and surance market conditions and expected developments. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertaties and can be affected by other factors that could cause actual results and plans and objectives of Zurich Fancial Services Ltd or the Group to differ materially from those expressed or implied the forward lookg statements (or from past results). Factors such as (i) general economic conditions and competitive factors, particularly the Group s key markets; (ii) the risk of the global economic downturn and a downturn the fancial services dustries particular; (iii) performance of fancial markets; (iv) levels of terest rates and currency exchange rates; (v) frequency, severity and development of sured claims events; (vi) mortality and morbidity experience; (vii) policy renewal and lapse rates; and (viii) changes laws and regulations and the policies of regulators may have a direct bearg on the results of operations of Zurich Fancial Services Ltd and its Group and on whether the targets will be achieved. Zurich Fancial Services Ltd undertakes no obligation to publicly update or revise any of these forward-lookg statements, whether to reflect new formation, future events or circumstances or otherwise. It should be noted that past performance is not a guide to future performance. Persons requirg advice should consult an dependent adviser. This communication does not constitute an offer or an vitation for the sale or purchase of securities any jurisdiction. THIS COMMUNICATION DOES NOT CONTAIN AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES; SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR EXEMPTION FROM REGISTRATION, AND ANY PUBLIC OFFERING OF SECURITIES TO BE MADE IN THE UNITED STATES WILL BE MADE BY MEANS OF A PROSPECTUS THAT MAY BE OBTAINED FROM THE ISSUER AND THAT WILL CONTAIN DETAILED INFORMATION ABOUT THE COMPANY AND MANAGEMENT, AS WELL AS FINANCIAL STATEMENTS. 2

3 Transaction summary Scope and structure Strategic rationale Busess overview Memorandum of Understandg (MOU) to create Zurich Santander Insurance America that is owned 51% by Zurich and 49% by Santander Zurich Santander Insurance America to acquire Banco Santander s Insurance Busess Brazil, Mexico, Chile, Argenta and Uruguay, which are to enter to 25-year exclusive 1 bank distribution agreement with Banco Santander affiliates each country Management control by Zurich, Banco Santander to reta 49% stake Provides Zurich access to 36m customers, c.5,600 bank branches and over 25,000 ATMs Zurich to become the 4 th largest surer one of the most attractive surance regions: 3 rd largest Life, and 6 th largest Non-life as of Offers a rare combation of high growth potential and strong cash flow generation Leverages Zurich s strong track record bank distribution and further diversifies Zurich s busess mix GWP 2010: USD 1.9bn: 68% life protection, 30% non-life, 2% savgs Brazil pension savgs contributions 2010: USD 2.9bn GWP CAGR for -scope countries: 45% 2 Net profit after tax 2010: USD 328m; RoE 2010: 17% Key fancial terms Up-front payment of USD 1.67bn for 51% of the surance busess Earn-out payment based on specific profit performance targets spread over 25 years Protection mechanism for under-achievement of specific profit performance targets Fancg and fancial impact Majority of up-front payment to be from existg cash resources, with the balance fanced through issuance of hybrid debt P/E 2010 multiple: 10x (upfront payment); 11-12x (upfront payment + disc. earn-out) Immediately EPS accretive and cash flow positive, mimal solvency impact 1 Subject to local regulatory requirements 2 Calculated USD, on local stat basis. Excludg Brazil pension contributions. Growth for Brazil adjusted to reflect acquisition of Real Seguros Vida e Previdência 3

4 Strategic rationale The alliance with Banco Santander: Provides a platform for growth with a leadg bank one of the emergg regions with the highest growth potential globally and low penetration Achieves immediate scale as Zurich becomes the #4 surer overall Lat America terms of GWP 1 Leverages Zurich s proven track record bank distribution terms of new products, distribution management and strong risk-based return culture Meets Zurich s fancial hurdles and offers a rare combation of high growth potential and strong cash flow generation Further enhances and diversifies Zurich s busess mix by creasg: Zurich Group s LatAm GWP by c. 92% 2 Global Life s LatAm contribution to NBV to c. 20% 2 Global Life Emergg Market NBV contribution up to c. 35% 2 Global Life LatAm focus to Brazil, the largest South American economy 1 Source: Fundación MAPFRE, for ; cludes VGBL pension product, excludes health. Includes Puerto Rico as part of Lat America. 2 On a pro forma 100% basis. GWP as reported for 2010 and excludg pension contributions. NBV 2010 actual for Zurich and estimated for Banco Santander s Insurance Busess 4

5 Strategic rationale Zurich forms alliance with leadg bank gag access to 36 million clients and c. 5,600 bank branches and over 25,000 ATMs Santander Santander bankg bankg position position Rankg¹ Country 2010 assets (USD m) 2 Branches Bank clients (m) 2010 loans (USD m) 4 Loans CAGR (USD) Brazil 233,260 3, , % 3 Mexico 54,462 1, , % 1 Chile 47, , % 1 Argenta 8, , % 1 Uruguay 4, , % 3 Region 348,206 5, , % Source: Local regulators, company filgs, Santander ¹ Rankg by assets as of 3Q10 accordg to local regulators, excludes government-owned banks 2 Assets as per local regulation except Argenta shown Spanish GAAP branches as per Santander 4Q10 earngs releases; Uruguay 2010 branches as of September 4 Gross loans as per local regulation except 2010 Argenta shown Spanish GAAP 5

6 Strategic rationale This alliance places Zurich as the 4th largest overall surer Lat America, one of the emergg regions with the highest growth potential globally and low surance penetration Total Total rankg rankg by by GWP GWP 1 (USD (USD bn) bn) Combed Combed pro pro forma forma surance surance market market position position by by country country Brazil Market share 1 : Life: 10.3% Non-life: 1.6% Mexico Market share 1 : Life: 2.0% Non-life: 5.4% Chile Market share 1,3 : Life: 14.4% Non-life: 13.7% Argenta Market share 1 : Life: 17.0% Non-life: 2.8% Uruguay Market share 1,2 : Life: 0.9% 1 Source: Fundación MAPFRE; cludes only VGBL pension product, Source: Local regulators, except for Brazil (Ratgs de Seguros) excludes health; MAPFRE adjusted for clusion of Banco do Brasil ex- ¹ Market share as of Last Twelve Months (LTM) 3Q10, except for Brazil (LTM 2Q10) Brasilprev, cludg Brasilveiculos. Prcipal adjusted for clusion of 2 Excludes pension operations Brasilprev (Banco do Brasil). Includes Puerto Rico as part of Latam 3 Includg annuities 2 USD 3.5bn cludg all Brazil pension flows, not just VGBL product 6

7 Strategic rationale Combed Zurich and Santander will become the 3rd largest life and the 6th largest non-life surer Market Market share share LatAm LatAm Life Life (GWP (GWP USD)¹ USD)¹ Market Market share share LatAm LatAm Non-life Non-life (GWP (GWP USD)² USD)² Bradesco 6' % Mapfre 5, % Itau/Unibanco 4' % Liberty Mutual 3, % Porto Seguro 2, % Zurich & Santander 3' % Itau/Unibanco 2, % Metlife 3' % Bradesco 2, % Santander 2' % Zurich & Santander 1, % Zurich 1, % Zurich % Santander % Bank distribution is the critical channel for life surance distribution Brazil and Mexico Although a life-weighted transaction, combation with Banco Santander also to improve Zurich s position the GI segment, creasg its market share the region to 3.0% Source: Fundación MAPFRE. Zurich numbers exclude Global Corporate busess. 1 Methodology cludes only VGBL pension product, excludes health Brazil; Banco do Brasil allocated to its strategic partners as per recent transactions 2 Banco do Brasil allocated to its strategic partners as per recent transactions, cludg Brasilveiculos 7

8 Busess overview Santander Latam Insurance Busess offers a rare combation of high growth potential, strong profitability and cash-flow generation Brazil Mexico Chile Argenta Uruguay 4% GWP breakdown % 78% 56% 41% 35% 6% 59% 35% 65% 100% Total GWP: USD 1.1bn Pension contributions: USD 2.9bn Total GWP: USD 276m Total GWP: USD 456m Total GWP: USD 67m Total GWP: USD 0.9m GWP CAGR (USD) % 1 36% 38% 27% 6% Bank clients (m) Bank branches 3,696 1, Combed ratio % 88.5% 83.8% 87.3% n/m Net profit 2010 USD 203m USD 42m USD 74m USD 8m USD 0.5m Life protection Non-life Savgs Source: Local surance regulators, Santander 1 Excludes Brazil Pension contributions, historically adjusted to reflect acquisition of Real Seguros Vida e Previdência. On local stat basis. 2 Combed ratio cludes both life and non-life. Combed ratio excludes Savgs & Pensions all countries. Calculated on NEP basis. 8

9 Busess overview Lat America surance and bank distribution markets have low surance penetration, have grown significantly and are poised for contued growth Consistent Consistent growth growth region region (GWP (GWP USDm) USDm) 1 Sustaable Sustaable growth growth across across countries countries CAGR GWP CAGR ,241 35, % 50,824 41,958 57,555 55,801 65, % 6.8% 10.3% 13.5% 18.1% LTM 3Q10 Source: Local regulators 1 Total GWP for Argenta, Brazil, Chile, Mexico and Uruguay. CAGR calculated USD terms. VGBL not cluded Strong Strong bancassurance bancassurance share share across across countries countries Source: Local regulators; Note: CAGR calculated nomal USD terms Low Low surance surance penetration penetration GWP GWP / GDP GDP 40% 10.4% 12.9% 10.0% 25% 24% 7.1% 7.8% 15% 3.1% 2.0% 3.9% 2.6% 1.6% Source: Local surance regulators; Note: Pension excluded for Brazil Life. Bancassurance Source: Swiss Re as of companies considered: Argenta Santander, BBVA, Galicia, Mapfre, Provcia; Brazil Santander, Bradesco, Itau Unibanco, Banco do Brasil, Safra, Caixa; Chile Santander, Banco de Chile, Penta, BBVA, BCI, CorpVida; Mexico Santander, Banamex, Banorte, BBVA Bancomer, HSBC 9

10 Fancial impact and fancg Shareholders equity 2010 USD 1,921m 1 Valuation multiples for 51% Upfront payment of USD 1.67bn 1.7x Upfront payment + discounted earn-out x Tangible Shareholders equity USD 1,461m 1 2.2x x Net come after tax Fancg EPS accretion (for ZFS) Solvency impact USD 328m 1 10x 11-12x Primarily from existg cash resources and balance hybrid debt issuance immediately expected to be mimal 1 Local stat, on a 100% basis 2 Discounted earn-out ranges between approx. USD m dependg on assumptions for discount rate and future f/x rates. 10

11 Appendix 11

12 Zurich has a successful track-record bank distribution Key Key partnerships partnerships Success Success factors factors Spa Switzerland Germany Strong track record drivg profitable growth for both partners (e.g. Deutsche Bank and Banco Sabadell) UK Successful post-deal capability Italy Proven tegrated and efficient busess model Venezuela Hong Kong Dedicated central team with experience and expertise Turkey Brazil Middle East Indonesia 12

13 Bank distribution growth prospects supported by bankg sector s under-penetration Strong Strong loan loan evolution evolution (USD (USD bn) bn) Q10 CAGR (USD) Brazil 33.6% Chile 14.8% Mexico 9.8% Argenta 16.0% Uruguay 15.0% CAGR 04-3Q10 1, % 1,086 1, Q10 Source: Local regulators 1 Total bankg system loans for Brazil, Chile, Mexico, Argenta and Uruguay Note: CAGR calculated USD terms Attractive Attractive marg marg ROAE ROAE 1 Increasg Increasg bancarization bancarization (credit (credit per per capita, capita, USD) USD) 31.9% 3, Q % 8, % 4, % ,394 1, Low Low bankg bankg penetration penetration loans loans / GDP GDP 2,298 Source: Local regulators as of 3Q Total bankg system loans for Argenta, Brazil, Chile, Mexico and Uruguay Note: CAGR calculated USD terms CAGR 04-3Q % 5, % 126% 126% 133% 13.7% 20.1% 21.7% 21.9% 18.5% 15.4% 16.6% 41% 37% 83% 24% 33% LTM 3Q10 Source: Local regulators 1 Combed Return on Assets Employed (ROAE) for Brazil, Chile, Mexico, Argenta and Uruguay Source: 2010 World Bank report relatg to 2008; for Brazil, Bacen as of