Bancassurance - trends and development prospects

Transcription

1 Bancassurance - trends and development prospects Case study based on the Italian market and analysis of the market potential in Poland Presented by Ed Morgan May 18, 2016 Warsaw

2 Contents 1. Italian Bancassurance Market 2. Comparison of Italian and Polish insurance and banking 3. Can Italian market success be replicated in Poland? 4. Conclusions and predictions 2

3 Why is bancassurance penetration relatively low in Poland compared to Southern and Western European countries? Life Market Share Non-life Market Share Looking over a long time horizon (10 years) we can see that in Southern and Western European countries like France, Italy and Spain, bancassurance has been a dominant channel for life insurance and a growing channel for non-life In this talk we will examine why the Polish bancassurance market has not had as much success as these other markets, taking Italy as an example. The lower penetration of non-life in Italy can be attributed to lack of development of MTPL in particular Source: Insurance Europe 3

5 Evolution of product offering Creditor protection Simple savings products Standalone protection, Home insurance Motor Retirement savings Over a period of >20 years we have seen a gradual evolution of the product offering from simple creditor protection products and tax advantaged savings products to a wide range of different propositions There are various driver for this growth including low interest rates reducing banks interest margins and requiring them to look for alternative sources of revenue. 5

6 Italian bancassurance market trend in production of various protection lines Individual protection term insurance Individual protection other Group protection LTC and CI Accident 1500 Sickness Fire and natural forces Other damages to property Financial losses Legal expenses Assistance Figures in EUR m 6

7 Different bancassurance models Different bancassurance models have been realized during the years: a. Captive bancassurance company (for example Credit Agricole/ Eurizon/Intesa) this follows the model adopted by leading French banks and allows the full integration of activities b. JV between company and bank (AxA-MpS, Unipol-BPER/BPSondrio, BPM-Covèa, Fondiaria-BancoPopolare, BCC-Cattolica, BPVi-Cattolica.). In recent years formerly captive companies have been put on the market (Arca, MpS, BCC, now Carige..), which can help the banks to raise capital and the insurers to secure captive distribution c. Exclusive distribution agreement (Desio Vita, formerly owned by the bank, now 100% owned by Helvetia) for some of these cases effectively goodwill has been paid for the exclusive distribution d. Non-exclusive distribution agreement (some Casse di Risparmio ) e. In the past a number of bancassurance companies sold through multiple banks (e.g. Arca Vita, Eurovita etc), but this model has become less common, in part due to consolidation in the banking sector. f. Some bancassurers are using a captive or JV for the mainstream products and a specialist provider for more niche products like some types of protection 7

8 Italian Bancassurance Market Key Players Life The table below shows the leading 20 life companies with bancassurers highlighted in yellow Premium income (EUR bn) Main Channel POSTE VITA 15.4 Banks (Post Office) INTESA SANPAOLO VITA 15.3 Banks GENERALI ITALIA 7.4 Agents GENERTELLIFE 5.9 Financial Promoters FIDEURAM VITA 5.8 Financial Promoters CREDITRAS VITA 5.4 Banks MEDIOLANUM VITA 5.2 Financial Promoters BNP PARIBAS CARDIF VITA 5.1 Banks ALLEANZA ASSICURAZIONI 4.1 Agents CREDIT AGRICOLE VITA 3.9 Banks UNIPOLSAI ASSICURAZIONI 3.7 Agents ALLIANZ 3.0 Agents POPOLARE VITA 3.0 Banks CNP UNICREDIT VITA 2.8 Banks AXA MPS ASSICURAZIONI VITA 2.3 Banks OLD MUTUAL WEALTH ITALY 1.7 Various AVIVA 1.6 Banks LOMBARDA VITA 1.5 Banks AVIVA VITA 1.4 Banks BIPIEMME VITA 1.4 Banks Ownership model: wholly owned captive Poste Vita was a relatively late starter in the Italian bancassurance market. For example in 2002 it was only in 5 th place in the market with EUR 2.8 bn of premiums. The company is wholly owned by the Italian Post Office It offers a simple range of products through its very wide range of Post Offices The banking crisis in 2008 and beyond reduced confidence of customers in banks and Post Vita was able to further improve its market position Ownership model: wholly owned captive Intesa Sanpaolo Vita grew from the merger of a number of the bancassurance companies of a number of banks which themselves merged The also has a large Irish subsidiary selling mainly unit linked business The Company is a captive, after buying out the joint venture share of Generali several years ago 8 INTERNAL RESEARCH FOR DISCUSSION PURPOSES

9 Italian Bancassurance Market Key Players Life Ownership model: Joint Venture Ownership model: Joint Venture Axa bought 50% of three bancassurance companies of the Montepaschi di Siena group in They were an Italian and an Irish life company as well as an Italian non-life company Due to changes in the strategy of AXA and some negative events within the bank, production is significantly lower than at the time of the acquisition and AXA has refocused its attention more on protection Unicredit works through a number of joint ventures with different partners (Allianz-RAS, CNP and also Aviva, although this partnership is less active). Companies have generally been 50/50 joint ventures, backed by shareholdings from the insurers in the bank. The network is divide between the different partners and a single organisation within Unicredit negotiates products with the different partners Product offering are usually very similar between the different partners and the partners try to avoid internal competition 9

10 Italian Bancassurance Market Key Players Non-Life The non-life bancassurance market is less well developed There are a number of specialist players but they for example Poste Assicura had EUR 84m of premiums in 2014 compared to EUR 15.4 bn of life premiums from Poste Vita Even some formerly bank owned companies (e.g. ex-carige Assicurazioni) mainly sell through agents Some of the leading non-life bancassurers are shown below: Name Rank Premiums (EUR m) INTESA SANPAOLO ASSICURA AXA MPS ASSICURAZIONI DANNI ARCA ASSICURAZIONI CREDITRAS ASSICURAZIONI AVIPOP ASSICURAZIONI CREDIT AGRICOLE ASSICURAZIONI SOGESSUR S.A

11 Banks selling model Below a typical organization model in a major Italian bank is described. 2 main segments, i.e. Retail and Corporate. Retail clients were then divided into: Family, i.e. clients with deposits < 25k Euro. These clients are followed by the basic employees, i.e. tellers or those working in the common areas in the banks, and usually the less expert ones. Common bancassurance products for them include accumulation plans (ideally small deposits, but trying to have a constant incoming cashflow), and protection products for mortgages, loans, credit card debt covers and similar. Affluent clients, i.e. deposits > 25k, < 1-1.5m. These are usually followed by a more expert employee, often in a private room, or sometimes by the branch director or deputy himself. The product usually sold to these clients are endowments, often as a single premium, so with an investment view, rather than a saving view. These clients, though, don t usually have specific tailor made products built for them, but only products that could suit them better. They are then divided into Upper and Lower affluent (e.g. <250k, >250k). Private clients (> 1m or 1.5m Euro). Followed by a specific team, that often visit them at home also. Specific products are prepared for them, with lower loadings or likely higher returns. Corporate clients are usually followed by the deputy or branch director, if they were small ones, and by specific centres when bigger. 11

12 Typical Conditions in Exclusive Bancassurance Agreement Most bancassurance agreements which have been negotiated as part of the creation of JV companies include exclusivity clauses which give the JV company exclusive right to distribute business unless mutually agreed or if a product cannot be provided (see below). The company s commitments are defined. This might typically include: Provision of relevant material such as contractual forms Ensuring products distributed are compliant with all relevant laws Providing adequate customer service The banks commitments include promoting the product, only using material approved by the company, monitor sales practices to ensure that they are compliant with regulations, ensure customers are adequately informed etc. Typically there will be a provision in the joint venture agreement which deals with the case in which the distributor (e.g. the bank) indicates a need to offer products not available from the JV company. In this case the JV company has effectively a right of first refusal to offer the products, but if it cannot do so within a reasonable timescale, the bank may use a third party supplier 12

13 Reasons for Success of Bancassurance Bancassurance has been for many years been the leading channel in the Italian market. Its success can be attributed to many factors including High level of trust in banks from Italian consumers, although this has been eroded in recent years due to a number of scandals (most recently that of Banca Montepaschi di Siena). This contrasted with a sometimes mixed feeling towards insurers who were very associated with compulsory motor business Product innovation the Italian market used to be more or less a tariff market and bancassurers were the earliest movers in introducing products like unit linked and more flexible savings products Low marginal costs for banks in selling insurance compared to life companies this was helped by fairly limited regulations directly around the selling process Banks needed to and were willing to extend their traditional activity in part to substitute reduced interest margins as interest rates dropped in the Euro convergence period. This was particularly the case of Unicredit Insurers like AXA, Aviva and Allianz saw bancassurance as a way of gaining important market shares French bancassurers like BNP-Paribas and Credit Agricole have also imported successful practices from France April 2013

15 Primary banking groups with their Subsidiary Insurers - Italy Banking Group Subsidiary Insurance Company Comments Gruppo Bancario Intesa Sanpaolo Gruppo Unione di Banche Italiane Gruppo Bancario Veneto Banca Intesa Sanpaolo Vita Aviva Vita and Lombarda Vita Apulia Previdenza The bank resulted from a major banking merger and now the insurance operations have largely been integrated into a single captive bancassurer (buying out Generali from previous JV) This was the result of a previous process to sell stakes in the bancassurance companies of the group Gruppo Bipiemme Recently created a JV with the French insurer COVEA, Bipiemme Vita S.p.A. having previously been a captive company Gruppo Monte dei Paschi di Siena Axa-MPS AXA won a major process to buy 50% of Montepaschi Vita Gruppo Banco Popolare Gruppo Unicredit Gruppo Bancario Cariparma Credit Agricole Gruppo BNP Paribas Popolare Vita S.p.A., Aviva Assicurazioni Vita CNP UniCredit Vita S.p.A, Aviva S.p.A, CreditRas Vita S.p.A Crédit Agricole Vita Cardif Vita S.p.A., BNL Vita These shares came from a major process similar to the MPV one, but were divided between Aviva and Fonsai Unicredit is in a unique position in having several insurance partners partly for historic reasons but this gives it more bargaining power with these partners CA follows its captive bancassurance model from France Cardif sells through third party banks whereas BNL Vita was bought out by BNP Paribas, which had acquired BNL itself earlier 15

16 Primary banking groups with their most important banks and number of branches - Italy Gruppo Bancario Intesa Sanpaolo Gruppo Unione di Banche Italiane Gruppo Bancario Veneto Banca Gruppo Bipiemme Gruppo Monte dei Paschi di Siena Intesa Sanpaolo Banco di Napoli Cassa di Risparmio del Veneto Cassa di Risparmio di Firenze Cassa di Risparmio in Bologna Banca Popolare di Bergamo Banco di Brescia San Paolo Cab Banca Carime Banca Regionale Europea Banca Popolare Commercio e Industria Cassa di Risparmio di Veneto Banca S.C.P.A. Banca Apulia Fabriano e Cupramontana Banca Popolare di Milano Banca di Legnano Banca Monte dei Paschi di Siena Banca Antonveneta Gruppo Banco Popolare Gruppo Unicredit Gruppo Bancario Cariparma Credit Agricole Gruppo BNP Paribas Banco Popolare Credito Bergamasco Unicredit Cassa di Risparmio di Banca Popolare Cassa di Risparmio della Parma e Piacenza Friuladria Spezia Banca Nazionale del Lavoro

17 Relations of banks and insurers on the Polish market Bank Assets (bpln) No of clients ('000) Own branches Branches + agencies and partnerships Relation with insurers PKO BP ,982 1,277 2,158 Insurer within group Bank Pekao SA , BZ WBK , JV with Aviva *including clients of BGŻOptima According to news looking for an insurance partner mbank , Former own insurer acquired by AXA ING Bank Śląski , Insurer within group Getin Noble Bank , Insurer within group Bank Millennium , Bank BGŻ BNP Paribas ,654* Insurer within group Citi Handlowy Intensified cooperation with Warta Alior Bank , PZU owns over 25% of Alior's shares Source: prnews.pl, press releases 17

18 Productivity per Branch - indications Full data on productivity for Italy and Polish bancassurance is hard to obtain on an exactly comparable basis. However we can look at some figures from dedicated bancassurance companies: It can be seen that levels of nonlife production are not very different between the two countries, but that life production is much higher This can be seen as being driven primarily by the successful sales of savings products. Note further that almost all Intesa Sanpaolo production is traditional ( endowment ) and further unit linked production is sold on a cross border basis by the Irish life company of the group Italy Production per branch in EURm in 2014 Poland 18

20 Challenges for Polish Insurance Market/opportunities in bancassurance The Polish insurance market is facing a whole series of regulatory and legal challenges which are too long to go into here, but make the future evolution very unpredictable The agency sales model in its historic form is probably no longer viable except for the most efficient players Trends in bancassurance partnership model are uncertain, but we may see some combination of more dedicated models for mainstream products, but use of specialised providers for more niche products The potential for bancassurance can be realised, but only with a combination of: Working hard to develop value and integration of partnerships Investing in more sophisticated products and associated training Looking closely at all aspects of the business model 20

22 Conclusions and Predictions Mid-term growth of bancassurance market share towards the highest levels seen in Europe seems a probable outcome when we consider: Bancassurance has much lower marginal selling costs than traditional channels like agencies In particular we do not believe the historical agency sales model is sustainable without changes in Poland. Competition from banks is likely to accelerate this The low interest rate environment squeezes other margins of the banks and make insurance intermediation an attractive proposition However there are some clouds which may slow down this trend: Regulator/consumer protection action is likely to make it hard to sell very high margin business Move to digital can (a) compete with banks on cost (b) reduce banks contact with clients and hence opportunities for selling We would expect: Trend in commissions from premium based to asset based for savings business More investment in sophisticated products and sales training 22

23 Life Insurance Penetration Development of the life insurance Milliman s analyses show that there is an inverse correlation between the development of the life market and the expense ratio (and this is quite independent of state of the economy look at France and Portugal and Germany and Greece). We note that many of the relatively more developed markets have an important share of bancassurance. 9% 8% 7% 6% 5% 4% 3% 2% Portugal Italy Belgium Spain Finland France Sweden Switzerland Netherlands Austria Germany Poland Czech Republic 1% Greece 0% 0% 5% 10% 15% 20% 25% Expense ratio Source: Generally data is from Insurance Europe (except Germany expenses). Expenses are average of available data over the last 10 years as a percentage of earned premiums. Life insurance penetration is the latest available figure as percentage of GDP. 23

24 Questions? Edward Morgan

25 Legal disclaimer This presentation is intended solely for educational purposes and presents information of a general nature. It is not intended to guide or determine any specific individual situation and persons should consult qualified professionals before taking specific actions. The information contained in the presentation is of a general nature and should not be construed as advice on an individual situation or company. Neither the author, nor the author's employer has certified the information contained in this presentation or guarantee the accuracy and completeness of such information. The use contained in this presentation is voluntary and should not be relied upon unless an independent review of its accuracy and completeness has been performed. Neither the author not the author's employer owe any duty of care to any attendant of this presentation and each expressly disclaims any responsibility for any judgments or conclusions which may result therefrom. Neither the author, nor the author's employer shall have any responsibility or liability to any person or entity with respect to damages alleged to have been caused directly or indirectly by the content of this presentation. 25