Giulio Fezzi - Chief Financial Officer and IR Manager Andrea Battista - General Manager Duomo Assicurazioni and IR UBS The Italian Financial Services Conference 2006 Capital allocation and strategic opportunities for Italian Financials : Strategic Opportunities and Capital Management Milan, 2 nd February 2006 1
Agenda n at a glance n Strategic framework and strategy implementation n Capital and risk management n Business growth and value creation n Attachments 2
Agenda n at a glance n Strategic framework and strategy implementation n Capital and risk management n Business growth and value creation n Attachments 3
n The Parent Company is a co-operative legal-entity structure, operating in the life and non-life insurance businesses in Italy n Today the Group consists of 22 companies, including 14 insurance companies n Insurance subsidiaries of the Parent Company, include: 8 life insurance companies (Duomo Previdenza, Risparmio & Previdenza, BPV Vita, Lombarda Vita, Eurosav, Axa-Cattolica Previdenza in Azienda, San Miniato Previdenza, Persona Life) 5 non-life insurance companies (Il Duomo Assicurazioni, ABC Assicura, Cattolica Aziende, Tua Assicurazioni, UniOne Assicurazioni) n Other Group companies consist of two real-estate companies, four service companies, one asset management company and one retail-brokerage (Fas) company 4
Evolution HISTORICAL PHASES brands and companies BIRTH CONS. GROUP DEVELOPMENT 1896 1976 1994 2000 2001 2002 2003 2004 2005 95 97 98 2006 Listing Premiums (Euro mln) 373 2,768 3,731 4,803 (1) (1) Planned 5
Group Market Share trend Group Market Share (2002-2004; Italian direct business) 2004 4.9% 4.5% 4.5% 4.5% 4.3% 4.2% 4.0% 4.0% 3.8% 2002 2003 2004 Non-life Life Total market share 7 FonSAI Generali Allianz Unipol Toro R. Mutua Cattolica Zurich Axa Italia Sara 6 6 Non-life Life Total Generali Allianz AIP Unipol Poste V. Cattolica Aviva FonSAI MPS Mediolan. Generali Allianz Unipol FonSAI AIP Cattolica Poste V. Aviva Toro MPS 5 th traditional insurance Italian Group Sources: Estimates on reports and ANIA data 6
Business mix: and the Market MARKET 30.09.2005 CATTOLICA GROUP 30.09.2005 Total Non-Life 32.1% Total Non-Life 27.2% Life 67.9% Life 72.8% Non-Life Motor TPL 52.8% Non-Life Motor TPL 60.2% Other 47.2% Other 39.8% Life Index and Unit 36.1% Life Index and Unit 48.9% Traditional 63.9% Traditional 51.1% Source: Isvap data direct business premiums 7
Agenda n at a glance n Strategic framework and strategy implementation n Capital and risk management n Business growth and value creation n Attachments 8
Mission and strategic objectives continued MISSION Strategic objectives sul core business assicurativo, focus on insurance core business, consolidating proseguendo nel consolidamento dei business current businesses and implementing new growth attuali ed avviando nuovi percorsi di crescita strategies through flexible development methods Organic Crescita External Crescita organica growth per growth linee esterne Architettura Focus industriale integrated, focalizzata, open Industrial integrata e architecture aperta STRATEGIC PATHS Develop current business Develop new markets, products, channels Consolidate the insurance business model Strengthen controllership Accelerate development Service centralisation and cost optimization Integrated development of financial services 9
Details on strategy and key assumptions n Consolidation of organization structure, insurance brands and corporate culture with a focused, integrated and open business architecture - Strengthening parent company controls by controlling strategic processes using improved support tools (planning and control, Internal Audit, Organization & HR, new Program Management structure, Group Finance) - Insurance business model consolidation with reorganization of technical areas, enabled by the new, enhanced non - life platform - Integrated development of financial and asset management - Completing integration of operating processes and procedures n Organic growth: research and development of internal growth initiatives, building on the existing business strengths - Expansion of existing businesses, through distribution channel development and diversification - Identification and entrance into new markets, products and channels: implementation and finalization of new initiatives like Tua Assicurazioni and Axa Cattolica Previdenza in Azienda - Assure the development of non-life bancassurance distribution - Reentry/development of multi- mandatory agent distribution: from Eurosav to Persona Life - Nurture the innovation culture as a growth driver for testing new products and market segments: Pension Center of Excellence, new health product development - from simple to LTC coverage n External growth - Formalized process for screening and developing proposals for potential acquisitions (Corporate Development team) July 2005 UniOne acquisition 10
Internal Reorganization: the path to a focused, integrated, open business architecture Current Status Financial Services Centralized Treasury services Group Asset Management Real Estate Management Company Integrated financial product distribution Central Management Group Risk Management and ALM Group Planning and Control Group Internal Audit Group Organization & HR Group Actuarial Control Group Reinsurance Group Corporate Development structure and Group integration Insurance Business Specific focus on insurance life and non-life business Centralized claims management Centralized purchasing department (Co.CeA) IT Service Company (new processes) Centralized Administrative Services Operational services 11
Organic growth: multi-channel development CHANNELS Tied agents Banks Brokers Other channels BUSINESS/SERVICE LINES Non-Life Life Financial services and asset management Agency network development Product and channel innovation (TUA) Retail segment Selective corporate expansion Focus on profitability Penetration on preferred segments Social security FAs working inside agencies: Cattolica Investimenti SIM Cross-selling at sales outlets Private retail segment Standard products JV with BPVN and other business/ partnerships agreements (OnLine Division) Flexible confirmation of the JV model Protection/development of strategic commercial contracts Product and segment innovation Banking partnerships to increase multi-bank financial products with specific proprietary brands Focus and selection of middle size, highcontribution brokers Re-launch of Cattolica Aziende Axa- Cattolica Middle company segment (B2B2E) Expansion of parent company units for direct assumption of corporate risks Direct channel for corporate contracts Development of preferred multimandatory distribution Development of Cattolica Investimenti SIM model Institutional Asset management: Verona Gestioni SGR 12
Agencies network development Agency network development (1999-2003; no. agencies) 974 1,024 1,049 900 +4,1% Proprietary agency network 1,523 1,092 19 364 +24.3% 1,357 187 56 382 546 732 709 1999 2000 2001 2002 2003 2004 2005 2007E Multi-mandatory agency network (number of agencies) 138 Eurosav multi-mandatory agencies as at 31 December 2005, which will sell non-life products starting in 2006. 13
Bancassurance consolidation December 2005 Renewal until 2010 of Cattolica and Banca Lombarda agreement Business and commercial agreement insurance products will continue to be sold via the 796 bank branches and 578 Financial advisors of Banca Lombarda Confirmation of Lombarda Vita activity: the jointventure founded in 2000, 50.1% owned by Cattolica and 49.9 by Banca Lombarda bank branches distribution: 2,885 branches Market share of 9.3% in Italy 4 171 38 14 157 2.053 (11.4%) 68 66 19 74 461 23 (6.6%) 164 29 8 65 371 65 (6.0%) 11 Non-life bancassurance - During 2006 a new jointventure with Banca Lombarda Group will be set up for the sale of non-life products through the bank partner s distribution network 14
Non-Life Bancassurance development A strategic opportunity in Italian Market In Italy Bancassurance business in the non-life sector is poorly developed, with a share of just 1%, whilst market share turns out higher in other European countries: in Germany it is 5%, in the Netherlands and France it is 8% Non-Life Bancassurance development: maximise competitive advantage and optimise the combination of Life Bancassurance experiences and Non-Life technical skills Mission: Meet the increasing demand for Non-Life insurance from the family segment Use the commercial and operative synergies between the insurance and banking partners Guarantee customers consultancy services suitable to different needs In first months 2006 start-up of the new 50/50 JV with the Group Banco Popolare di Verona e Novara Extend Non-Life Insurance activities to other Banking Groups Consolidate the operations of the Cattolica Online Division (development of the agreement with ICCREA) Products: Motor TPL, fire, theft, simple general TPL, injury and health Target: Bank retail customers Assistance: dedicated call center Claims settlement managed directly by Cattolica structure 15
UniOne acquisition Restructuring and Integration process n n n n n UniOne history Relative young company, born in 1984, from 2000 in Generali Group Agency network focused on P&C business, based most of them in middle and south Italy Motor Transportation business is 86% of total premiums Claims settlement network complementary to existing Cattolica network High potential in life business which is a recent start-up Ongoing process: activities integration at Group level with utilization of services from the Parent Company End 2005 UniOne Vita integration into Duomo Previdenza and following multimandatory agencies branch of business transfer from Eurosav to UniOne Vita Persona Life birth: UniOne Vita new denomination; the 100% first Group company dedicated to multi-mandatory agency network 16
Persona Life: development towards preferred multimandatory pole 100% Persona Life birth Branch of business transfer 100% 99.9% 100% TARGET Branch of business Multimandatory agents 100% Set up a Cattolica Group Pole for preferred multimandatory distribution Branch of (see business the French experience) transfer Branch of business transfer Persona Life Mission first dedicated company for the multi-mandatory agency network in line with the preferred multi-mandatory model Progressively concentrate Group agents in the new specialised multimandatory pole Target: Main focus on central-southern Italian market Products: Innovative and flexible life products portfolio. In 2006 non-life products distribution will be implemented Cross selling towards non-life products Completed process Ongoing process 17
Agenda n at a glance n Strategic framework and strategy implementation n Capital and risk management n Business growth and value creation n Attachments 18
Rating on Cattolica: excellent risk-adjusted capitalisation A Aq Api NOTE Excellent Stable outlook NOTE Strong Quantitative Insurer Financial Strength NOTE Strong Public Information The rating reflects Cattolica s prospective excellent riskadjusted capitalisation, excellent operating performance and distinctive business position in the Italian Market The rating reflects very strong capitalisation and strong earnings. The rating reflects strong capacity to meet policyholder and contract obligations. Risk factors are moderate, and their impact of any adverse business and economic factors is expected to be small 19
towards a integrated internal risk control system attitude Cattolica has acknowledged the existing European Union and Isvap regulations and is starting to develop its own risk capital model in order to: identify and reduce absorption of capital, required by its insurance, financial and operational activities achieve more efficient use of excess capital Objectives: Implementation of an adequate and integrated internal organisational structure for the development of quantitative models to evaluate and measure risks at all levels - Market risk -Credit risk - Liquidity risk Insurance business risks Financial risks Integrated risk management control system - Legal risks - Reputation risk - Operational risks Operational risks - Underwriting - Technical provisions 20
Proactive Risk Management Process Well-established, Well-established, comprehensive,coordinated comprehensive,coordinated process process across across the the financial financial organisation organisation Proactive risk management based upon three main principles: Disciplined Disciplined approach approach to to assessing assessing and and prioritizing prioritizing risk risk and and return return tradeoffs tradeoffs Limited Limited Portfolio Portfolio Risk Risk 1. Well diversified by asset type,sector and issuer 1. Well diversified by asset type,sector and issuer 2. Conservative, liquid, high quality portfolio with a 3.3%* allocation to 2. Conservative, liquid, high quality portfolio with a 3.3%* allocation to non-investment grade bonds non-investment grade bonds 3. Equity securities limited to 0.91%* of class C investment 3. Equity securities limited to 0.91%* of class C investment * End 2004 Current risk management priorities: Better Better interest interest rate rate risk risk management management and and improved improved product product level level risk risk return return decisions decisions by by developing developing a a flexible flexible financial financial database database covering covering class class C and and class class D portfolios portfolios Selection Selection of of new new risk risk management/investments management/investments technology technology platform platform Implementation Implementation of of ALM ALM for for non-life non-life business business 21
Risk Management map Risks Market risk Default risk Counterparty risk Liquidity risk Risk management Investment guidelines : document approved by the Board of Directors which defines the guidelines for the investment of assets guaranteeing the technical reserves and of net shareholders equity Finance Committee and ALM Committee held once a month Formal Process for selecting external asset managers Ongoing monitoring of compliance with investment guidelines by the asset managers and Implementation of strategies decided by the Finance and ALM Committees monitored on an ongoing basis Broad portfolio diversification focused primarily in highly rated bonds in compliance with limits defined in the Investment guidelines (maximum investment in a single issuer - 5% of total investments) Investment reporting broken down by rating and sectors to monitor risk Management of fallen angels : FINCO proposes the retention or sale of the position to the Board of Directors which retains the final decision and approval authority Selection of market counterparties regulated by the Investment guidelines - approval of Board of Directors required Diversification of market counterparties Broadly diversified investments Highly rated bonds preferred Criteria set in the Investment guidelines 22
Investment Management Tied to Risk Management and ALM Investment Management closely aligned with the Risk Management and ALM processes Management of Interest Rate Risk is an ongoing process 1 year earning at risk projection 5 year confidence interval of earnings Annual cash flow testing Liquidity Management is a core issue Liquidity is managed at group level in order to ensure maximum flexibility High yield investments are limited in order to limit liquidity and credit default risk (in accordance to Investment Guidelines) Internal stress tests show Cattolica has ample liquidity to comfortably manage through a severe stress scenario Risk is measured and communicated regularly is a core issue Senior management is constantly informed of risks Communication occurs at the Asset Liability Management Committee (ALCO) and Finance Committee (FINCO) levels Reporting 23
Agenda n at a glance n Strategic framework and strategy implementation n Capital and risk management n Business growth and value creation n Attachments 24
Growth and Value Performance Index focused on growth and value performance Index=Group net profit growth rate/ Consolidated premiums growth rate (1995-2007E) Focus on Value BUSINESS PLAN 2005 2007 Listing Business Plan 2005-2007 estimates a balanced mix of growth and value for the next 3 years Focus on Growth Index value = 1 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 More focus on VALUE in combination with positive growth 25
Development of consolidated premiums Gross Consolidated Premiums 2004 Result 2007 Target Direct and indirect business (1999-2003; Euro mn) CAGR 99/04 CAGR 04/07 4,212 +9.6% 4,617 26% MKT 10% 5,510 6% 3,731 2,768 3,351 2,298 2,464 2,820 +13.4% 3,197 28% MKT 13% 3,499 3% 1,442 2,012 Life Non-life (*) 917 525 756 1,053 1,267 1,392 +2.5% ** ** 1,420 22% MKT 6% 2,010 12% 1999 2000 2001 2002 2003 2004 2007E Breakdown Life 64% 73% 69% 66% 67% 69% 64% Non-life 36% 27% 31% 34% 33% 31% 36% Change % 2004/ 2003 Note: Business Plan Italian GAAP (*) With the inclusion of indirect business (**) Only direct business 26
Technical profitability Non-life combined ratio trend (1999-2003; %) 2004 Result 2007 Target 104.2% 101.3% 98.5% 100.6% 98.9% 97.5% 94.5% 1999 2000 2001 2002 2003 2004 2007E 27
Development of consolidated net profit Consolidated net profit 1999-2003 ( Euro mn) 2004 Result 150 CAGR 99/04 42% 2007 Target 176 CAGR 04/07 5,5% 125 +19.6% 47 53 63 26 1999 2000 2001 2002 2003 2004 2007E Group net profit (*) 25 44 46 57 116 +17.1% 136 40% 162 6% 28
3 rd Q 2005 Key numbers 3,331 2,308 Gross Premiums 18% 3,932 2,849 4,803 3,239 65 47 Technical Result 26.2% 82 51 98 62 Non-life combined ratio 98.02% 96.93% 97.2% 1,023 1,083 1,564 18 31 36 30.09.2004 30.09.2005 31.12.2005E* Non-life Life 30.09.2004 30.09.2004 31.12.2005E* Non-life Life 30.09.2004 30.09.2005 31.12.2005E* Net ordinary result Consolidated net result Net profit (1) 105 39.1% 146 165 92 11% 103 138 85 4.7% 89 126 30.09.2004 30.09.2005 31.12.2005E* 30.09.2004 30.09.2005 31.12.2005E* 30.09.2004 30.09.2005 31.12.2005E* Legend: Change 30.09.04-30.09.05 * Business Plan 2005-2007 - Italian GAAP Figures in mln (1) Net of taxes and minority interests 29
Development of dividend per share Cattolica dividend policy is consistent with the 3-year plan value creation program Dividend per share Dividend 2004 (1999-2003; Euro) 1.35 CAGR 99/04 0.62 Extraordinary dividend 0.70 1.00 1.00 0.22 1.02 +32,4% 17% 0.78 1 free share for every 10 Other indicators Pay-out (Euro mln) 1999 2000 2001 2002 2003 43 (**) 17 30 43 48 64,0 Pay-out ratio (*) 71.7% 76.5% 77.1 % (2) 72.4% (3) 78.3% 60.2% Dividend yield (1) n.a. 2.28% 3.60% 4.59% 3.50% 2004 3.75% (***) 30% Fonti: (1) Dividend Cattolica yield: Dividend Bilancio per d esercizio share/official2003 price of last Analisi day of interne the year (2) With the inclusion of extraordinary dividend (3) Pay out, net of property transfer (*) Pay-out at Parent Company level (***) Calculated on a price per share of 36 30
Cattolica stock performance in 2005-2006 Stock performance in comparison with the main indexes PERFORMANCE 2005-2006 as at 31 January 2006 Cattolica +32.73% Mibtel S&P/MIB MIB INS. +17.72% +18.22% +17.55% 01/01/2005 31/01/2006 Cattolica MIB INS. S&P/MIB MIBTEL Change % 01/01/2005-31/01/2006 Source: Bloomberg 31
Agenda n at a glance n Strategic framework and strategy implementation n Focus on growth and value creation n Capital Allocation n Attachments 32
Focused, integrated, open business architecture Business Architecture Characteristics Financial Services Nuova San Zeno Imm. Central Management Insurance Business Non - life Life Group finance Claims Administrative Back Offices General Services (*) Verona Servizi Operational services Focused: each unit must focus its activities on its own objectives Integrated: common, standardised, optimised, measurable mechanisms of interaction between the various structures Open: organisational framework consolidates existing functions while enabling integration of new businesses (*) Joint control with AXA Italia 33
Major initiatives Central management n n n Risk management and ALM - Formalized ALM process for life companies, - Developing ALM model for non-life companies - Establishing Financial Risk management structure Group Services in place Actuarial Control: group-wide guidelines on tariffs Financial Services n Group Finance Dept (2002) n Dedicated Asset Management Company (Verona Gestioni SGR, 2003) n Investment advisory company (Cattolica Investimenti, 2004) n Real Estate Management Company (2002) Operational Services n Claims management - Set up of a centralized function of claims management - Centralized claims call center DiCa handles all claim reporting and manages simple claims Cost Control:centralized purchasing dept. (CoCeA, April 2005) Cattolica It Services (January 2005) Centralized Administrative Services: definition of a Group Administrative Dept. 2006, implementation 2006/2007 34
Non-life business Premiums (Direct business - Euro mn) 1,001 +6.3% 1,064 1,398 30.09.2004 30.09.2005 2004 Growth in agency network 1,333 proprietary agencies 140 Eurosav multi-mandatory agencies New structures for selecting and supporting new agents Special projects Agency segmentation based on performance Service Partners and Club Best agencies Regional and local projects Premiums breakdown by channel Banks 1.3% Broker 1.2% Other 5.2% Premiums growth by channel (Direct business - Euro mn) 55 40 12 7 14 13 942 982 Agencies + 4.3% Broker + 8.3% Banks + 100% Other + 37.5% Agents 92.3% 30.09.2004 30.09.2005 Cattolica 2003 Group 35
Life business Premiums (Direct business - Euro mn) 2,308 +23.4% 2,849 3,197 Life premiums include investments contracts for an amount of 298 million Cometa pension fund collected 94.4 million premiums. In the first 5 months Cometa registered a 4% (annualized) performance. Subscribers are almost 36,000 30.09.2004 30.09.2005 2004 FAs 1.6% Broker 1.3% Other 7.2% Agencies 5.2 % Premiums growth by channel (Direct business - Euro mn) 2,131 27 138 12 2,414 241 149 45 Banks + 13.3% FAs + 275% Agencies + 8% Other + 792.6% Banks 84.7% 30.09.2004 30.09.2005 36
Life new business premiums Premiums (Euro mn) 2,708 +24.8% 2,170 2,981 30.09. 2005 Breakdown by channel (Euro mn) 82 Agents +20.6% 30.09. 2004 68 30.09.2004 30.09.2005 2004 Premiums mix by type of product (Euro mn) 30.09.2005 Banks 30.09.2004 1.485 2,066 2,350 +13.8% Index Unit Traditional 46.3% 11.4% 42.3% 34.1% 17% 12.8% 48.9% 30.09.2005 FAs/other 30.09.2004 44 3744 44 276 +646% 75 30.09.2004 30.09.2005 37
Investment Spread over Guaranteed Rates Technical reserves breakdown by financial guarantee Group average yield and average guaranteed rate Traditional products (Euro mn) 3.65% 3.57% 3.62% 3.54% 30.09. 2005 69.4% 10.6% 20% 6,487 3.45% + 33.5% + 3.9% - 10.6% 3.06% 2.98% 2.70% 2.65% 2004 61.5% 12.1% 26.4% 5,487 2.61% Financial guarantee 2003A 2004A 2005E 2006E 2007E <= 2.5% > 2.5% e < 4% >= 4% Group average yield (Segregated funds) Average guaranteed rate (Liabilities) 38
Core business: technical performance Non-Life technical result 31 (Euro mn) 18 +72.2% 30 30.09.2004 30.09.2005 2004 Non-life business Premiums stable; focus on profitability with an increase of 72.2% Expense ratio down to 19.21% from 19.54% in 3 rd Q2004 and claims ratio decreases from 76.37% as at 3 rd Q2004 to 75.55% as at 3 rd Q 2005 Life Business: Strong premiums increase (+23.4%); technical result +8.5% Life technical result 59 Combined ratio (Euro mn) 47 +8.5% 51 98.02% 96.93% 97.5% 30.09.2004 30.09.2005 2004 30.09.2004 30.09.2005 2004 39
Non-technical account Net Investment income (Euro mn) 200 +10.5% 221 260 Financial performance increase despite low interest rates environment Constant increase of ordinary result Lower incidence of extraordinary income deriving from real estate reorganization, even if property assets transfer is still ongoing 30.09.2004 30.09.2005 2004 Net ordinary result (Euro mn) 146 140 Net extraordinary result (Euro mn) 80 105 +39.1% 54-51.9% 26 30.09.2004 30.09.2005 2004 30.09.2004 30.09.2005 2004 40
Development of consolidated technical results Non-life business (Euro mn) +46% 93 (Euro mn) Total technical result 170 12 +148% +148% 30 +24% (Euro mn) 2003 2004 2007E Life business +9% 77 71 +26% 89 58 +1% 59 2003 2004 2007E 2003 2004 2007E Change % 2003-2004 CAGR 04/07 Cattolica 2003 Group 41
Economic / financial ratios Non-life claims ratio (%) Non-life expense ratio (%) 78.2% 75.2% 72.9% 19.2% 19.8% 20.0% 2003 2004 2007E 2003 2004 2007E Combined ratio (%) Life expense ratio (1) (%) 98.9% 97.5% 0.22% 0.17% 0.20% 94.5% 2003 2004 2007E 2003 2004 2007E (1) Other life administrative expenses / gross average life technical reserves 42
Embedded Value as at 31 December 2004 Group Embedded Value 2004 (Euro mn) 194 1,228 1,067 1,034 (33) Shareholders equity Variazione 2004/ 2003 2003 2004 Delta Adjustments N.A.V. Value of life Embedded in force Value business 979 5 984 193 1,067 (33) 1,034 194 + 88 (38) + 50 + 1 1,177 1,228 + 51 EV/Share ( ) 24.8 25.9 + 1.1 Note: 2004 figure is pre distribution of dividends. 50%Eurosav. All components are net of : taxes, reinsurance, policyholders interests and minorities Sources: Internal Analyses 43
Embedded Value Assumptions Variables Discount Rate Life Products Investment Return Solvency Margin Taxation on Profit Assumption 7.25% 4.5% 100% ISVAP Minimum 38.25% 44
Transition to IAS IFRS and impacts of first time adoption IAS IFRS application n edited the consolidated six-months report to 30 June 2005 in accordance with Italian GAAP principles and the required prospects attachment in compliance with CONSOB art. 81-bis n. 14990 n The Group has decided to apply IAS 39 and IFRS 4 as of 1st January 2005, in order to better understand the impacts on consolidated shareholders equity and on consolidated net profit n n All other IAS/IFRS principles were adopted as of 1st January 2004 The prospects resulted to be a complete IAS/IFRS application as far as it regards 1H2005 consolidated net profit and consolidated net shareholders equity Impacts of first time adoption Analysis areas Consolidation area Technical reserves and DAC Financial investments Business combinations Land and buildings Intangible assets Group shareholders equity = The impact on Group shareholders equity will be positive Impacts IAS/IFRS application has an insignificant impact on net profit 45
Details on ALM process Objectives Frequency of ALM simulations Interest rate scenarios considered Actions Better management of financial uncertainty: decisions on assets and liabilities are coordinated Definition of strategic asset allocation Identification of opportunities to improve financial results At least Quarterly or: In case of extraordinary operations (mergers, acquisitions, etc.) When required by regulatory Authorities (ISVAP) When required by the Management Level (no deviation from current rates) Increasing (rates rise 0.5% a year for ten years, then level) Cap (rates rise 1% a year for five years, fall 1% a year for five years, then level) Pop-up (rates rise 1% immediately, then level) Decreasing (rates fall 0.5% a year for ten years, then level) Cup (rates decline 1% a year for five years, rise 1% a year for five years, then level) Pop-down (rates fall 1% immediately, then level) Output Reports are sent to on a regular basis to all departments involved Major findings are discussed in the ALM Committee in order to determine strategic alternatives and select those which maximize the financial reward for a given level of risk The Investment Manager and the Actuarial Life Manager are responsible for the implementation of the strategies settled by the ALM Board Alm Committee Composition Deputy General Manager Deputy General Manager (Bancassurance) Life Business Manager Finance & Investment Manager Chief Actuary Administration & Financial Accounts Manager Internal Audit Manager 46
IAS/IFRS impact on shareholders equity Net shareholder s equity (Euro mn) 1,209 1,221 1,267 1,068-2.5% 1,041 1,166 +3.7% 1,163 +5% 1,201 +5.5% IT gaap as at 1st January 2004 IAS/IFRS as at 1 st January 2004 IT gaap as at 1st January 2005 IAS/IFRS as at 1 st January 2005 IT gaap as at 30 th June 2005 IAS/IFRS as at 30th June 2005 IT gaap as at 30th September 2005 IAS/IFRS as at 30 th September 2005 47
IAS/IFRS impact on shareholders equity Net shareholder s equity as at 30th June 2005 (Euro mn) 252 +5% 1,163-22 - 146 3-29 1,221 IT gaap Tangible and intangible assets Financial assets and liabilities Insurance contracts Other Fiscal effect IAS/IFRS 48
IAS/IFRS impact on consolidated net profit and life premiums Consolidated net profit Consolidated life premiums (Euro mn) (Euro mn) 2,849-10.5% Investment contracts: 298 million 2,551 150 +8.7% 163 103 +10.7% 114 66 +9.1% 72 IT gaap as at IAS/IFRS as atit gaap as at IAS/IFRS as at IT gaap as at IAS/IFRS as at 31 st December 31 st December 30 th June 30 th June 30 th September 30 th September 2004 2004 2005 2005 2005 2005 IT gaap as at 30 th September 2005 IAS/IFRS as at 30 th September 2005 49
Economic/Financial information 30.06-30.09.2005 2004 2003 PREMIUMS (Euro millions) P&C 55 236 +16% LIFE 1 5 204 P&C +19% LIFE 3 TOTAL 56 241 TOTAL 207 NET PROFIT (Euro millions) 0.2 14 9 CAPITAL (Euro miilions) 61 85 (*) 71 ASSETS (**) (Euro millions) 395 ~ 410 ~ 350 (*) Before dividens and reserves pay back (**) Class C investments 50
Agency network at the end of September 2005 UniOne network integrated network Number of proprietary agencies Number of proprietary agencies Number of proprietary agencies (with the inclusion of UniONE) 4 171 3 14 19 157 14 874 38 14 368 66 11 9 23 15% 29 164 23 11 82 65 27 37% 48% 188 N: 28 C: 70 S: 90 65 11 5 21 33 22 43 171 90 36 14 19 20 19 157 235 131 74 38 27 132 68 66 88 23 22 39 1.132 N: 665 C: 328 S: 139 58% 29 164 116 42 8 65 33 27% 15% 65 11 50 33 19 43 171 93 36 14 19 19 21 157 249 139 74 38 40 133 68 66 91 23 22 48 52% 29 164 139 53 10 8 65 60 27% 21% 1.333 N: 693 C: 363 S: 277 65 116 71 33 41 69 15 69 34 69 49 51
Definitions Ratio Claims Ratio Calculation method Claims incurred/earned premiums, net of reinsurance Expense Ratio (non-life) Operating expenses/ Earned premiums, net of reinsurance Combined Ratio 1 (Non-life technical result/net earned premiums) Expense Ratio (Life) Other administrative expenses/ Average Life Technical Reserves 52
Contatti Investor Relations Team Giulio Fezzi Investor Relations Officer Tel. + 39 045 8391620 giulio.fezzi@cattolicaassicurazioni.it Andrea Battista Tel. +39 045 8391450 abattista@duomo.it Chiara Adria Tel. + 39 045 8391229 chiara.adria@cattolicaassicurazioni.it 53
DISCLAIMER This document has been prepared by Cattolica Assicurazioni based on data from internal sources (year-end financial statements, consolidated group financial statements, internal reporting and other company documentation, etc.) for the sole purpose of providing information on the group s results and future operating strategies. Given this, it can in no way be used as a basis for possible investment decisions. It is not a solicitation to buy or sell shares. No part of the document can be taken to be the cause of or reason for agreements or commitments of any type or kind whatsoever, nor can it be relied upon for agreements and commitments.information contained in the document concerning forecasts has been prepared according to various assumptions and/or elements that might ultimately materialise differently to present expectations. Results might therefore change. Cattolica therefore in no way provides any guarantee, either explicit or tacit, as regards the integrity or accuracy of the information or opinions contained in the document, nor can any degree of reliability be attributed to the same, inasmuch as it has not been subjected to independent verification. Responsibility for use of the information and opinions contained in the document lies solely with the user. In any case Cattolica, within legally admissible limits, will not consider itself liable for any damages, direct or indirect, that third parties might claim due to utilisation of incomplete or inaccurate information. For any further information concerning Cattolica Assicurazioni and its related group, reference must be made exclusively to the information given in the annual, quarterly, and interim reports and financial statements. The full versions of these documents, which constitute the factual basis and proof for all legal purposes, are lodged at the company s registered offices and are available to anyone requesting them. Reproduction or full or partial publication and distribution of the information contained herein to third parties is prohibited. Acceptance of the present document automatically signifies recognition of the aforesaid constraints. 54
Giulio Fezzi - Chief Financial Officer and IR Manager Andrea Battista - General Manager Duomo Assicurazioni and IR UBS The Italian Financial Services Conference 2006 Capital allocation and strategic opportunities for Italian Financials : Strategic Opportunities and Capital Management Milan, 2 nd February 2006 55