CITIGROUP - ANNUAL PAN EUROPEAN SMALL/MID CAP CONFERENCE LA VIA CATTOLICA Searching for new ways to create value and new value to create London, October 17th 2007
Contents Cattolica: a reshaped Group transformation ongoing Going on the Cattolica way: Group strategy Economic and financial objectives to 2010 1H 2007 Interim results Cattolica stock 1
A solid base for the generation of value A history of overall growth of premiums Strong growth of the agency network 4.5 bn in 2006 (+8.5% CAGR compared to 2000), of which 35% is non-life and 65% is life insurance 6th largest operator in the Italian market, 5th in Motor From ~550 to ~1,500 agencies during 2000-06 A broad customer base with potential for further development Approximately 2 million direct customers in the agency network alone A successful model in Bancassurance The Group has a firmly rooted system of economic relations Flexibility and financial strength Over 30 agreements with partner banks involving over 2,700 branches ~ 26,000 Shareholder members Network of relations with Ecclesiastic and Non-profit entities A rating from A.M. Best (negative outlook) "A-" rating from Standard & Poors (stable outlook) 2
The strategic concept Strategic objectives 2007-2010 Focused, organic growth, with specialization and further development of Group's system of relations Leading insurance company for retail and small business customers Increased value with focus on operating efficiency and risk and capital management Plan perimeter Systematic development of growth opportunities in Italy and abroad 3
The Business Pillars which constitute the Group's strategy Strategic Pillars Unification and development of the Group's agency networks, widespread throughout the country Focused, endogenous growth, with specialization and further development of Group's system of relations Growth in value, quality of service and efficiency of the motor business, through the specialized business partnership with Mapfre Group Development of life and non-life bancassurance: reinforcement and extension of the partnerships with regional banks, intensification of the strategic relation with Banca Lombarda and extensive development of the new agreement with Banca Popolare di Vicenza Exploitation of the relations with shareholders Focused action on ecclesiastic and non-profit entities Increased value with focus on operating efficiency and risk and capital management Corporate, organizational and operational integration Development of Group investment policies Strategic risk and capital management 4
Reshaping the Group: New Shareholders and Corporate Structure 2007 Shareholders Structure 2007 Cattolica Shareholders structure Institutional investors show stronger interest on the Stock with acquisition of important stakes In September capital increase reserved to Banca Popolare di Vicenza for the 8% of Cattolica s post-increase share capital, raising its stake to 12.4% Further actions Stakebuilding plan announced by Mapfre who will acquire extra 10% Cattolica s shares on the market Another 4% of capital, will be sold to Banca Popolare di Vicenza starting on July 1 2010. Other Institutional Investors 15.3% Retail investors 65.6% Banca Pop. Vicenza 12.4% Fond. Cari Trento e Rovereto 2% Mapfre 7.5% Group & Plan Governance New Board of Directors in place since the AGM approval (28 th April) Cattolica new General Manager and new Deputy General Manager hired and already in place General Manager of Mapfre Cattolica Auto appointed by Mapfre In place new organizational structure 5
New Corporate organizational structure Chairman Group Auditing Werther Montanari Paolo Bedoni General Manager Giovan Battista Mazzucchelli Deputy General Manager Marco Cardinaletti Strategic Planning & Institutional Relationships (*) Giulio Fezzi Legal & Corporate Massimo Mella Group Finance and Investments Piero Gavazzi Non-life and Reinsurance (*) Commercial Group Bancassurance, Pension and Life (*) Group Motor Business Unit (*) Group HR & Organization Mayer Nahum Antonello Cattani Andrea Battista Luca Lanzoni Paolo Masini (*) Central Managers 6
New business and service model INSURANCE BANCASSURANCE Motor Factory JV (1) Non Motor P&C Banking and Pension Life financial Life Non-life products planning INSURANCE CHANNEL BANKING CHANNEL (2) Finance and Investments Shared operational services (1) Including Motor FTK, Assistance and all accessories to the overall Motor product, except the business developed with Shareholder members and the banking channel (2) Only the JVs will tend to have an autonomous corporate standing with respect to the parent company 7
Contents Cattolica Assicurazioni: a reshaped Group transformation ongoing Going on the Cattolica way: Group strategy Economic and financial objectives to 2010 1H 2007 Interim Results Cattolica stock 8
Corporate simplification and reorganization ongoing Simplification and rationalization of corporate organization and business structure ongoing Establishment of Motor Factory JV Integration of non motor business Corporate Business / brokers Agency motor classes Agency motor classes New name Centralization of claims management Claims Management branches Centralization of life divisions in Cattolica MERGER Motor Factory JV Cattolica Claims Management (new dica) (1) Note: The transactions are subject to the authorization of the competent authorities Our actions - Update Agreement with trade unions signed which approved all corporate operations Approved the integration of CIRA and Duomo UniOne non motor business by Cattolica Approved the integration of motor classes of Cattolica, Duomo UniOne and CIRA in the new Motor Factory JV Our actions - Update Integration of Cattolica and DuomoUnione claims management branches into the new dica, the company dedicated to Group claims management Our actions - Update Approved the merger of Duomo Previdenza in Cattolica Approved the merger of Persona Life in Cattolica 9
Insurance Business - Focus on proprietary channel Insurance Business Actions in place Unification and integration of the agency networks started - Segmentation of agencies into the types and models profiled - Progressive development of range of products and services Increase in commercial efficiency and exploitation of the agency network - New sales structure, unifying and strengthening of the central and local sales structures - Expanding Agency sales force, by introducing Insurance Consultants and Life and Pension Planning Consultants - Intense training program - Incentives aimed at increasing profitability and cross-selling - Development of support and sales monitoring tools Target Increased penetration of non motor and life products in the agency network 10
Rationalization of agency insurance business structure FROM FRAGMENTATION.... TO CONSOLIDATION Insurance Business Insurance Business Agency network Agency network Agency network A unified Agency network Administrative Services Administrative Services Administrative Services Administrative Services IT IT IT IT Claims Management Claims Management Claims Management Claims Management Commercial Marketing Product development Commercial Marketing Product development Commercial Marketing Product development Commercial Marketing Product development Two agency mandates Motor Factory JV 11
Unification and integration of the agency networks Insurance Business A unified agency network Number of Agencies (1) Our actions - Update 2 88 35 15 21 225 141 125 77 48 19 52% 1,231 625 569 N: 645 C: 361 S: 225 Agency clustering by dimensions and performance at advanced stage Geographical marketing analysis under development Operational re-configuration and integration 125 46 8 18% Year end unified commercial campaign 39 29% 52 13 68 41 51 (1) Updated June 2007. Excluding 125 Persona Life multymandatary agencies 12
Strategy of integrated products and services Insurance Business Retail and Small Business Customers Our actions - Update Set-up of a Group strategic marketing function Non-stop analysis of motor tariffs and new tariff to be launched in October New health care products ready to be launched Financial value proposition at advanced stage in cooperation with B.P. Vicenza 13
Commercial reorganization going on: unification and strengthening of the sales force Insurance Business Operational Marketing Life spec. Commercial Division - Agents Commercial Division - Agents Sales Area Manager Sales Assistants Agents Sales Planning Network Agents working under an company department Our actions - Update From: Geographical overlapping of sales supervisors No presence in some geographical areas Unbalanced sharing of span of control per sales assistant Many agencies managed directly by sales supervisors To: New integrated commercial division started in September Reorganization of the commercial division based on a new territorial structure: 9 areas 56 zones >80 people on the field 1 sales commercial assistant every 20 agencies New life sales department 14
Motor Factory JV Motor Factory JV Drivers of development Company specialized in the Motor segment in a joint-venture with Mapfre Expanding the range of products and services; careful selection of risks and customized pricing Actions focused optimizing claims management, with focus on customer service and profitability over the entire life of the claim Target Increase in profitability of the Motor segment, with increased penetration of coverage with higher added value and improvement in technical results Completion of on-going re-alignment strategy 15
Optimization of claims management Claims Management Action points All Group activities involving claims management centralized in di.ca Development of operating platforms: Industrialization of processes Flexible organization New Technologies Process integration Reduction of management and claim settlement costs (e.g. legal expenses and inspections) Reduction of logistics costs in adjustment centers (unification of adjustment center networks) Centralization and diffusion of information and knowledge Our actions - update Integration of claims management structures in di.ca by 1 July 2007 Integration & Improvement Task force started in September Reorganization of IT platforms started 17 16
Targets of the strategic actions Targets Premiums - Motor Agents ( mln) Total MCA 1,052 2.0% 1,138 Group share of MCA 569 2006 2010T Claims ratio MCA (2) (%) 80.3% (1) - 4.3 p.p. 76.0% (1) Normalized value (2) Estimate - Gross of reinsurance CAGR 06-10 17
Bancassurance - strategic drivers Bancassurance Drivers of development Reconfirmation of the partnership oriented model: sales agreements, focused partnerships, joint ventures Strategic partnership with BPVI Consolidation of life bancassurance Target Consolidation of the life market share and development of non-life bancassurance Development of non-life bancassurance 18
Bancassurance: the "repositioning" of the model Maximum exploitation of the management model for a differentiate portfolio of partnerships Focused partnerships Joint ventures Bancassurance Number of branches Sales agreements 1,539 252 Joint-ventures, with a strategic partnership 946 Product distribution agreements Distribution and product agreements, reinforced by capital investments (in certain cases featuring a cross over) Taking advantage of existing agreements Development of new agreements, aimed at completing geographic coverage Taking advantage of existing agreements Taking advantage of partnerships Business development aimed at selecting new agreements 19
The agreement with Banca Popolare di Vicenza Bancassurance The key points of the agreement Life Bancassurance: acquisition of a 50% share in Berica Vita SpA (governed by Italian law) and Vicenza Life Ltd (governed by Irish law) Non-life Bancassurance: disposal to BPVI of a 50% share of ABC Assicura SpA Asset management: integration of Verona Gestioni SGR with BPVI Fondi SGR. Equal stakes Our actions - update By 5th September the partnership with Banco Popolare di Vicenza is operative: Started distribution of non-life products Started distribution of life and pension products Next distribution of bank products through the agency network Significant growth potential in Life Bancassurance Average premiums per branch ( mn) Reserves/AUM (%) 0.9 1.6 16.4 22.4 BPVI Average for comparable banks BPVI Average for comparable banks 20
The agreement with Banca Lombarda Bancassurance Renewal until 2010 of Cattolica and Banca Lombarda agreement Business and commercial agreement Cattolica Group insurance products will continue to be sold via the 811 bank branches and 567 Financial advisors of Banca Lombarda LOMBARDA VITA 2006 premiums: 1.376 mn 1H 2007: +5.5% Market new business: -4.2% Confirmation of Lombarda Vita activity: the joint-venture founded in 2000, 50.1% owned by Cattolica and 49.9 by Banca Lombarda 21
Life Bancassurance: action points and objectives Bancassurance Action points Focus on pension planning as a growing business Balanced product mix, to maintain flexibility in relation to market performance Selective introduction of innovative product elements to respond to pension planning challenges (e.g. class I and class III mixed products) Monitoring and, where possible, development of the insurance content of life products with financial content Sales actions focused on medium to high level bank customers (affluent and private insurance, also through Irish operations) and testing of corporate bancassurance products (collective / employee benefit) Maintenance of penetration of current partnerships, with a focus on service and sales support to Partners Continuous search for new partnership opportunities (not taken into account for the Plan) Premiums - Life Bancassurance ( mn) 5.4% 3,107 2,517 BPVN 720 3,107 Other 1,797 partnerships 2006 2010T MS (%) ~4.9% ~5.0% CAGR 06-10 22
Non-life Bancassurance: action points and objectives Action points Our actions - update Bancassurance Gradual activation of the range of products offered through all major partner networks, with a focus on collective products coupled with banking products (credit protection on personal loans and mortgages, accident and injury coverage for c/a and fire insurance on mortgages) and on stand-alone products Maintenance of wide range of products/services (asset, vehicle, current account, credit line and personal coverage), but with a particular focus on personal coverage for the retail segment Subsequent focus on products for the small business segment, in particular with all risk coverage products (theft, fire, civil liability) Extension of the penetration of current partnerships In September 2007 start-up of ABC Assicura, JV with BPVI specialized in non-life bancassurance In 1H2007 significant growth of non-life bancassurance: + 66,7% despite the expiration of BPVN agreement Continuous exploration of opportunities for new agreements with banks and financial companies Premiums - Non-Life Bancassurance ( mn) Non motor Motor 28 31% 82 62 24 4 20 2006 2010T MS (%) ~4.1% ~7.3% CAGR 06-10 23
Grasping opportunities from pension market reform Pension Planning Complementary pension reform became effective on January 1, 2007 By now the Italian market grew less than expected. In comparison with other European countries, Italy shows strong potential market growth in this business Action points Reinforcement of the Central Competence Business Unit specialized in complementary pension planning through reorganization and consolidation of activities and units Achieve economies of scale and exploit Group resources and experience in pension field to create competitive advantages in terms of know-how Exploit potential strength of Group distribution network Our actions - update Capabilities and competitiveness in all business areas (closed funds, open funds, individual policies) Distribution of products through all Group networks (banks, agencies, brokers, direct channel) Development of services to support the distribution network Acquisition of the remaining 50% of AXA Cattolica Previdenza in Azienda, specialized in employee benefits business area and integration of the operational processes in the Group Results In 2007 growth in all business areas: Closed funds: from 4funds in 2006 to 10 funds in 2007 Open Funds: from 1.267 adhesions in 2006 to 4.707 in August 2007 (market share growing from 0.28% in 2006 to 2.2% in 2007) PIP: market share to 2% in terms of adhesions (0% in 2006) 24
IT intervention guidelines Corporate, organizational and operational integration Organizational acceleration strategies Main objectives Support the corporate and organizational evolution expected in the near future Support the operating launch of the new Motor Factory JV, through unification of the agency network Unification and innovation of Group systems, rationalizing the platform and facilitating efficiency Support the evolution of the integrated agency network Partnership in IT application and facility management selected and in place New management team for the IT company hired: Chairman, CEO and General Manager in place since 1H 2007 Investment Plan for strategic projects defined and under implementation. 2007/10 Investment ~ 60 mn 25
Operating efficiency Corporate, organizational and operational integration Action points Freeze employee turnover Take advantage of existing skills Reassign staff to areas with greater development, using dedicated training programs Recruitment of staff with selected specializations Insourcing of currently outsource tasks/departments to available staff once the corporate unification is complete actions planned on information systems Acceleration of the optimization and centralization of purchases Compliance with IT budget Our actions - update Observed reduction in headcount Strategic sourcing analysis near to start Rigid IT cost control Target 2010 Gross overall savings of approximately 35 million (1) in operating costs compared to inertial (1) At a perimeter level with 100% aggregated with MCA 26
Guidelines for capital usage and management Management of risks and capital Systematic development of growth opportunities in Italy and abroad Growth Confirmation of rating target A Solidity Capital availability targets Shareholders Progressive growth in the dividend per share In the medium term with absence of opportunities Capital management actions 27
Contents Cattolica: a reshaped Group transformation on going Going on the Cattolica way Economic and financial objectives to 2010 1H 2007 Interim results Cattolica stock 28
Main targets of the plan: focus on growth aimed at generating value TARGETS Premium collection ( mn) (1) Non-life Combined ratio (%) 3.4 % 5,279 109.2% 4,514 -~ 6 p.p Life Non-life 2,906 1,608 3,950 1,330 Normaliz. ~ 99% ~ 93% 2006 2010T 2006 2010T (1) Including investment contracts Note: Tua Assicurazioni included in the figures for 2006 (in the one-off item for the combined ratio) T: Target CAGR 06-10 p.p. 06-10 29
with attention to the technical profitability and operating efficiency levels TARGETS Claims Ratio 2006-2010 change (%) Expense Ratio 2006-2010 change (%) 85,6-1.6-1.3-1.8-1.5 Commission ratio 76.8 (1) 70.6 21 +1.8-1.9 Pure expense ratio 20.9 2006 Operations involving portfolio realignment Evolution of the portfolio mix with increasing weight on non motor business Portfolio rebalancing effect for the MCA operation Reduction of management claim adjustment costs 2010T 2006 Evolution of the commission mix: increasing weight of non motor business MCA effect Actions involving reduction of of operating costs 2010T (1) Normalized F: Forecast; T: Target 30
Development of consolidated and net Group profits TARGETS Net consolidated profit ( mn) Group net profit ( mn) 160 5,1% 195 139 5,2% 170 2006 2010T 2006 2010T In the interim period significant capital gains are expected from planned extraordinary transactions CAGR 06-10 T: Target 31
Contents Cattolica: a reshaped Group transformation ongoing Going on the Cattolica way: Group strategy Economic and financial objectives to 2010 1H 2007 Interim Results Cattolica stock 32
1H2007 Results: going on with the turnaround 1H2007 Interim Results Focus on non-life more profitable businesses: Non-motor business: +6.7% Motor premiums: -5.5% because of portfolio pruning Gross premiums2005 collection* Dividendo per azione -1.8% 831 816 1H2006** ( mln) 5.2% 1,955 2.057 1.124 1.241 10.8% ( ) 1H2007** 1H2006 income was positively affected by extraordinary gains coming from real estate disposal and strategic stake sale Net financial income 2005 ( mln) 188-3.7% 181 Dividendo per azione ( ) 1H2006** 1H2007** Improvement of claims ratio to 78.1% in 1H2007 from 81.4% in 1H2006. Expense ratio raises to 22.4% in 1H2007 from 21.6% in 1H2006 due to one-off expenses (for reorganization process) Combined ratio (%) 109.2% 103.8% 2006 1H2007 1H2006 result was positively affected by extraordinary gains coming from real estate disposal and strategic stake sale worth 82 mn, net of taxes Consolidated net result ( mln) - 42% 50 29 1H2006 1H2007 * Including investment contracts ** Excluding BPV VITA according to IFRS 5 33
Contents Cattolica: a reshaped Group transformation ongoing Going on the Cattolica way: Group strategy Economic and financial objectives to 2010 1H 2007 Interim Results Cattolica stock 34
Cattolica stock performance vs analysts target prices Strategic Plan presentation 2007-2010 Target Price Analyst 50 Target Price Analyst 47,5 46,8 Mediobanca 42,3 42 41 Average 41 Intermonte 40.8 UBM 38 Banca Leonardo 42,5 Mediobanca, Kepler Euromobiliare 45 40 44 43,5 43.5 Caboto Average UBM 43,3 Cheuvreux 42,3 Banca Leonardo 41 Intermonte 02/01/2007 11/01/2007 22/01/2007 31/01/2007 09/02/2007 20/02/2007 01/03/2007 12/03/2007 21/03/2007 30/03/2007 12/04/2007 23/04/2007 03/05/2007 14/05/2007 23/05/2007 01/06/2007 12/06/2007 21/06/2007 02/07/2007 11/07/2007 20/07/2007 31/07/2007 09/08/2007 21/08/2007 30/08/2007 10/09/2007 35
Evolution of volumes and capitalization since 2001 Volumes 2005 Turnover velocity (number) (%) x 4 142.820 110.872 x 4 76,6% 54,6% 62.845 33,8% 25.235 23.612 33.131 42.060 14,8% 13,8% 17,6% 22,8% 2001 2002 2003 2004 2005 2006 9M2007 2001 2002 2003 2004 2005 2006 9M2007 Volumes value in ( ) Capitalization ( mln) x 8 x 2 6.461.890 4.903.868 1.802 2.144 2.278 631.657 521.990 794.978 1.372.249 2.389.304 1.078 952 1.137 1.546 2001 2002 2003 2004 2005 2006 9M2007 2001 2002 2003 2004 2005 2006 9M2007 Source: Bloomberg and internal analysis 36
Defensive stance of Cattolica Stock: Best performer in Italy during market shock period Stock performance in comparison with main Italian insurance equities Market shock period 13.07.2007 14.09.2007 Cattolica: best performer in Italy during market shock period CATTOLICA ASSICURAZIONI VITTORIA ASSICURAZIONI GENERALI ASSICURAZIONI ALLEANZA UNIPOL FONDIARIA SAI + 0,64% -1,32% -1,52% -2,93% -8,85% -11,30% 01/07/2007 08/10/2007 Vittoria Generali Cattolica +10,2% +0,78% -2,54% Milano Unipol Alleanza -5,03% -6,59% -8,61% MILANO ASSICURAZIONI ERGO PREVIDENZA MEDIOLANUM -11,51% -12,63% -15,26% Cattolica: Third Best performer in Europe during market shock period Fondiaria -8,92% Source: Bloomberg 37
ANNEX 38
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/earned premiums, net of reinsurance) 39
Corporate Events 2007 Calendar 21 March 27-28 April 10 May 12 September Approval of the financial statements for the year and the consolidated financial statements for 2006 Shareholders Meeting 27 April First call 28 April Second call Approval of the quarterly financial statements for the period ending 31 March 2007 Approval of the quarterly financial statements for the period ending 30 June 2007 13 November Approval of the quarterly financial statements for the period ending 30 September 2007 40
Contacts Giulio Fezzi Group Chief Strategy and Operating Officer Head of Investor Relations Tel. +39 045 8391620 e-mail: giulio.fezzi@cattolicaassicurazioni.it Chiara Adria Investor Relations Tel. +39 045 8391229 e-mail: chiara.adria@cattolicaassicurazioni.it Andrea Battista Head of Bancassurance e-mail: abattista@duomo.it Chiara Giordano Investor Relations Tel. +39 045 8391114 e-mail: chiara.giordano@cattolicaassicurazioni.it Piero Gavazzi Chief Financial Officer e-mail: piero.gavazzi@cattolicaassicurazioni.it 41
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. 42
CITIGROUP - ANNUAL PAN EUROPEAN SMALL/MID CAP CONFERENCE LA VIA CATTOLICA Searching for new ways to create value and new value to create London, October 17th 2007