Cattolica Group: Strategy and Results

Giulio Fezzi - Chief Financial Officer and IR Manager
Andrea Battista - General Manager Duomo Assicurazioni and IR
Borsa Italiana
Italian Investor Conference 2006
Cattolica Group:
Strategy and Results
New York, 3-4 April 2006
Cattolica Group
1

Agenda
• Cattolica Group at a glance
• Strategic framework and strategy implementation
• Business growth and value creation
Cattolica Group
2

Agenda
• Cattolica Group at a glance
• Strategic framework and strategy implementation
• Business growth and value creation
Cattolica Group
3

Cattolica Group
• The Parent Company is a co-operative legal-entity structure, operating in the
life and non-life insurance businesses in Italy
• Today the Group consists of 22 companies, including 14 insurance
companies
• 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)
• Other Group companies consist of two real-estate companies, four service
companies, one asset management company and one retail-brokerage
(Fas) company
Cattolica Group
4

Cattolica Group Evolution
HISTORICAL PHASES
Cattolica Group brands and companies
BIRTH CONS. GROUP DEVELOPMENT
1896 1976 1994 2000 2001 2002 2003 2004 2005
‘95‘97 ‘98
2006
Listing
Premiums (*) (Euro mln)
(*) Including Investment Contracts
373 2,768 3,731 5,188
Cattolica Group
5

Group Market Share trend
Group Market Share
(2002 - 2005; Italian direct business)
Ranking
4.9%
4.5%
4.5% 4.5%
4.3%
4.2%
4.0% 3.9%
3.8%
4.2%
5.2%
4.9%
2005
6 6
7
Non-life Life Total
5 th
traditional
insurance
Italian
Group
2002 2003 2004
2005
Non-life Life Total market share
Sources: Estimates on Cattolica Group reports and ANIA data
Cattolica Group
6

Development of Group’s multi-channel network
Tied Agencies n.
FAs n.
Bank branches n.
With the
exclusion of
138 multimandatory
agencies
2,066
2,653 2,717 2,748
3,053
2,913
2,702
1,357
546
900
974 1,024 1,049 1,092
337
511
613
895
1,212 1,138
975
1999 2000 2001 2002 2003 2004 31/12/05
1999 2000 2001 2002 2003 2004 31/12/05
1999 2000 2001 2002 2003 2004 31/12/05
Cattolica Group
7

Rating on Cattolica: “excellent risk-adjusted capitalisation”
A
A
NOTE
Strong
Stable outlook
NOTE
Excellent
Stable outlook
The rating reflects strong
competitive position, strong
operating performance and strong
capitalization. The stable outlook
represents S&P’s expectation
Cattolica will maintain its strong
competitive position.
The rating reflects Cattolica’s
prospective excellent riskadjusted
capitalisation, excellent
operating performance and
distinctive business position in
the Italian Market
Aq
NOTE
Strong
Quantitative – Insurer
Financial Strength
The rating reflects very strong
capitalisation and strong
earnings.
Cattolica Group
8

Agenda
• Cattolica Group at a glance
• Strategic framework and strategy implementation
• Business growth and value creation
Cattolica Group
9

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
Cattolica Group
10

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)
- January 2005 – 50% Eurosav acquisition
- July 2005 – UniOne acquisition
Cattolica Group
11

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
Cattolica Group
12

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
Cattolica Group
13

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.
Cattolica Group
14

Agency network in 2005
Proprietary agency network
Number of proprietary agencies
Multi-mandatory agency network
Number of multi-mandatory agencies
Group integrated agency network
Number of total agencies
14 16
19 22
43
171 93
157 255 144 74
38 133 68
38
39
66
92
23 49
52%
29
164 142 55 10
8
65 60
27%
21%
69 51
1.357
N: 704
C: 371
S: 282
65
117 73
33 42
4
171 10
10
14 19 22
157 25 874
38
13 68
66
4
19%
233 6
164 11
48%
292
33%
8
65 26
69 11
138
N: 66
C: 26
S: 46
65
111 7
33 1
14 16
19 22
43
171 103
157 280 152 74
48 146 68
66
96
23 26 55
52%
38
39
29
164 153 57 10 8
65 86
27%
21%
69 62
1.495
N: 770
C: 397
S: 328
65
118 80
33 43
Cattolica Group
15

Bancassurance consolidation
December 2005
Renewal until 2010 of Cattolica and
Banca Lombarda agreement
Business and commercial agreement
• Cattolica Group 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
Cattolica Group bank
branches distribution:
2,913 branches
Market share of 9.3% in Italy
4
171
14 19
157
Market 74
share
11.4% 68
38
66
Market
share
23
6.6% 29
164
8
Market
65
65
share
11
6.0%
• 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
Cattolica Group
16

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%
Cattolica Group 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
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
Cattolica Group
17

UniOne acquisition
Restructuring and Integration process
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
• In 2006 – Plan of incorporation in Duomo
Assicurazioni in order to increase the level of
integration and profitability of non-life
business generated via the single-card
agency network
• creation of a strong non-life unit with 569
proprietary agencies
• End 2005 – UniOne Vita integration into
Duomo Previdenza and following “multimandatory
agencies” branch of business
transfer from Eurosav to UniOne Vita
100%
• Persona Life birth: UniOne Vita new
denomination; the first Group company
dedicated to multi-mandatory agency network
Cattolica Group
18

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
• Cattolica Group 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
Cattolica Group
19

Completing Life Operations restructuring
MAIN OBJECTIVES
Life operations restructuring
merger
merger
Specialize companies by business area
and distribution channel
• R&P: center of excellence in
bankinsurance agreements
– Scope economies (products,
commercial initiatives)
– Scale economies (IT, back-office
and other operations)
• Cattolica: set-up of a Group Pole for
Life Business through all tied agency
networks
– Scope economies (products,
commercial initiatives)
– Scale economies (IT, back-office
and other operations)
Cattolica Group
20

New Business Architecture
MAIN DRIVERS
• maximisation of opportunities for
value creation by integration of
business areas and sales
channels
• centralisation and optimisation of
common services
• generation of economies of scale
and increase of Group’s
operational integration
CHANNEL FOCUSED NEW GROUP CORPORATE STRUCTURE
Centralized Factories by divisions
Non Life
(*)
Life
Proprietary Agents Banks Brokers
Multi-mandatory
agents
(*) Illustrative - New brand still under construction
Cattolica Group
21

Agenda
• Cattolica Group at a glance
• Strategic framework and strategy implementation
• Business growth and value creation
Cattolica Group
22

Development of consolidated premiums
Gross Consolidated Premiums
Direct and indirect business (IT GAAP)
(1999 - 2004; Euro mn)
4,212
3,731
3,351
2,768
2,820
2,464
2,298
4,617
3,197
+12.4%
+14.1%
2005 Result***
5.188
3.646
CAGR
99/05
23.8%
With the
inclusion of
Investments
contract s
for € 327 mn
2007 Target
5,510
3,499
CAGR
04/07
6%
3%
1,442
2,012
Life
917
1,267 1,392 1,420
1,053
Non-life (*) 756
525
+9.1% ** **
1.542
2,010
12%
1999 2000 2001 2002 2003
2004
2005
2007E
Breakdown
Life
Non-life
64% 73% 69% 66% 67%
36% 27% 31% 34% 33%
69%
31%
70%
30%
64%
36%
Note: 2007
Premiums IT
GAAP
Change % 2005/2004
(*) With the inclusion of indirect business (**) Only direct business Cattolica Group ( ***) IAS/IFRS results with the inclusion of investments contracts
23

Non-life business
Premiums
2005 Non-Life business mix
(Direct business - Euro mn)
1,398
9.1%
1,523
(Direct business - Euro mn)
Motor
65%
Nonmotor
35%
2004 2005
Non-Life business mix
(Direct business - Euro mn)
1,398
Non-motor
460
Motor 938
9.1%
+14.8%
+6.3%
1,523
527
996
2005 significant growth of more
profitable business lines:
• Health at 58 mn (+ 14.5%)
• Accident at 105 mn (+ 15.4%)
• Fire at 88 mn (+ 8.6%)
2004 2005
Cattolica 2003 Group
24

Life business
Life business collection
(Direct business - Euro mn)
3,197
14.1%
3,646
2005 Life business mix
(Direct business - Euro mn)
Unit
16.4%
Class VI
2.8%
Traditional
48.8%
With the
inclusion of
Investments
contract s for
€ 327 mn
Index
32%
2004 2005
Life new business collection
(Direct business - Euro mn)
+15%
3.428
Mix by type of product
(Direct business)
2.981
Index
50.4%
34.4%
Unit
9.7%
16.5%
Traditional
39.8%
12.8% 49.1%
2004 2005
2004 2005
Cattolica Group
25

Development of consolidated net profit
Consolidated net profit 1999-2004 *
( Euro mn)
2005 Result **
2007 Target*
176
CAGR
04/07
5,5%
125
150
139
47
53
63
26
1999 2000 2001 2002 2003
2004
2005
2007E
Group
net profit 25 44 46 57 116
136
115
162
6%
(*) Italian GAAP results (**) IAS/IFRS result
Cattolica Group
26

Development of dividend per share
Cattolica dividend policy is consistent with the 3-year plan value creation program
Dividend per share
(1999-2004; Euro)
1.35
Dividend 2005
1.50
0.20
CAGR
99/05
16%
Extraordinary
dividend
1.00 1.00
1.02
+11%
0.22
0.62
0.70
1.30
0.78
1 free share
for every 10
Other indicators
1999
2000 2001 2002 2003
2004
2005
Pay-out (Euro mln) 17 30 43 (**) 43 48
64
71
Pay-out ratio (*) 71.7% 76.5% 77.1 % (2) 72.4% (3) 78.3% 60.2%
69.6%
Dividend yield (1) n.a. 2.28% 3.60% 4.59% 3.50% 3.98%
3.2% (***)
18.8%
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
Cattolica Group
(***) Calculated on a price per share of € 47.13
(as at 24.3.2006)
27

Cattolica stock performance in 2005-2006
Stock performance in comparison
with the main indexes
PERFORMANCE 2005-2006
as at 24 March 2006
Cattolica +39.2%
Mibtel
S&P/MIB
MIB INS.
+24.9%
+23.1%
+27.6%
01/01/2005
24/03/2006
Cattolica
MIB INS.
S&P/MIB
MIBTEL
Change % 01/01/2005-24/03/2006
Source: Bloomberg
Cattolica Group
28

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.
Cattolica Group
29

Giulio Fezzi - Chief Financial Officer and IR Manager
Andrea Battista - General Manager Duomo Assicurazioni and IR
Borsa Italiana
Italian Investor Conference 2006
Cattolica Group:
Strategy and Results
New York, 3-4 April 2006
Cattolica Group
30