CNP 2003 Resultats

1
Inside EEV
Analyst Presentation
28 April 2006
2
AGENDA

• SCOPE OF CALCULATION 2
• ANAV 6
• RISK FREE VALUE 10
• TIME VALUE OF OPTIONS 12
• COST OF SOLVENCY MARGIN AND NON-FINANCIAL
  RISKS 18
• NEW BUSINESS 21
• Y1 EEV ESTIMATE BASED ON EEV FOR Y 23
• APPENDICES
• RESULTS 26
• SENSITIVITIES 30
• ECONOMIC ASSUMPTIONS 32
• RECONCILIATION OF TRADITIONAL EV AND EUROPEAN
  EV 34

April 2006
3
SCOPE OF CALCULATIONDefinition of EV EEV

• Consolidated present value of shareholders
  interests generated by the insurance business
• ANAV
• Value of projected future cash flows from
  in-force business over the remaining life of the
  policies.

4
SCOPE OF CALCULATIONInsurance businesses and
entities

• Embedded Value and New Business group share
• France
• CNP Assurances (parent company),
• CNP IAM (100),
• Ecureuil Vie (50),
• ITV (100),
• Préviposte (100),
• Assurposte (50),
• CNPI (100),
• Brazil
• Caixa Seguros (51.75)
• Italy
• Cnp Capitalia Vita (57.5).
• The Group operates solely in the life insurance
  market, except in Brazil.
• Global and Global Vida in Portugal and the other
  entities have been valued at book value.

5
SCOPE OF CALCULATIONEEV methodology

• France and Italy gt EEV methodology savings,
  pension and risk
• with financial options and guarantees
• Minimum guaranteed yield (MGR)
• Profit sharing option
• Guaranteed surrender values
• Minimum guaranteed death benefit for unit-linked
  contracts
• Guaranteed annuity options
• Brazil gt traditional EV methodology, essentially
  risk contracts including non life covers

6
SCOPE OF CALCULATIONEEV methodology
NB Italy
NB
NB France
NB Brazil
IF
IF France
IF
IF Italy
IF Brazil
ANAV
TEV
EEV
The scope of EEV calculation used by the Group is
the euro zone. Group businesses in this zone
consist solely of life insurance. For businesses
in Brazil, the traditional EV methodology
continues to be applied.
7
ADJUSTED NET ASSET VALUEDefinition

• ANAV is the market value of shareholders' fund
• The EEV definition is the same as for the
  traditional EV
• There are no differences between the French Gaap
  and IFRS amounts
• Two possible calculation methods directly from
  the IFRS accounts or via the French Gaap accounts

8
ADJUSTED NET ASSET VALUECalculation at 31
December 2005 directly from IFRS
- 69
- 1 423
- 655
371
265
In Force
- 1,423
8,132m
Goodwill
Unrealised gains on property
Deferred tax on capitalisation reserve
- 265
Reevaluation on policyholdersfund
6,356m
Dividends
EEV adjusted NAV
IFRS equity

• Deferred tax on capitalisation reserve impact
  FTA Financial Accounts- Note 4.2.1 346 M
  impact 2004 10 M impact 2005 15 M
• Goodwill Financial Accounts 2005 - Note 7.2
• In Force Financial Accounts 2005 - Note 7.3.1
  Group share after tax

9
ADJUSTED NET ASSET VALUECalculation at 31
December 2005 via French Gaap
Deferred tax on capitalisation reserve
- 2593
Unrealised capital gainson shareholdersfund
8,132m
371
1 440
- 580
- 265
- 131
6,356m
- 18
Shadow Accounting Other adjustments
Dividends
Goodwill
In Force
Taxcredit
EEV adjusted NAV
IFRS equity
10
IN FORCE BUSINESSEEV definition

• For the calculation of EEV, in-force business is
  defined as the sum of
• The risk-free value (RFV) of the portfolio
• The time value of options (TV Options)
• The cost of locking-in solvency margin and
  non-financial risks (CSM NFR)

TV options
RFV
CSM NFR
EEV
11
RISK FREE VALUEAll contracts
TV options
RFV
CSM NFR
EEV
RFV risk free value present value of future
cash flows discounted at a risk-free rate
without taking into account the cost of
capital includes the intrinsic value of options
the cost of options under a specific economic
scenario where the value of assets increases at
the risk-free rate
12
TIME VALUE OF OPTIONSDistinction between savings
and other products

• Financial risks mainly concern savings products
  and are measured using stochastic models
• The risk of a deviation from standard loss
  experience mainly concerns products other than
  savings and is not taken into account in
  stochastic models
• gt A risk premium is still taken into account
  and is reported for in the cost of non-financial
  risks
• In 2005, the risk premium was equivalent to
  locking 5 times the solvency margin for the
  corresponding contracts

13
TIME VALUE OF OPTIONSby type of contract

• Savings contracts
• Options MGR, profit sharing option, guaranteed
  surrender rate
• Valued using a bottom-up model, market consistent
  approach with dynamic surrender rates
• Unit-linked contracts
• Options minimum guaranteed death benefit
• Taken into account in EEV through statutory
  reserves
• (Black Scholes valuation).
• Certain pension contracts
• Guaranteed annuity options
• Valued using a closed formula and added to the
  time value of options

14
TIME VALUE OF OPTIONS Savings contracts
RFV
TV options
CSM NFR
EEV

Time value of options valeurs des possibles
-
RFV (present value of future cash flows
discounted at a risk-free rate)
Average of discounted future cash flows based on
1,000 stochastic scenarios
Based on a bottom-up market consistent
approach using a Monte Carlo model and a dynamic
surrender rate that takes into account the
difference between the profit-sharing rate and
average long-term interest rates.
15
TIME VALUE OF OPTIONSBottom-up approach
Profit sharingpolicy
rights of policy holder and cashflow
Contracts database
Profit sharing rate Dynamic surrender rate
Earningsprojections
Financialstrategy
Flows and returns
Assets database
Buy / sold

• Stochastic calculations are performed using our
  bottom-up ALM model. Contracts and assets are
  modelled in detail in our simulations.
• This enables us to obtain comprehensive earnings
  projections
• ? Duration and mismatch issues are dealt with in
  full

16
TIME VALUE OF OPTIONS Minimum Guaranteed Rate
and Surrender Option

• The time value of options is equal to the
  difference between the stochastic valuation and
  the risk-free valuation

• ? The TV of the surrender option increases as
  interest rates rise.

• ? The TV of MGR option is the highest where the
  option is near the money.

Simulations based on non-unit-linked savings
contracts
17
TIME VALUE OF OPTIONS Market consistent model

• Scenarios are developed using a market consistent
  model
• Interest rates two-factor Heath Jarrow Morton
  model under a risk-neutral approach (model used
  to randomly generate future interest rate curves)
• Equity index model log-normal distribution.
  Average annual performance (including dividends)
  is equal to the short forward rate over the
  period, ensures the risk-neutral nature of the
  equity projections.

18
TIME VALUE OF OPTIONS Model parameters

• Based on market data at 31 December 2005
• Zero-coupon rate curve at 31 December 2005
  issued by the French Institute of Actuaries,
  calculated using treasury and government bond
  rates
• Interest rate model calibrated on the basis of
  implicit volatility observed on the swaption
  market (17 and 14 over 5 to 20-year projection
  period).
• Equity model calibrated on the basis of implicit
  volatility observed on the CAC options market
  (19 to 27 over a 5 to 20-year projected
  period).
• Equity / interest rate correlation used 45
  (analysis over a very long period).

19
COST OF SOLVENCY MARGIN NON-FINANCIAL
RISKSSavings contracts
RFV
TV options
CSM NFR
EEV
No additional risk allocation to the cost of
locking-in solvency margin and the time value of
options
Cost of Solvency Margin (CSM) limited to tax
impact (financial risks covered by the time value
of options) Non-Financial Risks (NFR) not
calculated (risks taken into account through the
locking-in of statutory solvency margin)
20
COST OF SOLVENCY MARGIN NON-FINANCIAL
RISKSOther contracts
RFV
TV options
CSM NFR

EEV
Risk allocation through the risk premium in the
discount rate (derived from WACC method with 30
Subordinated Debt)
Cost of Solvency Margin (CSM) calculated at a
discount rate that includes a risk premium
including tax impact (traditional approach)
Non-Financial Risks (NFR) difference between
present value of future cash flows discounted at
a rate including a risk premium and present value
of future cash flows discounted at the risk-free
rate
21
COST OF SOLVENCY MARGIN NON-FINANCIAL
RISKSLocked-in capital why our approach is
prudent

• Savings contracts
• Locked-in capital for CSM NFR 100 of
  statutory solvency margin eg 4 of reserves for
  contracts and 1 on unit-linked contracts
• Covers all the risks non valued in time value of
  options
• Other contracts
• Locked-in capital for CSM NFR statutory
  solvency margin (SM), plus the cost of a risk
  premium on locked-in solvency margin and
  discounted future profit cash-flows
• Equals to locked-in 5 times solvency margin
  without risk premium

22
NEW BUSINESSDefinition of EEV approach

• Same as for In Force
• Risk-free value (RFV) of one-years new business
• Time value of options
• Cost of solvency margin and non-financial risks
• Time value of options calculated based on the
  assets allocated to the covered new business gt
  existing portfolio unrealised gains are not taken
  into account
• Calculated at the date when the contract is
  signed gt includes any gains and losses at that
  date.

23
NEW BUSINESSPremium modelling

• Same as for TEV profile and volume of premiums
  generated by 2005 new business
• Savings all flexible premiums paid during the
  year and premiums on new contracts
• Non savings business
• Group personal risk business (excluding credit
  insurance) all premiums are included in New
  Business .
• Individual personal risk, credit insurance and
  pension contracts new business corresponds
  solely to contracts sold during the year

24
Y1 EEV ESTIMATE BASED ON EEV FOR YEstimating
Y1 values

• EEV at 31 December Y
• Sensitivities ? EEV at 31 December Y based on Y1
  market conditions
• Roll forward based on expected EEV return
• Plus value of Y1 new business
• Estimated EEV at 31 December Y1

April 2006
25
Y1 EEV ESTIMATE BASED ON EEV FOR Y Determining
the expected return

• Not a simple task
• Discounted time value of options based on 1,000
  scenarios !
• A mixed approach ( Savings contracts without a
  risk margin / Others contracts with a risk margin
  )
• Can be solved by using implicit rate
• Risk discount rate that reproduces the value of
  In Force in a traditional EV approach

April 2006
26
Y1 EEV ESTIMATE BASED ON EEV FOR Y Expected
return estimate based on implicit return

• Based on assumptions concerning long term rates
  spreads and equity risk premiums
• Using CNPs traditional EV assumptions
• Long-term rates at 31 December 2005 3.3 (no
  spread),
• Equities 5.3
• Implicit rate 5 excluding Brazil and 5.8
  with Brazil
• Using more aggressive assumptions
• Long-term rates at 31 December 2005 4 (70 bps
  spread)
• Equities 8.0
• Implicit rate 7.2 and 8 including Brazil

April 2006
27
2005 RESULTS TEV EEV
Net of a 265 M dividend
The change to the EEV results in a significant
increase in value ( 8 compared to the
traditional EV), which mainly comes from an
increase in the value of the French insurance
business. A significant proportion of CNP
business in France is savings business. For these
contracts the risk premium used in the
traditional EV methodology has been shown to be
significantly larger than the cost of options
under the EEV method..
28
2005 RESULTS In Force EEV
In the RFV, as for the traditional EV
methodology, the value of in force business
includes the intrinsic value of options. In
addition, the EEV approach requires us to
identify the time value of options. In the EEV
approach, unrealised gains on bonds as at
31.12.05 relating to the savings business are no
longer shared between the In Force and New
Business, as in the traditional EV. The return on
in force savings contracts takes into account the
total amount of these unrealised capital gains on
bonds. Similarly, unrealised gains on equity now
boost the investment return for in force savings
contracts. The level of asset-liability
matching, hedging strategies and the limiting of
minimum guaranteed rates given to policyholders
are all factors which help to reduce the cost of
financial options of contracts.
29
2005 RESULTS New Business TEV EEV
The transition to the EEV increases the value of
New Business by 50, most of which comes from the
French business. The unique risk premium used for
all insurance business in the traditional EV
methodology has been shown to be significantly
larger than the cost of options under the EEV
methodology.
30
2005 RESULTSEEV New Business by country
In the RFV, as for the traditional EV
methodology, the value of New Business includes
the intrinsic value of options. In addition, the
EEV approach requires us to identify the time
value of options. The level of asset-liability
matching, hedging strategies and the limiting of
minimum guaranteed rates given to policyholders
are all factors which help to reduce the cost of
financial options of contracts. Unlike for the
In Force business, the return on New Business no
longer includes any allowance for unrealised
capital gains on bonds or equity.
31
2005 SENSITIVITIESEEV
Interest rate curve /- 100 bp gt an increase /
decrease at all durations of the interest rate
curve of 100 basis points at the start of the
projection. This results in a revaluation of the
market value of bonds, an increase / decrease in
the reinvestment rate of 100 basis points for all
asset classes and an adjustment to the discount
rate. Risk Premium WACC 100 bp gt For
contracts other than savings 100 bps increase in
the discount rate. Equity 10 gt A 10
immediate increase in equity index of 10.. This
results in an increase of 10 in the market value
of equities and property.
32
2005 SENSITIVITIESIn Force New Business by
country
33
2005 ECONOMIC ASSUMPTIONSFrance and Italy
6 determined by the Weighted Average Cost of
Capital method using a 7.15 discount rate and
subordinated debt representing 30 of solvency
capital, updated at 31 December 2005 Standard
assumption reviewed at the time of the change to
EEV methodology.
34
2005 ECONOMIC ASSUMPTIONS Brazil

• Economic assumptions in Brazil have been revised
• To take into account the improved economic
  situation (stabilised interest rates, stronger
  Real, lower country risk) by projecting a
  declining risk margin, and
• Due to explicit modelling of inflation in
  earnings projections (via the discount rate).

35
RECONCILIATION OF TEV AND EEV IN-FORCE 2005 -
France
Cost of holding solvency margin added (calculated
by traditional method)
Elimination of risk margin 653
TV options - 155
IF RFV Risk-free value 3006
Time value of options
Adjustments - 247
CSM 1584

• CSM
• NFR
• 1240

Discount rate risk-free rate. Equity and
property yield risk free rate
IF EEV
IF TEV
Cost of holding solvency margin and cost of
non-financial risks calculated using EEV
assumptions
1611
1015
Update of expenses assumptions mainly relates to
change in inflation assumption (from 1.5 to 2)
-131m Determination of separate investment
return assumptions for In Force New Business
72m Change in status of regular premiums on
savings contracts to flexible premiums -
167m Other methodological adjustments - 21m
36
RECONCILIATION OF TEV AND EEV NEW BUSINESS 2005 -
France
Cost of holding solvency margin added (calculated
by traditional method)
Time value of options
Elimination of risk margin 86
TV options - 42
NB RFV Risk-free value 365

• CMS
• NFR
• 141

CSM 171
NB EEV
Discount rate risk-free rate. Equity and
property yield risk free rate
Cost of holding solvency margin and cost of
non-financial risks calculated using EEV
assumptions
NB TEV
182
108
Update of expenses assumptions mainly relates to
change in inflation assumption (from 1.5 to 2)
-17m Determination of separate investment return
assumptions for In Force New Business
12m Change in status of regular premiums on
savings contracts to flexible premiums
34m Other methodological adjustments - 5m
37
Disclaimer
Some of the statements contained in this
document may be forward-looking statements
referring to projections, future events, trends
or objectives which, by their very nature,
involve inherent risks and uncertainties. Actual
results could differ materially from those
currently anticipated in such statements by
reason of factors such as changes in general
economic conditions and conditions in the
financial markets, legal or regulatory decisions
or changes, changes in the frequency and amount
of insured claims, particularly as a result of
changes in mortality and morbidity rates, changes
in surrender rates, interest rates, foreign
exchange rates, the competitive environment, the
policies of foreign central banks or
governments, legal proceedings,the effects of
acquisitions and the integration of
newly-acquired businesses, and general factors
affecting competition. Further information
regarding factors which may cause results to
differ materially from those projected in forward
looking statements is included in CNP Assurances
filings with the Autorité des Marchés
Financiers. CNP Assurances does not undertake to
update any forward-looking statements presented
herein to take into account any new information,
future event or other factors. The English
language version of this document is a free
translation from the original, which was prepared
in French. All possible care has been taken to
ensure that the translation is an accurate
representation of the original. However, in all
matters of interpretation of information, views
or opinions expressed therein, the original
language version of the document in French takes
precedence over the translation.
April 2006