Insurance ALM case study

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Société Générale Global Equities and Derivatives
Solutions Capital Guaranteed Funds
March 28, 2008 Christian Cazenille Managing
Director
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Disclaimer

• The contents of this document are given for
  purely indicative purposes and have no
  contractual value. Prior to any investment in
  the product, you should make your own appraisal
  of the risks from a legal, tax and accounting
  perspective, without relying exclusively on the
  information with which you were provided, by
  consulting, if you deem it necessary, your own
  advisors in these matters or any other
  professional advisors. Subject to compliance with
  legal and regulatory requirements, Société
  Générale may not be held responsible for the
  financial or other consequences that may arise
  from the investment in this product.
• This product may be subject to restrictions with
  regard to certain persons or in certain countries
  under national regulations applicable to said
  persons or in said countries. It is your
  responsibility to ensure that you are authorised
  to invest in this product. This document does not
  constitute an offer for sale of securities in the
  United States. The securities can be neither
  offered nor transferred in the United States of
  America without being registered or being
  exempted from registration under the US
  Securities Act 1933, as amended.
• The documents relating to this product will
  provide for methods of adjustment or substitution
  in order to take into account the consequences on
  this product of extraordinary events which may
  affect one or several of the underlying
  instruments on which it is based or, as the case
  may be, the early termination of this product.
• WHEN SIMULATED PERFORMANCE OR PAST PERFORMANCE
  ARE DISPLAYED, THE FIGURES RELATING THERETO REFER
  TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR
  OF FUTURE RESULTS. When future performance is
  displayed, the figures relating to future
  performance are a forecast which is not a
  reliable indicator of future results.
  Furthermore, where past performance or simulated
  past performance rely on figures denominated in a
  currency other than that of your country of
  residence, the return may increase or decrease as
  a result of currency fluctuations. Finally, when
  simulated performance or performance (whether
  past or future) are displayed, the potential
  return may also be reduced by the effect of
  commissions, fees or other charges.
• For the products benefiting from a guarantee of
  Société Générale or of any other entity of
  Société Générale group (hereinafter referred to
  as the Guarantor), the due and punctual payment
  by the principal debtor of the obligation of any
  sums due in respect of these products is
  guaranteed by the Guarantor according to the
  terms set forth in the deed of guarantee. In this
  case, the investor bears in the end a credit risk
  on the Guarantor. For products with a capital
  protection, such capital protection is only
  ensured on the Maturity Date, and the secondary
  market price may fall below this capital
  protection during the life of the product.
• Moreover the investor should be aware that the
  capital protection feature requires for the
  Issuer, the Guarantor and/or their affiliates, to
  enter into hedging transactions which have a cost
  and which may affect the market price, liquidity
  or value of the Notes, especially when comparing
  them to the market price, liquidity and value of
  the underlyings of the Note. The Issuer and the
  Guarantor assume no responsibility whatsoever for
  such consequences and their impact on the
  investment.
• The attention of investors is drawn to the fact
  that, by the maturity date, the price of certain
  products can be subject to volatility due to the
  evolution of market parameters and more precisely
  the price of the underlying and the interest
  rates. For certain products, except when Société
  Générale undertakes to assure a secondary market,
  there is no liquid market on which these products
  can be easily traded, and this may have a
  material adverse effect on the price at which
  these products might be sold.
• The information presented in this document is
  based on market data at a given moment and may
  change from time to time. Back testing permits
  the calculation of returns that the product would
  have had if it had been launched in the past,
  presented according to the maturity date. It
  allows an understanding of how the product would
  have performed at different market stages over
  previous years.
• This document is confidential and may not be
  communicated to a third party (with the exception
  of your external advisors on the condition that
  they themselves respect the confidentiality)
  without prior written consent from Société
  Générale.

Société Générale Global Equities and Derivatives
Solutions Capital Guaranteed Funds
March 28, 2008 Christian Cazenille Managing
Director
Société Générale Corporate Investment
Banking 17 cours Valmy 92987 La Défense
Cedex Paris France
Société Générale Corporate Investment
Banking Siège Social Société Générale, 29
Boulevard Haussmann, 75009 Paris 552 120 222 RCS
de Paris - Numéro APE 651C
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Why Capital Guaranteed Funds ?

• Capital Guaranteed Funds have witnesses a huge
  increase in the past few years.
• Investors have exhibited enhanced appetite for
  these investment solutions because of a variety
  of reasons
• Capital Protection has proved to be a very
  attractive feature
• Enhancement of risk/return profile
• Possibility to benefit from innovative payoffs
• Opportunity to be linked to multiple asset
  classes
• Benefit from the performance of traditional and
  non-traditional asset classes
• Tax optimization possible in some countries
• Insurance linked guarantees have also seen a huge
  demand
• Access to exotic betas
• The Capital Guaranteed Funds are also called as
  Capital Guaranteed Structured Products

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When did it begin? Much earlier than what you
thought
If any one owe a debt for a loan, and a storm
prostrates the grain, , . in that year he
needs not give his creditor any grain, .. pays
no rent for this year
One of the first derivatives in history
Hammurabi Code 1800 B.C. Hammurabi was the 6th
king of babylonia. He unified his kingdom
creating a unique religion, language and law The
Hammurabi Code
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How big is the industry now? Evolution of
Structured Products fast growing activity

• Structured Products have witnesses a huge
  increase in the past few years.
• A business led by the European market
• The most innovative

Structured products Retail market volume 2004/2006
52
EUR Billion
39
26
Source Structured retail products
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Reasons behind the development

• Equity markets are widespread and easily
  accessible underlying
• A global demand for Equity linked Structured
  Products match various risk profiles
• A way to protect an equity investment
• and a way to enhance the yield return of a bond
  portfolio
• An adequate offer
• Recent developments of technology and the
  financial engineering techniques enable further
  innovation
• Banks infrastructures are set up to accept an
  increasing demand

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Encouragement for InnovationCase Study on
Principal Protected Notes

• From the investor standpoint
• Value added as compared to balanced funds
• Improvement of the efficient frontier

B
A
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Structured Products created for a range of
clients
Conservative Profile
Medium Profile
Dynamic Profile

• Investment with total safety
• Pattern recognition for Target Clients
• Lifestyle Simple and Safe
• Risk Tolerance Low
• Current Portfolio Bond Oriented and Less
  Diversified
• Typical Age group 30
• Behavior Traits Highly concerned about risks

• Investment with the optimal balance
• Pattern recognition for Target Clients
• Lifestyle Balanced
• Risk Tolerance Medium and Normal
• Current Portfolio Equities Bonds (or deposits)
• Typical Age group 25
• Behavior Traits Willing to go the extra mile
  with added risk appetite

• Investment with a maximum leverage
• Pattern recognition for Target Clients
• Lifestyle Adventurous
• Risk Tolerance Extremely High
• Current Portfolio Equity Options Bias
• Typical Age group 25-45
• Behavior Traits Enjoy taking risks for the
  additional upside potential

Capital Guarantee
Partial Capital Guarantee
No Capital Guarantee
Best Size ? Fits all Solution
Solution for Gambling can be fun
Play Safe Solution
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Conclusion

• Equity linked Structured Products are not trendy
  investments but long lasting financial tools
• Their ability to provide added value encourages
  new developments innovation
• Their flexibility allows to address almost all
  client needs

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Future Trends

• The Future of the Capital Guaranteed Funds in
  Turkey seems to be promising because of the
  following reasons
• Turkish individual investors have confidence in
  local financial institutions (based on marketing
  research, newspapers, TV..)
• Conviction that regulations protect strongly
  small investors on local market
• Increasingly sophisticated needs of investors
  lead to search for newer sources of performance
• More amount of time is being spent in the
  financial planning activities at the corporate
  and the individual level
• The convergence of various factors have created a
  very conducive environment for Capital Guaranteed
  Funds in Turkey
• Société Générale is proud of its commitment to
  the Turkish market and is a partner of choice for
  various major solution providers around the world
  in the domain of equity derivatives
• We commit to design customized investment
  solutions and educate the market on an on going
  basis (www.equityderivatives.com)

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SOCIETE GENERALE Culture of innovation
creating trends recognized innovation
1989 1993 1995 1998
2000
2003 2004 2005 2006
2007
1989 1993 1995 1998
2000
2003 2004 2005 2006
2007
Warrants
Warrants
in
in
Securitization
Hybrid
Option on Sharpe Ratio
Europe
Europe
Securitization
New strategies
New strategies
of
second
and multi
-
of
second
dedicated to
dedicated to
order risks
asset
Hedge Funds
Hedge Funds
Structuration
of a
Structuration
of a
fund eligible to
fund eligible to
Correlation products with
PEA
PEA
in France
in France
Launch of products
Correlation products with
100 capital guaranteed
Hybrid Multi Asset Class Structured products
based on our
100 capital guaranteed
dedicated to retail networks
Structured products
Hidden Assets
dedicated to retail networks
(Everest, Himalaya,
Structured products
based on
mutual
mutual
based on
Development of a new
Development of a new
funds and Hedge
funds and Hedge
offer dedicated to
Funds
offer dedicated to
Institutional Investors
Risk 20 years Modern Great
Risk 20 years Pioneer
2001/2002
2003
2004
2005
2006
2007
The contenders Société Générale BNP
Paribas Deutsche Bank JP Morgan UBS
The contenders Bankers Trust Credit Suisse
Financial Products Salomon Brothers SBC
OConnor Société Générale
Equity Derivatives House of The Year, The
Banker
Equity Derivatives House of The Year, RISK
Equity Derivatives House of The Year, IFR
Equity Derivatives House of the Year, Asia Risk
Best Equity Derivatives Provider in Europe and
Asia, Global Finance
Equity Derivatives House of the Year Europe,
Structured Products