Building profitable bancassurance business in emerging markets

1
Building profitable bancassurance business in
emerging markets
2
Contents

• The Fortis Group
• Key insurance concepts
• Benefits and growing importance of bancassurance
• Bancassurance models
• Case Fortis' bancassurance business in mature
  and emerging markets
• Take-aways.

3
Fortis-ABN AMRO top player in Europe set for
growth
23th February 2006
4
Fortis-ABN AMRO clear leader in Benelux
financial services
5
Fortis insurance businesses
Insurance

• Belgium
• Individuals
• Small and medium-sized enterprises
• Large enterprises
• Via independent brokers
• and the banking channel
• Netherlands
• Individuals
• Business customers
• Mainly via independent
• insurance brokers
• International
• Bancassurance (Luxembourg, Portugal)
• UK Non-life France Life
• Multi-distribution in Malaysia, Thailand and
  China (both bank and agents)

• Life
• Non-life
• Employee benefits
• Life
• Non-life
• Healthcare
• Disability
• Mortgages savings
• Specialist insurance
• Life
• Non-life

Fortis Insurance International
6
Insurance Swift expansion outside home markets

• Presence outside Benelux

• UK
• EUR 1.0 billion gross inflow
• Low cost operator

• Russia
• Greenfield
• Direct, worksite marketing

• Germany
• Sales via a.o. EB - CF
• Acquisition of small platform

• Ukraine
• Acquisition 7 player
• Leverage life product skills

• New markets in 2006

• China (24.9 stake)
• EUR 1.1 billion gross inflow

• France
• EUR 0.4 billion gross inflow
• Own agency force

• Hong Kong
• Quality franchise with strong potential
• Platform for Asian growth

• Thailand (40 interest)
• EUR 0.3 billion gross inflow, started in 2004
• Bancassurance sales boosted in 2006

• Portugal (51 stake)
• EUR 1.6 billion gross inflow Bancassurance
• Market leader in life

• Malaysia (30 stake)
• EUR 0.8 billion gross inflow
• Start in 2000, top 3 player
• Acquisition MNIH

• India
• 26 JV start-up
• Multi-channel starting with bancassurance
• Leverage product expertise

• Turkey
• Transfer from Fortis Bank Turkey
• Bancassurance skill transfer

23th February 2006
Fortis Insurance International
7
Contents

• The Fortis Group
• Key insurance concepts
• Benefits and growing importance of bancassurance
• Bancassurance models
• Case Fortis' bancassurance business in mature
  and emerging markets
• Take-aways.

8
Life insurance not always what you think it is

• Life insurance about life or about death ?
• Life insurance about risk or about savings ?
• Life insurance about tax or not about tax ?
• Life insurance about financial safety or not
  about financial safety ?
• Life insurance about insurance or about banking
  ?

23th February 2006
Fortis Insurance International
9
Retail life/savings insurance some definitons

• Traditional Life guarantees a fix investment
  yield on the premiums paid and all future
  premiums till maturity, increased with profit
  sharing.

• Universal Life appears with two different
  guarantees
• With a fix investment yield on the premiums
  paid, but not on future premiums
• Without a guaranteed yield neither on
  premiums paid, nor on future premiums
• (savings account) increased with profit
  sharing

increasing upside potential for the client
decreasing market risk for the company
Unit Linked has no guaranteed yield and no profit
sharing, the complete risk/return is for the
account of the policy holder
10
Retail life insurance what about profit (1)
Classical (Traditonal Life)products
New Generation (Universal Life, Unit-linked)
products

• Small Market with
• Big margins for companies and intermediary
• Good value for client only through tax advantages

• Big Market with
• Small margins for companies and intermediary
• Good value for client regardless tax advantage

11
Retail life insurance what about profit (2)

• No sustainable long term profit without risk
  (whole life) insurance

12
Contents

• The Fortis Group
• Key insurance concepts
• Benefits and growing importance of bancassurance
• Bancassurance models
• Case Fortis' bancassurance business in mature
  and emerging markets
• Take-aways.

13
Each partner should contribute to, and benefit
from, the partnership, eg
Bancassurance win/win/win game for banks/bank
clients/insurers
23th February 2006
Fortis Insurance International
14
Bancassurance still is a growing distribution
channel in Europe(GWP 2005, EUR billion)
100

• CAGR bank 1998-2005

• CAGR bank 2000-2005

• 100

• 100

15.9
8.0
37
394

• Europe

7
277
15.6
10.2
45
25

• Belgium

7
8.8
6.3
62
120

• France

49
12.3
3.9
12
25

• Netherlands

16
16
15.2
22.3
86
9

• Portugal

4
10

• Share of bank channel

2004 Group and individual (including
pension savings) Source Assuralia, FFSA, GFK,
APS team analysis

• Percentage

15
Europe recent developments show break-through
in non 'bancassurance' countries also

Fortis Insurance International
16
Contents

• The Fortis Group
• What is bancassurance ?
• Benefits and growing importance of bancassurance
• Bancassurance models
• Fortis case succesful introduction of
  bancassurance in an emerging market.
• Lessons learned and take-aways for transferring
  know-how from one market to another.

17
Bancassurance Models bancassurance is not the
same as bank insurance
Active client penetration

• Integrated Model C
• Full integration of front office and processes
• Control of sales and customer experience by the
  bank
• Exclusivity of partnership

25 - 30
Integrated Model

• Intermediate Models B
• More proactive selling
• Lead generation for a branch-based sales force

Belgium Spain Portugal
Intermediate Model

• Model A
• Arms length distribution agreement

10
Malaysia Thailand Luxembourg
Distribution Agreement Model
5
China
Sophistication of model
18
The level of integration within bancassurance
23th February 2006
Fortis Insurance International
19
Contents

• The Fortis Group
• The benefits of bancassurance for banks
• Growing importance of Bancassurance in Europe
• Bancassurance models
• Case Fortis' bancassurance in mature emerging
  markets
• Take-aways

20
Successful expansion of bancassurance model
1
Bancassurance
Inside Fortis
Outside Fortis
Belgium

• Initiatives aimed at boosting volumes
• Netherlands - Dedicated sales team started
• Turkey - Specialised agency force within the bank
• France - New business sold via Fortis Banque
  France
• Germany (2006) - Platform acquired to also
  support consumer finance

• 1992 CaiFor (Spain)
• 2000 Mayban Fortis (Malaysia)
• 2001 TaiPing Life (China)
• 2004 Muang Thai Fortis (Thailand)
• 2005 Millenniumbcp Fortis (Portugal)
• 2007 IDBI / Federal (India)

• Bancassurance originated within ASLK since 1865
• Fully integrated IT systems with bank
• Successfully integrated into enlarged bank in
  Belgium
• In 2006, EUR 3.2 billion gross (Life and
  Non-Life) inflow generated with Fortis Bank in
  Belgium (49 of total)

Exporting progressively
Cross sellingsystematically
21
Developing appropriate channel strategy in
mature markets Business Case Fortis
Insurance Belgium
22
Fortis Insurance BelgiumThe largest insurer in
Belgium, no.2 in Life and in Non-life
Business profile
Financial profile

• Serves its policyholders retail customers and
  small and medium-sized enterprises through a
  network of independent intermediaries and through
  the banking channel
• Diversified distribution strategy in the employee
  benefits market, where it stands out for its
  know-how, customisation and quality service

Gross Inflow (EUR mln)
Major strengths
Profit levers

• Accelerate growth in Group Life
• Leverage Bank van De Post distribution agreement
• Integrate Fortis AG and FB Insurance into
  Insurance Belgium

• Broker channel
• High broker satisfaction
• Low cost position through Straight Through
  Processing (STP)
• Product innovation and quality of offering
• Banking channel
• Market leader in bancassurance
• Best-in-class IT tools
• Low cost position
• Product innovation ahead of competition

23
Fortis Insurance Belgium Single label,
multi-channel multi-product operating model
Life insurance is core
Non-Life insurance is core
Fortis Bank
Insurance brokers
Group life brokers and direct
Channel specific commercial functions
Channel specific commercial functions
Specific commercial functions
Channel specific admin processes
Channel specific admin processes
Specific admin processes
Insurance Retail cross-channel shared functions
Fortis Insurance Belgium shared functions
24
Key characteristics of mature bancassurance model

• Long term driven build-up of the business
• Aiming at generating a secured stable and growing
  yearly return of assets under management rather
  than focus on short term maximisation of up-front
  commissions
• Balanced and diversified development of basically
  three life product portfolios
• - guaranteed save invest
• - unit-linked
• - term life / protection
• Fully integrated model
• Close contact with the bank management at all
  levels
• Alertness and pro-activeness towards changing
  needs of the bank and its customers.

25
Developing appropriate channel strategy in
emerging markets Business Case Mayban
Fortis, Malaysia
26
Mayban Fortis

• The insurance company Mayban Fortis Holding
• Joint venture between Fortis and Maybank Group
  (30-70)
• Mayban Life Assurance Berhad
• No 1 in single premium investment linked
• No 2 in mortgage reducing term assurance (MRTA)
• Mayban General Assurance Berhad
• No 2 in Personal Accident Insurance
• No 8 in Fire Insurance
• The bank partner Maybank Group
• Largest financial services group in Malaysia
• More than 7 million customer base
• 22,000 employees

27
Mayban Fortis
Organization
Mission and strategy

• Mission
• Creation of a Malaysian national insurance
  champion with a multi-channel distribution
  strategy (bancassurance, agency, brokers,
  e-channel)
• Strategy
• Integrated Manufacturer-distributor
  Bancassurance
• Business model (cfr. Fortis Insurance Belgium)
• Strengthen channel management
• Build fully integrated product factory for two
  lines of business Life and General
• Achieve post-merger operational efficiency
  through consolidation, sharing of best
  practices and scale advantages

80
Takaful Nasional
Business lines
Breakdown GWP Malaysia (2006/07)

• Life Insurance Mayban Life Assurance, Malaysia
  National Insurance
• Non-Life Insurance Mayban General Assurance,
  Malaysia National Insurance
• Takaful Insurance Mayban Takaful, Takaful
  National

Euro 880 mio
23th February 2006
Fortis Insurance International
28
Mayban Fortis Distribution channelsFrom agency
controlled to multi channel (bancassurance)

• Mayban Fortis

• Malaysia National Insurance

• Takaful National

Extensive agent network of 15,000

• Extensive agency network 5,000 agents

Agents

• No agency (except some corporate agents in
  General)

• Extensive agency network 10,000 agents

Leading bancassurance player
Banc- assurance (captive)

• Leading bancassurance player in Malaysia, with
  captive Maybank channel

• No captive bancassurance

• No captive bancassurance

Relationship with 14 third party bancassurance

• Small bancassurance business building
  partnership with 3rd party Islamic banks

• Growing bancassurance business dependent on
  partnership with 3rd party banks, i.e. OCBC,
  Citibank

Banc- assurance(3rd party)

• Small 3rd party bancassurance

Leading enterprise/ corporate player
Broking/Enterprise Direct

• Strong relationship within Government and GLC,
  esp PNB related companies

• Substantial business with Government, e.g.
  Federal Treasury

• Small enterprise segment

Leading alternative distribution provider
Alternative

• Direct marketing with Maybank

• Experience leveraging internet e.g., motor.com

• Experience leveraging contact center i.e., MNI
  ONELine

Fortis Insurance International
Multiple alternative channels Maybank Group
Call Center (MGCC), MNIONEline, Takaful Internet
Portal, Direct Mail
29
Maybanks bancassurance model is successful

• Number 1 in Malaysia for new life business
  premium end-2004
• (number 3 in June 2005)
• Most successful bancassurer, compared to
  competitors ( MNI OCBC Prudential Standard
  Chartered Uni Asia EON Bank AmAssurance
  AmBank Commerce Life BCB Hong Leong Assurance
  Hong Leong Bank Allianz RHB)
• Single premium / investment linked products as
  key driver
• Bancassurance has taken over market leadership
  (49) from agencies (45) in 2004 in Life
  business

30
Contents

• The Fortis Group
• Key insurance concepts
• Benefits and growing importance of bancassurance
• Bancassurance models
• Case Fortis' bancassurance business in mature
  and emerging markets
• Take-aways.

31

• Customer centricity is a key driver of
  bancassurance.
• Suitable Products Natural Fit products for
  bancassurance must be packaged and cross-sold at
  the banking moment must look feel like banking
  products (Bank Protection, terminology,
  transparency) must have natural fit (clients and
  bank staff both feel like it is natural).
• KISS Keep it simple and standardised to
  maximize sales-capacity.
• Suitable Commission and reward structures

Pre-conditions for successful bancassurance
32
Thank You.