ras group 2004 full year results and 3-year progress

Ras Group 2004 Full Year Results

and 3-year progress

Mario Greco

March 10th, 2005

3-year plan progress Group

1

Action taken in first year of plan brought better than expected results ...

… and positioned Ras one year ahead of schedule in achieving its 3-year plan

targets

2004 results vs 3-year plan goals Group

2003

(1) Excluding BNLi in 2004; (2)120 mln excluding Life, Personal Financial Services only

2004 growth 2006E

Premiums

P+C combined ratio (%)

Life NBV

RasBank gross ordinary result

Group net income

ROE (%)

RORAC (%)

Dividends (PS)

16,569 16,123 -2.7%

70 88 +26%

161 182 +13%

100.8 98.9 -190bp

554 691 +25%

12.9 15.2 +230bp

15.7 20.2 +450bp

0.60 0.80 +33%

19,300

170

205

98.0

820

16.5

17.5

CAGR>20%

(2)(1)

2

Value creation plan progress

3

2004 FY results Group

Strong Premiums growth in high value proprietary channels (Agents and FAs) countered by weak performance of bancassurance channel in Life

Improvement in Group Net Income driven by a strong technical result in both Life and P+C

First time disclosure of Group Shareholder Value and Value Added, with strong growth on all indicators

First Italian insurance company to disclose European Embedded Value, in compliance with CFO forum principles

4

Gross premiums written

Mln euro - Direct and Indirect Business

Italy

Abroad

Group

2003

7,017

2004

7,290

3,794

3,223

3,948

3,342

+4.1%

+3.7%

P+C GPWYoY growth

+ 3.9%

2003

9,552

2004

8,833

7,646

1,906

6,984

1,850

- 8.7%

- 3.0%

Life GPWYoY growth

- 7.5%

5

Net income growth GroupMln euro

FY net income YoY growth

+25%

2003 2004Full Year

691

554

2003 20044th Quarter

12190

4Q net income YoY growth

+34%

6

FY04 results: statutory accounts

2003 2004Mln euro

Group

39Technical Result

-68107

P+C

Life

YoY growth

N.s.

The new DAC accounting policy had an impact of 91 mln euro on the technical result (before minorities and tax)

313

55258

937

634

Realised gains and write-down(1)

264

The decrease in financial income due mainly to the cancellation of dividend tax credit (101 mln euro) was offset by a correspond-ing decrease in tax, giving a neutral final effect

+15%1,079

532

234

Ordinary financial income

Ordinary Result

36%Tax rate

Net Income 554 +25%

30%

691

(1) including other non-technical items 7

Shareholder Value: brief description Group

Group Shareholder Value is the sum of Life and PFS Embedded Value, plus P+C Net Asset Value

Annual Value Added is calculated as the sum of EV-earnings for Life and PFS, plus net income adjusted for change in unrealised capital gains and others for P+C

Italian In-force Value is net of cost of time value of financial options and guarantees

Tillinghast has provided an independent opinion on and review of the EEV and Shareholder Value

Shareholders equity

NAV adjustments

Total Net Asset Value

In-force Value

Shareholder Value

+

+

=

+

=

P+C Life PFS

New segment introduced

8

Shareholder Value movements Group

Group Shareholder Value increased despite high dividend distribution during 2004:

•Life and PFS: Shareholder equity growth is driven by net income; Net asset value reduction is due to real estate transfer from Life to P+C at book value, goodwill write-off (BNLI acquisitions) and DAC write-off; Strong growth in Italian In-force Value is partially offset by Switzerland In-force value reduction (due to a review of EV analysis)

•P+C: Shareholder equity growth is driven by net income; Net asset value increase is due to real estate transfer from Life to P+C at book value, growth of real estate portfolio value and strong increase of Italian bond portfolio, where duration is equal to 4 years

9

Total Shareholder Value Group

2003 2004

473

….

1,607

3,849

143

Life and PFS Embedded Value

1,745

3,825

1,869In-force Value

Net Adjustments

Shareholders equity

2003 2004

332

2,783

663

2,868

2003 2004

805

….

4,391

7,381

807

4,705

1,745

6,9401,869

P+CNet Asset Value

Total Shareholder Value

+6.3%

1,837

3,1153,532

(1)

(1) Transfer of 128 mln euro of Real Estate from Life to P+C(2) Total BNLI/BNLVita acquisitions impact: 54 mln euro: increase of In-force 95 mln; decrease of Adjustments 117; Reduction of Shareholder equity 32

(1)

(2) (2)

Mln euro - net of minority interests, taxes and cost of capital

10

2004 Value added Group

Annual Value Added is increasing driven by achieved net income and growing new business value:

•Life and PFS: Net Income increase is due to a strong technical and financial result in all countries; Delta Adjustments to Net asset gave negative contribution mainly due to DAC write-off, and realised capital gain (like Mediobanca); Delta In-force Value recorded a strong increase in Italy, and a decline in Switzerland

•P+C: Net Income growth driven by a better technical development in all countries; Delta Adjustments to Net asset had positive growth both for real estate and Bond portfolio unrealised capital gain increase

11

Life and PFS value added Group

2003 2004

6

….

204

298

-86

353

Value added

12%

ROEV

Italy 307

-16%Switz.-89

28%Austria 36

16%Spain 21

Country

137

348

30

DeltaIn-force

Delta Adjustments

Net Income

(1)

(1) Excluding Participation Exemption for 126 mln euro, (2) Excluding BNLI integration effect for -54 Mln euro; Net Income including BNLI integration cost would have been 321

(2)


12

Delta Adjustments

Net Income

P+C value added Group

2003 2004

89

439

350

573

203

370

Value added

18%

Return on NAV

Italy 332

14%Switz. 73

14%Austria 27

50%Spain 105

Country

(1)

(1) Excluding Participation Exemption for 136 mln euro, (2) Delta adjustments includes real estate unrealized capital gain increase for 52 Mln euro

(2)


13

GroupValue added by line of business

ROEV%

2003 2004

348

298

8.5

Total Life and PFS

9.6

2003 2004Total value

added

439

573

18.412.9

2003 2004

786

871

12.9

Total P+C

11.2

(1) Excluding Participation exemption effects for 262 mln euro. Of which 126 in Life and 136 in P+C (2) Excluding BNLI impact for -54 mln euro

(1) (1) (1)(2) (2)


14

Life Business development

15

Life 2004 FY results Group

Increasing market share for proprietary channels in Italy, driven by strong internal growth in new business volumes

Continuation of agency reorganisation, with strong growth by top agencies and high-potential agencies

Significant results recorded by FAs in terms of volumes and quality mix

Weak bancassurance performance, with a recovery in the last quarter

Strong increase in New Business Value. Higher incidence of proprietary channels. Improvement of global margins in Italy

16

Mln euro - Individual policies

420

Ras

517

Growth %

Life new business volumes A

gen

tsItaly

FAs

Ban

ks

2003

2004

252

327

2003

2004

5,221

4,368

2003

2004

Mkt (1) 2003

Mkt share %

2004

+23 +15 6.2 6.6

+30 -17 4.9 7.8

-16 +2 15.1 12.4

(1) Source: ANIA new business premium 17

Agents: new business premiums Italy

Recurrent Premium

Single Premium

2003 2004

109420

311

517

128

389

25%

17%

Mln euro - Individual business

Life NB Premiums +23%

(1) Ras spa - 850 agencies

227

+18%

+40%

82

114

Top Agencies (25% of total agencies) (1)

High potential (30% of total agencies) (1)

2003 2004

192

18

RasBank FAs: new business premiums Italy

Recurrent Premium

Single Premium

2003 2004

37

252

215

327

52

275

28%

42%

Mln euro - Individual business - excluding 35 mln euro of group policies for 2004

67

26

7

57

12

31

100% 100%

Life Premium mix by type of product - individual business

FAs MktRasBank

Life NB Premiums +30%

Unit Linked

Index LinkedTraditional

Mkt data source: Ania statistics as of Dec. 2004, (1) Issued by ex-BNLI FAs

(1)

19

Bancassurance new business volumes

2003

Mln euro - individual business

Italy

2004

Monthly new business premiums

209241

Jan.

510

Feb.

711

Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.

363

412

593

469551

400513

341

538

298213

313

402 402

263210

360

447

FY04 volumes 4.37 bn euro -16%

4Q04 volumes 1.27 bn euro +19%

423

20

Life Embedded ValueMln euro - net of minority interests, taxes and cost of capital, Embedded Value earnings analysis may not be completely consistent, as 2003 has not been restated for cost of options

Group

ROEV

(73)Change in EV

329

7.5%

Dividends and capital movements

EV Earnings 256

3,409

2003

3,336

2004

• 2003: 7% for all Italian businesses, and 6.25% for Switzerland

• 2004: 6.30% for Italian traditional products, 6.55% for Italian unit-linked, 6.1% for Switzerland

• 2004 data are net of cost of time value of financial option and guarantees for Italy

Discount rates

(1)

(1) Last year reported EV was 3,073, the new methodology calculates EV starting from consolidated figures 21

Life In-force Value Group

2003

1,530

2004

1,5752004

1,289Italy

Foreign countries

286

1,126

404

2003

Life In-force ValueYoY growth

+4%


(1) Including BNL Life portfolio acquisition, with an impact of 35 mln euro

(1)

22

Switzerland In-force Value GroupMln euro - net of minority interests, taxes and cost of capital

2004

2003

2002 236

303

162

In-force value DiscountRate

6.10%

6.25%

5.00%

Lower persistency ratio in the Group Business, consistent with the underway portfolio reform, caused by the introduction of new profit test process

Combined effects of a reduction in financial returns (-50 bp) and a new min. guaranteed in the Group business to 2.50% (+25 bp)

Improvement of cost ratio due to the decrease of the cost base by 12%

Stronger focus on Unit Linked in new business value (+57% vs. 2003)

Due to recent Mgmt changes, 2004 has been an year of review for EV analysis:

23

Life Embedded Value earnings Group

ExpectedProfit

Variance from

Assumptions

Change in Assumptions

New Business

Value

Embedded Value

Earnings

198

182

36

256

160

Change in assumption: mainly driven by Switzerland (-180 mln); no significant from other countries

Variance from assumption: Positive impact from Austria (investment variance), Spain (higher laps margins), Portugal (better mortality experience for risk products), partially offset by Italy (due to higher lapse rate for Unit Linked)

(1) all assumptions are detailed in the EV disclosure document available on the Ras web site


24

Life New Business Value by country Group

NBV

182

Spain

Austria

Switzerland

2004

NBValue

5 8

5 5

4 5

Italy Foreignbusiness

161

21

NBV 2004 YoY growth+13% +12%

2003

Portugal 3 3


25

Life New Business margins on APE Italy

FAs

Banks

2003 2004

11.0%

NBV/APE (1)

27.4%

(1) 100% recurring premiums + 10% single premiums, Individual policies only for 2003, including group polices for 2004

Mln euro - net of minorities, taxes and cost of capital at year-end

67.8%

48.3%Agents

2004

144

2003

161

51%

19%

50%

26%

24%

2004 YoY growth

Life NBVYoY growth

+12%

28.5%

9.1%

65.4%

51.6%

-14%

+32%

+14%

30%

26

RasBank FAs performance

27

RasBank 2004 FY results Italy

Fastest growing FAs network in terms of assets under administration, in part thanks to recent acquisitions

Further enhancement of average FAs profile through selective recruitment

Positive net inflows with significant growth in value products

Strong progress in gross operating result, thanks to gross margin increase and cost containment

Boost in Embedded Value and New Business Value for both Life and Asset Mgmt

28

FAs assets under administrationYoY growth rate

(1) Assoreti data as of December 2004

Italy

Assets Under Administration -mln euro

+37%

2,182

2003

9,867

3,084

15,132

AuM

Banking

Life

2,835

13,480

4,400

20,715

2004

Assets Under Administration Market comparison -bn euro

YoY growth

Fideuram

Mediolanum

RasBank

B. Generali

Xelion

Azimut

(1)

+2%

+9%

+37%

+6%

+23%

+22%

58.9

20.8

20.7

15.4

12.1

8.4

29

RasBank: high-profile FAs network Italy

Fideuram

Azimut

RasBank excl.BNLI (2)

Generali

Xelion

Mediolanum

Former BNLI

Assets under administration per FA - mln euro

YoY growth(1)

+7%

(1) 2004 Assoreti data, (2) excluding FAs working in agencies for RasBank

+8%

+20%

+18%

+34%

+9%

+43%

13.8

9.5

5.1

5.8

6.4

8.9

5.8

• RasBank FAs at the end of 2004 totalled 2,928, with a net increase of 556 people

• The BNLI merger brought in more than 700 FAs, after a reorganisation to remove small and unproductive FAs (total asset retention 95%)

• The lower-end network reorganisation involved the entire RasBank structure, with no impact on total assets but strong increase of AuM per FA

30

2004 Inflows development Mln euro - YoY growth rate

(1) Net Inflows: Assets under Management and banking assets

Italy

-24%FY04

981

624

FY03

357

252

1,233

578

388

190

362

940

3,584

AuM

Banking

Life

…while asset mgmt gross inflows grew sharply

FY04FY03

Net Inflows focused on high value products...

+67%

(1)

5,973

31

RasBank FAs results ItalyMln euro - RasBank PFS and Life sold through FAs - Excl. BNLI merger

FY gross operating result YoY growth (1)

+26%

39

70 49

2003 2004

•Net income reached 64 mln euro (+43%) excl. BNLI merger

• Including BNLI merger, net income amounted to 33 mln euro

•G&A cost ratio decreased from 55% to 52%

Main trends

(1) Including RasBank, RAM, Investitori Sgr, Rasfin, RBVita, Darta Savings - Excluding BNLI Merger

88

PFS only Including Life

32

RasBank FAs results by LoB Italy

2003 2004

Mln euro - Including Life business through FAs and before BNLI merger

210Gross margin

115Asset mgmt commission margin

238

133

YoY growth

43Banking margin 46Life technical margin

General expenses

Sales & marketing expenses and others

Gross operating result 88

45Net income 65

53 59

13%

-115 -125

-25 -25

26%

43%

8%

-1%

11%

7%

16%of which performance

fees 13 9 -28%

70

33

RasBank FAs Embedded Value Italy

2003

811

2004

416

395480

513

Life FAs

Asset Mgmt

NBV ‘04

49 +32%

28 +75%

304

294

In-force Value ‘04 growth

Embedded ValueLife through FAs and Asset Mgmt

+13%

Mln euro - Life FAs EV already included in Life Embedded Value as disclosed in EV section - net of minorities, taxes and cost of capital at year-end

+34%

+37%

growth993

(1)

(1) Excluding BNLI switches 34

RasBank FAs EV-earningsMln euro - net of minority interests, taxes and cost of capital

Italy

ROEV

182Change in EV

-142

12%

Dividends and capital movements

EV Earnings 94

Change 2004/2003

NBV

Change in assumptions

Variance from assumptions

Expected profit

2004

77

54BNLI acquisition one off impact

47

-21

-7

40EV earnings incl. BNLI acquisition

35

P+C Business development

36

P+C 2004 FY results Group

Continuous improvement in combined ratio in all countries, in presence of a stable reserve ratio

Italian P+C premiums growth driven by increase in retail and SME segments

Combined ratio improvement in Italy driven by both motor and general liability

Genialloyd reported strong growth, to enhance positioning and benefit from economies of scale

37

P+C profitability improvement

Combined ratio

2003

Reserve Ratio

(1) On NEP including “other technical items” excluding equalisation reserves (2) Net Technical Reserves/Net Premiums

(1)

(2)162.1

Group

2004

162.3

Combined ratio by country (%)

100.8%

98.9%Italy

Spain

Austria

Switzerland

20042003

%

99.199.5

101.4105.9

100.0104.8

92.696.2

38

P+C GPWMln euro - direct business

Italy

Motor

Non Motor

2003

3,763

2004

3,920

1,401

2,362

1,472

2,448

+5.1%

+3.6%

By client segment

Retail

SMEs

Commercial lines

2004 growth

+8.7%187

+4.4%359

P+C GPWYoY growth

+4.2%

+4.1%3,095

Public entities +7.8%124

Large Corporate -1.9%156

39

P+C combined ratio by Lob

Combined ratio in %

Focus by Lob (%)

Motor

Non motor

Of which General liability

2003 2004

99.8103.3

114.8127.3

99.5

20042003

97.197.799.1

Reserve Ratio157.9 159.0

Italy

40

Mln euro - Direct Business

Genialloyd performance

170

203

2003 2004

Italy

Technical results

Combined ratio 101.5% 96.5%

2003 2004

Expense ratio 19.0% 17.0%

Net income 3.5 12.0

Number of clients 320,000 366,000

GPWYoY growth

+19%

41

Return on invested capital

42

Capital Management Group

Slight increase in risk capital on Life and PFS mainly due to business growth

Reduction in P+C risk capital thanks to a new Cat-coverage reinsurance contract

Strong improvement in RORAC and ROE due in part to greater capital efficiency

High dividend policy in order to limit capital retention

43

Capital Requirement

Mln euro

Italy

Other Countries

2000

3,984

2004

3,441

2,534

1,450

20042003

Life

P+C

Group

2,390

1,051

Strategic Inv.

PFS

Diversif.

TOTAL

185

706

1,340

653

(494)

2,3902003

3,386

2,282

1,104

104

547

1,379

855

(603)

2,282

44

Return on invested capital

2004

20.2

Group

RORAC%

2003

15.7

2004

15.2

ROE%

2003

12.9

45

Dividend policy

Dividend Per ShareYoY growth

Euro

Group

+33%

2002

0.44

0.60

2003

0.80

2004

+36%

•Euro 0.80 DPS will be distributed on ordinary shares in May 2005, for a pay-out of 538 million euro

•the dividend policy is consistent with the 3-year plan value creation program

Dividend policy

46

2005 outlook

47

Outlook Group

Life: continuous investment in proprietary channels will drive high volumes and a good quality mix. Good start for bancassurance, but focus is on value rather than volumes

PFS: cost synergies and strong volumes growth expected after completion of the BNLI merger

P+C: cycle is peaking, but current level of profitability can still be maintained for a while

Economic results are expected to reflect positive business trends, with key contributions from Life and PFS segments

48

Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue” and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in RAS Spa’s core business and core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) interest rate levels, (vii) currency exchange rates including the Euro - U.S. dollar exchange rate, (viii) changing levels of competition, (ix) changes in law and regulations, including monetary convergence and the European Monetary Union, (x) changing in the policies of central banks and/or global basis.The matters discussed in this release may also involve risks and uncertainties described from time to time in Allianz’s filings with the U.S. Securities and Exchange Commission Allianz assumes no obligation to update any forward-looking information contained in this release.

Cautionary Note Regarding Forward-Looking Statements

49

ras group 2004 full year results and 3-year progress

Documents