Transcription

Financial Performanceof European InsurersStudyParis, July 2014

ContentsPage1. Methodology32. Consolidated performance of the Top 30 European Insurers63. Vision by type of insurer124. And the best performers are 205. Key learnings24 Roland Berger Strategy ConsultantsRoland Berger Performance of European Insurers 280714 final.pptx2

1. MethodologyRoland Berger Performance of European Insurers 280714 final.pptx3

We have analyzed the financial performance of the TOP 30EUROPEAN INSURERSScope of analysis and methodologyMethodology Review of the performance of the TOP30 EUROPEAN INSURERS – EUR 663 Bn in GWP in 2013 (61%of European GWP)– From 8 European countries(Belgium, France, Germany, Italy,Netherlands, Spain, Switzerland, UK)– From 2008 to 2013 Analysis of their financials– P&L– Balance sheet Segmentation in 6 clusters (Lifespecialists, Bank-insurers, Lifepredominant, Non-life predominant,Mutuals, Non-life specialists)Note: Sferen (#22) replaced by Old Mutual (#31) due to lack of published dataSource: Roland BergerRoland Berger Performance of European Insurers 280714 final.pptx44

The Top 30 players account for 61% of the total EUROPEANGROSS WRITTEN PREMIUMSGross Written Premiums – Top 30 European insurers 1) [2013; EUR bn]AxaAllianzGeneraliZurichPrudentialCNP AssurancesTalanxAvivaCredit Agricole AssurancesBNP Paribas CardifAchmea B.V.AEGON N.V.MapfreACE GroupErgoUnipolCovéaING InsuranceGroupamaRSA InsuranceSwiss LifeSociete Generale InsuranceLloyds Banking GroupAgeasLegal & GeneralBaloise InsuranceHelvetiaStandard LifeOld MutualMutua 16.815.1 1)15.1 1)13.712.311.110.710.09.47.46.05.75.04.53.7Note: Sferen replaced by Old Mutual due to non availability of dataSource: Company information, Roland Berger35.340.462.572.185.5Total Top 30Insurers EUR 663 bn inGWP 61% of totalEuropean GWP1) Estimations of 2013 GWP based on 2012 figures for Covéa and ING Insurance because of annual reports not published yetRoland Berger Performance of European Insurers 280714 final.pptx5

2. Consolidatedperformance of theTop 30 EuropeanInsurersRoland Berger Performance of European Insurers 280714 final.pptx6

The FINANCIAL CRISIS deeply impacted the valuation of theEuropean insurersEurostoxx Insurance Index [2008-2013]280June 2014: ECBintroduces a negativedeposit facility interest rateSeptember 2008:Fall of LehmanBrothers2602013: Transfer of investorsfrom emerging markets toEuropean markets240220March 2012:ECB injectsEUR 530bnof liquidity2011: Sovereigndebt Note: The EURO STOXX Insurance (Price) Index is a capitalization-weighted index which was developed with a base value of 100 as of December 31. 1991. It is composed of 15 companies: Aegon,Ageas, Allianz, Generali, Axa, CNP Assurances, Delta Lloyd, Hannover Rueck, ING group, Mapfre, Muenchener Rueck, Sampo, Scor, UnipolSai and Vienna InsuranceSource: Blommberg,Roland Berger analysisRoland Berger Performance of European Insurers 280714 final.pptx7

Overall, total insurers REVENUES have been STABLE since 2009 butinvestment income has suffered from the 2011 sovereign debt crisisTop 30 European insurers consolidated financials – Revenues [2008-2013; EUR bn]CAGR 1%Otherrevenues 1)52950Premiumsrevenues 2)592Net investmentincome 3)-113200890257245229CAGR11-13 [%]CAGR09-13 [%]CAGR 9%CAGR -7%89849CAGR09-11 604616597608629200920102011201220131) Including revenues from non-insurance activities (banking, )Source: company information, Roland Berger analysis2) Net premiums earned3) Including total interest and dividend income as well as realized gains/losses (net)Roland Berger Performance of European Insurers 280714 final.pptx8

Investment income HIGH VOLATILITY has been driven by FINANCIALMARKET CONDITIONS while premiums followed GDP trendCorrelation between revenues and macro-economic KPIsGovernment bond yields & net investmentincome [2008-2013; %; EUR bn]Premiums revenues as share of GDP1) & YoYGDP growth [2008-2013; %;YoY]8%2011-2013: RECOVERYPERIOD6%6.0%2009-2011: 22013Germany1280%2008200920102011Net investment income [EUR bn]1) GDP of the 8 European countries covered by the Top 30 insurersSource: ECB, Bloomberg Roland Berger analysis20142008YoY GDPgrowth [%]Premiums / GDP [%]Roland Berger Performance of European Insurers 280714 final.pptx9

Insurers have managed to keep a STEADY OPERATING MARGINTop 30 European insurers consolidated financials – Operating & Net Income [08-13;%]8%6.0%6%4%2%6.3%5.5%0.8%Delta11-13 [pts]Delta09-13 sCAGR09-11 [%]CAGR11-13 [%]CAGR09-13 [%]5.4%4.3%2.8%Delta09-11 [pts]3.5%2.1%2.6%0%2008Operatingresult [EUR bn]Net income 1)[EUR 2-19%40%7%Total Operating margin [%] 2)1) After tax and interest2009Net income after tax margin [%] 3)2) Total operating margin (Total revenues incl. financial revenues – total costs) / total revenuesSource: company information, Roland Berger analysis3) Net income margin Net income after tax / total revenuesRoland Berger Performance of European Insurers 280714 final.pptx10

After a drop in 2011 resulting from lower net income, RETURN ONEQUITY ratios almost RECOVERED to their 2009 levelTop 30 European Insurers consolidated financials – Return on Equity 1) [2008-2013;%]9.0%9.8%8.5%Average 2009-2013RoE 7%Delta09-11 [pts]Delta11-13 [pts]Delta09-13 [pts]-4.1pts3.6pts-0.5ptsCAGR09-11 [%]CAGR11-13 [%]CAGR09-13 [%]6.7%4.9%1.7%200820092010201120122013Net income 2)42531162432-19%40%7%Total equity 3)25127832133935937910%6%8%1) Return on equity calculated as net income after tax (excluding minority interest) divided by total equity (excluding minority interests)2) After tax and interest3) Average Equity Y(N) [YE (N-1) YE(N)]/2Source: company information, Roland Berger analysisRoland Berger Performance of European Insurers 280714 final.pptx11

3. Vision by type ofinsurerRoland Berger Performance of European Insurers 280714 final.pptx12

The TOP 30 PLAYERS have been classified into 6 CLUSTERS andcompared to global championsClustering of Top 30 European Insurers and ecialists 1)7ChampionsDomesticpredominance 2)Global footprint 2)1Lifespecialists 1)1) Life specialists when share of life premiums is above 80%; Non-life specialists when share of life premiums is below 20%2) Domestic predominance when share of business in domestic market is above 50%Source: Roland BergerRoland Berger Performance of European Insurers 280714 final.pptx13

MUTUALS & NON-LIFE PREDOMINANT GENERALISTS increasedrevenues while LIFE SPECIALISTS improved their RoEPerformance by cluster of Top 30 European Insurers [2009-2013 CAGR; EUR bn]ARevenues09-13 CAGRLife1 Life specialists2 Bank InsurersGeneralistsNon-Life3 Life predominant4 Non life predominant5 Mutuals6 Non-Life specialistsTop 30 European InsurersSource: company information, Roland Berger2013 EUR bn 10%-2pts583809-13 Average4pts1440%1%Return on Equity1751%(excl. ING)B3pts2%9%-5pts0pts7%Roland Berger Performance of European Insurers 280714 final.pptx14

A RevenuesBetween 2009 and 2013, some players achieved to GROW theirREVENUES at a RAPID PACE, mainly in Non-lifeShare of life vs. Revenues CAGR [2009-2013; EUR bn;%]Share of Life 1) ipol30%Mapfre20%RSA Insurance10%0%-14%Admiral Mutua e predominant generalistsSize represents volume of premiums [EUR bn; 2013]Source: company information, Roland Berger analysisLife specialistsBank insurer28%30%Revenues CAGR[2009-2013; %]Top 30 Insurers Revenues2009-2013 CAGR 0.8%Life predominant generalists16%Non-Life specialistsMutualChampions1) As % of premiumsRoland Berger Performance of European Insurers 280714 final.pptx15

A RevenuesGrowth champions relied on 3 SUCCESSFUL STRATEGIES:acquisitions, focused internationalization and specialized innovativemodelsAcquisitionsFocused internationalization Specialized innovativemodels2012: Merger by incorporation of UnipolAssicurazioni with: Opportunity to grow in size, especially in Non-Life2010: Acquisition of Canadian non-life GCANInsurance Company ( 11% in GWP followingacquisition)2011: Acquisition of Oak Underwriting2012: Acquisition of online company 123 Money(premiums 16% at RSA's Irish unit) andArgentinian Insurer El Comercio2011: Takeover of 2 Belgian insurance companiesNateus SA/NV and Nateus Life SA/NV2014: Acquisition of the Luxembourg business ofBelgian insurance company P&V Assurances Consistently continuing its growth in the international business andin non-life2011: Acquisition of 50% SegurCaixa Adelsas, thenon-life insurance company of "La Caixa" andcommercial agreement for the exclusivedistribution of the products of the new companythrough the retail branch network of "La Caixa"Strategic move to aglobal footprint Strong growth of local international operations1) : 35% GWP increase since 2009 in Industriallines Targeted attractive regions: Latin America,South/east Asia & Arabian PeninsulaDominant position indomestic market andsustained internationalexpansion mainly inLatam Start of operations in Colombia in 1984 1987-1994: Entry in Portugal, Latam, Tunisia,USA 1994-2013: Development of Europe, Latin Am.,S-E Asia and North Am. Now: Presence in more than 40 countriesworldwideDevelopment throughinnovation with astrong focus ondigitalization First UK company with online insurancedistribution First car insurance price comparison siteCapacity to partner instrategic countries todevelop offer Successful partnerships in the UK withand in China through Joint venture with US healthcare group Humanato offer Vitality wellness program to health planmembers1) From 23 countries in 2010 to 37 in 2013 for Industrial lines divisionSource: company information, press research, Roland BergerRoland Berger Performance of European Insurers 280714 final.pptx16

A RevenuesPlayers from Spain, Germany and Switzerland have achieved toboth strongly increase their premiums with an above average RoERevenue growth vs. average Return on Equity [2009-2013; %]Revenues CAGR[2009-2013; p 30 average 2)-1%-2%FranceNetherlands-3%-4%Rationale: mix of : Higher GDP growth Higher share of non-life Performance of the specific playersUnited KingdomBelgium-5%0%4%5%6%7%8%9%10%11%12%Return on equity 1)[average 2009-2013; %]Size represents volume of premiums [EUR bn; 2013]Source: company information, Roland Berger1) Return on equity calculated as net income after tax (excluding minority interest) divided by total equity excluding minority interests2) Bubble size not reflecting total volume of premiumsRoland Berger Performance of European Insurers 280714 final.pptx17

B Return on EquityNON-LIFE players have been growing faster with higher RoE – InLIFE, BANK-INSURERS have been the most profitable playersEvolution of revenues vs. average Return on Equity [2009-2013; %]Revenues CAGR[2009-2013; %]724%56%Mutual14%22%4Life specialistsBank insurers (excl. ING)Top 30 Average 3)3Non-Life predominant GeneralistsBank insurer0%-2%Champions6Non-Life specialistsLife predominant Generalists-4%0%1%2%3%4%5%Life specialistsNon-Life predominant GeneralistsChampionsBank insurerMutualTop 30 AverageLife predominant GeneralistsNon-Life specialistsSize represents volume of premiums [EUR bn; 2013]Source: company information, Roland Berger6%7%8%9%10%34%Return on equity 1)[average 2009-2013; %]1) Return on equity calculated as net income after tax (excluding minority interest) divided by total equity excluding minority interests2) Bubble size not reflecting total volume of premiumsRoland Berger Performance of European Insurers 280714 final.pptx18

B Return on EquityWhile below average RoE players managed to improve their profitability,above average players tended to decline towards INDUSTRY AVERAGEReturn on EquityReturn on Equity aTop 30 Insurers2009 RoE t4ptTop 30 InsurersDelta RoE -0 ptsLife focus GeneralitsNon-life predominant generalistsLife specialistsBank insurerNon-Life specialists5pt6pt7pt8pt 13pt 20pt21ptDelta 2009-2013 Return on Equity[pts]MutualChampionsSize represents volume of premiums [EUR bn; 2013]Source: company information, Roland BergerRoland Berger Performance of European Insurers 280714 final.pptx19

4. And the Championsare Roland Berger Performance of European Insurers 280714 final.pptx20

CHAMPIONS like DISCOVERY and ADMIRAL manage to combineDOUBLE–DIGIT GROWTH with STRONG RoEEvolution of revenues vs. average Return on Equity [2009-2013; %]Revenues CAGR[2009-2013; % -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%Mutuals Av. 2.0%Life focus GeneralitsBank insurersAv. 5.1%3)Life predominantGeneralists Av. 5.8%Non-Life focus GeneralitsSize represents volume of premiums [EUR bn; 2013]Source: company information, Roland BergerLife specialistsNon-life specialistsNon-life predominant GeneralistsAv. 9.4%Av. 10.5%Life specialists Av. 8.2%Bank insurerNon-Life specialistsMutual56%Champions Av. 34%Return on equity 1)[average 2009-2013; %]Champions1) Return on equity calculated as net income after tax (excluding minority interest) divided by total equity excluding minority interestsRoland Berger Performance of European Insurers 280714 final.pptx21

ADMIRAL has grown rapidly since its creation in 1993 throughtechnology innovation in motor insuranceNew winners: AdmiralAdmiral PLC: development through innovation[2004-2012; GBP Bn]RevenuesCAGRProfit before 09201020112012 Constant innovation– First UK company to offer insurancesolely via the internet– First car insurance price comparisonsiteMarket capitalization [2004-2013, GBP 52006200720082009Source: Bloomberg, Annual reports, Roland Berger analysis2010 Private motor insurance and pricecomparison group launched in 199320112012201313%– First car insurance company to offercustomer product segment dedicatedbrands (Bell Direct, Diamond,Gladiator,.) Named in 2012 "Best large place to workfor in the UK"Roland Berger Performance of European Insurers 280714 final.pptx22

DISCOVERY, a South African health insurer, has grown internationallythrough partnership with leading International Insurance groupsNew winners: DiscoveryGross inflows and Profit from Operations [2000-2012, R bn]Gross inflowsCAGRProfit from 635%Market capitalization [2000-2012, R bn]21171244331213231572000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Annual reports, Roland Berger 2000: after a rapid success in South Africain 2000, introduction on the StockExchange 2001: diversification with development ofLife Insurance products (protection)2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201231 Started in 93 as a Health InsuranceProviderKey positioning: adaptation of insurancepolicy to customer behavior 2002: launch in the US19% 2004: launch in the UK, througha partnership with(PruHealth) 2010: launch in China througha partnership withRoland Berger Performance of European Insurers 280714 final.pptx23

5. Key learningsRoland Berger Performance of European Insurers 280714 final.pptx24

KEY LEARNINGS from our study European insurers' premiums have kept stable but financial performance remains strongly linked to financial markets Players with non–life orientation have been growing faster and more profitably (except for mutuals) In life, only specialists and bank-insurers have been able to secure higher than average profitability Overall, return on Equity tends to normalize between 8% and 10%,except in financial market turmoil Many insurers managed to outperform their peers on growth thanks to acquisitions or focused geographic expansion but their performance still lags behind the one of small innovative champions who managed to combine double-digit growth and doubledigit Return on EquityRoland Berger Performance of European Insurers 280714 final.pptx25

Note: The EURO STOXX Insurance (Price) Index is a capitalization-weighted index which was developed with a base value of 100 as of December 31. 1991. It is composed of 15 companies: Aegon, Ageas, Allianz, Generali, Axa, CNP Assurances, Delta Lloyd, Hannover Rueck, ING group, Mapfre, Muenchener Rueck, Sam