Banca Mediolanum SpA · MIL:BMED
Banca Mediolanum SpA — Mediolanum — H1 2002 Earnings Presentation
43 slides from Banca Mediolanum SpA's earnings presentation, 2002
Slide 1: H1 2002 Reclassified Results
“00 H1 2002) a > Hi 2002,)Reclassified Results Hi 2002 Reclassified Results Agenda >» Core Business > New Ventures >» Consolidated >» Embedded Value > 2002 Outlook > Operational Progress oun
Slide 2: Mediolanum & the Bear Market
Mediolanum & the Bear Market > June 2001 - June 2002: "Annus Horribilis" > Financial Markets declined by 27% (MSCI World - Eur) > Rigourous test to demonstrate Mediolanum solidity > Mediolanum is capable of doing well when market conditions are difficult and times are tough oun Core Business
Slide 3: Assets under Administration
H1 2002 Assets under Administration Euro million Life Reserves Mutual Funds & M.A Bank Deposits Institutional Assets Consolidation Adjustments 6,745.2 8,975.9 5,332.4 494.2 -3,130.3 H1 2002 Life Reserves Euro million > Traditional > Index-linked > Unit-linked Life Reserves Life Reserves in own Mutua
Slide 4: Evolution of Life Reserves Composition
Evolution of -_ 4 Life Reserves Composition Core Business Euro million 2,665 2,733 2,551 Unit-linked 72% © Index-linked 25% i Traditional H199 FY99 H100 FY0OO H101 FY01 H102 H1 2002 a_i Mutual Fund & MA. Assets Core Business > Equity Funds 1,050.9 1,532.9 -31.4% > Bond Funds 397.3 521.2 -23.8% » Mon
Slide 5: Bank Deposits and Net Inflows
Hi 2002 Bank Deposits Euro million Cash under Deposits Securities under Deposits Repurchase Agreements Subordinated Loans Core Business| 2,604.1 2,005.4 702.2 20.7 H1 2002 Net Inflows Euro million > Mutual Funds & M.A. > Life Policies Managed Savings > Securities > Cash > Repurchase Agreements Admin
Slide 6: Gross Premiums Written
Gross Premiums Written Core Business > U-L Pension Plans (Europension) 17.2 > U-L Pension Plans (Tax Benefit *) 30.7 > U-L Investment Pol. (Life Funds) 13.6 > Open Pension Funds 0.0 Recurring Policies 51.5 > Trad./ Group / Invest. Policies 5.9 63.4% > Unit-linked Pol. (Life Funds & Oro Funds) 130.5
Slide 7: Bank Account & Customer Growth
H1i 2002 4 Bank Account & Customer Growth Core Business 323,409 yp s22% [™llRrimary/AccountHolders) 743,900 (=">+10% Mediolanum Customer Base a_i as at 30.06.02 Core Business 743,900 Other | y, 73,600 oul
Slide 8: Mediolanum Customer Base and Sales Network
Mediolanum Customer Base _ 4 as at 30.06.02 Core Business Bark 441,900 Other | y 77,100 H1 2002 a_i Sales Network Core Business » Licensed Financial Advisors 4,086 3,473 +17.7% » Non-licensed Financial Advisors 1,064 2,034 -47.7% Banca Mediolanum* 5,150 5,507 -6.5% * o/w Financial Executives 870 +6.
Slide 9: Economic Results
H1 2002 Economic Results Euro million Total Revenues Profit before Tax & E.l. Extraordinary Items Profit before Tax Income Tax H1 2002 Profit by Business Line Euro million Life Insurance Mutual Funds Bank Business (excl. Adv. Investments) Other Operations
Slide 10: Total Revenues
H1 2002 Total Revenues Euro million Premium Income Reinsurance ceded Commission Income Bank Revenues Other Commissions & Revenues 702.0 -6.0 106.9 37.5 3.1 Core Business| +58.7% -18.3% +0.5% +22.7% +122.6% ound H1 2002 Adjusted Premium Income Euro million Recurring Policies Single Premium Policies x
Slide 11: Commission Income - Mutual Funds
Hi 2002 Commission Income - Mutual Funds Euro million Entry Fees o/w Irish Funds Management Fees o/w Irish Funds Performance Fees o/w Irish Funds *+19.1% when Service Fees from M.A. are included (91.1 vs. 76.5 mn Euro = +19.1%) Core Business| -37.4% -37.4% +12.0%* +26.7% +25.7% +223.3% Hi 2002 Commi
Slide 12: Bank Revenues and Costs
H1 2002 -_ 4 Bank Revenues Core Business| Euro million Interest Spread » Securities >» Managed Accounts » Other Services Service Margins Hi 2002 Costs Euro million Claims, Benefits paid, Changes in Reserves Recov. from Reinsurance Acquisition Costs G&A Expenses Advertising Expenses Depreciation
Slide 13: Benefits paid & Changes in Reserves
H1 2002 a_i Benefits paid & Changes in Reserves > Claims & Maturities 133.1 108.3 +22.9% » Surrenders 304.0 * 162.7 +86.8% Benefits paid 437.1 271.0 +61.3% Changes in Reserves (less Policyholders' interest) 565.1 312.6 +80.8% * 136.2 mn Euro net of transformation = - 16.3% Hi 2002 Surrenders Euro mi
Slide 14: Surrenders - Investment Policies
H1 2002 Surrenders - Investments Policies Euro million Traditional Investment Policies Average Reserves % of Reserves Unit-linked Investment Policies Average Reserves % of Reserves Average jotal Reserves 4,058:2 4, 05514 % Of Reserves 22.3% ** 7.1% * excluding Index-linked & ‘Pull in our Nets’ inclu
Slide 15: Weight of G&A Expenses on AUA
H1 2002 -_ 4 Weight of G&A Expenses* on AUA 0.85% 0.85% 93 94 95 96 97 98 99 00 01 H102** * Not including Depreciation * Annualised Hi 2002 Net Investment Income Euro million Investment Income y . -44.2% Adjustments to the value of financial investments A -10.7% Interest paid on Investments ; H +41.
Slide 16: New Ventures Assets under Administration
New Ventures ls) Hi 2002 Assets under Administration Euro million 30,0502 30,05.) Chewy Spain 1,847.1 2,133.2 -13.4% Germany 516.5 = --- Banca Esperia* 745.2 — --- Mediolanum Private 6.8 --- — NEW VENTURE ASSETS 9,415.5 2,193.2 tA5I% * Mediolanum Group's share (48.5%) d out
Slide 17: Sales Network - Spain
H1 2002 Sales Network - Spain Euro million >» Commercial Agents & Employees - Old model » Financial Advisors - Mediolanum model Sales Network Introducers 150 150 +126.6% H1 2002 Economic Results Euro million Spain Germany Banca Esperia & Mediolanum Private * share of Profit pertaining to the Mediola
Slide 18: Net Consolidated Effect
Hi 2002 Net Consolidated Effect Euro million Net Profit * Goodwill Depreciation -5.2 +94.0% Interest paid on Investments ; -2.5 +40.0% * share of Profit pertaining to the Mediolanum Group H1 2002 Assets under Administration - Spain Life & Pension Funds 53.2 54.5 -2.4% Mutual Funds 751.6 853.1 -11.9%
Slide 19: Economic Results - Spain
H1 2002 Economic Results - Spain Euro million Total Revenues Profit before Tax & E.l. Extraordinary Items Profit before Tax Income Tax Profit from Minority Interests * share of Profit pertaining to the Mediolanum Group H1 2002 Net Effect - Spain Euro million Net Profit * Goodwill Depreciation Intere
Slide 20: Consolidated Economic Results
Consolidated*» By == . Hi 2002 ( i Economic Results : Euro million Hd) 2002) a 2007) CiTange; Total Revenues 1,308.6 865.5 +51.2% Profit before Tax & E.I. 49.4 69.5 -28.9% Extraordinary Items 21 0.1 --- Profit before Tax 52.1 69.6 -25.1% Income Tax -13.1 -19.1 +31.4% Profit from Minority Interests o
Slide 21: Consolidated Assets under Administration
Hi 2002 Assets under Administration Euro million 20,06;02 Life Reserves 6,745.2 Mutual Funds & M.A. 8,975.9 Bank Deposits 5,332.4 Institutional Assets 494.2 Consolidation Adjustments -3,130.3 Core Business Assets 18,417.4 Spain 1,847.1 Germany 516.5 Banca Esperia 745.2 Mediolanum Private 6.8 New Ven
Slide 22: EV Economic Assumptions
H1 2002 EV Economic Assumptions a 2007 id) 2002 Investment Vong tori Son y 4 5.25% <> 5.20% Return EGUIVES) i> 7.75% — >» 7.75% EE > 4.50% wap 3.70% Segregated funds = 72 5.10% —— 4.85% Unit-linked funds _ P 6.85% 96.30% Our Portfolio Mutual funds & M.A. |! J 655% 7 6.30% Discount Rate py 7.75% BERS
Slide 23: Embedded Value Growth
Hi 2002 Embedded Value Growth Euro million +21% Value of ee in-force business || Adjusted shareholders’ equity +24% 1,283 +72% 707 745 595 +5% 535 +19% 484 +11% 1 TEED 94 95 96 I 98 99 00 * including New Ventures goodwill 1,917* wen +2% 4,758" 1,953 * +11% 1,147 VIF Life -\ 348 VIF Funds & M.A. tn 4
Slide 24: Embedded Value Earnings
H1 2002 Embedded Value Earnings Bro million |i 2002 Hi 2007 Change over the period 36 170 Dividends paid 72 69 Goodwill Depreciation - New Ventures 10 5 H1 2002 EV Earnings Components » Expected return in EV 59 49 +20% » Experience variances (84) (18) n.a. > Operating assumpt.changes 18 15 n.a. > Mu
Slide 25: EV Earnings - Experience Variances
H1 2002 EV Earnings - Experience Variances Bro million [Hi 200242001 » Investment return variance on NAV (125) (24) » Mutual Fund pricing variance 70 0 » Asset mix variance (27) 0 » Performance fees variance 9 5 » Persistency/paid-ups variance 6 18 » Operating variance (3) (1) » New ventures net pro
Slide 26: 2002 Outlook
2002 Outlook Investor Behaviour Io > Uncertainty over the strength of the economic recovery > Investor behaviour is generally not synchronised with fundamental market shifts > For a certain period of time investor behaviour will not improve > This period represents additional opportunities for Medio
Slide 27: Mediolanum Market Share Growth
Mediolanum Market Share Growth 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 90 91 92 93 94 95 96 97 98 99 00 01 * Source: Banca d'Italia 3,000 2,500 ; 2,000 1,500 1,000 | 800 Core Business| Mediolanum Market Share Italian Household Assets* (Euro bn)
Slide 28: Operational Progress - Life
Operational Progress -_ 4 Life - New Product Core Business > 'My Pension’ Allows policyholder to choose 1 x year to invest in - 'Tax Benefit’ version (tax advantages during capital accumulation phase) OF - 'Europension' version (lighter tax during annuity distribution phase) OF - both Launch Septemb
Slide 29: Operational Progress - Other Projects and Internet
Operational Progress -_ 4 Other Projects Core Business| > Continuation of the switch from unbundled mutual funds into wrap products > Project to boost mortgage sales ound Operational Progress -_ 4 Internet Channel Core Business! On-line Current Accounts on-line customers" 372,000 active traders > 28
Slide 30: Operational Progress - New Ventures Spain and Germany
Operational Progress me New Ventures - Spain > Mediolanum model officially operative September 17 > Close to 700 advisors including 261 Introducers > Products available > Channels tested and ready to go Operational Progress me New Ventures - Germany: Lenz >» Outsourcing system defined > Recruitment
Slide 31: New Ventures Germany Gamax; Banca Esperia Highlights
Operational Progress me New Ventures - Germany: Gamax >» Complete restructuring of the organisation > Restructuring of the product offer > Encourage transfer of best IFAs to Lenz exclusive advisor system oun Hi 2002 Banca Esperia Highlights Euro million Bai sas) ___Assets under Administration |" 1,0
Slide 32: Concluding Remarks
SS Concludin Concluding Remarks ( x, Mediolanum business is sound and in good shape We are extremely confident in our current position and in our future > Investments in New Ventures > Consolidation of the core business > Margin development Competitive advantage & acceleration of growth ound
Slide 33: Q2 2002 Reclassified Results
O2 2002": ou » Q2 2002 Reclassified Results 2 Q2 2002 Reclassified Results Mediolanum Group
Slide 34: Q2 Net Inflows and Gross Premiums Written
Q2 2002 Net Inflows Euro million > Mutual Funds & M.A. > Life Policies Managed Savings > Securities > Cash > Repurchase Agreements Administered Savings -51.8% +65.5% -3.5% +193.7% +54.0% +112.4% Core Business| -17.5% +8.9% -0.5% +328.2% -0.4% +26.1% +60.7% Q2 2002 Gross Premiums Written Euro million
Slide 35: Gross Inflows into Mutual Funds and Managed Accounts
Q2 2002 -_ 4 Gross Inflows into M.E & M.A.* Core Business > Equity Funds 44.2 -33.3% -9.8% >» Bond Funds 11.4 -41.5% -30.9% » Monetary Funds 28.7 +21.5% +0.6% Italy-based Funds 84.3 -22.9% -10.3% > Equity Funds 94.2 -60.4% -13.2% >» Protected Funds 0.1 -47.0% -47.0% >» Bond & Monetary Funds 56.1 -3.
Slide 36: Profit by Business Line
Q2 2002 -_ 4 Profit by Business Line Core Business Euro million Life Insurance , -61.6% -61.0% Mutual Funds : +3.0% +47.9% Bank Business -547.1% +660.0% (excl. Adv. Investments) n.s. ns. Other Operations Q2 2002 _ 4 Total Revenues Core Business| Euro million Premium Income +62.3% -2.8% Reinsurance c
Slide 37: Adjusted Premium Income
Q2 2002 = 4 Adjusted Premium Income Core Business Recurring Policies H -33.2% -11.3% Single Premium Policies x1/10 34.9 +114.0% -8.7% * Annual Premium Equivalent Q2 2002 a_i Commission Income - Mutual Funds Core Business Entry Fees 7 -38.1% -2.3% o/w Irish Funds i, -40.2% -3.2% Management Fees +12.0
Slide 38: Bank Revenues and Costs
Q2 2002 -_ 4 Bank Revenues Core Business| Euro million Interest Spread : 0.0% » Securities ' +5.9% » Managed Accounts 4 +45.1% » Other Services ; +87.9% Service Margins +45.8% Q2 2002 a_i Costs Core Business| Euro million Claims, Benefits paid, Changes in Reserves +78.4% -3.8% Recov. from Reinsuranc
Slide 39: Benefits paid & Net Investment Income
Q2 2002 Benefits paid & Changes in Reserves Euro million Benefits paid >» Claims & Maturities >» Surrenders Changes in Reserves (less Policyholders’ interests) 307.6 +57.4% +67.3% +51.4% +93.8% Core Business| -27.5% +25.6% -43.6% +19.5% Q2 2002 Net Investment Income Euro million Investment Income Ad
Slide 40: H1 vs. Q1 2002 Sales Network
H1 vs. Q1 2002 Sales Network S06 02 40 s)02Z » Licensed Financial Advisors 4,086 3,924 » Non-licensed Financial Advisors 1,064 1,387 Banca Mediolanum* 5,150 5,311 879 * o/w Financial Executives 870 Partner Time 1,281 1,390 TOIAL NEMWORKK Q2 2002 Reclassified Results Mediolanum Group
Slide 41: Q2 2002 New Ventures Economic Results
Q2 2002 ome Economic Results Euro million Spain E -300% 100% Germany i -483% Banca Esperia & Mediolanum Private ; 50% * share of Profit pertaining to the Mediolanum Group Q2 2002 Net Consolidated Effect Euro million Net Profit * -2,200% +600% Goodwill Depreciation h +100% +6.1% Interests paid for In
Slide 42: Q2 2002 Economic Results - Spain
Q2 2002 me Economic Results - Spain Total Revenues 14.7 +25.6% -10.9% Profit before Tax & E.l. -0.5 -225.0% +25.0% Extraordinary Items 0.1 0.0% -50.0% Profit before Tax -0.4 -180.0% +100.0% Income Tax 0.0 -100.0% os Profit from Minority Interests Q2 2002 Net Effect - Spain Euro million Net Profit *
Slide 43: Q2 2002 Consolidated Economic Results
02 Reclassified Results olanum Group : Q2 2002 Economic Results Euro million G2 2002 Vs, @207 Vs) @g 02 Total Revenues 653.0 +54.6% -0.4% Profit before Tax & E.l. 22.9 -31.0% -13.7% Extraordinary Items 2.4 +2300% +700% Profit before Tax 25.3 -24.0% -5.7% Income Tax -6.3 -29.2% -7.4% Profit from Mino