Banca Mediolanum SpA · MIL:BMED
Banca Mediolanum SpA — 9M 2002 Earnings Presentation
50 slides from Banca Mediolanum SpA's earnings presentation, 2002
Slide 1: 9M 2002 Reclassified Results
) MEDIOLANUM GRUPPO. MEDIOLANUM SM 2002 Reclassified Results Gwin, ELIE 3
Slide 2: Ennio Doris, Chief Executive Officer
y o P MEDIOLANUM Ennio Doris ie ; free ; [ a = , ¥ & gs ~~ % a y, = hea Chiet igebnite Officer’ o\
Slide 3: Mediolanum's performance is less dependent upon the market environment
Mediolanum's performance is less dependent upon the market environment Mediolanum's Strategy & Model built with “anti-seismic” criteria ¥ responsive to the shocks & jolts of tumultuous times not just the “easy” times Net Inflows into Mutual Funds* always positive & consistent === Total Italian Indus
Slide 4: Net Inflows into Equity Mutual Funds
Net Inflows into Equity Mutual Funds* differentiates Mediolanum even more Mar Jun 7 Sep Dec Mar Jun Sep 20D gan Jan 01 2002 Total Italian Industry “ y esses Mediolanum * including Managed Accounts & Unit-linked policies Source: Assogestioni
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Slide 6: 9M 2002 Reclassified Results Agenda
9M 2002 Reclassified Results Agenda > Core Business Results >» Consolidated Results > New Ventures Results & Outlook >» Operational Progress
Slide 7: Core Business
| owt 2002 Reclassified Results gi Mediolanum Group ind Core Business aii,
Slide 8: Core AuA mitigated market effect thanks to strong net inflows
Core AuA were able to mitigate market effect thanks to strong net inflows Buro million sages. eee Life Reserves 6,634.5 6,131.8 +8.2% Mutual Funds & M.A 8,254.1 8,443.2 -2.2% Bank Deposits 5,550.0 3,979.3 +39.5% Institutional Assets 477.3 407.6 +17.1% Consolidation Adjustments -2,953.2 -2,797.2 +5.6
Slide 9: GPW very strong thanks to single premiums
GPW were very strong thanks to SP AP still weak vs. last year's boom > U-L Pension Plans (Europension) 23.8 45.2 47.3% > U-L Pension Plans (Tax Benefit *) 39.7 60.8 -34.7% > U-L Investment Pol. (Life Funds) 20.7 18.1 +14.4% > Open Pension Funds 0.0 0.5 -- Reaeurring Polisias (AP) G42 1248 BAH > Trad
Slide 10: Market climate limited gross inflows into new mutual funds
Market climate limited Gross Inflows into new MF - MA fared better > Equity Funds 133.8 202.7 -34.0% > Bond Funds 40.6 65.0 -37.5% >» Monetary Funds 83.2 67.6 +23.1% Italy-based Funds 257.6 335.3 -23.2% > Equity Funds 279.4 606.7 -53.9% >» Protected Funds 0.4 0.8 -50.0% >» Bond & Monetary Funds 182.
Slide 11: Sales Network went down but productivity remained the same
Sales Network went down but productivity remained the same: Quality improves! » Licensed Financial Advisors 4,122 3,755 +9.8% » Non-licensed Financial Advisors 937 1,862 -49.7% Banca Mediolanum* 5,059 5,617 -9.9% * o/w Financial Executives 868 869 -0.1% Partner Time 1,320 1,255 +5.2% Non-licensed no
Slide 12: Economic results rewarding due to strong premiums
Economic Results are rewarding in large part due to strong premiums Total Revenues 1,838.8 1,298.9 +41.6% Profit before Tax & E.l. 100.6 105.1 -4.3% Extraordinary Items 2.3 ane = Profit before Tax 102.9 105.1 -2.1% Income Tax -22.2 -25.3 -12.3% An improved profit level was achieved despite two Major
Slide 13: Profit from Life decreased due to negative contribution from traditional reserves
Profit from Life decreased due to negative contribution from traditional reserves... Life Insurance 53.4 73.9 -27.7% nn 7 ... the related Net Investment Income was close to zero this year temporary situation and is expected to improve next year ... Life Investment Income was close to zero in 9M 2002
Slide 14: Lower Net Investment Income from Life impacted Net Profit
Lower Net Investment Income from Life impacted Net Profit a negative 10% Investment Income - Life 55.9 86.5 -35.4% Adjustments to the value of financial investments -10.4 -13.2 -21.2% Adjusted Invest. Income - Life 45.5 73.3 -37.9% Policyholders' Interest -44.9 -59.1 -24.0% Neat invest, Income 2 LFS
Slide 15: An improved profit level was achieved despite two major obstacles
An improved profit level was achieved despite two Major Obstacles 1. The crisis in Life insurance yield on traditional reserves 2. The erosion of Mutual Funds net asset value Profit decrease from MF was mitigated by positive net inflows & margin increase Life Insurance 53.4 73.9 -27.7% Mutual Funds
Slide 16: Commission Income from MF unchanged despite lower assets
Commission Income from MF was unchanged despite lower assets ... Entry Fees 23.8 36.2 -34.3% Management Fees 111.4 102.6 +8.6%* ¥ when Service Fees from M.A.* are included management fees increase by 12%** Performance Fees 16.5 12.6 +31.0% * for Service Fees, see Bank Revenues ** 132.1 vs. 117.7 mn
Slide 17: Profit from MF business decreased but margins increasing
Profit from MF business decreased ... ... but margins are increasing Life Insurance 53.4 73.9 -27.7% Mutual Funds 34.5 -10.4% the strategic introduction of no-load products dampened entry fees, but margins are healthier and increasing substantially Profit from Bank business is now significantly posi
Slide 18: Bank Revenues increased due to service margin
Bank Revenues increased due to service margin & reduction in interest rates paid Interest Spread 18.8 22.4 -16.1% » Securities 9.8 9.7 +1.0% » Managed Accounts servicefees 20.7 15.0 +38.0% » Other Services 17.8 13.4 +32.8% Service Margin 48.3 38.1 +26.8% Benefits paid & Change in Reserves are under
Slide 19: Surrenders of Investment Policies net of transformation are down
Surrenders of Investments Policies net of transformation are down 2'7% YoY Traditional Investment Policies 262.7 121.5 Average Reserves 420.6 626.0 % of Reserves 62.5%") 19.4% Unit-linked Investment Policies 27.9 3.7 Average Reserves 608.7 411.9 % of Reserves 4.6% 0.9% Average Jotal| Reserves 1),029
Slide 20: Costs reflect the flexibility of our strategy
Costs reflect the flexibility of our strategy & the tight control we have on business Claims, Benefits paid, Changes in Reserves 1,456.4 917.8 +58.7% Recov. from Reinsurance -12.0 -13.1 -8.4% Acquisition Costs (Commission Expense) 141.3 152.6 -7.4% G&A Expenses 120.8 118.3 2.1% Advertising Expenses
Slide 21: Consolidated Results
| 9M 2002 Reclassified Results , Mediolanum Group jm w Y ‘ ; Consolidated ™
Slide 22: Impact of investments in New Ventures pulled Consolidated Net Profit down
Impact of investments in New Ventures pulled Consolidated Net Profit down Euro million SMizZ00z2 92007 Change Total Revenues 1,889.2 1,330.3 +42.0% Profit before Tax & E.I. 64.2 91.8 -30.1% Extraordinary Items 4.5 0.1 n.s. Profit before Tax 68.7 91.9 -25.2% Income Tax -18.8 -23.4 -19.7% Profit from
Slide 23: New Ventures
New Ventures/i= =
Slide 24: NV generated a loss mainly due to start-up costs
NV generated a Loss mainly due to start-up costs & adjustment to value of securities Spain -2.6 0.5 ns. Germany -1.1 oo --- Banca Esperia & Mediolanum Private -3.0 = --- Net Operating Profit / Loss -6.7 --- ns. Net Adjustment to the Value of Financial Investment -3.1 --- n.s. * share of Profit perta
Slide 25: Spain - The engine is up-and-running
Spain - The engine is 'up-and-running" >» Mediolanum model now in place and functional > Multi-channel system launched Sept. 17 with state-of-the art Call Centre, Telephone, Teletext and Internet v since Sept. 17: over 500 new multi-channel bank customers acquired Spain - Steadily building a commiss
Slide 26: Spain - Results dampened by one-off investment costs
Spain - The engine is 'up-and-running" > Ireland-based Unit and Index-linked single premium policies introduced on the Spanish market Vv 5.5 mn Euro of Index-linked sold in just over one month >» A number of other products to follow, including new Ireland-based mutual funds Spain - Results dampened
Slide 27: Germany - Bankhaus August Lenz; Banca Esperia
Germany - Bankhaus August Lenz: investing to replicate our model » Outsourcing system defined > Staffing of key personnel underway > Recruitment of exclusive advisors progressing well ¥ 16 supervisors already in place bringing advisors along with them > Distribution of lreland-based Mutual Funds and
Slide 28: Core Business Progress
Core Business Progressh= 3
Slide 29: Operational Progress - My Pension
Operational Progress - 'My Pension' supported by strong marketing effort > series of long-length TV commercials on air at end of October > innovative campaign using Mediolanum Channel to present 'My Pension’ at advisor sponsored groups meetings 12,500 clients/prospects involved in the first event >
Slide 30: Operational Progress - Other Projects
Operational Progress Other Projects > Continuation of the switch from unbundled mutual funds into wrap products >» Developing a project to boost mortgage sales
Slide 31: 9M 2002 Additional Slides
| Hi 2002 Réeclassified Results « lL” Mediolanum Group a 9M 2002) accitiona! slides
Slide 32: Profit by Business Line
9M 2002 Profit by Business Line Life Insurance 53.4 73.9 -27.7% Mutual Funds 30.9 34.5 -10.4% Bank Business 13.8 -3.3 ns. (excl. Adv. Investments) 19.0 5.5 n.s. Other Operations 2.5 -0.0 ns. 9M 2002 Total Revenues Premium Income 1,615.4 1,091.0 +48.1% Reinsurance ceded -7.0 -8.9 -21.3% Commission In
Slide 33: Commission Income - Mutual Funds
9M 2002 Commission Income - Mutual Funds Entry Fees 23.8 36.2 -34.3% o/w Irish Funds 16.5 25.9 -36.3% Management Fees 111.4 102.6 +8.6%* o/w Irish Funds 94.7 78.3 +20.9% Performance Fees 16.5 12.6 +31.0% o/w Irish Funds 12.8 4.7 +172.3% * +12.2% when Service Fees from M.A. are included (132.1 vs. 11
Slide 34: Net Investment Income Breakdown
9M 2002 Net Investment Income Breakdown Investment Income 53.4 Adjustments to the value of financial investments -11.8 Interest paid on Investments 8.4 Adjusted Inv. Income 50.0 Policyholders' Interest -44.9 45.5 9M 2002 Life Reserves > Traditional 1,552.9 2,075.6 -25.2% > Index-linked 2,548.8 1,769
Slide 35: Mutual Fund & Managed Accounts Assets
9M 2002 Mutual Fund & Managed Accounts Assets » Equity Funds 918.1 1,249.0 -26.5% > Bond Funds 388.8 499.1 -22.1% » Monetary Funds 218.6 214.4 +2.0% Italy-based Funds 1,525.5 1,962.5 -22.3% > Equity Funds 3,687.1 4,297.0 -14.2% » Protected Funds 100.2 109.6 -8.6% >» Bond & Monetary Funds 1,734.7 1,6
Slide 36: Mediolanum Customer Base
Mediolanum Customer Base as at 30.09.02 752,200 iE» 295,800 Other [~ v7, 73,700 Mediolanum Customer Base as at 30.09.02 897,300 eee» 452,100 Other y 77,200
Slide 37: Surrenders; Market Share Growth
9M 2002 Surrenders * Surrenders of Individual Pension Plans 240.2 82.9 Average Reserves 3,311.8 3,309.9 % of Reserves 7.3%) 2.5% Surrenders of Investment Policies 290.6 125.2 Average Reserves 1,029.2 1,037.8 % of Reserves 28.2%) 12.1% Average jotal Reserves 4,341.0 4,347.7 % Of Reserves 12.2% ABY% *
Slide 38: Assets under Administration - Spain
9M 2002 Assets under Administration - Spain Euro million Life & Pension Funds Mutual Funds Bank Deposits Institutional Assets lreland-based Assets Consolidation Adjustments 49.7 52.1 4.6% 699.6 778.1 — -10.1% 1,076.9 1,303.8 -17.4% 44.6 44.6 0.0% 17.4 = = -180.2 224.8 +19.8% 9M 2002 Net Effect - Spa
Slide 39: Sales Network - Germany
9M 2002 Sales Network - Germany » IFAs - Germany * 1,043 = --- » IFAs - Austria * 200 oo --- » Exclusive Advisors Lenz 8 oo --- * advisors with sales activity in the past 6 months
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Slide 42: Q3 2002 Net Inflows; Gross Premiums Written
Q3 2002 Net Inflows Euro million > Mutual Funds & M.A. > Life Policies Managed Savings > Securities > Cash > Repurchase Agreements Administered Savings 102.4 -54.7% -31.6% 190.7 -24.9% -46.9% 293.1 -38.9% -61.7% 81.1 -11.2% -69.2% 19.7 -44.1% -69.8% 44.2 +167.5% +410.3% 205.0 +21.8% -61.7% Q3 2002 G
Slide 43: Gross Inflows into MF & MA; Sales Network
Q3 2002 Gross Inflows into M.E & M.A.* > Equity Funds 40.6 -23.3% -8.2% > Bond Funds 12.7 -30.6% +11.4% » Monetary Funds 26.0 +43.8% -9.2% Italy-based Funds 79.3 -11.2% -5.9% » Equity Funds 76.7 -44.0% -18.5% » Protected Funds 0.1 -68.7% -11.3% >» Bond & Monetary Funds 59.3 +40.2% -5.7% lreland-base
Slide 44: Economic Results Q3 2002
Q3 2002 Economic Results Total Revenues 569.4 +25.0% -10.2% Profit before Tax & E.l. 30.8 411.7% -11.8% Extraordinary Items 0.1 - -93.7% Profit before Tax 31.0 412.2% -16.4% Income Tax -7.6 +46.2% +11.8% Q3 2002 Profit by Business Line Life Insurance 19.6 Mutual Funds 7.5 Bank Business 5.2 (excl. Ad
Slide 45: Total Revenues
Q3 2002 Total Revenues Premium Income 501.4 +28.9% -8.7% Reinsurance ceded -2.1 -27.6% -22.2% Commission Income 44.3 -0.4% -24.3% Bank Revenues 21.1 -8.3% -13.5% Other Commissions & Revenues 4.7 +161.1% -6.0% Q3 2002 Adjusted Premium Income Recurring Policies 22.7 -39.8% -21.6% Single Premium Polici
Slide 46: Commission Income - Mutual Funds; Bank Revenues
Q3 2002 Commission Income - Mutual Funds Entry Fees 6.4 -23.8% -25.6% o/w Irish Funds 4.1 -32.8% -32.8% Management Fees 34.6 +1.8% -12.0% o/w Irish Funds 29.7 +10.0% -11.9% Performance Fees 3.3 +57.1% -68.9% 3.7 +82.4% -63.5% o/w Irish Funds Q3 2002 Bank Revenues Interest Spread 6.0 -3.2% -16.7% » S
Slide 47: Costs
Q3 2002 Costs Claims, Benefits paid, Change in Reserves 454.3 +35.9% -7.5% Recov. from Reinsurance -3.1 -31.1% -11.4% Acquisition Costs 41.5 -11.9% -14.4% G&A Expenses 38.4 +4.9% -16.0% Advertising Expenses 0.6 -82.4% -81.8% Depreciation 10.0 +5.3% -13.0% Q3 2002 Benefits paid & Change in Reserves B
Slide 48: Net Investment Income
Q3 2002 Net Investment Income Buro milion save gm ae Investment Income - Life 21.5 -15.6% +25.2% Adjustments to the value of financial investments -4.8 -34.2% -44.7% Adjusted Invest. Income - Life qi, -8.3% +94.4% Policyholders' Interest -13.0 -30.7% -16.2% Net Invest, Income = Lita ou ns, AS, Net I
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Slide 50: Economic Results
Q3 2002 Economic Results Total Revenues 580.6 +24.9% -11.1% Profit before Tax & E.l. 14.8 -33.6% -35.3% Extraordinary Items 1.8 ns -25.0% Profit before Tax 16.6 -25.6% -34.3% Income Tax -5.7 +32.6% -9.5% Profit from Minority Interests — = —