Banca Mediolanum SpA · MIL:BMED
Banca Mediolanum SpA — H1 2004 Earnings Presentation
41 slides from Banca Mediolanum SpA's earnings presentation, Sep 9, 2004
Slide 1: H1 2004 Reclassified Results
H1 2004 Reclassified Results September 9, 2004
Slide 2: Slide 2
Slide 3: Alessandra Lanzone and Ennio Doris
2 Alessandra Lanzone Head of Investor Relations 3 Ennio Doris Chief Executive Officer
Slide 4: MSCI World and market crises recovery trend
MSCI World US$ in Euro - 2002-2004 2 1200 1100 1000 900 800 700 600 500 Sept 2004 July 2004 May 2004 May 2002 Mar 2004 Mar 2002 May 2003 Jan 2004 July 2002 Jan 2002 Mar 2003 Jan 2003 Sept 2003 Nov 2002 Sept 2002 July 2003 Nov 2003 Source: Datastream Market Crises Recovery Trend 3 Dow Jones Index 70%
Slide 5: Investor sentiment and the market
Investor Sentiment & the Market 6 Disruption in growth trend: a critical point for the 9 average investor Changes are not perceived as they occur: 9 positive media & public opinion drive action Investor response to market upturns occurs 9 with a considerable lag The recent 5-month decline has interr
Slide 6: Net inflows into equity mutual funds and assets under administration trend
Net Inflows into Equity Mutual Funds* 8 € mn 600 12000 10000 400 8000 6000 200 4000 2000 0 0 Jan 00 July 00 Jan 01 July 01 Jan 02 July 02 Jan 03 July 03 Jan 04 -2000 -200 -4000 -6000 -400 -8000 Mediolanum Total Italian Industry -10000 -600 -12000 * Including Managed Accounts & Unit-linked policies S
Slide 7: Net profit trend and embedded value growth
Net Profit Trend & Performance Factors 10 € mn H101 H102 H103 H104 100 92,6 Performance Factors 76,8 80 74,1 9 Strong volume of life 57,4 57,3 insurance 60 54,7 9 50,3 Higher performance 39,0 fees 40 9 Strong mortgage business 20 Lower losses from 0 9 New Ventures -20 -7,1 -15,8 -18,4 -19,3 Consolid
Slide 8: Agenda
12 Edoardo Lombardi Chief Operating Officer Agenda 13 9 Group Consolidated Results 9 Core Business 9 New Ventures 9 Embedded Value 9 2004 – Upcoming Activities
Slide 9: Group Consolidated Net Profit
Consolidated 14 H1 2004 Reclassified Results Group Consolidated Net Profit 15 € mn H1 04 H1 03 Change Total revenues 1,425.1 1,075.7 +32.5% Total costs (1,325.2) (1,017.2) +30.3% Net investment income 4.1 18.9 -78.3% Profit before Tax & E.I. 104.0 77.4 +34.4% Extraordinary items (0.6) (4.9) n.s. Pro
Slide 10: Net Profit in Detail; Assets under Administration
Consolidated Net Profit in Detail 16 € mn H1 04 H1 03 Change Net Premiums written 1,194.5 863.3 +38.4% Commission income 146.6 126.9 +15.5% Bank revenues 73.6 76.7 -4.0% Other revenues/commissions 10.4 8.8 +18.2% Total Revenues 1,425.1 1,075.7 +32.5% Net change in reserves (1,071.5) (767.8) +39.6% A
Slide 11: Net Inflows; Sales Network
Consolidated Net Inflows 18 € mn H1 04 H1 03 Change Life policies 739.2 529.4 +39.6% Mutual funds & managed accounts 279.8 552.3 -49.3% Managed Savings 1,019.0 1,081.7 -5.8% Administered Savings 28.7 224.2 n.s. NET INFLOWS 1,047.7 1,305.8 -19.8% Sales Network 19 H1 04 H1 03 Change Italy: Banca Medio
Slide 12: Core Business Net Profit
Core Business 20 H1 2004 Reclassified Results Core Business Net Profit 21 € mn H1 04 H1 03 Change Total revenues 1,351.5 1,020.9 +32.4% Profit before Tax & E.I. 119.8 98.4 +21.7% Extraordinary items 0.3 (5.2) n.s. Profit before Tax 120.1 93.2 +28.9% Tax (27.5) (19.1) +44.0% NET PROFIT 92.6 74.1 +25.
Slide 13: Core Business Net Inflows
Core Business Performance Factors 22 9 Solid gross inflows in life businesses Strong commission income, with a solid 9 contribution coming from management fees Net Inflows 23 € mn H1 04 H1 03 Change Life policies 693.1 498.7 +39.0% Mutual funds & managed accounts 75.8 319.5 -76.3% Managed Savings 76
Slide 14: Assets under Administration; Life Reserves
Core Business Assets under Administration 24 € mn H1 04 H1 03 Change Life reserves 9,370.6 7,366.9 +27.2% Mutual funds & managed accounts 10,812.0 9,090.3 +18.9% Institutional assets 162.9 164.8 -1.2% Consolidation adjustments (4,253.9) (3,257.0) +30.6% Managed Savings Assets 16,091.6 13,365.0 +20.4
Slide 15: Life Reserves Trend; Mutual Funds & M.A. Assets
Core Business Life Reserves Trend 26 € bn Decline in 9 traditional reserves sensitive to low interest rates 4.1 3.6 Guarantees relate 9 1.9 3.0 only to traditional 1.8 1.4 1.6 2.3 2.6 reserves: 1.1 13% of Life assets 0.8 0.6 0.5 1.2 1.7 2.2 2.6 0.01 2.7 4.1 2.7 3.6 2.8 3.1 Unit & Index-linked 9 85%
Slide 16: Mutual Funds Assets by Location; Bank Deposits
Core Business Mutual Funds Assets by Location 28 as at 30/06/04 Ireland 82% Italy 18% Bank Deposits 29 € mn H1 04 H1 03 Change Cash under deposit 2,602.2 2,779.4 -6.4% Securities under deposit 1,744.8 2,033.1 -14.2% Repurchase agreements 145.7 340.9 -57.3% Subordinated loans 10.3 16.5 -37.6% BANK DE
Slide 17: Gross Premiums Written; Recurring Policies in Detail
Core Business Gross Premiums Written 30 € mn H1 04 H1 03 Change U-L Pension plans 30.5 43.8 -30.4% Pension plans: automatic increase in premiums* 15.0 13.0 +15.4% U-L Investment policies (Life Funds) 43.9 12.0 +265.8% Recurring Policies (AP) 89.4 68.8 +29.9% Trad/Group/Investment policies 4.9 5.4 -9
Slide 18: Gross Inflows into Retail Mutual Funds; Bank Accounts
Core Business Gross Inflows into Retail Mutual 32 Funds & Managed Accounts € mn H1 04 H1 03 Change Equity funds 244.7 220.6 +10.9% Bond funds 122.1 158.0 -22.7% Monetary funds 253.5 241.4 +5.0% Total "unbundled" mutual funds 620.3 620.0 +0.1% '"Elite" fund of funds 32.0 0.0 n.s. o/w equity 21.8 0.0
Slide 19: Primary Account Holders; Total Account Holders
Core Business Primary Account Holders 34 H1 04 H1 03 Change Life 592,800 559,900 +5.9% Mutual funds & managed accounts 284,400 286,100 -0.6% Bank 301,000 298,800 +0.7% Other 61,800 62,600 -1.3% Unduplicated Primary Account Holders 782,000 766,000 +2.1% Total Account Holders 35 H1 04 H1 03 Change Lif
Slide 20: Sales Network; Total Revenues
Core Business Sales Network 36 H1 04 H1 03 Change Licensed Financial Advisors 4,055 4,130 -1.8% Non-Licensed Financial Advisors 803 725 +10.8% Banca Mediolanum 4,858 4,855 +0.1% o/w financial executives 777 845 -8.0% Partner Time 939 1,167 -19.5% TOTAL NETWORK 5,797 6,022 -3.7% Total Revenues 37 € m
Slide 21: Adjusted Premium Income; Commission Income
Core Business Adjusted Premium Income 38 € mn H1 04 H1 03 Change Recurring policies* 74.4 55.8 +33.3% Single premium policies x 1/10 67.1 42.9 +56.2% NEW BUSINESS APE* 141.5 98.7 +43.3% * excluding automatic increases in premiums Commission Income 39 € mn H1 04 H1 03 Change Entry fees 13.7 14.5 -5.5
Slide 22: Commission Income by Location; Bank Revenues
Core Business Commission Income by Location 40 as at 30/06/2004 Management Entry 53% 5% Performance 3% Management 8% Entry 5% Performance 26% Italy Ireland 16% 84% Bank Revenues 41 € mn H1 04 H1 03 Change Interest Spread 25.1 31.8 -21.1% Securities 6.4 8.3 -22.9% Service fees on managed accounts 10.
Slide 23: Claims, Benefits Paid and Change in Reserves; Surrenders
Core Business Claims, Benefits Paid & 42 Change in Reserves € mn H1 04 H1 03 Change Claims & maturities 229.6 158.3 +45.0% Natural surrenders 193.1 89.6 +115.5% Surrenders from transformation 40.0 109.7 -63.5% Benefits Paid 462.7 357.6 +29.4% Change in Reserves 567.8 385.0 +47.5% Recovery from reins
Slide 24: Surrenders of Investment Policies and Pension Plans
Core Business Surrenders of Investment 44 Policies € mn H1 04 H1 03 Change Surrenders of Traditional invest. pol. 23.1 35.9 -35.7% % of reserves 11.2% 14.3% -21.7% o/w Natural Surrenders 19.5 18.5 +5.4% % of reserves 9.4% 7.1% +32.4% Surrenders of Unit-linked invest. pol. 53.6 30.2 +77.5% % of reser
Slide 25: Costs; Net Investment Income
Core Business Costs 46 € mn H1 04 H1 03 Change Net claims, benefits paid, changes in reserves 1,026.4 740.3 +38.6% Acquisition costs (commission expense) 97.3 87.3 +11.5% G&A expenses 95.1 88.0 +8.1% Advertising expenses 2.6 2.5 +4.0% Depreciation & provisions 14.7 24.3 -39.5% Net Investment Income
Slide 26: Profit by Business Line
Core Business Profit by Business Line 48 € mn H1 04 H1 03 Change Life insurance 58.2 48.3 +20.5% Mutual funds 36.8 23.9 +54.0% Bank business 24.5 27.9 -12.3% Other operations 0.3 (1.7) -116.5% PROFIT BEFORE TAX & E.I. 119.8 98.4 +21.7%
Slide 27: New Ventures Net Profit
New Ventures 49 H1 2004 Reclassified Results New Ventures Net Profit 50 € mn H1 04 H1 03 Change Spain 1.4 0.1 n.s. Germany: Gamax 0.8 (0.7) n.s. Germany: B.A. Lenz (5.5) (3.9) +41.0% Banca Esperia 0.9 (1.6) n.s. Mediolanum Private & Others (0.7) (0.4) n.s. NET PROFIT/LOSS (3.1) (6.4) -52.4%
Slide 28: Net Consolidated Effect; Spain Net Profit
New Ventures Net Consolidated Effect 51 € mn H1 04 H1 03 Change Net profit/loss (3.1) (6.4) -52.4% Goodwill amortisation (10.1) (10.1) +0.0% Interest paid on investments (2.6) (2.8) -7.1% NET CONSOLIDATED EFFECT (15.8) (19.3) -18.5% Spain Net Profit 52 € mn H1 04 H1 03 Change Total revenues 73.2 52.
Slide 29: Spain Net Effect; Spain Embedded Value
New Ventures Spain Net Effect 53 € mn H1 04 H1 03 Change Net profit/loss 1.4 0.1 n.s. Goodwill amortisation (6.8) (6.8) +0.0% Interest paid on investments (1.5) (1.7) -11.8% SPAIN NET EFFECT (6.9) (8.4) -17.7% Spain Embedded Value* 54 € mn H1 04 FY 03 In-force Value Life & Mutual Funds 20 16 New Bus
Slide 30: Spain Sales Network; Spain Gross Inflows
New Ventures Spain Sales Network 55 H1 04 H1 03 Change Financial Advisors (Mediolanum model) 407 260 +56.5% Commercial Agents & Employees (Traditional model) 62 77 -19.5% Part-time Agents 99 68 +45.6% SPAIN TOTAL NETWORK 568 405 +40.2% Spain Gross Inflows 56 € mn H1 04 H1 03 Change Gross Premiums wr
Slide 31: Spain Net Inflows; Spain Assets under Administration
New Ventures Spain Net Inflows 57 € mn H1 04 H1 03 Change Life policies 41.0 29.1 +40.9% Mutual funds & managed accounts (24.9) 51.0 -148.8% Managed Savings 16.1 80.1 -79.9% Securities 10.6 67.1 -84.2% Cash (15.6) (43.7) -64.3% Administered Savings (5.0) 23.4 n.s. SPAIN NET INFLOWS 11.1 103.5 -89.3%
Slide 32: Gamax Highlights; B.A. Lenz Highlights
New Ventures Gamax Highlights 59 € mn H1 04 H1 03 Change Net profit/loss 0.8 (0.7) n.s. Assets under Administration 419.8 420.1 -0.1% Gross inflows 56.2 55.1 +2.0% Net inflows (24.9) (8.0) +211.3% B.A. Lenz Highlights 60 € mn H1 04 H1 03 Change Net profit/loss (5.5) (3.9) n.s. Assets under Administr
Slide 33: Banca Esperia Highlights
New Ventures Banca Esperia Highlights 61 (100%) € mn H1 04 H1 03 Change Net profit/loss 1.8 (3.3) n.s. o/w Mediolanum share (48.5%) 0.9 (1.6) n.s. Assets under Administration 3,709.0 2,454.2 +51.1% % in Managed Savings 82.8% 81.7% +1.3% Net inflows 570.0 481.3 +18.4% o/w Managed Savings 528.0 385.3
Slide 34: Embedded Value Growth (post-acquisition effect)
Embedded Value 62 H1 2004 Reclassified Results Embedded Value Embedded Value Growth 63 Post-acquisition Effect* € mn +7% 2,166* Value of in-force 2,029* +15% business +12% 1,881* 1,816* 1,768* Adjusted 1,373 shareholders equity 1,496* VIF Life 1,283 362 VIF Funds & M.A. 707 745 595 484 535 431 94 95
Slide 35: Embedded Value Growth; EV Economic Assumptions
Embedded Value Embedded Value Growth 64 Pre-acquisition Effect* € mn +6% 2,295* 2,166* +13% Value of in-force 2,028* 1,972*+10% business 1,917* Adjusted 1,373 1,588* VIF Life shareholders equity 1,283 362 VIF Funds & M.A. 707 745 595 484 535 560 94 95 96 97 98 99 00 01 02 03 H103 H104 * before exclu
Slide 36: Embedded Value Earnings; Earnings Components
Embedded Value Embedded Value Earnings 66 € mn H1 04 H1 03 Change Change over period 129 56 +130% Dividends paid 80 72 +11% Goodwill amortisation - New Ventures 10 9 +1% EV Earnings Pre-Acquisition Effect 219 137 +60% (before excluding residual NV goodwill) Goodwill Increase over the period (2) ---
Slide 37: EV Experience Variances; Value-Added New Business
Embedded Value EV Earnings on Initial EV: 68 Experience Variances in detail € mn H1 04 H1 03 Investment return variance on NAV 26 (19) Asset mix variance 37 35 Performance fees variance 23 22 Persistency/paid-up variance (16) (1) Bank net profit/loss variance (excl MA) 1 4 Other operations net profi
Slide 38: 2004 – Upcoming Activities
Activities 70 2004 – Upcoming Activities Product Development 71 Innovation Mediolanum traditionally the “product innovator” in the Italian market ; September 2004 First Insurance products in Italy bringing Hedge Funds to the mass market
Slide 39: Product Development: Innovation and Responsiveness
Activities Product Development: Innovation 72 New Insurance Products 9 DiPiù Alternative: index-linked policy principal-protected product investing in ”funds of hedge funds” 6 & 9 year maturities 9 Mediolanum Alternative Funds: unit-linked investment policy offers the choice among 3 differ
Slide 40: Product Responsiveness; Focus on Affluent Segment
Activities Product Development – Responsiveness 74 New Fee structure on Italy-based funds 9 We changed Performance fee calculation method drastically according to new regulations 9 We increased Management fees to offset performance fees reduction, as our TER is lower than the market average ; Neut
Slide 41: 2004 – Key Business Priorities
Activities 2004 – Key Business Priorities 76 9 Recovery of Volumes: aggressively grow the life insurance business market behavior determining factor in mutual funds business growth 9 Recruitment of Advisors: planning a major effort in September/October 9 Resurgence of the Current Accounts: p