Slide 1: European Embedded Value 2010
European Embedded Value 2010 22nd July 2011 No. 2011 – 13
Slide 2: European Embedded Value analysis
European Embedded Value analysis Towers Watson opinion letter Methodological appendix Statistical appendix Glossary 2 No. 2011 - 13
Slide 3: Executive summary
Executive summary Summary of the development of the EEV in 2010 Change vs. 2009: (1) w/ additions w/o additions Value of In-force Business (VIF) 1,713.1 +15.9% +0.9% (2) European Embedded Value (EEV ) 2,490.5 +7.9% +2.8% Return on Embedded Value (RoEV) 4.9% -14.4p.p -14.4p.p Present Value of New Bus
Slide 4: EEV components
EEV components ANAV Adjusted Net Asset Value Present value of the in-force business, after tax, discounted using the risk-free PVIF yield curve TVFOGs Time value of embedded financial options and guarantees CoC Cost of capital European Embedded Value European Embedded Value analysis 4 No. 20
Slide 5: EEV components and their variation in 2010
EEV components and their variation in 2010(1) EEV 2009 EEV 2010 1,984.9 1,718.7 266.2 (24.8) 2,490.5 (6.8) 2,309.2 (227.7) (44.1) 181.3 (202.9) (37.3) 830.7 (53.3) 777.4 ANAV 2009 PVIF CoC TVFOGs EEV 2009 ANAV 2010 PVIFs CoC TVFOGs EEV 2010 EEV 2009 and 2010 Value in 2009 Changes in 2010 Million Eur
Slide 6: Breakdown of 2010 EEV
Breakdown of 2010 EEV(1) By business line By distribution channel € mill. % Var. % € mill. % Var. % Adjusted Net Asset Value 777.4 31.2% -6.4% Adjusted Net Asset Value 777.4 31.2% -6.4% Net PVIF(2) - Life Assurance(3) 1,371.0 55.0% 18.0% Net PVIF - Agents' channel 842.6 33.8% -8.6% - PVIF 1,580.4 63
Slide 7: Minority interests in the VIF for 2010
Minority interests in the VIF for 2010 Breakdown of MAPFRE’s 2010 VIF 1,757.2 1,713.1 (44.1) 1,262.0 (451.1) Aggregate PVIF pre- TVFOGs Aggregate VIF post- Minority interests VIF attributable to TVFOGs TVFOGs MAPFRE S.A. Million Euros European Embedded Value analysis 7 No. 2011 - 13
Slide 8: Value added in 2010
Value added in 2010(1) Change in Embedded Value 466.6 (2) 202.0 80.4 (73.0) (6.9) 121.3 41.2 (350.2) (97.6) (81.2) 2,490.5 2,309.2 RoEV(3) = 4.9% 2009 EEV Changes in Additions Variation in Changes in Expected Value added Deviation Change in Value added in Dividends paid 2010 EEV model intangible ass
Slide 9: Analysis of the main variations in EEV
Analysis of the main variations in EEV The increase in the embedded value reflects primarily the following: Change Description Changes in model Positive impact of the updating of the databases used for Life Assurance Additions and variation in The 2010 EEV includes the figures for CATALUNYACAI
Slide 10: Analysis of the main variations in EEV (contd.)
Analysis of the main variations in EEV (contd.) Change Description Includes primarily the impact of the unwinding of the discount rate, which amounted to €39 million, and the actual after-tax investment return on the Expected return beginning-of-the-year adjusted net asset value, net of the cost o
Slide 11: Value added by new business
Value added by new business Development of the value added Main changes 6.0% 5.6% 1 Growing contribution of Life-Protection business ▲ 5.6% 5.4% 2 Moderate decrease in new business volume ▼ 220.6 209.9 3 Increase in acquisition expenses ▼ 4 Greater relative weight of unit-linked products ▼ 2009 2010
Slide 12: Sensitivity analysis of the value of in-force business
Sensitivity analysis of the value of in-force business(1) Variation in VIF Resulting Value € million 100bp increase in interest rates -91.9 1,621.2 10% decrease in the value of stocks and real estate -17.7 1,695.4 10% decrease in expenses 27.3 1,740.4 Base scenario: €1,713.1 million 10% decrease in
Slide 13: Sensitivity analysis of the value added by new business
Sensitivity analysis of the value added by new business Variation in the value added by new business Resulting Value € million 100bp increase in 204.0 -16.6 interest rates 10% decrease in the value of 0.0 220.6 stocks and real estate Base scenario: €220.6 10% decrease in expenses 3.2 223.8 million 1
Slide 14: European Embedded Value analysis
European Embedded Value analysis Towers Watson opinion letter Methodological appendix Statistical appendix Glossary 14 No. 2011 - 13
Slide 15: Towers Watson opinion letter
Towers Watson opinion letter Towers Watson opinion letter 15 No. 2011 - 13
Slide 16: European Embedded Value analysis
European Embedded Value analysis Towers Watson opinion letter Methodological appendix Statistical appendix Glossary 16 No. 2011 - 13
Slide 17: Covered business
Covered business The 2010 embedded value was calculated for the following blocks of business: – Life assurance (including complementary) and accidental death insurance businesses of MAPFRE VIDA, sold through the agents channel – Life assurance (including complementary) and accidental death insuran
Slide 18: Methodology
Methodology The embedded value of the life assurance, accidental death insurance, mutual funds and pension funds businesses includes the adjusted net asset value and the value of in-force business, defined as follows: - Embedded value = Adjusted Net Asset Value + Value of In-Force Business - Adjus
Slide 19: Methodology (contd.)
Methodology (contd.) Credit risk allowance: – In 2010, Spanish government bonds have experienced a widening of spreads (vs. the swap curve) of around 175 basis points. In our opinion, this reflects the uncertainty concerning Spain’s economic development, but not a structural problem with the credi
Slide 20: Methodology (contd.)
Methodology (contd.) TVFOGs: – Under EEVP, FOGs (Financial Options and Guarantees) are defined as those features of the covered business conferring potentially valuable guarantees underlying, or options to change, the level or nature of policyholders’ benefits and exercisable at the discretion of
Slide 21: Methodology (contd.)
Methodology (contd.) CoC: – In line with market practices, the CoC used in the calculation of the 2010 EEV was measured by applying a 4% fixed rate to the minimum required solvency margin. – This represents an allowance for frictional costs, non-hedgeable risk as well as unexpected credit risk whi
Slide 22: Methodology (contd.)
Methodology (contd.) With-profits business: – MAPFRE’s with-profits in-force business comprises products with the following features that are common in the Spanish insurance market: • A minimum return guarantee, ranging between 2.25% and 6% in the case of MAPFRE. • A profit-sharing mechanism defin
Slide 23: Methodology (contd.)
Methodology (contd.) Look through EEVP: – In order to assign correctly revenues and expenses to the businesses that generate them and measure the value of each block of business more consistently with its economic reality, the following adjustments were made: • The mutual funds business, as well a
Slide 24: Methodology (contd.)
Methodology (contd.) Value added by new business: – In Life assurance, new business is defined as single, extraordinary and regular premiums written in the year, as well as extraordinary contributions to existing policies. In the mutual funds business, new business is defined as new contributions.
Slide 25: Assumptions
Assumptions 2010 EEV 2009 EEV Discount rate Euroswap zero-coupon curve as at 31/12/2010 Euroswap zero-coupon curve as at 31/12/2009 1 year 1.31% 1 year 1.31% 5 years 2.59% 5 years 2.84% 10 years 3.47% 10 years 3.69% 15 years 3.78% 15 years 4.13% Financial returns 20 years 3.82% 20 years 4.23% -Exist
Slide 26: European Embedded Value analysis
European Embedded Value analysis Towers Watson opinion letter Methodological appendix Statistical appendix Glossary 26 No. 2011 - 13
Slide 27: Breakdown of the value added by new business
Breakdown of the value added by new business Breakdown by business line (1) (2) PVNBI VNB VNB/PVNBI 2010 2009 2010 2009 2010 2009 Life assurance: 3,021.3 2,459.2 208.7 186.2 6.9% 7.6% - Agents channel 731.6 1,186.7 34.9 52.6 4.8% 4.4% - Bank channel 2,289.7 1,272.5 173.8 133.6 7.6% 10.5% Mutual Fund
Slide 28: Breakdown of 2010 change in EEV between ANAV and value of in-force business
Breakdown of 2010 change in EEV between ANAV and value of in-force business(1) (1) ANAV Value of In-force business TOTAL 2009 EEV 830.7 1,478.5 2,309.2 Changes in assumptions 0.0 -81.2 -81.2 Expected return 227.5 -147.1 80.4 (2) Value added by new business -64.2 266.2 202.0 Deviation of actual value
Slide 29: Breakdown of the sensitivity analysis
Breakdown of the sensitivity analysis Sensitivity of the value of in-force business (1) MAPFRE VIDA Bank channels - Other Impact of: - 100bp increase in interest rates -48.3 -43.6 - 10% decrease in equity and property values -17.6 -0.1 - 10% decrease in expenses 17.2 10.1 - 10% decrease in the lapse
Slide 30: MAPFRE VIDA: Reconciliation to adjusted net asset value
MAPFRE VIDA: Reconciliation to adjusted net asset value Consolidated net assets for MAPFRE VIDA as at 31/12/10 (IFRS) 792.4 Unrealised gains 88.9 - of which: property 35.0 - of which: financial assets 53.9 Donations and dividends 0.0 Intangible assets -516.9 Commissions and other acquisition costs n
Slide 31: Units and operating companies included in the 2010 EEV
Units and operating companies included in the 2010 EEV MAPFRE VIDA(1) OTHER BANK CHANNELS(2) 2010 2009 2010 2009 Adjusted Net Asset Value 366.0 680.7 Adjusted Net Asset Value 411.4 150.0 Net PVIF - Life Assurance 814.3 833.6 Net PVIF - Life Assurance 556.7 328.5 - PVIF 987.1 1,009.3 - PVIF 593.3 343
Slide 32: EEV 2010 MAPFRE S.A.
EEV 2010 MAPFRE S.A. Aggregate(1) 2010 2009 Adjusted Net Asset Value 777.4 830.7 Net PVIF - Life Assurance 1,371.0 1,162.1 - PVIF 1,580.4 1,352.4 - CoC (209.4) (190.3) Net PVIF - Mutual Funds 108.1 154.0 - PVIF 109.4 155.7 - CoC (1.3) (1.7) Net PVIF- Pension Funds 278.1 199.7 - PVIF 295.1 210.6 - Co
Slide 33: Share of the parent company in the EEV
Share of the parent company in the EEV MAPFRE Controlling stake Shareholder Minorities ANAV MAPFRE VIDA 100.0% 366.0 0.0 (1) OTHER BANK CHANNELS 50.0% 205.7 205.7 AGGREGATE TOTAL 571.7 205.7 NET PVIF MAPFRE VIDA - AGENTS CHANNEL 100.0% 842.6 0.0 MAPFRE VIDA - CAJA MADRID CHANNEL 51.0% 127.9 122.9 (1
Slide 34: European Embedded Value analysis
European Embedded Value analysis Towers Watson opinion letter Methodological appendix Statistical appendix Glossary 34 No. 2011 - 13
Slide 35: Glossary
Glossary The European Embedded Value Principles or “EEVP” are the principles that establish the methodology that must be applied in order to calculate the European Embedded Value. The EEVP were agreed upon by the CFOs of the multinational European insurers belonging to the “CFO Forum” in order to
Slide 36: Glossary
Glossary The Cost of Capital or “CoC” represents an allowance for frictional costs, non-hedgeable risk as well as unexpected credit risk which has not been considered in the value of in-force business. The CoC used in the calculation of the 2010 EEV was measured on the basis of an amount of capita
Slide 37: Glossary
Glossary New Business is defined as: in the case of Life assurance, single, extraordinary and regular premiums from policies written in the year, as well as extraordinary contributions to existing policies; in the case of Mutual Funds, new contributions; in the case of Pension Funds, single, extra
Slide 38: Disclaimer
Disclaimer This document is purely informative. Its content does not constitute, nor can it be interpreted as, an offer or an invitation to sell, exchange or buy, and it is not binding on the issuer in any way. The information about the plans of the Company, its evolution, its results and its divide