Slovakia: Life business after Crisis
Central European L&H Leadership Forum, Radisson BLU Palais, Vienna

Torsten Leue May 11, 2010

New reality crashed into the old plans
Slovakia: GDP development

old plan
+15%

+10%

past development

+5%

W -NE OLD LITY R EA GAP

+0%

-5%

new reality
2004 2005 2006 2007 2008 2009 2010 2011 2012
2

Data source: Slovak Statistics Office, Allianz – Slovenská poisťovňa
Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010

Q4-2007

Q1-2009

Regular Life business a bit below 2006
Slovakia: New Business
(mn €)

New Business: Single vs. Regular

500 NB mn € 400 300 200 100 0
44% 56% 38% 62% 45% 55% 58%

42%

Q4-2006

Q4-2007
Regular

Q4-2008
Single

Q4-2009

Share of Single gets higher consequence Life duration gets shorter
Data source: Slovak Insurance Association
Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010 3

Share of Traditional business grows
Slovakia: Premiums of UL, Traditional and Riders
(mn €)

1 200 1 000 GWP mn € 800 600 400 200 0 53% 36% 11%

Premiums of UL, TR and RI
10% 33% 12% 30%

57%

58%

2 007 Traditional

2 008 Unit-linked Riders

2 009

Value creation mainly out of riders
Data source: Slovak Insurance Association
Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010 4

Insurance business under high pressure
Capital Markets
Low interest rates Pressure

Clients & Sales Force
Low prices, High commissions, Cancellations & Frauds

Pressure

Company margins

Pressure

ShareHolders
Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010

Pressure

Return on Capital

Fair value approach, Solvency II & MiFID

Regulator
5

Warren Buffet: Crisis

„When the tide is coming than it can be seen who wears underpants.“
Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010 6

Share of Loss-makers increased to 43%
Life companies in Slovakia
Result (P/L) [mn €] 25,0 20,0

Total Result (Profits & Losses)

-21%
15,0 10,0 5,0 0,0 -5,0 -10,0 -15,0

20,2 15,8 Total Result (P/L) Total Result just of Lossmakers
% of Loss-makers

-7,7 -11,6

29% 43%

2007

2009

Decreasing Total Result (P/L) of Life insurers Increasing portion of Loss-makers among Life insurers
Data source: Slovak Insurance Association
Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010 7

Good old proprietary networks „en vogue“
Distribution Channel Old reality New reality

Composite net

Specialized Life net

Bancassurance

Brokers

Direct
Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010 8

Life business will follow the slow recovery in economy

+15% +10% +5% +0% -5%

fast growth

sudden drop

slow recovery

2005

2010

2015

Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010

9

Demographical problem more significant in Slovakia
Age structure in 2000 vs. 2050 in 2000 in 2050

SLOVAK REPUBLIC MEN

oldest
85+ 80 - 84 75 - 79 70 - 74 65 - 69 60 - 64 55 - 59 50 - 54 45 - 49 40 - 44 35 - 39 30 - 34 25 - 29 20 - 24 15 - 19 10 - 14 5-9 0-4

OECD SK WOMEN2050 2050

SK 2000
,2 ,4 ,6 ,8 ,10

,10

,8

,6

,4

,2

youngest,0 ,0

in 2000: 5,4 Total population (in millions) in 2050: 4,9 in 2000: 19 Old age dependency ratio (65+ in % 20-64) in 2050: 57 Population by age group, gender, in 2000 and 2050, in percentage of total population in each group

Slovakia: 0,8 young* / 1 old** in 2000 3,6 2050
** old = people 70 and above

vs. OECD: 0,8 young* // 1 old** in 2050 vs. 1,1 young* 1 old** in 2050
* young = people below 20 years
Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010 10

Gap to OECD is significant
(Premiums in € / Population)

1500 1250 1000 750 500 250 0
40 49

Density

Almost 1,3 thd € per capita GAP

1265 861 961 1020 1063

759

770

67 2003*

84 2004

102 2005*

120 2006

161 2007

2001

2002

Slovak Republic

GAP of Slovakia to OECD

Gap of per capita premium in Slovakia vs. OECD still high and growing!
* Estimate for Slovakia (2003 and 2005 data for Slovakia not available) Data source: OECD
Torsten Leue ● Slovakia: Life Business after Crisis May 11, 2010 11
EUR 1 = USD 1,3256 (29 April 2010)