Unfavourable business environment: • Worsening financial crisis, particularly after the summer with the collapse of Lehman Brothers and banking industry bailouts
CNP Assurances’ resilience confirmed: • Partnership in Italy renewed (January) - Distribution agreement with Unicredit extended until 2017 (November)
• Strategic partnership established in Greece and Cyprus with Marfin Popular Bank (July)
• AA rating affirmed by Standard and Poor’s, with a negative outlook (November)
Decline primarily affecting the bancassurance sector Bancassurers down 14% Traditional networks down 4%
Two main factors underlying the 10.6% decline: Competition from easy-access savings products: 5% impact Falling stock markets: 4% impact
Marked increase in new money at the end of the year: up 16.4% in Q4 08 Higher average mathematical reserves: up 5.3% Net new money still positive in France, at €7.3bn (representing 25% market share)
Strong upturn in Q4 08: Consolidated premium income up 16.4% Premium income in France up 24.0%
Others: €4,504.7m: Companies & Local Authorities: €2,045.3m (up 17.6%) Transfer to the Group of supplementary pension institutions’ portfolios Financial Institutions: €1,457.5m (up 4.4%) Mutual insurers: €915.5m (up 7.1%)
Currency effect: the real lost 17% against the euro between end-2007 and end-2008
The 2008 target was met, with recurring net profit before capital gains up 26% to €1,411m. Net profit declined 40% to €731m, reflecting the impact of the financial crisis
A tt ri bu ta bl e to e qu ity h ol de rs
EPS: Recurring profit before capital gains and losses: €9.5/share Reported profit: €4.9/share
Sensitivities: 10% fall in share prices = €234m reduction in attributable net profit and €68m reduction in equity 100-bp increase in interest rates = €11.9m reduction in attributable net profit and €353m reduction in equity
Recurring liabilities: Mathematical reserves by business segment: 3.1%3.0%P. Risk 11.1%10.9%Pensions 85.9%86.0%Savings 31/12/200731/12/2008 31/12/2008 31/12/2007 31/12/2006
- Other movements (portfolio transfers, changes in assumptions, etc. 224 (912)
Mathematical reserves at 31 Dec. (excl. deferred participation) 241,513 102.5% 235,518 217,544
Policyholders’ surplus reserve at 31 December 2008: 1.1% of total mathematical reserves in France (excluding linked liabilities).
19,2%16.5%Annualized recurring ROE after capital gains 7,3446,787Average equity, excl. AFS & deeply-subordinated debt 1,4111,120Recurring profit 31/12/200831/12/2007 8.5%13.9%Annualized book ROE
Equity hedges: partial hedging to limit the effect on profit of a sharp drop in stock prices.
Interest rate hedges: €35.5bn in hedges against a sharp rise in rates: 5 and 10-year caps
Impacts: Madoff: no direct investment. A few funds exposed, leading to lower-thanexpected performance. No unrealised losses. Lehman Brothers: approximately €200m split between AFS and trading
After shadow accounting adjustments: €(47)m before tax: • €(6)m impact on profit • €(41)m impact on equity
Deferred participation asset reduced to €0.8bn at 31 December 2008 from €1.5bn at 30 June 2008
• Reduction in unrealised losses to be carried forward Bonds: decline in interest rates at end-2008 restored part of the capital gains on the bond portfolio
surplus reserve - deferred participation asset) to economic value of commitment to policyholders
CNP’s capacity to record a deferred participation asset: Low proportion of contracts with high guaranteed yields Significant proportion of losses concern bonds which the Group has the ability to hold to maturity Taken into account in surrender tests (surrenders following a fall in policyholder yields compared with prior periods and with market yields) Availability of a policyholders’ surplus reserve (1.1% x mathematical reserves excluding linked liabilities)
If the EEV method used in 2007 had been applied at 31 December 2008, this would have resulted in an embedded value figure comparable to that obtained using the MCEV method
Frictional cost of capital and cost of residual non hedgeable risks
Other items contributing to MCEV of €10,440m: Adjusted exchange rates (negative impact of €151m) Marfin acquisition
VIF outside France held up well, led by 10% growth in Brazil
France: APE down in a sharply slowing market. The NBV calculation does not include group pensions portfolios transferred from supplementary pension institutions
Italy: APE down 29%, reflecting the fall in the Italian market. Unit-linked sales - representing a core business for CNP Vita - were badly hit by the financial crisis
Brazil: fall in APE mainly due to unfavourable currency effect. At constant exchange rates, APE was up 8%. It has been converted into euros at the 31 December 2008 exchange rate. The decline in APE vs. the increase in IFRS premium income is also due to the fact that the Consorcio business is included in the APE calculation but not in the calculation of premium income under IFRS
The fall in APE ratio was mainly due to the lower proportion of unit-linked contracts 0.4620.464o/w Brazil 0.2260.117o/w Italy €m €/share€m€/share 2.33411.8o/w France 430New Business Value
This effect was partly offset by more favourable experience adjustments – the average duration of loan insurance contracts was longer, the portfolio was refreshed and costs were kept under control
Changes in product mix in 2008 reflected the complete overhaul of the product line-up following renegotiation of the agreements with Unicredit and slower unit-linked sales
Exchange rate changes reduced new business value by €16m but had no impact on the APE ratio.
Solvency margin based on equity and subordinated debt stable (1.17x in 2007)
Intangible assets at around 8% of net assets, significantly below the industry average
Subordinate debt maturities: In 2008, CNP Vita: €45m (repaid over 5 years) In 2009, CNP Assurances: €403m (repaid over 5 years) These debt issues are not included in solvency capital under Solvency I
The Business Plan is based on CNP Assurances’ core strengths: • High proportion of revenue generated by mathematical reserves
Outlook France Life and Pensions Market Affected by the Economic Conditions
The FFSA expects France’s Life and Pensions market to remain stable overall in 2009
The market for risk insurance will continue to grow • Long-term care
Product activity: "Cachemire" • Build on last year’s success • Deploy the offer to a broader customer base
(high net worth + mass affluent) • Encourage more active product promotion (particularly by independent financial advisors)
No mass exodus of Livret A customers • Continued interest in a life insurance offer
Network now fully operational again • Savings Bank mergers completed in 2008
CNP Trésor • Good start to 2009 in terms of new money
• Growth outlook supported by the hiring of new insurance advisors in 2008
• Partnership agreement with Mutualité de la Fonction Publique (civil service mutual) renewed in Q1 2009 for the fourth time in a row
Exclusive distribution agreements with UniCredit extended for three years until 2017
Improved balance between non-unit-linked and unit-linked offerings with the development of UniGarantito: • Unigarantito: the best-selling non-unit-linked product in the range
Cost saving plan to be launched in 2009: • Information system rationalization
November 2008: marketing initiave to protect the savings of customers holding Index-Linked policies based on Lehman Brothers bonds. These customers were offered two options: Conversion: transfer to a non-unit-linked product invested in a basket of zero coupon bonds, with a 3 1/2 year maturity for the most part Cash: immediate payment of 50% of the initial premium, and ultimately any recovery of the Lehman Brothers bonds
There are nevertheless some areas of uncertainty: • Exchange rates: a hedging strategy has been implemented to protect profits
Brazil: Continued Excellent Outlook in an Environment Shared by the Global Crisis
Acquisition price :€145m + €20m earn-out 10-year exclusive distribution agreement with a rollover option
DJ Insurance dec 07 jan 08 febr 08 mar 08 apr 08 may 08 jun 08 jul 08 aug 08 sept 08 oct 08 nov 08 dec 08 jan 09 febr 09