9 months 2005 - CNP Assurances

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Feb 17, 2014 (3 years and 8 months ago)

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1

CNP Assurances
-

December 2005

Managing the product range

and the financial risk




December 2005

France’s leading

personal insurer

CNP Assurances

2

CNP Assurances
-

December 2005

1. Managing the product range


CNP’s business model


Sales strategy



2. Taking into account the financial risk


Longevity


Pricing


Interest rates

OVERVIEW

3

CNP Assurances
-

December 2005


France’s leading personal insurer


17.0 %* share of the personal insurance market in 2004


18.0 %* share of the life / savings market in 2004


14 million clients


12 million individual insurance contracts


A
comprehensive

range of personal insurance products


Extensive distribution network for individual insurance


More than 20,000 sales outlet
s

in France


Long
-
term agreements


Significant group insurance activity


Close to 40 % share of the
loan insurance

market **



Measured international development


Brazil, Portugal, Argentina, local bases in Europe


Recent acquisition in Italy

FFSA estimates : *July 2005, ** June 2004

Company profile

4

CNP Assurances
-

December 2005

Public

State

1%

CDC

AAA

26%

37%

Caisses d'Epargne


AA

La Poste


AA state
-
owned institution

18%

18%

Relations between CNP Assurances shareholders continue to be
governed by the shareholders' pact (through 31 Dec. 2008)

Ownership Structure

Institutional shareholders

22.3%


of which


USA


7.0 %



France


6.5 %

UK


5.8 %


Germany

1.2 %


Private shareholders

3.7%

5

CNP Assurances
-

December 2005


Individual insurance : bancassurance through two major networks


French Post Office


Savings Banks


a CNP salesforce : CNP Trésor



Group insurance : traditional distribution through business
-
to
-
business
partnerships

CNP

Other

ALM

management

Fund selection

Asset management


Financial management

Policy management

Needs analysis

Development

of the offer

Marketing

initiatives

Distribution

Product offering

Sales

Underwriting

Events in

life of policy

Claims

management

Business Model

6

CNP Assurances
-

December 2005

Breakdown of gross premium income

BY PRODUCT SEGMENT

Loan insurance

Health insurance

Personal risk

Savings

Retirement

BY PARTNER

Caisses d'Epargne *

CNP Trésor

La Poste

Companies and local authorities

Mutual insurers

Financial institutions

Property and casualty

Foreign Subsidiaries

80.1 % Savings

1.0 % P&C

7.0 % Loan insurance

1.0 % Health insurance

4.9 % Personal risk

6.0 % Pensions

33.6 % La Poste

39.1 %

Caisses

d’épargne*

3.1 % CNP Trésor

4.4 % Financial inst.

2.6 % Mutual insurers

5.2 % Companies and

local authorities

11.6 % Foreign subsidiaries

9 months 2005 (IFRS)

* including loan insurance

7

CNP Assurances
-

December 2005

Individual insurance : stronger ties with business partners


Commercial partners are also CNP shareholders


Common subsidiaries


Long term agreements (from 5 to 10 years)


Share of the commissions charged on premiums and on managed
assets


Common sales policy and constantly updated product ranges


Shared information systems, tailored to partners' specific needs

8

CNP Assurances
-

December 2005

Individual insurance : La Poste network


Long term distribution agreement (11 years until December 2009)


Setting up of CNP IT systems in La Poste’s branches


Launch of the Postal Bank in 2006

Partnership structure

Assurposte

18 %

50 %

50 %

Risk products

Loan insurance

17,000 branches

6,000 specialised financial advisers

25 million clients, of which 12 million
active clients, 9% market share in
deposits

CNP policyholders : 3.6m in 2004


123.8m

9 months 2005 total
premiums collected
through la Poste :


6,534.6m (+19.8%)

Sopassure

Savings, pensions

9

CNP Assurances
-

December 2005

Individual insurance : Savings Banks network


Long term distribution agreement (5 years until December 2008)


IT system interconnection project with CNP since 2000


CNCE (Caisse Nationale des Caisses d’Epargne) announced its
ambition to go public

Partnership structure

Ecureuil Vie

18 %

< 50 %

> 50 %

Savings, Pensions

4,700 branches


8 million active clients with banking
products, 12% market share in deposits

CNP policyholders : 3m in 2004

9 months 2005 total
premiums collected


7,611.2m (+12.1%)

Sopassure

Loan insurance

10

CNP Assurances
-

December 2005


CNP Trésor network


Since January 2004, CNP has managed ongoing relations

with insured who purchased their policy via the French Treasury network


Maintain the value of the insurance book and of assets

under management


Offer former French Treasury clients a seamless transition

to CNP Trésor


9 months 2005 :

268 insurance advisors, n
ew money collected :

613m (+37%)










Strategy


Continue to upgrade the Savings offer


Increase contribution to total new money from unit
-
linked business


Improve client segmentation, focus on high
-
end clients

Individual insurance : CNP Trésor salesforce

Premiums

collected

Target


613m

75% of 2003

2005

9m 2005

2004

2003


738m

83 %

of 2003

Exceed 2003

11

CNP Assurances
-

December 2005

Partner networks’ client profile:


Over 20 million clients


Clients profile close to French population

(slightly lower penetration among young workers)


Very highly regarded networks by the French public


CNP Assurances policyholder profile:


Over 6 million policyholders


Relatively low proportion of young people

and seniors


All saving profiles, concentration on average levels


CNP has a high credibility in the long
-
term savings
market and assets and liabilities management

CNP in France : clients profile

0%

5%

10%

15%

20%

25%

30%

18
-
24

25
-
34

35
-
44

45
-
54

55
-
64

65
-
74

>75 years

French life

insurance market

CNP policyholders

0%

5%

10%

15%

20%

French population

Clients of

CNP networks

25%

18
-
24

25
-
34

35
-
44

45
-
54

55
-
64

65
-
74

>75 years

Source : CNP, 2003


Strategy : develop CNP’s client base

(attract younger clients and extend the product range)

12

CNP Assurances
-

December 2005

Commercial strategy and outlook


Leverage the growth potential of CNP’s partner networks


Younger clients


Extend the product range



Extend product ranges


Long
-
term care


Build on success of Protectys Autonomie


High
-
end products


Pensions



Develop higher
-
margin products


Unit
-
linked


Products with insurance risk


Loan insurance


Continued growth in personal risk business

13

CNP Assurances
-

December 2005

Individual insurance : La Poste network

Strategy

30

35

60

45

1998
-
2000

Personal risk

2004

Pension (Life, PERP)

2005/2006

Increase unit
-
linked

2004

Long term care

years

Life insurance

CNP traditional clients

70

Age

14

CNP Assurances
-

December 2005

Individual insurance : Savings Banks network

Strategy

Savings Bank

High
-
end

products

Low
-
end

2005

Nuances Privilège


Nuances Plus

Increase unit
-
linked

2001

Nuances 3D

Increase unit
-
linked

2004

PERP

2005

Ricochet

Life insurance

CNP traditional
clients

Initiatives
Transmission

Monosupport*

* Monosupport
: non unit
-
linked, euro
-
denominated,

as opposite to
multisupport
(combined unit
-
linked / non
-
unit linked)

15

CNP Assurances
-

December 2005

First achievements


Renouvellement du portefeuille


Number of CNP policyholders (épargne, retraite, prévoyance)

through :








Attract younger clients :

average age of the users of new pension
products : 40


Increase share of unit
-
linked in France :

new money collected during
Q3 : + 60 %

3.6 millions

La Poste

network

Savings Banks

network

3.3

2.5

2

2.5

3 millions

2004

2002

1998

16

CNP Assurances
-

December 2005

CNP in 2004


New pension products and PERP offerings launched by CNP and its partner
networks : 500,000 new contracts


PERPs : strategic importance in the positioning of CNP and its partner
networks


Strengthening relationships with 35
-
45 age bracket : average age of subscribers : around 40


No cannibalisation of traditional life insurance : 2/3 of new clients do not have life insurance yet


Impact on profitability should be positive



CNP at 9 months 2005



243m in premiums, of which 161,000 new pension contracts


PERPs:

84m in premiums, of which 65,000 new PERPs (and Solésio Préfon at the French
Post Office)


Launch of PERP 2 at Savings Banks


2005 objective: 300,000 new pension contracts

Attract younger clients:

Launch of new pension products

17

CNP Assurances
-

December 2005

Develop unit
-
linked business in France


Challenge


Enable policyholders to benefit from the market outlook in an environment
of low interest rates


Lower solvency capital


Need for appropriate advice to policyholders


Response


Include unit
-
linked products in certain promotional offers on rates


Leverage the Breton Act (Fourgous amendment)


Strengthen sales force training, setting up of sales force competition


CNP : 3rd quarter unit
-
linked sales in France : + 60 %

Unit
-
linked sales


(French GAAP)

CNP

French

market

2001
-
2004

9 months 2005

+ 10.2 %

-

14%

+ 48 %

stable

18

CNP Assurances
-

December 2005

9 months


2005


524.6

460.2

+14.0%

8.2%

Change

In

m


1,327.8

1,189.6

+11.6%

18.1%

CNP Trésor

80.6 *

33.1

+ 143.5%

13.8%

Total
**

3,513.2

1,803.2

+ 94.8%

20.9%

9 months

2004

% Savings &

Pensions


revenues


*

French Treasury network new money at 9 months 2003:

30m

** Includes unit
-
linked savings products sold via other channels

Fineco Vita

1,525.4

-

-

-

IFRS


3rd quarter unit
-
linked sales in France : + 60 %

Develop unit
-
linked business in France

19

CNP Assurances
-

December 2005

OVERVIEW

1. Managing the product range


CNP’s business model


Sales strategy



2. Taking into account the financial risk


Longevity


Pricing


Interest rates

20

CNP Assurances
-

December 2005

Taking risks into account in the product offering

3 examples


Insurance risks


Longevity risk: how did CNP manage the risk of longevity in
annuity products?


Example : PERPs


Risk of increase in claims: how did CNP manage to adapt its
pricing policy for risk products?


Example: temporarily disability


Financial risks


Interest rates: how did CNP manage the risk of declining
interest rates ?


Example of traditional life insurance: limitation of guaranteed
rates (in duration and level)


Adjusting the investment strategy


Adjusting policyholders’ yield in order to protect the margins


Equity risk : good resistance of CNP share in 2002

21

CNP Assurances
-

December 2005

Insurance risks:

Longevity risk

Longevity risk in pension products (annuities)



Combined Non
-
Unit
-
Linked/Unit
-
Linked PERP: annuity payments
as from retirement


No guarantees on annuities


Longevity calculated using mortality tables applicable when insured
retires



L441 PERP: increased longevity taken into account


Mortality tables by generation

22

CNP Assurances
-

December 2005

Insurance risks:

Risk of increase in claims

Adjusting the pricing policy in risk products :

Temporary disability loss ratios in the mutual insurers and local
authority sectors


2003: higher loss ratios


Termination of 11,000 local authority contracts (with offer of a new
contract)


higher premiums


CNP reimbursement no longer triggered automatically by medical
committee decision


introduction of an excess clause


2004: underwriting profit on local authority business


Adjusting inclusive rate if necessary


Example: most long term care products

23

CNP Assurances
-

December 2005

Risk: asset yield too low to cover yield commitments given to
the insured



In a period of falling interest rates, asset yields decline due to
new investments at the lower rates



Yield commitments given to the insured may be higher



The interest spread can represent a heavy and escalating
burden (if contract allows for top
-
up premiums with the same
guaranteed yield)

Financial risks:

Low interest rates

24

CNP Assurances
-

December 2005

CNP strategy since 1992



Capped yield guarantees


Guaranteed yield capped at 60% of the TME* rate applicable at the
payment date (initial premium, top
-
up premium)



After 8 or 10 years, no yield guarantee

Top
-
up premium

8/10 years

Life of contract

T2

T1

Guaranteed yield = 0%

Initial premium

T2 < 60% TME 2

T1 < 60% TME 1


Guaranteed yield commitments systematically backed by fixed rate
bonds with the same or a longer maturity


Financial risks:

Low interest rates

* TME:
average government bond yield

25

CNP Assurances
-

December 2005


Others
(2)


24,346.6


14.6 %


13,964.3


16.9 %

Total


167,269.0


100.0 %


82,551.1

100.0 %

Breakdown of liabilities by type of contract


Contracts offering guaranteed

rate of return (gr)

0 < gr < 60% TME
(1)


71,112.3

42.5 %

27,516.3

33.3 %


Contracts offering a higher

variable rate of return


2,929.2


1.8 %


3,475.8


4.2 %


Contracts offering a higher

fixed rate of return


7,368.4


4.4 %


28,355.5


34.3 %


Guaranteed rate contracts

including dividends


\
2,468.3

1.5 %


3,277.7


4.0 %

(1) TME : average state bond yield (2) including personal risk, loan insurance, annuities


Contracts offering guaranteed

rate of return (gr) = 0%

42,977.9

25.7 %


4,330.3


5.2 %

At 31 December

2004 (

m)


Breakdown %

At 31 December

1997 (

m)


Breakdown %


Unit
-
linked contracts

sssssdd
16,066.2

9.6 %


1,631

2.0 %


Between 1997 and 2004, CNP's exposure to interest rate risks on its contracts declined significantly, reflecting:


Growth in unit
-
linked business


A sharp decline in the proportion of contracts offering a higher fixed rate of return


The increased proportion of contracts offering a guaranteed rate of return not exceeding 60% of the TME


CNP practice: rate of return guaranteed for 8 or 10 years only, no guarantee beyond this period


These liabilities are matched by assets with similar interest rate profiles and the commitments

are adequately covered by technical reserves

26

CNP Assurances
-

December 2005

..reinvested at 2%

..reinvested at 1%

Guaranteed yield

Highly efficient asset/liability management


Asset yield projected over 10 years with income reinvested in 1% or
2% fixed rate bonds from 2006, assuming flat equities prices


In force business at end
-
2004, surrenders and payments taken into account

Managing sharply falling interest rates

CNP Group on a 100% basis

Asset yield with income:

0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
3,00%
3,50%
4,00%
4,50%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
27

CNP Assurances
-

December 2005

Risk: underperforming assets (paying interest at below current
market rates)


Possible consequences


Policyholders may be temp
ted

to invest in new, higher yield
products


lower premium income from the products concerned


High surrender rates


Sale of assets at a loss


CNP strategy


Increased hedging to cover the risk of interest rate hike in the
long term (

22.5bn at 30 June 2005)


Significant proportion of the portfolio invested in :


Floating rate or indexed bonds (10% of the total bond portfolio)


Structured bonds with floating components

Risk of sharp rise in interest rates

28

CNP Assurances
-

December 2005


A high
-
quality portfolio



In low interest rate environment, new investment in fixed rate bonds
with shorter maturities while preserving asset/liability match


Average maturity of assets is always higher than duration of the
guaranteed rates


At 31 Dec. 2004 : average maturity of assets = 6.72

years (fixed rates > 1 year)



Equities purchases for 12 to 13% of transactions, mainly euro zone



Scale
-
up of private equity funds

Investment strategy

29

CNP Assurances
-

December 2005

Property

4,117

1,441

1,038

2.1%

Carrying amount

30 June 2005

Unrealised

gains

30 June 2005

Unrealised

gains

30 June 2004

Bonds

140,432

12,192

5,820

85.7%

Equities

47,939

4,262

2,039

12.2%

Assets excluding unit
-
linked:

162,806m

Total

192,488

17,895

8,897

100%

In

m


French GAAP

Breakdown

excl. unit
-
linked

Asset values boosted by market recovery

New IFRS classification of assets at 30 June 2005:

214.9bn :

Held
-
to
-
maturity (0.3%), Available
-
for
-
sale (73.6%), Trading (24.9%), Other (investment
property, loans & receivables) (1.2%)

30

CNP Assurances
-

December 2005

Growth of private equity


Over

900m committed in private equity funds at 30 June 2005


Sharp increase in commitments in first half 2005



Diversified portfolio: nearly 80 funds

Mezzanine: 5%


Euro (79%), Dollar (19%), Sterling (2%)

Venture and growth capital: 15%

LBO: 60%

Funds of funds and

Secondary funds: 20%

31

CNP Assurances
-

December 2005

Assessment factors


Accounting and insurance rules governing the treatment of the
effects of falling prices



Contract characteristics


Time frame, surrender option


Is the yield guaranteed or can it be adjusted?



Reserves available to offset the effects of falling prices


Level of unrealised gains


Level of reserves available to smooth the effects (policyholders' surplus
reserves)



Resistance of CNP share during the market crisis


Stable CNP share vs
-

60% for DJ Eurostoxx Insurance

Equity risk

32

CNP Assurances
-

December 2005

Disclaimer


“Some of the statements contained in this document may be forward
-
looking statements
referring to projections, future events, trends or objectives which, by their very nature,
involve inherent risks and uncertainties. Actual results could differ materially from those
currently anticipated in such statements by reason of factors such as changes in general
economic conditions and conditions in the financial markets, legal or regulatory decisions

or changes, changes in the frequency and amount of insured claims, particularly as a result
of changes in mortality and morbidity rates, changes in surrender rates, interest rates,
foreign exchange rates, the competitive environment, the policies of foreign central banks

or governments, legal proceedings,the effects of acquisitions and the integration of newly
-
acquired businesses, and general factors affecting competition.


Further information regarding factors which may cause results to differ materially from those
projected in forward looking statements is included in CNP Assurances’ filings with

the Autorité des Marchés Financiers. CNP Assurances does not undertake to update any
forward
-
looking statements presented herein to take into account any new information,

future event or other factors.”



“The English language version of this document is a free translation from the original, which
was prepared in French. All possible care has been taken to ensure that the translation is

an accurate representation of the original. However, in all matters of interpretation

of information, views or opinions expressed therein, the original language version

of the document in French takes precedence over the translation.”

33

CNP Assurances
-

December 2005

Investor Relations Team

Brigitte MOLKHOU

brigitte.molkhou@cnp.fr

+33 1 42 18 77 27



CNP Assurances

4, place Raoul Dautry

75716 Paris Cedex 15

infofi@cnp.fr




www.cnp.fr/eng


Financial Information

Receive CNP Financial Newsletter


34

CNP Assurances
-

December 2005


Bond portfolios

(excluding Brazil)


By rating:


AAA (58.9%), AA (27.5%), A (11.7%)


BBB (1.7%), non
-
investment grade (0.08%)


By ty
pe
:


Government (G7, EU): 44%, Other: 56%


Life portfolios
: 97.6%

Non
-
Life portfolios: 2.4% (o/w property 8%, equities 32%,
bonds 60%)


Private equity funds


3.5% of equity portfolio excluding unit
-
linked (book value)


Investments in nearly 70 funds


Euro (79%), Dollar (19%), Sterling (2%)


Hedge funds


Book value:

636.3m in 2004, vs

261.0m in 2003

Appendice

Quality of assets (end
-
2004)

35

CNP Assurances
-

December 2005

Appendix

Individual insurance : La Poste network

Product range

Combined

Unit
-
linked/


Individual

insurance

Group

insurance



/

U
-
L

Individual/

group

Premiums

2004

Managed

assets


-
denominated

insurance only



5,459

44,366

1,396

7,741

GMO Poste Avenir

Ascendo

Savings

In million euros and French Gaap

Network

36

1,351

17

522

Plein Temps

Assurimmo

Pensions

179

Solésio

PERP Poste

6.7

174

6.5

20.7

48.2

Aviposte

Resolys/Premunys/Seralys/

Avisys/Ponctualys/Prévialys

Risk products

6.4

Complétys Santé

36

CNP Assurances
-

December 2005

Appendix

Individual insurance : Savings Banks network

Product range

Combined

Unit
-
linked/


Individual

insurance

Group

insurance


-
denominated

insurance only



Savings

In million euros and French Gaap

Pensions

Risk products

3,851

13,321





143

3,412

31,271

Nuances

Initiatives Transmission

Initiatives Plus

Ecureuil Projet



212

2,037

4,104



/

U
-
L

Individual/

group

Premiums

2004

Managed

assets

Network

38

515

60

1,204

35

1,558



Garantie retraite Ecureuil

Points Retraite Ecureuil

Perspective Ecureuil



69.0

PERP Ecureuil

67.1

113

Annuity products

1,558





19.6

Urgence et Famille