analysts meeting delta lloyd nuts ohra group€¦ · analysts meeting delta lloyd nuts ohra group...
TRANSCRIPT
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Analysts meetingDelta Lloyd Nuts Ohra Group
Niek HoekChairman Designate8 December 2000
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Agenda
! 13.30 hr Direct division by R. Hillebrand (chairman OHRA Insurance)
! 14.30 hr Asset Accumulation by L. Keemink (chairman banking division Delta Lloyd/OHRA)
! 15.30 hr Investment policy by J. Aardoom (general manager OHRA Asset Management)
! 10.00 hr Introduction by N. Hoek (Chairman Designate)! 11.30 hr Intermediary Division by G. Kullberg (chairman Delta Lloyd Insurance)
! 12.30 hr Lunch
! 16.00 hr Drinks
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Contents
! Dutch Insurance market
! Structure and strategy Delta Lloyd Nuts Ohra
! Highlights
! Integration/Reorganisation Plans
! E-business
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Major drivers of change
" Ageing population
" Individualization
" Assertive customer
" Better educated
" Spending power
" Internet technology
" Customer RelationshipManagement (CRM)
" Tax plans 21st century
" Insurance agency andbroking act changes
" Social Security &Health: privatisation
1999DistributionIntermediary 60%
Direct writing 20%
Banks 16%
Internet 4%
200555%
Market forcesTechnologicaladvancesConsumer
199566%
16%
15%
3%
21%
18%6%
Source:IG&H
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5
439
497
604
895
1.042
1.204
1.643
3.213
947
619
AXA
Zwitser Leven
ASR
SNS Reaal
Fortis
Delta Lloyd/OHRA
Interpolis
Achmea
Aegon
ING
Dutch Gross Written Premium life companies (1999) in £ mln
Source: VVP magazine August 2000
Market position Netherlands Life
Nuts Ohra is included for the full year
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6Source: VVP magazine August 2000
Market position Netherlands GI+Health
Dutch Gross Written Premium GI+Health companies (1999) in £ mln
320
345
366
581
620
1,134
1,152
772
203
346
448
SNS Reaal
AXA
Royal
Aegon
Unive
Fortis
Interpolis
ASR
Delta Lloyd/OHRA
ING
Achmea
Nuts Ohra is included for the full year
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Dutch market
! Attractive Life market- profitable- economic and capital growth- growing demand for financial services- flexibilisation pension market (Witteveen)- changes in legislation- tax reform plans 21st century
! Developing Health market- withdrawing government- initiatives for a ‘base insurance’- platform for cross- and upselling
! Mature General Insurance Market
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Overall positioning Delta Lloyd and OHRAin the Netherlands
! Sales (GWP)
No. 4 Overall insurer No. 3 Pensions No. 3 General Insurance and Health No. 4 Investment Funds No. 1 Performance world wide investment funds
! Distribution
No. 2 Direct No. 3 Intermediary
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Delta Lloyd 3.8 m
Nuts/Ohra 1.7 mPolicies
Number of clientsPolicies per client
Customer base almost a quarterof Dutch population
Total5.5 m
Leverage cross selling opportunities from integration
2.2 m 1.7
1.4 m1.2
3.6 m1.5
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Contents
! Dutch Insurance market
! Structure and strategy Delta Lloyd Nuts Ohra
! Highlights
! Integration/Reorganisation Plan
! E-business
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Mission
In order to become a major Northwest Europeanfinancial services providers within five years, a completerange of Life/Savings/Asset Accumulation products andselected Health and General Insurance products isoffered.
7-2-7
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7 Pillar Strategy : Focus on Life& Asset Accumulation
1. Strengthening of the intermediary organisation- Delta Lloyd Life- Delta Lloyd General Insurance- Delta Lloyd Health- Integrated Marketing and Sales- Complete EB offering
2. Multi-channel distribution- Intermediary- Direct- Banking/Asset Accumulation- E-Business
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7 Pillar Strategy : Focus on Life& Asset Accumulation (2)
3. Top ten position retail banking activities- Delta Lloyd Retail (incl. mortgages)- Delta Lloyd Private Bankers- Delta Lloyd Securities- Delta Lloyd Bankunie- OHRA Bank (retail & E-)
4. Asset Management as key activity“Best in class” asset managers with the Delta Lloyd and OHRA brands
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7 Pillar Strategy : Focus on Life& Asset Accumulation (3)
5. Think and operate in target groups- Home-owners- Pleasure crafts owners- Employers (EB concepts)- Small and medium sized businesses- Directors / Owners and self employed without staff
6. Stringing pearlsFocus on Life and Asset Accumulation
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7 Pillar Strategy: Focus on Life& Asset Accumulation (4)
7. International group
- The Netherlands Life, GI, Health, Asset Accumulation
- Germany- Belgium Life and Asset Accumulation- Luxembourg }
}
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2 Brands
Delta Lloyd - Main brand
- Focus on intermediary distribution / asset accumulation (The Netherlands, Germany, Belgium and Luxembourg)
OHRA - Main brand
- Focus on direct distribution (incl.direct banking) The Netherlands
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7 Values
! Client oriented
! Integrity
! Entrepreneurial
! Open communication
! Teamspirit
! Flexibility
! Commitment and responsibility
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Corporate Objectives
! Premium and profit growth 15% p.a. (10% auton. + 5% acq.)
! Premium growth exceeds expense growth > 2%
! Net return on average shareholders’ funds > 10% real p.a.
! Profitable new business
! Long-term organic new business growth > 10% p.a.
! Special attention E-Business development
! Cost savings DLNO merger > £ 30 m (£ 10 m annual)
after 3 years; back office integration
! Top 10 position North West European market within 5 years
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DL AssetManagement
Amsterdam
Organisational structure(decentralised and distribution driven)
Delta LloydNuts Ohra
OHRANSFLife
GeneralInsurance
HealthOHRA ASSETManagementArnhem
Intermediarydivision
Direct division AssetManagement
AssetAccumulation
DL Belgium
International
DL Germany
Other
Delta Lloyd
LifeGeneral
InsuranceHealth
DL BankDL SecuritiesOhra Retail
Prefs +subordinated loans
Stichting Nuts Ohra (SNO)CGNUPublic Health
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Share Delta Lloyd Nuts Ohra inCGNU figures
Operating result
D LNO14%
C G NU (excl
D LNO )86%
P ublic HealthP ublic HealthP ublic Health
Embedded value life business(The Netherlands)
DLNO17%
CGNU (excl
DLNO)83%
(first 9 months 2000)
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Contents
! Dutch Insurance market
! Structure and strategy Delta Lloyd Nuts Ohra
! Highlights
! Integration/Reorganisation Plans
! E-Business
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Keyfigures 9M 2000Dutch GAAP
! Result after tax £ 120m (+24%)
! Total Revenues £ 2.75bn (+58%)
! Gross Written Premium £ 1.7bn (+57%)
! Investment Income £ 1.0bn (+53%)
! Permanent staff 5,664 (+5%)
! New money investment funds £ 986m
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Delta Lloyd Nuts Ohra GWPGeographical coverage 9M 2000 (£ m)
Germany
236
The Netherlands1,366
Belgium 49
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Revenues Delta Lloyd Nuts Ohra
£ m
LifeGeneral Insurance.HealthTotal
Investment incomeOther incomeTotal revenues
99-00in %
EUR basis21.4%37.8%
n.m.57.2%
9M00
976375341
1,692
99558
2,745
53.1%288.5%57.7%
GWP
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Result Delta Lloyd Nuts Ohra
Dutch GAAP£ m
LifeGeneral InsuranceHealthBankHolding and otherResult before tax
TaxationMinority interestResult after tax
9M00
126.7(10.5)
4.114.214.0
148.4
(27.5)(0.8)
120.2
99-00in %
EUR basis
20.6%
23.5%
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Assets under management own risk 30September 2000
Real estate
9%
Shares26%
Fixed-interest
65%
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9
7298
185
66
387
214
0
50
100
150
200
250
300
350
400
450
1994 1995 1996 1997 1998 1999 9M00
CAGR 1994-1999: 109%
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Delta Lloyd Total Achieved Profits (£ m)
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Potential profit for shareholders
Total Life reserves £ 8 billionProfit for policyholderGroup Segregated funds28%
Unit-Linked/Un. Life8%
36% of life reserves
Excess profit for shareholderGroup Non-linked 26%
Individual Non-Linked 20%
Annuities 7%
53% of life reserves
OtherCoass.8%
Other5%
11%
Considerable upside potential from investment returns
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Example: Potential on traditionalbusiness from higher investment returns
10-
5-
0
5
10
15
20
4% 5% 6% 7% 8% 9%
Inves tm ent R eturn
E V - N etherlands
E V -UK
• 5% guaranteed return• solvency margin • excess profit to shareholder (NL)• 90% excess profit to with profit policy- holders (UK)
(excl. NU)
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New Business Cost of Capital
Life FundReserves
valued asDiscountedCash Flow
(DCF) at RDR
Free assets within LifeFund valued as DCF
Shareholder assets
Valued at Marketvalue
Shareholder assets
Valued at Marketvalue
DUTCH LIFE COMPANY
New Business leads to anadditional cost of capital
UK WITH-PROFIT LIFE COMPANY
New Business has no additional cost ofcapital
Life Reserves
valued asDiscountedCash Flow
(DCF) at RDR
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Life tax advantage
5% Holdings (£m) Tax rate
0
100
200
300
400
500
600
700
800
900
1996 1997 1998 1999
0
5
10
15
20
25
30
5% Hold ings tax rate
Over 50 “Tax exempt”HoldingsDSM, Ahold, ABN AMRO, Munich Re, van Lanschot
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Return on capital employed
ROCE (annualised, excl. capital gains)
ROCE (annualised, incl. capital gains)
1
Actual9M00
11.1%
24.1%
Actual9M99
11.4%
17.6%
*
ROCE (excl. cap. gains) = Result after tax / capital employed 1-1
ROCE (incl. cap. gains) = Result after tax + capital gains / capital employed 1-1
1 Result of 9M 99 is excluding Nuts Ohra figures
* ROCE lower than last year due to high unrealised capital gains
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Embedded Value Delta Lloyd Nuts Ohra £m
0,0
400,0
800,0
1200,0
1600,0
2000,0
1995 1996 1997 1998 1999 9M00Shareholders funds Value in force
852
1292
1766
1988
930
1262
CAGR 1995-1999: 20%
Note: 1£ = NLG3.69
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Life: new business (APE)
N ew B us ines s L ife (AP E ) 9M00
Life50%
Individual pens ions
22%
G roup pens ions
28%
Single premiumsIndividual pensionsGroup pensionsLifeTotal
Annual premiumsGroup pensionsLifeTotal
Total retailinvestment sales
9M00
1679056
313
133346
813
99-00 in %EUR basis
+172%-18%+3%
+5%-19%
£ m
(9M99: £ 163m)
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■ Exit Bourse and larger risks business
■ Rate increases 7% in Motor, in 1999 10%
■ Reserve strengthening (2000: 108% ofGWP, 1998: 88% of GWP)
General Insurance:Improve Profitability
2000
97%
111%
103%
146%
143%
120%
1999
97%
121%
87%
130%
114%
90%
COR
Domestic
Motor
Comm.Fire
Liability
InwardReinsurance
Other
Premiums by class
Motor33%
Commer-cial Fire
28%
Liability7%
Domes-tic
17%
Other 15%
Overall COR 110% 106%
9 months
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Health: Improve Profitability
! Nuts back to profitability
! Re-branding Nuts Health to Delta Lloyd Health
! Rate adjustments
! Rationalisation group contracts
! Strict claims management
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Conservative cost policy
! Prudent adjustments to provision levels in GeneralInsurance, Life and pensions
! IT expenditures through P&L
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Human Resources Management
! ED/MD- development and executive programs
! Great place to work!
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Contents
! Dutch Insurance market
! Structure and strategy
! Highlights
! Integration/Reorganisation Plans
! E-Business
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Reorganisational measures
! Combining Marketing and Sales Intermediary Division
! BPR OHRA (improve profitability)
! BPR Berlinische (reduce published cost ratio)
! BPR Nuts (improve profitability)
! Combining asset accumulation (banks) activities
! Integration of Belgium activities
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Integration Projects:Target almost fulfilled
£ m
GroupIntermediary HealthDirectBanksGermany
Total
Target
4.211.4
5.41.46.9
29.3
30.0
0%24%67%0%0%
22%
100%76%33%
100%100%
78%
Cost Savings % One Off % Continuing
! The costs to achieve the savings are low and provided for
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Significant integration savingsyet to come
! Life, General Insurance, Health and BankNew core systems
- ForeSure- Extended office- Stater- Globus
! General Insurance - Integration backoffices Delta Lloyd and OHRA
! Health - Integration public health funds (Nuts and OHRA) - Integration backoffices
! Backoffice opportunities Asset Management
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Contents
! Dutch Insurance market
! Structure and strategy Delta Lloyd Nuts Ohra
! Highlights
! Integration Plans
! E-Business
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E-business initiatives
WWW.DDD.NL
WWW.KOERSLIJN.NL
WWW.DELTALLOYD.NL
PPP+
Site in a day
WWW.BP2001.NLExtended Office
WWW.PROFITEERNU.NL
WWW.FILMFONDS.NL
WWW.DLLHYPOT.NL
WWW
BE
WWW. .DE
WWW.LANCYR.NL
.nl
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E-Business
! Improvement primary processes (straight throughprocessing) via internet for intermediary division
- extended office- extranet for intermediaries (DDD)
! OHRA transforms from direct writer into E-insurer- customer self service
! E-finance strategy of banking division centered in OHRA Bank- on line mortgages- on line credit (75% of total credit applications via internet)- voice recognition response system OHRA Investment funds
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E-Business
! Transforming DL Germany Life units to sell via internet
Other initiatives:! Participation Financial Portal! Participation Internet consultancy an development company! Investigating a large number of parties regarding alliances in
electronic distribution (budget: £ 12m)
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E-Business
! Many e-business initiatives
! Low-risk strategy: internet not the objective, but a logicalcomponent of the business-strategy. Direction through linemanagement
! All internet-activities and investments based on practicalbusiness cases related to business objectives
! Good co-ordination
! In the coming 3 years +/- £ 24 m
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Where will Delta Lloyd Nuts Ohrastand in 5 years?
A leading financial services provider in a selectednumber of countries in North Western Europe with strongmulti-channel distribution (Agents, Direct, E-business,Bankassurance).
OHRA will be a leading E-Asset Accumulator in the Netherlands.
Asset Management of Delta Lloyd and OHRA to remain the bestand the leading Asset Manager of the Netherlands.
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Conclusions november 1999Delta Lloyd Nuts Ohra transaction
! Multichannel! Strong market position! Clear segregation intermediaries (Delta Lloyd) versus direct (OHRA)! Significant economies of scale! Significant scope for cost savings (£30m by year 3)! Broader/stronger fund management business! Two major brands! Acquired at 0.6 x Net Asset Value after adequate provisioning
AN EXCELLENT DEAL!
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Appendix
! Financial structure of DLNO deal
! Deal creates Shareholder value
! Profitability of Nuts OHRA
! Integration
blz.51
blz.52
blz.53
blz.54
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Financial structure of DLNO deal
Pref. Shares £ 6m
Subordinated perpetual loan£ 317m
100% Nuts OHRA Shares
Delta Lloyd Fd. VNO
A very attractive deal from a financial perspective
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Deal creates Shareholder value
! Loan perpetual / subord. £317m: yield 2.5% 2.76%! Market value Ca £ 116m
! Pref. shares Ca £6m: yield 2.5% 2.76%
! Goodwill £ (66)m
! Net asset value £188m
! Cost savings £ 30m by year 3minimum target
£ 1 = NLG 3.41
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Profitability of Nuts Ohra
£ m
! Premium Income
1998
804
(10)
1999
687
11
Figures adjusted to UK Gaap, unaudited £ 1 = NLG 3.41 (1999)
£ 1 = NLG 3.12 (1998)
5.25m net p.a.
! Profit recovery will accelerate through years 2 & 3.
■ Immediate contribution to earnings per share. No dilution.
! Net result before cost savings
! Financing costs
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Issues at Nuts Ohra
! Quality of management! Nuts and OHRA culture clash! Administrative issues! Weak acquisition policy! Teakwood based life policies! Financial strength! Group contracts Nuts! Focus
All provided for and addressed before end 1999
Opportunityfor Delta Lloyd
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Integration
! Organisation by Distribution Channel! All top management appointed! 34 integration projects defined! Sponsors and Owners of projects appointed! Monitoring in place! Integration on ground complete by July 2000
Examples of integration projects! Financial restructuring! Business Process Re-engineering and strengthening management at
Nuts! Integration of DL Direct Operations and OHRA! Cross-selling on Nuts Public Health! E-commerce projects