Banca Mediolanum SpA · MIL:BMED
Banca Mediolanum SpA — Mediolanum — FY2004 Earnings Presentation
44 slides from Banca Mediolanum SpA's earnings presentation, Mar 22, 2005
Slide 1: FY 2004 Reclassified Results
FY 2004 Reclassified Results March 22, 2005
Slide 2: Slide 2
Slide 3: Net Inflows into Mutual Funds and Equity Funds
2 Net Inflows into Mutual Funds* € mn 600 6000 2004 400 4000 200 2000 0 0 Jan 00 July 00 Jan 01 July 01 Jan 02 July 02 Jan 03 July 03 Jan 04 July 04 -200 -2000 -400 -4000 -600 -6000 -800 -8000 Mediolanum: 2004 = 609 € Total Italian Industry: 2004 = -10.5 € bn -1000 -10000 * Including Managed Account
Slide 4: FY 2004 Consolidated Highlights; AuA Trend
4 FY 2004 Consolidated Highlights Profit +9% Embedded Value +16% Assets +10% 5 AuA Trend & 5-year comparison € bn 23.5 25.8 +100% 21.0 20.9 17.8 13.0 9.5 7.2 6.1 5.3 5.5 4.7 3.1 2.6 1.6 2.0 1.3 0.9 0.1 0.6 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 FY99 FY04 Core Business New Ventur
Slide 5: Net Profit Trend; Embedded Value Trend
6 Net Profit Trend & 5-year comparison € mn FY99 FY00 FY01 FY02 FY03 FY04 FY99 FY04 174 +97% 180 164 160 129 141 118 120 140 115 121 120 103 88 82 100 80 60 40 20 0 -20 -3 -17 -40 -39 -35 -33 Consolidated Core Business New Ventures Goodwill Amortisation & Interests paid on investments 7 Embedded Val
Slide 6: Foundation of our Growth; Dividend Proposal 2004
8 Foundation of our Growth Flexibility of our model & strategy Quality of our relationship with the network Confidence that our customers place in us Validity of our commercial strategy 9 Dividend Proposal 2004 Dividends per share 0.14 € Total amount of dividends to be paid 101.6 € mn Dividend payou
Slide 7: Agenda
10 Agenda Group Consolidated Results Core Business New Ventures Embedded Value Growth Strategy
Slide 8: Group Consolidated: Net Profit
ted da soli n Co 11 FY 2004 Reclassified Results Group Consolidated 12 Net Profit € mn FY 04 FY 03 Change Total revenues 2,822.0 2,576.4 +10% Total costs (2,655.2) (2,437.3) +9% Net investment income 22.6 24.0 -6% Profit before Tax & E.I. 189.4 163.1 +16% Extraordinary items 2.5 (12.3) n.s. Profit b
Slide 9: Net Profit in detail; Assets under Administration
Co ns oli da ted 13 Net Profit in detail € mn FY 04 FY 03 Change Net Premiums written 2,389.9 2,125.0 +12% Commission income 271.4 281.3 -4% Bank revenues 140.3 150.3 -7% Other revenues/commissions 20.4 19.9 +3% Total Revenues 2,822.0 2,576.4 +10% Net change in reserves (2,159.1) (1,923.0) +12% Acqu
Slide 10: Net Inflows; Sales Network
ted da soli n Co 15 Net Inflows € mn FY 04 FY 03 Change Life policies 1,481.2 1,481.2 +0% Mutual funds & managed accounts 534.4 935.9 -43% Managed Savings 2,015.6 2,417.1 -17% Administered Savings (17.5) (103.2) n.s. NET INFLOWS* 1,998.1 2,313.9 -14% * Includes Mediolanum Group's 48.5% share of Banc
Slide 11: Core Business: Net Profit
Bu Co sin re es s 17 FY 2004 Reclassified Results Core Business 18 Net Profit € mn FY 04 FY 03 Change Total revenues 2,689.5 2,456.4 +9% Profit before Tax & E.I. 223.7 197.2 +13% Extraordinary items 2.8 (8.6) n.s. Profit before Tax 226.5 188.6 +20% Tax (52.2) (24.2) +116% NET PROFIT 174.3 164.4 +6%
Slide 12: Net Inflows; Assets under Administration
re ss Co sine Bu 19 Net Inflows € mn FY 04 FY 03 Change Life policies 1,399.2 1,411.3 -1% Mutual funds & managed accounts (53.3) 444.7 n.s. Managed Savings 1,345.9 1,856.0 -27% Securities (58.7) 45.1 n.s. Cash 38.3 (334.6) n.s. Repurchase agreements (60.2) (23.0) +162% Administered Savings (80.6) (3
Slide 13: Policyholders' Assets and Trend
Bu Co sin re es s 21 Policyholders’ Assets € mn 31/12/04 31/12/03 Change Traditional Reserves 1,208.3 1,286.3 -6% Index-linked Reserves 4,415.4 3,600.1 +23% Unit-linked Reserves 4,483.1 3,560.6 +26% LIFE RESERVES 10,106.8 8,447.0 +20% 22 Policyholders’ Assets Trend € bn Decline in traditional reserv
Slide 14: Mutual Funds & M.A. Assets; Assets by Location
re ss Co sine Bu 23 Mutual Funds & M.A. Assets € mn 31/12/04 31/12/03 Change Equity funds 6,719.2 5,976.9 +12% Bond funds 1,826.7 1,803.2 +1% Monetary funds 828.0 773.3 +7% Total "unbundled" mutual funds 9,373.9 8,553.4 +10% "Elite" fund of funds 100.3 69.8 +44% o/w equity 78.1 39.5 +98% "Mix" accou
Slide 15: Bank Deposits; Gross Premiums Written
Bu Co sin re es s 25 Bank Deposits € mn 31/12/04 31/12/03 Change Cash under deposit 2,575.5 2,537.2 +2% Securities under deposit 1,723.0 1,935.7 -11% Repurchase agreements 120.5 180.8 -33% Subordinated loans 5.1 10.3 -50% BANK DEPOSITS 4,424.1 4,664.0 -5% 26 Gross Premiums Written € mn FY 04 FY 03 C
Slide 16: Recurring Policies in detail; Gross Inflows into Retail Mutual Funds
re ss Co sine Bu 27 Recurring Policies in detail (AP) € mn FY 04 U-L Pension plans (My Pension) 59.2 o/w automatic increase in premiums 11.4 o/w discretionary increase in premiums already paid 7.2 U-L Pension plans (Europension) 43.0 o/w automatic increase in premiums 14.6 o/w discretionary increase
Slide 17: Bank Accounts & Account Holders; Primary Account Holders
Bu Co sin re es s 29 Bank Accounts & Account Holders 31/12/04 31/12/03 Change Active bank accounts 344,000 333,000 +3% Primary account holders (unduplicated) 785,100 778,200 +1% 30 Primary Account Holders 31/12/04 31/12/03 Change Life 600,500 581,800 +3% Mutual funds & managed accounts 278,000 287,5
Slide 18: Total Account Holders; Sales Network
re ss Co sine Bu 31 Total Account Holders 31/12/04 31/12/03 Change Life 600,500 581,800 +3% Mutual funds & managed accounts 423,400 440,000 -4% Bank 477,000 457,300 +4% Other 64,000 65,900 -3% Total Account Holders 921,600 917,700 +0% 32 Sales Network 31/12/04 31/12/03 Change Licensed Financial Advi
Slide 19: Total Revenues; Adjusted Premium Income
Bu Co sin re es s 33 Total Revenues € mn FY 04 FY 03 Change Premium income 2,309.1 2,062.8 +12% Re-insurance ceded (7.1) (7.7) -8% Commission income 248.5 258.8 -4% Bank revenues 118.5 124.7 -5% Other commission & revenues 20.4 17.8 +15% TOTAL REVENUES 2,689.5 2,456.4 +9% 34 Adjusted Premium Income
Slide 20: Commission Income; Commission Income by Location
re ss Co sine Bu 35 Commission Income € mn FY 04 FY 03 Change Entry fees 24.9 31.5 -21% Management fees 168.2 142.8 +18% Performance fees 55.4 84.5 -34% TOTAL COMMISSION INCOME* 248.5 258.8 -4% * on all products with mutual funds underlying 36 Commission Income by Location as at 31/12/2004 Managemen
Slide 21: Bank Revenues; Benefits Paid & Change in Reserves
Bu Co sin re es s 37 Bank Revenues € mn FY 04 FY 03 Change Interest Spread 52.0 54.9 -5% Securities 11.7 17.1 -32% Service fees on managed accounts 19.6 22.3 -12% Other services 35.2 30.4 +16% -o/w mortgages 19.4 14.9 +30% Service Margin 66.5 69.8 -5% BANK REVENUES 118.5 124.7 -5% 38 Benefits Paid &
Slide 22: Surrenders; Surrenders of Investment Policies
re ss Co sine Bu 39 Surrenders* € mn FY 04 FY 03 Change Surrenders from Transformation 99.4 133.3 -25% Natural Surrenders* 222.9 168.6 +32% % of reserves 4.3% 3.8% +13% TOTAL SURRENDERS 322.3 301.9 +7% *excluding index-linked & group policies 40 Surrenders of Investment Policies € mn FY 04 FY 03 Cha
Slide 23: Surrenders of Pension Plans; Costs
Bu Co sin re es s 41 Surrenders of Pension Plans € mn FY 04 FY 03 Change Surrenders of Traditional Pension Plans 31.3 134.9 -77% % of reserves 3.3% 13.5% -76% o/w Natural Surrenders 14.5 23.6 -39% % of reserves 1.5% 2.2% -32% Surrenders of Unit-linked Pension Plans 142.4 32.3 +342% % of reserves 4.7
Slide 24: Net Investment Income; Profit by Business Line
re ss Co sine Bu 43 Net Investment Income € mn FY 04 FY 03 Change Investment income - Life 50.8 60.2 -16% Adjustments to financial investments (1.3) 0.9 n.s. Adjusted investment income - Life 49.5 61.0 -19% Policyholders' interest (36.0) (40.3) -11% Net Investment Income - Life 13.5 20.7 -35% Net In
Slide 25: New Ventures: Net Profit
Ve Ne ntu w res 45 FY 2004 Reclassified Results New Ventures 46 Net Profit € mn FY 04 FY 03 Change Spain 1.0 0.0 n.s. Germany: Gamax 1.6 (0.3) n.s. Germany: B.A. Lenz (11.7) (9.4) +25% Banca Esperia* 4.1 1.0 +333% Mediolanum Private & Others (1.1) (0.9) +19% NET PROFIT/LOSS (6.1) (9.6) -37% * Mediol
Slide 26: Net Consolidated Effect; Spain Net Profit
w es Ne ntur Ve 47 Net Consolidated Effect € mn FY 04 FY 03 Change Net profit/loss (6.1) (9.6) -37% Goodwill amortisation (21.2) (20.1) +5% Interest paid on investments (5.7) (5.3) +6% NET CONSOLIDATED EFFECT (33.0) (35.1) -6% 48 Spain Net Profit € mn FY 04 FY 03 Change Total revenues 130.1 115.0 +1
Slide 27: Spain Embedded Value; Spain Net Effect
Ve Ne ntu w res 49 Spain Embedded Value* € mn FY 04 FY 03 Value In-Force Life & Mutual Funds 21 16 New Business Life & Mutual Funds 6 7 * gross of minorities 50 Spain Net Effect € mn FY 04 FY 03 Change Net profit/loss 1.0 0.0 n.s. Goodwill amortisation (14.8) (13.6) +9% Interest paid on investments
Slide 28: Spain Network; Spain Assets under Administration
w es Ne ntur Ve 51 Spain Network 31/12/04 31/12/03 Change Financial Advisors (Mediolanum model) 453 375 +21% Commercial Agents & Employees (Traditional model) 63 76 -17% Part-time Agents 110 81 +36% SPAIN TOTAL NETWORK 626 532 +18% 52 Spain Assets under Administration € mn 31/12/04 31/12/03 Change L
Slide 29: Gamax Highlights; B.A. Lenz Highlights
Ve Ne ntu w res 53 Gamax Highlights € mn FY 04 FY 03 Change Net profit/loss 1.6 (0.3) n.s. Assets under Administration 386.8 430.2 -10% Gross inflows 95.0 113.4 -16% Net inflows (44.3) (14.2) +211% 54 B.A. Lenz Highlights € mn FY 04 FY 03 Change Net profit/loss (11.7) (9.4) +25% Assets under Adminis
Slide 30: Banca Esperia Highlights (100%)
w es Ne ntur Ve 55 Banca Esperia Highlights (100%) € mn FY 04 FY 03 Change Net profit/loss 8.5 2.0 +333% o/w Mediolanum share 4.1 1.0 +333% Assets under Administration 4,826.0 3,102.0 +56% % in managed assets 82% 81% +2% Net inflows 1,642.9 1,147.8 +43% o/w Managed saving 1,388.9 917.9 +51% Private
Slide 31: Embedded Value Growth
Em be dd Va ed lue 56 FY 2004 Reclassified Results Embedded Value 57 Embedded Value Growth Pre-acquisition Effect* € mn 2,503* Value of in-force 2,166* +16% business 1,972* 1,917* Adjusted shareholders equity 1,588* 1,477 VIF Life 1,283 359 VIF Funds 745 & M.A. 707 595 484 535 667 94 95 96 97 98 99
Slide 32: Embedded Value Growth Post-acquisition; EV Economic Assumptions
ed edd b Em lue Va 58 Embedded Value Growth Post-acquisition Effect* € mn 2,354* Value of in-force 2,029* business 1,816* +16% +1 6 % 1,768* Adjusted 1,477 shareholders equity 1,496* VIF Life 1,283 359 VIF Funds 707 745 & M.A. 595 484 535 518 * after excluding residual New Ventures Goodwill 94 95 96
Slide 33: Embedded Value Earnings; EV Earnings Components
Em be dd Va ed lue 60 Embedded Value Earnings € mn FY 04 FY 03 Change Change over period 337 194 +74% Dividends paid 80 72 +11% Goodwill amortisation: New Ventures 20 19 +5% EV Earnings Pre-acquisition effect 437 285 +53% (before excluding residual NV goodwill) Goodwill Increase over the period (32)
Slide 34: EV Experience Variances; Value-added New Business
d de b ed Em lue Va 62 EV Earnings on Initial Ev: Experience Variances in detail € mn FY 04 FY 03 Investment return variance on NAV 32 (9) Asset mix variance 43 18 Mutual Fund ITA pricing variance 11 0 Performance fees variance 28 53 Persistency/paid-up variance (10) (22) Bank net profit/loss varian
Slide 35: Growth strategy
G St row rat th eg y 64 65 Growth strategy Major effort to generate a solid boost in no. of customers & advisors Strategic goal: Substantially increase the number of current accounts Rationale: Customers that hold a current account with us have 5 times the assets who are not account holders
Slide 36: Marketing Initiatives: Product
th ow y Gr ateg r St 66 Marketing Initiatives: Product Simplicity & transparency Normal banking operations: free Free cash withdrawals from all Italian ATM’s Free cash withdrawals/deposits at more than 15,000 branches (P.O. & Banca Intesa) Monthly fee: from 0 to 5 € per month, based on managed asset
Slide 37: Marketing Initiatives: Media communications
G St row rat th eg y 68 Marketing Initiatives: Media communications New TV advertising campaign Centers on Riflex account: 45” & 30” spots Additional ads feature Riflex card & Global Advising approach Ads focusing on recruiting run locally Heavy flights in March & April 69 Marketing Initiatives: Med
Slide 38: Mediolanum Tour concept events; Direct Marketing
th ow y Gr ateg r St 70 Marketing Initiatives: Mediolanum Tour concept events Innovative forms of entertainment & contact Focusing on smaller & mid-sized towns to spread brand awareness at a grass-roots level Movie Premieres Theatrical Premieres “Sunday in Concert” “Caffé & Conto” etc. 71 Marketing
Slide 39: Co-Marketing; Collective sales events
G St row rat th eg y 72 Marketing Initiatives: Co-Marketing Co-Marketing relationship will be further exploited Agreements with important brands, like Volkswagen, that serve & target the same customer segments To share customer base data To run joint-marketing activities 73 Marketing Initiatives: Co
Slide 40: Network incentives; Return on Investment
th ow y Gr ateg r St 74 Marketing Initiatives: Network incentives Powerful point-based incentive plan for the network The number of Accounts opened, activated &/or associated with an initial investment in managed savings results in a multiplier that increases payout to the advisor: 30% maximum 75 Ma
Slide 41: Growth Opportunity: Pension Reform; New Products
G St row rat th eg y 76 Growth Opportunity: Pension Reform Reform might bring a strong improvement in the fiscal advantages Increase in the yearly deductions: no longer the lower between € 5,165 and the 12% of the taxable income, but the higher of the two Elimination of the discrimination against em
Slide 42: Growth Opportunity: New Products
th ow y Gr ateg r St 78 Growth Opportunity: New Products New mutual funds that invest in special sectors Real estate, commodities, and currency swapped equity markets Available for investments only via unit-linked policies 79 Growth Opportunity: New Products New index-linked policies 3-year index-li
Slide 43: Growth Opportunity: Productivity
G St row rat th eg y 80 Growth Opportunity: Productivity Working with Call Centre and back office to smooth demand & achieve higher productivity Our commitment to technology will allow us to absorb expected increase in assets without significant increase in manpower
Slide 44: Disclaimer; Investor Relations Contacts
Disclaimer This document has been prepared by Mediolanum S.p.A. for the sole purpose of providing information and presenting the Group’s strategies. The information, opinions, valuations and forecasts it contains have not been audited by any independent body; they may be altered at any time without