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Current insurance market trends:

where does Poland stand and what lies ahead?

Sopot Summer Insurance & Reinsurance Days Sopot 17 June 2008 Patrizia Baur Swiss Re Economic Research & Consulting

Agenda
Current situation Market trends Outlook

(Re)Insurance Days Sopot 17 June 2008 Slide 2

1% of premiums written in Europe stem from Poland


Share CEE 1996 2000 2003 2007 Non-life 3.3% 4.2% 5.4% 9.4% Life 0.6% 0.8% 1.2% 2.1%

Split of total insurance premiums (life and non-life)


EUR 1097bn, 2007

________France 18% United Kingdom 27% _____

Share Poland 1996 2000 2003 2007 Non-life 0.7% 1.1% 0.8% 1.1% Life 0.3% 0.4% 0.5% 1.0%

Switzerland 3%_ Netherlands 7% Germany 15%


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______ __________ _________ Austria 1%_________ _____Other Europe 25%

Other CEE 4% ______________Poland 1%

Sources: Supervisory Authorities, Insurance Association, Swiss Re Economic Research & Consulting

Non-life growth gained momentum in Poland


Real growth rates
40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E

Portfolio overview
2007
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Hungary Slovakia Czech Republic Austria
Other

Poland

Western Europe

Central & Eastern Europe, excl. Poland

Accident

Poland

Motor

Property

Russia

Liability

Source: Swiss Re Economic Research & Consulting

Russia: motor hull is included in property Source: Swiss Re Economic Research & Consulting

Slide 4

High, but slowing life insurance growth


Real growth rates
40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E
0% Poland Ordinary, term life Unit-linked insurance Pension and annuities Czech Republic Hungary Slovakia Austria 20% 40% 60% 80%

Portfolio overview
2006
100%

(Pure) endowment, whole life Marriage & birth Accident and Health

Poland

Western Europe

Central & Eastern Europe, excl. Poland

Source: Swiss Re Economic Research & Consulting

No data for Russia

Source: Swiss Re Economic Research & Consulting

Slide 5

Profitability decreasing from record levels


Non-life profitability
Return on Equity, book value
40% 35% 30% 25% 20% 15% 10% 5% 0% -5% 1999 UK* 2000 2001 2002 2003 2004 France 2005 2006 2007E

Life profitability
40% 35% 30% 25% 20% 15% 10% 5% 0% 1999 UK* 2000 2001

Return on Equity, book value

2002

2003

2004 France

2005

2006

2007E

Germany

Poland

Germany

Poland

* market values Source: Swiss Re Economic Research & Consulting

* market values Source: Swiss Re Economic Research & Consulting

Slide 6

Agenda
Current situation Market trends Impact of current credit crisis Products where to grow profitably? Distribution the role of bancassurance Outlook

(Re)Insurance Days Sopot 17 June 2008 Slide 7

Towards a more challenging macro environment


Stock markets Inflation
year to date, local currency) %)

Current account Government (30 May, %-chg. (April 2008, balance deficit
(2008, % of GDP) (2008, % of GDP)

Czech R. Hungary Poland Russia Slovakia


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-8.1 -15.4 -26.7 +38.2 +13.8

6.7 6.8 4.3 14.3 3.7

-3.5 -4.2 -4.8 +2.4 -4.0

-3.0 -3.9 -3.1 +3.0 -2.8

Sources: Bloomberg, Oxford Economic Forecasting Ltd., Swiss Re Economic Research & Consulting

.. but so far impact of the credit crisis remained limited


Europe EMBI+ spreads
1800 1600 1400 1200 1000 800 600 400 200 0
Mai-01 Mai-02 Mai-03 Mai-04 Mai-05 Mai-06 Mai-07 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Mai-08 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Bulgaria
Slide 9

Poland

Russia (rhs)

Turkey

Ukraine
Source: Bloomberg

Consequences for CEE insurance


Non-life insurance gets less profitable Lower demand for index-linked life products Countries with high share of foreigners no major supply side issues most probably

Foreign bancassurers under some pressure to sell subsidiaries (Erste Bank Vienna Insurance Group) Less aggressive acquisition strategies of foreign insurers, less aggressive expansion in CEE countries
(Re)Insurance Days Sopot 17 June 2008 Slide 10

Agenda
Current situation Market trends Impact of current credit crisis Products where to grow profitably? Distribution the role of bancassurance Outlook

(Re)Insurance Days Sopot 17 June 2008 Slide 11

Non-life insurance competition will become stronger


Real growth by line of business Situation in the non-life sector
Opportunities Infrastructure projects (EU, EURO 2012) Lowly penetrated SME sector Potential in liability/agro/credit & surety Risks Saturated market for industrial/ commercial property Increasing competition from abroad
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Liability 2007E

40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10%

Non-life total

Accident

MTPL

Motor hull

Property

Source: KNF, Swiss Re Economic Research & Consulting

Slide 12

Life insurance cooling financial markets ask for new solutions


Real growth by line of business
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% 03Q4 04Q1 04Q2 04Q3 04Q4 05Q1 05Q2 05Q3 05Q4 06Q1 06Q2 06Q3 06Q4 07Q1 07Q2 07Q3 07Q4

Hot topics in the life sector


Drop in stock markets Increasing need for risk protection (eg health) and old-age provision Changing accounting and regulatory environment Key Offer new products Address new client segments

Total life Marriage & birth Annuity

Life Linked Accident & Sickness supplement

Source: KNF, Swiss Re Economic Research & Consulting

Slide 13

Agenda
Current situation Market trends Impact of current credit crisis Products where to grow profitably? Distribution the role of bancassurance Outlook

(Re)Insurance Days Sopot 17 June 2008 Slide 14

Bancassurance is underdeveloped
Non-life insurance Life insurance
2005, except for France and Italy: 2006
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Spain Poland UK Germany Belgium France Italy

2005, except for Poland, Hungary, Czech Rep., France, Italy: 2006
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Poland Czech Rep.* Hungary France Germany* Spain Italy UK Belgium Others

Banks

Agents

Brokers

Others

Banks

Agents

Brokers

No information available for Hungary, Czech Republic Source: Swiss Re Economic Research & Consulting

Estimates for Hungary, Czech Republic; * new business split Source: Swiss Re Economic Research & Consulting

Slide 15

Key drivers of bancassurance


Success factors Opportunities and risks

Low product complexity Good fit with core banking products High bank branch traffic and density Captive model?

Opportunities complexity Low product Distribution synergies Good fit with core banking products Cost advantages of bancassurance Bank branch traffic and density Risks Labour market flexibility Cultural differences

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Trend towards tailor-made multi-channel distribution


From macro to micro segmentation

Phases Client

yesterday

today
macro segmentation

tomorrow
micro segmentation within clients target group

total of clients

Mass Market client

Affluent clients

SMEs/ Corporate clients

Channel

Branch
Brokers

Point of sale

stationary sales

branch

Telephone /Online Mobile

non stationary sales

sales

non banking

CLIENT

home banking

Slide 17

Points of sale Partners

sales

smart card banking

mobile sales

TV banking

Agenda
Current situation Market trends Outlook

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Still considerable gaps to developed markets


Premiums /GDP (2007, preliminary)
10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Czech Rep. Belarus Kazakhstan Russia* Poland Hungary Germany Bulgaria Ukraine Slovakia Romania Croatia Slovenia EU15

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Life

Non-life
* Russia: without short-term policies aimed at tax optimisation Source: Swiss Re Economic Research & Consulting

CEE countries lie in the steep part of the S-curve


Life Insurance
2007
12% 10% 8% 6%
SV KR JP FR NA IN MY BW IL SG CH HK IE

Non-life Insurance
2007
6%
BB

5%
US CH

4%
KR DE GB ESFR IT JP SG HK IE ZW ZA NA RU HR

3%

TW IL CZ

4% 2%
MW

IT US DE AT ES NZ IS NO

2%

CN TH BD VN ID BO EC DZ

0% 0.1

PL HU CZ SK MXHR OM RU

1%
VN IN BD ID

CN

RO MX

PL SK HU OM

1.0

10.0

100.0

0% 0.1

GDP per capita in 1000 USD

1.0

10.0

100.0

GDP per capita in 1000 USD

Source: Swiss Re Economic Research & Consulting (Re)Insurance Days Sopot 17 June 2008 Slide 20

Source: Swiss Re Economic Research & Consulting

Poland is expected to grow at about the same speed as other CEE markets
GDP and insurance growth forecast
2008-2012, inflation-adjusted

Growth drivers Favourable (long-term) macroeconomic environment Catch-up towards EU wealth levels State to rely more on private solutions Tapping of potential farther East Underwriting discipline

Poland

Central & Eastern Europe (excl. Poland)

Western Europe

0% GDP

2%

4%

6%

8%

10%

12%

New products (eg structured life) Further diversification of distribution channels

Life insurance

Non-life insurance

Source: Swiss Re Economic Research & Consulting

Slide 21

Summary
Good capitalisation and saturation in large industrial/commercial lines will intensify competition in non-life insurance. Profitable growth will be in areas where the growing cake will allow to expand without compromising on terms and conditions. In life insurance, success will very much depend if insurers manage to offer alternatives to pure investment products, capture potential resulting out of social security sector and use whole range of distribution channels Insurance products in CEE will increasingly mirror those in Western Europe.
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Growth in CEE and Poland is expected to outpace Western Europe. However, differences will erode over time.

Thank you!

(Re)Insurance Days Sopot 17 June 2008 Slide 23

Patrizia_Baur@swissre.com www.swissre.com/sigma

Appendix

(Re)Insurance Days Sopot 17 June 2008 Slide 24

Statistical overview
2007 Poland Czech Republic Hungary Slovakia Slovenia Romania Russia Croatia Ukraine Kazakhstan Belarus Total Eastern Europe
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GDP
(EURbn)

Life insurance
(EURm) Penetration

Non-life insurance
(EURm) Penetration

305.266 127.358 101.786 54.696 33.375 117.978 898.586 37.214 92.325 69.469 33.126 1950.264

5804 1938 2008 760 609 409 441 337 110 28 11 12991

1.9% 1.5% 2.0% 1.4% 1.8% 0.3% 0.0% 0.9% 0.1% 0.0% 0.0% 0.7%

5605 2749 1602 945 1284 1706 21153 896 2423 876 231 41110

1.8% 2.2% 1.6% 1.7% 3.8% 1.4% 2.4% 2.4% 2.6% 1.3% 0.7% 2.1%

Preliminary data Russia: life insurance without short-term tax optimisation schemes Sources: WIIW, supervisory authorities, insurance associations, Swiss Re Economic Research & Consulting

Disclaimer
The material, views and conclusions contained in this presentation are for information purposes only. Although all information used in this presentation was taken from reliable sources, Swiss Re does not guarantee the accuracy and completeness of its content. All liability for the integrity, confidentiality or timeliness of this presentation or for any damages resulting from the use of information herein is expressly excluded. Under no circumstances shall Swiss Re or any of its affiliates be liable for any financial or consequential loss relating to this presentation.

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