Bancassurance in Central Eastern Europe: Trends and Practices

1. Bancassurance in Central Eastern Europe:Trends and Practices Kyriakos Apostolides Regional Vice President Associate Distribution Networks & Direct Marketing ALICO Central Eastern Europe

2. ALICO: Best footprint at CEE • A multi product, multi distribution vehicle, with proven track record, to deliver superior results, being an important income generator for the partner. • Presence in 13 countries with local dedicated expert teams, able for fast implementation of mutual plans with strong cultural local understanding of market trends and practices. • Over 100 partnerships in force. • Over 5.5M individual clients through current bancassurance relationships, with fast year on year growth pace. • All ALICO’s local insurance companies are financially sound, well capitalized and solvent well above industry standards, highly regulated entities. Greece Bulgaria Romania Russia Poland Czech republic Hungary Slovakia Ukraine Latvia Lithuania Serbia Cyprus

3. A Snapshot of CEE Region – The Environment GDP Growth Rates Source: International Monetary Fund, World Economic Outlook Database, April 2009 Adverse short-term forecasts create the need for counterbalance strategies focused on non-core income fees

4. A Snapshot of CEE Region Insurance Market (Life and Non-Life) Source: Swiss Re sigma study “world insurance in 2008” The Growth Potential Source: CEA, national supervisory authorities, insurance associations

5. Current Market Trends • Slowdown of retail lending • Wholesale funding / capital is scarce and costly, affecting interest and investment income • Major Fx fluctuations • FI players under review of their strategy / plans for growth / expansion / country presence / core focus / size of balance sheetFront line sales desks facing a new challenging sales environment • Non - interest income of rising importance • Shift to deposit bundles/guaranteed savings/segmented risk protection offers • Engage in capital-hassle free models for non interest fees to reach multi-income accelerated growth dynamics. • Provide Fx-Linked Savings/Cautious-conscious choice / transparency. • Create/deliver core business innovative proposals using insurance as a smart tool on both sides of balance sheet. • Raise respective supportive field deliveries. Leverage more on DM / Bundled approaches. Renew focus on existing clientele. • More focus on core and non-core income opportunities (retention of core business & x-sell, up-sell as antiattrition tools and income generators) to maximize fees per client.

6. Strategic choices: • Price • Innovation • Convenience/ effectiveness of execution Segment and focus

7. Bancassurance in Central & Eastern Europe • Bancassurance activity is fairly new within major CEE’s players. Many players have not built yet the necessary experience and know-how to generate income from insurance related business, based on a fully integrated model of sales. • Getting the right partner with the right know-how • is critical for success A successful insurance partner is the one which: • Has a proven track record to deliver planned results. • Has expertise to support and is ready to invest in all distribution channels (bundled, telemarketing and over the counter). • Designs the right distribution channel and best fit product sequence for maximum results, being fully complementary to core strategies. • Provides long term customer security – min counter party risk. • Offers a transparent value added product palette to the end customer. Meet the scorecard

8. Prospecting Offer Acquisition Lapse Embedded: Credit Life (cards) In-branch: OTC Direct: Outbound TM Inbound TM One Offer One Product Cancels Dies The Traditional Insurance Sales ModelCustomer acquired … Customer pays … Customer leaves

9. Time Deposits Time Deposits Foreign Currency Foreign Currency ATM ATM Shares Trading/ Shares Trading/ Phone banking Phone banking Financing Financing Investment Investment Current Accounts Current Accounts Mutual Funds Mutual Funds Transaction Transaction Checking Checking Savings Accounts Savings Accounts Lending Lending Protection Protection Credit Card Credit Card Income Income Education Education Overdraft Overdraft Assets Assets Business Loans Business Loans Health/Medical Health/Medical Mortgage Mortgage Savings Savings Life Life Personal Loans Personal Loans Travel Accident Travel Accident An effective Sales Model • Significant opportunities to embed insurance into banking services Based on deep understanding/experience of partner’s strategy/needs. Create and implement a step-by-step approach on projects that match core business.

10. An effective Sales ModelMultiple channels... Multiple Offers … base on a full Range of Products Offer based on: Prospecting Acquisition based on: Embedded: Credit Protection In-branch: OTC Direct: Outbound TM Inbound TM Mail Inserts Customer Service Calls (welcome, thank you, birthday, anniversary) • Data Base Marketing • Customer Profiling • Segmentation • Product • Customization • Customer Relationship Management • Predictive Modeling • Products: • Credit Life • Accident & Health • Bill protection/Lifestyle • Individual Savings • Accident & Health • Products • Broken Bones • Critical Illness • Female cancer • Hospital Daily benefit • Accidental death and dismemberment • Pure endowment • Term Life • Savings top-ups

11. Prospecting Offer Acquisition Upgrade Reactivation Referrals Retention Cross-sell Based on a lifecycle approach linked with customers’ evolving needs First Stage Biggest financial impact and simple execution Maturing Expand and improve existing activities State-of-the-Art Continuous sales approach at all touch-points in the customer’s lifecycle

12. WHO? Prospects SALE Active customers CANCELATION Ex-customers WHAT? Acquisition programs Loyalty / Retention / cross sale programs Win-back programs HOW? Advertising Internet Mailings Inserts Outbound calls Inbound calls Over the counter Welcome Calls Activation calls Up-sale offers Cross-sell offers Service calls opportunities E-mailings Mailings In-branch / POS offer Bundled product offer Retention unit Misses payment & lapse rescue Calls E-mailings Mailings SMS on former customers Based on a fully integrated approach • Build a fully complementary tailor-made marketing plan on partner’s needs and local strategy. • Integrated approach across all sales channels for sequenced, tailored & timely offers supported by a fully dedicated expert local team. • Based on full deployment of synergy projects, estimated fee income for the partner will potentially represent a significant profit component: min. 10% at 2nd year, best practice can reach 30% including Bundled offers, Direct marketing and Over the Counter sales model.

13. Distribution methods / touch points Branch / POS In / Outbound TM Death/ Disability Benefits PPI cross sell PPI bundled Entry campaign/ Welcome A&H initial coverage bundled Product sequence Hospital/Surgical Benefits Applicable to all Loan Upgrades protection Traffic accident End of loan Proposal Broken Bones Life / Savings products Segmented Female Cancer

14. Acustomer-centric, multi-distribution, multi-product offering model Bundled Product (Paid by Client) Direct Marketing • Cardholders’ protection plans • Credit shield for credit cards • Consumer loans with insurance • Auto loans with loan insurance • Mortgage loan with loan insurance • Education fee loans with Life protection • Joint marketing initiatives to promote easy and inexpensive solutions tied to financial products • Special projects to enhance performance of banking products (e.g. welcome/activation telemarketing) • Product sequence designed to offer the right product to the right customer at the right time Bundled Product N.A.C. (No Additional Cost for Client) Over The Counter Sales • Travel and Accident & Health cover for cardholders • Long-term savings products for retirement / education • Accident and Health products

15. Partnerships: working models • Open architecture (along with captives/reinsurers). • A fully integrated bancassurance model (single provider). • Joint ventures (joined shareholdings with FIs to serve a fully integrated tailor made approach).

16. Managing Partnerships: Relationship managementMaximize Effectiveness/Interaction/Commitment Partner Teams Involved • Distribution • Profit centers • Legal / compliance • Finance • IT/Back Office Vendor Tools (Internal) Tools (External) • Penetration / revenue regular reports • Quarterly strategic reviews • Reciprocities • Ad hoc communication • Regular reports / reviews • Sales/persistency reports (kpis) • Database analysis / segmentation • Claims management • Market research / mystery shopping • Ad hoc communication

17. Key success factors in model execution • Understanding / speaking the language • Dedicated-expert teams / territorial strength / cultural understanding • Financial strength • Global to local • Budgeting / Monitoring / Incentivizing • Priorities / Convenience