Investing in Israel: Generali Groups experience

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Investing in Israel Generali Groups
experience
Generali Group in Israel
Alessandro Corsi, Area Manager Milan, June
16th, 2005
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Agenda
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Short history and overview of Generalis
investment in IsraelOur arena, the insurance
and long term savings market situation and
perspectivesDoing business in Israel some
impressions on the basis of our experience
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The Generali Groups investment in Israel the
Migdal Group

• Migdal Group
• Founded in 1934 in Jerusalem by a group of Jewish
  families and businessmen together with Generali
  (with a participation of 27)
• Bank Leumi joins as a shareholder during the
  forties, subsequently acquiring majority
• Migdal is listed on Tel Aviv Stock Exchange in
  1997 (included in TA25 Blue Chips index)
• In 1997 AG becomes the majority shareholder, with
  a share of 59 (brought to 64 in 1999)
• In May 2005 Generali reduces its stake down to
  approx. 60 in order to keep the TA25 status

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The structure of the Group
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Migdal Group Key figures 2003-04

• Figures in millions (exchange rate 31.12.04)

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Agenda
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Short history and overview of Generalis
investment in IsraelOur arena, the insurance
and long term savings market situation and
perspectivesDoing business in Israel some
impressions on the basis of our experience
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Insurance Market size and comparative penetration

• Written premiums 2004 ? 5,2 bn (2,4 Life 2,8
  Non Life)
  ? 1,3 on 2003 (2,5 Life
  0,4 Non Life)

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The Israeli Insurance Market
2004 market shares (in terms of premiums)
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The Israeli Insurance Market Life Long Term
savings (1)

• a developed sector long term funds appr. 75
  of GDP in 2004.
• Formerly
• 3 parallel, almost separate, markets
• Life insurance ? insurance companies, mainly
  through independent agents
• Pension Funds ? mainly Trade Unions through
  direct sales
• Provident Funds ? mainly by and through banks
• High degree of supply concentration, limited
  competition among and within marketplaces
• In Life assurance specifically
• high profitability and low risk environment in
  the 80s
• pricing decline and more product / benefits
  competition in the 90s
• a distribution driven sector

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The Israeli Insurance Market Life Long Term
Savings (2)

• Recent structural / regulatory changes
• Quite significant changes, some in place others
  under discussion, all mainly driven by
  regulators will to further increase consumer
  protection and competition in financial markets
• New mandatory structure in Life assurance
  products as from 2004
• lower management fees
• lower distribution commissions
• increased transparency to policyholders
• Trade Unions Pension Funds taken over and some
  privatised in 2004, lower management fees
  applicable and no more subsidized investments
• Tax regulations increasingly favouring annuities
  rather than lump sums (longevity / ageing
  concerns)
• A mandatory supplementary pension scheme ?
• Bachar Committee recommendations ? Banks to exit
  AM activities (Provident and Mutual Funds) and
  act solely as distributors (including Life
  policies and pension funds)

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The Israeli Insurance Market Future Expectations

• Life and Long Term Savings Markets
• Converging to one single marketplace (products,
  distribution channels, providers)
• A transparent, competitive, less profitable
  marketplace (maybe with growth potential if
  mandatory supplementary pension law passed in
  Knesset)
• General Insurance Market
• Mature and competitive market we expect a fairly
  moderate growth and a certain volatility in
  pricing and profitability levels

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Agenda
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Short history and overview of Generalis
investment in IsraelOur arena, the insurance
and long term savings market situation and
perspectivesDoing business in Israel some
impressions on the basis of our experience
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Our experience as investors a balance

• Premise our impressions are subjective and
  related to specific circumstances within the
  frame of a peculiar business sector
• General context a modern, developed, dynamic and
  informal business environment, with good level of
  infrastructures and high level of human capital,
  flexible labour market
• Satisfactory return on investment so far, a
  challenging future
• Supervisory and regulatory/legal environment
• - Supervisor focused on consumer protection and
  competition promotion (sometimes with unnecessary
  complications)
• - A solid and institutionalised legal frame, a
  strong Companys Law very keen on neat corporate
  governance and minority interests protection
• Overall a positive balance of our experience as
  investors

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Investing in Israel Generali Groups
experience
Generali Group in Israel
Thank you for your time
Alessandro Corsi, Area Manager Milan, June
16th, 2005