EuroBusiness Media (EBM): CNP Assurances, France's largest personal insurer, just reported first-half profit. Gilles Benoist, welcome. You are the CEO of CNP Assurance. What are your comments on the company's performance in the first-half?
Gilles Benoist (GB): I think we can describe this performance as very good. In a brilliant market in France, we have maintained our share of the market. We have increased our share of the market in Italy and Brazil. Our real operating result -- the very important [indicator] -- has increased by more than 13%, and the net result by 16%. The embedded value of the company has increased. And, very importantly, the value of the new business has increased, meaning that the profitability of CNP is better.
EBM: Just now you described a strong first-half, and yet your net profit decreased when stated in IFRS. How do you explain the disconnect between your business performance on the one hand, and your net financial results on the other?
GB: Well, it is very clear. I explained last year for the mid-term result, and for the whole year result, that IFRS norms would introduce volatility in the results of insurance companies. This volatility has been very positive in the first-half of 2005 and at the end of 2005. It is now going in the other direction. It can be exactly the reverse in six months. And I think that what is important for an insurance company, and for a life insurance company, is the creation or not of value: profitability -- net recurrent underlying profit. And on that front, I am completely confident in the future of CNP.
EBM: You have recently renegotiated your distribution agreement, which has both business implications and capitalistic implications for CNP. Starting with the capitalistic ones: you have agreed to buy the 50% of Ecureuil Vie that you already don't own. What can you tell us about this deal in terms of price, calendar, financing and strategy?
GB: Well, this will be a real simplification of our relations with the savings banks. On the side of the savings banks, the decision has already been made, it has been published, on their agreement to do that, and on the price. But on our side, in exactly two weeks, the advisory board will have to discuss and accept our proposal. So let's have a meeting again in two weeks [to answer].
EBM: As part of the renegotiated distribution agreement, your distributors will receive higher commissions, which will decrease your margin on all new business. What is your comment on the impact of the new agreement? And should we be concerned by the fact that you will see lower margins on new business?
GB: Well, you don't need to feel concerned, because of course we have simulated the impact of these new agreements. And in the first-half, the impact on the net result would have been exactly one million euros. That is quite insignificant. And already, looking at the first-half, in fact the increase of commissions that we have given has already been offset by the profitability increase on unit-linked products, which have sharply increased in our premiums. And that is exactly the sense of our agreement. And we have told the market that the more unit-links we make, the more these agreements will be win-win agreements.
EBM: You recently made an acquisition in Italy. What is your update on the state of the Italian life insurance market? And how is CNP affected by the ongoing shakeup in the Italian market, of which the Intesa /San Paulo IMI merger is emblematic?
GB: Well, first, I am really satisfied with the performance of our joint venture with Capitalia - its name is CNP Capitalia Vita. While the market in Italy was going down by 8% in the first-half, our company increased its premium by 18%. So we have gained a share of the market in Italy. The second point: Intessa/San Paulo IMI is good news for CNP, because it preserves the independence of our beloved partner Capitalia. Of course, with Capitalia we are looking very attentively at the Italian market, and at any possibility of expanding our business in life insurance.
EBM: What is your growth outlook for the French life insurance market in the second half of 2006, and beyond in 2007?
GB: I agree with the figures that you can get from the French Federation of Insurance, which show that by the end of 2006 the progression of the French market will of course not be 20%, but perhaps nearer 17%. Do not forget that half of this progression will be due to the transfer of banking products named PEL, and that the natural increase is half the global increase. And due to that effect, 2007 will not be on the same track. There will be a base impact. There will be a very slow, and not as important, transfer of PELs. So, I also agree with the French Federation which says that the increase next year will tend to be between +5% and +10%, no more.
EBM: And, finally, you are pretty much in line with your business plan which aimed to have 15% of your revenues generated internationally. What is your update today about your acquisition strategy and your plans for international expansion?
GB: Well, if you look at the profitability of our subsidiaries, and mostly in Brazil, it is interesting for us to find new areas of growth outside [France]. So, we are still looking at opportunities in Europe. Some projects are in the pipe. Perhaps they will get out before or after the end of this year, but we still have in mind the idea that it must be profitable. So this makes a number of projects disappear.
EBM: Gilles Benoist, CEO of CNP Assurance, thank you very much.
GB: Thank you.
