Ståle Frausing – Head of Broker & International Dept.

Oslo, 22. June 2011

Consequences of the commission ban in the Norwegian insurance market

Vital- part of DnB NOR, Norway’s leading Bank

Pre-tax operating profit before write-downsNOK million

The DnB NOR Group's market capitalisationNOK billion

• 2.300.000 retail bank customers• 200.000 corporate clients• Market leader in all main segments• 11.000 employees in Norway and 3.000 abroad• Specialized in Shipping, Energy and Sea-food abroad

* 1EUR=8NOK, 1USD=5,5NOK, 1GPB=9NOK

•Norway’s largest provider of individual

and group life insurance and pension

savings

•Life insurance– 1 million retail customers– 26 000 agreements with companies,

municipalities and public enterprises

Vital

Our marketplace- Brokers operate solely in corporate market

• Personnel insurance

> Workman Compensation, mandatory covers paid by

employer

> Group Life, standard cover in most industries

> Limited demand for Health-Insurance

• Disability & Old Age Pension

> 1 million Individuals in minimum mandatory DC-scheme• > 1 million Individuals in medium/high-contribution

DC-schemes or DB-schemes,

Disability-cover is normally included.

Insurance brokers in Vital

• 35% of the pension market and 60% of personal insurance is covered by brokers

• Vital is doing business with 23 brokers of which “the big 4” represents 80% of the volume

• The 3 largest brokers are international: AON, Willis and Mercer

• Commission-ban was introduced in Norway in 2004 for non-life insurance and in 2007 for life-and pension-insurance.

Consequences of the commission ban

Providers introduced a 2-price system

-Broker’s customers received a rebate representing provider's lower cost of service

Brokers started to bill their customers for their services - brokers' loyalty shifted from the provider to the customer

- increased competition between brokers focusing on brokers ability to

- give administrative relief for customers- consulting in connection with customers EB program- achieve lower prices

Brokers' business model - professionalism

Commision ban has not yet led to structural changes in the industry, but the business models has been greatly professionalized

• Several firms focuses less on day-to-day value chain and more at high-value- consulting: - running tenders - renegotiates rates - adapt and change pension plans, such as the transition from DB to DC

• Billing Models: a) Basic solutions covering access / x-consulting hours + tender every x year

b) Basic solutions + separate pricing of transformation from DB to DC, change and tender

c) Basic + profit-share linked to price decrease

Most brokers have managed this adaptation in a good way. AON delivered a verygood 2010 with 20% profit margin.

Vital customers:What matters most to your business when choosing a pension provider?

150+ employees

År 150+

2010 59

8 %

16 %

19 %

44 %

22 %

25 %

23 %

13 %

23 %

27 %

20 %

11 %

28 %

16 %

22 %

16 %

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 %

Effektivkundebetjening

God rådgivning

God avkastning

Gode priser

Nevnt som viktigtste

Nevnt som nest viktigste

Nevnt som tredje viktigste

Nevnt som fjerde viktigste

good prices

good returnon assets undermgt.

good advice &consulting

efficient customer service

mentioned # 1 importantmentioned # 2 importantmentioned # 3 importantmentioned # 4 important

Consequences

For customers:• The former brokers were well paid in the form of comission from suppliers

without necessarily doing a good job for the customer. • Now we have brokers working for the customers and they are depending

of showing their value - otherwise they will loose the client to other brokers.- better consulting- lower cost of pension and personnel insurance

For providers:• Previously, we lived well in a sheltered competitive climate. • Today we are experiencing very strong competition where the market is

highly price focused as a result of the brokers need to show value to his client.- pressure on margins / pricetariffs / underwriting- need to cut costs to maintain earnings

Thank you!