GEORGIAN HEALTH CARE & INSURANCE MARKET INSURANCE COMPANY ALDAGI - PowerPoint PPT Presentation

GEORGIAN HEALTH CARE & INSURANCE MARKET INSURANCE COMPANY ALDAGI BCI Presenter: Nikoloz Gamkrelidze, ALDAGI BCI, CEO FEB 2011

Health Care Market - 8% Of GDP Out Of Pocket Spending - 72% Of Total Health Care Expenditure Fragmented Health Care Market New Governmental Initiative - Insurance Companies In Health Care Business Aldagi BCI – The Only Company Running Managed Chain Of Clinics Since 2006 Planned Expansion – Launching 6 New Hospitals In 2012 Attractive Investment Opportunity ALDAGI BCI INSURANCE Outstanding Results in 2010 - 64% Net Profit Growth; ROAE - 25.6%

HEALTH CARE MARKET IN GEORGIA 3 TOTAL HEALTH CARE EXPENDITURES CIS COUNTRIES COMPARISON Y2009 Per capita Total Government SOURCE: WHO. expenditure on expenditure expenditure on World Health Statistics 2010 health (US$) on health as % health as % of of GDP total Health expenditure Armenia 133 4 47 Georgia has Azerbaijan 140 4 27 Still, the share of Belarus 302 7 75 one of the governmental 191 8 18 GEORGIA highest rate expenditure in Kazakhstan 253 4 66 of health care total health care Kyrgyzstan 46 7 54 expenditure sector is the Moldova 127 10 51 as % of GDP lowest in Russia 493 5 64 among other Georgia among Tajikistan 29 5 22 low income European Turkmenistan 139 3 52 countries countries Ukraine 210 7 58 Uzbekistan 41 5 46 CIS AVERAGE 175 6 48 EU-12 1379 7 72 AVERAGE EU15 4134 9 78 AVERAGE

HEALTH CARE MARKET IN GEORGIA 4 MARKET STRUCTURE ! ! ! NO SIGNIFICANT COMPETITORS OPPORTUNITY ! ! ! HIGH SPENDING PER Governmental TO CAPTURE CAPITA spending Out of pocket HUGE 18% spending CUSTOMER 72% ! ! ! CONSIDERABLE BASE Insurance PROFIT MARGINS spending 10% HEALTH CARE EXPENDITURE PER CAPITA – USD 191 HEALTH CLAIMS PER CAPITA – USD 18.86 TOTAL HEALTH CARE EXPENDITURE: more than USD 1.0 BN

Health Care Market - 8% Of GDP Out Of Pocket Spending - 72% Of Total Health Care Expenditure Fragmented Health Care Market New Governmental Initiative - Insurance Companies In Health Care Business Aldagi BCI – Sole Company Running Managed Chain Of Clinics Since 2006 Planned Expansion – Launching 6 New Hospitals In 2012 Attractive Investment Opportunity ALDAGI BCI INSURANCE Outstanding Results in 2010 - 64% Net Profit Growth; ROAE - 25.6%

HEALTH CARE MARKET IN GEORGIA 6 FRAGMENTED MARKET Highly fragmented Health Care market despite higher health care expenditure as % of GDP in Georgia compared to low & middle income European countries ! No managed chains of outpatient & inpatient centers ! Depreciated hospitals of the Soviet era ! No managerial capacity (Inexperienced managers,) ! Medical equipment and service delivered in hospitals below any standard requirements AMPLE ROOM FOR IMPROVEMENT

HEALTH CARE MARKET IN GEORGIA 7 GOVERNMENTAL REFORMS GOVERNMENTAL ATTEMPT TO COPE WITH FRAGMENTED HEALTH CARE MARKET: GOVERNMENTAL REFORM IN 2007 GOVERNMENTAL REFORM IN 2010 INSURANCE COMPANIES IN 100 NEW HOSPITALS HEALTH CARE BUSINESS Governmental Health Insurance Government initiated privatization of Programs envisage establishment all hospital assets under the liability to of small & medium-sized hospitals build health care centers in by the private insurance companies accordance with international that supply health insurance standards services according to the region of their operations REFORM DID NOT SUCCEED reasons 46 SMALL & MEDIUM SIZED HOSPITALS TO BE BUILT BY INSURANCE COMPANIES FINANCIAL CRISIS IN 2008 FAILURE OF TENDER WINNERS

Health Care Market - 8% Of GDP Out Of Pocket Spending - 72% Of Total Health Care Expenditure Fragmented Health Care Market New Governmental Initiative - Insurance Companies In Health Care Business Aldagi BCI – Sole Company Running Managed Chain Of Clinics Since 2006 Planned Expansion – Launching 6 New Hospitals In 2012 Attractive Investment Opportunity ALDAGI BCI INSURANCE Outstanding Results in 2010 - 64% Net Profit Growth; ROAE - 25.6%

ALDAGI BCI INTEGRATED DELIVERY NETWORK 9 EXISTING AND PLANNED MEDICAL CENTERS ALDAGI BCI operates 5 In 2010/11 ABCI outpatient & 1 inpatient investments in building centers since 2006 one large and 5 medium- sized hospitals in the country’s largest region 21% of ABCI total health amounts to US$ 15 MLN claim expense is captured by these medical centers (48% of outpatient claims The addition of 6 medical expense) centers will enable ABCI capture more than 40% of its hospitalization claim Aldagi BCI Clinics expense network is the only managed health care chain in the country 6 new hospitals to be launched in Q1 2012

ABCI BUSINESS MODEL 10 CAPTURING CUSTOMER BASE CAPTURING CUSTOMER IN TWO WAYS HEALTH CARE INSURANCE BUSINESS INCREASED PENETRATION Offering health care services ENHANCED UP SELLING CUSTOMER INSURANCE PRODUCTS BASE IN CUSTOMERS INSURANCE CAPTURED IN COMBINED PRODUCT: RISK & HEALTH CARE SERVICE COMPONENT TOGETHER

ALDAGI BCI - KEY FINANCIAL FIGURES 11 FINANCIALS OF ABCI HEALTH CARE BUSINESS REVENUE GENERATED WITH EXISTING 6 Selected financial data of OUTPATIENT CLINICS ABCI Health care business GEL ‘000 Y2009 Y2010 Total Revenue 6,215 7,204 COGS -3,631 -3,830 Gross Profit 2,584 3,373 Total Operating Costs -1,227 -1,327 EBITDA 1,356 2,047 Net Profit/Loss 827 967 Total Assets 8,353 10,304 Total Liabilities 2,588 3,572 Total Equity 5,765 6,732 ROAA 10.4% 10.4% ROAE 15.5% 15.5% Operating Leverage 13.4% 22.5% Gross Profit Margin 41.6% 46.8% EBITDA Margin 21.8% 28.4% Net Profit Margin 13.3% 13.4%

Health Care Market - 8% Of GDP Out Of Pocket Spending - 72% Of Total Health Care Expenditure Fragmented Health Care Market New Governmental Initiative - Insurance Companies In Health Care Business Aldagi BCI – Sole Company Running Managed Chain Of Clinics Since 2006 Planned Expansion – Launching 6 New Hospitals In 2012 Attractive Investment Opportunity ALDAGI BCI INSURANCE Outstanding Results in 2010 - 64% Net Profit Growth; ROAE - 25.6%

GEORGIAN INSURANCE MARKET OVERVIEW 13 MARKET DATA MARKET GOVERNMENTAL INSURANCE PROJECTS IN STRUCTURE GEORGIA BY GPW (Health Insurance) 184,128 Health & GEL ‘000 Life 76% HEALTH INSURANCE 131,674 129,040 PROGRAMS FINANCED 109,527 FROM STATE BUDGET 18,528 Property & Casualty MARKET 24% 491% 68.1% -28.5% -2.0% GROWTH 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 INSURANCE MARKET BY GPW EXCL. GOVERNMENTAL PROJECTS 211,197 (Life & Non-Life) Property 185,144 GEL ‘000 38% 161,903 GEORGIAN Liabilities 95,667 134,763 24% MARKET BY INSURANCE 66,249 59,025 LINES 43,641 Cargo 2% MARKET Casco 35.3% 12.2% 44.4% 40.9% 20.1% 14.4% 14.1% OTHER GROWTH 30% 2% Aviation 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3%

GEORGIAN INSURANCE MARKET OVERVIEW 14 COMPETITION 17 insurance companies operating in Georgia GPI 18% IRAO More than 80% of the market is held by top 5 16% insurance companies MARKET IMEDI L 17% SHARES BY GPW ALDAGI BCI IS A UNION OF 4 IC GROUP YE2009 14% INSURANCE COMPANIES ALDAGI BCI Aldagi Acquires Insurance 19% OTHER Company SALBI 16% BCI Acquires BoG Acquires BCI 2005 Insurance Company 2004 Europace Insurance Company BCI is Founde d 1998 BCI Acquires ALDAGI Insurance 2006 Company ALDAGI is Founded 1990 2007 Aldagi BCI Merger 2008

INSURANCE MARKET IN GEORGIA 15 DENSITY & PENETRATION PENETRATION (GPW/GDP) INSURANCE DENSITY Nascent state of Y2009 (GPW PER CAPITA USD) Y2009 Georgian insurance sector translates into UK UK 4,579 12.9% extremely low France 4,269 France 10.3% insurance penetration US US 3,710 8.0% and density levels Germany 2,878 Italy 7.8% Italy 2,729 Germany 7.0% Market research Czech Rep. 649 India 5.2% reports reveal that Poland 403 Czech Rep. 3.9% majority of population Estonia 357 Poland 4% does not have Russia 281 China 3.4% adequate perception C&E EUROPE 263 Brazil 3.1% of property & personal Brazil 252 C&E EUROPE risks, thus is reluctant 2.7% to pay money for risk Latvia 182 Estonia 2.7% minimization Lithuania 168 Russia 2.5% China * 121 GEORGIA 1.9% EXCLUDING GOVERNMENTAL Turkey 103 Latvia 1.7% PROJECTS IN GEORGIA : India 54 Lithuania 1.7% PENETRATION * GEORGIA 22 Turkey 0.9% 1.3% * Figures for Georgia excludes SOURCE 1 : Swiss Re sigma study “World insurance in 2009” SOURCE 2: CEA Statistics N °42, “European Insurance in Figures” Governmental Projects

ALDAGI BCI - INSURANCE BUSINESS OVERVIEW 16 KEY PERFORMANCE INDICATORS UNDISPUTED MARKET PERFORMANCE DYNAMICS ( NET PROFIT, ROAE) LEADER IN CORPORATE & NET PROFIT RETAIL INSURANCE Consolidated Figures GEL 7.1 BUSINESS MLN 20 years of experience on 5.0 the market MLN 4.2 MLN The largest subsidiary of the largest financial group ROAE -11.4% -40.3% 27.2% 25.6% in Georgia (100% shares held by Bank of Georgia 2007 2008 2009 2010 Group) Contribution FORECAST in Group -1.6% …% …% 6.1% Profit The largest insurer of property & casualty risks -1.2 ML N The largest portfolio in Group Health Insurance NET LOSS -6.3 Widest range of distribution MLN channels in the country