Teaser

Teaser
January 2015
Enquiries
All communications and enquiries related to this document should be directed to Citi and Halk Yatırım. Under no
circumstances should any employee of Halkbank and Halk Sigorta or any other member of Halkbank group be
contacted directly.
Citi
Kayıhan Kopmaz
Managing Director
Head of Turkish Investment Banking
Tel: +90 212 319 44 11
Email: [email protected]
Address:
Tekfen Tower
Eski Büyükdere Cad. No: 209, Kat: 4
34394, Levent
İstanbul, Turkey
Address:
Citigroup Centre
33 Canada Square
London E14 5LB
United Kingdom
Egemen Edgü
Director
Turkish Investment Banking
Tel: +44 20 7986 71 16
Email: [email protected]
Onur Canlıtepe
Vice President
Turkish Investment Banking
Tel: +44 20 7986 57 47
E-posta: [email protected]
Address:
Citigroup Centre
33 Canada Square
London E14 5LB
United Kingdom
1
Cyrille Cotte
Director
Insurance Investment Banking
Tel: +44 20 7986 72 12
Email: [email protected]
Address:
Citigroup Centre
33 Canada Square
London E14 5LB
United Kingdom
Halk Yatırım
Murat Çetinkaya
General Manager
Tel: +90 212 314 81 20
Email: [email protected]
Address:
Halide Edip Adıvar Mah.
Darülaceze Cad. No:20 Kat:4
34382, Şişli
İstanbul, Turkey
Bülent Sezgin
Assistant General Manager, Investment Banking
Tel: +90 212 314 82 80
Email: [email protected]
Address:
Halide Edip Adıvar Mah.
Darülaceze Cad. No:20 Kat:4
34382, Şişli
İstanbul, Turkey
Investment Opportunity and Transaction Scope

Pursuant to Privatization High Council’s (“PHC”) decision dated 5 February 2007 and numbered 2007/08,
Türkiye Halk Bankası A.Ş. (‘‘Halkbank’’) was taken into the privatization scope and program.

Pursuant to the PHC’s decision dated 29 December 2014 and numbered 2014/130, 93.49% of Halk
Sigorta A.Ş. (“Halk Sigorta” or “the Company”) shares, 89.18% held by Halkbank and 4.31% stake held by
Halk Yatırım Menkul Değerler Anonim Şirketi (“Halk Yatırım”), will be privatized via a Block Sale method
(“Transaction”).


As part of this Transaction, Halk Sigorta will also enter into a 15-year exclusive bancassurance agreement
with Halkbank for the distribution of non-life insurance products, subject to legal and commercial terms to be
agreed between the parties.
The privatization procedure of Halk Sigorta in relation to this Transaction shall be conducted in accordance
with the provisions of the Privatization Law numbered 4046.
Investment Case
Turkey: Strong Macro and Supportive Operating Environment
Underpenetrated Non-Life Sector with Profitable Growth
Prospects
Solid Non-Life Franchise with Diversified Business Mix and
Multi-distribution Model
Robust Bancassurance Platform with Significant Upside
Financial Strength and Track Record of Profitable Growth
Experienced Management Team with a Clear Strategic Plan for
the Future
Transaction Scope
Free Float
51.1%

Halkbank is planning to sell a 89.18% stake in Halk
Sigorta, together with an exclusive 15-year
bancassurance agreement for the distribution of non-life
products.

Halk Yatırım’s 4.31% stake in Halk Sigorta will be included
in the Transaction, currently held as a financial
investment.

The remaining 6.51% shares of Halk Sigorta are listed on
the Borsa Istanbul and are subject to Capital Markets
Board (“CMB”) legislation relating to listed companies. No
exemption has been requested for these shares from the
CMB in relation to this Transaction. The potential acquirer
will need to follow CMB legislation with regard to the
change of control of listed companies in Turkey.
48.9%
Total Free Float
Scope of Transaction
89.18%
100%
Life
Business
Pension
Business
Exclusive 15-yr
bancassurance
10.82%
Halk Yatırım
Portfolio
4.31%
Other
6.51%
0.07%
Pension
Monitoring
Centre
Note: Halk Sigorta’s 16.67% ownership in unconsolidated affiliate Türk P&I, specialist in maritime protection and indemnity insurance, will be transferred to Halkbank prior to the Transaction and do not fall into the Transaction
scope. Türk P&I had a total shareholders’ equity of TRY5.05m and total paid-in capital of TRY6m as of 1H2014.
2
Underpenetrated Non-Life Sector with Profitable Growth Prospects
–
–

Cross Country Comparison
Underpenetrated Non-Life Insurance sector
(1.3% GDP) compared to CEE and European
countries (2-3% average), driving future growth
prospects:
– Non-Life insurance sector growth of c.15%
CAGR over the last decade (in US$ term).
Sector size quadrupled in size since 2003.
Expected Turkish GDP growth of 4.4% over the
next 5 years compounded by further penetration
of non-life insurance into GDP should result in
material growth for the sector in the short and
medium term.
Increasing Technical profitability of the sector is
expected to be fuelled by scale benefits, new
product developments and improved underwriting:
–
–
–
2013 showed a material improvement in sector
technical profitability up to c.6%.
Development of new products and use of new
distribution channels with higher and more
stable margins are expected to improve the
long-term profitability of the sector (i.e.. health
and accident, bancassurance distribution,
telemarketing and other alternative channels).
Insurance players increasingly sophisticated,
importing best underwriting practices from
mature markets and launching selective
underwriting strategies.
Product Mix by GWP
100%
5%
Non-Life GWP as % of GDP

Averages of Non-life GWP as % of GDP
Mature markets(1): 3.1%
CEE(2): 2.0%
Turkey: 1.3%
Slovenia
4%
90%
Germany
80%
70%
2%
Croatia Czech Rep.
Poland
Turkey
Slovakia
Hungary
Bulgaria
1.3%
Serbia
1%
5,000
10,807 15,000
Italy
5%5%
13%
10%
13
13%
13%
14%
13%
14%
14%
13%
14%
12%
13%
12%
14%
14
18%
19%
19
30%
30%
20%
20%
34%
10%
45,000
32%
34%
19%
21%
18%
19%
18%
18%
21%
21%
21%
21%
23%
21%
26%
23%
26%
23%
23
32%
32%
32%
32%
31%
32%
29%
31%
26%
29%
26
2011
2012
2013
1H 20141H 2
2010
2011
2012
2013
Motor Third Party Liability Property
General Losses
Other
Technical Profitability (TRYm)
14
1.5%
6.4%
1.3% 1150
12
1.1%
1.1%
8
1.0%
1.1%
1.1%
1.1%
1.1%
1.1%
150
7.7
7.2
2.6
3.8
404
0.4%
4
4.8
5.6
6.7
7.8
0.9%
1.6%
227
109
20
(0.1%)
2.0%
0.6%
58
0.0%
9.4
(5)
(2.0%)
-350
0.7%
(4.0%)
(567)
(4.5%)
0
-850
0.5%
2003
2004
2005
2006
2007
2008
Non-Life Insurance GWP (US$bn)
Source: Sigma report, Insurance Association of Turkey.
Note: (1) Mature markets include Netherlands, Switzerland, Australia, UK, USA, Denmark, Germany, Austria, Italy and Belgium.
(2) CEE markets include Poland, Croatia, Slovakia, Bulgaria, Czech Republic, Slovenia, Hungary and Serbia.
(3) Technical Margin calculated as Technical Profit Balance / Net Earned Premium.
2009
6.0%
4.0%
650
0.9%
2
879
8.0%
3.8%
1.0%
8.5
6.3%
1.3%
1.2%
10
2010
2011
2012
2013
Non-Life Insurance GWP as % of GDP
(6.0%)
2006
2007
5
18%
18%
0%
2008
2009
2010
2008
2009
Motor Own Damage
Health
Turkish Non-life Insurance Market
10.7
3
5%5%
10%
10%
20%
21%
GDP per capita (US$)
6
5%5%
10%
10%
40%
0%
35,000
5%5%
8%10%
50%
20%
40%
Size of the circles is 10%
proportionate to the non-life GWP
25,000
4%5%
9%8%
21%
21%
50%
France
4%4%
8%9%
70%
21%
60%
60%
Spain
3%
100%
4%
8%
90%
13%
80%
2008
2009
2010
2011
2012
2013
(3)
Technical Profit/(Loss)
Technical Margin
Halk Sigorta - Business Overview (1/2)
Overview

Established in 1958 under the Birlik Sigorta brand name and rebranded as Halk
Sigorta in 2010.

Halk Sigorta is listed on the Istanbul Stock Exchange since May 2012 with a
market cap of US$168mn as of 1st January 2015.

Halk Sigorta is the 12th largest player in the Turkish Non-Life insurance
market with a 2.6% GWP market share as of 1H2014.

Halk Sigorta’s key differentiators in the Turkish Non-Life market are:

–
Its customer-centric service quality, its strong “Halk” brand name and
reputation
–
Established and close relationships with both its agency and bancassurance
channel
–
Its range of reasonably priced products
Halk Sigorta offers a large range of products ranging from Motor, Fire,
Property, Mandatory Earthquake and other natural disasters, General Losses,
Health and Personal Accident.
–
Historically, products predominantly sold by Halk Sigorta have been MOD,
MTPL, Fire and Natural Disaster.
–
Similar to most players in the Turkish non-life insurance market, majority of
GWP is generated through agents, complemented by the bancassurance
channel.
–



Economies of scale are supporting profitability levels.
As of 1H2014, share of bancassurance stood at 35%, significantly higher
than market average of 14%, with a focus on increasing bancassurance
1958
1998
1999
2000
2005
 Established under
 As per the change in  Expansion of reach to  Samsun and Bursa
“Birlik Sigorta” brand
regulatory framework,
national level started
regional offices
name as the first
Birlik Sigorta
with establishment of
established.
cooperative company
transferred its life
İstanbul, Adana,
in the Turkish
insurance business to
Elazığ and Antalya
insurance industry.
Birlik Hayat Sigorta.
regional offices.
2009
2010
2011
 Halkbank acquired a
63.3% of Halk Sigorta
stake from Halkbank
Personel Vakfı and
increased its stake to
78.3%, up from 15.0%.
2012
2013 - 1Y2014
 Halkbank injected
 Company renamed to  Company decided to  10.82% stake started 
TRY15.5m capital and
“Halk Sigorta”.
list in Borsa İstanbul’s
trading in Borsa
increased stake to
Secondary Trading
İstanbul in May.
89.18%. Paid in
Platform.
 Company’s paid-in
capital increased to
 Appointment of a new
capital increased to
TRY40m.
senior management
TRY70m.
team in December.
Paid-in capital of the
Company increased
to TRY94m in
1H2014.
Market Positioning by GWP
#
Com pany
1
Allianz Sigorta
GWP 1H 2014 (TRYm )
Market Share
2
Anadolu
3
AXA
4
AkSigorta
5
Mapfre Genel
6
Gunes
622
5.3%
614
5.2%
(1)
1,666
1,593
1,420
951
780
14.2%
13.6%
12.1%
8.1%
6.7%
–
Products sold in 874 Halkbank branches
7
Groupama
–
Wide distribution network of 493 agencies and 38 brokers
8
Ziraat
418
3.6%
The Company had 245 employees as of 1H2014:
9
Eureko
409
3.5%
–
10
Sompo Japan
336
2.9%
11
Ergo
326
2.8%
12
Halk Sigorta
300
2.6%
13
HDI
293
2.5%
14
Acıbadem
15
Zurich
181 employees in the HQ and 64 in regional sales offices.
Following the appointment of a new and highly experienced management
team in December 2011, the Company has achieved a strong GWP growth,
while also significantly improving bank penetration and profitability
Source: Company, Sigma report, Insurance Association of Turkey.
Note: (1) Includes Yapı Kredi Sigorta following the completion of merger.
4
Key Milestones
256
204
2.2%
1.7%
Halk Sigorta - Business Overview (2/2)
Non-Life Premiums by Channel
Bank GWP %
Gross Combined Ratio Evolution
TRYm
39.6%
31.3%
37.6%
37.5%
35.2%
68.7%
62.4%
62.5%
64.8%
1H2014
Net COR
Non-Bank GWP %
60.4%
118%
30%
257
82
124
300
3
14
177
271
2
13
154
270
206
4
1
119
96%
89%
177
2012
Bank
2013
Agency
Broker
102
106
1H2013
89%
1H2014
4%
9%
8%
3%
3%
11%
14%
9%
27%
25%
3%
30%
26%
2011
2012
16%
16%
2011-2013
CAGR
40%
38%
38%
Broker
5%
MTPL
43%
Direct
1%
Bank
35%
24%
64%
52%
54%
2013
1H2013
Fire and
Natural
Disasters
26%
Agency
59%
MOD
13%
1H2014
(2)
Expense Ratio
RoAE and Net Profit Evolution
Rank
30%
#13
#8
#13
#14
#18
#12
33.1%
17%
4.7%
3.9%
3.8%
22.7%
25.4%
42.2
3.3%
1.6%
1.5%
16%
13.4%
2.6%
2.3%
2.3%
1.9%
42%
22%
Accident Other
2%
Health 3%
4%
General
Losses
9%
Market Share by Product and Ranking
60%
43%
24%
(1)
13%
27%
24%
Loss Ratio
53%
20%
78%
87%
#6
22%
76%
27%
Direct
GWP Evolution by Product
5%
99%
88%
61%
2011
95%
117%
470
6
17
395
5
10
Product and Distribution Mix
1H2014
15.4
1.8%
1.6%
0.7%
0.6%
13.8
11.5
1H2013
1H2014
-8.9
98%
2011
2012
(3)
MTPL
Fire and Natural Disasters
Health
(4)
Other
2013
1H2013
(3)
MOD
General Losses
Accident
1H2014
MTPL
MOD Fire and General Health Accident Total
Natural Losses
Non-Life
Disaster
2013
Source: Company.
Note: (1) Gross Loss ratio calculated as (Gross Claims Paid + Change in Outstanding Claims Provisions) / Gross Earned Premium.
(2) Cost ratio includes both expense ratio and acquisition ratio.
(3) MTPL corresponds to Motor Third Party Liability and MOD to Motor Own Damage.
5
(4) Others includes maritime vehicles, transportation, aircraft liability, general liability and financial losses products.
1H2014
-19.5%
2011
2012
Net Profit
2013
ROAE
Halkbank: Robust Bancassurance Platform
Share Price Performance
 Second largest state-owned bank and
largest bank in Turkey by assets and
loans with market share of 7.9% and
8.2% respectively
6th
 Universal bank with an established
franchise in both corporate and retail
segments
 Strategic focus on SMEs, given
historical role to support this segment
 Nationwide distribution network of 880
domestic branches as of 1H2014
– Top 6 bank by branch network
25
1,318
15
984
10
7,3%
Consumer
8,3%
867
708
-2007
2008
2009
2010
2011
Halkbank
2012
2013
2015
Revenue Mix
Loans to Deposits
16.7%
16.8%
15.5%
16.2%
12.2%
16.0%
15.9%
14.3%
16.2%
13.9%
Other
1%
SME
39%
Loan Portfolio
Breakdown by
Currency
TRY: 72%
FX: 28%
Micro SMEs 13%
71.5%
68.8%
70.9%
70.3%
73.4%
2010
2011
2012
2013
1H 2014
NII
Funding Mix
Fees
RoAE and RoAA
82%
2.9%
2.9%
2011
2012
84%
98%
NPL Ratio
2010
3.0%
2.5%
2.6%
2013
1H2014
Basel II
Basel III
16.2%
15.9%
2.6%
14.3%
2.2%
Deposits Breakdown
Retail: 68%
Corporate: 32%
2.6%
Capital Adequacy
Basel I
Other
Liabilities
Equity
5%
11%
13.9%
14.4%
1.7%
31%
25%
25%
21%
16%
Deposits
65%
2010
Source: Halkbank unconsolidated financial statements, Banks Association of Turkey, Factset.
Note: (1) BIST-100 Index rebased to Halkbank IPO price of TRY 8.0 per share.
85%
Other
(1H2014)
Securities
Issued
12%
81%
3.8%
6%
Retail
27%
9,2%
542
(By Customer Type, 1H2014)
Corporate
27% Commercial
Mortgage
672
BIST-100
Loan Portfolio Breakdown
Interbank
7%
6
11,8%
Retail
880
5
 Over 14,500 employees
 Rated Baa3/Negative by Moody’s and
BBB-/Stable by Fitch
SME
970
– c.6,500 corporate and commercial
clients
– Market cap of US$7.4bn as of 1
January 2015
(By Loan Type, 1H2014)
1,649
992
– 7.7 million retail customers
 Conducted US$1.9bn IPO in 2007 floating
25.0% and in 2012 increased free float by
further 23.9% via US$2.5bn SPO
Market Share
(1H2014)
20
 Strong and stable deposit and customer
base
– 1.2 million SME customers
Branch Network
Market cap as at 1 Jan 2015:
US$7.4bn
(TRY / share)
Business Overview
2011
2012
RoAE
2013
RoAA
1H2014
2010
2011
2012
2013
Capital adequacy
1H2014
Disclaimer
This teaser (the “Teaser”) has been prepared at the direction of and from materials and information supplied by Türkiye Halk Bankası A.Ş (“Halkbank”) and Halk Sigorta A.Ş (“Halk Sigorta” or the “Company”) and solely in connection with the
possible sale of Halk Sigorta (the “Proposed Transaction”). The Teaser (references to which shall be deemed to include any information which has been or may be supplied in writing or orally in connection herewith or in connection with any
further enquiries) is being delivered to parties who, it is believed, may be interested in acquiring the Company. Citigroup Global Markets Limited (“Citi”) and Halk Yatırım Menkul Değerler A.Ş (“Halk Yatırım”) are acting as Halkbank’s
financial advisor and Citi is also acting as the financial advisor to the Republic of Turkey Prime Ministry Privatization Administration (“PA”).
By its acceptance hereof, each recipient agrees that they will use this Teaser for the sole purpose of deciding whether to proceed with a further investigation of the Company. This Teaser is not intended to form the basis of any investment
decision and should not be considered as a recommendation by Halkbank, the Company, Citi, Halk Yatırım, PA or any other person to the recipient of this Teaser. In all cases, interested parties should conduct their own investigation and
analysis of the Proposed Transaction and the information contained in this Teaser. This Teaser does not constitute an offer or invitation for the sale or purchase of securities or any of the business or assets described in it. No information set
out or referred to in this Teaser shall form the basis of any contract. Any prospective purchaser shall be required to acknowledge in the sale and purchase agreement for the Proposed Transaction (when, as and if executed) that it has not
relied on or been induced to enter into such an agreement by any representation or warranty, save as expressly set out in such agreement.
While the information contained herein is believed to be accurate, Citi and Halk Yatırım have not conducted any investigation with respect to such information and this Teaser has not been independently verified. No representation, warranty
or undertaking, express or implied is or will be given by the Company, PA, Halkbank, Citi and Halk Yatırım or their respective directors, partners, employees, advisers or representatives or any other person as to, and no reliance should be
placed on, the accuracy, completeness or fairness of this Teaser and, so far as permitted by law and except in the case of fraud by the party concerned, no responsibility or liability whatsoever is accepted for the accuracy or sufficiency
thereof or for any errors, omissions or misstatements negligent or otherwise relating thereto or for any loss however arising from any use of this Teaser or its contents or otherwise arising in connection with this Teaser. Only those particular
representations and warranties made by the Company in a definitive written purchase agreement, when and if one is executed, and subject to such limitations and restrictions as may be specified in such purchase agreement, shall have any
legal effect.
Neither the Company, PA, Halkbank, Citi and Halk Yatırım nor any of their respective directors, partners, employees or advisers nor any other person shall be liable for any direct, indirect or consequential loss or damage suffered by any
person as a result of relying on any statement in or omission from this Teaser and any such liability is expressly disclaimed. In all cases, interested parties should conduct their own investigation and analysis of the Company and the
information contained in this Teaser.
Any prospective purchaser of the issued share capital, assets or business as described herein will, so far as permitted by law and except in the case of fraud by the party concerned, be required to acknowledge, in the purchase contract or
in any offer made by it for the issued share capital, assets or business as described herein, that it has not relied upon or been induced to enter into such contract or to make such offer by any representation or statement contained herein.
Except where otherwise indicated, this Teaser speaks as of the date hereof. Neither the delivery of this Teaser nor the purchase of the Company shall, under any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof. In furnishing this Teaser, neither the Company nor Citi, Halk Yatırım, PA, Halkbank undertakes any obligation to update any of the information contained herein or to correct any inaccuracies
which may become apparent.
The PA is subject to Law No. 4046 during the tender process. This tender is not subject to State Tender Law No. 2886 and the PA reserves the right at its sole discretion to proceed or not with the bidding process, to award the contract at its
own discretion, and to extend the bidding deadline.
This Teaser does not constitute or form part of and should not be construed as an offer or invitation for the sale or purchase of shares, assets or business described herein or an inducement to enter into an investment activity. No part of
this Teaser shall form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.
The PA, Halkbank, Citi and Halk Yatırım reserve the right to negotiate with one or more prospective purchasers at any time and to enter into a definitive agreement for the sale of the Company described herein without prior notice to other
prospective purchasers. The PA, Halkbank, Citi and Halk Yatırım also reserve the right, without advance notice, to change the procedure for the sale of the Company as described herein or to terminate negotiations at any time prior to the
entry into of any binding contract for the purchase of the issued share capital, assets or business as described herein.
Citi and Halk Yatırım are acting for the PA and Halkbank and no one else in connection with the sale of the Company described herein and neither Citi nor Halk Yatırım will be responsible to any other person other than the PA and Halkbank
for providing the protections afforded to its clients for providing advice in relation to such sale.
In the United Kingdom, this Teaser is being distributed only to and is directed at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (the “Order”) or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49 of the Order (all such persons together being referred to as
“Relevant Persons”). The shares of the Company and/or one or more of its subsidiaries (the “Securities”) are available only to, and any invitation, offer or agreement or proposal to purchase or otherwise acquire the Securities will be
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In the event that there are any differences between this Teaser and tender specifications, the tender specifications shall overrule this Teaser. Nothing contained herein shall be construed as legal, tax or accounting advice.
By accepting this Teaser, the recipient agrees to be bound by the foregoing limitations.
7