Unit Linked Products Yannis Vasilatos November 2013

The policyholder bears the investment risk. Definition UL PRODUCTS Premiums are invested directly in a pool of assets. Returns to the policy-holder are dependent on the performance of the investment pool. An insurance element is always attached. The policyholder bears the investment risk.

Types of U L products Pure UL without guarantees Hybrid products CATEGORY BRIEF DESCRIPTION Pure UL without guarantees A pure financial savings product, linked to the performance of a particular portfolio, with no financial guarantees attached, but which pays the market value of the units at the earlier of maturity, death or surrender. Hybrid products They combine merits of traditional participating life insurance and UL products by periodically shifting funds between the policy reserve stock of an insurer (with an interest rate guarantee), a guarantee fund and / or an equity fund. Variable annuities The funds are placed with an insurance company and the policyholder chooses how the money will be invested. The policyholder chooses from a pre-selected list of guarantees; each guarantee caries a certain cost. Structured UL UL guarantees are ensured by periodically allocating assets to risk-free and risky investments; such a mechanism invests funds in a pro-cyclical way and might lead to a cash-lock of the unit price during an observation period. Capital guarantee products The capital guarantee ensures that the investment is protected from market downturns.

Main qualities of U L products Act as a vehicle of regular savings for the purpose of building a personal pension fund. Flexible risk profile, tailored to the personal risk appetite of the policy owner. Allow individuals with low available funds to invest in sophisticated investment/financial tools. Regular premium UL products have an inherent mechanism to absorb the effect of market volatility. Level of transparency on the performance of each policy is higher compared to traditional insurance products.

EUROPE Main trends and opportunities UL products are leading products in life insurance. UL individual pension markets are continuously growing in Europe. After the 2008 financial turmoil, when UL policies‘ surrender phenomenon registered a historical peak, the investment linked insurance policies were the first to benefit from the financial markets recovery during 2010 and later. In 2010, UL premiums covered over 62% of total life insurance premiums growing by 53% vs. 2009. In 2011, UL insurance GWP grew by about 18.5%, vs. 4.3% growth for the Life market overall. UL life insurance line represents now a 40% share of the entire C.E.E. life market. Strong customers’ demand for guarantees within UL products. EUROPE

UL policies performed well by registering growth of 8.1% in 2012. Country examples EUROPE UL is the main individual life business line. In 2011 UL business increased its share in the market portfolio by 5%. It is the most developed UL market in Europe. Growth is mainly driven by individual pension market and offshore bonds. UL policies performed well by registering growth of 8.1% in 2012. The average share of UL products in total reserves is approximately 15% in 2012. The only market where UL business experienced a slowdown versus Life market.. United Kingdom Romania Italy Poland France

The Greek market experience U L products introduced in 1994. Launching was strong to be followed by a long period of volatility before nearing maturity. Proved resilient during current financial crisis. Today UL products represent 21% of Life market GWP vs. 25% in 2008. Drove growth of the institutional investors market, adding depth to asset portfolios with long term investment horizon. Main challenges related to delays in properly training sales associates and building the right tools to educate customers.

Focus areas Action to further analyze and investigate the consumer trends on UL products will be taken, mainly by cross-sectoral analysis under the auspices of the Joint Committee of the European Supervisory Authorities (ESAs) CONSUMERS Growing interest in UL products ►Complex products ►The associated risks and costs are not sufficiently transparent to policyholders ►Hybrid life insurance products which combine UL offerings with some with profit and/or guarantee element REGULATORS In response by Regulators: ►Increased cost transparency is required ►Guidance on the pre-contractual disclosure ►Structured licensing process for distribution channels

Managing challenges Taxation for policyholders, company taxes, investment assets Regulatory controls on capital, reserves, transparency Financial reporting under IFRS, local GAAP Leveraged components from US project to jump start the project and reduce overall expense The same code base for the user interface Started with the same JSON base, expanding as needed The same data standardization toolkit and servers (with new library) The same Web Service implementation for loading “Activity” data The same MongoDB hardware for DEV, QA and PROD Expanded the User Interface capabilities to address new requirements from Greece Coded functionality to allow for UI localization (Greek UI) Can now render Policy Riders Implemented Active Directory authentication to support user authorization Designed new data structure to support multiple roles for a person on a single contract (the same person as Owner and Insured) Created all enhancements for ease of re-use by additional countries Localization & Active Directory work will be leveraged by Japan in 2013 Payments type data (introduced by Greece) will soon be loaded into US Wall for certain Group Products Policy Riders capability has high potential of future re-use To continue the global nature of the application, Greece IT team will be key stakeholder in UI Version 2 Design over the next several months

Market evolution – new horizons Low interest rates prevail globally affecting returns Guaranteed returns become very expensive to offer Consumers get more educated every day Other industries are copying UL products Managing risk is our business

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