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Bancatakaful: International Opportunities and Challenges December 6, 2007 Paris Sohail Jaffer Partner, FWU Group Bancatakaful: International Opportunities and Challenges December 6, 2007 Paris Sohail Jaffer Partner, FWU Group 2007 Euromoney “Best Takaful Award” Winner IFSB Observer Member

Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Income Simulation § Structured Asset Management Approach § FWU’s Value Added proposition § Appendices ü FWU Group Profile ü Consumer Banking Opportunities and Challenges for Islamic Banks 2

FWU’s definition of Bancassurance «Bancassurance is defined as the delivery and distribution of a FWU’s definition of Bancassurance «Bancassurance is defined as the delivery and distribution of a suitable range of tailored ‘bankable’ protection and long term savings and pension products designed to meet the lifecycle needs of the customer base of a bank or other financial institution. » Custo mer Dema nd Dr iven 3

FWU Group’s International Business Model ü Strategic Product ü Clone international Bancassurance success Partners FWU Group’s International Business Model ü Strategic Product ü Clone international Bancassurance success Partners FWU Shari’ah Board & Expertise ü Product & process innovation ü Structured asset management approach ü Web-based POS & Admin System ü customer convenience ü commission factoring solution ü tailored ‘white label’ solutions ü exclusive Retakaful solution ü quality training and sales support ü selection of service providers incl. custodian bank 4

Benefits of ‘White label’ Bancassurance Solution ü Bank defines own commission level ü Tailored Benefits of ‘White label’ Bancassurance Solution ü Bank defines own commission level ü Tailored customer solutions ü Seamless integration into Bank’s own brand Bank offers choice of both conventional Bancassurance and Takaful products ü Structured asset mgt. approach linked to open inv. architecture üBank has choice to participate in other modules of the service value chain (custodian, brokerage, transaction banking) 5

FWU Group‘s international Bank distribution and Strategic product partners Bank Distribution Partners Al Safat FWU Group‘s international Bank distribution and Strategic product partners Bank Distribution Partners Al Safat Takaful Company Kuwait Takaful Ikhlas Malaysia § Product administration, and claims management § Customer statements § Financial accounting § Filing with local regulatory authorities Bank Customers Bank is Custodian of all customer funds in the Savings Plan Local Life Insurance Product Partner FWU Int. Network Dubai, KL & Luxembourg Aman Insurance UAE Al Ahli Takaful Company KSA § New product development, § Product launch support § Product management, Marketing & Training support § Structured asset mgt. apporach § Systems support to Strategic Product Partner and Bank Distribution Partner § Product enhancements & Shari’ah compliance 6

FWU's International Bank Distribution partners include: Abu Dhabi Commercial Bank National Bank Of Dubai FWU's International Bank Distribution partners include: Abu Dhabi Commercial Bank National Bank Of Dubai Am. Bank Dubai Islamic Bank Mashreqbank ABN AMRO National Commercial Bank 7

Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Income Simulation § Structured Asset Management Approach § FWU’s Value Added proposition § Appendices ü FWU Group Profile ü Consumer Banking Opportunities and Challenges for Islamic Banks 8

Takaful Industry Update 2006 Total Takaful Premiums *GCC $2 bn (KSA $900 mio, UAE Takaful Industry Update 2006 Total Takaful Premiums *GCC $2 bn (KSA $900 mio, UAE $480 mio and Egypt 467 mio) **Asia/ Pacific $3, 1 bn (Malaysia/Indonesia $1. 4 bn) ***Europe, Turkey, China, India and USA $2, 3 bn Source: Shuaa Capital 9

Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Income Simulation § Structured Asset Management Approach § FWU’s Value Added proposition § Appendices ü FWU Group Profile ü Consumer Banking Opportunities and Challenges for Islamic Banks 10

FWU Group‘s FWU Group‘s "White Label" Savings, Education and Retirement Plans – Product Highlights Product features Customer Benefits § Plan benefits are available to all bank customers § All bank customers are insurable § No medical examination of bank customer required (up to a defined limit) § Eliminates important psychological barrier § Transparent and cost efficient structure § Greater customer comfort § Accelerated sales process using FWU’s Point of Sale and Administration technology § Immediate risk cover for bank customer § Plan benefits are available immediately to all bank customers § Bank customer convenience 11

Income Simulation – Regular Contributions Assumptions Number of Plans Average Duration Average Monthly Contribution Income Simulation – Regular Contributions Assumptions Number of Plans Average Duration Average Monthly Contribution Lapsation rate Fund growth rate Conservative 25 000 Average 40 000 20 years $ 150 10% year 1 declining to 2. 5% from year 4 7% p. a Best Scenario 50 000 12

Income Simulation – Lump Sum Contributions Assumptions Number of Plans Average Duration Average Contribution Income Simulation – Lump Sum Contributions Assumptions Number of Plans Average Duration Average Contribution Lapsation rate Fund growth rate Conservative 1 000 20 years $ 40, 000 10% year 1 declining to 2. 5% in year 4 7% p. a Average 16 000 Best Scenario 3 000 13

Income Simulation – Combined Contributions Assumptions Number of Plans Average Duration Average Contribution Lapsation Income Simulation – Combined Contributions Assumptions Number of Plans Average Duration Average Contribution Lapsation rate Fund growth rate Conservative 25, 000 20 years $ 40, 000 lump sum / $ 150 regular plan 10% year 1 declining to 2. 5% in year 4 7% p. a Average 40, 000 Best Scenario 50, 000 14

Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Income Simulation § Structured Asset Management Approach § FWU’s Value Added proposition § Appendices ü FWU Group Profile ü Consumer Banking Opportunities and Challenges for Islamic Banks 15

Our Quant Models Focus on Fund Model - SAM § We run two models Our Quant Models Focus on Fund Model - SAM § We run two models - Fund Selection and Allocation (Selection & Allocation Model – SAM) - Equity Selection 16

Funds – Investment Process 17 Funds – Investment Process 17

SAM - Selection & Allocation Process Flow Selection = find the 8 best funds SAM - Selection & Allocation Process Flow Selection = find the 8 best funds Allocation = Find best weight for each fund Constraints: Universe of 20 funds -max weight < 20% - limited amount invested in a fund Filter Return > 1% Volatility < 20% 18

FWU‘s Dynamic Fund Selection and Allocation Model (SAM) Allocation model (key value added) § FWU‘s Dynamic Fund Selection and Allocation Model (SAM) Allocation model (key value added) § Overweighting of the outperformer § Underweighting of the underperformer 19

Investment Proposal for Regular and Single Premium Savings Plans FWU‘s Dynamic Fund Select & Investment Proposal for Regular and Single Premium Savings Plans FWU‘s Dynamic Fund Select & Allocation Model (SAM) Bank Customer Risk Profiles Takaful Company‘s Internal Funds with Custodian Bank Conservative Balanced Growth Dynamic Customer Choice 20% 80% 50% Equity Pool 50% 80% 20% 90% 10% Cash Pool Allocation to Best Perfoming Sharia Compliant Mutual Funds Launched as internal funds of FWU‘s local Takaful Product Partner 20

Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Income Simulation § Structured Asset Management Approach § FWU’s Value Added proposition § Appendices ü FWU Group Profile ü Consumer Banking Opportunities and Challenges for Islamic Banks 21

Value added for Bank Distribution Partner and end consumer Enhance retail product offering with Value added for Bank Distribution Partner and end consumer Enhance retail product offering with own brand Low cost market entry Increase fee annuity revenues Expand retain individual customer relationships Lifecycle Savings & protection plans Transparent terms and conditions and charging structure Enhance returns through Dynamic Fund Allocation Model Plan accumulates collateral value Rapid sales process Payment and Investment flexibility Optimise synergy between bank customer and product groups Choice of beneficiaries Bank Distribution Partner Consumer Value Proposition 22 22

The value added – why FWU Group ENTREPRENEURIAL INNOVATION PARTNER ü Customised product design The value added – why FWU Group ENTREPRENEURIAL INNOVATION PARTNER ü Customised product design ü Product training and sales support ü Sophisticated Point of Sale and Administration System ü Dynamic funds select and allocation model ü Business simulation model ü Cost efficient Agency structure ü Regional service hubs ü Unique Retakaful arrangement 23

Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Contents § FWU’s International Business Model § Takaful Industry Update § Product Highlights and Income Simulation § Structured Asset Management Approach § FWU’s Value Added proposition § Appendices ü FWU Group Profile ü Consumer Banking Opportunities and Challenges for Islamic Banks 24

Appendix I - FWU-GROUP‘s Core Business Competencies Bancassurance - Asset Management - Factoring Germany Appendix I - FWU-GROUP‘s Core Business Competencies Bancassurance - Asset Management - Factoring Germany Luxembourg Austria Italy France Saudi Arabia United Arab Emirates Kuwait Pakistan Malaysia The group is well positioned to meet the life assurance, investment and pension needs of institutional and private clients in Europe, Middle East and Asia with state of the art bancassurance, Life Takaful and quantitative asset management services. 25 25

Group – Profile § The FWU Group is an entrepreneurial financial services group with Group – Profile § The FWU Group is an entrepreneurial financial services group with headquarters in Munich, Germany. § FWU International Network established in Luxembourg, Dubai Internet City (DIC) and Kuala Lumpur. § Group shareholders include Swiss Re Frankona, an international re-insurer, and European banks and insurance companies. § Core activities are Bancassurance, Savings & Pension Plans and Asset Management. § Group subsidiaries include: ü an Asset Management Company (PREMIUM SELECT LUX S. A. ) ü a Life Insurance Company (ATLANTICLUX S. A. ) § Both are based and regulated in Luxembourg. 26

FWU-GROUP An entrepreneurial and institutional partnership Swiss Re Frankona Rückvers. AG, Dr. Manfred J. FWU-GROUP An entrepreneurial and institutional partnership Swiss Re Frankona Rückvers. AG, Dr. Manfred J. Dirrheimer and Partners Munich 95% 5% FWU AG Munich, Luxembourg, Dubai, Kuala Lumpur 74, 9% ATLANTICLUX Life Insurances S. A. Luxembourg PREMIUM SELECT LUX S. A. Luxembourg 25, 1% Branch Bolzano 100% 80% 25, 1% VHV Versicherungen, Hanover Branch Luxemburg International HQ Branch Dubai Regional HQ ME Branch Kuala Lumpur Regional HQ FE 13, 25% 100% 10% FWU Commission Factoring Gmb. H FWU Payment Services Gmb. H Al Ahli Takaful Company Wave Asset Management AG Munich Jeddah, KSA Hamburg 13, 25% IFC International Finance Cooperation Washington 30% National Commercial Bank, Jeddah, KSA 7, 5% 90% VHV Versicherungen, Hanover 27

FWU Group Regional Customer Service Hubs Luxembourg Dubai for the Middle East Sales support FWU Group Regional Customer Service Hubs Luxembourg Dubai for the Middle East Sales support and training for the distribution partners Kuala Lumpur for the Far East Product management Systems support Sales Development of new Support Product applications 28

FWU International Advisory Board § *Abdulhadi Al. Shaif, Chairman § Abdulaziz Al-Mansour, CEO Al FWU International Advisory Board § *Abdulhadi Al. Shaif, Chairman § Abdulaziz Al-Mansour, CEO Al Safat Takaful, Kuwait § Dr Mohammed Daud Bakar, President International Institute of Islamic Finance Education, Malaysia § Abdulkader Thomas, CEO Shape Financial Corporation Kuwait § Ayman Khaleq, Partner, Vinson and Elkins, Dubai § Professor Dr Volker Nienhaus, President, University of Marburg, Germany and adviser to IFSB § *Ex CEO, National Commercial Bank, Jeddah 29

Our Positioning in Takaful FWU was the winner in the category „Best Life Takaful Our Positioning in Takaful FWU was the winner in the category „Best Life Takaful Provider“. Financial Bridges Award 2007 for Best Islamic Finance Organisation World Finance Islamic Banking Awards 2007 Takaful (Life & General) 30

Appendix II - Consumer Banking Opportunities and Challenges for Islamic Banks § According to Appendix II - Consumer Banking Opportunities and Challenges for Islamic Banks § According to the 2005 -06 World Islamic Banking Conference (WIBC) Competitiveness report authored by Mc. Kinsey and Company, § “Consumer banking will be the main source of steady profits. Capturing the consumer banking opportunity and appealing to a broader consumer base is key for Islamic Banks. So far Islamic banks have managed to capture customers who have a strong preference for Sharia compliant products. § Going forward, they will have to broaden their appeal to customers who are interested in Sharia compliant products but are not ready to sacrifice returns, service or convenience. § To do so, Islamic banks need to improve their service levels, network convenience and staff knowledge while developing critical enablers 31 (i. e. operations, risk management and people management)”.

Consumer Banking Opportunities and Challenges for Islamic Banks The report findings include: § “Successfully Consumer Banking Opportunities and Challenges for Islamic Banks The report findings include: § “Successfully delivering against customers’ expectations requires a complete rethink of the bank’s approach § Islamic banks will strongly need to improve their quality of service and distribution network § Islamic product offering presents major gaps and customers want to see some of these gaps closed § Customers would like to see an improvement in price/returns of banking products” 32

Consumer Banking Opportunities and Challenges for Islamic Banks § According to the WIBC Competitiveness Consumer Banking Opportunities and Challenges for Islamic Banks § According to the WIBC Competitiveness report “Islamic banks will need to make substantial efforts to meet expectations. To capture the growth thrust in Consumer banking, Islamic banks will have to: § Focus the offering and develop wider product range § Expand network and use branch channels § Step up service quality and knowledge § Ensure competitive pricing” 33

Contact Mr. Sohail Jaffer Partner, FWU Group FWU International Branch 4 a, rue Albet Contact Mr. Sohail Jaffer Partner, FWU Group FWU International Branch 4 a, rue Albet Borschette L-1246 Luxembourg Tel: +352 – 26 197 701 Fax: +352 – 26 197 801 Email: S. [email protected] com The information in this presentation does not constitute a sales offer, investment advice or an offer for the acquisition of financial products or instruments, and shall not in this regard imply legal obligations for the FWU Group or anybody else towards the readers of this presentation. This presentation is solely intended to provide information on matters of interest for the readers and such information is not 34 meant to replace the knowledge and the judgment of the readers who should make all appropriate inquiries.