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EBRD in Ukraine: Challenges
and Opportunities
Noel Edison
European Bank for Reconstruction and Development
Insurance & Financial Services
Director
EBRD Background




AAA-rated International financial
institution, founded in 1992 and located in
29 countries from central Europe to central
Asia
Shareholder breakdown
Japan
9%
Owned by 61 countries and two intergovernmental institutions
Largest single investor in Central and
Eastern Europe (CEE) and the
Commonwealth of Independent States
(CIS)
EBRD’s objectives include:
– Promoting the transition to competitive
market economies by investing mainly in
the private sector
– Mobilising significant foreign direct
investment
– Investing in projects and companies
whose needs cannot be fully met by the
market
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USA
10%
Others
11%
EBRD region
(excluding EU
members)***
7%
EU-27
countries**
63%
EBRD Background
Debt
€36.5 billion
Cumulative Gross Signings:
All sectors (€bn)
Equity
€9.4 billion
50
45
€45.9 billion invested
in over 2,750 projects
40
35
30
25
20
15
Financial Institutions (FI)
€14.9 billion (32%) invested in
1,282 projects
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5
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
0
Debt
€10.1 bn (68%)
Equity
€4.8 bn (32%)
FI is a key element of the EBRD’s portfolio
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EBRD’s Profile in Ukraine

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Ukraine is the Bank’s largest country of
operation after Russia
EBRD in Ukraine since 1993, 18 years
of experience in the local market
M &S
13%
41 staff based in Kiev, including 28
bankers
Total investments in Ukraine of over
USD 7 billion
Agribusiness
21%
Municipal
Infrastructure
5%
Financial
Institutions
31%
Approximately USD1.5 billion invested
last year, USD870m into financial
institutions

Total 249 projects (42 in 2009)

The EBRD is the largest financial
investor to the private sector in Ukraine
Transport
14%
Natural
3%
Telecom
4%
Energy
7%
Property
2%
EBRD Insurance in CIS
Russia
$150mln Equity Investment
Ukraine
Russia
$4mln Equity Investment
€ 26.5mln Equity
Investment
March 2008
May 2007
Purchase of up to 10% stake in
RESO Insurance
30% equity stake in a
greenfield life company
alongside Renaissance
Insurance Group / Sputnik
Group Limited
November 2008
30% equity stake in a
greenfield direct insurance
company
Regional
CHF250 million
equity framework
Six insurance and pensions
sub-projects in three
countries
Azerbaijan
Armenia
EUR 1.2 million
equity finance
USD 0.5 million
equity finance
30% equity stake in an
Azerbaijani non-life insurer
35% equity stake in one of
Armenia’s leading insurers
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Ukrainian Insurance Sector
Insurance Penetration Rates
4.0%
3.6%
3.5%
3.2%
3.0%
3.0%
2.5%
2.2%
2.1%
1.8%
2.0%
1.5%
1.5%
1.5%
1.2%
0.8%
1.0%
0.5%
0.0%
Germany
Western
Europe
France
Czech
Rep
CEE
Poland
Turkey
Romania
Real market, net of financial schemes, Swiss Re Sigma (2007) and market sources
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Russia
Ukraine
Ukrainian Insurance Sector

Severely hit by financial crisis: 2009 non-life premiums down by more than 20%, life
premiums down by more than 30%

Challenging market conditions.
–
Retail new business volumes down due to bank distribution channels drying up
–
Corporate new business volumes down due to reduced budgets and pressures in large
corporations
–
Retention levels down, Claim payments up
–
Insurance receivables and bad debts up

High level of financial (tax) schemes – real insurance penetration is below official 2.5%

Compulsory insurance (motor) has low uptake (30-40% vs. 90-95% in Russia)

Majority of European insurers are yet to build a strong market position. Only AXA, Uniqa
have sizeable presence, PZU and QBE also present

Highly fragmented market – top 10 only have 60% market share. No dominant market
leader – AXA, Lemma, Providna have 8-12% each – opportunities for consolidation

Capital eroded by financial crisis

Regulatory developments could spur growth

Economic recovery in heavy industries will drive growth of corporate insurance

Life insurance a promising sector in the medium to long term, but currently only 5% of
premium volume
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Ukrainian Insurance Sector
Positives
Negatives
Open to foreign ownership

Growth potential – emerging
middle class
Questionable quality of
insurance book

Tax schemes

Room to grow in CMTPL
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Profitability

Scarcity value of targets

Transparency

Some major strategic
investors are yet to enter

Price expectations

Perception of political risk
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Under developed life &
pensions sector
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
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EBRD’s Value Proposition

Experienced financial investor in insurance
companies

Local experience, regional network

Relationships with key strategic insurers

Provider of technical assistance to aid company
development and promote transparency

Support dialogue between company, government and
regulator
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EBRD Project Criteria

€1-200 million

Minority positions, up to 35%

7-10 year maximum investment time horizon
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Reputable local or strategic partners

Our success is measured by a combination of
transition impact and investment return
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Contacts
Noel Edison
Director of Insurance & Financial Services, London
Email: [email protected]
Phone: +44 20 7338 6638
Alexander Pavlov
Head of Financial Institutions Ukraine
Email: [email protected]
Phone: +380 44 277 1100
EBRD
One Exchange Square, London. EC2A 2JN, United Kingdom
www.ebrd.com
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