The Future of Bancassurance
Rebuilding Confidence
International Insurance Society Annual Seminar
June 07, 2010
Oscar Zimmerman
SVP & Managing Director, Corporate Insurance
The Bank of Nova Scotia

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Agenda
• Bancassurance
• Customer Needs
• Opportunities
• Challenges
• Scotiabank Strategy
• Key Success Factors
• Operational Results
• Closing

Definition
BANCASSURANCE
Distribution of any insurance product through Bank channels
Products - Bank Owned Insurer Products – Other Insurers
Branch Officers Insurance Agents External Sales Forces
Telemarketing Internet Mailing
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Types of Products
BANCASSURANCE
• Risk Protection
• Life and health insurance
• Automobile and home insurance
Creditor Insurance
Optional Insurance
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• Wealth Accumulation
• Savings with an insurance component
• Accumulation and payout annuities
• Pensions
Universal Life
Annuities

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Retail Banking Products
CUSTOMER NEEDS
• Choice
• Simple, easy to understand and purchase
• Convenience
• Service
• Trust the “promise to pay”
• Price competitive
Bancassurers are uniquely positioned to offer an integrated value proposition to meet customer needs at various life stages.

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Life Stages
CUSTOMER NEEDS
Typical Changes in Life Stage
Couple
• Buy Home
• Start Saving
• Acquire Goods
New
Family
• Buy Home
• Acquire Goods
• Protect Income
Single
• Buy Car
• First Job
• Start Saving
Established
Family
• Save for
Education
• Reduce Debt
Independent
• Plan to retire
• Buy home
• Plan estate
Pre-
Retirement
• Plan to Retire
• Accumulate
• Plan Estate
Retired
• Disburse
Savings
• Plan Estate
It is easier to cross sell insurance to existing relationships

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How Does Bancassurance Help Retail Banks?
RETAIL BANK OPPORTUNITY
• Protects credit insurance
• Improves loyalty and cost utilization
• Additional fee income boosts shareholder ROE
• Insurance risk taking is less correlated to the credit cycle
• Approved borrowers tend to be better insurance risks

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Cultural Differences Between Financial Sectors
BANCASSURANCE CHALLENGES
BANKING INSURANCE
Consumer Brand
Transactions
Distributor Brand
Sales &
Relationship-based
Fixed cost Variable cost
Liquidity, credit
& financial risk management
Mortality, morbidity, property & financial risk management
Short Term
Focus
Long Term
Focus
Deconsolidated capital ratio test
Chief Risk Officer
(CRO)
Deconsolidated capital ratio test
Appointed Actuary
(AA)
Closing the Cultural Gaps
 Protect Bank Reputation
 Focus on Retail
 Understand and manage insurance risk volatility
 Enhance ROE with stable recurring income

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Regulatory Framework
BANCASSURANCE CHALLENGES
• Bank and Insurance sectors separately regulated
• Outdated regulations
• Limits of regulatory restrictions
• International insurance regulation vary

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Strength of Canada & Canadian Financial System
SCOTIABANK STRATEGY
• Strong Canadian Financial System
• Sound Canadian Banking System
• World Economic Forum
Relative bank share price performance
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
Canada
* As of April 30, 2010.
Source: Bloomberg; Scotia Capital.
Australia U.S.
5-Year CAGR
10-Year CAGR
Switzerland
Data to May 3, 2010
U.K.* Japan*

Scotiabank Around The World
SCOTIABANK STRATEGY
• 14.6 million customer in some 50 countries
• 68,000 employees worldwide (32,000 in Canada)
• Personal, Commercial, Corporate and Investment Banking
• 2700 + Branches and Offices, 5800 ABMs
• Diversified Business Lines: Canadian Banking, International
Banking, Scotia Capital
• Market Cap. Circa $50 billion, USD (Top 25)
• Tier 1 capital ratio 11.2%, S & P AA-
• Net Income 2009 Full Year $C3.5 billion ROE 16.7%
2010 Half Year $C2.1 billion ROE 18.7%
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Top Tier ROE Versus Global Peer Group
SCOTIABANK STRATEGY
2009 Return on Equity (Reported)
Scotia
Canada
16.7%
Royal 11.9
U.S.
Wells Fargo 9.9%
US Bancorp 8.2
International
Credit Suisse 18.3%
BBVA 16.0
BMO
CIBC
TD
9.9
9.4
8.4
JPMorgan 6.0
Commonwealth
Bank of Australia
15.8
Bank of
America
Citibank n/m n/m
Deutsche
HSBC
14.6
5.1

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Global Priorities
SCOTIABANK STRATEGY
• Sustainable revenue growth
• Capital management
• Leadership
• Prudent risk management and appetite
• Efficiency and expense management

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Scotiabank Mission
SCOTIABANK STRATEGY
To be the best at helping customers become financially better off by finding relevant solutions to meet their unique needs.
Four Cornerstone Strategy

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Bancassurance Strategy
SCOTIABANK STRATEGY
• Focus on helping customers protect their assets
• Leverage Bank distribution and servicing capabilities, financial strength and brand awareness
• Assume retail insurance risks
• Assume 3 rd party reinsurance risks that are less correlated with traditional bank risk

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Insurance Footprint
SCOTIABANK STRATEGY
Direct Writing Subsidiaries
Canada (L & H)
Dominican Republic (L & H)
El Salvador (L & H / P & C)
Jamaica (L & H)
Trinidad (L & H)
Reinsurance Subsidiary
Barbados (L & H / P & C)
Joint Venture
El Salvador (Auto)
Insurance Brokerages
Canada
Chile
Costa Rica
Dominican Republic
Puerto Rico
Insurance Fee Income
Caribbean
Central America
Mexico
Peru

Key Success Factors in Bancassurance
KEY SUCCESS FACTORS
• Identify profit zone in retail value chain
• Integrated sales processes
• Sales Management
• Optimize corporate structure and risk taking business model
• Manage adverse earnings volatility
Teamwork is critical to strategy execution
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Identify Profit Zone in the Retail Value Chain
KEY SUCCESS FACTORS
Retail Banking
Products
Retail Consumers
Protection Needs
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Retail Banking Sales &
Service Platforms
Value Proposition Differs By Customer Segment

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Integrated Sales Processes
KEY SUCCESS FACTORS
Simple product portfolio
Low product complexity
Attractive packaging
Streamlined sales process
Comprehensive sales support
Bundled sales
Systematic sales management
Leverage
Information
Technology
Systems and
Customer Data
Integrated Sales
Management
Simplified underwriting
Systematic sales guidance
Rigorous Market conduct compliance

Sales Management
KEY SUCCESS FACTORS
• Measurable bank channel sales targets
• Appropriate incentives impacting bonus compensation
• Fully automated and simple sales process
• Provide continuous product and sales training
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Optimize Business Model
KEY SUCCESS FACTORS
Decision Criteria:
• Local Market Structure
• Insurer Financial Strength
• Regulatory Environment
• Retained Risk Appetite
• Management Capacity
• Speed to Market
•
Choices:
Underwriting Subsidiary
• Pure Distribution
• Distribution/Reinsurance
• Joint Venture

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Manage Adverse Earnings Volatility
KEY SUCCESS FACTORS
• Insurance Oversight Committee
• External Appointed Actuaries for Subsidiaries
• Follow Canadian Insurance Prudential Standards
• Pre-Approval of limits for catastrophic events

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Operational Results
• Protect Bank Reputation
• Focus on Retail
• Understand and manage insurance risk
• Enhanced ROE, Stable Recurring Income

Closing Observations
• Insurance profits held firm during financial crisis
• Bank colleagues were very appreciative
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