SNS REAAL Core activities post 2013 first half net profit of 204 million

Transcription

1 Press Release Interim Financial Report Utrecht, the Netherlands, 5 August 0 SNS REAAL Core activities post 0 first half net profit of 04 million SNS REAAL including Property Finance posts 0 first half net loss of,585 million due to oneoff provision for real estate finance portfolio related to nationalisation CORE ACTIVITIES (SNS RETAIL BANK AND INSURANCE ACTIVITIES) POST NET PROFIT OF 04 MILLION Higher net profit at SNS Retail Bank of 8 million, mainly due to higher net interest income and other income. billion net inflow of retail savings at SNS Retail Bank following nationalisation Lower underlying net profit at Insurance activities of 9 million due to lower direct investment income, higher claims at NonLife and lower technical results Net loss at Insurance activities of 5 million, driven by impairments of intangible assets and a lower underlying performance STRONG IMPROVEMENT SOLVENCY SNS BANK AND DECREASE DOUBLE LEVERAGE SNS REAAL DUE TO NATIONALISATION MEASURES; INSURANCE SOLVENCY SLIGHTLY LOWER Core Tier ratio Banking activities improves to.% (6.% at yearend 0); Pro forma core Tier ratio amounts to 6.% Regulatory solvency Insurance activities of 7% (76% at yearend 0) Double leverage SNS REAAL decreases to 07% ( at yearend 0) NET LOSS OF,789 MILLION AT PROPERTY FINANCE Net loss at Property Finance due to.8 billion net impact of provision to bring valuation real estate finance portfolio in line with transfer value as determined by Dutch State Pro forma net exposure of Property Finance (net of additional provision) reduced to 4.8 billion Good progress on intended separation of Property Finance to a separate asset management organisation as per December 0 During the second quarter, SNS REAAL came into calmer waters. Most nationalisation measures have been implemented and the core activities of SNS REAAL posted a net profit for the first half year of 04 million. Impairments of intangible assets (mainly VOBA) and a lower underlying performance led to a net loss at the Insurance activities in the second quarter. Still, the core activities of SNS REAAL reported a net profit of 4 million in this period thanks to a continued good performance at SNS Retail Bank. We are making progress with preparations for the transfer of Property Finance to a separate asset management organisation and we have started with the financial disentanglement of the holding company, bank and insurer. We are increasingly able to focus on our core activities and our clients and are on schedule with the drafting of a restructuring plan for SNS REAAL, in consultation with the Ministry of Finance. The plan will be submitted to the European Commission before August. Once the European Commission has published its final ruling on the state aid including the isolation of Property Finance, we will press ahead with the execution of the restructuring plan and we can focus fully on our core activities. said Gerard van Olphen, Chairman of the Executive Board.

2 Table of contents SNS REAAL NV Interim financial report 0 Foreword. Core activities. Restructuring plan. Progress on preparations for isolation of the Property Finance portfolio and the financial disentanglement of holding, bank and insurer 4.4 Outlook 4 Key figures 5 Financial analysis SNS REAAL 6. Net result 6. Capital management. Funding activities 5.4 Balance sheet and risk management 5 4 SNS Retail Bank 9 4. Highlights SNS Retail Bank 9 4. Result 0 4. Credit risk 5 REAAL 6 REAAL Life 4 6. Highlights REAAL Life 4 6. Result 5 7 REAAL NonLife 8 7. Highlights REAAL Nonlife 8 7. Result 8 8 REAAL Other 0 9 Zwitserleven 9. Highlights Zwitserleven 9. Result 0 Property Finance 5 0. Highlights Property Finance 5 0. Result 6 0. Portfolio development 7 Interim Financial Statement 9. Statement of the Executive Board 9. General information 9. Basis of preparation 40 About SNS REAAL 4 Disclaimer 4 4 Tables 4

3 Foreword The nationalisation of SNS REAAL, announced on February 0, has led to a strengthening of the solvency of SNS Bank, a lower double leverage at SNS REAAL and has addressed the losses at the real estate finance operations. SNS REAAL has taken a provision for the loss resulting from the transfer of Property Finance to a separate asset management organisation at the value determined by the Dutch State. As the transfer value is predetermined, impairments on Property Finance s real estate finance portfolio will going forward be offset by a release from this provision. All this means we can now increasingly focus on our core business, to find a response to a still contracting housing market and a low interest rate environment, against a difficult economic backdrop. With our mission Simplicity in Finance as a compass the different labels of SNS REAAL will continue to strive to represent the interests and needs of our customers as best as we can. We are aware that we must work even harder to prove that society and our (prospective) customers can entrust us with their financial future. Furthermore, as announced previously, the legal and financial implementation of the (consequences of the) nationalisation and the preparations for the isolation of the Property Finance portfolio are important shortterm priorities. We will also work on the financial disentanglement of the holding company, bank and insurer, in line with the contents of the letter from the Dutch Minister of Finance to Parliament after the nationalisation.. Core activities Excluding Property Finance, the core activities of SNS REAAL posted a net profit of 04 million, compared to 58 million for the first half of 0. Adjusted for oneoff items, net profit of the core activities declined to 0 million from 7 million for the first half of 0, which included a substantial amount of realised gains on bonds and derivatives at the Insurance activities. SNS Retail Bank posted a sharply higher net profit of 8 million. Main factors behind this increase were lower funding expenses, resulting in a higher net interest income, higher buyback results and the expropriation of debt as part of the nationalisation which benefitted both interest income and other income segments. Loan impairments increased due to the weakening economic situation and the pressure on real estate prices in the Netherlands, but were lower compared to the second half of 0. Following a decline of. billion in January, retail savings showed a steady increase after the nationalisation. At the end of June 0 retail savings balances were back at the level of yearend 0, at.8 billion. Also savings balances of SME rebounded after the nationalisation, to.8 billion compared to.9 billion at yearend 0. In July 0, SNS Bank informed former holders of the third tranche of participation certificates, who were expropriated as part of the nationalisation, about the compensation amount offered. In the first half of 0 a provision charge of 5 million was taken for this compensation offer. Adjusted for this amount, and for an extra allocation of costs from SNS REAAL's holding, operating expenses at SNS Retail Bank were reduced by 6%, mainly driven by a reduction in the number of staff. Responding to the difficult situation in the Dutch housing market, SNS Retail Bank has, in the first half of 0 taken initiatives to approach clients with mortgages where the value of the house has dropped below the unpaid principal amount of the loan, to inform them about their situation and possible solutions. Going forward, we aim to gradually increase our market share in new production of mortgages. In order to further improve our service to our clients, in the first half of the year, several mobile services were added to the SNS Bank s mobile banking proposition. The core Tier ratio of SNS Bank NV (including Property Finance) improved to.% compared to 6.% at yearend 0, driven mainly by nationalisation measures. The pro forma core Tier ratio, which already takes into account a SNS REAAL NV Interim financial report 0

4 release of riskweighted assets due to the future separation of Property Finance in combination with a guarantee on the funding, and SNS Bank s share in the nonrecurrent resolution levy on Dutch banks, stood at 6.%. After the nationalisation, the total liquidity position was reduced but remained high at 8.7 billion at the end of June 0. Against the background of continued difficult market circumstances and margin pressure, the Insurance activities posted a net loss of 5 million. Results at the Insurance activities were again impacted by impairments of intangible assets. These consisted of an additional partial impairment of VOBA at REAAL Life and Zwitserleven and an impairment of internally developed and capitalised software at Zwitserleven. Net profit excluding oneoff items decreased sharply to 0 million, mainly driven by lower gains on bonds and derivatives. Also underlying results (excluding both oneoff items and the impact of the investment portfolio and hedges) were sharply lower. At REAAL NonLife and Zwitserleven they were negative, impacted by a high claims ratio and incidental technical results respectively. At REAAL Life the underlying result remained positive. By the end of the first half of 0, REAAL Life and Zwitserleven had informed almost all holders of individual and pension unitlinked policies if, and to what extent, they qualify for compensation. Regulatory solvency of the Insurance activities decreased slightly from 76% at yearend 0 to 7%. Solvency of SRLEV at the end of June stood at. In July 0 Fitch downgraded France, which led to a realignment of the ECB AAA curve used to calculate regulatory solvency. The subsequent downward shift of the ECB AAA curve is expected to have a significant negative impact of approximately points on the level of regulatory solvency of the Insurance activities. Consultations on the impact of France s downgrade on solvency ratios are currently taking place with DNB. It is still uncertain whether an alternative curve will be used. In July 0, the regulatory solvency of the Insurance activities was positively impacted by conversion into share premium of 50 million of subordinated debt issued to SNS REAAL NV. This subordinated debt had not been included in the available capital of the Insurance activities as the total amount of subordinated debt exceeded regulatory limits. The conversion improves the Insurance solvency ratio by points, while increasing the double leverage of SNS REAAL. SNS REAAL is currently at an advanced stage to conclude a settlement agreement with the Netherlands Tax Authorities relating to corporate tax returns. This agreement clarifies principles upon which the corporate tax returns for SNS REAAL are to be established and can potentially lead to a substantial tax benefit.. Restructuring plan On February 0, the European Commission (EC) granted temporary approval for the state aid to SNS REAAL, with the exception of the Property Finance measures for which approval was not requested. The EC s temporary approval is conditional on the presentation by the Dutch Ministry of Finance of a restructuring plan within six months from that date. The restructuring plan is being drawn up in close consultation between the Ministry of Finance and SNS REAAL and it will be officially submitted before August 0. The EC will take a final decision on the nationalisation measures based on this plan. SNS REAAL NV Interim financial report 0

5 . Progress on preparations for isolation of the Property Finance portfolio and the financial disentanglement of holding, bank and insurer In the second quarter of 0, SNS REAAL made progress with the intended transfer of Property Finance to a separate asset management organisation. A new CEO and CRO of Property Finance have been appointed. Furthermore, SNS REAAL is currently working on and addressing the legal, fiscal, financial, operational and personnel consequences related to the separation. As part of the nationalisation measures, a constructive obligation arose to transfer Property Finance to a separate asset management organisation at the value determined by the Dutch State. This led to the recognition of a provision of.0 billion gross in the first quarter of 0. Subsequent impairments at Property Finance are offset by releases from this provision. As a result, following a first quarter net loss of,79 million due to the provisioning, Property Finance reported a small profit of million in the second quarter. After the nationalisation, SNS REAAL started with the financial disentanglement of the holding company, bank and insurer. In this context, in the first quarter of 0 a bridge loan of. billion received from the Dutch State was used to redeem 65 million of internal loans granted by REAAL NV to the holding company. The remainder is largely used to redeem loans provided to SNS REAAL by third parties. As of January 0 an additional amount of operating expenses incurred at holding company level is structurally allocated to the Banking and Insurance activities to reflect a more accurate standalone cost level of these entities. On an annual basis, approximately 48 million in operating expenses will be additionally allocated to the operating entities (of which 4 million in the first half of 0)..4 Outlook For the remainder of 0, the macroeconomic outlook remains challenging and housing and commercial real estate prices are expected to remain under pressure. Indicators suggest that economic activity in the Netherlands will remain subdued. Consumers' purchasing power is expected to decrease further, while unemployment continues to increase. We expect SNS Retail Bank to continue to report satisfactory results over the coming quarters, in spite of loan impairments remaining at historically high levels. We expect the market environment at the Insurance activities to remain difficult. As a result, earnings and solvency at the Insurance activities will likely remain under pressure in the quarters ahead. The consequences of France s downgrade on solvency ratios of the Insurance activities are still unclear but may be significant. As a consequence of the nationalisation, Property Finance has reported a significant net loss for the first half of 0, due to the.8 billion net impact of the provision to bring the valuation of the real estate finance portfolio in line with the transfer value as determined by the Dutch State. This means that SNS REAAL, including Property Finance, will also report a loss for 0 as a whole. We will press ahead with the legal and financial implementation of the (consequences of the) nationalisation. We strive for the transfer of Property Finance to a separate asset management organisation as per December 0. However this depends amongst others on approval by the European Commission. We will also continue to work on the financial disentanglement of the holding company, bank and insurer. Gerard van Olphen SNS REAAL NV Interim financial report 0 4

6 Key figures Table : Key figures st half year 0 st half year 0 nd half year 0 Result SNS Retail Bank REAAL Life REAAL NonLife (79) (06) (4) REAAL Other (9) (9) (6) REAAL 64 (9) Zwitserleven (64) 5 (7) Insurance activities (5) 6 (6) 9 (4) (57) (47) Group activities SNS REAAL Core activities Property Finance (,789) (4) (670) SNS REAAL (,585) 5 (,087) Total income,,64,656 Total expenses,855,65 4,50 Total assets 8,0 4,60,66 Investments,9,60 4,75 Investments for account of policyholders,99,67,7 Loans and advances to customers 54,94 65,48 64,4 Assets held for sale 6,9 Total equity 4,88 4,79,85 Savings,78,569,85 Insurance contracts 40,999 40,077 4, % 8.9% 0.% 6,68 6,786 6,74 Efficiency ratio SNS Retail Bank 4.% 5.9% 6.8% Core Tier ratio.% 9.6% 6.% Tier ratio.%.% 7.7% BIS ratio.% 4. 9.% Operating cost/premium ratio REAAL.%.5%.% Operating cost/premium ratio Zwitserleven 0.6% 9.7% 5.4% Regulatory solvency Insurance activities 7% 99% 76% Regulatory solvency SRLEV 4% % Regulatory solvency NonLife 47% 445% 49 Balance Sheet Ratios Double Leverage Number of internal employees (FTE) Banking activities Insurance activities June 0 and December 0 Core Tier ratio, Tier ratio and BIS ratio are calculated based on Basel II. June 0 ratios are calculated based on Basel II, taking into account the 8 floor of Basel I. SNS REAAL NV Interim financial report 0 5

7 Financial analysis SNS REAAL. Net result.. Results first half of 0 compared to first half of 0 For the first half of 0, SNS REAAL reported a net loss of,585 million driven by a net loss of,789 million for Property Finance, which included a net impact of an additional provision of,790 million (,04 million gross) because a constructive obligation arose to transfer Property Finance at the value as determined by the Dutch State. Excluding Property Finance, SNS REAAL posted a net profit from core activities of 04 million compared to 58 million for the first half of 0. Adjusted for the impact of oneoff items, net profit of the core activities declined to 0 million, from 7 million in the first half of 0. The decline was driven by lower realised gains on bonds and a lower result on financial instruments at the Insurance activities. SNS Retail Bank s net profit increased sharply. The main factor behind this increase was a higher net interest income driven by lower interest expenses due to the expropriation of subordinated debt, declining interest rates offered on savings accounts and the redemption of term deposits. Furthermore, oneoff items (see table ) and buyback results had a positive impact. This was partly offset by higher impairments on loans, which were 5 basis points of loans (annualised) compared to 0 basis points for the first half of 0. At REAAL, net profit was sharply lower due to a substantially lower result on financial instruments, that had boosted the 0 first half year result, an impairment of Value of Business Acquired (VOBA) at REAAL Life, and a lower underlying result (see table 4) at both REAAL Life and NonLife. At REAAL Life the underlying profit was down, mainly driven by lower direct investment income in the absence of a gain on the settlement of Lehman collateral, lower reinvestment yields and the impact of an additional cost allocation from the holding company. At REAAL NonLife, the underlying result was negatively impacted by high claims ratios at fire and motor. Furthermore, the absence of a release of provisions for unearned premiums contributed to the decrease. Zwitserleven posted a net loss due to an additional impairment of VOBA and an impairment of internally developed and capitalised software. Furthermore, realised gains on bonds were sharply lower. Zwitserleven s underlying result was million negative, a sharp decline compared to the first half of 0 due to lower mortality, interest and cost results. The underlying net result was also impacted by an additional cost allocation from the holding company. Finally, the 0 first half year result included an additional charge for a provision related to compensation for investmentbased pension contracts. The net loss at Property Finance amounted to,789 million, primarily due to the provision for a constructive obligation of,790 million to value the total real estate finance portfolio at the transfer value as determined by the Dutch State. The net result, excluding the addition to this provision, amounted to million positive, compared to a 4 million net loss in the first half of 0, mainly because subsequent impairments were offset by releases from this provision. Furthermore, operating expenses were considerably lower which more than compensated for a decrease in net interest income. Additional cost allocation from holding company to Banking and Insurance activities As of January 0, an additional amount of operating expenses is structurally allocated from the holding company to the Banking and Insurance activities in order to reflect a more accurate standalone cost level of these entities. On an annual basis approximately 48 million operating expenses will be additionally allocated of which 4 million is already reflected in the firsthalf 0 figures. Of the additional allocation, 9 million related to SNS Retail Bank, 9 million to REAAL, 5 million to Zwitserleven and million to Property Finance and others. SNS REAAL NV Interim financial report 0 6

8 Held for sale classification Property Finance Following the nationalisation on February 0, including the decision to isolate Property Finance in a separate asset management organisation, total assets and liabilities of Property Finance are classified in the balance sheet as assets held for sale and liabilities held for sale respectively. In the income statement, the total result of Property Finance is classified as a net result from discontinued operations. Comparative figures in the income statement have been adjusted accordingly. Impact of oneoff items Table : Impact of oneoff items on SNS REAAL's net result Net result SNS Retail Bank Net result REAAL st half year 0 st half year 0 nd half year (9) (64) 5 (7) 9 (4) (57) (47) Net result Property Finance (,789) (4) (670) Total net result SNS REAAL (,585) 5 (,087) Net result Zwitserleven Net result Group activities Total net result SNS REAAL Core activities Impact of oneoff items SNS Retail Bank 0 (9) (7) Impact of oneoff items REAAL () (5) Impact of oneoff items Zwitserleven (6) (4) () Impact of oneoff items Group activities 57 (6) Impact of oneoff items Property Finance (,790) (47) Total oneoff items (,796) (5) (64) Adjusted net result SNS Retail Bank Adjusted net result REAAL Adjusted net result Zwitserleven () 5 5 Adjusted net result Group activities (8) (7) (46) Total adjusted net result SNS REAAL Core activities (4) (6) 0 (45) Adjusted net result Property Finance Total adjusted net result SNS REAAL Oneoff items in the first half of 0 amounted to,796 million negative, mainly consisting of the impact of nationalisation measures. The impact of nationalisation measures on net profit of the core activities amounted to 7 million positive: 0 million at SNS Retail Bank, 57 million at Group activities and 6 million negative at REAAL Life. The net loss at Property Finance included a net impact of,790 million related to an additional provision because by the decision of the Dutch State a constructive obligation arose to transfer Property Finance in line with the value as determined by the Dutch State. The 0 million positive impact from nationalisation measures at SNS Retail Bank consisted of the impact from the expropriation of privately placed subordinated debt and gains from unwinding derivatives related to subordinated debt partly offset by a provision charge for the compensation to the holders of expropriated participation certificates. In July 0, SNS Bank informed all former holders of participation certificates (third tranche) about their offered compensation amount. REAAL Life s result included a 6 million net oneoff loss, due to the expropriation of a subordinated bond of SNS Bank that was included in the investment portfolio. SNS REAAL NV Interim financial report 0 7

9 The impact of nationalisation measures at Group activities amounted to 57 million positive, consisting of a 40 million positive impact from the expropriation of privately placed subordinated debt, million gains from unwinding derivatives related to expropriated debt and a 6 million adjustment for a subordinated loan in SNS Bank held by REAAL. At Property Finance, a provision of,04 million (,790 million net) was taken in line with the transfer value of Property Finance. The total assets of Property Finance will be separated at a considerably lower value than the book value. As part of the transfer, a writeoff of.8 billion was required on the total assets of Property Finance as per 0 June 0. This.8 billion writeoff has been determined by the Dutch State. Therefore, in addition to the 776 million impairments and discounts in the second half of 0, an additional writeoff of,04 million gross (,790 million net) is taken. SNS REAAL is currently at an advanced stage to conclude a settlement agreement with the Netherlands Tax Authorities relating to corporate tax returns. This agreement clarifies principles upon which the corporate tax returns for SNS REAAL are to be established and can potentially lead to a substantial tax benefit. In addition to the oneoff impact of nationalisation measures, the net impact of other oneoff items amounted to 77 million negative, entirely at the Insurance activities. This mainly consisted of an impairment of VOBA of 6 million net ( 8 million pretax) related to the shortfall of the IFRS liability adequacy test (LAT), of which 47 million at Zwitserleven and 5 million at REAAL Life. This LAT compares the market value and the IFRS carrying amount of insurance liabilities and related assets. By using shadow accounting, the positive fair value reserve of the fixedincome portfolio is used to increase the IFRS carrying amount of the insurance liabilities. In the first half of 0, the LAT shortfall decreased compared to yearend 0 due to an increase in interest rates, partly mitigated by adjustments in cost parameters. However the fair value reserve of the fixedincome portfolio decreased even more sharply. As a result, the fair value reserve of the fixedincome portfolio could not fully compensate the LAT shortfall and the remaining shortfall of 8 million gross ( 6 million net) was charged to the income statement as an impairment of the VOBA. The 0 second half figures had also included an impairment of the VOBA of 9 million net related to the shortfall of the IFRS LAT. Finally, there was an impairment of 5 million net at Zwitserleven of internally developed and capitalised software in the light of its changed strategy. Zwitserleven's management recently chose a new strategic direction, aiming at an increased focus on the Defined Contribution (DC) market and an increased number of products outside the second pillar. The result is a new balance between a focus on new markets in which DC, PPI and individual products prevail, and the more traditional markets. It will also have organisational consequences. Oneoff items in the first half of 0 had amounted to 5 million negative. At SNS Retail Bank, the impact of oneoff items consisted of a loss of 9 million net on the exchange of Greek government bonds. At Group activities, the net impact of oneoff items amounted to 6 million negative, consisting of an impairment charge on the shareholding in Van Lanschot NV. SNS REAAL NV Interim financial report 0 8

10 Operating expenses Table : Total operating expenses SNS REAAL Total operating expenses SNS REAAL Core activities Total operating expenses Property Finance Total operating expenses SNS REAAL st half year 0 st half year 0 nd half year % 55 (%) 4 50 (%) 66 (48%) % 67 (8%) Adjustments: Restructuring charges 54 SNS Retail Bank's share in savings guarantee scheme () () 6 Expenses related to the strategic restructuring 6 Provision charge for compensation participation certificates 5 Total adjustments (%) Total adjusted operating expenses SNS REAAL Core activities Total adjusted operating expenses Property Finance Total adjusted operating expenses SNS REAAL 500 (5%) (%) 60 (4%) (4%) 560 (9%) Total operating expenses Property Finance are included in the result discontinued operations. Total operating expenses in the first half of 0 increased by 9 million (+7%) compared to the first half of 0, mainly due to oneoff expenses of 59 million, which included a provision charge of 5 million for compensation of holders of expropriated participation certificates and costs of strategic restructuring plans at Group activities of 6 million. Total adjusted operating expenses decreased by 0 million (4%), supported by a decrease in the number of internal staff by 06 FTEs to 6,68 (%) and considerable lower operating expenses at Property Finance. Underlying result Insurance activities Table 4: Underlying results of the Insurance activities REAAL Net result for the period Gains, losses and impairments on equity portfolio Gains, losses and impairments on fixedincome securities Result on financial instruments s in insurance contracts due to movements of fair value items Total net impact investment portfolio and hedges Impact of oneoff items Net result excluding impact of oneoff items and impact of investment portfolio and hedges Amortisation VOBA and other intangible assets Underlying net results st half year 0 Zwitserleven st half year 0 nd half year 0 st half year 0 st half year 0 nd half year 0 64 (9) (64) 5 (7) 7 () (4) () (7) () () (5) (9) () (5) (6) (4) () 8 () (4) (4) () (8) (8) () 0 6 Results on equity hedges are included in gains/loses on equity portfolio instead of result on financial instruments. s in insurance contracts due to movements of fair value items includes releases of/additions to provisions for interest rate guarantees in unitlinked portfolio and separate accounts, the impact of shadow accounting and the impact of the hedging of inflation. SNS REAAL NV Interim financial report 0 9

11 REAAL Compared to the first half of 0, REAAL s net profit declined sharply by 5 million to million driven by a lower net impact from gains, losses and impairments on the investment portfolio and hedges, a lower underlying result, and a negative impact from oneoff items. The oneoff items consisted of an impairment of VOBA of 5 million and a 6 million loss due to the expropriation of a subordinated bond of SNS Bank. The total net impact from gains, losses and impairments on the investment portfolio and hedges decreased to million positive (first half of 0: 74 million positive) mainly driven by a substantially lower result on financial instruments, which had boosted the 0 first half year result (in this period high gains on interest rate derivatives occurred due to the strong decline in interest rates). This was partly compensated by higher results on the equity portfolio due to lower impairment charges, higher realised gains and a higher result on equity options. s in insurance contracts due to movements of fair value items mainly consisted of the impact of shadow accounting. REAAL s underlying result of 40 million was 74 million lower. At REAAL Life, the underlying profit was down mainly driven by lower direct investment income due to the absence of a gain on the settlement of Lehman collateral and lower reinvestment yields and an additional cost allocation from the holding company. At REAAL NonLife, the underlying result was negatively impacted by high claims ratios at fire and motor. Furthermore, the absence of a release of provisions for unearned premiums contributed to this decrease. Zwitserleven Compared to the first half of 0, Zwitserleven s net result declined by 6 million to a net loss of 64 million, partly due to oneoff items consisting of an additional impairment of VOBA of 47 million and an impairment of internally developed and capitalised software of 5 million. The total net impact from gains, losses and impairments on the investment portfolio and hedges declined to million positive (first half of 0: 40 million positive) driven by sharply lower realised gains on bonds. This was partly compensated by higher results on financial instruments, mainly consisting of unrealised gains on derivatives used for hedging interest rate risk. Amortisation of VOBA and other intangibles decreased from 8 million to million following a partial impairment of VOBA in 0. Zwitserleven s underlying profit was million negative, a sharp decline compared to the first half of 0 due to lower mortality, interest and cost results (including the additional cost allocation from the holding company). Furthermore, the firsthalf 0 result included an additional charge for a provision related to compensation for investmentbased pension contracts. SNS REAAL NV Interim financial report 0 0

12 Group activities The net result of Group activities improved from 4 million negative to a net profit of 9 million. This improvement was driven by a oneoff gain from nationalisation measures of 57 million. Furthermore, the firsthalf 0 result had included an impairment on the stake in Van Lanschot of 6 million (first half of 0: million). Adjusted for these oneoff items, the net result came in at 8 million negative, compared to 7 million negative for the first half of 0. The improvement was due to lower interest charges on expropriated debt and a higher allocation of operating expenses from the holding company to the Banking and Insurance activities... Results first half of 0 compared to second half of 0 For the first half of 0, SNS REAAL reported a net loss of,585 million, compared to a net loss of,087 million for the second half of 0. At Property Finance, the net loss increased sharply from 670 million in the second half of 0 to,789 million driven by the additional provision to transfer Property Finance in line with the transfer value as determined by the Dutch State. Excluding Property Finance, the result from continued operations increased from 47 million negative in the second half of 0 to 04 million positive for the first half of 0, driven by a sharply lower negative impact of oneoff items ( 6 million negative compared to 587 million negative for the second half of 0). At SNS Retail Bank, net profit increased sharply compared to the second half of 0. The main factor behind this increase was a higher net interest income driven by lower interest expenses due to the expropriation of subordinated debt, declining interest rates offered on savings accounts and the redemption of term deposits. Furthermore, oneoff items, consisting of the impact of nationalisation measures, had a positive impact, while the second half of 0 included a restructuring charge. Impairment charges on loans were with 5 basis points of loans (annualised) lower compared to the 5 basis points for the second half of 0 (which included the impact of the new risk assessment models for loans). REAAL s net result increased from 9 million negative to million positive, mainly driven by oneoff items ( million negative compared to 5 million negative for the second half of 0). The total net impact from gains, losses and impairments on the investment portfolio and hedges was, with million positive, lower than in the second half of 0 ( 76 million positive). REAAL s underlying result of 40 million showed a sharp decline, partly driven by the impact of an additional cost allocation from the holding company. Furthermore, at REAAL Life, this decline was also driven by lower direct investment income. At REAAL NonLife, the net underlying result was sharply lower driven by high claims ratios, most notably at fire and motor. Zwitserleven s net loss of 64 million narrowed compared to the net loss of 7 million for the second half of 0. This was largely driven by oneoff items ( 6 million negative compared to 4 million negative for the second half of 0). The total net impact from gains, losses and impairments on the investment portfolio and hedges was million positive, down compared to the second half of 0 ( 4 million positive). Zwitserleven s underlying result of million negative was sharply lower compared to the 6 million positive for the second half of 0, mainly due to lower results on mortality and disability. Furthermore, interest income decreased due to lower investment yields and cost results were lower, impacted by a structural additional cost allocation from the holding company. SNS REAAL NV Interim financial report 0

13 . Capital management Table 5: Capitalisation June 0 December 0 June 0 SNS REAAL Total equity 4,88,85 4, % 0.% 8.9% Core Tier ratio.% 6.% 9.6% Tier ratio.% 7.7%.% BIS ratio.% 9.% 4. BIS ratio (Basel I 8 floor).9% 9.6% 4. Core Tier capital,46,5,89 Tier capital,46,584,96 BIS capital,5,908,75 8,85 0,59 8,7 Regulatory solvency insurance activities 7% 76% 99% Regulatory solvency SRLEV % 4% Regulatory solvency NonLife 47% % Available regulatory capital,508,60,70 Capital requirement,46,49,64 Double Leverage Banking activities Risk Weighted Assets (Basel II) Insurance activities June 0 and December 0 Core Tier ratio, Tier ratio and BIS ratio are calculated based on Basel II. June 0 ratios are calculated based on Basel II, taking into account the 8 floor of Basel I... Liability Adequacy Test The adequacy of the insurance technical provisions is tested in every reporting period by means of the IFRS liability adequacy test (LAT). This LAT compares the market value and the IFRS carrying amount of the insurance liabilities and related assets (including VOBA). In 0, SNS REAAL changed the interest rate curve used to calculate the market value of the insurance liabilities in the IFRS LAT from the ECB All Government curve to the ECB AAA + UFR curve. This change implied a significantly lower discount rate which negatively impacted the surplus value shown in the IFRS LAT. The use of the ECB AAA + UFR curve and the general decline of interest rates led to an IFRS LAT shortfall in the insurance liabilities in 0. By using shadow accounting, the positive fair value reserve of the fixedincome portfolio was used to increase the IFRS carrying amount of the insurance liabilities. The remaining shortfall of 7 million gross ( 9 million net) was charged to the income statement 0 as a partial impairment of the VOBA. In the first half of 0, the LAT shortfall decreased compared to yearend 0 due to an increase in interest rates, partly mitigated by adjustments in cost parameters. However the fair value reserve of the fixedincome portfolio decreased even more sharply. As a result, the fair value reserve of the fixedincome portfolio could not fully compensate the LAT shortfall and the remaining shortfall of 8 million gross ( 6 million net), was charged to the income statement as an impairment of the VOBA. SNS REAAL NV Interim financial report 0

14 .. SNS REAAL In the first half of 0, total equity at SNS REAAL rose to 4.8 billion, compared to. billion at the end of 0. The main drivers behind the increase were the capital contribution of the Dutch State (. billion of which.9 billion was downstreamed to SNS Bank and of which 0. billion was retained at holding company level) and the expropriation of subordinated creditors (.0 billion), partly offset by the net loss for the first half of 0 (.5 billion). The fair value reserve of the fixedincome portfolio decreased by 4 million to 84 million positive driven by the negative effect of increasing interest rates. The fair value reserve of the equity portfolio decreased by million to 7 million due to somewhat lower equity markets. The impact of the amendment on accounting standard IAS 9 (Employee Benefits) had a negative impact on total equity of 67 million net. Comparative figures have been restated. Compared to yearend 0, Group double leverage decreased from to 07%, mainly as a result of the capital contribution of the Dutch State and the expropriation of subordinated debt. The nominal leverage decreased from 985 million to 4 million, driven by the capital contribution of the Dutch State of 00 million and the expropriation of subordinated debt ( 7 million)... Solvency Banking activities Nationalisation measures had an important impact on the core Tier ratio of SNS Bank NV in the first half of 0. At the end of June 0, the core Tier ratio had improved to.%, compared to 6.% at yearend 0. The increase was due to the capital contribution of the Dutch State of.9 billion and the impact from the expropriation of subordinated debt ( 0.7 billion), partly offset by the first half year loss of SNS Bank NV of.6 billion. Riskweighted assets declined with. billion to 8.4 billion, mainly due to the provision to value the total real estate finance portfolio of Property Finance at the transfer value as determined by the Dutch State. Due to the expropriation of subordinated debt, the Tier ratio and the BIS ratio are almost equal to the core Tier. At the end of June 0, the only remaining subordinated loan of SNS Bank was a 40 million internal loan obtained from the holding company...4 Solvency Insurance activities Solvency of the Insurance activities amounted to 7% compared to 76% at the end of 0. Solvency was negatively impacted by parameter changes, which mainly consisted of adjustments to cost parameters (including the impact of the additional structural cost allocation from the holding company), an increase in the number of homogeneous portfolios and adjustments in the risk margin used in the solvency calculation. The negative factors were largely compensated by the development of interest rates and credit spreads and underlying net profit. At Insurance holding level, the inclusion of Tier debt in available capital, and as a result the solvency position, is capped when it exceeds regulatory limits as of June 0. At end June 0, an amount of 0 million of subordinated debt issued to SNS REAAL NV is not included in available capital of the Insurance activities. In July 0, the regulatory solvency of the Insurance activities was positively impacted by the conversion into share premium of 50 million subordinated debt that was issued to SNS REAAL NV. This conversion improved the solvency ratio of the Insurance activities by points. In July 0, Fitch downgraded France, which led to a realignment of the ECB AAA curve that is used to calculate regulatory solvency. The consequent downward shift of the ECB AAA curve is expected to have a significantly negative impact on the level of regulatory solvency of approximately. Consultations on the impact of France s downgrade on solvency ratios are currently taking place with DNB. It is still uncertain whether an alternative curve will be used. SNS REAAL NV Interim financial report 0

15 The regulatory solvency ratio of SRLEV, the legal entity comprising most of the life insurance operations, was, almost equal to yearend Pro forma capitalisation Most nationalisation measures (the writeoff of Property Finance assets, the capital contribution from the Dutch State and the expropriation of subordinated debt) have already been executed and are reflected in the capital position at the end of June 0. The following pro forma figures provide insight in the effects of the remaining main nationalisation measures, which have not been implemented yet and are, therefore, not reflected in the reported capital position. Actual effects may differ, for instance as a result of the European Commission s response to the restructuring plan. Table 6: Impact Nationalisation Pro forma figures June 0 Guarantee on funding PF Resolution Deduction Tier levy (shortfall) Pro forma SNS REAAL Total equity Double Leverage ( ) Double Leverage (%) 4,88 (70) 4, % Banking activities Total equity, (70) Core Tier capital (Basel II),46 (70) Risk Weighted Assets (Basel II) 8,85 Core Tier ratio (Basel II).% (5,46),4 (5),4,9 6.% The pro forma core Tier ratio of SNS Bank NV at the end of June 0 stands at 6.%. The pro forma figure includes a release of riskweighted assets of 5. billion related to the transfer of Property Finance to a separate asset management organisation in combination with an expected guarantee of approximately 5 billion for the funding after the separation. It also includes an estimated 70 million negative impact from SNS Bank s share in the nonrecurrent resolution levy on Dutch banks of billion to be paid in 04. Furthermore the difference between expected loss (EL) and actual provisions made for the related exposure is adjusted in the capital. The negative difference (when EL amount is larger than the provision amount) is deducted from the capital base as a shortfall. At the end of June 0, this shortfall amounted to 70 million of which 5 million is deducted from core Tier capital and 5 million from BIS capital. In the pro forma figures the entire shortfall is deducted from core Tier capital due to the absence of subordinated debt after the expropriation. The fully phased in pro forma Basel III core Tier ratio of SNS Bank NV amounted to.6%. In this ratio the entire deferred tax asset (DTA) related to the loss carry forward as at end June of 49 million and the entire negative fair value reserve of SNS Bank NV of 7 million are deducted from core Tier capital. Under Basel II these items, which are included in core Tier capital as at end June, will be gradually deducted from Tier capital in the period January 04 up and to January 08. Furthermore, Basel III Risk Weighted Assets of.7 billion include a Credit Valuation Adjustment (CVA) capital charge, which increases the capital held against the risk that the marktomarket value of derivatives may deteriorate due to a change in counterparty credit worthiness. SNS REAAL NV Interim financial report 0 4

16 The pro forma double leverage of SNS REAAL and the pro forma regulatory solvency of the Insurance activities are equal to the reported figures.. Funding activities.. Banking activities During the first half of 0, SNS Bank did not enter into any capital market transactions. In total, retail savings balances remained stable at.8 billion. After a decline of. billion in January, the following months showed a net inflow of the same amount. As a result of the decrease in loans and advances to customers, in combination with stable retail funding, the loantodeposit ratio of the Banking activities improved from 4% at yearend 0 to 8%. Excluding Property Finance, the loantodeposit amounted to %. The total liquidity position was reduced but remained high at 8.7 billion at the end of June 0, compared to.5 billion at the end of 0. The decline was due to the redemption of securitisations which reduced the assets eligible for the repo funding facilities of the ECB. In July liquid assets increased again by.9 billion as ECB eligible assets increased driven by an increase in available collateral due to an on balance securitisation and a lower use of collateral related to contingencies. Table 7: Development liquidity position SNS Bank June 0 December 0 June 0 Cash 6,0 6,69 Liquid assets,4 4,88 7,65,797 Total liquidity position 8,74,509,448.4 Balance sheet and risk management Compared to yearend 0, SNS REAAL s balance sheet decreased by 5.4.billion to 8. billion (4%), mainly driven by a decrease of loans and advances to customers at SNS Retail Bank. The provision of billion related to valuing the total real estate finance portfolio at the transfer value as determined by the Dutch State did not have an impact on the balance sheet total as this provision is not netted with the real estate finance portfolio but included in the liabilities held for sale at the liability side..4. Intangible assets Intangible assets decreased by 4 million to 859 million due to 8 million regular amortisation and 0 million impairments. Impairments consisted of a 8 million partial impairment of VOBA and a 0 million impairment of internally developed and capitalised software. At the end of June 0, total goodwill of 4 million related to REAAL Life ( 50 million), RegioBank ( 67 million) and Zwitserleven Asset Management ( 7 million). VOBA at the Insurance activities amounted to 55 million (yearend 0: 6 million). SNS REAAL NV Interim financial report 0 5

17 .4. Investments Investment portfolio Banking activities Total investments at the Banking activities remained stable at 5. billion. The reduction of a shortterm position in the trading portfolio held at yearend 0 in the context of liquidity management was offset by an increase in sovereign debt exposure, mainly in Belgian, Dutch and French debt. The peripheral European sovereign exposure of SNS Bank increased modestly to 45 million due to revaluations. The market value of the GIIPS exposure at end June 0 was at of SNS Bank s total sovereign exposure in line with yearend 0. Investment portfolio Insurance activities At the end of June 0, total investments for own account at the Insurance activities amounted to 0.6 billion (yearend 0:.7 billion) of which 96% was invested in fixedincome securities (yearend 0: 96%). Of the fixedincome portfolio, 76% was rated A or higher (yearend 0: 75%) and 59% was AAA (yearend 0: 58%). The exposure of the Insurance activities to peripheral European sovereign debt remained limited at 4 million, % of total sovereign exposure, with no exposure to Greece, Portugal and Ireland. The equity portfolio of the Insurance activities amounted to. billion, stable compared to yearend 0. The fair value reserve of the Insurance activities related to equities was million compared to 9 million at yearend Loans and advances to customers Loans and advances to customers fell by 9.9 billion due mainly to the transfer of loans at Property Finance to assets held for sale. Excluding Property Finance, loans and advances to customers decreased by. billion to 54.4 billion. At SNS Retail Bank, loans and advances to customers decreased by.0 billion. SNS Retail Bank s residential mortgage portfolio decreased by. billion to 48. billion due to redemptions. Sales of new mortgages were limited. Additional to the decline in residential mortgages other loans decreased by.8 billion mainly due to lower cash loans to governments as part of liquidity management..4.4 Assets held for sale Assets held for sale amounted to 6.9 billion at end June 0, consisting of the assets of Property Finance, which are classified as held for sale in anticipation of a transfer to a separate asset management organisation. Assets held for sale mainly consist on the real estate finance portfolio, which net exposure amounted to 6.6 billion at end June (yearend 0: 7.0 billion). For further details on this portfolio see table 5 (breakdown Property Finance portfolio)..4.5 Participation certificates, subordinated debt and debt certificates Participation certificates and subordinated debt decreased from.744 million at yearend 0 to 56 million due to the expropriation of subordinated debt at SNS Bank NV and SNS REAAL NV. The remaining external subordinated debt at end June 0 entirely relates to the Insurance activities (SRLEV NV). Debt certificates decreased by 4. billion to 7.9 billion as a result of regular redemptions. SNS REAAL NV Interim financial report 0 6