DELTA LLOYD GROUP DOUBLES RESULT

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1 PRESS RELEASE Amsterdam, 11 August CONTINUED LOW INTEREST RATES LEAD TO ADJUSTMENT OF INTEREST RATE POLICY DELTA LLOYD GROUP DOUBLES RESULT Delta Lloyd Group key figures, first six months of Including Delta Lloyd Insurance, OHRA Insurance, ABN AMRO Insurance, Delta Lloyd Banking, Delta Lloyd Asset Management, Delta Lloyd Belgium, Delta Lloyd Germany and ENNIA. Result before taxation 238 million (+ 69%) Net result 180 million (+120%) Total Group income 5.4 billion (+ 27%) Total gross premium income 3.3 billion (+ 7%) Gross premium income, Netherlands 2.8 billion (+ 9%) In the first half of this year, Delta Lloyd Group showed a sharp improvement in results both before and after taxation, by 69% to 238 million and by 120% to 180 million respectively. Result before taxation in the General business showed the highest growth, to 119 million (: 51 million). The result at Life, of 80 million (: 69 million) was depressed by low interest rates, requiring extra provisions. The 7% organic growth in gross premium income was supported by the Dutch and Belgian Life businesses. Premium income from General Insurance operations stabilised on sharply improved profitability, while the Health results were marginally lower. For Delta Lloyd Banking, the mortgage portfolio continued to grow and Delta Lloyd retained its market share in this competitive market. Sales of investment funds in the Netherlands via third-party distribution channels climbed 72% and gained in importance for Delta Lloyd Asset Management. Despite falling premium income as a result of a changing fiscal climate, Delta Lloyd Germany showed improved profitability. Low interest rates have a mixed effect on the results of Delta Lloyd Group. The sharp fall in interest rates in the past year led to investment earnings on the bond portfolio. However, current long-term interest rates are too low to cover future life and pension liabilities and hence induced extra provisions for life and pension products with guaranteed contracts. Low interest rates are also reflected in the embedded value. Despite profitable new production, low interest rates cause the embedded value to rise only 5% in comparison with last year, to 3.8 billion. Delta Lloyd Group has therefore now adjusted its interest rate policy (see page 7). The risk of interest rate reductions is partially covered by derivatives, while at the same time, the provision for insurance obligations is continually adjusted to movements in market interest rates. Since, Delta Lloyd Group has published its results in compliance with the International Financial Reporting Standards (IFRS). To this end, the results and balance sheet for were restated in line with the IFRS rules. This led to an 8% increase in the net result for, to 327 million. Shareholders funds at year-end are 6% higher, at 2.8 billion (see also Annex 5). 1/17

2 Delta Lloyd Group results improve across the board Results Delta Lloyd Group Change Result before taxation % Net Result % Operating result n.a. n.a. Delta Lloyd Group s results improved during the first half of, leading to a sharp increase in the total result before taxation, to 238 million. These favourable developments were seen in all business units and resulted partly from an emphasis on cost management, so that higher sales were realised at a lower cost level. Capital gains also played a positive role. The sharply higher profit is particularly notable, since lower interest rates also led to the formation of a number of extra provisions. 128 million was reserved for guaranteed contracts on life insurances, for example, and an extra allocation of 347 million was added to the provision for insurance obligations. As a result of a favourable tax effect, the net result turned out at 180 million, more than double the 82 million of the first half of. Delta Lloyd Group total revenue increases 27% to 5.4 billion Total revenue Delta Lloyd Group Change Total revenue 5,374 4,248 27% Gross premium income 3,260 3,048 7% - From Life business 2,071 1,858 11% - From General insurance business % - From Health business % Investment income 1,926 1,110 73% Fee and commission income % Other operating income n.a. The Group s total revenue rose 27% to 5.4 billion. Just under 3.3 billion, or more than 60% of the revenues derive from insurance activities, in the form of gross premium income. The organic growth of the Group s insurance portfolio is based on the life insurance activities in the Netherlands and Belgium, which grew by 17% and 22% respectively. Annual premiums account for almost 1 billion of the total Life premium income of 2.1 billion and single premiums for 1.1 billion. The share of single premiums thus rose almost 3.5% in comparison with the first half of, to nearly 53% of the Life premium. The improved stock market climate in the first half of led to an increase in investment income, both for the Group s own risk and expense ( 0.9 billion) as for the risk and expense of policy-holders ( 1 billion), to 1.9 billion (+73%). The sharp increase in fees and commission results mainly from the asset management activities, where a growing number of products are sold via third parties. 1 The definition of operational result has been changed under IFRS rules, thus a comparison with the first half of is not available. 2/17

3 Organic growth of insurance operations by 7% Insurance operations Change Total gross premium income 3,260 3,048 7% Netherlands 2,756 2,520 9% - Delta Lloyd 1,559 1,512 3% - OHRA % - ABN AMRO Insurance % Germany % Belgium % Other % Results before tax by division Delta Lloyd Insurance % OHRA Insurance % ABN AMRO Insurance % Delta Lloyd Germany 6-4 n.a. Delta Lloyd Life Belgium n.a. The Dutch insurance operations play a dominant role within Delta Lloyd Group, accounting for almost 85% of the gross premium income. The unique position in the Dutch market - where Delta Lloyd Group is represented with A brands in all important distribution channels led to organic growth in the Dutch market of more than 9%, to 2.8 billion. As an intermediate insurer, Delta Lloyd Insurance accounts for almost threefifth of this, while direct writer OHRA and banking distribution under the ABN AMRO label each account for more than one fifth. Strong Dutch brands of Delta Lloyd Group generate 9% organic premium growth Gross premium income, The Netherlands Change Total gross premium income Netherlands 2,756 2,520 9% - From Life business 1,589 1,354 17% - From General insurance business % - From Health business % The position of Delta Lloyd Group in the Dutch insurance market once again strengthened in the first half of. Delta Lloyd Insurance increasingly uses the advisory know-how of agents and thus manages to further strengthen its position in relation to small and medium-sized enterprises (SMEs). Relations with regional SME departments are also being intensified here. OHRA created a hype with its Direct Result advertising campaign. The purple crocodile from the OHRA commercial has now become a symbol of unnecessary bureaucracy in the corridors of Parliament. This summer, around 51,000 purple crocodiles were handed out to promote OHRA s continual travel insurance. The highest growth in premium income at OHRA was achieved in the Life segment. Gross premium income at Life rose 81%, to 264 million, in the first six months, mainly as a result of a good position in the market for immediate annuities. 3/17

4 ABN AMRO Insurance also showed an increase in both its gross premium income and its result. The partnership with ABN AMRO Bank ensures close attention to insurance in ABN AMRO s Dutch branches. Extra efforts in the sale of immediate annuities led to a sharp increase in premium income for this product and ultimately translated into a 25% increase in Life premium income. General premium income was slightly lower than last year, when ABN AMRO Insurance included many underwriting agreements in its own books causing a sharp increase in premium income. Profitability of Belgium and Germany improves A focus on insurance activities outside the Netherlands shows that the Belgian insurance activities still generate the highest increase in gross premium income within the Group, although the rate and, consequently, new production stabilised compared to earlier years. This is partly the result of a growing emphasis on profitability. Early this year, the cost basis was substantially improved through a major reorganisation, with no compulsory redundancies. Capital gains had also already led to a significant reduction in Belgian losses. In order to strengthen its position as a young pension insurer in the Belgian market, Delta Lloyd Life initiated the debate on pensions in Belgium early this year. Delta Lloyd Germany showed a significant reduction in gross premium income, due to a change in fiscal facilities for life insurance, which came into effect on 1 January of this year. As a result, Germany showed a peak in new production and premium income at Life at the end of, followed by a collapse of the market this year. Profitability did improve in, through better investment results and the completion of a streamlining operation for the internal organisation, to a result before taxation of 6 million. Life premium income rises 11%, but low interest rates depress results The gross Life premium income showed a marked increase in the first half of the year. Both OHRA and ABN AMRO Insurance saw strong growth in single premiums. Delta Lloyd Insurance saw an increase in new annual premiums from 47 million in the first half of, to 62 million in the first half of. The Life segment is still suffering from low interest rates. In order to cover commitments for guaranteed contracts in the life and pension portfolio, 128 million was added to provisions in the first half of this year. The extra allocation to the provision for insurance obligations in excess of the fixed actuarial interest rate amounted to 347 million in the first half of (see also page 7 for further details). Through good returns on the investment portfolio and the cost reductions realised, the results before taxation for Life insurance activities rose 16% to 80 million. Embedded Value (EEV) Delta Lloyd Group Change EEV 3,756 3,570 5% - Value in Force 1,338 1,715-22% - Timevalue of options and guarantees % - Net Worth 2,562 1,977 30% Low interest rates were also reflected in the embedded value. In the first six months, this rose 2% to 3.8 billion 2. However, compared with a year earlier, the increase was more than 5%. Lower interest rates than in the preceding period also played a role here. Partly because of this, the Life result based on the operational returns on the embedded value, the Life EEV Operating Return, fell 18% to 124 million in the first six months of the year. The composition of the embedded value and a comparison with the embedded value in the same period of is presented in further detail on page 4. The shift in the Value in Force to Shareholders funds is primarily due to the switch from the Dutch GAAP to the IFRS rules (see also Annex 5). 2 See Annex 4 for further details of movements in the embedded value. 4/17

5 New Life production 13% higher NAPI 3 Delta Lloyd Group Change Total NAPI Delta Lloyd Group % Netherlands % Germany % Belgium Delta Lloyd Group s Life business was once again able to improve new production levels in the first half year. In total, new production rose 13% to 235 million and generated a positive new value of 18 million. This increase was solely attributable to the Dutch activities, with Delta Lloyd Insurance, OHRA and ABN AMRO Insurance showing a collective growth of 22%. General Insurance profitability more than doubles The gross premium income from the General Insurance activities stabilised at 672 million, 1% higher than in the same period of last year. This was the result of slightly higher premium income at Delta Lloyd and OHRA and a reduction in premium income at ABN AMRO Insurance, which fell back somewhat from the high growth of last year. The profitability of the General Insurance activities made excellent progress. This applied for all product lines. Thanks to a unique concept, car insurance in particular, continues to perform very well for both policy-holders - for whom premiums remained unchanged for the third year in succession-, and in terms of its profitability for Delta Lloyd Group. As a result of good cost and claim management, the Combined Operating Ratio dropped to 95%. Overall, the General activities recorded a result before taxation of 119 million in the first six months, more than double the 51 million in the first six months of. Health prepares for new basic system Partly because of the upcoming introduction of a new basic healthcare system at the start of next year, the health insurance market is changing fast. The number of insured and, consequently, the premium income, diminished slightly to 517 million, while profitability improved. In the run-up to the new basic healthcare system, the Health activities under the Delta Lloyd and OHRA labels are focusing on possibilities to further improve the cost basis. Innovative forms of partnership with care providers, which could benefit our clients, are also being considered. Early this year, for example, Delta Lloyd Group was the first to contract an agreement with a preferred hospital, under which patients are promised compensation if a planned operation is cancelled. 3 New Life business is expressed in New Annual Premium Income, NAPI. The NAPI is the sum of 100% of new annual premium income and 10% of new single-premium policies. 5/17

6 Banking and investment operations in the first half of Banking and asset management activities Change Assets under management Delta Lloyd Group 59,050 55,165 7% - of which property investments 1,671 1,665 - Mortgageportfolio Delta Lloyd Banking 9,510 8,954 6% New mortgages 4 1, % Delta Lloyd Banking can look back on a positive past six months. Both interest income and commissions performed well, leading to an increase in net revenues of more than 5%, to 79 million. The result before taxation rose to 8 million (: 0 million) among others due to growth in credits, limitation of cost increases and improved management of interest risks. Delta Lloyd grows its market share for mortgages Delta Lloyd Banking has further grown its position in the Dutch and Belgium mortgage market. New mortgage production was 26% higher, at 1.1 billion, in comparison with 0.9 billion in the first half of. The Netherlands accounted for 930 million of the growth in the first half of, raising Delta Lloyd s share of the Dutch mortgage market to 2.1%. New mortgage sales by Delta lloyd Bank of 215 million were realised in Belgium, while Delta Lloyd Germany sold 242 million in new mortgages in Germany (: 250 million). In the Netherlands, Delta Lloyd Banking started a new E-banking concept for savings and loans via agents, first introduced at the 140 offces of De Hypotheker. In Belgium, the market position of Delta Lloyd Banking was strengthened through a full merger of the Group s two banks, Bank Nagelmackers 1747 and Delta Lloyd Bank. In the Belgian market, with in total some 200 outlets, Delta Lloyd Bank now operates solely under the Delta Lloyd label. Asset Management and Property Sales of Delta Lloyd investment funds via banks, including ABN AMRO and Rabobank, soared. Third-party sales via banks rose 71% to 132 million. The gross inflow of investments increased 26% to more than 1 billion. Asset Management s net inflow of new investments fell back in the first six months of this year, to 66 million. This was partly attributable to the termination of a large 240 million mandate. OHRA s theme funds showed a marginal net outflow, but their performance improved. Both FD Morningstar and Standard & Poor s named the Delta Deelnemingenfonds as the bestperforming mutual fund in the Netherlands Shares category. In May, the successful Delta Lloyd Rentefonds passed the 2 billion mark for invested capital. The Group s total assets under management rose 7% to more than 59 billion. The share of property remained unchanged, at 1.7 billion. The property portfolio continued to perform well. In the persistently difficult commercial property market, total void in the portfolio did rise somewhat, to 4.6% (from 4.0%), but compared to the overall market this is still a low percentage. 4 Results compare the first half of with the first half of 6/17

7 Healthy growth of Delta Lloyd Group shareholders funds Development of financial solidity Delta Lloyd Group Shareholders funds 3,145 2,818 Solvancy Dutch insurance business 279% 240% BIS ratio Delta Lloyd Banking Delta Lloyd Group showed healthy growth of shareholders funds in the first half of, by 12% to 3.1 billion. The solvency of the Dutch insurance operations improved significantly, to 279%, clearly showing the strength of the Group s core activities. The BIS ratio of Delta Lloyd Banking fell back to 11.8, as a result of more effective capital deployment. This reduced the internal benchmark of the BIS ratio from 12 to 10. This policy will be continued in the coming period. Standard & Poor's did not alter its AA - (stable outlook) rating for Delta Lloyd Group in the first half of. Delta Lloyd Group changes interest policy Long-term interest rates have been falling for a fairly long period now, and have reached a historically low level. These falling interest rates both depress and boost the results of Delta Lloyd Group. A positive factor is that the falling interest rates have led to capital gains on the bond portfolio in the past year. However, in Delta Lloyd Group s view, this does not offset the negative impact on the provision for insurance obligations. With falling interest rates and unchanged policy, this provision will not be enough to produce sufficient returns to meet all future commitments. At current falling interest rates, a situation could arise in which under the IFRS rules the returns are shown as results, due to these interest rate changes, while a provision shortfall threatens. In Delta Lloyd Group s view, this is improper and at variance with the interests of policy-holders, because these investments are in fact intended to cover their liabilities. The increase in the value of the portfolio should be allocated to the insurance obligations provision, rather than taken to the profit and loss account. Otherwise the opposite situation will arise if interest rates rise: losses as a result of increasing interest rates will not be offset by releases from the provision for insurance obligations. If policy remains unchanged, therefore, a drop in interest rates could in fact lead to overstated book profits on the bond portfolio, while an increase in interest rates could in fact lead to overstated book losses on that portfolio. After all, the value of the bond portfolio falls when interest rates rise. Through the switch to IFRS phase 1, the value of fixed-rate investments is determined on the basis of the market value, while the provision for these liabilities is still determined on the basis of the fixed actuarial rate customary under the Dutch GAAP rules. This valuation mismatch leads to high volatility in the result, which is no longer an accurate reflection of the actual economic reality. This is why Delta Lloyd Group has opted to create an additional provision from now on, the level of which will be determined taking into account the market interest rate. Delta Lloyd Group has also decided that under IFRS, it will no longer classify fixed-income securities as Available For Sale, but as Other Than Trading (OTT). As a result, the unrealised movements in the value of investments resulting from interest rate fluctuations will be shown in the Profit & Loss Account rather than the balance sheet. This is related to the change for the insurance obligations provision, which will now also be valued at the market interest rate. In the valuation of the obligations, therefore, the fixed actuarial interest rate is replaced by a theoretically risk-free swap curve. In addition Delta Lloyd Group decided to partially cover the risk of further interest rate falls through derivatives. 7/17

8 The great advantage of the method now used by Delta Lloyd Group is that this leads to capital gains on the fixed-income securities (i.e. rising income) when market interest rates fall, and at the same time, requires a higher provision (i.e. extra costs). The net effect of interest rate movements is therefore largely neutralised 5. An additional advantage is that Delta Lloyd Group in this way anticipates the IFRS phase 2 method that will take effect later. Comparison of IFRS and Dutch reporting regulations (Dutch GAAP) IFRS leads to two sorts of changes in the financial statements: firstly, in changes that only involve a switch of classification (reclasses). In the IFRS regime, for example, investments are shown under a different heading than in the Dutch GAAP. These changes only affect the level of individual balance sheet items, not the total equity. This is therefore only a shift in items. The other changes are more radical and do affect the level of total equity and the result (revaluations). These changes involve a different valuation method, for instance, or the creation of provisions. The consequences for the shareholders funds and result are relatively minor. Under IFRS, the net profit on is 8% higher ( 327 million) than the 302 million reported under the Dutch GAAP rules. Shareholders funds at year-end rise 6%, from 2.6 billion under the Dutch GAAP rules to 2.8 billion under IFRS. The largest increase (17%) is in the balance sheet total as at 31 December, to 48 billion (compared with 41 billion). This is partly because various items that could be totalled under the Dutch GAAP have to be shown separately under the IFRS rules. One example is securitised mortgages, which could be shown as a net amount under Dutch GAAP but which, under the IFRS rules, have to be shown both as debit items in investments and as credit items as liabilities. The connection between the shareholders funds at year-end and the differences in the result for between IFRS and Dutch GAAP are shown in Annex 5. A detailed review will be published in the Delta Lloyd Group financial statements for. Outlook for full-year In outline, Delta Lloyd Group maintains the outlook published earlier for the full-year. In view of the uncertain impact of investments on the results under the IFRS reporting rules, Delta Lloyd Group will refrain from making a profit forecast for as a whole. The Group will further improve efficiency and a further increase in gross premium income is expected for all insurance activities, with the exception of gross premium income in Germany, which is expected to remain more or less unchanged. An improved relative position of Delta Lloyd Group in the Dutch mortgage market is also expected. 5 The degree of neutralisation depends on the composition of the investment portfolio and the duration. 8/17

9 Other information, Delta Lloyd Group The results and income of the ABN AMRO Insurance joint venture are fully consolidated in the figures. An adjustment for the 49% interest of ABN AMRO Bank Netherlands is included in minority interests in the consolidated profit & loss account. The ordinary shares and preference B shares of Delta Lloyd Group are wholly owned by the international insurance group Aviva plc in London, UK. In addition, Stichting Nuts Ohra in Amsterdam, the Netherlands, has an interest in the form of preference A shares. This means that 92% of the total issued capital is held by Aviva plc and 8% by Stichting Nuts Ohra. As from the start of the financial year, Delta Lloyd Group has reported on the basis of the IFRS rules. Comparative figures for have been restated in compliance with the IFRS for terms defined in the IFRS. The differences between the balance sheet and result under the IFRS and Dutch GAAP are explained in Annex 5. Terms that are not defined in the IFRS, such as the operating result, have not been restated and, therefore, no comparative figures are given. No share issues or buy-backs occurred during the first half of. No external audit of this press release has been conducted. FOR MORE INFORMATION: David Brilleslijper Director Corporate Communications TEL cc@deltalloyd.nl This press release can be viewed in Dutch and English at 9/17

10 ANNEXES 1. Delta Lloyd Group. Summary Consolidated Profit & Loss Account (IFRS) INCOME - Gross premium income 3,260 3,048 - Investment income 1,926 1,118 - Fee and commission income Other operating income Total gross income 5,374 4,256 - Premiums ceded to reinsurers and change in premium reserve Profit or loss on disposal of discontinued operations - -7 Total net income 5,084 3,931 EXPENSES - Net claims and benefits paid -3,768-2,857 - changes in insurance liabilities and other provisions Expenses attributed to investment contracts Fee and commission expenses Acquisition costs Other operating expenses Finance costs Other expenses Total expenses -4,846-3,789 RESULTS Result before taxation Taxation Result after taxation Minority interest Group -9-6 NET RESULT /17

11 2A. Delta Lloyd Group. Consolidated Balance Sheet - Assets (IFRS) Assets Intangible fixed assets Property & equipment Investment property 1,671 1,665 - Investment in associates, subsidiaries and others Debt securities 20,897 19,309 - Equity securities 11,010 10,555 - Other investment derivatives Loans and receivables 11,350 11,059 Total investments 45,004 42,671 - Reinsurance assets 1,403 1,325 - Tax assets Other assets Receivables and other financial assets 1,648 1,388 - Prepayment and accrued interest Total receivables 4,267 3,737 - Cash 1, Credit institutions Deposits 1, Total cash & cash equivalent 2,414 1,014 TOTAL ASSETS 52,217 47,977 11/17

12 2B. Delta Lloyd Group. Consolidated Balance Sheet - Liabilities (IFRS) Liabilities Share capital Capital reserves Revaluation and other reserves 1,289 1,046 - Retained earnings 1,658 1,573 Shareholders funds 3,145 2,818 - Minority interest Total equity 3,333 2,993 - Insurance liabilities ,981 - Liabilities for investment contracts 1,851 1,768 - Provisions for other risks 1,320 1,321 - Tax liabilities Borrowings 11,480 10,253 - Other liabilities 1, Derivatives Payables and other financial liabilities 2,512 2,342 Total liabilities 48,884 44,985 TOTAL EQUITY AND LIABILITIES 52,217 47,977 12/17

13 Annex 3. Premium income and result for insurance activities, by sector Pension & Life business Change Gross premium income 2,071 1,858 11% Netherlands 1,589 1,354 17% - Delta Lloyd % - OHRA % - ABN AMRO Insurance % Germany % Belgium % Other % Life result before taxation % Life EEV operating return % General insurance business Change Gross premium income % Netherlands % - Delta Lloyd % - OHRA % - ABN AMRO Insurance % Other % General insurance result before taxation % Health business Change Gross premium income % Delta Lloyd OHRA % Health result before taxation % 13/17

14 Annex 4. Movements in European Embedded Value (EEV) in first six months of EEV movement Published EEV 1 January prior period adjustments (mainly changes from Dutch GAAP to IFRS) 64 Revised opening EEV 1 January New business contribution Total profit from existing business 106 Life EEV Operating Return Investment return variances Effect of economic assumption changes Total capital adjustments (dividends paid to Delta Lloyd Group) -82 EEV 30 June Item 1 Prior period adjustments Through the switch from Dutch GAAP to IFRS, certain items have been restated, as a result of which the shareholders funds have been adjusted. Item 2 New business contribution This is determined by discounting the expected future earnings for new Life production. The earnings are (negatively) affected by lower interest rates. Item 3 Total profit from existing business These are primarily determined by recalculating the hurdle rate on the portfolio. The earnings are (negatively) affected by lower interest rates. Item 4 Investment return variances The difference between the investment returns actually realised and the returns calculated in the EEV. Item 5 Effect of economic assumption changes The embedded value is determined on the basis of economic parameters such as current interest rates, return on investments, inflation and taxation. Overall, the economic parameters, which were adjusted as a result of the sharp fall in long interest rates in the first year, had a negative effect of 294 million. 14/17

15 Annex 5 Comparison of report on the basis of the Dutch GAAP and IFRS rules 5A. Comparison of Shareholders funds as at year-end under Dutch GAAP and IFRS rules Shareholders funds Dutch GAAP 2,649 1 Valuation of investments 1,308 2 Valuation of property for corporate use Technical provisions Employee benefits Derivatives Goodwill 3 7 Preference shares -9 8 Capatilisation of software 26 9 Deferred taxation -257 Other -25 Tax effect on adjustments -368 Shareholders funds IFRS 2,818 Item 1. Valuation of investments Under IFRS, Delta Lloyd Group shows some of the bonds as available for sale, resulting in valuation at the current value and incorporation of unrealised movements in the Shareholders funds. The remaining bonds are shown at fair value through profit or loss, with both realised and unrealised movements in value taken to the Profit and Loss Account. Under Dutch GAAP, bonds were shown at amortised cost. Item 2. Valuation of property for corporate use Under Dutch GAAP, property for Delta Lloyd Group s own use and property investments were shown at current value, with unrealised revaluations stated in Shareholders funds. Under IFRS, Delta Lloyd Group values property for its own use at cost, less depreciation and any exceptional diminutions in value. Delta Lloyd Group values property investments at the current value, with both realised and unrealised movements in value taken to the Profit and Loss Account. Item 3. Technical Provisions The difference results from changes in the provisions. Under Dutch GAAP, provisions were determined on the basis of a fixed actuarial rate. Under IFRS, this is discounted at the current market interest rate. Item 4. Employee benefits Adjustment in processing of liabilities for the in-house pension provisions for Delta Lloyd Group employees. Item 5. Derivatives Derivatives are shown in the balance sheet at the current value, with all movements in value shown in the Profit and Loss Account. Under Dutch GAAP, derivatives held for risk management purposes were shown in transitory items. Item 6. Goodwill Under IFRS, acquired goodwill is no longer amortised. This was possible under Dutch GAAP. Item 7. Preference shares This concerns preference shares that are classified as borrowed capital under IFRS, in view of their economic character. Under Dutch GAAP, this was included in Shareholders Funds. 15/17

16 Item 8. Intangible fixed assets In contrast to Dutch GAAP, software is capitalised. Depreciation is based on an economic life of three years. Item 9. Deferred taxation on property for corporate use Under IFRS, deferred taxation on property is shown at the nominal tax rate, while under Dutch GAAP, this was shown at the discounted value. 16/17

17 5B. Comparison of results under Dutch GAAP and IFRS Net result Dutch GAAP Investment return Valuation of property for corporate use Technical provisions Employee benefits -6 5 Derivatives Goodwill 6 7 Capitalisation of software 3 8 Other -18 Tax effect on adjustments -12 Effect minority interest -4 Net result IFRS 327 Item 1. Investment return Under IFRS, Delta Lloyd Group shows part of the bonds at fair value through profit or loss, with both realised and unrealised value movements taken to the Profit and Loss Account. In comparison with the statements under the Dutch GAAP rules, this leads to more movements in the Profit and Loss account. Item 2. Property for corporate use Under IFRS, Delta Lloyd Group has opted to value property for its own use at cost, less depreciation and to show any exceptional diminutions in value in the Profit and Loss Account. Under Dutch GAAP, property for Delta Lloyd Group s own use and property investments were shown at current value, with unrealised revaluations stated in Shareholders funds. No commercial depreciation was applied to property. Item 3. Technical provisions Delta Lloyd Group has decided to form an additional provision, taken to the Profit and Loss Account, at a level based partly on current market interest rates. Item 4. Employee benefits This concerns differences in liabilities for Delta Lloyd Group s own pension fund. Item 5. Derivatives Derivatives are shown in the balance sheet at current value, with all movements in value shown in the Profit and Loss Account. Under Dutch GAAP, derivatives held for risk management purposes were shown in transitory items. In comparison with Dutch GAAP, this leads to more movements in the Delta Lloyd Group Profit and Loss Account. Item 6. Goodwill Under IFRS, acquired goodwill is no longer amortised. This was possible under Dutch GAAP. Item 7. Capitalisation of software In contrast to the Dutch GAAP, software is capitalised. Depreciation is based on an economic life of three years. 17/17