Result impacted by severe weatherand high healthcare costs
Half Year Results 2016
Willem van DuinChairman of the Executive Board
Huub ArendseChief Financial Officer
Result affected by severe weather conditions and higher healthcare expenses
Net loss of €24 million
Severe weather conditions causes damage with approximately 30,000 customers
Total cost of claims approximately €270 million
Increase in healthcare expenses stronger than expected, amongst others due to higher than expected use of new medicines
Good progress on Acceleration & Innovation program:
Lots of innovations launched by our brands, high level of customer satisfaction regarding innovation
Centraal Beheer General Pension Fund (APF) formally launched after receiving the license on 18 July 2016
Expenses have decreased by about €355 million since start of Acceleration & Innovation in 2014
Solid financial position with a solvency ratio of about 204%
S&P ‘A’ credit rating for the insurance entities
| Achmea Half Year Results 20162
Inhoud
General overview
Group results
Acceleration & Innovation
Financial overview
Results per segment
New segment structure
Capital position and solvency ratio
Investments
Conclusion
Appendix
Investment portfolio
| Achmea Half Year Results 20163
Severe weather conditions caused approximately 30,000 reported claims
Severe weather conditions in June affected our customers in Brabant and Limburg
Impact for Achmea greater than any previous calamity (e.g. Kyrill in 2007)
Emergency plan immediately put into effect
Extra deployment of employees at Interpolis, Centraal Beheer, FBTO and Avéro Achmea
In the first week, often in the first few days, claims experts visited in person to inspect agricultural damages
Rapid repair of damages, also by using innovative techniques, such as drones and hail damage scanners
The consequences of climate change have so far been insufficiently included in the premium rate; higher premiums are inevitable
As a cooperative company we work together with our customers on preventive measures to limit cost of claims in future
| Achmea Half Year Results 20164
204
199
Severe weather conditions and higher healthcare expenses result in net loss
Higher gross written premiums property & casualty, Health and International
Net loss of €24 million
Net impact of severe weather conditions €137 million after reinsurance
Healthcare expenses higher than expected, mostly due to higher costs for new medicines
Higher contribution from Pension & Life due to higher investment results and lower operating expenses
Expenses decreased further by 4% due to Acceleration & Innovation. When adjusted for strategic investments, about €355 million in operating expenses have been reduced since the start of the change programme in 2014
Solid financial position with a solvency level of 204%. S&P ‘A’ credit rating for insurance entities
| Achmea Half Year Results 20165
Net result (in € million)
Gross written premiums(in € million)
Solvency ratio (SII)(in %)
Operating expenses (in € million)
H1 2016 2015H1 2016 H1 2015
-24
272
H1 2016 H1 2015H1 2016 H1 2015
16,940 16,902
1,310
1,367
5
Results of insurance activities per segment
| Achmea Half Year Results 2016
Segment results (in € million) H1 2016 H1 2015
Non-Life -121 75
Health 2 172
Pension and Life 187 110
Retirement services -13 -5
International activities 8 28
Other activities -101 -95
Operational result -38 285
6
Result of Non-Life affected by one-offs
Operational result affected by severe weather conditions
Underlying results of Non-Life increased
Result of Health break-even
Result of health insurance affected by:
Higher than expected use of new medicines
Increase in claims despite premium rates set below cost price
Result for Pension and Life increased
Lower operating expenses and higher investment results
Retirement services
Result affected by strategic investments
Centraal Beheer General Pension Fund well received by employers
International activities
Underlying result increases when adjustedfor one-offs in previous year
6
Acceleration & Innovation programme since 2014
Background
Acceleration in customer focus and cost savings
Innovation of processes and online services
Changes in response to rapidly changing customer needs
Ambititions Acceleration & Innovation
Providing new solutions to our customers
Maintaining the current high level of customer satisfaction
Maintaining long-term solid financial health
Objectives
€450 million cost reduction
Reduction of approximately 4,000 FTE’s
| Achmea Half Year Results 2016
Competitiveexpenses
Responsiblereturns
EmployeesEmployees
Customer-driven
7
Customer-driven: responding to customers’ rapidly-changing needs
Centraal Beheer and Interpolis ‘most appreciated’ large insurers according to Dutch Association of Insurers (Verbond van Verzekeraars)
Centraal Beheer launches RoadGuard, a roadside assistance app without a subscription
Centraal Beheer, Interpolis and Avéro Achmea increase flexibility and coverage of disability insurance (AOV)
Eurocross starts 24/7 assistance to electric car drivers for charging
Good progress FBTO pilot for usage-based car insurance
Zilveren Kruis has the best online service according to WUA Research Institute
Zilveren Kruis invests via ‘HartWatch’ in improved care for heart patients
Zilveren Kruis works together with hospitals on procurement of medicines to reduce healthcare expenses
The quality label for customer centric insurance scored our brands higher from 3.8 to 4.5(on a scale of 1 to 5)
8 | Achmea Half Year Results 2016
Employees
Responsible returns
Centraal Beheer General Pension Fund formally launched after obtaining licencefrom Dutch Central Bank
Establishment Closed books for Pension and Life finalised
Improvement in performance Non-Life portfolio due to measures taken
Further growth in mortgage portfolio to €4.8 billion. On track to achieve a portfolio of €6 billion at the end of this year
Focus on core activities: sale of Staalbankiers’ private banking activities and Winnock reintegration business
More intensive collaboration with Rabobank: digital processing for retail customers; strengthening of advice for commercial clients
Working together with customers on prevention and innovation,including impact of climate change
9 | Achmea Half Year Results 2016
Employees
Competitive expenses: good progress on reducing expenses
Operating expenses reduced by €355 million since the start of the Acceleration & Innovation programme in 2014
Expenses reduced by €57 million (4%) compared to the same period last year
Decrease in operating expenses affected by strategic investments in amongst others our retirement services strategy, bancassurance and international activities
Effects of reduction targets fully visible in the course of 2017
Reduction of about 3,000 jobs since the start of the programme
Decrease in jobs of more than 500 in the first six months
Sustainable social plan and career support for redundant employees
| Achmea Half Year Results 2016
Employees
10
Focus on employees: crucial to further improving our services
Continuously investing in the required competences to be able to work in a digital environment
Employability of employees is an important theme
Use of awareness campaign including tools, information and special activities
Recruitment is focused on attracting strategic talent
Achmea ‘best employer’ amongst pension funds and insurance companies according to Intermediair in their research on image and perception
11 | Achmea Half Year Results 2016
Employees
Acceleration & Innovation: Stay on course, complete and accelerate
Maintaining the chosen strategic direction:
Further strengthen core competencies Property & Casualty, Disability and Health insurances and International activities
Strong positioning in pension market via Centraal Beheer APF within retirement services strategy
Provide our customers with innovative solutions and maintain high level customer satisfaction
Maintain solid, long-term financial position
Further acceleration consists of:
Continuing with further digitisation and innovation of services provided to customers
Continued focus on reducing expenses
More intensive collaboration with Rabobank
| Achmea Half Year Results 201612
Programma
General overview
Group results
Acceleration & Innovation
Financial overview
Results per segment
New segment structure
Capital position and solvency ratio
Investments
Conclusion
Appendix
Investment portfolio
| Achmea Half Year Results 201613
H1 2016 H1 2015
-24
272
H1 2016 H1 2015
-38
285
H1 2016 H1 2015
1,310
1,367
H1 2016 2015
10,194 10,280
H1 2016 H1 2015
16,940 16,902
H1 2016 2015
204199
Strong financial position: solvency ratio 204%
Operational result affected by:
Severe weather conditions caused total damages of €267 million for our customers
Impact on result of €137 million after reinsurance
Higher healthcare expensesthan estimated due to:
Higher expenditures new medicines
Changed portfolio composition
Gross written premiums increased at Property & Casualty, Health and International
In 2016, operating expenses decreased further by 4% due to the decline in the number of employees and continued digitisation of processes
Solid financial position with a solvency level of 204%¹
| Achmea Half Year Results 201614
Operational result(in € million)
Net profit(in € million)
Gross written premiums(in € million)
Solvency ratio (SII) (in %)
Operating expenses(in € million)
Equity (in € million)
¹ Percentage based on an estimate with a range of -10% / +5%
14
New governance structure leads to different segment structure
Main changes in segment structure:
Segment Retirement Services constitutes of:
Achmea Bank (formerly Bank activities)
Pension administration (formerly Other activities)
Achmea Investment Management (formerly Other activities)
Reinsurance operations now included in Other activities (formerly segments Non-life and Pension & Life)
A travel insurance portfolio is part of the segment Non-life (formerly Health)
Segment Banking activities is eliminated
| Achmea Half Year Results 2016
New segment reporting
As of January 1st, 2016 the reporting segments have been changed
The changes do not impact the results on group level
The businesses that execute the Retirement Services strategy have been brought together in the same governance structure.
Comparative figures 2015 have been changed in accordance with the new segment structure
15
Results affected by one-offs
| Achmea Half Year Results 2016
Segment results (in € million) H1 2016 H1 2015Former
structure
Non-Life -121 75 109
- Severe weather conditions -130 -
Health 2 172 188
Pension and Life 187 110 125
Banking activities -18
Retirement services -13 -5 -
International activities 8 28 34
Other activities -101 -95 -153
16
Non-Life
Operational result affected by severe weather conditions
In 2015 realisations on investments due to change in portfolio mix
Health
Result basic health insurance negative due to:
Higher than expected healthcare expenditures for medicines
Changed portfolio composition
Pension and Life
Higher investment results and lower operating expenses
Retirement services
Result affected by investments in retirement services strategy
International activities
Underlying result has improved
16
Non-Life: High impact of severe weather conditions, underlying result improved
Property & Casualty
Due to reinsurance cover the impact on the operational result of the severe weather conditions is €130 million (gross claims: €267 million)
Underlying result improved because of return improvement measures within the retail customer and commercial portfolio
Income Protection
Sickness insurance
Higher duration of absence due to sickness
Trend towards own risk
Individual disability insurance (AOV)
Portfolio decline in line with the market
Effect accelerated reintegration smaller
Group disability insurance (WIA)
Higher inflow combined with accelerated reintegration
| Achmea Half Year Results 2016
3
11
H1 2016 H1 2015
Operational result Income Protection
(in € million)
-124
64
H1 2016 H1 2015
Operational resultProperty & Casualty
(in € million)
17
448440
502 512
Non-Life: Portfolio growth within Property & Casualty
Property & Casualty
Gross written premiums increased due to higher inflow in the retail customer portfolio and price effects in retail and commercial customer portfolio
Structurally lower claims ratio
Impact of severe weather conditions 10.4%-pt
Commission expenses increase in proxy channel
Income Protection
Portfolio decreases in line with the market for individual disability and sickness insurance. Gross written premiums of group disability insurance portfolio grows due to return improvement measures
Operating expenses decline due to realised cost efficiency measures
Combined ratio increases due to lower premiums
Claims ratio higher because of increased duration of absence due to sickness and a rising number of customers disabled for work
Result from previous year lower for our individual disability portfolio due to lower impact of initiatives of accelerated rehabilitation and reintegration
| Achmea Half Year Results 2016
H1 2016 H1 2015H1 2016 H1 2015
H1 2016 H1 2015 H1 2016 H1 2015
Combined ratio Income(in %)
Claims ratio Expense ratio
Operating expenses(in € million)
Gross written premiums(in € million)
Combined ratio at Non-Life(in %)
Property & Casualty Income Protection
Claims ratio Expense ratio Severe weatherconditions
2,007 1,982
109.4%99.4% 100.5%
94.0%
1,505 1,470
69.7% 71.2% 75.5% 69.6%
29.3%28.2%
10.4%25.0%
24.4%
18
Health: Negative result basic health insurance mainly due toincreased expenditures on new medicines
Basic health Insurance
Structural result lower:
Higher healthcare expenses due to higher than expected expenditures new medicines
Equalisation system does not fully compensate for the change in our portfolio
Allocation of €481 million to the results in 2015 is still insufficient
Less incidental result from previous years:
In 2016, lower than expected expenditures on geriatrics and care received abroad
In 2015, increased outpatient care and different development in fixed/variable healthcare expenses than expected
Declining operating expenses contribute to the result
Supplemental health insurance
Customers with supplemental health insurance take a more conscious decision for choosing their coverage
Penetration level of supplemental health insurance on basic health insurance remains stable
| Achmea Half Year Results 2016
Operational result HealthBasic + supplemental (in € million)
Incidental resultbasis health insurance
Previous underwriting years (in € million)
Structural resultbasic health insurance
Current underwriting year (in € million)
Operational result HealthSupplemental (in € million)
2025
H1 2016 H1 2015
65
158
H1 2016 H1 2015
-83
-11
H1 2016 H1 2015
172
H1 2016 H1 2015
2
19
260282
H1 2016 H1 2015H1 2016 H1 2015
13,106 12,977
H1 2016 H1 2015
100.7%98.2%
H1 2016 H1 2015
96.2% 95.4%
Health: Higher gross written premiums and lower operating expenses
Basic health Insurance
Higher gross written premiums due to higher contribution equalisation fund
Administrative costs declined due to more efficient processes
Claims ratio up due to higher healthcare expenditures
Expense ratio down due to initiatives relating to Acceleration & Innovation
Supplemental insurance
Gross written premiums for supplemental insurance declined due to a lower number of insured customers
Claims ratio has increased due to lower premium revenue and growth in more selective choice of package for supplemental cover
| Achmea Half Year Results 2016
Gross written premiums (in € million)
Basic Supplemental
Claims ratio Expense ratio
Operating expenses(in € million)
Combined ratioBasic (in %)
Claims ratio Expense ratio
Combined ratioSupplemental (in %)
8.4% 9.4%
87.8% 86.0%
2.9%3.2%
97.8%95.0%
1,318 1,327
11,788 11,650
20
Pension & Life: higher investment results and lower operating expenses
Pension & Life
Operational result increased
Higher investment results due to recovery real estate market, higher commodity prices and widening of swap spread
Lower amortisation on value of business acquired (VOBA)
Lower operating expenses
Result of complexity reduction visible
Decrease in number of employees in line with premium lapses
Immediate annuities and term life insurance
Ongoing pension and life insurance activities increased by 51%
Pension & Life closed-book
Licence for Centraal Beheer General Pension Fund obtained on 18 July 2016. Sale of pension insurance products ceased with creation of General Pension Fund (APF)
Gross written premiums decreased by 9%, mainly due to regular premium lapses and a large single premium contract in 2015
Closed-book yields cost benefits
| Achmea Half Year Results 2016
Operational result(in € million)
Operating expenses(in € million)
Gross written premiumsAnnuities and term life insurance
(in € million)
Gross written premiumsPension & Life closed book
(in € million)
148
98
H1 2016 H1 2015
844924
H1 2016 H1 2015
130
139
H1 2016 H1 2015
187
110
H1 2016 H1 2015
21
Retirement services: Achmea invests in the future
Retirement services
Underlying operational result €2 million
Investment of €15 million (total: €35 million) in implementingthe Retirement Services strategy
Achmea Investment Management
Assets under Management increased due to higher prices on financial markets
Management fees increased due to higher Assets under Management
Achmea Bank
Higher interest margin due to lower financing expenses
Quality of mortgage portfolio remains solid with an addition to loan provisions of approximately 5bps
Core Tier 1 Ratio increased to 18.0% (H1 2015: 16.8%)
Syntrus Achmea Pension Management
Preparations well under way for General Pension Fund with investmentsin a new administrative platform
Administration fees decreased slightly to €44 million(H1 2015: €53 million)
| Achmea Half Year Results 2016
Operational result(in € million)
Operating expenses(in € million)
Assets under Management AIM(in € mrd)
Interest margin Achmea Bank(in bps)
95
81
H1 2016 H1 2015
106
102
H1 2016 2015
140
124
H1 2016 H1 2015
-13
-5
H1 2016 H1 2015
22
International: Underlying result improved due to premium growth
International activities
Total increase in premiums of 4%:
Strong growth in gross written premiums in Turkey (9%),higher in local currency (24%)
Growing market share in Greece in a shrinking market. No. 1 position achieved in Greece’s retail customer market
Growth in Ireland due to further improving economy
Successful online initiatives by Onlia (Slovakia) and Anytime (Greece)
Adjusted for one-offs the operational result increased by €2 million
Increase in operating expenses less strong than growth in premiums
| Achmea Half Year Results 2016
Operational result(in € million)
Gross written premiums(in € million)
603579
H1 2016 H1 2015
8
28
H1 2016 H1 2015
23
Other activities
Achmea Reinsurance
Positive contribution of €6 million (H1 2015: €26 million) to the group result from Achmea Reinsurance despite June severe weather conditions and restructuring of reinsurance contracts Life. The restructuring also caused a decrease in gross written premiums
Achmea Real Estate & Finance
Assets under Management of Syntrus Achmea Real Estate & Finance increased to €16.7 billion, driven by growth in mortgage portfolio and positive revaluationof real estate
Management fees stable at €33 million with lower fees on real estate due to growth in mortgage portfolio
Staalbankiers
Achmea sells private banking activities Staalbankiers to Van Lanschot in line with the strategy
| Achmea Half Year Results 201624
Solvency II position remains strong
Solvency
Estimated Solvency II ratio as of Q2 2016 increased to 204%
The solcency ratio is an estimate. Due to uncertainties (LACDT) a rangeof -10%/+5% around the estimate is applied.
Available capital
Increase of available capital as result of interest rate developments (including UFR-effect)
Impact of severe weather conditions, coupon payments and dividend
Required capital
Higher increased capital due to an increase in life and market risk as result of interest rate developments
| Achmea Half Year Results 2016
FY 2015H1 2016
Availablecapital
Requiredcapital
Availablecapital
Required capital
Solvency II (approved model)(in € million)
9,801
4,816
9,151
4,589
25
204% 199%
Investment results affected by lower interest rates and lower realisations
Investment results
Investments results for own risk decreased with€98 million due to lower interest rates (direct results) and lower realisations (indirect results)
Increase in dividends and rental income more than offset by decline in interest rate
Positive revaluation of housing portfolio ensures stable indirect investment result
Running yield (annualized) at 2.3%
Realised and unrealised results in fixed income securities in Pension & Life do not form part of the profit and loss account but run through the FFA (Fund for Future Appropriation)
The amount of the FFA in H1 2016 is €9.5 billion (2015: €6.2 billion)
| Achmea Half Year Results 2016
Analysis of Change investment results for own risk Achmea Group(in € million)
628
665
72641
42
61
-98
Result own riskH1 2016
Other resultsIndirect resultsDirect resultsResult own riskH1 2015
(Corrected for)
Impact portfolio
change Non-life
Result own riskH1 2015
26
Programma
General overview
Group results
Acceleration & Innovation
Financial overview
Results per segment
New segment structure
Capital position and solvency ratio
Investments
Conclusion
Appendix
Investment portfolio
| Achmea Half Year Results 201627
Result affected by severe weather conditions and higher healthcare expenses
Net loss of €24 million
Severe weather conditions causes damage with approximately 30,000 customers
Total cost of claims approximately €270 million
Increase in healthcare expenses stronger than expected, amongst others due to higher than expected use of new medicines
Good progress on Acceleration & Innovation programme:
Lots of innovations launched by our brands, high level of customer satisfaction regarding innovation
Centraal Beheer General Pension Fund (APF) formally launched after receiving the licence on 18 July 2016
Expenses have decreased by about €355 million since start of Acceleration & Innovation in 2014
Solid financial position with a solvency ratio of about 204%
S&P ‘A’ credit rating for the insurance entities
| Achmea Half Year Results 201628
Programma
General overview
Group results
Acceleration & Innovation
Financial overview
Results per segment
New segment structure
Capital position and solvency ratio
Investments
Conclusion
Appendix
Investment portfolio
| Achmea Half Year Results 201629
Quality of investment portfolio remains high
Total investment portfolio
Investment portfolio increased by 7%:
Growth mainly within fixed income securities because of lower interest rates
Equity and real estate portfolio increased due to positive revaluation of the housing portfolio, higher commodity prices and higher equity prices
Fixed income portfolio
84% of portfolio invested in fixed income securities with an investment grade rating (BBB or higher). Slight decrease in rating profile relative to 2015 due to increased exposure to mortgages (NR¹)
Mortgage portfolio increased as of HY 2016by €1 billion to €4.8 billion²
End-of-year target 2016: €6 billion
| Achmea Half Year Results 2016
Total investment portfolio 30-6-2016(in %)
Total investment portfolio 31-12-2015(in%)
Fixed income portfolio 31-12-2015(in %)
2
3
3
5
11
2
12
62
49.0€billion
2
3
3
6
8
3
11
65
46.0€billion
34.6€billion
1
1
23
3
4
14
14
39
Fixed income portfolio 30-6-2016(in %)
1
1
23
2
4
16
8
45
36.0€billion
¹ Not rated² financed through the sale of covered bonds
Alternative investments
Equities
Real estate
Other investments
Derivatives
Deposits
Fixed income securities
Loans and mortgages
Derivatives
Other investments
Real estate
Equities
Deposits
Fixed income securities
Loans and mortgages
Alternative investments Convertible bonds
Fixed Income funds
Corporate bonds
Covered bonds
Asset-backed securities
Loans and mortgages
Semi-government bonds
Government bonds
Convertible bonds
Fixed Income funds
Corporate bonds
Covered bonds
Asset-backed securities
Loans and mortgages
Semi-government bonds
Government bonds
30
Questions?
Please contact:
Steven Vink, Investor [email protected]
Stefan Kloet, Corporate [email protected]
31 | Achmea Half Year Results 2016