Life

• Life results under pressure

GENERAL

Eureko’s Life business (including pension insurance) accounts for 23% (H1 2008: 24%) of Eureko’s gross written premiums. Eureko’s Life business operates in the Netherlands, Ireland, Greece, France, Slovakia, Romania, Cyprus and Bulgaria.

Gross written premiums amounted to € 2,368 million (H1 2008: € 2,563 million), a decrease of 8% compared to the first half of 2008.
Premiums from traditional products were down 5%. Premiums from unit-linked products declined by 12% reflecting the difficult market circumstances and negative sentiment on this product. Lower mortgage sales also resulted in a lower sale of related insurance products. The contribution of investment contracts (mainly Ireland) is down by 18% to € 140 million (H1 2008: € 170 million).

Compared to the first half of 2008, profit before tax decreased to a loss of € 114 million (H1 2008: € 14 million). Included in the profit before tax is a provision (A 14 million) to cover interest-rate guarantees in segregated investment funds related to our pension business. To limit the impact of the volatility on the financial markets, Eureko de-risked the investment portfolio. A part of the equity portfolio was sold, resulting in realised losses on equities of € 47 million (H1 2008: € 20 million). At € 118 million, impairment losses are slightly higher than in 2008 (H1 2008: € 113 million).
Technical result amounted to a loss of € 44 million (H1 2008: A +111 million), due to lower premiums while costs increased. Non-technical results improved € 27 million to a loss of € 70 million.

The Embedded Value of the Life operation increased by € 333 million to € 4,456 million; € 595 million results from the allocation of capital within Eureko. The economic profit of A -171 million (2008: € 817 million) is mainly explained by changes in asset mix due to de-risking.

EMBEDDED VALUE

The Value of new business (VNB) decreased to € 11 million (2008: € 28 million). VNB decreased at Friends First in Ireland and in the Netherlands.

NETHERLANDS

Gross written premiums were down 8% to € 2,133 million (H1 2008: € 2,313 million). Following the introduction in 2008 of a new bancassurance product (“banksparen”), gross written premiums through our bank distribution channel decreased 26% to € 653 million. This decline is expected to continue.
Gross written premiums through our direct distribution channel increased by 17% to € 242 million for the first half of 2009. The increase in premiums is due to the result of policyholders depositing the benefits of expiring saving policies as single premiums and due to the adjusted pricing of some products. Gross written premiums through our brokerage channel amounted to € 182 million. Compared to the first half of 2008, this is a decrease of 12%.
For our Pension business, gross written premiums amounted to € 723 million or a decrease of 13%.

Profit before tax was down to a loss of € 132 million (H1 2008: A -6 million).

Compared to 2008, the VNB decreased by € 12 million to € 7 million. Our Dutch activities reported a lower VNB except for our bank distribution channel. VNB for this channel was stable, but the VNB margin improved considerably.
Annualised Premium Equivalent (APE) for the first half of 2009 declined to € 77 million (H1 2008: € 149 million).

On 1 June Stichting Pensioenfonds Interpolis and Stichting Pensioenfonds Achmea Personeel have merged; this represents one of the final milestones in the integration and harmonisation of the merger and the working conditions. The financial impact of the merger will be included in the full-year figures.

IRELAND

The economic recession had a considerable impact on the market for new life and pensions sales in Ireland, estimated to be down over 40% on equivalent sales in the first half of 2008. Friends First’s new sales are down roughly 28% compared to 2008, so slightly better than the market experience. Despite this drop in new sales, gross written premiums for Friends First in H1 are almost the same as last year (A 136 million versus € 134 million). However, current market conditions strongly affected the level of new deposits on investment contracts, as demand for this type of product is very weak. New deposits in the first half of 2009 amounted to € 113 million compared to € 136 million in 2008.

The new business volumes decreased overall and acquisition expenses are over-run due to the lower sales. VNB fell to € 5 million (2008: € 9 million).

GREECE

The Greek life and pensions market is beginning to decline, particularly in investment-related business. Gross written premiums decreased to € 56 million (H1 2008: € 61 million). The contribution of investment contracts is down 27% to € 27 million (H1 2008: € 37 million). VNB for Interamerican Greece was stable at A -0.2 million in the first half of 2009 (H1 2008: A -0.1 million).

OTHER EUROPEAN COUNTRIES

The developing operations in other European countries contributed gross written premiums of € 43 million (H1 2008: € 55 million) or 2% on the total Life gross written premiums.

In February 2009, the French regulatory authorities (CEA) withheld their final approval of the sale of Império France. This was due mainly to the current economic environment. As a consequence, the sales contract is now terminated and the “held for sale” classification of Império France is no longer applicable. Our strategic intentions, however, remain unchanged.

In 2009, our Bulgarian Life business went into operation.