Non-Life

• Organic premium growth 4%; strong contribution from banking distribution channel
• Satisfactory results
• Expense ratio down 1.3%-points to 29.0%

General
A core business and a core competence for Eureko,Non-Life insurance (Property & Casualty and Income Protection) accounts for 21% (2008: 20%) of Eureko’s total gross written premiums. In the Netherlands, we are market leader with a market share of 20% and we have ambitions to further improve our profitable market share. Our Non-Life business comprises a full range of property & casualty products and, from 2009, includes occupational health or income protection insurance. Customers are private individuals and businesses. We are active in Non-Life in a number of European markets: the Netherlands, Turkey, Greece, Belgium, Slovakia, Romania, Bulgaria, Cyprus and, since the end of 2008, in Russia. In February 2010, Eureko announced the sale of its Cyprus activities through a management buy out.

Gross written premiums were up 6% from € 3,816 million to € 4,030 million, due to increased premiums in the Netherlands and Greece and the full year consolidation of Oranta in Russia. Organic growth amounted to 4%.

Profit before tax recovered significantly from a loss of € 95 million to a profit of € 282 million. Although partly offset by higher claims, € 2,573 million in 2009 (2008: € 2,287 million), this was the result of lower realised losses on equities, lower impairments and a considerable reduction in operating expenses. Total operating expenses expressed as a percentage of Net earned premiums (net expense ratio) improved from 30.3% (2008) to 29.0%. The expectation is that the expense ratio will further improve in 2010 as the operational measures and efficiencies, including a reduction of the number of legacy systems, translate into performance. The goal is to reduce the around 80 current systems to less than 20 starting in 2010. The claims ratio for 2009 of 67.8% (2008: 65.3%) was influenced by more regular claims. Another factor is the continuous pressure on price in the market. Specific product groups saw higher claim activity – mobility and legal. Furthermore, storms and unseasonably heavy rainfall/hail in May 2009 and the severe winter weather at the start and in final months of the year added to claims.

Netherlands
The Dutch Non-Life market is saturated and competition is fierce. New web-based providers,specifically in the motor segment, but also in home insurance, are targeting individual customers, competing on price. There is equally fierce competition in commercial lines. Achmea is leader in Non-Life with an estimated 20% of the market. Gross written premiums in the Netherlands increased 3% to € 3,318 million (2008: € 3,215 million) mainly as a result of growth in the existing portfolio through price indexing and strong sales in income protection. Market growth is expected to be limited in the coming years. We offer Non-Life products through a range of Achmea brands and all distribution channels. Profit before tax improved to € 269 million (2008: € -118 million).

Property & Casualty
Achmea is market leader in property & casualty (estimated at 21% in 2009) in the Netherlands with number one positions in both bank and direct distribution. Achmea’s brands are able to maintain their leading position because they have high recognition and offer customers tailored distribution options. Our key target groups are individual customers and small and medium-sized enterprises (SMEs). In spite of fierce competition, gross written premiums in the Netherlands increased 2% to € 2,632 million (2008: € 2,573 million). The combined ratio in 2009 was 94.5% (2008: 95.5%). The claims ratio was 67.1% against 66.4% in 2008. The expense ratio improved to 27.4% from 29.1% in 2008.

Bank: Our bank distributor Interpolis ranks top of the customer preferred Non-Life insurer table. Interpolis has an estimated market share in Non-Life of more than 11% in 2009. Interpolis works closely with Rabobank which is its almost sole distribution channel. The focus at Interpolis is on prevention and insuring only what is important for the customer without unnecessary cover. The bank distribution channel achieved a gross written premium of € 1,376 million (2008: € 1,337 million). Net expense ratio in 2009 improved to 28.7% (2008: 30.0%) as a result of higher net earned premiums and lower marketing and sales expenses and project costs.

Direct: We are market leader in direct distribution, with an estimated market share of 7% in Non-Life (property & casualty). Direct distributors, Centraal Beheer Achmea and FBTO, are both household names, achieving high customer satisfaction rates, specifically in the individual market. Centraal Beheer Achmea is also a very strong label in commercial lines. The new direct InShared concept, that at year-end matches actual claims and premiums and repays the difference to customers, is carving out a position in this market. Direct distribution contributed gross written premiums of € 874 million (2008: € 892 million). Net expense ratio in 2009 improved considerably to 22.1% (2008: 23.6%), mainly due to a decrease in employee costs and lower marketing and sales expenses.

Broker: Through our Avéro Achmea brand, we serve more than 3,000 brokers. With an estimated market share of 3% Avéro Achmea is a modest player in the Non-Life business. The broker channel will remain important for SME and large corporate segments. The expectation is that private individuals will switch increasingly to the direct channel for simple products. In line with the revised strategy, standard products rather than more complex tailored insurances will be offered to brokers. The broker channel achieved gross written premiums of € 323 million (2008: € 326 million). Higher net earned premiums and decreasing operating expenses resulted in an improved net expense ratio in 2009 of 37.5% (2008: 44.7%).

Income protection
Often known as occupational health insurance, Achmea is a top three player in income protection, with an estimated 19% market share. This share is divided over our bank distribution channel with 40%, direct distribution with 38% and the broker division with 22%. Our expectation for the coming years is that the market for income protection will contract due to pressure on premiums which could be offset by a shift from public to private management of disability. In the reporting year, gross written premiums increased 7% from € 642 million in 2008 to € 686 million. Lower absenteeism was offset by growth in (long-term) disability segments, mainly due to non-recurring sales of single-premium policies. Main reason is deteriorating market conditions. The claims ratio increased to 75.6% from 68.3% in 2008, due to greater price pressure. The expense ratio improved from 24.1% in 2008 to 23.6%.

OUR EUROPEAN MARKETS

Turkey
Acquired in 2007, Eureko Sigorta Turkey currently ranks seventh in the top 10 Non-Life providers. The longerterm target is to grow that position to the top five by 2012. Through strong retained links with former parent and historic shareholders, Garanti Bank of Turkey, bank distribution is a key component in our strategy and currently represents 70% of sales. The 2009 gross written premiums (€ 250 million) are stable compared to last year (2008: € 254 million). However, measured in local currency, gross written premiums increased by 13%.

Greece
Interamerican is currently the number two player in the Greek market. Distribution is mainly through agents and brokers, traditionally the way Greek customers buy their insurance. The direct channel, still relatively small and new, selling motor and property has more than tripled turnover in 2009. Non-Life activities achieved growth in gross written premiums, despite downturn in the market. Gross written premiums in 2009 increased 24% to € 211 million (2008: € 170 million) as a result of increases in business coming from motor hull and third-party liability and the uccessful launch of a home package. The focus on operational excellence resulted in an improved expense ratio.

Belgium
Avéro Belgium has a significant position in the niche marine (cargo, hull, CMR, trucks) and special risk businesses. In this market, we offer a full range of Non-Life broker-driven products to both individuals and corporate clients. Gross written premiums were stable at € 124 million (2008: € 126 million) which is an achievement in the shrinking insurance market in Belgium.

Russia
With potential for multi-channel distribution and a mixed portfolio, Oranta represents a platform for further growth through its considerable potential in motor and property insurance. It is presently in the top 30 with gross written premiums of € 78 million in 2009. Acquired at the end of 2008, Oranta’s performance was consolidated for the first time.

Slovakia
Already the top player in the travel insurance segment with 44% of the market, Union Slovakia entered the motor segment in October 2009. It has ambitious goals. The aim is to achieve 5% market share within three years. In 2009, Union gross written premiums were stable at € 22 million.