SOLID PROFIT, FURTHER BOOSTED BY PZU SETTLEMENT

• NET PROFIT AT € 1.4  BLN (2008: € -2.1  BLN), OF WHICH € 1.1  BLN DUE TO THE PZU SETTLEMENT
• IMPACT FINANCIAL MARKETS € -337 MLN (2008: € -2,697 MLN)
• STRUCTURAL COST REDUCTIONS OF € 183 MLN; TARGETS MORE THAN ACHIEVED
• SOLVENCY INSURANCE ACTIVITIES AT 251%
• DEBT LEVERAGE IMPROVED
• STRATEGY SHARPENED

General
In the reporting year, Eureko’s focus was to return to a healthy base for the near-term and into the future. A series of both strategic and operational measures have been put in place designed to counteract the effects of the changed financial environment. The measures taken and the major efforts made by the whole Group are already generating promising results. In 2009, these are clear. Solvency and liquidity are both strong and solid, due primarily to rapid action in derisking the investment portfolio, a capital increase by our main shareholders, and the high net profit achieved in 2009. Eureko’s equity has improved to over € 10 billion (2008: € 7.5 billion). The focus is on achieving economies of scale rather than growth. As a result, specific measures were implemented to reduce our operational costs considerably, specifically by streamlining processes. Furthermore, the phased reduction in the workforce of our Dutch business is on track.

RESULTS 2009

Net profit
In 2009, Eureko’s net profit improved to € 1,381 million compared to a loss of € 2,118 million in 2008. Profit before tax amounted to € 1,507 million (2008: € -2,620 million). Profit in 2009 was impacted positively by the settlement reached with the Polish government on the PZU dispute. The effect on net profit was € 1,064 million and on profit before tax € 1,238 million. At € 337 million in 2009, the negative impact of the financial markets was considerably lower than in 2008 (€ -2,697 million). Total impairments especially were lower at € 188 million in 2009 compared to € 1.9 billion in 2008. At € 123 million, realised losses on the equity portfolio were € 306 million less than in 2008. Part of the annuity portfolio is valued at fair value through profit and loss. In 2008, significant losses of € 462 million were incurred; in 2009 we realised a profit of € 19 million. The loss on guaranteed for segregated investments accounts was € 14 million, also considerably lower than in 2008 (€ -136 million). In the first half of 2009, part of the equity investment portfolio was hedged via a collar. This fair value hedge resulted in a loss of € 31 million due to higher share prices and loss of time value of the collar. Excluding the impact of the PZU settlement and financial markets, profit before tax amounted to € 606 million, up from € 77 million in 2008.

In Non-Life, results improved to € 282 million (2008: € -95 million), not only due to better investment results, but also to higher premiums in combination with a lower cost base. This was partly offset by higher claims. The result for basic and supplementary health insurance activities increased considerably compared to last year with profit before tax up to € 319 million (2008: € -28 million). This is due primarily to the (semi-final) settlement for 2006 from the equalisation pool. With some recovery in equity markets, results in our Life operations improved to € -108 million (2008: € -1,381 million). In Banking, profit before tax decreased to € -47 million (2008: € 36 million). Results in Dutch Banking were offset by the necessary additions to loan loss provisions at Friends First Finance.

Net profit per country
In 2009, the greater share of results was generated in the Netherlands, specifically due to cost-reduction programmes and the PZU settlement. In Europe, Friends First’s made a significant loss, mainly through essential additions to loan loss provisions. Furthermore, Oranta’s results were consolidated for the first time following its acquisition at year-end 2008.

PZU settlement
Following a dispute with the Polish state that lasted more than a decade, in 2009 Eureko finally reached settlement with the Polish state on PZU. Eureko holds economically 33% less one share of the shares in PZU. As part of the settlement, in November 2009, € 1.9 billion was paid to Eureko, of which € 1.0 billion was regular dividend on our shareholding in PZU and € 0.9 billion represented 50% of the special dividend that had been paid to the Polish treasury in 2009. The first part of the financial compensation Eureko is to receive in return for giving up specific rights in relation to PZU it acquired earlier. This latter component has been added to profits. As a result, the settlement had a positive impact on our solvency ratios and enabled us to reduce outstanding debt. The settlement further provides for an Initial Public Offering (IPO) of PZU before 2012 that will further improve our liquidity and solvency position. In the IPO, Eureko will offer at least 15% of which 10% through the special purpose vehicle of the outstanding PZU shares as agreed in the settlement. The Polish Treasury will sell 4.9% of the shares in PZU through the special purpose vehicle and Eureko will receive fixed proceeds on these shares. This will constitute the second part of the above mentioned financial compensation. The regular dividend payment, the financial compensation received from the Polish Ministry of State Treasury, the fixed proceeds from 4.9% of the shares and other economic interests in PZU via derivative contracts resulted in total in a net profit in 2009 of € 1,064 million.
While Eureko welcomed the amicable resolution of this long-running dispute, it also means that the strategic goal of positioning Poland as a potential second domestic market is no longer feasible. Although regrettable, the settlement and the gradual divestment create flexibility at a time when the insurance industry is in flux. This change was a key component in the strategic review of the international portfolio during 2009.

Gross written premiums
Gross written premiums increased slightly to € 19.6 billion (2008: € 19.3 billion). Eureko has been able to increase premiums in our Non-Life business. Organic growth amounted to 4%. The acquisition of Oranta at the end of 2008 resulted in a positive contribution in grosswritten premiums of € 78 million. In our Health business we achieved a growth in new customers. However, this was more than offset by lower contributions received from the Dutch state. Our sales in the Life business were impacted by the entry of banks and pension funds that are now offering similar products. The resulting decrease in premiums was, however, more than compensated by the merger of our two pension funds which has led to a non-recurring increase of € 1.1 billion in gross written premiums. Excluding this one-off, premiums in Life declined 8%.

Expenses Total operating expenses are down by 10% to € 3,284 million (2008: € 3,664). In the first half of this year, Eureko began implementing programmes to achieve a reduction of € 100 million by the end of 2009. When we reported our semi annual results, we indicated we were confident that we would achieve this goal. In view of our actual performance, the implemented programmes are successful so far. Of the decrease, € 183 million can be attributed to structural cost reductions. This relates mainly to lower procurement, IT, marketing and external FTE costs. We are also seeing the first impacts of the SENS programme. Around € 121 million relates to one-offs, such as delayed project costs, lower costs due to the current economic climate and no bonuses. The divestment in 2008 of two of our medical facilities in Greece decreased our operating expenses by € 58 million. The acquisition of Oranta increased operating costs by € 43 million. Lower sales resulted in € 69 million lower acquisition costs.

Programmes to achieve operational excellence by improving performance for our customers while reducing expenses were implemented in several Dutch divisions in 2009. The first solid results are expected to materialise in 2010 and 2011.

FTEs
As a result of cost reduction programmes, the mix between our internal and external personnel improved significantly compared to last year. The total number of employees (both internal and external) for Eureko decreased with 1,207 from 24,883 to 23,676 of which 1,084 in the Netherlands. The number of external employees in the Netherlands decreased more than 30% or 1,160 in 2009. We expect that the external workforce will decrease in 2010 as part of the ongoing efficiency programmes. During 2009, our number of internal FTEs was almost stable, with a total of 21,209. Within the Dutch businesses, our FTEs increased slightly, mainly to replace external employees. In our European businesses, our FTEs decreased by 123.

INVESTMENT PORTFOLIO

Eureko’s investment portfolio increased € 2.8 billion in 2009 to € 39.1 billion. This is excluding investments related to cash collateral received in securities lending and investments in PZU and MillenniumBCP. Throughout 2009, Eureko has systematically divested higher risk instruments in favour of less volatile investment products. As a result, the share of equity instruments was reduced in favour of fixed income securities. Impairments amounted in 2009 to € 161 million compared to € 1,125 million in 2008.

Fixed-income portfolio
The share of fixed income securities in our total investments portfolio grew throughout the year from 76% at the end of 2008 to 78% at the end of 2009. This corresponds to an increase in value of € 2 billion to € 30 billion. The main reasons for this development are the implementation of our derisking strategy and the improving economic climate. Throughout 2009, we have selectively divested equity investments and credits to reinvest in high grade fixed income securities. To reduce our counterparty risk, we also changed the composition of the fixed income portfolio to predominantly government bonds with an AAA-rating (mostly Dutch and German government bonds).Our total government exposure to Greece, Italy, Portugal and Spain is limited to less than 2% of the total fixed income portfolio. The exposure to Greece is primarily through our subsidiary Interamerican.

The position in loans consists mainly of savings accounts related to mortgages and pension products with Rabobank.

Despite having divested part of our corporate bonds,reducing credit spreads generated positive revaluations of € 557 million on Eureko’s corporate bond portfolio. In 2009, Eureko impaired € 23 million on the fixed income portfolio of which € 8 million during the second half.

Equity portfolio
The relative share of equities in our total investment portfolio is limited and amounts to 3% or € 1.1 billion as of 31 December 2009 compared to € 2.5 billion at the end of 2008. The decrease is due mainly to the sale of equities as part of the derisking programme. Eureko’s equity portfolio has an acceptable risk profile. The portfolio is not hedged. Eureko impaired € 44 million on the equity portfolio in 2009 of which € 18 million in the second half.

Real estate portfolio
Our real estate portfolio amounted to € 1.7 billion (year-end 2008: € 1.7 billion) of which 100% is unlisted. The portfolio consists of € 1.4 billion direct real estate and € 0.3 billion indirect real estate. Impairments amounted to € 94 million (second half € 7 million).