result impacted by severe weather and high healthcare...

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


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


https://youtu.be/cGkXi3-zILo






204

199

Severe weather conditions and higher healthcare expenses result in net loss

Higher gross written premiums property & casualty, Health and International


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


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


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


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


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


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


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


Programma

General overview

Group results


Financial overview

Results per segment



Investments

Conclusion

Appendix



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


Operational result(in € million)

Net profit(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


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


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


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


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


H1 2016 H1 2015H1 2016 H1 2015

H1 2016 H1 2015 H1 2016 H1 2015

Combined ratio Income(in %)

Claims ratio Expense ratio



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


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


Gross written premiums (in € million)

Basic Supplemental



Combined ratioBasic (in %)


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




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)




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


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




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


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


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)


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


Financial overview

Results per segment



Investments

Conclusion

Appendix



Result affected by severe weather conditions and higher healthcare expenses


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


Programma

General overview

Group results


Financial overview

Results per segment



Investments

Conclusion

Appendix



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


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]


mailto:[email protected]

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