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KBC Group Life insurance business Embedded value as at 31 Dec 2005 and analysis of change and sensitivity. Foto gebouw. Cautionary Statements. - PowerPoint PPT Presentation

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  • KBC Group Life insurance business Embedded value as at 31 Dec 2005 and analysis of change and sensitivity

    Foto gebouw

  • Cautionary StatementsEmbedded Value is the result of cash-flow projections with underlying assumptions and expectations. The values in this presentation are calculated on a deterministic basis.Many assumptions, such as the general economic conditions, performance of financial markets, taxes, changes in laws, frequency and severity of insured loss events, mortality and morbidity levels and trends, and others, are beyond the control of KBC. A modification of assumption can result in a significantly different Embedded Value. Deviations from assumed experience are normal and are to be expected. Even without any change in the parameters, actual results will vary from those projected due to normal random fluctuations. Embedded Value cannot be considered as an absolute value. This value, together with a sensitivity analysis, enables the recipient to obtain an idea of the magnitude of the expected value created by the insurance activities.Under no circumstances should the inclusion of the projections (including the relevant underlying assumptions and expectations) be regarded as a representation, warranty or prediction that the business will achieve or is likely to achieve any particular results.

  • ContentsLife insurance activity SalesTechnical chargesEmbedded Value (EV)TerminologyOverviewAdjusted Net Asset Value (ANAV)ComponentsRoll forward, 2004-2005Value of Business In Force (VBI)ScopeAssumptionsSensitivitiesRoll forward, 2004-2005Value of New Business (VNB) at date of saleOverviewSensitivities

  • Life insurance activity:Sales (Premium income without the application of IFRS deposit accounting)

  • Life insurance activity:Technical provisionsGrowth in Technical Provisions, Life, 1998-2005 (in 000 EUR)

  • Embedded Value:TerminologyPV Tied Surplus, LifeValue In Force(VIF)Embedded ValueShareholdersEquityEconomicAdjustmentsANAV=Free SurplusAsinvestmentforEmbedded Value > Equity adjustments > Asset adjustments > Resilience Reserves > Tax assets and liab.Tied Surplus, LifeANAVOther Allocated SurplusPVFP*VBI** (PVFP- Cost Tied Surplus)

    Tied Surplus LifeorKBC standardEmbedded ValueFree SurplusFree SurplusOther Allocated SurplusOther Allocated SurplusOther Allocated Surplus = Tied Surplus Non Life + Other Tied Surplus *PVFP = Present Value of Future Profit **VBI = Value of Business In Force

  • Embedded Value: Overview(in 000 EUR)Remarks:The value of the Non-Life portfolio is not taken into account. However, Other Surplus includes surplus of both Life and Non-Life activities.Restatements of the 2004 figures relate to model changes in VBI and IFRS adjustments to the ANAV

  • Adjusted Net Asset Value (ANAV): CompositionAdjusted Net Asset Value (ANAV) =[+]Shareholders Equity[+] Equity Adjustments:Minority interests[+]/[-] Asset Adjustments:Excluding unrealised capital gains on AFS bonds backing the life portfolio (buy-and-hold philosophy)Goodwill deducted[+]Additional Reserves:Additional reserves, life, minus the cost of holding those reserves[-] Tax assets and liabilities on the above

  • Adjusted Net Asset Value (ANAV): Compositionas at 31/12/2005 (in 000 EUR)('000 EUR) 3 198 958 +74 271 -349 937 +219 468 -74 597 3 068 163Shareholders equityequity adjustmentsasset adjustmentsadditional reserves, lifetax assets and liab.ANAV* Shareholders equity after dividend payout*

  • Adjusted Net Asset Value (ANAV):Roll-forward, 2004 2005(in 000 EUR) 3 068 163 +175 480 +461 852 -527 000 +454 561 2 474 453 + 28 816Reported Anav 31/12/2004Restated Anav 01/01/2005Profit in 2005Dividends PaidAsset Value AdjustmentsOtherAnav 31/12/2005

  • Value of Business in Force (VBI): Scope Modelled:86.97% of the mathematical reserves97.88% of the total premium income in 200599.88% of the new premium income in 2005Activities under review:KBC Insurance Belgium + Fidea + Vitis LifeTotal technical provisions: 17 786 million EURActivities not under review:Central European subsidiaries (CSOB CZ, CSOB SK, K&H Life, WARTA Vita)Secura (re-insurance)Total technical provisions: 891 million EUR

  • Value of Business in Force (VBI): Assumptions

    The current RBC for Life activities is 188.4 % of the legally required solvency margin for the Life business (176% in 2004)

  • Value of Business in Force (VBI): AssumptionsExpenses:Expenses are allocated to the different products and activities in such a way that the total expenses in the study equal the total expenses in the statutory accountsExpenses increase with expected wage inflationFuture expense reductions programmes and synergies are not taken into accountMortality:Assumptions based on most recent industry experience were usedLapses:Assumptions based on annual experience, investigations of surrenders and paid-ups, with a reasonable safety marginAssumptions are set according to product and to distribution channel

  • Value of Business in Force (VBI): Assumptions* Based on the bond yield in the long run - weighted Average Cost of Capital, taking into account partial funding with subordinated loans

  • Value of Business in Force (VBI): Overview(in 000 EUR, only reserves of modelled business)

    PVFPVBIVIFPVFP/ res.VBI/ res.reserves2004607 844420 6371 272 4315.4%3.7%11 294 2132005675 107468 3241 508 1854.4%3.0%15 418 013 % +11.3%+11.1%+17.9%-1.0%-0.7%+36.5%

  • Value of Business in Force (VBI): SensitivitiesEffect of non-econonmic parameters on VBI:Effect of economic parameters on VBI:

    + 1.0 %- 1.0 %Discount rate-14.8%+16.7%Investment Return+10.8%-16.2%

  • Value of Business in Force (VBI): SensitivitiesChanging the solvency margin:(in 000 EUR)

  • Value of Business in Force (VBI):Roll-forward, 2004 2005(in EUR) +4 806 442 -11 437 100 +96 502 780 -56 154 239+33 307 748 -4 505 681 -14 832 901 468 323 796 420 636 746VBI 31/12/2004model changesChange non-econ. assumptionsUnwinding discountingCashflow to ANAVVNB as of 31/12/2005Variances over 2005Change econ.assumptionsVBI 31/12/2004

  • Value of New Business (VNB): Overview (new business at date of sale)(in 000 EUR)

    APE (Annualised Premium Equivalent)PVFPVNBPVFP as % of APEVNB as % of APETotal, 2005570 385125 73398 04422.04%17.19%Total, 2004324 17074 487 57 19922.98%17.64%

  • Value of New Business (VNB): Sensitivities (at date of sale)Non-Economic Sensitivities:Economic Sensitivities:

    + 10%- 10%Expenses-5.93%5.93%Lapses-3.19%3.64%Mortality-2.59%2.62%

    - 0.5%+ 0.5 %Discount rate+5.86%-6.27%Investment Return (excl. disc. rate)-6.23%+5.18%

  • ReviewLane Clark & Peacock Belgium reviewed the methodology and assumptions used by KBC Insurance in the determination of the Embedded Value at 31/12/2005, the Value of 2005 New Business and the analysis of the change in the value of in-force business for the Life Insurance activities of KBC Insurance. It is the view of Lane Clark & Peacock Belgium, based on the data made available, that the assumptions used are reasonable and that the methodology used by KBC Insurance is in line with basic principles described in appropriate literature.Our assignment included a review of the calculations.This review was not a detailed verification of the correctness of all calculations. This review was a limited high-level reasonableness checks on the results and included a detailed review on a limited random sample of contracts of the insurance portfolio of KBC Insurance. No material issues have been discovered. Therefore, based on our work and our validation report on the work carried out by KBC Insurance, we consider the embedded value, the value of new business and the analysis of the change in the value of in-force for the life business to be reasonable and suitable for inclusion as supplementary information to the Groups consolidated accounts.

  • Contact informationInvestor Relations Office Luc Cool, Head of IR Luc Albrecht, Financial Communications Officer Tamara Bollaerts, IR Coordinator Marina Kanamori, CSR Communications Officer Nele Kindt, IR Analyst E-mail: investor.relations@kbc.comSurf to www.kbc.com for the latest update.