Capital
Solvency II Standard Formula (SF) ratio down to 127% (year-end 2015: 131%)
Pro forma Solvency II Standard Formula (SF) ratio after rights issue at 154%
and within target range of 140-180%
Shareholders' funds (IFRS) at € 2.8 billion (year-end 2015: € 2.6 billion)
Pro forma Shareholders' funds (IFRS) after rights issue at € 3.5 billion
Commercial
Solvency II Life value new business (SII VNB) of € 22 million
Solvency II New business margin (SII NBM) at 3.7%
Solvency II Life new business, SII NAPI[1] stable at € 132 million (3M 2015: € 132 million)
Combined ratio (COR) at 97.0%[2] slightly up but better than target of 98% (3M 2015: 96.6%2).
General insurance: Gross written premiums (GWP) increased to € 465 million[3] (3M 2015: € 434 million3)
Hans van der Noordaa, chairman of the Executive Board:
"We welcome the support of investors for the rights issue, which brings us now within our target range of 140 - 180%. The sharp fall in interest rates in the quarter adversely impacted the capital position. This was partly mitigated by progress on our capital management actions. The commercial momentum with our clients in Life and General Insurance continues. We are focussed on further unlocking the value of the franchise by improving commercial and operational performance and we will make sure that all product lines deliver acceptable returns."

Key figures
(in millions of euros, unless otherwise stated) 3M 2016 3M 2015 % Change
Solvency II Life value new business 22 n/a n/a
Solvency II NAPI 132 132 1%
Combined ratio 97.0% 96.6% 0.4pp
GWP General Insurance 465 434 7%
Solvency II Standard formula (SF) ratio 127% 131%* -4pp
Solvency II Standard formula (SF) pro forma ratio after rights issue
154% n/a n/a
Shareholders' funds (IFRS) after non-controlling interests 2,805 2,569* 9%
Pro forma Shareholders' funds (IFRS) after rights issue 3,454 n/a n/a

*compared to year-end 2015

Overview of first three months of 2016
During the first quarter, we executed the rights issue, which was an important step in the overall capital plan to reach the targeted SII ratio range of 140 - 180%. The pro forma SF ratio, after the rights issue, was 154%. The effect of the completed rights issue will be reported at our half year results. During the first quarter, net capital generation and management actions added to our capital position, partly mitigating the effect of adverse market conditions. Subject to market conditions, the sale of the shareholding in Van Lanschot by way of a marketed offering is expected to have an 8% points increase in the SF ratio. The implementation of a Partial Internal Model by 2018, another important aspect of the capital plan, is developing as planned.

We have an ongoing commitment to product profitability and cost efficiency through our focus on margin over volume. In Life new business, we reported good margins at 3.7% and the SII NAPI amounted to € 132 million, which provided a positive contribution to capital generation. In General Insurance, the COR was slightly higher (up 0.4% points to 97.0%), but still better than our target of 98%. In this segment, the overall margin is solid, but we need to focus on areas of underperformance. To do so, we initiated a performance improvement programme.

We continuously strive to improve the quality of service to our customers and we actively respond to new market developments such as the introduction of the general pension fund APF. Delta Lloyd APF will offer company pension funds a solution to the growing administrative and regulatory burden.

We expect to receive a license from the Dutch regulator for the newly introduced Delta Lloyd APF general pension fund in the coming months. We already see a clear interest from potential APF clients.

Capital management
SF ratio down to 127% (year-end 2015: 131%)
Pro forma SF ratio after rights issue at 154%
Shareholders' funds (IFRS) up 9% to € 2.8 billion (year-end 2015: € 2.6 billion)
Pro forma Shareholders' funds (IFRS) after rights issue at € 3.5 billion

During the first quarter, the SF ratio decreased by 4% points to 127%. Net capital generation delivered c. 2% points increase. The run off regarding the equity transitionals resulted in c. 2% points decrease during the quarter. Market movements had a c. 10% points negative impact on the SF ratio. The latter was partly mitigated by realised management actions, with a positive effect on the SF ratio of c. 6% points. Realised management actions include reduced equity, currency and credit spread exposures as well as modelling enhancements in Belgium. More management actions are planned for the remainder of 2016.

The negative impact of adverse market conditions of c. 10% points mainly consisted of:

A significant part of the large decrease in interest rates was covered by the hedge programme at business unit level. Nonetheless, there was a negative impact due to the flattening of the Solvency II VA curve and due to increased spreads relating to the valuation of our residential mortgage portfolio ;
An increase in non-eligible Own Funds, mainly caused by the increase in the value of restricted Tier 1 and Tier 2 (i.e. subordinated debts) due to lower interest rates. Subordinated debt at group level is not included in the interest hedge programme. The amount of non-eligible Own Funds will reduce as a result of the executed rights issue.

At end of March, Shareholders' funds (IFRS) had increased by € 236 million to € 2.8 billion (year-end 2015: € 2.6 billion), due to a favourable credit spread development between the Collateralised AAA curve and the swap curve.

Transition to Solvency II metrics
The year 2016 marks the start of Solvency II, which for Delta Lloyd as well as other insurers, requires a further evolution of reporting metrics to further align with Solvency II requirements. In particular VNB together with respective volumes and margins have been impacted. In 2016 Delta Lloyd will report on both old and new regimes in order to provide clarity on key trends. The old regime was applicable in 2015 (and prior to 2015) and the new regime applies as of 2016.

Specifically for VNB, a number of changes to the methodology were implemented during the first quarter to further align with Solvency II requirements. Main changes include the application of Solvency II contract boundaries, the removal of frictional costs and the replacement of cost of non-hedgeable risk with risk margin. Furthermore, look-through benefits are not included.

The application of contract boundaries also impacts new business volumes. New business under the old regime included new contracts and extensions to existing contracts. New business under the new regime includes new contracts and renewals of existing contracts, whereas extensions are recognised as existing business. These changes are reflected in our New Annualised Premium Income (NAPI). In the first quarter NAPI is higher under the new regime which is due to a higher NAPI for renewals than NAPI for extensions to existing contracts.

Life Insurance
Value of new business (SII VNB) at € 22 million
SII New business margin (SII NBM) was 3.7%
SII NAPI stable at € 132 million (3M 2015: € 132 million)
Shift to DC continued, SII NAPI in DC was € 31 million (3M 2015: € 28 million)

Life SII VNB was € 22 million and taking into account a capital strain of € 13 million, the net capital generated due to new business sales was € 9 million. The corresponding SII NBM was 3.7% and was driven by Belgian protection products and profitable DB pension renewals.

SII VNB was slightly lower than VNB under the old regime, reflecting a negative impact of contract boundaries for DC Pension, partly offset by a positive contribution of DB Pension renewals.

For the quarter, VNB and NBM under the old regime showed an increase mainly due to the Belgian protection products, partly offset by a reduction for DC Pension which largely reflected a model correction. The impact of this model correction was a decrease of VNB of around € 4 million.

SII NAPI was stable at € 132 million (3M 2015: € 132 million), the increase in SII NAPI for DB products is due to the fact that renewals are now included in this number. SII NAPI for DC increased by 8%.

General Insurance

COR was better than target at 97.0% (3M 2015: 96.6%)
GWP up 7% to € 465 million

Overall, the COR was better than target. The COR in Income & protection decreased by nearly 6% points to 73.3%, reflecting some prior year reserve releases and lower commissions. The COR in Property & Casualty (P&C), increased by 1.3% points to 101.8%, reflecting adverse large claims experience in the quarter. In the coming months we are reviewing the performance of all of our general insurance product lines, to ensure that each delivers an acceptable return. For example, we expect the COR of personal general insurance products to be positively affected by the strategic partnership with service provider Voogd & Voogd we announced in March. The increase of GWP in General Insurance is mainly attributable to increased premium production at Authorised Agents.

Asset Management
Net outflow of € 354 million (3M 2015: inflow of € 12 million)
Assets under management € 73 billion (year-end 2015: € 70 billion)
In the Asset Management segment, there was a net outflow on third party base (€ -354 million) due to an outflow of one large mandate and outflows in retail funds. In asset management, we plan to concentrate more on institutional clients.

Bank
Production of new mortgages up € 289 million (3M 2015: € 258 million)
The portfolio of mortgages was stable at € 13.3 billion (year-end 2015: € 13.3 billion)
The savings portfolio was stable at € 3.4 billion (year-end 2015: € 3.4 billion)

In the first quarter, the production of new mortgages increased, supported by the recovering Dutch housing market. The portfolio of Bank Annuity and savings products stabilised, reflecting our focus on margin over volume. There is a continued focus on improving operational efficiency and client satisfaction, also by developing new services such as Instant Payment. This is a service which allows customers to instantly transfer money from their savings account to their bank account at another bank.

Outlook
We will continue to execute the capital plan that we announced with the rights issue. We are progressing with the sale of our shareholding in Van Lanschot by way of a marketed offering in the course of 2016. Further Asset & Liability Management (ALM) actions will be executed to release capital and reduce volatility. Including the benefit of actions already implemented, the programme of ALM actions will deliver a total of 10-15% points uplift. After this, we expect to reach a solvency position in the top half of our target range, which gives us a solid foundation from which to execute our strategy and deliver customer-focused and profitable new business.

We are committed to operational cost discipline and our focus is on improving the operational performance by an ongoing review of the business lines. We are on track to meet our target for operational expenses of € 610 million for 2016.

In February 2016, alongside the rights issue we presented our strategy and capital plan including targets. During our Investor Day on 27 May 2016, we will provide a further update and details regarding the progress of our strategy execution and our capital plan.


Financial calendar 2016
Date Event
19 May 2016 Annual General Meeting
27 May 2016 Investor Day
17 August 2016 Publication of half-year 2016 results
16 November 2016 Publication of Interim management statement first nine months of 2016

Solide commercieel resultaat; focus blijft op kapitaalpositie en operationele vooruitgang
Kapitaal
Solvency II Standaard Formule (SF) ratio gedaald naar 127% (eind 2015: 131%)
Pro forma Solvency II Standaard Formule (SF) ratio na claimemissie: 154%, binnen beoogde bandbreedte van 140-180%
Eigen vermogen (IFRS) op € 3,5 miljard (eind 2015: € 2,6 miljard)
Pro forma eigen vermogen (IFRS) na claimemissie: € 3,5 miljard
Commerciële ontwikkeling
Solvency II waarde nieuwe productie Leven (SII VNB) op € 22 miljoen
Solvency II marge nieuwe productie (SII NBM): 3,7%
Solvency II nieuwe productie Leven, SII NAPI[1] stabiel op € 132 miljoen (3M 2015: € 132 miljoen)
Combined ratio (COR) op 97,0%[2] iets hoger maar wel beter dan doelstelling van 98% (3M 2015: 96,6%2).
Schade: bruto premie-inkomen gestegen naar € 465 miljoen[3] (3M 2015: € 434 miljoen3)
Bestuursvoorzitter Hans van der Noordaa:
"Wij verwelkomen de steun van beleggers voor de claimemissie, waardoor wij nu binnen de beoogde bandbreedte van 140% - 180% uitkomen. De scherpe daling van de rente in dit kwartaal had een ongunstige impact op de kapitaalpositie. Dit is gedeeltelijk ongedaan gemaakt door de voortgang op onze kapitaalmanagementacties. Het commercieel momentum bij onze klanten in het Leven- en Schadebedrijf houdt aan. Wij richten ons op de verdere ontsluiting van de waarde die in onze bedrijfsonderdelen ligt besloten. Om dit te bereiken moeten de commerciële en operationele resultaten verbeteren. Wij zullen ervoor zorgen dat alle productlijnen een acceptabel rendement genereren."

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