Solvency ratio of 143% (2015: 131%), towards the lower end of our target capital range, reflecting adverse longevity development and DNB guidance on LAC DT to the industry
Solvency II net capital generation of € 172 million, after the impact of exceptional weather of € 30 million, equivalent to underlying net capital generation of € 202 million
Holding company cash structurally improved to € 510 million (2015: € -319 million)
Operational expenses down 5% to € 589 million (2015: € 619 million), well below our target of € 610 million for 2016, 2018 target revised down to € 530 million
Business performance continues to be a priority, value of new business of € 27 million and combined ratio (COR) of 105.4%[1] (2015: 96.2%), executing on pricing and product design
While we are making good progress on our priorities, we have agreed, in the best interest of all stakeholders, to recommend the acquisition by NN Group and build a new combined company
Delta Lloyd solvency safeguarded, should NN Group acquisition not proceed, from net capital generation, merger of Belgian and Dutch life activities and implementation of PIM
Final cash dividend for 2016 suspended, reflecting offer by NN Group
Hans van der Noordaa, Chairman of the Executive Board:

"In 2016, we successfully executed a range of actions to strengthen our capital and cash position. We have made good progress on initiatives to improve our client focus, business performance and reduce costs, and we expect to see results of these during 2017. However, we operate in a difficult environment, with margins consistently under pressure, record low interest rates and challenging regulatory developments. We believe the combination with NN Group is in the best interest of our stakeholders and will create a leading insurance and pension company in the Dutch market, with strong presence in Belgium and an attractive proposition in asset management and banking."
Key performance indicators1

(in millions of euros, unless otherwise stated) FY 2016 FY 2015 Change
Solvency II Standard formula (SF) ratio 143% 131% 12pp
Solvency II net capital generation 172 n.a. n.a.
Holding company cash 510 -319 260%
Dividend per share in euro 0.10 0.212 -51%
Gross operational result 915 940 -3%
Operational expenses 589 619 -5%
Net IFRS result 231 128 80%
Shareholders' funds after non-controlling interests 3,185 2,569 24%
Solvency II Life value new business 27 n.a. n.a.
Solvency II NAPI 491 587 -16%
Combined ratio 105.4% 96.2% 9.2pp
GWP General Insurance 1,452 1,353 7%

¹ KPIs are expressed after the effect of exceptional weather of € 40 million equivalent to € 30 million post tax

2 Based on the number of ordinary shares at 31 December 2016

Strategic and business overview
In 2016, we made good progress on implementing our Closer to the Customer strategy and our management priorities of capital, performance and customer. We successfully executed our capital plan, our cash position is substantially improved and we are well on track for the implementation of the Partial Internal Model (PIM). However, during the fourth quarter, our capital position was negatively impacted by adverse longevity development and DNB guidance on LAC DT to the industry. Consequently, our Solvency II ratio declined to 143% (Q3 2016: 156%).

Our operational performance continues to be a priority, with a disappointing Life SII VNB of € 27 million and a COR of 105.4%. However, we outperformed on our operational expenses target for 2016, revised down further our 2018 expense target and we have taken action to structurally improve technical results in Life and GI, including pricing, product design and exiting unattractive and unprofitable business segments. We aim to be the preferred insurer for our customers and business partners. In 2016, we increased our NPS customer satisfaction scores and, for the fifth consecutive year, intermediaries and financial advisors rated us the number one pension provider in the Netherlands. In December 2016, Delta Lloyd Algemeen Pensioenfonds (APF) received a licence to administer a general pension fund.

Delta Lloyd operates in a highly competitive, mature market, where margins on both life and non-life products are consistently under pressure. Organisational agility and scale benefits are necessary to deliver acceptable margins and make ongoing investments. In addition, the regulatory and macro environment remains challenging with volatile markets, record low interest rates and low yields. We believe that consolidation in the Dutch market will, and should, take place in the near or mid-term future.

On 23 December, NN Group and Delta Lloyd announced that they reached a (conditional) agreement on an improved recommended public offer for the entire issued and outstanding ordinary share capital of Delta Lloyd. NN Group and Delta Lloyd agreed to certain non-financial covenants in respect of corporate governance, post-closing legal merger, strategy, organisation, integration and employees. The offer price of € 5.40 (cum dividend) represents a premium of approximately 38% relative to the average closing price during the last month and a premium of approximately 55% relative to the average closing price during the last three months prior to the initial announcement.

We recommend shareholders vote in favour of the offer and all resolutions at the EGMs to be held on 29 March 2017. Both the Executive and Supervisory Boards of Delta Lloyd support and recommend the improved offer. We believe that the combination of the Dutch and Belgium activities of both companies will result in an overall stronger platform within the Benelux from which to provide enhanced customer propositions and generate shareholder return. The combination will have a robust balance sheet and an improved solvency ratio.

Outlook
Following the announcement of the agreement with NN Group, we are working towards achieving the shareholder, regulatory and antitrust approvals required to complete the transaction. We expect these in the second quarter. Meanwhile, we have started high level preparation for the planned integration to ensure a seamless transition for our stakeholders.

It is important that the business maintains its progress on management priorities as a standalone company, until such time as all approvals are achieved. In that context, we remain committed to our existing targets to bring operational expenses down to € 530 million in 2018 and Solvency II net capital generation of € 200-250 million per year over time. We also continue to work on our existing plans for the PIM, until completion of the transaction.

We expect to see results of our initiatives to improve our technical profitability in Life and GI during 2017. We remain confident in the solvency position of Delta Lloyd as a standalone business should the NN Group acquisition not take place, reflecting among other things, net capital generation as well as the strong progress and potential for solvency benefits of the merger of our Belgian and Dutch life activities and the PIM.

Dividend
We have decided not to pay a final dividend for 2016, in view of NN Group's recommended offer for Delta Lloyd. Any final dividend paid would reduce the purchase price of € 5.40 per ordinary share.

The total dividend for 2016 equals the interim dividend of € 0.10 per ordinary share, which was paid in September 2016.