avatar SRH N.V. Finance, Insurance, And Real Estate
  • Location: UTRECHT 
  • Founded: 1987-05-25
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    ANNUAL REPORT 2000 Customers in the picture www.snsreaalgroup.com

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    Customers in the picture Creative, innovative, solution-oriented - three strong points cited by six different customers of SNS Reaal Group. This annual report quotes them more extensively on the services of SNS bank, Hooge Huys and a few group subsidiaries. Naturally their stories are all very different as each of them makes use of our services in their own way. But if there is one thing that stood out in all six of the interviews, then it was the unanimous appreciation for the service - ‘actively thinking along with us’ was the constantly recurring theme. And for all customers, versatility, flexibility, quality consciousness, efficiency and speed are all essential parts of the service. The six mini-portraits portray a modern, ambitious and client-responsive banking and insurance group - SNS Reaal Group.

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    Annual Report SNS Reaal Group 2000 SNS Reaal Group N.V. Pettelaarpark 70 P.O. Box 70053 5201 DZ ’s-Hertogenbosch The Netherlands Telephone: +31 (0) 73 683 30 90 www.snsreaalgroup.com Concern Communication Telephone: +31 (0) 73 683 30 83 Fax: +31 (0) 73 683 27 04 concerncommunication@snsreaal.nl Investor Relations Telephone: +31 (0) 73 683 30 12 Fax: +31 (0) 73 683 36 30 investorrelations@snsreaal.nl Registered at the Trade Register of the Chamber of Commerce in ’s-Hertogenbosch under no. 16062627 Annual Report 2000 / SNS Reaal Group 1

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    SNS Reaal Groep in brief MISSION SNS Reaal Group focuses on creating, managing and protecting the financial assets of its private and business clients by offering a coherent package of banking, investment and insurance products through a variety of distri- bution channels. PROFILE SNS Reaal Group is an innovative and fast-growing Dutch financial services provider with more than 6,000 employees and year-end 2000 assets totalling almost EUR 41 billion. The Group’s head offices are in ’s-Hertogen- bosch. SNS Reaal Group serves its private and business clients mainly through SNS bank and Hooge Huys. SNS bank reaches customers directly through its branch offices and financial advisors, by telephone and via the internet. Hooge Huys markets its products and services through independent intermediaries. The third business unit, SNS Reaal Invest, focuses on broadening the financial base and supporting the financial activities of SNS Reaal Group. Strong social commitment is a traditional characteristic of SNS Reaal Group, as expressed in its specialised research, sustainable products, donations and sponsoring activities. STRATEGIC OBJECTIVES • Strengthening the all-finance operations • Expanding multi-channel distribution • Increasing market share • Improving returns FINANCIAL OBJECTIVES • Net profit increase of at least 10% per year (2000: 11.2%) • Return on shareholders’ equity of at least 12.5% per year after tax (2000: 11.8%) • Maximum efficiency ratio for bank operations of 65% (2000: 68.4%) • Maximum cost/premium ratio for insurance operations of 27% (2000: 30.8%) • Profit contribution of SNS Reaal Invest at least 20% (2000: 14.2%) RATINGS Moody’s S&P Fitch SNS Reaal Group Senior long-term debt A3 A- SNS bank Senior long-term debt A2 A A+ Short-term deposits P1 A1 F1 2 Annual Report 2000 / SNS Reaal Group

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    Contents GENERAL Structure 4 Personal details 5 Key figures 8 Foreword chairman of the Group Executive Board 10 Highlights of 2000 11 REPORT OF THE SUPERVISORY BOARD 12 REPORT OF THE GROUP EXECUTIVE BOARD Strategy and policy 14 SNS Reaal Group 14 SNS bank 15 Hooge Huys 18 SNS Reaal Invest 19 Market developments 21 General 21 Private market 22 Business market 27 Professional market 28 Result and balance sheet 31 Net profit 31 Return on shareholders’ equity 35 Income 36 Expenses 37 Efficiency ratios 38 Composition and growth of the balance sheet 38 Capital base 39 Risk management 42 Social orientation 44 Socially responsible entrepreneurship 44 SNS Reaal Fund 45 Employees 48 Prospects 50 ANNUAL ACCOUNTS 2000 Consolidated balance sheet 52 Consolidated profit and loss account 53 Consolidated cash flow statement 54 General notes 56 Notes to the consolidated balance sheet 63 Notes to the consolidated profit and loss account 77 Consolidated balance sheet banking operations 84 Consolidated profit and loss account banking operations 85 Consolidated balance sheet insurance operations 86 Consolidated profit and loss account insurance operations 88 Consolidated balance sheet SNS Reaal Invest 92 Consolidated profit and loss account SNS Reaal Invest 93 Company balance sheet 94 Company profit and loss account 95 Notes to the company balance sheet 96 List of the most important group companies 100 List of the most important equity participations 101 OTHER INFORMATION Profit appropriation under the articles of association 103 Auditor’s report 103 Curricula vitae of members of the Supervisory Board 105 Additional functions of members of the Executive Board 106 Glossary 107 Annual Report 2000 / SNS Reaal Group 3

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    General Structure COMMERCIAL STRUCTURE OF THE SNS REAAL GROUP SNS Reaal Group SNS bank Hooge Huys SNS Reaal Invest Regional SNS banks Reaal Funeral insurance (sector summary on page 19) ASN Bank Proteq CVB Bank BLG Hypotheken (mortgages) Business market insurance Mortgages service centre Life service centre Securities service centre Non-life service centre Bank service centre The Group Executive Board of the SNS Reaal Group. From left to right: prof. J.J.A. Leenaars, chairman; G. van Olphen, chief financial officer and M.W.J. Hinssen. 4 Annual Report 2000 / SNS Reaal Group

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    General Personal details as of 14 March 2001 SUPERVISORY BOARD SNS REAAL GROUP1 GROUP EXECUTIVE BOARD SNS REAAL GROUP1 Prof. J.L. Bouma, chairman Prof. J.J.A. Leenaars, chairman H.M. van de Kar, deputy chairman M.W.J. Hinssen J.V.M. van Heeswijk G. van Olphen, chief financial officer D. Huisman Prof. S.C.J.J. Kortmann H. Muller J.W.M. Simons BOARD OF DIRECTORS SNS BANK NEDERLAND2 BOARD OF DIRECTORS SNS REAAL VERZEKERINGEN M.W.J. Hinssen, chairman G. van Olphen, chairman B.A.G. Janssen, deputy chairman J.M. Kroon, deputy chairman J.A.M. Henneke J. Boven A.W.M. Janssen N.J. Jongerius M. Menkveld BOARD OF DIRECTORS SNS REAAL INVEST C.J. Ambachtsheer, chairman J.B.M. van Roon CENTRAL EMPLOYEES COUNCIL F.M.M. van Maasakkers, chairman A.M.J. Borsboom J.C.T. Hemels H.H. Foppen, deputy chairman P. Brakeboer J.J. Kolkman A. Dijkhuizen, secretary A.P. van Campen M.L.M. Nijkamp J.B.M. Bekker G.J.M. Dröge W.G. Vredenburg R. Bloos G.M. ten Heggeler R. Woudboer 1 ) More information about board members is on pages 105 and 106. 2 ) As of 1 February 2001, director controlling and concern affairs A.W.M. Janssen (37) was appointed to the Board of Directors of SNS bank Nederland responsible for the finance portfolio. Likewise on 1 February 2001, J.A.M. Henneke (52), director of information technology at SNS bank Nederland, was appointed to the Board of Directors of SNS bank responsible for the operations and information technology portfolio. Mr Henneke succeeds T.G. Wu. Annual Report 2000 / SNS Reaal Group 5

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    ‘Transparent and open are two of the keywords. And the mortgage man was not the only one. The information on investment opportunities was honest and very understandable.’ ‘Easy access and great ba are why I chose the SNS ‘What struck us immediately at SNS bank was their great willingness to be creative with us, to relate to our problems. This ‘thinking-along- with-you’ has become a bit of a cliché, but their interested and very competent advisor taught me it can actually mean something.’ ‘We have been Internet-banking for some years now. And it’s great. So easy you enter your code and simply follow instructions. Perfect for people who are often on the road or who work during the day. In fact we have 24-hour service.’

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    ck-up bank’ Christel Duiven is nurse and mother of young son Sil, and was introduced to the SNS bank when she and her partner were looking for the best mortgage. ‘After I discovered SNS bank we just stopped looking any further.’ ‘Choosing a bank is like choosing a shop. If I’m pleased with my grocer, I don’t buy my vegetables at the supermarket. That personal service and dedication is worth a lot. Choosing my bank is sort of the same thing; easy access and great back-up are why I chose the SNS bank.’

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    General 1 Key figures EUR millions 2000) 1999) 1998) 1997) 1996 BALANCE SHEET Total assets 40,879) 32,527) 26,529) 23,051) 21,224 Investments 8,527) 8,028) 7,207) 6,610) 6,032 Mortgage loans 22,909) 17,486) 13,897) 11,629) 9,989 Other loans 4,203) 3,662) 3,263) 2,755) 2,515 Shareholders’ equity 1,575) 1,452) 1,197) 1,029) 851 Capital base 2,575) 2,113) 1,700) 1,533) 1,186 Technical reserves, insurance operations 7,683) 7,032) 6,158) 5,554) 4,871 Funds entrusted 13,997) 13,119) 11,956) 10,576) 10,424 Debt securities 11,072) 5,188) 2,954) 1,326) 1,110 PROFIT & LOSS ACCOUNT Income banking operations Net interest income 391) 348) 291) 272) 258 Commission income 89) 63) 59) 54) 41 Other revenue 69) 57) 54) 40) 16 Total 549) 468) 404) 366) 315 Income insurance operations Gross premium income 1,410) 1,249) 1,162) 1,120) 997 Investment income 547) 517) 481) 433) 380 Other revenue 22) 145) 159) 82) 56 Total 1,979) 1,911) 1,802) 1,635) 1,433 Income SNS Reaal Invest Net interest income 31) 27) 15) 9) 5 Commission income 3) 2) 3) 1) -- Other revenue 41) 32) 19) 15) 12 Total 75) 61) 37) 25) 17 Total income 3,639) 3,209) 2,901) 2,626) 2,334 Total expenses 3,390) 2,978) 2,710) 2,468) 2,201 Operating profit before taxation Banking operations 157) 140) 115) 93) 73 Insurance operations 111) 102) 87) 71) 54 SNS Reaal Invest 32) 24) 13) 8) 6 Group (51) (35) (24) (14) -- Total 249) 231) 191) 158) 133 Net profit 179) 161) 138) 117) 97 KEY RATIOS Return on shareholders’ equity 11.8% 12.2% 12.4% 12.4% 11.8% Efficiency ratio banking operations 68.4% 68.8% 69.9% 72.5% 72.9% Cost / premium ratio insurance operations 30.8% 31.7% 32.7% 31.3% 31.0% Capital ratio 6.3% 6.5% 6.4% 6.7% 5.6% Average number of employees 5,932 5,603 5,231 4,963 4,714 1 ) The figures for 1996 have been combined pro forma. 8 Annual Report 2000 / SNS Reaal Group

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    General NLG millions 2000) 1999) 1998) 1997) 1996 BALANCE SHEET Total assets 90,086) 71,678) 58,462) 50,798) 46,770 Investments 18,791) 17,691) 15,882) 14,567) 13,292 Mortgage loans 50,485) 38,534) 30,625) 25,626) 22,012 Other loans 9,261) 8,070) 7,190) 6,072) 5,542 Shareholders’ equity 3,470) 3,199) 2,638) 2,268) 1,875 Capital base 5,674) 4,656) 3,747) 3,379) 2,613 Technical reserves, insurance operations 16,932) 15,495) 13,569) 12,240) 10,734 Funds entrusted 30,846) 28,909) 26,346) 23,306) 22,971 Debt securities 24,399) 11,434) 6,510) 2,922) 2,447 PROFIT & LOSS ACCOUNT Income banking operations Net interest income 862) 767) 642) 599) 568 Commission income 196) 139) 129) 118) 90 Other revenue 151) 125) 119) 89) 35 Total 1,209) 1,031) 890) 806) 693 Income insurance operations Gross premium income 3,108) 2,752) 2,561) 2,468) 2,196 Investment income 1,206) 1,133) 1,060) 954) 838 Other revenue 49) 320) 351) 180) 123 Total 4,363) 4,205) 3,972) 3,602) 3,157 Income SNS Reaal Invest Net interest income 69) 60) 33) 19) 11 Commission income 7) 5) 6) 2) -- Other revenue 89) 69) 42) 32) 26 Total 165) 134) 81) 53) 37 Total income 8,020) 7,072) 6,392) 5,787) 5,144 Total expenses 7,471) 6,563) 5,972) 5,439) 4,851 Operating profit before taxation Banking operations 347) 307) 254) 204) 160 Insurance operations 245) 225) 191) 157) 119 SNS Reaal Invest 70) 53) 28) 17) 14 Group (113) (76) (53) (30) -- Total 549) 509) 420) 348) 293 Net profit 395) 355) 303) 257) 213 KEY RATIOS Return on shareholders’ equity 11.8% 12.2% 12.4% 12.4% 11.8% Efficiency ratio banking operations 68.4% 68.8% 69.9% 72.5% 72.9% Cost / premium ratio insurance operations 30.8% 31.7% 32.7% 31.3% 31.0% Capital ratio 6.3% 6.5% 6.4% 6.7% 5.6% Average number of employees 5,932 5,603 5,231 4,963 4,714 Annual Report 2000 / SNS Reaal Group 9

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    General Foreword chairman of the Group Executive Board ‘BE GOOD AND TELL IT ….’ Sharpening Strategy The financial target of increasing net profit by at least 10% each year was once again achieved in the year under review. And our goal is to continue this growth over the coming years. With this in mind, in late 2000, we initiated an exchange of ideas aimed at sharpening our corporate strategy. The reinterpretation of our all-finance/multi-chan- nel concept that resulted from that dialogue calls for more focus on core competencies, more synergy generated within the organisation, greater distribution power and more rationalisation initiatives. Excellent and innova- tive products have been introduced by leading brands SNS bank and Hooge Huys and these will be brought to the market in a broader and more emphatic manner, especially in the form of product packages. In short, we are focusing on what we are good at from an intensified marketing approach. Investing in the Internet SNS Reaal Group succeeded in acquiring a leading position in the banking and insurance operations with regard to Internet service provision. Bank relations and intermediaries have in various independent analyses expressed their appreciation of the offer. SNS Reaal Group wants to continue to set the speed of development in the future. Without affecting the development of other distribution channels, much will be invested in the internet-based serv- ice over the coming years. Sustainable Society Society is clearly becoming ever more interested in socially sound entrepreneurship and sustainable investment. SNS Reaal Group believes that this development is of a structural nature. SNS Reaal Group has, for some years, gained knowledge and experience in these subjects. Analysis and research quality has translated itself into an excellent investment track record. Also in this field SNS Reaal Group will invest efforts in continuing and rein- forcing the trendsetter’s role. Our People Staying at the fore is only possible by investing in your people. Our employees are at the heart of all our efforts to offer better services to clients. In today’s context of continually changing processes, their expertise must remain up to date and the same applies to the organisation around them. That demands a lot from everyone associated with us. And here I would like to express my gratitude for their ongoing loyalty and input, also on behalf of my col- leagues on the Group Executive Board. Hans Leenaars Chairman, Group Executive Board 10 Annual Report 2000 / SNS Reaal Group

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    General Highlights of 2000 STRENGTHENING ALL-FINANCE ACTIVITIES • Innovative saving and investment products are introduced to the market under various brands through direct and indirect channels (pages 23 and 26) • Hooge Huys introduces SNS investment funds on the market; SNS bank also sells ASN Bank investment funds (pages 26 and 27) • Synergy is realised through service centres for banking and insurance operations; the mortgage activities of SNS bank and Hooge Huys are centralised (pages 15 and 18) EXPANSION OF MULTI-CHANNEL DISTRIBUTION • SNS bank is the first bank to offer the combination of online/real-time banking, saving and investing via the internet (page 15) • Sales activities in the Randstad are intensified (page 15) • SNS Reaal Group sets up ‘Distribution Partners’, to reinforce its position in the intermediary market (pages 19 and 20) INCREASING MARKET SHARE • The mortgage loans portfolio of SNS Reaal Group again shows a strong increase, up to EUR 22.9 billion, partly due to the successful Stable Interest Mortgage (page 22) • Savings, investment and mixed products lead to a market-share increase in their respective markets (page 23 and 26) • In 2000, the ASN Aandelenfonds, the largest sustainable world share fund in the Netherlands, is the only fund in this domain to record a positive investment return (page 44) IMPROVEMENT OF RETURN • Net profit again increases by more than 11% to reach EUR 179 million in the year under review (page 31) • The efficiency ratio for banking operations (68.4%) and the cost/premium ratio for insurance operations (30.8%) show further improvement (page 38) • SNS Securities delivers an important contribution to the profits of SNS bank (page 28) • Funding and securitisation programmes are successful; assets worth EUR 7.5 billion are attracted in 2000 via SNS Financial markets; securitisation amounts to a total of EUR 0.6 billion (page 29) Annual Report 2000 / SNS Reaal Group 11

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    Report of the Supervisory Board Report of the Supervisory Board The Supervisory Board met six times in the year under On 1 October 2000, we bade farewell to J.F.T. Vugts, review. In addition to the general business affairs of who, as chairman of the Executive Board of firstly SNS the SNS Reaal Group and the group subsidiary opera- Group and later SNS Reaal Group, since 1987 headed tions, strategic policy was a recurring topic. Risk man- up a concern that guided the group through a tenfold agement and its various connotations were regularly increase in total assets thanks to mergers and discussed. The Supervisory Board gave approval for autonomous growth during the period. We express our proposed investments and sales, and for the introduc- gratitude and appreciation to Jan Vugts, leader among tion or increase of the euro medium-term note pro- the founding fathers of this bank-insurer, for the way grammes of SNS Reaal Group and SNS bank. The board in which he achieved this. In his long period at the evaluated its own performance at its 7 February 2001 helm, Jan Vugts was always fully attuned to both the meeting. main line of business as to the human detail. Succeeding Jan Vugts, J.J.A. Leenaars took up his duties ANNUAL ACCOUNTS AND HALF-YEAR REPORT as chairman of the Executive Board on 1 October 2000, At its meeting of 14 March 2001, the Supervisory Board having been appointed deputy chairman on 1 March adopted the SNS Reaal Group year-end accounts for that year. 2000. Previous meetings had scrutinised the budget for 2001 and management letters regarding SNS Reaal R.R. Latenstein van Voorst, chief financial officer of Group, banking and insurance operations and SNS SNS Reaal Group and member of the Board of Directors Reaal Invest. In turns, two board members attend the of SNS bank Nederland, has notified us of his intention meeting of the Central Employees Council at which to continue his career outside the group. The Supervi- the budget for the coming year is discussed. The board sory Board extends its appreciation to Mr. Latenstein also took note of the half-year report for the SNS Reaal van Voorst for the way in which he has contributed to Group. the Group’s development and management in the past years. RE-APPOINTMENTS TO THE SUPERVISORY BOARD G. van Olphen was appointed chief financial officer of At its 14 March 2001 meeting, the Supervisory Board SNS Reaal Group on 1 February 2001. re-appointed H. Muller and J.W.M. Simons as members. Preceding these re-appointments, and in accordance with the procedure agreed on in 2000, the board chair- CHANGE PROCESS man first consulted with both commissioners; the SNS Reaal Group has always managed to successfully Executive Board and Central Employees Council were combine an ongoing internal change process with a also heard. continued growth in profit. The dynamism associated with these changes seems to be translated with ease by APPOINTMENTS TO THE EXECUTIVE BOARD those involved in the SNS Reaal Group into a con- In parallel to the reorganisation and renewal of the stantly growing profit figure. The Supervisory Board organisation there has been a clear rejuvenation of the extends its gratitude to the Executive Board and all Executive Board. A completely new board has taken staff of SNS Reaal Group for the way in which they also office in only a few years. made the year 2000 into a success story. ’s-Hertogenbosch, 14 March 2001 On behalf of the Supervisory Board J.L. Bouma, chairman 12 Annual Report 2000 / SNS Reaal Group

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    Report of the Group Executive Board Annual Report 2000 / SNS Reaal Group 13

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    Report of the Group Executive Board Strategy and policy SNS REAAL GROUP ages. In the year under review energetic steps were taken to create synergy advantages by benefiting more SNS Reaal Group focuses on creating, managing and from each other’s products, and especially to create protecting the financial assets of its private and busi- combined all-finance products. Intensified coopera- ness clients by offering a coherent package of banking, tion in product development will lead to a flow of new investment and insurance products through a variety products that will appeal to clients. of distribution channels. The Group continues to rein- force and expand its all-finance/multi-channel strategy The advent of the new Dutch tax system in 2001 is in addition to the two other main strategic group objec- leading to increasingly high requirements for (combi- tives namely increasing market share and improving nations of) banking, investment and insurance prod- returns. ucts, to enable them to raise their pension coverage and compensate for any shortfalls in current pension The Group achieved a number of financial and com- provisions. mercial objectives in the year under review though in some areas developments did not progress at a suffi- Greater Distributive Capacity ciently high rate. What required adjustment were Following on its strategic objective to increase market expenses in the banking operations, and the results of share, SNS Reaal Group considers further reinforce- sales efforts in the insurance activities. Together with ment and optimisation of its multi-channel distribu- sharpening of the strategic direction, this is leading to tion network essential with regard to both direct sales to the accentuating of a number of developmental direc- clients and indirect sales through intermediaries. The tions for the coming years. These are described below, increasing of distribution capacity will therefore first for the Group, then in more detail for SNS bank remain a point of attention for the coming period. SNS and Hooge Huys. bank will focus in particular on expanding its current advanced position in the field of e-commerce, in addi- Greater Focus tion to reinforcing sales through its office network. Within SNS Reaal Group, the two main brand names of Hooge Huys will intensify sales through the all- SNS bank and Hooge Huys will be positioned with finance intermediaries. As a result of the founding of additional emphasis. In the context of customer-ori- ‘Distribution Partners’, the growing cooperation ented service provision, they will increasingly target between insurer and intermediary will take place in an further expansion and exploitation of their core com- organisational context. petencies. SNS bank will more strongly target innova- tive product development and the achievement of a Greater Efficiency prominent position in mortgages and asset-creating Increasing attention for efficiency and effective work- products. The key to this is seen as ‘packaging’, or ing methods will continue to be one of the most rather, the combining of the various financial products important tasks for the SNS Reaal Group during the within the group and offering them as one coherent coming period. Substantial progress was made in this whole. The focus of Hooge Huys will be as trend-setter regard in the year under review through the creation in supporting intermediaries by offering more and of central service centres (‘multi-label back-offices’) for innovative services. Traditional insurance intermedi- banking and insurance operations. This centralised aries will convert into all-finance providers by the and uniform processing and management of a number addition of a broad package of banking services. of core products within the SNS Reaal Group will lead to considerable savings in the future. Further savings will Greater Synergy accrue from the simplification of the organisational As a consequence of the internal merger processes, not structure, as well as the evolution of the currently only the two main brands but also other brands within decentralised management guidance to a more cen- the SNS Reaal Group still had a generous amount of tralised model. time at their disposal with their own product pack- 14 Annual Report 2000 / SNS Reaal Group

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    Report of the Group Executive Board SNS BANK nity to place share orders through the internet. Low cost, access to current share price information and SNS bank targets her distribution of integrated and improved faculties to follow order processing all con- non-integrated banking, investment and insurance tributed to a rapid rise in the number of clients and products to private and business customers using a transactions in the year under review. Independent mix of complementary distribution techniques. Ser- research rated the SNS investment website as superior vice provision is decentralised through a national based on its rates, user-friendliness and the securities branch network, increasingly supported by the call research available. centre and the internet. SNS bank also enables customers to conduct real-time payment transactions via the internet, with an accom- Focus panying overview of recent payments and receipts and SNS bank continues to commercially develop its inno- up-to-the-minute account balance information. Bal- vative capabilities, putting the accent on products for ance and transaction alerts can also be transmitted by which it has a proven track record. These ‘spearhead’ SMS message or e-mail, informing clients by mobile products include mortgages and asset-creating prod- phone or personal computer about relevant (positive ucts. The mortgage loans portfolio is the cornerstone or negative) changes in the account balances. of SNS Reaal Group as an all-finance institution, shown by the fact that mortgages comprise more than A savings product has been added to the internet-based half of the Group’s balance sheet and two-thirds of its investment and payment functions in the form of SNS banking balance sheet. Mortgages will be expanded Internetsp@ren (‘internets@ving’), in which the bank from mono-products to combination products, for translates its own low transaction costs to a premium example, by packaging them together with insurance interest rate for the client. SNS bank was the first bank and/or investment funds, thus laying the foundation in the Netherlands to offer a real-time combination of for pre-cross-selling in the future. savings, payments and investment via the Internet. It was furthermore the first financial organisation to The second group of spearhead products concerns offer this combination of services without a subscrip- asset generation: savings, investment and life insur- tion fee. Now customers can also obtain consumer ance products. In the year under review, SNS bank suc- credit through the internet. This product range will be cessfully introduced many innovative products on the expanded in 2001, adding at first simple insurance market, often as (indexed) combination products. New products and mortgages. investment funds were also introduced. Historically, SNS bank has been a minor player in mar- Synergy kets in the densely populated western part of the Combination products – those combining, in whole or Netherlands, the ‘Randstad’. Penetrating these markets, in part, products of the bank and the insurer – ideally with ten million potential clients, is therefore being lend themselves to synergy advantages. SNS bank will approached with vigour. Modern means of customer increasingly be offering more packaged concepts contact are being used, such as the internet, telephone, through its own sales channels and intermediaries. the call centre and ‘house calls’ from personal advisors. This packaging will result in increased efficiency and SNS bank has offices located in Amsterdam, The Hague good alignment between the various product parts, and Utrecht. thus leading to benefits for the customer. SNS bank branch offices have rapidly modified their Distribution function over the past years and now provide inte- Increasing distribution capacity is growing in impor- grated advice on banking, insurance and investment tance. In this regard, SNS bank foresees the internet as a issues. Clients’ changing needs have driven the cluster- major spearhead of activities. Internet applications ing process into full-service offices. The number of have been developed quickly and successfully during branch offices is thus expected to drop gradually from recent years. In 1999, clients were given the opportu- about 300 in early 2000 to some 200 in 2001. In addi- Annual Report 2000 / SNS Reaal Group 15

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    Jaap Harmsen is Managing Director of local pension specialists ‘Pensioen Perspectief Vorden’. From his offices in the eastern Netherlands, Jaap and his colleagues advise on pension matters, and progress operation growth and national coverage. ‘If you want a clear overview of the Netherlands, you should work in from the edge.’ ‘I consider Hooge Huys an excellent service provider. Why? They adapt fast to market needs, maintain a completely open cost structure, and are both versatile and flexible. But if this sounds like a commercial let me rephrase things…’ ‘The management of pension contracts involves matters such as salary raises, divorces and marriages, asset transfers and other such complexities. To process such changes Hooge Huys often does not need more than one week. This means their organisation is efficient and effective.’

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    ‘Their organisation is efficient and effective’ ‘Changes in pensions legislation often complicate matters for us. And we naturally have to introduce them properly and on time, and that requires quite some effort. I must say that, in this respect, Hooge Huys has sorted out its affairs very well. For consultants like us that is essential to good business.’ ‘Professionally, our company operates at high quality. The publications on pension legislation of Hooge Huys reflect this keen quality awareness, because solid, high relevance content.’ the articles always possess

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    Report of the Group Executive Board tion to this office clustering, new offices are still open- Also in the year under review Hooge Huys began a ing, in the Randstad for example. publicly oriented advertising campaign with the theme ‘professional distribution of financial peace of Efficiency mind’. The campaign goal was to familiarise potential A focus on innovative products requires not only customers with the Hooge Huys name before they step investments in product development and marketing, into an intermediary’s office for an independent finan- but also accurate and efficient administrative processing cial consultation. It is then easier for intermediaries to of these products. For this, SNS Reaal Group has cre- suggest one or several Hooge Huys products during a ated a number of service centres. These fall under one of consultation. the main brands and yet also serve all other brands. Virtually all mortgages within SNS Reaal Group, for Synergy example, are processed in the mortgages service centre Like SNS bank, Hooge Huys attaches great value to in Utrecht. There a uniform administration system is synergy-increasing activities which can be realised used together with the electronic processing of docu- through mutual cooperation. Hooge Huys is also pur- ment flows. This centralisation has led to better serv- suing increased sales through other brands within SNS ice for clients and intermediaries. Other banking service Reaal Group, particularly where products are not yet centres have been reaping the benefits of economies of sold in combination with Hooge Huys insurance prod- scale for quite some time, such as in Banking in Arn- ucts. Through the years, together with SNS Investment hem and Securities in ‘s-Hertogenbosch. Funds, Hooge Huys has introduced a large number of investment funds to the market under its own name. Dutch Savings Banks’ Association In 2001, Hooge Huys will introduce an integrated The last independent Dutch savings bank, financial services package based on financial planning. Bondsspaarbank Katwijk, joined SNS bank in the With this banking-oriented product, Hooge Huys is year under review. This brought an end to the adapting to consequences and opportunities of the activities of the Dutch Savings Banks’ Associa- new 2001 tax system. For example, it is creating sup- tion (Nederlandse Spaarbankbond), which, since plementary pension products to address the problem its founding in 1907, represented the interests of of pension shortfall. For intermediaries, this concept Dutch savings banks. SNS bank actually has the offers excellent prospects for high-quality consultancy same background as suggested by its name in work. Clients can follow the value growth of their bygone days – Samenwerkende Nederlandse portfolio on the internet any time they may wish. Spaarbanken (Cooperating Dutch Savings Banks). Distribution Hooge Huys has a solid reputation to uphold in the way it maintains contact with intermediaries. In fact, HOOGE HUYS independent research has shown that Hooge Huys has earned a top position with its most important product, Focus the investment insurance, with respect to quality, Hooge Huys targets the sale through intermediaries speed and flexibility of processing (policy set-up, claim (indirect distribution) of insurance, banking and processing and the like). Other independent research investment products for the private and business mar- has shown that operationally as well, in terms of speed kets. It is renowned for the quality of its product pack- of policy set-up and the like, Hooge Huys is clearly ages and its high level of service. In insurance, Hooge positioned above the market average. Huys focuses on life insurance, with non-life insurance in a supporting or parallel role. In the year under Hooge Huys invests substantial effort in communica- review , the new Dutch tax system for 2001 and the tion with intermediaries, and increasingly supports Insurance Intermediary Act led Hooge Huys to modify them using internet techniques. Through its ‘TOP site’ and expand its product line, to uphold its excellence in extranet, Hooge Huys services its distribution process quality. optimally on line, enabling intermediaries to work 18 Annual Report 2000 / SNS Reaal Group

  • Page 21

    Report of the Group Executive Board more efficiently and offer better service to their cus- scouting out potential markets, functioning as incubator tomers. Hooge Huys was the first insurer to offer the for new activities; and the expectation is that a higher ‘multi-pricing’ option, meaning that the intermedi- return on investment can be realised in this sector. In aries themselves have the opportunity to partly deter- just five years, SNS Reaal Invest has developed from a mine the premium. limited size and scope into a group unit contributing a substantial 14.2% of Group profit. SNS Reaal Invest is Consolidation trends are evident among insurers and targeting a contribution of 20% to 30% to profits intermediaries. Inevitably, insurers and intermediaries within three years. will seek each other out, the former to ensure distribu- tion and appropriate IT investments, and the latter to Portfolio Management find financing. In order to realise this objective, and in Following on a phase of rapid growth and the building association with SNS Reaal Invest, Hooge Huys up of a substantial company, the time is now ripe for founded ‘Distribution Partners’, a company exclusively SNS Reaal Invest to address a number of specialisa- pursuing minority interests. In the future, Hooge Huys tions. In the context of portfolio management, SNS sees a continuing role for the insurance intermediary, Reaal Invest maintains strategic and non-strategic divi- who, as entrepreneur, can maintain flexible working sions, a categorisation that depends on whether an hours to service customers and will increasingly pro- activity is considered essential for the support of the vide advice on complicated insurance and investment banking operations or insurance operations. This par- products. With their lower cost base, intermediaries tition can have consequences for the sustainability of a can continue to operate in areas where financial insti- relationship and return on equity requirements set. tutions have to withdraw. Hooge Huys will assure the quality of its services by entering into service-level SNS Reaal Invest has now classified its activities and agreements with its insurance intermediaries. participating interests under five sectors: lease, con- sumer credit, real estate, financial service & distribu- Efficiency tion and venture capital. Hooge Huys continues to target tight control over cost development and the introduction of increasingly effi- Lease cient working methods. In anticipation of the new tax ‘Leasing’ is a specialism outside regular banking activi- system, the demand for periodic life insurances ties, yet its goal is nonetheless to support banking declined strongly. While, on one hand, this has operations. In the year under review, SNS Automotive prompted replacement products better attuned to the and the previously acquired Abfin were integrated to 2001 tax system, on the other hand, it has led to struc- gain a wider foothold in the lease market. The merger tural economising. Like SNS bank, Hooge Huys has set resulted in better service to clients: dealers, car fleet up service centres for life insurance (Alkmaar) and managers and small companies. The broader goal is non-life insurance (Zoetermeer) to support all insur- more cooperation in the car lease market in order to ance products of the SNS Reaal Group. Administrative gain scale benefits. Through the subsidiary SNS processes at these centres are handled with the help of Autolease, bank clients are offered car lease facilities sophisticated computer support. By mid-2001, technol- under the banks’ own brand. ogy will be in place to enable employees to gain autho- rised access to complete digital files from the various Leaseco and TransNed Lease are active in their own insurance companies. niche markets, which are heavy equipment and trucks. Leaseco is furthermore involved in the equipment lease market, also under the SNS Equipment Lease SNS REAAL INVEST label. The fast-growing business unit SNS Reaal Invest Consumer Credit expands and supports financial activities within SNS In the consumer credit sector, PrimeLine has been Reaal Group. For several reasons significant invest- growing well for a number of years. PrimeLine works ment took place in this unit: spreading the result, closely with a number of large retail organisations, Annual Report 2000 / SNS Reaal Group 19

  • Page 22

    Report of the Group Executive Board which offer their clients credit facilities by means of a of independent insurance agencies. In the meantime, credit card under their own brand. In the consumer acquisitions have been made and interests purchased, credit area, Ribank operates in its own niche market. for instance, in Wagner & Partners, a national financial Opportunities are now being sought to intensify con- consultancy and planning firm. sumer credit activities in foreign markets, possibly in the form of cooperation with a partner abroad. TMF Group, an internationally operating financial management and trust company in which a 49% inter- Real Estate est was acquired in 1999, more than lived up to growth In real estate, Stienstra is the most important partici- expectations in the year under review. Xtensive Fran- pating interest, contributing substantially to profits of chising (100%) and Incasso Vesting (40%), both fast- SNS Reaal Invest. The SNS Reaal Group has also been growing companies in the field of collection and credit able to capitalise on the expertise available in transac- management, are also part of this portfolio. tions in and management of its own real estate. Its par- ticipating interest in Q-Park, manager of parking Venture Capital garages, increased to 15% in the year under review. Developments in the venture capital sector, while still at an early stage, also met expectations. In addition to Financial Services & Distribution small direct participations through the wholly owned The financial services & distribution sector is strength- subsidiary Foresta, participation in a fund for medium ened by the SNS Reaal Group’s 100% interest in ‘Distri- sized interests (Parnassus Fund) were taken in a more bution Partners’, the company set up by SNS Reaal indirect way. Increasingly, participation is being Invest (51%) and Hooge Huys (49%), to support inter- sought in specialised funds and companies targeting mediaries by acquiring minority interests in a network new technologies. 20 Annual Report 2000 / SNS Reaal Group

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    Report of the Group Executive Board Market developments GENERAL the first time in ten years, declining by more than 5%. Its performance was worse than Euro Stoxx 300 (–2%) Economic growth yet better than the Dow Jones (–7%). Japan’s down- The year 2000 will be remembered as a year of strong turn was even more pronounced (–23%), and those economic growth. In the industrial countries, growth who placed money in the TMT sector (telecommuni- averaged 4.3%, with more than 5% in the United cations, media, technology) faced a serious setback States, 3.5% in the euro countries and 4% in the (–40%) after years of strong growth. Nonetheless, Netherlands. Such growth figures have not been 2000 was a top year in terms of securities turnover, achieved since 1988. When selling their products, the both for transactions for private customers and pro- various units of SNS Reaal Group succeeded in benefit- fessional trade. ing from the strong upward trend in family budgets. The economic situation also kept the bank’s risk pro- Government policy file low, despite steady and strong growth in credit The arrival of the new tax system for 2001 was clearly issuance. discernible in the year under review. Severe restric- tions on the fiscal deductibility of premiums for life The euro, which dropped in comparison to the dollar, insurances resulted in a major slump in this market, by significantly improved the competitiveness of euro- tens of percents. The market is expected to decline fur- zone countries; exports were a strong force driving ther during 2001. The new tax system does offer oppor- economic growth, along with high home expenditures. tunities, however; the pension ‘gap’ problem has A more troublesome sign was that the reduction in increased clients’ interest in investment funds and unemployment figures did not parallel economic ‘universal life’ products. developments. It looks like the euro region passed its cyclical high point in mid-2000; slowdown also In the later months of the year, savers and investors became visible in the United States. Years of phenome- showed increasing interest in socially responsible nal productivity growth, owing to investments in ‘green’ investment funds, particularly after it became information and communication technologies, lev- clear that the fiscal benefits of green funds were to be elled off rapidly towards year’s end. retained under the new tax system. This development gave the ASN Green Project Fund an extra stimulus. Interest In a little over a year, short-term interest rates almost Basel Capital Agreement doubled: the official rate of the European Central Bank The original 1988 Basel Capital Agreement prescribed a went from 2.50% in November 1999 to 4.75% at year- 20% solvency weighting for loans to banks in OECD end 2000. The levelling of the interest curve in the countries. In its newest version, the agreement is more Netherlands also resulted in a relative decline in the nuanced, allowing loans to banks to be weighed accord- interest margin for the banking operations. In the year ing to the country in question, an external rating or an under review, inflation rose gradually to finally reach internal credit model. On the one hand, the agreement 2.6%. offers our banking credit providers the possibility of adopting an internal credit model, for which a realistic Following its introduction exchange rate of USD 1.18 estimate of the creditworthiness of SNS bank will form in 1999, the euro, affected by buoyant growth in Amer- the basis for the solvability requirement. On the other ica and the uncertainties surrounding policy on the hand, in recent years, an active diversification policy new currency, dropped to USD 0.82 in late October has been applied with regard to the type of funds 2000. It had recovered somewhat by the end of the provider, whereby the share of banks in providing the year. total funding requirements has significantly declined. As a consequence the review of the Basel Capital Agree- Stock exchange ment is not expected to have a major influence on costs In 2000, the Amsterdam AEX Index was negative for of funding. Annual Report 2000 / SNS Reaal Group 21

  • Page 24

    Report of the Group Executive Board PRIVATE MARKET Mortgage loans portfolio banking operations millions Being a national financial services provider, SNS Reaal € Group pursues a prominent position in private mar- kets for mortgages, savings, investments and insur- 20,000 ances. It uses various brands to meet this goal. 15,000 Mortgages In 2000, the Dutch housing market was characterised by a declining volume of newly concluded mortgages 10,000 and continuing strong increases in housing prices. Fac- tors underlying the high house prices are clear: the low mortgage interest makes buying attractive, the 5,000 strong economy makes the future seem rosy, personal incomes are on the rise and dual-income families are 0 allowed to count both incomes fully in mortgage 1996 1997 1998 1999 2000 applications. There is also scarcity on the housing market, with supply falling short of demand in terms With guarantee of both quality and quantity. Finally, the mortgage Without guarantee interest paid remains virtually fully deductible under the 2001 tax system. Developments in the housing market prompted the BLG Hypotheken, which sells mortgages through inde- Nederlandsche Bank to initiate a broad study of mort- pendent intermediaries, saw a strong portfolio gage lending in late 1999. The study concluded that increase, also due to the success of the Varirust Mort- Dutch credit institutions in general do not lend unre- gage, a variant of the Stable Interest Mortgage. alistically in this sector. The high creditworthiness of the Dutch banking system thus remains intact. Within SNS Reaal Group, mortgage credit lending is approached with prudence. Internally, the Group maintains and monitors set ‘house quota’ standards to Mortgage loans portfolio insurance operations protect the risk profile of these assets. € millions The position of SNS Reaal Group on the mortgage mar- 5,000 ket improved in the year under review, especially due to the large share of the Stable Interest Mortgage in 4,000 total turnover. This mortgage type is especially attrac- tive when the money market interest rate is relatively 3,000 low compared to the capital market interest rate. The mortgage loans portfolio (under management) 2,000 increased by 26.2% to reach EUR 26.3 billion. Of this EUR 22.9 billion is ‘on balance’. 1,000 The gross production of SNS bank, including the bank- ing brands BLG Hypotheken, CVB Bank and ASN Bank, 0 amounted to EUR 7.2 billion. As a result, the portfolio 1996 1997 1998 1999 2000 (under management) increased by 33.6% to reach EUR Off-balance 20.9 billion. On-balance 22 Annual Report 2000 / SNS Reaal Group

  • Page 25

    Report of the Group Executive Board CVB Bank offers a complete package of banking prod- ment and insurance products. Various brands within ucts and services to independent intermediaries. SNS Reaal Group introduced a large number of innova- tive savings and investment products to the market. In CVB Bank further facilitates banking activities for the year under review the revised 2001 tax system pro- Hooge Huys, enabling this insurer to provide an inte- vided a significant stimulus for product renewal by grated service package to its own intermediaries. In removing the fiscal veil that enshrouded many prod- the year under review, CVB Bank realised mortgage ucts such that customers are now better able to com- growth equal to its top year of 1999. The bank sells pare products on the basis of pure revenue. Interest in endowment mortgages under its own name linked to savings again rose, while attention for investments Hooge Huys insurance policies. Investment mortgages remained high even though people seem to be more will also be sold in this way. conscious of possible whimsical developments on the stock exchange. The mortgage loans portfolio under management of Hooge Huys and Reaal increased by EUR 227 million to - Savings products reach EUR 5.4 billion, of which EUR 2 billion is ‘on bal- SNS bank enjoyed great success with its internet sav- ance’ (+9.6%). This proportionally limited increase ings account, which translated relatively low costs was due to the placing of the Reaal financial advisors into a premium interest payment to the client – first at SNS bank, in addition to unusual competitive condi- 4.25% and later 4.5%. For small and medium-sized tions. companies, a special savings account was developed in late 1999. The ‘SNS Euro Top Account’ offered a high Influenced by the above-mentioned developments, the interest rate for balances starting at EUR 100,000. Total market share on balance of all brands within SNS Reaal savings within SNS Reaal Group (including interest Group reached almost 11% in the first six months of payments) increased by 3.4% to reach EUR 7.5 billion the year, with a gradual decline in the second half. in the year under review. Average market share for the entire year was consider- ably higher than in 1999. - Investment funds All categories of investment funds within SNS Reaal Consumer credit Group increased markedly in the year under review. SNS Reaal Group is active on the consumer credit mar- The total fund value increased by 26.2% to reach ket by providing consumer credit as a part of the SNS almost EUR 2.0 billion. The increase is the balance of bank product package and outside the banking envi- new investments (EUR 463 million) and stock price ronment by provision via PrimeLine, part of SNS Reaal declines (–EUR 56 million). Invest. In total the consumer credits portfolio rose by nearly 50% to reach EUR 1.1 billion. Invested assets in the SNS Investment Funds increased by 17.9% to reach EUR 1.4 billion. An important part The SNS bank portfolio increased by EUR 160 million of new investments can be ascribed to the conversion to reach EUR 590 million in the year under review. of Reaal’s Multi Facet Plan funds to SNS investment This strong growth was due to an increase in bridging funds. Hooge Huys investment funds almost doubled, loans, associated with the robust market for mort- with invested equity rising from EUR 74 million to gages. Advances against securities also increased due EUR 143 million. Invested equity of the ASN funds to increasing investment. The SNS Reaal Invest portfo- increased by 44.4% from EUR 277 million to EUR 400 lio, PrimeLine in particular, increased by EUR 187 mil- million, of which EUR 288 million is in the ASN Share lion to reach EUR 487 million in the year under Fund and EUR 96 million in the ASN Green Project Fund. review. This was especially due to sustained high lev- els of spending in the Netherlands. In the year under review a twelfth fund was added to the SNS Investment Funds palette, the SNS Euro Real Asset Creation Estate Fund, which invests indirectly in business prop- In the context of asset creation for its clients, SNS erties, offices, shops and houses. In 2000 Hooge Huys Reaal Group is active on the market for savings, invest- introduced the Hooge Huys World Share Fund. Annual Report 2000 / SNS Reaal Group 23

  • Page 26

    ‘My partner Bouke Bakker and I now operate two wind turbines. It took us 7 years to get all the permits for one of them and 4 years for the other. And to think that the financing was completely rapidly with the ASN Bank. You know what the best thing was? Everything was arranged by fax or telephone. I did not have to visit the ASN Bank in The Hague once, and that saved a lot of time. At the SNS bank closeby in Sneek I opened a current account with no fuss, which was also pretty handy.’ ‘Financing was complet Peter Dijkstra is a supervisor on Dutch Railways Betuweroute rail freight line, and with fellow-villager and dairy farmer Bouke Bakker, operates two wind turbines in Friesland’s Boazum. ‘A hobby turned religion.’ In the summer of 2001 they hope to build the country’s most advanced manure fermenting installation. ASN Bank is giving financial assistance. ‘No nonsense people

  • Page 27

    ed rapidly’ ‘Did you know that one of today’s wind turbines can provide the equivalent energy needs for over 600 homes? You can be proud of that. The ASN Bank is environmentally savvy so they know what they are talking about and can help us accordingly.’ ‘Communication lines should be short. I was introduced to the SNS bank by my contact atASN Bank and for those complicated wind turbines I only had to deal with two people. They both knew exactly what I was talking about. And another thing: I appreciate agreements, if you agree on something, you should stick to it. And I must say those guys from the ASN Bank were very straight with us.’ - their Yes was always Yes and they kept their promises.’

  • Page 28

    Report of the Group Executive Board Investment funds EUR million Year-end 2000 Year-end 1999 Change % Invest- Share price ment development SNS bank 1,416 1,201 215 17.9 260 (45) ASN Bank 400 277 123 44.4 127 ( 4) Hooge Huys 143 74 69 93.2 76 ( 7) Total 1,959 1,552 407 26.2 463 (56) The ASN Novib Fund, a closed fund, was opened to pri- growing proportion of orders from private individuals vate investors in the year under review. ASN Bank now come via the internet and are sent on to the secu- funds targeting sustainable investment (the ASN Share rities exchange. Telephone orders are still gaining in Fund and ASN Green Projects Fund) are now also sold popularity. The number of account holders at SNS by SNS bank. In addition, SNS bank has its own sus- ‘Securities Line’ (Effectenlijn) increased by almost tainable fund, the SNS Eco Share Fund. Returns on 60%, while orders likewise grew by more than 60%. investment from the sustainable share funds of ASN Commission income doubled compared to 1999. Bank and SNS bank were positive in the year under review. In addition to this private customers increasingly required investment advice, which is available via the The three guilder and euro (bond) growth funds were branch offices. withdrawn from listing in the year under review because they had lost their specific advantages under - Insurance products the 2001 tax system. Investors were given the opportu- The 2001 tax system cast a shadow on the future market nity to switch to one of the other investment funds at no for periodic life insurances due to limitations on fiscal cost. deductibility of premiums. New production of tradi- tional, investment and group insurances fell short The pursuit of synergy and cost reductions has led to compared to the top year 1999. But production did the exchange of products within the Group. As a result develop in line with the market. Growth of the life some of these products are offered under their original portfolio amounted to EUR 45 million in the year names and some under other labels. In this fashion, under review, resulting in a balance of EUR 600 mil- Hooge Huys and CVB Bank have for quite some time lion at year’s end. The market share of SNS Reaal taken advantage of opportunities offered by SNS Group reached 6.3%. This market is expected to Investment Funds, respectively under their own names decline further in 2001. or carrying the SNS brand. The private market also exhibited a decline in single - Mixed products premium insurances, albeit to a lesser degree, Besides the ‘pure’ savings and investment products although a slight recovery was evident in the last SNS bank introduced many ‘mixed’ products to the months of the year. In 2000, many private individuals market, enabling customers to (almost entirely) pro- took advantage of their wider fiscal opportunities for tect their principal investment while benefiting from the last time. In view of this, Hooge Huys and SNS (increasing) share prices. A number of these products bank introduced a special end-of-year promotion with were positioned in other channels as well, for instance the single premium product. In 2000, production by Hooge Huys and CVB Bank, sometimes under their reached EUR 506 million. own names. Sales of these products generously met expectations. - Non-life insurance products The non-life portfolio showed a slight decrease (–EUR - Investment portfolios 3 million) compared to the previous year; the balance Investing via the internet, introduced at the end of at year-end 2000 was EUR 213 million. Sales lagged 1999, gained popularity during the year. A rapidly especially in the automotive sector. Though premium 26 Annual Report 2000 / SNS Reaal Group

  • Page 29

    Report of the Group Executive Board income rose. The loss ratio was low (58.9%) despite a tions and business insurance and specialised forms of number of storm damage claims and the appalling fire- service, such as leasing. works disaster in Enschede. Hooge Huys pursues no direct growth in its non-life insurances; these products SNS bank are considered to be supports or ‘parallel’ to the life SNS bank offers business services including (non-life) insurances. It thus maintains a cautious acceptance insurances through its regional banks, the insurance policy. SNS bank sells non-life insurances actively, in offices of those banks and directly through headquar- part with a view to generating cross-sales. ters. - Funeral insurance Business credits involve 16,8% of SNS bank’s balance In the year under review, activities in the area of sheet total, of which nearly one-third is related to funeral insurance products of Reaal Uitvaartzorg, mortgages. Business clients are mainly small and Hooge Huys and the former intermediary insurer medium-sized companies and professionals. The bank PC171, were combined in Reaal Overlijdenszorg, mak- thus regards its target groups as naturally in line with ing primary use of intermediaries for distribution. the retail market, on which SNS bank has focused for a Overlijdenszorg (or ‘funeral care’) is an advanced form of long time. Many social organisations and semi-state- service providing guidance and aftercare to families in controlled institutions belong to its circle of clients, as addition to the funeral. The product is therefore much do a number of large corporations. The business credit more advice-sensitive than a standard funeral policy. portfolio (excluding mortgages) increased by 11.7% to An autumn campaign among intermediaries proved reach EUR 3.3 billion during the year. successful in this activity; Reaal Overlijdenszorg holds third place in this market. ASN Bank ASN Bank has dealt with the financing of wind turbine Hooge Huys will continue to offer its own-brand projects for quite some time. In the scope of financing funeral insurance products to maintain its ability to energy-saving investments for small- and medium- supply a complete service package to intermediaries. sized businesses, a partnership was recently estab- lished with NUON. Upon application, this energy supply - Affinity groups company judges the technical merits of an energy-sav- Proteq, the brand for affinity groups, expanded activi- ing proposal, after which ASN Bank may extend credit in ties in the year under review. The production of legal positive cases. aid cover progressed favourably although other non- life sectors declined against 1999. For life insurances, SNS Reaal Invest the targeted campaign on single premiums proved suc- SNS Reaal Invest is active in the lease market via its cessful, although periodical life premiums showed a brand names SNS Automotive, Leaseco and TransNed decline. Lease. SNS Automotive activities include dealer financing, for instance, through Abfin. Leaseco pro- Insurance for pets, introduced in 1999 under the ‘Ani- vides for equipment lease, while TransNed Lease mal & Care’ label, proved an attractive commercial focuses on trucks. A sharpening of acceptance policies product in the year under review. Now pet owners can restricted their production to some extent. apply for this insurance using the internet. Business Market Insurance Business Market Insurance, created in 1999 as a result BUSINESS MARKET of the merger of Reaal Bedrijven Arbeidsvoorwaarden, Reaal Bedrijven Schade and Hooge Huys Zakelijke SNS Reaal Group is active in business service provision Markt, has large corporate clients who have placed through SNS bank, ASN Bank, Business Market Insur- their collective insurances (pension contracts) with ance, Hooge Huys, SNS Automotive, Leaseco and this business unit. In the year under review, many TransNed Lease. This partly concerns business credit large clients renewed their contracts; and the SNS bank and accompanying activities, such as payment transac- pension contract was also added to the portfolio. Annual Report 2000 / SNS Reaal Group 27

  • Page 30

    Report of the Group Executive Board Competition in this market intensified over previous SNS Securities years, resulting in a narrowing of margins. In addition, SNS Securities is among the larger brokers in the companies are increasingly opting for separate Netherlands, and enjoyed a most successful year. Dur- deposits, whereby the investment income is for own ing this period activities in the area of research and account and risk, leaving only administrative income distribution of Dutch and European shares and fixed for Business Market Insurance. interest paper enjoyed strong growth. As a result, SNS Securities together with SNS bank took third place on Customer service also improved due to the implemen- the turnover ranking list of Euronext Amsterdam in tation of a ‘Virtual Workshop’, whereby clients can the year 2000. Within these activities, SNS Securities request information online and enter transactions. principally targets domestic and foreign institutional A non-life insurance package was introduced for small and professional investors. The growth in turnover in and medium-sized businesses. Following on the 2001 shares and fixed interest paper related to the expan- tax reform, an increasing need for personal consul- sion of activities resulted in a substantially higher net tancy on matters of income insurance and supplemen- profit contribution in the year under review. As a tary pension saving is evident. Within the scope of result of the increased efficiency and the advanced IT employee benefits, this is an attractive market for the organisation it proved possible to process the rapidly companies within SNS Reaal Group. growing activities without having to recruit new per- sonnel for the back office. During this period staffing Hooge Huys in the front office rose strongly. Services and activities in Hooge Huys also sells business insurances through its the area of asset management and advice for wealthy internally serviced indirect channel. Its current activi- individuals showed further growth. ties, through intermediaries, focus on small and medium-sized companies. This sector should also see a In the year under review SNS Securities bore responsi- growing need for an integral approach to the problem of bility for eight introductions on the stock exchange of pension shortfalls. Euronext Amsterdam. These introductions primarily concerned investment funds and structured invest- Sickness Benefits Portfolio ment products whose initial investment was fully or SNS Reaal Group offers a wide range of employee bene- almost fully guaranteed at the end of the period. These fits with pension products as its spearhead. The Group products were introduced at the request of parts of SNS decided not to carry risks for care and care-related Reaal Group, as well as for other financial institutions. insurances. In view of this policy Reaal Verzuim- In the first half of the year under review the research verzekeringen (Reaal Work Absence Insurance) was activities of SNS bank and SNS Securities were merged sold, with the participating interest in Arbodienst into the research department of SNS Securities in Ams- Groep GAK (Employment service administration) terdam. A recent study ranked SNS Securities as the involved in the sale. The sale bore no personnel conse- third best Dutch research team qualified in the quences for SNS Reaal Group. Benelux region. For employee benefits with care-provision features, joint ventures with specialised suppliers were chosen. SNS Financial Markets Within SNS bank, SNS Financial Markets is responsi- ble for the treasury and funding activities of the entire PROFESSIONAL MARKET group. The contacts of SNS Reaal Group with professional Funding markets, national and international securities, equity, Funding needs intensified over the year under review, money and capital markets, are run by a number of primarily as a result of strongly rising mortgage credits specialist business units at SNS bank: SNS Securities, in relation to the inflow of savings. Almost EUR 7.5 bil- SNS Financial Markets and SNS Asset Management. lion of assets were attracted in 2000. To meet such funding needs at acceptable rates, the investor base was spread early on and various funding instruments 28 Annual Report 2000 / SNS Reaal Group

  • Page 31

    Report of the Group Executive Board were developed. The aim was to bring out liquid tional investors. Operating as part of SNS bank, it man- benchmark placements in the case of public transac- ages the portfolios of many social organisations, pen- tions. Private placements involving customisation are sion funds and other institutional investors. SNS Asset also becoming increasingly significant. Management also manages the sizeable portfolios of SNS Reaal Group, especially those of the insurance The funding policy pursued resulted in good interna- companies and investment funds within the Group. At tionalisation and diversification of funding sources, by year-end 2000 the total assets under management which access to financial markets could be optimally amounted to EUR 8.9 billion. achieved. The issues listed showed stable price devel- opment in the secondary market, indicating a well- SNS Asset Management offers institutional clients a spread placement with final investors. The name complete package of advanced investment products recognition of SNS bank on the financial markets con- and services. This gives sustainable asset management a tributed to a drop in spreads. A slight decline in total unique position. In this way institutional clients have funding needs is expected for 2001. the opportunity to translate their social commitment into a sustainable investment strategy, investing in Securitisation shares or bonds of prominent, usually multinational Ongoing development of ‘Mortgage Backed Securities’ companies on the basis of the so-called ‘triple bottom markets, on both the demand and the supply sides, line’ of people, planet, and profit. The Sustainability offers attractive funding opportunities for the robust Analysis department of SNS Asset Management stud- mortgage production within SNS Reaal Group. In the ies sustainable performances of listed companies. year under review, the second public securitisation Interest in these activities is on the rise, both nation- transaction (‘Hermes-II’) was successfully completed. ally and internationally. This involved issuing a total of EUR 0.6 billion. The policy aim is to further increase the amount on ‘off- The sustainable investment style of SNS Asset Man- balance sheet’ funding operations through mortgage agement has yielded excellent revenues and a most securitisation. acceptable risk profile, which is well tuned to the obli- gations of pension funds and other institutional SNS Asset Management investors. In the Netherlands, SNS Asset Management SNS Asset Management is an asset manager for institu- is the leader in the field of sustainable institutional SNS bank issue 800 million EUR, SNS bank issue 800 million EUR, 10 year fixed-rate, placement by region 10 year fixed-rate, placement by investor type 11% 2% 16% 10% 15% 10% 15% 7% 35% 36% 18% 22% 3% France Switserland Insurance companies Banks Benelux Scandinavia Investment groups Private Italy/Spain/Portugal United Kingdom Mutual funds investors Germany Pension funds Annual Report 2000 / SNS Reaal Group 29

  • Page 32

    Report of the Group Executive Board SNS bank issue 500 million EUR, SNS bank issue 500 million EUR, 5 year floating-rate, placement by region 5 year floating-rate, placement by investor type 4% 3% 4% 9% 9% 14% 17% 1% 1% 13% 4% 23% 3% 13% 45% 18% 15% 4% Japan United Kingdom Money market funds Private investors Asia (excl. Japan) Scandinavia Banks Government Germany Switserland Mutual funds Investment groups France Spain/Portugal Insurance companies Benelux Austria Corporates asset management. To this end, it develops innovative 2000, invested assets amounted to EUR 893 million on sustainable investment strategies. SNS Asset Manage- the basis of strict sustainability criteria. ment boasts an excellent track record. At year-end 30 Annual Report 2000 / SNS Reaal Group

  • Page 33

    Report of the Group Executive Board Result and balance sheet NET PROFIT Composition of net profit 2000 (1999) In the year under review, net profit of SNS Reaal Group increased by 11.2% to reach EUR 179 million. This enabled the Group to once again meet its financial 14% (13) objective of at least 10% net profit growth annually. The banking operations, insurance operations and SNS Reaal Invest all contributed to the increase in the net 49% (51) profit. 37% (36) Net profit of the banking operations increased by 10.6% to reach EUR 104 million. Echoing the success of 1999, 2000 also brought an increase of the net inter- est income, in line with the growth of the mortgage loans portfolio. The professional market also con- Banking operations tributed substantially to profit growth. Costs increased Insurance operations considerably in the year under review, especially staff SNS Reaal Invest and consultancy costs. The insurance operations yielded a net profit of EUR The difference between the net profit of SNS Reaal 78 million in the report year, a 16.4% increase over Group (EUR 179 million) and that of the joint group 1999. Both the life and non-life insurance operations units (EUR 212 million) was a result of financing contributed. The market for periodical life insurance expenses, costs for strategic projects and costs incurred shrank considerably on the eve of the 2001 tax system. in building up the holding organisation. Reduced premium income was accompanied by a pro- portional decrease of sales costs and technical expenses. RETURN ON SHAREHOLDERS’ EQUITY SNS Reaal Invest showed robust growth in net profit in Compared to 1999 (12,2%), the return on sharehold- the year under review, by 30.4% to reach EUR 30 mil- ers’ equity (RSE) of SNS Reaal Group dropped to 11.8% lion. The profit contribution to SNS Reaal Group rose in the year under review, which is below the (long- to 14.2%, in line with its long-term financial objective. term) financial objective of 12.5%. Result of SNS Reaal Group EUR millions 2000 1999 Change Total income 3,639 3,209 13.4% Total expenses 3,390 2,978 13.8% Operating profit before taxation 249 231 7.8% Taxes 66 70 (5.7%) Group profit 183 161 13.7% Third party interest 4 Net profit 179 161 11.2% Annual Report 2000 / SNS Reaal Group 31

  • Page 34

    ‘I was an account manager at a merchant bank for many years, so I’m familiar with that kind of world; firstly it’s about big money and of course there’s nothing wrong with that. But I find it very pleasant when the service includes some social involvement.’ Georgette Eendragt is managing director of ‘Clients want conve IBSS Consultancy, an international advisory and training bureau in Amsterdam focusing on higher educated women and ethnic minorities. Her view - business should reflect society. Two years ago in London she was voted international black businesswoman of the year.

  • Page 35

    ‘A capital injection by the SNS bank gave us the opportunity to set up the business. And after that our relationship just got better and better. Which account managers give you a call when the queen makes a working visit to successful ethnic entrepreneurs? That was wonderful. Today we also have on-line contact with SNS bank. It’s easy. We immediately put some insurance business their way.’ nience and friendly contact’ ‘I have an excellent relationship with the SNS bank account manager. The personal way in which he works for us is reassuring. He really is interested in the alternative enterprise circuit in which I am involved and he helps us watch over the ups and downs of business. But he also appreciates it when we ask him about his work. The financial world is also changing fast. ‘As long as you remain the bank I feel comfortable with,’ I told him. He said he would pass it on.’ ‘Whether you operate as a company or private person, you are always important enough for personal contact. They realise this only too well at SNS bank.’

  • Page 36

    Report of the Group Executive Board Result of banking operations EUR millions 2000 1999 Change Net interest income 391 348 12.4% Commission income 89 63 41.3% Other income 69 57 21.1% Total income 549 468 17.3% Staff costs 229 184 24.5% Other operating costs 147 138 6.5% Total operating expenses 376 322 16.8% Value adjustments to loans and receivables 16 6 166.7% Total expenses 392 328 19.5% Operating profit before taxation 157 140 12.1% Taxes 49 46 6.5% Group profit 108 94 14.9% Third party interest 4 Net profit 104 94 10.6% Result of insurance operations EUR millions 2000 1999 Change Gross premium income, life insurance 1,117 941 18.7% Gross premium income, non-life insurance 293 308 (4.9%) Total premium income 1,410 1,249 12.9% Investment income 547 517 5.8% Other income 22 145 (84.8%) Total income 1,979 1,911 3.6% Technical expenses 1,448 1,446 0.1% Staff costs 119 120 (0.8%) Other operating costs 170 172 (1.2%) Total operating expenses 289 292 (1.0%) Other expenses 131 71 84.5% Total expenses 1,868 1,809 3.3% Operating profit before taxation 111 102 8.8% Taxes 33 35 (5.7%) Group profit 78 67 16.4% Third party interest -- Net profit 78 67 16.4% 34 Annual Report 2000 / SNS Reaal Group

  • Page 37

    Report of the Group Executive Board Result of SNS Reaal Invest EUR millions 2000 1999 Change Net interest income 31 27 14,8% Commission income 3 2 50,0% Other income 41 32 28,1% Total income 75 61 23,0% Staff costs 21 16 31,3% Other operating costs 17 14 21,4% Total operating expenses 38 30 26,7% Value adjustments to loans and receivables 5 7 (28,6%) Total expenses 43 37 16,2% Operating profit before taxation 32 24 33,3% Taxes 2 1 100,0% Group profit 30 23 30,4% Third party interest -- Net profit 30 23 30,4% The RSE of banking operations in 2000 remained result of strong capitalisation. SNS Reaal Invest steady in the year under review at 10.9%, equal to that achieved an RSE of 41.1%, substantially more than the in 1999. In insurance operations as well RSE, at 8.8%, 1999 figure (37.5%). remained unaltered compared to 1999, mainly as a Net profit and return on shareholders’ equity Net profit and return on shareholders’ equity of SNS Reaal Group banking operations € millions % € millions % 100 11.0 200 12.5 80 10.0 150 12.0 60 9.0 100 11.5 40 8.0 50 11.0 20 7.0 0 10.5 0 6.0 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 Net profit Return on shareholders’ equity Net profit Return on shareholders’ equity Annual Report 2000 / SNS Reaal Group 35

  • Page 38

    Report of the Group Executive Board Net profit and return on shareholders’ equity Net profit and return on shareholders’ equity insurance operations SNS Reaal Invest millions € % € millions % 70 9.5 30 40.0 60 9.0 25 35.0 50 8.5 20 30.0 40 8.0 15 25.0 30 7.5 10 20.0 20 7.0 10 6.5 5 15.0 0 6.0 0 10.0 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 Net profit Return on shareholders’ equity Net profit Return on shareholders’ equity INCOME For the insurance operations, total income increased by 3.6% against 1999 to reach EUR 2.0 billion. Of that In 2000, the total income of SNS Reaal Group income, 71.2% comprised gross premium income and increased by 13.4% to reach EUR 3.6 billion (1999: 27.6% investment and interest income. Gross premi- EUR 3.2 billion). This increase was mainly due to ums for the life insurance operations increased by higher banking interest income, commission income 18.7% to reach EUR 1.1 billion (1999: EUR 941 billion). and gross life premiums. The total income can be cate- The growth was due mainly to single premium insur- gorised as interest income (43%), gross life and non- ances, for which premiums increased by 47.1%. life premiums (39%), investment income (12%) and commission income plus other activities (6%). Composition of income 2000 (1999) SNS Reaal Group The total income of the banking operations increased by 17.3% to reach EUR 549 million in the year under review (1999: EUR 468 million). This amount includes 6% (6) the net interest income as the balance of the greatly increased interest income (+29.7%) and interest charges (+37.4%). The net interest income increased 39% (39) by 12.4% to reach EUR 391 million (1999: Euro 348 43% (37) million). Growth in commission income grew strongly, increas- ing by 41.3% to reach EUR 89 million (1999: EUR 63 12% (18) million). In particular, the commission on securities developed positively due to increasing turnover at the Gross premium income stock exchange and the issue of a number of combined Investment income saving and investment products. Moreover, insurance Interest income commission income increased largely in line with the Commission income and other advisors’ transition from Reaal Particulier to SNS bank. 36 Annual Report 2000 / SNS Reaal Group

  • Page 39

    Report of the Group Executive Board At SNS Reaal Invest total income increased by 23.0% Development gross premium income to reach EUR 75 million (1999: EUR 61 million). The insurance operations net interest income increased by 14.8% to reach EUR € millions 31 million. Other income yielded a 28.1% growth to 1,400 EUR 41 million. 1,200 EXPENSES 1,000 In the year under review, SNS Reaal Group’s total 800 expenses increased by 13.8% to reach EUR 3.4 billion. The increase was primarily due to higher interest 600 charges and staff costs. These latter costs were espe- cially due to strong activity growth and need for tem- 400 porary staff. At year-end 2000, SNS Reaal Group 200 counted 6,049 employees (‘full-time equivalents’, or FTEs), a 4% increase over year-end 1999. 0 1996 1997 1998 1999 2000 The total expenses of the banking operations increased Non-life by 19.5% to reach EUR 392 million in the year under Life review (1999: EUR 328 million). Staff costs rose signifi- Total cantly (+24.5%), both for permanent and temporary staff. The former was due, in addition to collective employment agreement effects, to a strong growth of performance-based salary components, and the latter Of this, EUR 212 million related to a contract with the was attributable to the tight job market, which made it pension fund of SNS bank. The periodical life premi- difficult to fill vacancies and recruit temporary ums increased by 2.3% to reach EUR 611; this employees for temporary projects. Staff costs comprise restricted growth was mainly in anticipation of the more than 58% of total expenses. Consultancy costs 2001 tax system. Composition of investments 2000 (1999) Gross premiums for non-life operations decreased insurance operations slightly to EUR 293 million (1999: EUR 308 million); one of the reasons was because premiums were set on the basis of a profitable portfolio. 2% (2) 13% (13) 2% (2) In the year under review investment income in the insurance operations amounted to EUR 547 million, of which EUR 494 million was for own account and EUR 27% (26) 53 million on behalf of policyholders. The investment 56% (57) income for own account reached EUR 79 million on business assets (shares and real estate) and EUR 415 million for fixed interest investments (bonds, private loans and mortgages). The return in the year under review amounted to 6.5%, which was slightly lower Shares than that in 1999 (6.8%). The decrease was mainly due Real estate to reduced returns on the mortgage portfolio. The drop Mortgage loans in other income was related to the declining quota- Bonds and private loans tions with regard to investments on behalf of policy- Other holders. Annual Report 2000 / SNS Reaal Group 37

  • Page 40

    Report of the Group Executive Board Efficiency ratio banking operations Cost/premium ratio insurance operations 73% 32% 72% 71% 31% 70% 30% 69% 68% 29% 67% 28% 66% 65% 27% 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 Efficiency ratio Cost/premium ratio for projects also increased substantially, in particular under review. Here again, cost savings will contribute in the field of IT. These costs are included in ‘other to the more rapid realisation of the stated objective of operating costs’. 27%. For the insurance operations, total expenses increased by 3.3% to reach EUR 1.8 billion. The technical COMPOSITION AND GROWTH OF THE expenses remained largely unchanged at EUR 1.4 bil- BALANCE SHEET lion, which was consistent with the periodical devel- opment at life operations. Staff costs and other busi- SNS Reaal Group’s balance sheet total rose 25.7% in ness expenses declined slightly in the year under the year under review to EUR 40.9 billion. This figure review. expresses in particular the strong growth of the mort- gage loans portfolio. The expenses of SNS Reaal Invest increased by 16.2% to reach EUR 43 million. This was partly due to the rise This development was especially evident on the bal- in staffing (including 100% participations) by which ance sheet of the banking operations. The net growth staff costs increased as a result by 31.3%, to reach EUR of the mortgage loans portfolio by EUR 5.2 billion was 21 million (1999: EUR 16 million). the main driver behind the 34.5% growth of the bal- ance sheet, which reached EUR 30.3 billion at year- end. As funding for this, debt securities and other EFFICIENCY RATIOS funds entrusted on the liabilities side increased by 130% and 10.2% respectively, to reach EUR 10.4 bil- As a result of a positive margin effect, the efficiency lion and EUR 6.6 billion. Savings increased slightly to ratio of the banking operations (excluding value EUR 7.5 billion. adjustments to receivables) improved from 68.8% to 68.4%. The aim is to reach 65% within a number of The balance sheet total of the insurance operations years. increased by 4.8% to reach EUR 9.8 billion in the year under review (1999: EUR 9.3 billion). At EUR 9.1 bil- The cost/premium ratio of the insurance operations lion, investments make up more than 93% of the bal- improved from 31.7% in 1999 to 30.8% in the year ance sheet total. The investments on behalf of policy- 38 Annual Report 2000 / SNS Reaal Group

  • Page 41

    Report of the Group Executive Board holders, coupled with unit-linked products, made up The Fonds Algemene Bankrisico’s (Fund for general EUR 1.8 billion of this. This investment category banking risks) remained unchanged at EUR 70 million increased by 23.2% in the year under review. in the year under review. The quality of the extended credits and the existing provisions do not suggest any The balance sheet total of SNS Reaal Invest increased addition to the fund. by 16.7% to exceed EUR 1.2 billion (1999: EUR 1.1 bil- lion). On the assets side, the credit item increased by Shareholders’ equity of the insurance operations 13.8% to reach EUR 1.0 billion, while the participating amounted to EUR 906 million at year-end 2000, an interest item increased by 37.9% to reach EUR 160 increase of 5.2% over year-end 1999 (EUR 861 mil- million. On the liabilities side, other funds entrusted lion). The capital base increased by 7.3% to reach EUR increased by 23.1% to reach EUR 1.0 billion. 986 million in the year under review. The solvency of the insurance life operations was 2.81 times the legal norm (1999: 2.77) and 4.06 times the norm for non-life CAPITAL BASE operations (1999: 3.14). The capital base of SNS Reaal Group increased by Shareholders’ equity of SNS Reaal Invest increased by 21.9% to EUR 2.6 billion in the year under review. 11.6%, from EUR 69 million to EUR 77 million in the Shareholders’ equity increased by EUR 123 million, up year under review. to EUR 1.6 billion, as a result of the addition of the net profit in 2000 of EUR 179 million, with the difference primarily attributable to goodwill write-off. The capi- tal ratio, the capital base as a percentage of the balance sheet total, dropped slightly from 6.5% to 6.3% in 2000. Capital base SNS Reaal Group millions € % The capital base for banking operations increased by 2,400 7.0 attracting subordinated debt for a total of EUR 210 million. Subsequent to the 30.4% increase in the year 2,000 6.5 under review, the capital base now amounts to EUR 1.8 billion and thus makes up 6% of the balance sheet of 1,600 6.0 the banking operations (1999: 6.2%). Shareholders’ equity makes up 55.5% of the capital base. 5.5 1,200 The BIS ratio, the solvency ratio of the banking opera- 800 5.0 tions, was 11.2% in the year under review (1999: 11.7%). This ratio, which reflects the level of qualify- 400 4.5 ing capital against risk-based assets, remained at the same level despite the sharply increased mortgage 0 4.0 credit extension by the addition of the net profit to 1996 1997 1998 1999 2000 shareholders’ equity and attracting subordinated debt. Shareholders’ equity Capital ratio The securitisation of parts of the mortgage loans port- Subordinated debt folio resulted in a decline of risk-based assets. The BIS Fund for general banking risks ratio complies generously with the legal standard of Third party interest 8% and also the internal standard of 11%. Annual Report 2000 / SNS Reaal Group 39

  • Page 42

    ‘We simply want treated as a top Arno Driessen is managing director of Selman Transport. He is responsible for safe and prompt transport of cut flowers and plants across the Netherlands and Germany. ‘Every day fifty of our articulated trucks criss-cross the country and that means most people know us.’ ‘I am very proud of our company which has been on the road since 1946. Perhaps that explains my extra sensitivity to the way we are treated. That in turn explains why I prefer SNS bank to a large operator.’

  • Page 43

    ‘SNS bank works with short lines of communication which makes it very accessible. This brought me into personal contact with the manager of my local branch, and that is why I also met leading management at their HQ. Their ‘just-act-normal’ approach appeals to me a lot.’ ‘In 1998 Selman was threatened with sale. I contacted SNS bank through our accountant and they introduced me to Foresta, a subsidiary of SNS Reaal Invest that later proved an excellent venture capital investor.’ to be company’ ‘SNS Reaal Invest purchased 49% of the shares; I bought the other 51%. We soon agreed on details and what appealed to me so much was the fact that we shared the same enthusiasm. They wanted to buy just as much as I did. I have the impression that as investor, SNS Reaal Invest works selectively. They study all material thoroughly; and at shareholders’ meetings I discuss things with people who really understand our business. Not so long ago we started doing business with Transned Lease for our trucks. It’s a subsidiary of SNS Reaal Invest, and shows the same involvement.’

  • Page 44

    Report of the Group Executive Board Risk management Organisation ing interest margins, or rather the difference between Risk management at the strategic level is centrally the loan rate and the funding plus organisation costs. embedded in the SNS Reaal Group. Within the Group, Management determines the rates package for the the banking and insurance entities as well as SNS regional sales organisations of SNS bank, for BLG Reaal Invest hold regular Asset & Liability Manage- Hypotheken and for CVB Bank separately. ment meetings (ALMs), at which proposals are devel- oped for submission to the Executive Board and the Investment mix respective Boards of Directors. On the basis of com- The ALM process aims at optimal balancing of the pany continuity, the Executive Board determines the duration of claims and obligations. Within this frame- desired overall risk profile. Formulating ‘risk appetite’ work the insurer’s main concern is determining the means creating a framework for the accepted risks and optimal strategic investment mix. Optimisation means risk management in the organisation. pursuing the combination of the highest possible expected coverage ratio (market value of investments Beyond the centralised coordination of risk manage- compared to technical provisions) with the least ment, the Group’s basic approach remains one of decen- chance of under-coverage. In the form of a stochastic tralised responsibility, with management of risk allo- ALM analysis, whereby series of scenarios are evalu- cated first to line management because that is where ated, the evolution of the coverage level was examined profit responsibility lies. The line organisation must for the Investment Plan 2001. This led to a further therefore have clear insight into the boundaries of the increase in the share of business assets. risks at its disposal, both in advance and after the fact. Currency risks Market risk Since SNS Reaal Group focuses on the Dutch home Market risk is that which might result from price move- market there is hardly a ‘country’ risk worth speaking ments (in shares, interest, currencies, etc.) on the finan- of. The currency risk – value adjustments to receiv- cial markets. The value of a portfolio or equity capital ables and/or liabilities due to exchange-rate fluctua- might fluctuate due to changes in market variables. tions – play a role in the funding operations and insurer’s investments. In the case of funding, the cur- ‘Value-at-risk’ rency risk is hedged by cross-currency swaps. Invest- The system approach improvements in the year under ments of the insurance operations are not strategically review were completed; total activity risks were listed hedged. and reported on a daily basis. ‘Value-at-risk’ and stress limits are defined for all desks. The model-based work- Credit risk ing method used in market risk management makes it The credit risk represents the risk of a counterparty possible to correlate realised gross and net incomes not being able to meet its obligations to (a part of) SNS with estimated levels of uncertainty. Reaal Group. Interest rate risk Credit-scoring model The total interest rate risk in the balance sheet is deter- Supervision concerning the banking debt risk lies with mined by means of gap-analysis, duration-analysis and the Credit Committee. Partly in view of the Basel Capi- simulation techniques. In addition to the gapping limits, tal Agreement, it is important that SNS bank be able to top management regularly determines the duration produce quantitatively substantiated evaluations of limit for the shareholders’ equity. On the basis of sce- credit risks prior to extending credit. In 2001, a credit- nario analyses, it then decides whether adjustment is scoring model will be used to this end, enabling a desirable. diversified pricing policy and a substantially shorter credit procedure. This is especially valuable for the rel- Price risk atively small business credits often issued by SNS Pricing policy is an important instrument for manag- bank. The capital attachment based on the results of 42 Annual Report 2000 / SNS Reaal Group

  • Page 45

    Report of the Group Executive Board the credit scoring model is expected to be slightly tion was realised in the year under review. Funding is below current levels. raised mainly by SNS bank, which pursues diversifica- tion of funding sources in terms of both instruments In the case of the insurer’s investments, minimum and investors. An optimal mix is maintained between creditworthiness requirements and maximum limits money market funding (interbank deposit market, ECP as to outstanding credit to a single debtor are carefully programmes, ‘Treuhand’) and capital market funding monitored. Naturally, this minimises credit risks as far as (EMTN market, ‘private placements’). The subjects possible. For questions on these matters, the insurer ‘funding’ and ‘securitisation’ are described under SNS consults with specialised departments of SNS bank. Financial Markets on page 29 of this report. Within the framework of credit extension, lease in par- ticular, and consumer credit, SNS Reaal Invest also Operational risk uses SNS bank facilities. Operational risks are related to the daily activities within companies and result from matters like system Liquidity risk errors, improperly described processes and human fail- The liquidity risk mainly concerns the chance that the ure. The frameworks in which the organisation can act organisation might not have enough cash resources to and the instruments that it can use are carefully meet its immediate obligations. The concern here is defined by the central staff departments. The responsi- therefore the risk of limited access to financial mar- bility for operational risks rests with line manage- kets. A substantial strengthening of the funding posi- ment. Annual Report 2000 / SNS Reaal Group 43

  • Page 46

    Report of the Group Executive Board Social orientation SOCIALLY RESPONSIBLE ENTREPRENEURSHIP in harvesting this expertise in the field of sustainabil- ity analysis (see also page 30 of this report). Business, government and consumers are showing growing interest for socially responsible entrepreneur- ‘Green’ Financing ship. The way that a company operates now weighs The ASN Green Projects Fund grew substantially also more heavily than ever in determining the ‘valuation’ in 2000. Many projects recognised by the Ministry of of its products or services. Entrepreneurs are therefore Housing, Spatial Planning and Environment (VROM) having to give more explicit consideration to the as ‘green’ projects – in sustainable energy, housing, bio- thinking and expectations of society regarding their logical agriculture, nature and landscape conservation – actions. With its roots deep in Dutch society, SNS were made possible thanks to financing by the ASN Reaal Group is well aware of the importance of wide Green Projects Fund. social consensus for its activities. In this context, the SNS Reaal Group considers sustainable development a Sustainable Investment in Developing Countries desirable and necessary long-term goal. SNS Reaal Through the ASN Novib Fund, SNS Reaal Group offers Group believes that a business perspective broader opportunities, via an investment fund, to link a good than a purely financial-economic one will benefit the return on investment with sustainable economic Group. activities of companies in developing countries. Sustainable investment Day of Ethical Investment SNS Reaal Group further increased its leading market In association with ASN bank and The Other Invest- position in the field of sustainable investment, using ment Fund (Het Andere Beleggingsfonds), SNS Reaal both investment funds and institutional portfolios. Group organised its second annual Day of Ethical Since 1993, the ASN Share Fund has invested world- Investment. At the event, the latest developments in wide in companies that were selected on the basis of ethical and sustainable investment were presented to environmental, socio-ethical and human rights criteria. public and press. Renowned members of the financial In 2000, the ASN Share Fund once again proved that and enterprise world gave their views on socially investing on the basis of sustainable criteria is perfectly sound entrepreneurship. With this event, SNS Reaal compatible with good returns. The fund grew by some Group wants to continue to stimulate public debate on 53% to exceed EUR 288 million at year-end 2000. The sustainable development, including the role of finan- ASN Share Fund is the largest ethical investment world cial services providers. share fund in the Netherlands. In 2000 it was the only sustainable world fund in the Netherlands to achieve a Sustainable Accounting positive return on investment. The SNS Eco Share Around the world research is being conducted on Fund, which invests in European companies with the guidelines for sustainable accounting. The need for a best environmental performances in their sectors, also report that reliably reflects companies’ sustainability showed positive returns. The fund was the first in the performance is growing. Once again, SNS Reaal Group Netherlands for which companies’ ‘eco-efficiency’ was organised a symposium on the Global Reporting Ini- mapped by business sector. At year-end 2000, the SNS tiative (GRI), set up by the United Nations Environ- Eco Share Fund had reached nearly EUR 30 million. ment Programme. At this busy symposium, sustain- ability analysts from SNS Asset Management made Sustainable asset management and specific recommendations to establish even-handed sustainability analysis indicators at the environmental and social levels. In SNS Asset Management specialised further in sustain- parallel to the further advancement of the Internal able asset management and analysis. Having a depart- Environmental Care evaluations, SNS Reaal Group has ment with specialist sustainability analysts has con- taken steps to present its first sustainability report in tributed strongly to its successful positioning. Nation- the near future using the GRI guidelines as its basic ally and internationally, there has been great interest approach. 44 Annual Report 2000 / SNS Reaal Group

  • Page 47

    Report of the Group Executive Board Sponsoring and Consultancy ture and monuments. Part of the allocation is still In 2000, a strong appeal was made to SNS Reaal Group related to NOG Verzekeringen, which has supported to sponsor national and international congresses on national projects since 1994 and which was absorbed sustainability and to provide a contribution to con- into Hooge Huys in 1999. Hooge Huys supports tent. The central issue is often the so-called ‘triple bot- national educational projects, in which there is a role tom line’ of people, planet, and profit which targets a for the intermediary. feasible equilibrium between economic, ecological and social interests. Active participation in many sym- Reaal Profit Sharing Committee posia and expert panels has earned SNS Reaal Group a The Profit Sharing Committee has the objective of strong position in the field as well as impressive name emancipating socially dependent or disadvantaged awareness. groups, and supporting small-scale activities of a similar nature, as well as the support of activities associated with social democracy and workers’ movements. SNS REAAL FUND SNS Funds The foundation SNS Reaal Fund was set up after the Each of the six regional SNS banks has an SNS Fund merger of SNS Group and Reaal Group in 1997. The that supports social activities and projects in their own aim of the SNS Reaal Fund is ‘to contribute to the regions. SNS bank provides for the annual budget. The development of a balanced society in the Netherlands board consists of people from the region with a clear and assist financially or even initiate (the renewal of) social involvement plus a representative of the bank. projects of general social interest with an idealistic or social component.’ In this context, the fund targets the Autonomous Foundations subjects of art and culture, the restoration of historical The savings banks that became part of SNS Reaal buildings, health, nature and the environment, sport Group have always been closely linked to their local and recreation, education, and social activities. The and regional societies. This involvement is being con- assessment of applications and the initiative to sup- tinued by means of thirteen foundations, connected to port have been delegated to a number of committees the Group. The foundations, set up in line with the and foundations associated with the SNS Reaal Group. mergers, are given the resources they need to continue the social activities of the former savings bank. The SNS Reaal/Hooge Huys Committee boards of these foundations operate fully This committee receives a fixed annual budget to sup- autonomously, even though in the support a relation- port initiatives in the area of projects in education, cul- ship with the local SNS bank is often established. SNS Reaal Fund SNS Reaal/Hooge Huys Reaal Profit Sharing Six regional Committee Committee SNS Funds Thirteen autonomous foundations Annual Report 2000 / SNS Reaal Group 45

  • Page 48

    ‘My daily contact with their account manager is very pleasant. He’s very good at the special things, which is very useful for us. So, for instance, he regularly introduces us to new software that saves us time and effort. That sort of thing is great.’ ‘At the Pension Desk I am responsible for financial planning, pension advice and employee benefits such as special pension ‘gap’ coverage, collective sickness cover and surviving dependants insurance. These are typical Hooge Huys products. The employer is our contact for the group cover, but for annuity or disability products, for instance, I literally visit people at their homes. And then of course you talk about banking services such as sav- ings and investment accounts.’ ‘The services of Hooge Huys mean real added value’

  • Page 49

    ‘We get creative thinking for all non-standard cases’ Nancy Rohen is financial planner at the Pensions Desk of De Mijnstreken (Maastricht) and regularly uses Hooge Huys insurance products. Nancy is a member of the Dutch Federation of Financial Planners (FFP); and her ambition is to head a professional advisory group. ‘I was reminded recently thatHooge Huys is a key part of SNS Reaal Group. Not so long ago our account manager came up with an SNS bank-labelled investment product that some of our clients liked very much. I would probably not have been able to offer it if Hooge Huys had not been part of the SNS Reaal Group. So for us this has been a very good thing.’

  • Page 50

    Report of the Group Executive Board Employees Employees – the company’s human capital – are essen- policy which includes legally prescribed rules as well tial to SNS Reaal Group, especially in view of the high as behaviour codes. Compliance ensures the rules are quality financial services the organisation offers. The observed and raises awareness among employees, right person must be at the right place with the right through information sessions, that integrity is a basic expertise necessary for the function. condition of service at SNS Reaal Group. The integrity policy is based on the compliance statement, which Management development reads as follows: In order to fill key positions in particular, SNS Reaal Group has introduced a management development programme, set up to satisfy the professional needs of Compliance statement three-quarters of the essential positions internally. The SNS Reaal Group pursues the provision of high- company thus continues to invest careful attention to quality service. This is only possible if SNS Reaal the individual career development of a large number of its staff. In positive discussions agreements are Group and its employees act with complete negotiated and established regarding the paths to be integrity. This does not only mean acting in followed by these ‘potentials’. Current performance accordance with legal constraints, but also treat- and development are tracked by periodic discussions ing clients with respect and maintaining the rep- on progress. The management development policy utation of SNS Reaal Group as a trusted partner. applies across the Group, thereby simplifying and stimulating exchanges between banking and insur- ance operations. Since 1 January 2001, a screening for integrity and expertise has become part of the application proce- The Company Collective Labour Agreement dure for candidates wishing to work at SNS Reaal 2000 (CAO) Group. With the candidate’s permission, information The creation of a company CAO in the year under is obtained from previous employers. review is a fact to celebrate. It greatly simplified the exchange of bank and insurance staff, as such Career Centre exchanges no longer have to take account of variations In an organisation that is always on the move, jobs in primary and secondary employment benefits. change and disappear constantly. SNS Reaal Group has Another major advantage of the new CAO is the always made best efforts to ensure effective personnel greater flexibility it offers with regard to working transfers and reappointment. To this end, its Career hours and remuneration. Besides their fixed salary, Centre serves as an internal employment market, employees are eligible for performance-based remu- where staff availability meets staff demand. In the con- neration of up to 15%, so responding to steps being text of professional human resources management taken in performance management. policy, much attention is paid to career development and employee guidance. As a result, SNS Reaal Group Compliance can present itself as an attractive employer even in Freedom of choice and space for personal responsibil- today’s tight job market. ity on the one hand are accompanied by restrictions on the other. ‘Freedom is restraint’ means not only that Employee Participation employees must always act within the framework of The Central Employees Council was consulted several internal instructions. They must also meet strict times in the year under review, particularly in discus- norms at a higher level. As a professional financial sions on the current reorganisation project. The advice services provider, SNS Reaal Group attaches great provided by the council revealed their great expertise value to integrity and reliability. Compliance, part of and involvement in the significant changes now the Staff Group on Legal and Fiscal Affairs, Compli- underway within the organisation. In 2001, following ance & Security, upholds its own internal integrity the restructuring within SNS Reaal Group, co-manage- 48 Annual Report 2000 / SNS Reaal Group

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