Dutch Insurance Peer Review

Dutch Insurance Peer Review Issuers IFS / Outlook Aegon NV A+ / Stable NN Group NV A+ / Stable VIVAT NV BBB+ / Stable This Peer Review report compares and contrasts the key credit Each score’s relative influence (higher, moderate, lower) on the insurers’ factors affecting the ratings of the insurers listed to the right. ratings and the outlook (stable, positive, negative) is also shown. Bar Colours = Relative Importance Fitch Ratings assigns a score to each of the nine key credit factors The information in this Peer Review is derived from the most Higher Influence Moderate Influence Lower Influence (as outlined in the table below) underlying the groups’ Insurer recently published Insurance Ratings Navigator report on each Financial Strength (IFS) ratings. These scores are denoted by organisation, which is developed based on the application of Bar Arrows = Rating Factor Outlook lower-case letters and follow the same scale Fitch uses for its IFS Fitch’s Insurance Rating Criteria. Links to the insurers’ individual ratings (ie ‘aaa’ through ‘c’). Navigator reports, applicable criteria and other related research, Positive Negative Evolving Stable are on the final page of this report.

Insurer Financial Operating Profile Key Credit Factors Financial Profile Key Credit Factors Strength Debt Service Industry Profile Financial Asset/Liability Reinsurance, Factor Capitalisation & Capabilities Investment & and Operating Business Profile Performance & & Liquidity Reserve Adequacy Risk Mitigation & Rating Scores Leverage & Financial Asset Risk Environment Earnings Management Catastrophe Risk Flexibility aaa (Aegon not scored)

aa+ Aegon VIVAT NN aa Aegon Aegon NN NN Aegon VIVAT

aa- NN Aegon VIVAT VIVAT Aegon NN NN NN NN a+ VIVAT VIVAT NN a Aegon NN a- VIVAT VIVAT bbb+ Aegon VIVAT bbb VIVAT bbb-

bb+

bb

www.fitchratings.com | March 2018 1 Dutch Insurance Peer Review

Higher Influence: Capitalisation & Leverage

market movements. Aegon’s S2 ratio improved to 185% at end- Factor Levels Capitalisation & Leverage Very Strong Capitalisation & Leverage Fitch assesses capitalisation & leverage as ‘very strong’ for Aegon and 1H17, in line with the peer average. Aegon A+ NN A+ VIVAT BBB+ NN, and ‘strong’ for VIVAT. The credit factor has high influence on the ratings. VIVAT’s capitalisation & leverage score is one notch below peers, S2 Sensitivities Manageable aaa due to the higher historical volatility of its capital metrics. We view the sensitivity of insurers’ S2 ratios to market factors, such as aa+ the widening of government bond spreads, as manageable. While S2 disclosures and sensitivities in particular inform our analysis, changes to aa Prism FBM Scores Support Capital Assessment S2 ratios from market movements are unlikely to directly, of themselves, Fitch primarily focuses on its Prism Factor-Based Model (Prism FBM) aa- affect ratings; this is because Fitch continues to focus on its own Prism for its assessment of insurers’ capital adequacy. Our Prism FBM Factor-Based Model as its primary assessment of insurers’ capital adequacy. a+ scores support our view that insurers in the peer group are well capitalised. Prism FBM scores were ‘extremely strong’ at end-2016, a with the exception of Aegon which scored ‘very strong’. However, we New Debt Drives Increasing Leverage We forecast the financial leverage of both NN and VIVAT to have a- estimate NN’s Prism FBM score to have weakened to ‘Very Strong’ at increased in 2017 to around 30%. VIVAT issued new debt in 2017 bbb+ end-1H17 following the acquisition of Delta Lloyd. Strong coverage ratios under the Solvency II (S2) regulatory regime also confirm our to support the capitalisation of its operating subsidiaries, while NN bbb assessment of capitalisation. NN’s S2 ratio of 196% at end-1H17 was issued debt as part of financing the Delta Lloyd acquisition. Also, Delta Lloyd’s higher financial leverage contributed to the increase in NN’s bbb- the strongest among peers. VIVAT’s end 1H17 S2 ratio was 171%, slightly below the same period last year, mainly due to unfavourable financial leverage ratio post acquisition.

Financial leverage ratios S2 ratios

(%) Aegon NNª VIVAT (%) 1H16 1H17

40 300

35 250 30 200 25 150 20

15 100 2013 2014 2015 2016 2017 Aegon NN VIVAT a NN end-17 estimate includes Delta Lloyd estimated Source: Companies, Fitch Source: Companies, Fitch www.fitchratings.com | March 2018 2 Dutch Insurance Peer Review

Higher Influence: Financial Performance & Earnings

Factor Levels Financial Performance & Earnings Earnings a Key Rating Weakness Stabilising Non-life Margins Profitability is a key rating weakness in the Dutch insurance sector. The earnings contribution of non-life insurance is more modest Aegon A+ NN A+ VIVAT BBB+ We consider a significant improvement as unlikely in the medium compared to life insurance. Fitch expects continued price adjustments term. NN scored higher than peers for this credit factor, as it delivered to lead to stabilising underwriting results in the P&C segment in 2018. aaa the most balanced long-term financial performance, supported by However, both NN and VIVAT are exposed to the challenging MTPL aa+ earnings diversification. Aegon’s score reflects its weak but improving segment, which could face further difficulties. NN’s underwriting margin aa performance. Although VIVAT’s profitability has recovered in recent in the Dutch business remained negative at end-1H17, pressured by aa- years, it has a weaker and more volatile track record over the longer increasing bodily injury claims, while VIVAT’s margin recovered strongly term and has more limited revenue diversification relative to peers. from the hailstorm hit in 2016. Aegon’s non-life operations are very a+ small and do not have a material influence on the factor score. a Life Closed Books Run Off Gradually a- Life insurance remains the main earnings source for all of the rated peers. Cost Savings Remain Focus bbb+ Dutch life results are pressured by low interest rates and the lack of demand We estimate large Dutch insurers will cut annual costs by a further EUR650 for higher-margin traditional life insurance and unit-linked savings products. million in 2017-2020, mainly through staff reductions and operational bbb We expect tight management of closed books through cash flow matching; efficiencies. This includes the expected cost synergies from the integration bbb- interest rate risk hedging and cost controls will support life segment of Delta Lloyd into NN. However, cost savings are unlikely to translate into bb+ earnings. Pockets of growth in protection products, such as term life, could significantly improved profitability, due to the gradual run-off of higher partly offset revenue declines from the gradual run-off of closed books. margin life policies and strong competition in non-life insurance. bb

Net income return on equity Non-life underwriting margins

(%) 2015 2016 (%) 1H16 1H17

10 2 8 0 6 -2 -4 4 -6 2 -8 0 -10 -2 -12 -4 -14 Aegon NN VIVAT NN VIVAT

Source: Companies, Fitch Source: Companies, Fitch www.fitchratings.com | March 2018 3 Dutch Insurance Peer Review

Higher to Moderate Influence: Business Profile

significant operations in the US and UK. NN also has insurance activities Factor Levels Business Profile Business Profiles Support Ratings The business profiles and strong Dutch market positions of each company in various countries outside the Netherlands, but the proportion of the Aegon A+ NN A+ VIVAT BBB+ in the peer group is a key rating strength which supports ratings. Aegon international business is more modest compared to Aegon. VIVAT is a large and NN score ‘very strong’, which reflects their strong market positions, insurer in the Netherlands, with top five positions in both Dutch life and aaa and the high level of product and international diversification. VIVAT non-life insurance, but lacks international diversification. aa+ scores ‘strong’, below peers, due to its smaller size, lack of international diversification and more modest market share. aa Banking Adds to Diversification NN and Aegon also have banking subsidiaries which contribute positively aa- Diverse Business Activities to their earnings and business diversification. Banking subsidiaries NN’s acquisition of Delta Lloyd in 2017 positioned it as a contender for a+ provide Dutch insurance groups with a vehicle to participate in the Dutch non-life market leader, and further reinforced its position as the life growing ‘bank savings’ market, as well as cross-selling opportunities. a market leader. Aegon also has a strong market position in life insurance in In addition, banking subsidiaries have become increasingly important the Netherlands, but its activities are more internationally focused, with a- participants in the mortgage origination market. bbb+ bbb bbb-

Gross premium split Asset split by geography (end-2016) (end-2016) Life Non-Life (EURbn) Dutch Non-Dutch 13% 500

17% 400

300 27% 200

100 87% 83% 73% 0 Aegon NN a VIVAT Aegon EUR23bn NN EUR9bn VIVAT EUR3bn a 'other' segment assets shown as Dutch Source: Companies, Fitch Source: Companies, Fitch www.fitchratings.com | March 2018 4 Dutch Insurance Peer Review

Moderate Influence: Debt Service Capabilities & Financial Flexibility

Factor Levels Debt Service Capabilities & Financial Flexibility Factor Score ‘Strong’ to ‘Good’ Adequate Financial Flexibility Debt service capability and financial flexibility are relative rating Fitch’s assessment of the financial flexibility of both Aegon and NN Aegon A+ NN A+ VIVAT BBB+ weaknesses for Aegon and VIVAT, whereas NN’s score is in line benefits from their established track record of accessing capital with its rating. VIVAT’s score of ‘good’ reflects its relatively weak markets. VIVAT’s track record in this regard is somewhat weaker, being aaa long-term fixed charge coverage and more limited standalone the only company in the peer group that is not listed publicly and that aa+ financial flexibility compared to peers, although this assessment has used to be reliant on its parent for financial support. However, VIVAT’s improved in recent years. successful issuance of both senior and subordinated notes in 2017 aa reflects significant improvement in its standalone financial flexibility. aa- Interest Expenses to Increase Funding conditions for Dutch insurers further improved in 2017 with a+ Our assessment of this credit factor is driven mainly by the insurers’ fixed the normalisation of risk premiums, as measured by the z-spread charge coverage ratio (FCC), which in turn is driven by insurers’ profitability falling below 200bp on long-term debt. a and financial leverage. A moderate increase in interest expenses is likely a- for VIVAT and NN due to increasing leverage in 2017; this could somewhat bbb+ pressure FCC ratios. In 2016, VIVAT’s FCC of 4x was the weakest in the peer group, due to its weaker profitability. This compares to Aegon’s 7x (based bbb on net underlying earnings) and NN’s 13x. bbb-

Fixed charge coverage ratios

(x) Aegon NN VIVAT

15

10

5

0

-5

-10 2013 2014 2015 2016 2017 (estimated) Source: Companies, Fitch www.fitchratings.com | March 2018 5 Dutch Insurance Peer Review

Moderate Influence: Investment & Asset Risk

Factor Levels Investment & Asset Risk Low Investment Risk Low Risky Asset Ratios All insurers in the peer group scored ‘very strong’ for investment and Risky assets ratios - defined as investments in non-investment-grade Aegon A+ NN A+ VIVAT BBB+ asset risk, reflecting their conservative investment portfolios and low fixed-income securities and unaffiliated common stocks relative to asset risks. Asset risk credit metrics are largely consistent among the equity - are low. Aegon’s end-2016 risky asset ratio was 55%, somewhat aaa three peers; Aegon’s slightly lower score reflects it’s relatively lower higher than that of VIVAT and NN (37% and 38% respectively), due to aa+ quality fixed-income portfolio compared to peers. its higher exposure to non-investment grade bonds. aa Fixed-Income Dominates Portfolios Increasing Mortgage Exposure aa- Dutch insurers’ general account investments mainly consist of fixed- Mortgage investments in Dutch insurers’ portfolios have increased a+ income assets and Dutch residential mortgages, while other asset significantly in recent years, in an effort to earn higher yields in the low classes remain less relevant. VIVAT is overweight in fixed income interest rate environment. Aegon and NN originate new mortgages a investments compared to peers, with a high proportion of ‘AAA’ through their own banking subsidiaries, which provide a steady supply of mortgage investments to their insurance business. VIVAT’s mortgage a- rated Dutch and German government securities, resulting from investments were significantly below peers, partly driven by conservative bbb+ past capital constraints, preventing higher investment risk. With risk taking and the absence of a banking subsidiary, but we expect it to capitalisation restored, Fitch expects VIVAT to normalise its portfolio gradually catch up to peers. We believe higher mortgage investments bbb and conservatively re-risk, shifting some of its ‘AAA’ government bond do not translate into significantly higher credit risk; the Dutch residential bbb- portfolio to other higher yielding debt, mortgages, investment funds mortgage market has historically been stable with low credit losses, and real estate. underpinned by creditor-friendly legislation and a relatively high proportion of mortgages guaranteed by Nationale Hypotheek Garantie.

General account investment split Fixed income rating split (end-2016) (end-2016) AAA - AA Fixed Income Loans & Mortgages Cash and equivalent A - BBB Equities and similar Properties Other 6% Below BBB - Not rated 100% 2% 80%

60% 34% 2% 40% 15%

20% 50% 44% 64% 83% 0% Aegon NN VIVAT Aegon EUR103bn NN EUR78bn VIVAT EUR28bn Source: Companies, Fitch Source: Companies, Fitch www.fitchratings.com | March 2018 6 Dutch Insurance Peer Review

Moderate Influence: Asset/Liability & Liquidity Management

possible. This results in some earnings volatility from time-to-time, Factor Levels Asset/Liability & Liquidity Management Interest Rate Risk Hedged Duration gaps between assets and liabilities generate interest rate but Fitch views the hedging programmes for capital market-related Aegon A+ NN A+ VIVAT BBB+ risk for all Dutch life insurers. Insurers manage this risk by matching risks for both Aegon and NN as having been reasonably effective in cash flows as closely as possible and hedging residual interest rate recent years. aaa risk. VIVAT’s lower score (‘good’) for this credit factor reflects its aa+ historically high duration mismatch, which contributed to weak Low Liquidity Risk financial performance as interest rates declined. Insurers have seen aa Fitch views Dutch insurers’ liquidity positions as sound. Insurers declines in the individual life insurance business in recent years as a regularly perform liquidity stress tests to ensure smooth aa- result of market changes, and have mostly stopped selling traditional operations in severe stress scenarios, including both market and a+ life products. The gradual run-off of closed book life portfolios will insurer-specific events. However, an increased use of derivatives naturally reduce interest rate risk exposure. for hedging purposes by insurers could create higher liquidity a needs, through higher collateral requirements in case of sharp a- Closed Books Adequately Managed unfavourable market movements. bbb+ Guarantees in run-off life portfolios - including NN’s Japan and Europe, as well as Aegon’s US legacy variable annuity businesses - are closely bbb managed through hedges, although perfect risk mitigation is not bbb-

Forecasted run-off of life closed books (number of policies)

(%)

100

80

60

40

20

0 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

Source: DNB, Fitch www.fitchratings.com | March 2018 7 Dutch Insurance Peer Review

Lower Influence: Reserve Adequacy Lower Influence: Reinsurance, Risk Mitigation & Catastrophe Risk

Factor Levels Reserve Adequacy Factor Levels Reinsurance, Risk Mitigation & Catastrophe Risk

Aegon A+ NN A+ VIVAT BBB+ Aegon A+ NN A+ VIVAT BBB+ aaa aaa aa+ aa+ aa aa aa- aa- a+ a+ a a Not Scored Not Scored a- a- bbb+ bbb+ bbb bbb bbb- bbb-

Adequate Reserving Positive Run-off Development Adequate Risk Management Good Quality Reinsurance Protection Dutch insurers score ‘strong’ for reserve adequacy. Fitch considers the reserving practices of NN Dutch insurers score ‘strong’ for this credit factor, Reinsurance is placed with a diverse panel of This credit factor has lower influence due to the and VIVAT to be prudent; this is confirmed by which has a lower influence on their ratings due to reinsurers with a minimum credit rating of ‘A-’. Fitch relative smaller size of non-life operations in the loss development triangles, which show overall the relative smaller size of non-life operations in the believes the reinsurance programmes of NN and overall business profiles. We do not score this credit positive run-off results for the past five years. overall business profiles. As for reserve adequacy, VIVAT provide adequate protection against large factor for Aegon, given it is predominantly a life However, increasing bodily injury claims in the we do not score this credit factor for Aegon, given losses, with conservative retention levels compared insurance-focused insurer. motor business could have an adverse effect on its life focus (instead, these factors are assessed to equity. reserves, as reflected by NN’s EUR40 million reserve as part of asset/liability management). VIVAT’s strengthening in 1H17. risk management processes are fully independent of Anbang’s risk management framework; the strength of the risk management processes are ensured by regular interaction with the regulator, the Dutch Central Bank.

www.fitchratings.com | March 2018 8 Dutch Insurance Peer Review

Insurance Ratings Navigator Aegon N.V. European Life European Life Operational Profile Financial Profile Other Factors & Debt Service Reinsurance, Factor Industry Profile Financial Asset/Liability & Criteria Insurer Financial Capitalization & Capabilities & Investment & Reserve Risk Mitigation & Publish Date: 04-Aug-17 Levels & Operating Business Profile Performance & Liquidity Elements Strength Leverage Financial Asset Risk Adequacy Catastrophe Environment Earnings Management (see below) Flexibility Risk Sector Details: aaa AAA Stable Sector: European Life aa+ Credit Factor Credit Factor AA+ Stable

Region: Developed Markets - Europe aa Not Applicable Not Applicable AA Stable

Country: Netherlands aa- AA- Stable

Country IDR: AAA Stable a+ A+ Stable

Country IDR Action: Affirmed a A Stable

Country Action Date: 28-Apr-17 a- A- Stable

Country Ceiling: AAA bbb+ BBB+ Stable

bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable Ratings History bb BB Stable Date IFS Action bb- BB- Stable

03-Aug-17 A+ Stable Affirmed b+ B+ Stable

02-Mar-17 A+ Stable Affirmed b B Stable

23-Aug-16 A+ Stable Downgrade b- B- Stable

15-Mar-16 AA- Negative Affirmed ccc CCC Stable

03-Aug-15 AA- Stable Affirmed cc CC Stable

22-Oct-14 AA- Stable Affirmed c C Stable

21-Feb-14 AA- Negative Affirmed d or rd D or RD Stable

Bar Chart Legend: Vertical Bars = Range of Rating Factor Other Factors & Criteria Elements Drivers Bar Colors = Relative Importance Unadjusted Insurer Financial Strength A+ Very Strong Business Aegon has a strong franchise and scale in its main markets - the US, the Netherlands and the UK - with top n Higher Influence Other Credit Factors Profile 10 positions in most of its chosen market segments. Moderate Influence Non-Insurance Attributes Positive Neutral Negative +0 The group’s capital strength is supported by a score of "Very Strong" in Fitch's Prism Factor-Based Model n Very Strong Capital n Lower Influence Corporate Governance & Management Effective Some Weakness Ineffective +0 at end-2016. Bar Arrows = Rating Factor Outlook Ownership Positive Neutral Negative +0 Stable Financial Aegon's Fitch-calculated financial leverage ratio (FLR) was 29% as at end-2016 (end-2015: 27%), a level  Positive Other Criteria Elements Leverage that Fitch views as commensurate with the 'A' rating category, and in line with similarly rated peers.  Negative Sovereign-Related Constraint Yes No AAA +0 Aegon’s profitability, driven by pressure from pricing competition and low interest rates in the main markets, Weak Profitability is a key rating weakness. Fitch views Aegon's net income return on equity (ROE) of 2% in 2016 as  Evolving Country Ceiling Yes No AAA +0 moderately weak. Stable Start-up / Runoff Constraint Yes No n.a. +0 Aegon is shifting its business mix from high-margin spread-based business to lower-margin, capital-light,  Capital-Light Strategy fee-based business. While we view this strategy positively, it results in a compression of margins for the Relevant Criteria & References Insurer Financial Strength (IFS) Final: A+ group. IFS Recovery Assumption Good -1 Insurance Rating Methodology (Apr 2017) Issuer Default Rating (IDR) Final: n.a. Sensitivities ` The ratings could be upgraded if Aegon's net income ROE improves to above 7% for a sustained period European Life: SCF Report (Nov 2016) Improving Profitability Direct Peer Group Current IFS Previous IFS Date Changed with the Prism Factor-Based Model capital score remaining at least "Very Strong". Allianz SE AA AA- 04-Apr-2007 Deterioration in The ratings could be downgraded if, over a sustained period, the FLR rises above 30% or if the Prism Assicurazioni Generali S.p.A. A- AA- 13-Dec-2011 Capital/Leverage Factor-Based Model score falls to below the "Very Strong" category. Aviva Plc AA- WD 11-Dec-2015 Weak Earnings The ratings could also be downgraded if net income ROE remains below 3%. AXA SA AA- AA 20-Mar-2009 Legal & General Group Plc AA- AA 15-Jun-2009 NN Group N.V. A+ 11-Apr-2016 Analysts Prudential plc AA AA+ 01-Oct-2010 Willem Loots (+44 203 530 1808) Harish Gohil (+44 20 3530 1257) The Navigator summarizes the main IFS rating(s) of the noted operating company, and/or operating company subsidiaries of the noted holding company.

www.fitchratings.com | March 2018 9 Dutch Insurance Peer Review

Insurance Ratings Navigator NN Group N.V. European Composite European Composite Operational Profile Financial Profile Debt Service Other Factors & Factor Industry Profile & Financial Asset/Liability & Reinsurance, Insurer Financial Capitalization & Capabilities & Investment & Reserve Criteria Elements Publish Date: 25-Oct-17 Levels Operating Business Profile Performance & Liquidity Risk Mitigation & Strength Leverage Financial Asset Risk Adequacy (see below) Environment Earnings Management Catastrophe Risk Flexibility Sector Details: aaa AAA Stable Sector: European Composite aa+ AA+ Stable

Region: Developed Markets - Europe aa AA Stable

Country: Netherlands aa- AA- Stable

Country IDR: AAA Stable a+ A+ Stable

Country IDR Action: Affirmed a A Stable

Country Action Date: 28-Apr-17 a- A- Stable

Country Ceiling: AAA bbb+ BBB+ Stable

bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable Ratings History bb BB Stable Date IFS Action bb- BB- Stable

23-Oct-17 A+ Stable Affirmed b+ B+ Stable

02-Dec-16 A+ Stable Affirmed b B Stable

11-Apr-16 A+ Stable New Rating b- B- Stable

ccc CCC Stable

cc CC Stable

c C Stable

d or rd D or RD Stable

Bar Chart Legend: Vertical Bars = Range of Rating Factor Other Factors & Criteria Elements Drivers Bar Colors = Relative Importance Unadjusted Insurer Financial Strength A+ NN’s capital position remains a key rating strength despite the group’s key metrics weakening following the Very Strong Capital acquisition of Delta Lloyd on 7 April 2017. Fitch expects NN's Prism FBM score to fall to 'Very Strong' in n Higher Influence Other Credit Factors 2017. Moderate Influence Non-Insurance Attributes Positive Neutral Negative +0 NN's financial leverage, as calculated by Fitch, increased to above 30% at end-1H17, from 22% at end- n Increased Leverage n Lower Influence Corporate Governance & Management Effective Some Weakness Ineffective +0 2016, as a result of the Delta Lloyd acquisition. However, Fitch expects leverage to improve. Bar Arrows = Rating Factor Outlook Ownership Positive Neutral Negative +0 NN’s profitability is strong, with a Fitch-calculated net income return on equity (ROE) of 6%, which we Strong Profitability  Positive Other Criteria Elements expect to remain stable. Fitch expects NN to realise significant synergies out of the Delta Lloyd acquisition.  Negative Sovereign-Related Constraint Yes No AAA +0 Very Strong Business NN is a market leader in life and the second largest non-life insurer in The Netherlands following the Delta  Evolving Country Ceiling Yes No AAA +0 Profile Lloyd acquisition. Operations in Europe and Japan add to the group's diversification.  Stable Start-up / Runoff Constraint Yes No n.a. +0 Conservative Investment NN’s investment exposure is conservative and supported by a risky assets/equity ratio of 38% at end-2016. Relevant Criteria & References Insurer Financial Strength (IFS) Final: A+ Exposure General account assets are predominantly ‘A’ or higher rated fixed-income securities or mortgages. IFS Recovery Assumption Good -1 Insurance Rating Methodology (Apr 2017) Issuer Default Rating (IDR) Final: A Sensitivities ` Improved Financial The ratings could be upgraded if, on a sustained basis, financial leverage improves to below 24% or net European Composite: SCF Report (Life) (Nov 2016) Direct Peer Group Current IFS Previous IFS Date Changed Leverage or ROE income ROE rises to above 8%, while NN’s Prism FBM Score remains at least ‘Very Strong’. Prudential plc AA AA+ 01-Oct-2010 Higher Financial The ratings could be downgraded if, for a sustained period, financial leverage increases to above 32% or Aegon N.V. A+ AA- 23-Aug-2016 Leverage or Lower ROE net income ROE falls to below 5%. Aviva Plc AA- WD 11-Dec-2015 The ratings could also be downgraded if capitalisation weakens significantly, as measured by a fall in the Weaker Capital Legal & General Group Plc AA- AA 15-Jun-2009 Prism FBM score to below ‘Very Strong’. VIVAT N.V. BBB+ BBB 19-Oct-2016

Analysts

Willem Loots (+44 203 530 1808) Harish Gohil (+44 20 3530 1257) The Navigator summarizes the main IFS rating(s) of the noted operating company, and/or operating company subsidiaries of the noted holding company.

www.fitchratings.com | March 2018 10 Dutch Insurance Peer Review

Insurance Ratings Navigator VIVAT N.V. European Composite European Composite Operational Profile Financial Profile Debt Service Other Factors & Factor Industry Profile & Financial Asset/Liability & Reinsurance, Insurer Financial Capitalization & Capabilities & Investment & Reserve Criteria Elements Publish Date: 24-Jan-18 Levels Operating Business Profile Performance & Liquidity Risk Mitigation & Strength Leverage Financial Asset Risk Adequacy (see below) Environment Earnings Management Catastrophe Risk Flexibility Sector Details: aaa AAA Stable Sector: European Composite aa+ AA+ Stable

Region: Developed Markets - Europe aa AA Stable

Country: Netherlands aa- AA- Stable

Country IDR: AAA Stable a+ A+ Stable

Country IDR Action: Affirmed a A Stable

Country Action Date: 27-Oct-17 a- A- Stable

Country Ceiling: AAA bbb+ BBB+ Stable

bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable Ratings History bb BB Stable Date IFS Action bb- BB- Stable

08-Jan-18 BBB+ Stable Affirmed b+ B+ Stable

20-Jun-17 BBB+ Negative Affirmed b B Stable

19-Oct-16 BBB+ Stable Upgrade b- B- Stable

25-May-16 BBB Positive Affirmed ccc CCC Stable

25-Apr-16 BBB Positive Affirmed cc CC Stable

13-Nov-15 BBB Positive Affirmed c C Stable

17-Aug-15 BBB RWE Rating Watch Maintained d or rd D or RD Stable

Bar Chart Legend: Vertical Bars = Range of Rating Factor Other Factors & Criteria Elements Drivers Bar Colors = Relative Importance Unadjusted Insurer Financial Strength BBB+ Ownership Neutral To We believe that the regulatory and governance framework under which VIVAT operates protects its capitalisation and policyholders through restrictions on the minimum capital position and on capital flows to n Higher Influence Other Credit Factors Rating the shareholder, Anbang. Moderate Influence Non-Insurance Attributes Positive Neutral Negative +0 VIVAT scored ‘extremely strong’ in Fitch’s Prism factor-based capital model (Prism FBM) at end-2016 (end- n Strong Capitalisation 2015: ‘very strong’). We expect VIVAT to maintain a Prism FBM score at or near the ‘extremely strong’ n Lower Influence Corporate Governance & Management Effective Some Weakness Ineffective +0 level. Bar Arrows = Rating Factor Outlook Ownership Positive Neutral Negative +0 Increased Financial We estimate that VIVAT’s financial leverage ratio had increased to above 30% at end-1H17 from 21% at  Positive Other Criteria Elements Leverage end-2016 due to a new EUR650 million senior debt issue in May 2017.  Negative Sovereign-Related Constraint Yes No AAA 0 Stable Dutch Market VIVAT has a stable presence in the Dutch market, notably in life insurance. At end-2016, it ranked fourth in Dutch life with a 13% market share and fifth in non-life with a 5% market share based on gross premiums  Evolving Country Ceiling Yes No AAA +0 Position (excluding health). Stable Start-up / Runoff Constraint Yes No AAA +0 Profitability could improve, supported by significant cost savings, and other management actions to improve  Volatile Profitability underwriting performance. We estimate run-rate net income return on equity (ROE) of 4%-5%, but actual Relevant Criteria & References Insurer Financial Strength (IFS) Final: BBB+ results could be volatile. IFS Recovery Assumption Good -1 Insurance Rating Criteria (Nov 2017) Issuer Default Rating (IDR) Final: BBB Sensitivities ` Improved Profitability, Net income ROE sustained above 6% could lead to an upgrade. The rating could also be upgraded if European Composite: SCF Report (Life) (Nov 2016) Direct Peer Group Current IFS Previous IFS Date Changed Lower Leverage financial leverage falls below 25% while the Prism FBM score is maintained at 'extremely strong'. Aegon N.V. A+ AA- 23-Aug-2016 Lower Earnings, Capital; The ratings could be downgraded if VIVAT’s net income ROE falls below 3%, if the Prism FBM score falls to the low end of the 'strong' category, or if financial leverage increases to more than 35% for a sustained NN Group N.V. A+ 11-Apr-2016 Higher Leverage period. Ethias SA BBB+ BBB 27-Jun-2017 Weaker Regulatory An adverse change in our perception of the strength of the ring-fencing provided by the regulatory and Oversight governance framework under which VIVAT operates could lead to a downgrade. Deteriorating Parent Significant deterioration in Anbang's credit profile as assessed by Fitch could also lead to a downgrade of Credit Profile VIVAT's ratings. Analysts Willem Loots (+44 203 530 1808) Andras Sasdi (+44 203 530 1805) The Navigator summarizes the main IFS rating(s) of the noted operating company, and/or operating company subsidiaries of the noted holding company.

www.fitchratings.com | March 2018 11 Dutch Insurance Peer Review

Aegon N.V.

31-Dec-2012 31-Dec-2013 31-Dec-2014 31-Dec-2015 31-Dec-2016

Year End Year End Year End Year End Year End Capitalisation and Leverage (%) Total financing and commitments (x) 1.4 1.6 1.4 1.6 1.7 Financial leverage 34 34 29 27 29 Solvency II ratio n.a. n.a. n.a. 220 157 Debt Service Capabilities and Financial Flexibility (x) Fixed-charge coverage ratio 5 4 6 -1 4 Fixed-charge coverage ratio - based on underlying earnings 5 5 7 7 7 Financial Performance and Earnings (%) Net income return on equity 6 3 5 -2 2 Net underlying earnings return on equity 6 7 7 6 7 Pre-tax operating return on assets 0.7 0.4 0.5 -0.1 0.2 Investment and Asset Risk (%) Risky assets to equity 55 63 49 55 55 Unaffiliated shares/equity 7 9 4 6 5 Non-investment grade bonds/equity 40 46 40 43 42 Asset/Liability and Liquidity Management (%) Liquid assets to policyholder liabilities 109 107 99 97 98 Key Financial Metrics (EURbn) Total assets 365 352 425 416 426 Shareholders' equity 23 18 24 23 21 Gross written premiums 19 20 20 23 23 Net income 1.6 0.9 1.2 (0.5) (0.6) Net underlying earnings - reported by Aegon 1.4 1.5 1.4 1.5 1.5

www.fitchratings.com | March 2018 12 Dutch Insurance Peer Review

NN Group N.V.

31-Dec-2012 31-Dec-2013 31-Dec-2014 31-Dec-2015 31-Dec-2016

Year End Year End Year End Year End Year End Capitalisation and Leverage (%) Total financing and commitments (x) 0.5 0.6 0.5 0.5 0.5 Financial leverage n.a. 26 23 22 22 Solvency II ratio n.a. n.a. n.a. 239 241 Debt Service Capabilities and Financial Flexibility (x) Fixed-charge coverage ratio n.a. 5 10 13 13 Financial Performance and Earnings (%) Net income return on equity 4 2 3 8 6 Pre-tax operating return on assets n.a. 0.3 0.5 1.1 1.0 Combined ratio (Netherlands only) n.a. 101 99 97 100 Investment and Asset Risk (%) Risky assets to equity 24 50 41 50 38 Unaffiliated shares/equity 19 43 33 32 20 Non-investment grade bonds/equity n.a. n.a. n.a. 7 6 Asset/Liability and Liquidity Management (%) Liquid assets/net technical reserves (excluding unit linked) n.a. n.a. n.a. 102 107 Reserve Adequacy (%) Loss reserves/equity (non-life) 1.6 3.3 4.5 2.9 2.8 One year reserve development to prior year equity n.a. -0.3 -0.8 -0.5 -0.5 One year reserve development to prior year loss reserves -1.1 -2.5 -3.5 -2.9 -3.2 Key Financial Metrics (EURbn) Total assets 336 145 165 162 169 Shareholders' equity 26 14 20 20 23 Gross written premiums n.a. 9.5 9.3 9.2 9.4 Net income 1.1 0.3 0.6 1.6 1.2

www.fitchratings.com | March 2018 13 Dutch Insurance Peer Review

VIVAT N.V.

31-Dec-2012 31-Dec-2013 31-Dec-2014 31-Dec-2015 31-Dec-2016

Year End Year End Year End Year End Year End Capitalisation and Leverage (%) Total financing and commitments (x) 1.9 1.3 1.4 0.7 0.6 Financial leverage 48 36 38 21 21 Solvency II ratio n.a. n.a. n.a. 160 175 Debt Service Capabilities and Financial Flexibility (x) Fixed-charge coverage ratio 0 -5 -6 3 4 Financial Performance and Earnings (%) Net income return on equity -4 -23 -27 4 4 Pre-tax operating return on assets 0.0 -1.1 -1.3 0.5 0.6 Combined ratio 97 108 111 109 105 Investment and Asset Risk (%) Risky assets to equity 75 61 76 65 37 Unaffiliated shares/equity 42 45 66 57 25 Non-investment grade bonds/equity - Fitch estimate 31 16 10 8 12 Asset/Liability and Liquidity Management (%) Liquid assets/net technical reserves (excluding unit linked) 130 131 97 99 91 Reserve Adequacy (%) Loss reserves/equity (non-life) 1.6 3.3 4.5 2.9 2.8 One year reserve development to prior year equity -1.3 -0.2 -0.7 -0.3 -0.2 One year reserve development to prior year loss reserves -5.2 -0.7 -1.8 -0.5 -0.5 Key Financial Metrics (EURbn) Total assets 56 54 55 60 59 Shareholders' equity 2.9 2.6 2.0 3.4 3.7 Gross written premiums 3.5 3.2 3.1 2.6 2.5 Net income (0.1) (0.6) (0.6) 0.1 0.2

www.fitchratings.com | March 2018 14 Dutch Insurance Peer Review

Analysts

Willem Loots Navigators Related Research +44 20 3530 1808 [email protected] Aegon (August 2017) Aegon Americas (And North American NN Group (October 2017) Subsidiaries of Aegon N.V.) (October 2017) VIVAT NV (January 2018) NN Group N.V. (Feb 2018) VIVAT N.V. (Feb 2018) Andras Sasdi +44 20 3535 1805 Related Criteria [email protected] Insurance Rating Criteria (November 2017)

www.fitchratings.com | March 2018 15 Dutch Insurance Peer Review

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