> Return address P.O. Box 20201 2500 EE The Hague

Financing Department Chairman of the House of Representatives of the States General Korte Voorhout 7 P.O. Box 20018 2511 CW The Hague 2500 EA The Hague P.O. Box 20201 2500 EE The Hague www.rijksoverheid.nl

Our reference FIN/2015/1261 U Your letter (reference)

Appendices

Date 3 December 2015 Re: Plans to sell ASR Nederland N.V.

Dear Chairman,

The cabinet has decided to start up the sales process for insurance company a.s.r. Nederland N.V. (hereafter referred to as: ‘ASR’). By way of this letter I wish to inform you about this intended sale.

In 2008 ASR was acquired by the State through the purchase of Fortis/ABN AMRO Nederland. That was essential at that time in order to guarantee the stability of the Dutch financial system. In doing so, the government took over all Dutch components of the Fortis concern. At the acquisition of ASR the State had already indicated that the insurance company would ultimately be sold.

My letter of 23 August 2013 ‘Future plans of financial institutions ABN AMRO, ASR and SNS REAAL’ (‘Toekomstplannenbrief’ [future plans letter]) and the subsequent General Consultation, was the first time that I informed the House about my plans for ASR.1 In that letter I also outlined the conditions to be able to sell ASR.

Then in my letter of 6 June 2014, concerning my plans for selling REAAL Verzekeringen (VIVAT N.V., hereafter to be referred to as ‘VIVAT’) and ASR (‘Letter to Parliament VIVAT/ASR’), I informed the House about the postponement of the sale of ASR.2 At that time I had already indicated that I would inform the House about the sales strategy of ASR after the sale of REAAL (now VIVAT) and the initial public offering (IPO) of Nationale Nederlanden. That moment has arrived, because Nationale Nederlanden was successfully listed on the stock exchange in June 2014 and VIVAT was sold on 26 July 2015.3 In addition, the IPO of ABN AMRO took place on 20 November.

This letter was discussed with the Netherlands Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB). I have also discussed the letter with the Board of Directors and the Supervisory Board of ASR. The company backs the plans to sell.

1 Parliamentary Papers II, 2013/2014, 32 013, no. 36 2 Parliamentary Papers II, 2014-2015, 33 532, no. 36 3 Letter of 26 July 2015 to the House of Representatives about the sale of Reaal.

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Assessment conditions for the sale Financing Department I have requested the Trust Office Foundation (Management Financial Institutions ‘NLFI’)4 to advise me on the sale of ASR. NLFI has the statutory task to give advice Our reference FIN/2015/1261 U to the Minister of Finance about the strategy to sell financial institutions administered by NLFI. This advice is attached to this letter as an annex. On the basis of this advice, I am of the opinion that the preconditions of sale for ASR have been complied with. Below, is an explanation of this conclusion together with my plans, and I've detailed the selling process.

In order to decide on the sale of a financial participation, three preconditions must be complied with: firstly, a stable financial sector; secondly, a sufficient number of interested buyers; and thirdly, ASR itself must be ready for the envisaged form of sale. After the General Consultation of 27 November 2013 I decided to assess at a later stage whether these conditions have been complied with.5 The cabinet assumes that those conditions have been complied with.

In my letter of 22 May 2015 about my plans to sell ABN AMRO (‘letter to Parliament ABN AMRO’) I dealt extensively with the recovery of the stability of the financial markets.6 For ASR a differentiation must be made here between the financial markets on the one hand, in which transactions take place and financing is raised, and on the other hand the insurance sector, in which ASR is active as a provider of products. In respect of the financial markets, NLFI concludes that there are sufficient stable circumstances for the sale of ASR. For the insurance sector a number of issues are of influence on the envisaged sale, such as the downturn in the sector and the persistent low interest rates. These developments will be explained in more detail further on in this letter. Although these developments have an influence on the sector, they do not obstruct the sale of ASR.

To be able to sell ASR, the market must show sufficient interest. From an analysis by NLFI it is apparent that investors now have more interest in shares than in recent years, so too in shares of financial institutions. The number of IPOs has increased since the end of 2013. In the meanwhile this number has reached the level of before the crisis. During the sale of VIVAT, ASR has also shown that it is in a position to independently attract investors. What's more, the recent positioning of subordinated debt has confirmed investor's interest in ASR. I've therefore concluded that the second condition has been complied with.

In recent years ASR has prepared itself for the sale and it is now ready for it. The company offers non-life and life insurances and has a strong position in both segments in the Netherlands. ASR has shown a series of nice results and has proven to be in a position to be able to operate independently as a financially strong and profitable insurance company. ASR is financially strong, so too under the Solvency II regime that will enter into force in 2016. Finally, in recent years ASR has distributed a marginally increasing dividend.

4 NLFI was founded as a result of the Weekers et al. motion to give content to the shareholding in financial institutions in a commercial, non-political manner and to separate the interests of the State in a transparent manner. 5 My letter of 23 August 2013 ‘Future plans of financial institutions ABN AMRO, ASR and SNS REAAL’ (Toekomstplannenbrief) and the subsequent General Consultation, was the first time that I informed the House of Representatives about my plans for ASR. In that letter I also outlined the relevant conditions to be able to sell ASR. Source: Parliamentary Papers II, 2013/2014, 32 013, no. 36 6 Parliamentary Papers II, 2014-2015, 31 789, no. 64

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Method of sale Financing Department In my Toekomstplannenbrief of August 2013, I concluded that a dual selling process, being both an IPO as well as a private sale, would be the best option for Our reference FIN/2015/1261 U the sale of ASR. Recent research by NLFI and ASR has shown that no adequately concrete and attractive private offers are expected in the short-term. It is for this reason, that NLFI and its consultants assess that a private selling process at this point in time, will not provide any added value. NLFI recommends that priority is given to a successful implementation of an IPO in the short-term. I therefore have the intention to ask NLFI and ASR to start with the preparations for this, so that an IPO will be possible in the first half of 2016.

If a party should come forward with a serious private bid for ASR, I will assess it on its merits whether I shall take action at that time. Among other things, potential interest is assessed on financially economic attractiveness, sustainability of the future situation, continuity of the company and on added value in respect of the strategic development of ASR. In addition, in the weighing up whether or not to accept a bid I will keep account of the risk of execution that is related to a private sale, including the application of a certificate of no objection (vvgb) from the regulatory authority(ies). Furthermore, I will take into consideration whether the acceptance of any private bid could have adverse consequences for the (preparations of) the IPO.

For an IPO I intend to sell a minority of the shares. The exact size of the parcel that will be sold, amongst other things, depends on the valuation at that moment. The State's share in ASR represents a substantial investment, which I want to scale back step-by-step. By way of subsequent placements or possible sequential private sale, the State will eventually sell its full share in ASR.

In recent IPOs, as was the case with NN, use was successfully made of investors who wanted to invest in advance or who wanted to commit to an investment at the time of listing. This is a positive sign to the market about the attractiveness of a share. This method also reduces the risk that part of the envisaged shares remain unsold. At this point in time I have not taken a decision yet about this, but I see no reason in advance to exclude such an arrangement. In the assessment of a possible proposal, I will weigh up the benefits and drawbacks against each other. If an investor would want to obtain more than 10% of the shares, a certificate of no objection would be required from DNB.

In conformity with the Trust Office Foundation Management Financial Institutions Act, I will issue NLFI with a separate authorisation for the implementation of a specific sale. So all implementing acts are carried out by or on behalf of the Minister of Finance. If, after ASR's IPO, the State's share is reduced to less than 50%, at a following sale of shares the State loses its controlling interest in ASR. If this happens I will inform the House of Representatives in private about this in good time. Aside from the aforementioned points in time, due to the price sensitivity, I will inform the House of Representatives in retrospect after each sale of shares.

In light of the forthcoming selling process, I will not go into further detail about the selling price per share. It is up to ASR and NLFI to place the company in the market as best as possible at an optimum selling price. The cabinet aims for an

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optimum return at the sale, so that as much of the invested capital as possible can Financing Department be recouped. The capital expenditure for ASR amounted to € 3.65 billion. The interest payments are estimated at approximately € 700 million. Until 2014 Our reference FIN/2015/1261 U approximately € 400 million was received in dividends. As was the case in the sale of ABN AMRO, I am aspiring to keep the costs of sale at ASR as low as possible without detracting from the quality of the advice.

Timing of the sale I expect to finalise the IPO at the earliest in the first half of 2016, whereby I immediately wish to point out, that this is not an aim in itself. It is important that ASR pursues a thorough and careful preparation. On 20 November the IPO of ABN AMRO took place. So there is adequate time between both IPOs, so that these processes do not hinder each other. I will ask NLFI to monitor the market developments sharply until the sale. The sale of the shares which the State stills owns in ASR after the IPO could take a couple of years, depending on the size of the parcel issued at the IPO.

ASR Governance In order to protect the remaining share of the State after an IPO, the Articles of Association at ASR will be arranged in such a manner that for decisions which have an impact on the identity and nature of the company, a qualified majority is required. As a result, the State (via NLFI) maintains control on such decisions as long as it keeps more than one-third of the shares. In addition, this offers the State protection against undesirable shareholders' activism at ASR.

I also have the intention to establish a continuity foundation at ASR. From the time that the State has less than one-third of the shares in ASR, this foundation can also protect ASR from an unwanted offer or undesirable shareholders' activism in the future. This could include an offer from a party who does not keep adequate account of the continuity of the company and the social interests related thereto. I agree with NLFI that there is no reason to correspond with the form of protection opted for at ABN AMRO, being certification. At ABN AMRO the assessment was done by the ECB and at ASR that is done by DNB. DNB is familiar with the construction of a continuity foundation.

In closing The following provides more detail of the abovementioned points and further explains my plans for ASR. Firstly I have addressed the general decision-making framework for future decisions about privatisation and corporatisation that is applicable to ASR. This is followed by a description of how the various preconditions of sale are complied with, the selling process, the governance and protection of ASR at an IPO and finally, the consequences for the National Budget.

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Table of Contents Financing Department

1. Decision-making framework ...... 6 Our reference FIN/2015/1261 U

2. Preconditions of sale...... 7 2.1. Stability of the financial sector ...... 7 2.2. Interest from the marketplace ...... 9 2.3. ASR's Sale preparedness ...... 10 3. Selling method ...... 11 3.1. Selling process...... 11 3.2. Proceeds from the sale ...... 12 3.3. Costs of a sale ...... 13 4. Governance after an initial public offering ...... 13 4.1. Embedding the societal role ...... 13 4.2. Qualified majority for important decisions ...... 13 4.3. Defensive Structure – Continuity Foundation ...... 14 5. Consequences for the national budget ...... 16 6. In closing ...... 17

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Financing Department 1. Decision-making framework Our reference The Dutch Senate's parliamentary committee of inquiry ‘Privatisation and FIN/2015/1261 U corporatisation of public services’ presented its report ‘Connection disconnected’ on 30 October 2012.7 In response to this report, the cabinet promised to use the developed decision-making framework to inform parliament in good time and adequately about future decisions concerning privatisations and corporatisations which involve a public interest.

The decision-making framework comprises five steps: 1. The intention 2. The concept 3. The decision 4. The implementation 5. The follow-up

The intention for the sale was the first step. When, as a result of the financial crisis, a number of Dutch financial companies were faced with difficulties, the State became a shareholder of ASR (and of other financial institutions administered by NLFI) to guarantee the stability of the Dutch financial system.8 Unlike for other state participations, it is no longer necessary to remain a shareholder in order to secure the public interest. That security, after all, takes place through legislation and regulations which apply for all financial institutions and via the supervision by DNB and AFM. The intention to bring ASR back to the market at a suitable time has always been the cabinet's brief.

The second step was the concept. In my Toekomstplannenbrief, the subsequent General Consultation of 27 November 2013, and my letter to Parliament VIVAT/ASR, I explained my plans with ASR to the House of Representatives.9 In it, in conformity with the Groot-Bashir motion,10 the Van Hijum-Nijboer motion and the decision-making framework, I looked at the different options for the sale.11 My conclusion was, of all the possibilities, only an IPO or private sale would result in a desired outcome for the State.

This letter details the third step of the decision-making framework, with which the cabinet intends to present the sale of ASR for decision making to the House of Representatives. The crux of the decision is whether the House of Representatives agrees with the sale of ASR.

If the House of Representatives agrees with the sale of ASR, this is followed by an implementation, the fourth step in the decision-making framework. Hence it must be clear who is responsible for the sale. For the implementation phase of the sale of ASR shares, I want to authorise NLFI to start with the implementation of an IPO. Thereafter NLFI will have the leadership in structuring and implementing the sale. In the case of an IPO, the sale takes place in several steps, in which a parcel will be sold each time. It is up to NLFI and ASR to position the company as best as

7 Parliamentary Papers I, 2012–2013, C, A. 8 Parliamentary Papers II, 2010-2011, 28 165, no. 117. 9 Parliamentary Papers II, 2013-2014, 32 013, no. 49. 10 Parliamentary Papers II, 2010-2011, 28 165, no. 127. 11 Parliamentary Papers II, 2013-2013, 33 532, no. 17.

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possible in the market in order to get the best selling price. My prior approval is Financing Department required each time for the initial public offering, subsequent placements or for a private sale. Our reference FIN/2015/1261 U

The decision-making framework even has a fifth step, the follow-up. That step concerns an evaluation which assesses whether the objectives have been attained. Taking into consideration the extent of this privatisation, I think it is important to look back. That is the reason why an evaluation of the selling process takes place after the State's entire share in ASR has been scaled down. Securing the public interest through general legislation and regulations does not change due to this privatisation. The evaluation is therefore mainly focused on a comparison of ASR's performances before and after the privatisation in relation to other Dutch insurance companies. Hence the client interest and ASR's social role are also given attention. The outcome of this evaluation will be shared with the House of Representatives.

2. Preconditions of sale I have asked NLFI to examine whether the preconditions of sale have been complied with and to advise me on it. This advice is attached to this letter as an annex. The preconditions are that the financial sector is stable, the market has sufficient interest and the company is ready for it. My aspiration is to earn back as much of the invested capital as possible.12 The following paragraphs contain the conclusions I draw from the NLFI advice.

2.1. Stability of the financial sector In the precondition that the financial sector must be stable, for ASR a difference is made between the financial markets on the one hand, in which transactions take place and financing is raised, and on the other hand the insurance sector in which ASR is active as a provider of products. These are addressed separately below.

Stable financial markets In the letter to Parliament ABN AMRO I concluded that the limiting condition of a stable financial sector was complied with. This mainly applies to the increased demand for shares in financial institutions and the number of IPOs. This has not changed in the recent past.

The stress indicators in the financial markets have dropped to levels which are comparable with levels of before the crisis (see figures 1 and 2). Simultaneously, DNB notes that the volatility in the financial markets has risen in the recent past.13 This development follows a period in which the volatility was exceptionally low, partly as a result of measures by public authorities and central banks, and can therefore partially be regarded as a correction of this situation. However, DNB warns that it cannot be precluded that the market volatility will increase further, for instance, as a result of a tightening of the American monetary policy or a revival of the European debt crisis. DNB states that the consequences of such a turnaround could possibly be massive. So it's necessary to keep our fingers on the pulse. All the same, the situation in the financial markets has significantly improved in relation to the past few years and DNB notes that the Dutch economy has ended up in an acceleration.

12 Parliamentary Papers II, 2010-2011, 28 165, no. 117. 13 DNB, Overview of Financial Stability in the Netherlands, autumn 2015, no. 25, pages 8 to 15.

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Financing Department Currently the market is adequately stable for a transaction. This means compliance with the limiting condition of a stable financial sector. Our reference FIN/2015/1261 U

Figure 1 – Indicator of financial Figure 2 – ECB Composite stress (DNB's Financial Stress Indicator of Systemic Stress Index)14 (CISS)15 4 1

3

2

1

0

-1 0 2000 2003 2006 2009 2012 2015 2000 2003 2006 2009 2012 2015

Source: DNB

Stability of the insurance sector The insurance sector itself is faced with major challenges. Premium volumes and profitability in the life insurance segment have already been dropping for many years, which is why future-proofing of their business models is under pressure. The long-term low interest rates are also responsible for the problems in this segment.16 In view of this background it is important that (life)insurance companies adapt their traditional revenue models to the changing market circumstances in order to stay profitable. That could lead to a consolidation taking place. In addition, the premium volumes are shrinking and they must adjust their associated cost levels. To this end DNB has provided concrete recommendations and says it's an important part of the ongoing supervision. These conclusions are also outlined by the Insurance Commission and endorsed in the cabinet's related response.17

Supervisory bodies are aware of these challenges in the insurance sector. DNB also looks critically at the future-proofing of business models and the effects of low market interest in combination with commitments towards clients on the current and future capital positions of insurance companies. The dividend policy of the institution must be assessed in conjunction with this. Another point for concern, particularly in the Dutch insurance sector, is the file on investment insurances. At this point in time insurance companies are seriously activating clients with an investment insurance, so that they can make a well-considered choice about their insurance. The AFM supervises this and can enforce action if it appears that insurance companies show unsatisfactory results in the activation of clients.

14 Stress Index, based on indicators for share, obligation and currency markets relevant to the Netherlands and an index that shows how healthy financial institutions are. Source: DNB, Overview of Financial Stability in the Netherlands - autumn 2015 (1 January 2000 – 18 September 2015). 15 The Composite Indicator of Systemic Stress (CISS) is a constituted indicator which comprises 15, mainly market-based financial stress indicators in the eurozone which are equally divided into the following five categories: interbank markets, money markets, share markets, bond markets and foreign exchange markets. A higher value means relatively more stress in the system and vice versa. Source: ECB Statistical Data Warehouse (7 January 2000 – 25 September 2015) 16 Letter of 4 June 2015, ‘Future of financial sector’, Parliamentary Paper 32 013, no. 101 17 Insurance Commission, New life for insurance companies report, dated 5 March 2015

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As from 2016 the new supervisory framework Solvency II will be applicable in the Financing Department Netherlands and the rest of Europe. The main objective of Solvency II is an improvement of the protection of policy holders. For that purpose, Solvency II also Our reference FIN/2015/1261 U introduces higher solvency requirements based on risk, and enlarges the role of the European regulatory authority. This framework facilitates the stability of the insurance sector.

On the basis of the foregoing, I conclude that the insurance sector faces challenges, but that this does not obstruct the sale of ASR. On the other hand, ASR's IPO does not obstruct solutions for these challenges nor a possible future consolidation in the insurance sector.

2.2. Interest from the marketplace For a successful IPO investors must be sufficiently interest. The analysis by NLFI shows that investors, across the board, are more interested in investing in shares, also in those of financial institutions. The number of IPOs in Europe since the end of 2013 has increased and has returned to a level which is comparable with a level from before the crisis. In 2013 Europe saw 189 IPOs (EUR 28.2 billion) take place. In 2014 this rose further to 283 IPOs, which collected a total of EUR 51.6 billion from investors. Of that, 36 IPOs were of financial institutions for a total amount EUR 11.3 billion. The NLFI shows in its advice that this trend has continued through 2015. In the Netherlands nine major IPOs have taken place up to now since 2014.18 When taken as a whole, this is a positive picture. In the run-up to the IPO I will continue to keep a sharp eye on this.

Furthermore, since the crisis the volatility of the share markets have dropped from peaks far above 40% to more stable levels between 15% and 30%. That is favourable for IPOs. Recently in 2015 there was a short period with an increased volatility, but this is not a cause to delay the ASR's IPO. The shares of European financial institutions have risen by approximately 40% in the last three years, which indicates an increased interest in the market for shares of financial institutions.19 Investor interest in the IPO and follow-up transactions by insurance company Nationale Nederlanden, is a good example.20 A number of major investors have already shown a concrete interest in ASR's IPO. So too have several merchant banks indicated that investors really want to invest in an insurance company like ASR. What's helpful in this, is that as from 2016 there will be more certainty about the consequences of the introduction of Solvency II.

Finally, it is important to note that there is currently a great deal of interest in the market for investments in shares and in IPOs because of the low returns on fixed income instruments such as government bonds.

With this I conclude that the precondition of sufficient interest from the marketplace has been complied with, whereby I will ask NLFI to continue monitoring the developments carefully in the run-up period to the sale.

18 Altice January 2014), Euronext (June 2014), IMCD (June 2014), Nationale Nederlanden (July 2014), Bols (February 2015), Grandvision (February 2015), Refresco (March 2015), Flowtraders (July 2015) and Intertrust (October 2015). 19 EURO STOXX Financials, share price index of 64 European financial institutions, 3 years to 16 October 2015 20 Other examples of financial sector IPOs are: Virgin Money (November 2014, UK); TSB (June 2014, UK); One Savings Bank (June 2014, UK); Santander Mexico (September 2012); and Talanx (October 2012, Germany).

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2.3. ASR's Sale preparedness Financing Department ASR has prepared itself in recent years for a sale. ASR offers both non-life as well Our reference as life insurances and has a strong position in both segments in the Netherlands. FIN/2015/1261 U

ASR has shown a series of nice results and has proven to be in a position to be able to operate independently as a financially strong and profitable insurance company. In the years 2011 – 2014 ASR has distributed almost EUR 400 million in dividends to the State. On the proviso that sufficient solvability remains, currently 40% - 45% of net profit is distributed.21

In the Toekomstplannenbrief of August 2013 I concluded that ASR would still have to improve its result to be able to provide a stable and attractive (dividend)return to investors. Here a reduction of the cost ratio due to wage restraint also played a role. In the past year ASR has shown satisfactory progress. The cost ratios for ASR are below the market average.22 Because of the shrinking portfolio, costs control will continually demand attention. Besides, ASR has a strong solvability, which is a significant indicator that shows how healthy an insurance company is. In combination with this, ASR also has an above-average return on the equity capital, which is further proof of ASR's strength.23 From the regulatory authority's perspective, maintaining a strong capital position is the most important criterion to assess ASR on its possibility of a dividend distribution.

In order to be ready for an IPO, ASR must be able to offer investors a stable and attractive dividend. This must be based on sufficient profitability and a sturdy solvability. That's what ASR has got. In recent years ASR has distributed a stable, marginally increasing dividend. The Solvency II ratio at mid-year 2015 was approximately 185%.24 ASR likewise has a strong and stable creditworthiness.25

ASR is active in all important Dutch insurance segments and therefore has a highly diversified business model. ASR has a long-term strategy which consists of client orientation, cost control and a solid capital position. Recent acquisitions, such as the pension insurer De Eendragt and funeral insurer AXENT, contribute to this strategy and confirm ASR's strong position in the Dutch marketplace.

The financial management is of a satisfactory calibre, the same also applies for the internal and external reporting and reports. This assessment is confirmed by an external financial consultant.

The investment insurances case file plays an important role in the whole insurance sector. Since 2008 ASR has effected settlements with claims organisations and is on course in its compliance with those agreements, but recognises that the case file is not closed yet. At the same time the independent external auditor concludes that the provisions for this case file are adequate at this point in time.

21 After distribution of compensations to other capital providers, such as hybrid loans issued by ASR. 22 In the Life insurance sector the cost ratio is 0.5% (vs. 0.6% market average) “Administration costs / Total reserves” and in the Claims sector the cost ratio is 95% (vs. 100% market average) “Claims and other costs / Premiums received”; 2014 figures 23 Return on equity capital is 12.3% (vs. 8.5% market average); 2014 figures 24 Source: ASR Interim Report for the first half year 2015 25 ASR’s subsidiary insurance companies have an A rating by Standard & Poor's (which is expected to remain stable). A rating is an opinion by a rating agency about the creditworthiness of a company. ASR has a rating for the financial impact of the company in the long-term.

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On the basis of the positive aforementioned developments, it is my opinion that a Financing Department start can be made with the selling process of ASR. Our reference FIN/2015/1261 U

3. Selling method According to the advice received from NLFI, an IPO of ASR is a realistic option. NLFI writes that in a possible IPO, potential investors will regard ASR as a yield share. This means, taking the aspects described above into consideration, the company is particularly attractive for investors who are in search of a relatively stable revenue stream.

On the basis of the preliminary survey, NLFI and ASR assess that a proactive, wide-ranging auction for a private sale does not look promising and is therefore not opportune at this point in time. This is due to the strategic, financial or operational preparedness of the parties. It is for this reason that I opt for a process geared towards an IPO.

My intention is to sell a minority of the shares at an IPO. In my opinion the phasing out must take place carefully and gradually. By way of subsequent placements or a possible sequential private sale, the State will eventually sell its full share in ASR.

During the preparation of an IPO, NLFI will assess a possible private bid in light of the process geared towards the IPO, in which private bids that could possibly have adverse effects on the (preparations of the) IPO, will be eliminated.

3.1. Selling process NLFI makes recommendations to implement the preparations for an IPO in such a manner, that a sale in 2016 will be a possibility. Furthermore, NLFI recommends placing an initial parcel that is large enough to reach the desired liquidity of the share after the initial offering and its related target group of investors, thus increasing the attractiveness of the share. The large, institutional investors in particular, expect a certain minimum size as a condition to participate in this IPO. In the Letter to Parliament about my sales plans for ABN AMRO I described the process of an IPO in detail.26 An IPO of ASR does not differ substantially from this. A number of specific elements of the ASR IPO are explained below.

At an IPO, part of the ASR shares will be sold to private and institutional investors and will be listed and traded on the regulated Euronext Amsterdam stock market. Private investors will also get the option to buy ASR shares, but this happens without an explicit marketing campaign or other (financial) incentives which could incite the buying of shares. As recommended by NLFI, I am exercising a cautious approach, as was the case for the ABN AMRO IPO. The size of a private parcel will therefore not be determined in advance, but will depend, among other things, on the keenness of this group of investors. There will be no priority or discount for the possible acquisition of shares by ASR employees or managers. There is also no question of employees or managers receiving options of shares.

NLFI recommends, moreover, to investigate the possibilities of making use of investors who want to invest in advance (or want to commit themselves thereto), to thus show some kind of sign to the market about the attractiveness of the

26 Parliamentary Papers II, Year of Session 2014-2015, 31 789, no. 64

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share. This method also reduces the risk that part of the envisaged shares remain Financing Department unsold. At recent IPOs the use of this method has been successful. At this point in time I have not taken a decision about whether or not to use such investors. In Our reference FIN/2015/1261 U the assessment of a possible proposal, I will weigh up the benefits and drawbacks against each other.

Furthermore, use will also be made of a so-called green shoe/overallotment option. This instrument is used to stabilise the share price directly after the IPO. If necessary and if there is sufficient demand, the supervising banks can allot a maximum of 15% of the first parcel's shares to investors. As was the case at the sale of ABN AMRO, all benefits from an overallotment will accrue to the State. In the subsequent period after the initial offering, the remaining shares will be sold in stages. It is common practice that the follow-up parcels will be smaller in size than the initial parcel of shares. After the IPO a lock-up period of 180 days will probably apply. It is expected that it will take more than a year after the initial offering before all the shares are sold.

Dealing with private bids NLFI estimates, at this point in time, that too few parties who have a clear strategic rationale to undertake a partnership with ASR, have the opportunity to bring a bid. This means that there can be no question of sufficient competitive pressure for a private sale to facilitate an active process for this parallel to the preparations for an IPO. Dependent on the keenness of unexpected bidders, this in turn will be arranged and implemented in such a manner that it maximises the outcome for the State and avoids harmful effects on an IPO.

In order to make a clear weighing up between a private sale and an IPO, NLFI will not take any new bids into consideration anymore if these could have adverse effects on the (preparations of) the IPO and the time line associated with it, independent of the attractiveness of the possible bid(s). Investors must be inspired for the IPO, because as long there is a chance that ASR will be sold privately, institutional investors in particular will only spend limited time on ASR.

3.2. Proceeds from the sale The valuation of ASR, being the proceeds for the State, is dependent on a large number of factors at the time of the IPO. Such as the financial market circumstances, the introduction of the Solvency II framework, keenness by investors, the influence of investors on the management of ASR and the share price development of comparable insurance companies. Of course the attained and expected financial results also play an important role.

The full return is only clear if ASR is sold in its entirety and for an IPO this can last a number of years. So there is still the possibility that after the IPO, the State sells its remaining share privately. I don't exclude the possibility that, at a later stage, there may be sufficiently concrete and attractive interest for a private bid on ASR. The return for a private sale could be financially attractive. A private party with know-how of the sector probably assesses risks differently to potential investors on the stock exchange. For a private sale the purchaser, for instance, also has an eye for the potential synergy benefits which the purchaser can gain through a centralisation of certain business operations and the restriction of overheads. Investors don't have these synergy benefits. However, it is important in this

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respect that there are sufficient parties who are in a position in the short-term, to Financing Department offer a concrete and attractive proposal. NLFI's analysis shows that there are now insufficiently concrete and attractive proposals for a private sale, which, in respect Our reference FIN/2015/1261 U of the strategic development of ASR and the risk/return profile of the State, could constitute added value in respect of an IPO.

3.3. Costs of a sale NLFI has hired consultants who will provide NLFI with direct advice on financial and legal aspects during the process of the sale. In addition, as from today, NLFI can commence with the selection procedure for hiring a syndicate of banks, who will mainly take care of the implementation of the sale and also play a significant role after the shares have been placed. However, the appointment hereof only takes place after this letter has been discussed with the House of Representatives. The fee of the syndicate will be based on a percentage of the proceeds of the sale. This percentage is based on a survey of fees paid to merchant banks since 2006. Furthermore, the most recent fees for major privatisations have been examined. This has shown that the average fee is 1%. NLFI intends to remunerate the relevant merchant banks a maximum of 1% of the proceeds of the sale for an IPO. At the IPO of ABN AMRO the State succeeded in keeping the costs for the IPO very restricted. The selected syndicate will also engage a legal consultant to ensure that all legislation and regulations are complied with on the basis of which a judicial audit can take place. These are costs which likewise will be remunerated by NLFI.

On the basis of the process that NLFI has undertaken in hiring its own consultants and the process outlined by NLFI for attracting the syndicate of banks, I conclude that account has been kept to a sufficient degree with the starting point of cost minimisation and a qualitative and careful process arrangement.

4. Governance after an initial public offering Besides the State, other shareholders will join ASR at an IPO. These shareholders will be given participation in the company. On the other hand, the State will remain a (major)shareholder for some time. In view of the forthcoming IPO I want to secure the continuity of the company, to protect the remaining (financial) interests of the State and additionally to establish the societal role of ASR in the Articles of Association. I will explain this further hereunder.

4.1. Embedding the societal role NLFI has recommended that the societal role that ASR has as a major insurance company, should explicitly be established, by amending ASR's Articles of Association to incorporate the lawful interests of the clients, the policy holders, shareholders, employees and the community in which the insurance company operates, into the objectives of the company. This will tie in with relevant case law and the general duty of due care for financial institutions. I wholeheartedly support making this role explicit in the Articles of Association of the company. All major financial institutions in the Netherlands have this role pursuant to legislation and regulations.

4.2. Qualified majority for important decisions After an IPO the State must be able to continue to exercise sufficient influence on important decisions regarding ASR, because the State's remaining share participation represents a substantial investment of government resources.

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This can be achieved by using qualified majorities laid down in statute at the Financing Department decision making of the shareholder's meeting on important subjects. Such decisions can only be taken with a two-thirds majority of the cast votes which Our reference FIN/2015/1261 U represent more than half of the issued capital.

NLFI points out that this measure is common practice and known among investors. I further agree with NLFI's recommendation to only include genuine decisions in this respect, like changes in the name, registered office, objective and authorised capital of the company, amendments to the Articles of Association, mergers, take- overs and major (dis)investments.27

4.3. Defensive Structure – Continuity Foundation In the parliamentary debate of the letter concerning my future plans for ABN AMRO, ASR and SNS REAAL the House of Representatives passed the Nijboer motion which requested taking a defensive structure into consideration for ASR.28 Considerations by the House of Representatives in this respect were, that the continuity and stability of the service by ASR served a public interest, which can be protected by a defensive structure. The bulk of Dutch listed companies and all listed insurance companies have some form of defensive structure, that the cabinet does not exclude an independent future for ASR and that a defensive structure, in principle, may not obstruct a merger or a take-over at a later stage.

My starting point is that public interest that coheres with the insurance sector is protected by way of general legislation and regulations which pertains to all insurance companies in the Netherlands. I don't want to make an exception for ASR or treat ASR differently because it belongs to the State.

Though I do see an added value in some form of protective mechanism. If the sale of ASR takes place by way of an IPO and the participation of the State is scaled down to such a degree that NLFI no longer has a controlling interest anymore, the insurance company can be faced with undesirable shareholders' activism or an unwanted take-over bid. In such situations a defensive structure can ensure that there is enough time to conduct a decent discussion and process with all the stakeholders involved.

NLFI is of the opinion that there is no reason to correspond with the form of protection opted for at ABN AMRO, being certification. Since protection by means of a continuity foundation is common practice in the marketplace and also offers sufficient protection in the company's opinion, this takes preference. Also in relation to the supervisory bodies and the required certificate of no objection relevant to ASR in exercising a call option, the choice for a continuity foundation is appropriate. I agree with this opinion.

Operation of a continuity foundation The foundation will already be established before the sale and will become effective as soon as NLFI holds less than half of the shares. This foundation is granted a call option to take preference shares. As long as the State maintains more than one- third of the ASR shares, the ASR continuity foundation can only exercise the call option with prior consent from the State. The foundation may not hold these

27 Including the decisions as meant in Book 2 Section 107a of the Civil Code. 28 Parliamentary Papers II, Year of Session 2013-2014, 32 013, no. 47

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preference shares for longer than two years. Thus, in situations in which the Financing Department continuity, independence and identity of the insurance company are threatened, the foundation can obtain the (majority) control over ASR in order to generate Our reference FIN/2015/1261 U enough time for a decent process and weighed-up decision. This is a similar measure which NN introduced at the recent IPO and a commonly used construction in other major listed companies.

A continuity foundation has the right, in special circumstances (“times of war”), to buy preference shares via a call option, in order to gain temporary influence in the company. Through the allocation of these protective preference shares the voting right of shareholders is diluted including that of the undesirable bidder. In order to achieve this effect it is normally arranged that the foundation can obtain a maximum of 50% of the share capital (and voting rights), including the preference shares. If the foundation obtains more than 30% of the voting right in a financial institution, in principle, the obligation to launch a bid by virtue of the Financial Supervision Act (Wft) applies. This would oblige the foundation to launch a public bid on the other shares in the company. Since this is undesirable, the Wft contains an exemption for continuity foundations. A precondition to be eligible for this, is that the continuity foundation does not hold the shares for longer than two years. During this period the Board of Directors and the Supervisory Board can ascertain for themselves what the intentions are of the shareholder who wants to take over the company, and consult with him about the policy that this acquiring party wants to pursue. Questions were posed by the House of Representatives in relation to the sale plans for ABN AMRO concerning the possibility of invoking the call option again after the period of two years. Although this could be justifiable, there is no certainty about this as yet, simply because this situation has never happened before.

If the continuity foundation actually exercises the call option, the foundation must first obtain a certificate of no objection from DNB. By invoking the call option, the foundation, after all, obtains a qualified majority in a financial institution. In that context DNB will also test the officers of the foundation as co-policymakers of the bank. The House of Representatives has posed questions about the effectiveness of a continuity foundation because of the requirement of consent by DNB.29 The question is whether the threatening situation for which the continuity foundation wants to invoke the call option has not already been realised by the time that DNB has granted the consent. Though there is a chance that this risk is present, it is limited. A threatening situation occurs in two ways. Either activist shareholders start a campaign against the board of ASR for the purpose of pursuing a certain change in the strategy, structure or leadership of the company, or a party is considering bringing a hostile public takeover bid. In the first situation the ASR Board of Directors can rely on the statutory response provision of 180 days. In a threatened hostile public takeover bid, the hostile bidder must undergo the process of a public bid. In practice, such a procedure for a hostile takeover bid often takes more than ten weeks. Furthermore, the bidder must also personally apply for a certificate of no objection. In both threatening situations the continuity foundation has sufficient time to apply – as fast as possible – for consent at DNB. Because of the applicable periods and the awareness at DNB about such defensive structures, I consider this manner of protection appropriate for ASR.

29 Parliamentary Papers II, Year of Session PM

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Structure of continuity foundation Financing Department The board of the foundation will consist of at least three officers. The first Our reference appointment takes place at the nomination of NLFI by the Minister of Finance, FIN/2015/1261 U after consultation with ASR. Then the appointment of future officers takes place by the current board (by co-option). For the composition of the board of the ASR continuity foundation the requirements of independence pursuant to the law will be applied strictly and meticulously.

The shareholder's meeting will maintain a certain degree of control on the foundation's Articles of Association. It is common practice that only the board of a continuity foundation itself, or with consent from the company to be protected, can amend its own Articles of Association. Because an amendment to the Articles of Association can alter the basis of the foundation, NLFI has proposed to establish by statute that for an amendment of the Articles of Association of the foundation, approval is required from the shareholder's meeting of ASR and that for such decisions a qualified majority of two-thirds of the cast votes is applicable and at least 50% of the issued share capital must be represented. This shall also apply for any dissolution of the foundation.

Value impact of the continuity foundation Although a defensive structure can have a depreciating effect, I expect that the protection chosen for ASR will not have a major value impact. There are a number of reasons for this. For lighter schemes a positive effect on the value might arise because of the additional time that the company can buy in the situation of a threatened hostile takeover. The chance of a depreciating effect is mainly present for heavy defensive structures which strongly curtail the control of shareholders30. It is because financial institutions such as insurance companies, also enjoy protection via a regulatory authority's certificate of no objection, that the proposed construction for ASR could have a downward value impact between 0 and 2%, according to the Netherlands Bureau for Economic Policy Analysis (CPB). Moreover, it is important to mention that the proposed defensive structure for ASR is common practice in our country. The listed Dutch insurance companies ( Delta Lloyd and Nationale Nederlanden) make use of similar constructions. In light of this background the choice was made for a continuity foundation.

5. Consequences for the national budget The proceeds of the sale of ASR will be applied for the repayment of government debt. The State invested € 3.65 billion in ASR. The interest payments are estimated at approximately € 700 million. Until 2014 approximately € 400 million was received in dividends. The impact on the general government balance is twofold: on the one side interest payments are decreasing due to a lower general government debt, which has a positive impact on the general government balance. On the other side, future dividend income reduces because of the sale which has an adverse effect on the general government balance. Whether these effects result in a positive or negative net balance depends on the selling price, the interest payments and the dividend distribution of ASR. At an IPO the size of the initial parcel is also important.

30 CPB 2015 Financial Markets Risk Report to the House of Representatives, 5 June 2015

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The sale proceeds and costs will be justified in item 3 of the Ministry of Finance's Financing Department budget. In addition, all emergency measures fall under budget rule 24. This means that the expenditures and revenue involved in the sale of ASR are not relevant for Our reference FIN/2015/1261 U the expenditure framework.

6. In closing ASR was acquired by the State on the nationalisation of the Dutch components of the Fortis concern. In that context ASR did not receive any state aid. ASR was and is an insurance company which can and does stand on its own feet. As was the case for ABN AMRO, the priority was that the State's participation in ASR had to be temporary. Now that the financial sector is stable enough for a sale, there is sufficient interest in the market and ASR is ready for the sale, it is time to take a further step towards a normalisation of the Dutch financial sector.

Yours faithfully, Minister of Finance,

J.R.V.A. Dijsselbloem

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