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Achmea Bank – Investor Presentation HY 2018 - September 2018 RESTRICTED Naam van de indeling: Alleen titel
Achmea Bank at a glance
WELL POSITIONED IN RETIREMENT SERVICES STRATEGY OF ACHMEA
STRONG BRANDS
11 >40 WELL BILLION YEARS OF CAPITALISED MORTGAGES EXPERIENCE TOTAL CAPITAL AND IN THE MORTGAGE RATIO 20.4% MARKET
SAVINGS PORTFOLIO WITH HIGHLY QUALIFIED STAFF 6 ORIGINATING BILLION NPS > 10 MORTGAGES FOR AP&L CROSS SELL
ROE OF 6-8% IN 2020
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Highlights 2017 / 2018
. Residential mortgages (excl. Acier) on balance sheet decreased to EUR 10.1 billion (HY 2017: 10.7 billion) . Capital: Common Equity Tier 1 Ratio increased to 20.3% (HY 2017: 19.1%) FINANCIAL . Profit before tax increased by EUR 5 million to EUR 18 million (HY 2017: EUR 13 million) PERFORMANCE . Interest margin increased by EUR 8 million to EUR 56 million (HY 2017: EUR 48 million) . In May 2018 Achmea Bank paid EUR 50 million in dividends to its shareholder Achmea B.V.
. Set up of EUR 5 billion Conditional Pass -Through Covered Bond Programme (“CPTCB”) with inaugural issue of EUR 500 million bonds in November 2017 KEY . Improved customer satisfaction and service levels through process optimizations DEVELOPMENTS . Continuing origination of mortgages for Achmea Pension and Life (AP&L) (HY 2018: EUR 56 million) . New administration system for saving products and payments implemented
. Preparing for future growth in its mortgage and savings portfolios by: UPDATE . Investing in the retirement benefit strategy of Achmea Group; and ON STRATEGY . Outsourcing the mortgage servicing process
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Agenda Inhoudsopgave
Achmea Capital, Achmea Group and Achmea Achmea liquidity and Bank Closure Achmea Bank Bank savings funding mortgages Bank
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Agenda Inhoudsopgave
Achmea Capital, Achmea Group and Achmea Achmea liquidity and Bank Closure Achmea Bank Bank savings funding mortgages Bank
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Achmea at a glance: strong brands, diversified distribution, innovative services
Four main characteristics Mutual background and mindset Diversified insurer . A strong and solid insurance group with a mutual background, founded in 1811 7% Health 8% . Clear market leader in Dutch insurance: Property & GWP 2017 Non-life Casualty #1, Health #1, Income Protection #3, €19.4bn 68% 17% Pension & Life Pension #5 and Life #3 International . Interpolis, Centraal Beheer and Zilveren Kruis are the most recognized insurance brands in the Dutch market and high Net Promotor Scores (NPS) Strong and recognized brands Digital and innovative insurer . Distribution mainly through direct & banking channels; well positioned for market developments
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Stability through two major cooperative shareholders
ACHMEA ASSOCIATION¹ RABOBANK NETHERLANDS¹ OTHER¹ PREF. SHAREHOLDERS 64.5% 30.0% 5.5% 100%
ORDINARY SHARES² ACHMEA TUSSENHOLDING² 94.2% 5.8%
HEALTH INSURANCE
NON-LIFE INSURANCE ACHMEA BANK N.V. PENSION & LIFE INSURANCE . Senior Unsecured . Subordinated RETIREMENT SERVICES . Senior Unsecured . Covered Bond INTERNATIONAL INSURANCE . Securitisation . Secured EMTN OTHER The mission of Achmea Association is to support the continuity of Issuing entities
¹ Owners of capital rights | ² Owner of voting rights Achmea and to look after the collective interests of customers
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Achmea bank as part of Achmea Group
Strategically anchored within Achmea Group Leading player in retirement benefits . Achmea Bank is the competence and service centre for mortgage and retail savings products within Achmea Group . The mortgage and savings products complement the wider range of insurance products provided by Achmea Group . Achmea Bank plays an important role in the retirement services strategy of Achmea Group. Strategically important and complementary to the insurance propositions . Achmea bank is key to accomplish Centraal Beheer’s vision with respect Health Non-life Retirement to pillar 3 and 4 products benefits Markets Total solution Centraal Beheer retirement benefits
4TH COMPLEMENTARY INDIVIDUAL ZZP / DGA PILLAR SAVINGS AND MORTGAGES (HOME EQUITY) PROPOSITIONS Brands 3RD COMPLEMENTARY INDIVIDUAL ZZP / DGA PILLAR BANK SAVINGS (FISCALLY ATTRACTIVE) PROPOSITIONS
Proposition, 2ND COLLECTIVE RETIREMENT ARRANGEMENTS ZZP COLLECTIVITY brands & Multiple Multiple PILLAR CENTRAAL BEHEER APF (TBD) Labels DC AND DB COLLECTIVE THROUGH EMPLOYERS Employees Self-employed
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Strategically anchored within Achmea Group
Retirement benefits strategy . Achmea aims to be a leading player in retirement services anticipating a shift to more individualized need for retirement solutions. Achmea strongly positioned itself in this market and offers consumers integrated propositions consisting of pension solutions, together with asset management, savings and mortgages products . Achmea Bank plays an important role in the retirement services strategy of Achmea Group. Our products form a critical component of the retirement services and of the solutions offered by Centraal Beheer. The retirement services strategy will lead to future growth in the Bank’s mortgage and savings portfolio Originating mortgages for Achmea Pension & Life (AP&L) . Achmea Bank originates mortgages for its own balance sheet as well as the balance sheet of Achmea Pension & Life . This benefits customers (lower priced long-term mortgages), Achmea Bank (fee-income) and Achmea Pension & Life (improved return on investments) . Achmea Bank also has an Asset Switch Agreement with Achmea Pension & Life. Achmea Bank exchanges, (legally not economically) a mortgage portfolio for a government bond portfolio with AP&L. This raises liquidity at lower costs. The fee paid to AP&L enhances the total return on the government bond portfolio for AP&L Acier loan portfolio In 2015 Achmea Bank acquired the first tranche of the loan portfolio from Staalbankiers. In December 2016 Achmea Bank acquired the remainder of the loan portfolio of Staalbankiers. Achmea BV provided Achmea Bank with additional capital and guarantees for credit losses and claims regarding the portfolio
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Agenda Inhoudsopgave
Achmea Capital, Achmea Group and Achmea Achmea liquidity and Bank Closure Achmea Bank Bank savings funding mortgages Bank
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Sound strategy in current market circumstances
As part of the Achmea retirement services strategy we focus on: . Robust growth of the mortgage and savings businesses, and thereby optimizing risk and return of the total portfolio . Improvement of operational efficiency and processes in order to lower costs . Maintaining acceptable levels of interest margin . Lowering funding risks and costs by diversification of funding and improving the sustainability of retail savings . Improving the savings and mortgage propositions for Centraal Beheer and improve cross sell ratios . Developing new niche propositions for the Woonfonds label
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Brands & Distribution strategy
Mortgage & Savings products are sold using two respected and well known Achmea brands via the direct as well as the intermediary channel:
. Direct/ broker channel (distribution partners) . Well known market brand of Achmea Group . CB focuses on mainstream mortgages, sold via a few large professional intermediate chains and direct to customer via execution only . Sold via a few large professional intermediary chains and direct to customer via execution only . Savings products are sold using CB brand only . Risk based pricing
. Exclusively via broker channel (intermediary) . A respected brand for over more than 40 years . Specialized in niche markets i.e. self employed and buy to let . Risk based pricing
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Key figures Achmea Bank
Well established originator KEY FIGURES (IN EUR MILLION) . Achmea Bank is the competence and service centre for mortgage and retail savings products within Achmea Group. Our mortgage and savings Achmea Bank NV HY 2018 FY 2017 FY 2016 products complement the wider range of insurance products provided by Achmea Group. Achmea Bank plays a strategically important role in the Total assets 13,063 14,199 14,985 retirement services strategy of Achmea Group. Mortgages - Regular portfolio 10,176 10,425 10,827 . Well established originator of mortgages with over 40 year’s experience Mortgages - Acier portfolio 904 926 1,111 . Three labels: Centraal Beheer, Woonfonds and Acier Savings 5,871 5,939 5,922
Low Risk Capital base 779 824 823
. High quality mortgage portfolio with low arrears and write-offs Risk Weighted Assets 3,813 4,024 4,237 (HY 2018: 1.53 bps) Operating result before tax 18 24 17
. Strong capital and liquidity position: diversified funding base, which LCR (Liquidity Coverage Ratio) 290% 255% 572% comprises retail savings and wholesale funding Leverage Ratio 6.1% 6.0% 5.6% Strong ratings profile NIM (Net Interest Margin) 1.02% 0.96% 0.98% . Fitch: A/F1 (stable outlook) Common Equity Tier 1 Ratio 20.3% 20.4% 19.1% . S&P : A-/A-2 (negative outlook) Total Capital Ratio 20.4% 20.5% 19.2%
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Prudent Risk Management Strategy
Market risk / Interest rate risk
. Market risk is related to interest rate risk in the banking book only; no trading activities
. Mandate of Achmea Bank’s Asset & Liability Committee (“ALCo”) is a maximum duration of equity of 7 years. Current duration target is a range of 2-3 years. Duration is actively managed by ALCo
Credit risk (retail portfolio)
. Strict underwriting criteria, strong and experienced default management department, good recovery ratio and low arrears and defaults
Balance sheet
. Maximum asset encumbrance ratio: 35% (HY 2018: 34.0%)
. Maximum overcollateralization: 80% of qualifying capital (HY 2018: 39.6%)
Funding mix (target levels 2018)
. Target minimum level of retail funding: 30% (HY 2018: 45%)
. Target minimum level of unsecured funding (including retail funding): 50% (HY 2018: 68%)
. Refinancing risk: Capital market funding refinancing volume of max. EUR 2 billion p.a.
Liquidity risk
. Liquidity buffer (e.g. cash and highly liquid securities) for managing unexpected, material retail and wholesale cash outflows. Survival period, based on an internal combined idiosyncratic and market liquidity stress test, of at least 6 months
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Sound Financial Strategy
Increase of Profitability Improvement of net profit and Return on Equity has management priority: . Increase income by: . Repricing mortgage and funding . Growth of mortgage book (as part of Retirement Services strategy) . Optimize liquidity costs . New fee business . Decrease costs by: . Reducing operational costs savings portfolio
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Regulatory developments
Basel IV . Achmea Bank currently applies the standardized approach to calculate the risk weighting of its assets. The implementation of the Basel IV regulation is expected to have no or a minor negative impact on the capital ratio. Achmea Bank expects to stay well above the minimum capital requirements as set by DNB. Furthermore, Achmea Bank is working on the implementation of Advanced Internal Rating Based (AIRB) models which will have a positive effect on Achmea Bank’s capital ratio’s going forward IFRS 9 Classification and measurement of financial instruments . Financial assets should be classified and measured in accordance with the business models of Achmea Bank as well as by the type of contractual cash flows of the underlying financial assets. Both elements determine whether they will be measured at Amortised Cost (AC), Fair Value through Other Comprehensive Income (FVOCI) or Fair Value through Profit or Loss account (FVtPL). The classification and measurement of the financial assets and liabilities of Achmea Bank is in most cases equal to the classification and measurement under IAS 39. The only exception is a small part of the mortgage portfolio which was measured at fair value through profit and loss. This portfolio was be reclassified to amortised cost under IFRS 9, in line with the related business model of this portfolio. Therefore, the impact is limited to EUR 13 million Impairment . Achmea Bank expect an increase of the loan loss provision for both the regular Achmea Bank portfolio as well as the Acier portfolio when implementing IFRS 9. The impact for the Acier portfolio will be compensated for the biggest part by the guarantee of Achmea B.V. Currently the timing of this compensation is being studied to minimize the impact on capital ratio’s. The initial impact of the implementation of IFRS 9 on the loan loss provision amounted to EUR 18.3 million. EUR 14 million is related to the Acier portfolio, which was largely compensated by the capped guarantee Achmea B.V. issued to Achmea Bank to cover credit risk and legal claims related to the Acier portfolio MREL . Achmea Bank still awaits guidance from the Dutch Central Bank regarding a potential MREL requirement applicable to Achmea Bank, implementation dates and choice of instruments to cover MREL requirements. At this moment it is unclear when this guidance will arrive
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Agenda Inhoudsopgave
Achmea Capital, Achmea Group and Achmea Achmea liquidity and Bank Closure Achmea Bank Bank savings funding mortgages Bank
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Achmea Bank is strongly capitalized
. The total risk exposure amount and capital ratio calculation is based on the Standardized Approach. However Achmea Bank is currently working KEY FIGURES (IN EUR MILLION) on implementing AIRB models with the earliest implementation date Achmea Bank NV HY 2018 FY 2017 FY 2016 expected to be in 2022. Current capital base mainly consists of Common IFRS Equity and Reserves 777 822 810 Equity Tier 1 capital: therefore sufficient headroom for AT1 and/or T2 Issuance as and when necessary Deductions and regulatory adjustments -1 -2 -2 Common Equity Tier 1 776 820 808 . In line with Achmea Group’s policy to manage excess capital at group Tier 2 3 4 5 level, Achmea Bank has drawn up a dividend policy in 2017 whereby dividend is paid out if the Bank’s Total Capital Ratio exceeds a minimum Total Capital Base 779 824 813 limit. In accordance with this policy and given its solid capital position, the Risk Weighted Assets 3,813 4,024 4,237 clear and lower than expected impact of both Basel IV and IFRS 9 and positive developments in the Acier portfolio, Achmea has paid out a total BASEL III RATIOS (FULLY LOADED) dividend of EUR 50 million in May 2018 Achmea Bank NV HY 2018 FY 2017 FY 2016
Leverage Ratio 6.1% 6.0% 5.6% Common Equity Tier 1 Ratio 20.3% 20.4% 19.1% Total Capital Ratio 20.4% 20.5% 19.2% LCR 290% 255% 572% NSFR 118% 119% 122%
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Achmea Bank funding
Maturity profile Maturity Profile RMBS (cash) incl. waterfall Covered bond MTN & Private placements . Significantly smoothened future Commercial paper Subordinated loans Private loans refinancing peaks (in € million) Intercompany funding Funding banks/Central bank Funding (GAR.) Government 1500 . A well balanced funding mix: . Retail funding at least 30% 1000 (HY 2018: 45%) 500 . Unsecured funding (including retail funding) at least 50% (HY 2018: 68%) 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2026+ Funding & liquidity strategy Funding Mix 31-12-2012 30-6-2018 . Diversification: shift in funding mix from secured wholesale funding to savings and unsecured 50% 40% wholesale funding 30% 20% . Further diversification in maturities in order to 10% avoid refinancing peaks 0% . Liquidity: Survival period of at least six months . Lower asset encumbrance
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Achmea Bank key ambitions
METRIC HY 2018 AMBITION
. Total capital ratio . 20.4% . >17.7% CAPITAL . Leverage ratio . 6.1% . >3.5%
. Survival period . 10 months . >7 months LIQUIDITY . Liquidity coverage ratio . 290% . >130% . Net stable funding ratio . 118% . >110%
. Retail funding . 45% . >30% FUNDING . Unsecured + retail funding . 68% . >50% PROFILE . Asset encumbrance . 34% . <35%
. Return on equity (RoE) . 2.87% . 5-6% PROFITABILITY . Cost/Income ratio (CIR) . 70% . 55-65% . Interest margin . 1.02% . >1%
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Agenda Inhoudsopgave
Achmea Capital, Achmea Group and Achmea Achmea liquidity and Bank Closure Achmea Bank Bank savings funding mortgages Bank
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Evolution of Dutch mortgage lending standards
. The limitation of tax deductibility to repayment mortgages (with an annuity or linear redemption scheme) . Maximum LTMV allowance to be decreased from 106% to 100% within 6 years (currently 100%) . Property transfer tax to be kept at the reduced level of 2% PROVISIONS AFFECTING . Interest paid on outstanding debt that remains after the sale of a home can be deducted up to 15 years (This measure will be in place for negative equity financings entered into before 2018) THE HOUSING MARKET . Borrowers with pre-1 January 2013 mortgages are permitted to keep the existing mortgage in case of refinancing and moving house AS FROM 2013 . Up until 31 December 2014 endowments from family members or a third party up to EUR 100,000 were temporally exempted from tax as long as the money is invested in the home or outstanding mortgage. As from 1 January 2015 the tax exempt limit is EUR 52,752 and only applies to endowments from parents to their children
. The maximum tax deductibility from the highest tax bracket (2018: 49.5%) will be reduced by 0.5% per annum to the second-highest tax bracket of 38% in 2042 AS FROM 2014
. The maximum tax exempted endowments limit structurally increases to EUR 100,000. The exemption applies to endowments from parents or any other third party as long as the money is invested in the property or outstanding mortgage AS FROM 2017
. The tax deduction of prepayments will be limited and abolished in 30 years AS FROM 2019
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Key aspects Dutch Code of Conduct
. Dictates the strict framework of mortgage underwriting following . Guidelines are prepared in close consultations with government, mortgage GOVERNANCE the government guidelines lenders, consumer organisations and intermediaries . Endorsed by all major mortgage lenders and intermediaries
. Loan size cannot exceed 100% (2018) of the value of the property . For new mortgages the interest only mortgage no longer possible as of LOAN 2013. For existing mortgages an interest only mortgage has a maximum of 50% of the value of the property
. Financial position consists of: . Loan size is dependent on interest rate and fixed duration of . Annual gross salary of borrower and the interest rate BORROWER any secondary (f.e. partner) . Additional securities offered by the borrower . Loan size is restricted to governmental guidelines, . Credit history checks (BKR) which is roughly 5 times the gross salary . Fraud checks (EVA)
. The valuation of the property is validated by 1 of . The valuation cannot be older than 6 months the 4 existing validation institutes PROPERTY . The valuation has been done by a professional certified valuator, who lives and works in the same area as the property
. The lender provides all information required for borrower to have a profound understanding of how the mortgage will work, INFORMATION what they may expect to change in the future and what choices they have. Goal is to prevent unfavourable borrower behaviour
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Underwriting criteria
. 2 types of mortgages: NHG and non-NHG . Maximum loan size is EUR 750.000 MORTGAGE . Minimum amount for value of property without NHG: EUR 80.000 . Loan to income is determined by code of conduct and follows . Maximum mortgage in ratio to value of property is 100% in 2018 governmental guidelines
. Type of income (self employed, fixed or variable): . Loan size is dependent on interest rate and fixed duration BORROWER . Annual gross salary of borrower and any secondary of the interest rate . Loan size is restricted to governmental guidelines, . Additional securities offered by the borrower INFORMATION which is roughly 5 times the gross salary . Credit history checks (BKR)
. Fraud checks
. Type of property: private properties or private property . Report should contain the market value with a small part business (max 40% of the value) . The valuation of the property is validated . Appraisal report criteria: by 1 of 4 existing validation institutes PROPERTY . The valuation cannot be older than 6 months, calculated . The valuation has been done by a professional certified valuator, from the value reference date who lives and works in the same area as the property . The appraisal report is prepared according to the latest model . The certified valuator may not be involved directly or indirectly of Contactorgaan Hypothecair Financiers in the transaction
INFORMATION . All underwriting criteria are automatically checked by the system
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CHF mortgages and hedging
Acquisition of Acier . Achmea Bank acquired the Acier mortgage portfolio from Staalbankiers in 2 tranches in 2015 & 2016 resulting in a total of EUR 1,014 million of mortgages . A significant part of the Acier mortgages (HY 2018: EUR 434 million) are CHF denominated Hedging the CHF exposure . This CHF position is partly hedged by 300 million CHF funding . The remaining CHF exposure is fully hedged on a monthly basis via foreign exchange derivatives (currency swaps) Optimising the balance sheet Via the issuance of a CHF denominated bond Achmea bank will: . Increase the natural hedge, both from a volume and a tenor perspective; . Decrease the dependency of FX-derivatives
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Achmea Bank Mortgage Portfolio
Long-standing portfolio Mortgage size by label Mortgage type . Achmea Bank has over 40 years experience in (in %) (in %) mortgages, with label Woonfonds. In 2016 the bank introduced an unique proposition with the 1% CBA Thuishypotheek 11% Interest only . EUR 10.1 billion nominal value regular mortgage Centraal Beheer portfolio at HY 2018 27,8% Savings 21% Annuity . Approximately 72,000 mortgage customers Woonfonds 50% Linear . High quality mortgage portfolio with low arrears 72,2% Hypotheken and write-offs (HY 2018: 1.53 bps) 16% Other . The low interest environment increases customers interest for longer term mortgages Non NHG Regulatory developments Current loan-to-indexed market value Interest rate type NHG . LTMV cap for new mortgage originations will be 50% scaled back to 100% as of 2018 40% 8% . Due to recent developments on tax deductibility in the Netherlands, the expectation is that 30% Fixed annuity mortgages will comprise a higher 20% percentage of the mortgage portfolio going Floating forward 10% 92% . A large majority of the loans have a fixed rate 0% character which is in line with peers in the Dutch 0% - 60% 60% - 80% 80% - 90% 90% - 100% - > 110% mortgage market 100% 110%
Data as at 30/06/2018
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Arrears and Default management
Adequate loan loss provisions FILES UNDER DEFAULT MANAGEMENT (in € million) . At HY 2018 the Achmea Bank mortgage provision (excl. Acier portfolio) 2014 2015 2016 2017 HY 2018 increased to EUR 7.6 million (YE 2017: EUR 7 million) partly due to the Notional amount (a) 118 77 57 64 79 implementation of IFRS 9 Collateral value (b) 108 73 55 83 104 Loan-to-Value (a/b) 109% 105% 104% 77% 76% Special servicing Net exposure 21 16 11 6 7 . Flow from early collections to late collections remains low and well below % NPL 1.01% 0.67% 0.53% 0.61% 0.78% the standard of 30 cases per month in 2018 Stage 1+ 2 provision 6.7 5.0 4.3 3.3 3.3 Stage 3 provision (c) 16.1 13.4 7.2 3.7 4.3 . A customer will be transferred to Special Servicing in case of no contact Coverage ratio (c/a) 14% 17% 13% 6% 6% and 3 sent reminders. The transfer will take place at 3 months in arrears at the latest Arrears rate FY 2017 HY 2018 . Total number of mortgages that are managed under special servicing 1,50% decreased from 464 in December 2017 to 330 mortgages in June 2018 NHG pay out ratio 1,00% . 7 completed NHG, representing EUR 90.761,- 0,50% . Pay out ratio 99.6 %, benchmark NHG 96.8 % 0,00% 0-3 months 3-6 months 6-9 months 9-12 months >12 months Total
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Special servicing
. Direct contact as soon as payments are overdue. Late collections # files Collections late Together with the customer we look for a suitable solution 800 . Making a physical house call after a 38 day arrears of payment and no response of the customer 600
. Inventory of the customer's situation and mapping the credit risk 400
. Deploy customized instruments in consultation with the customer (job 200 coach /budget coach and interest rate or product adjustment) 0 . Flow from early collections to late collections remains low and well below 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 HY 2018 the standard of 30 cases per month in 2018 2017 HY 2018 . Arrears rate decreased further as a result of close monitoring from Arrears rate 2 months overdue 1,40% 1,20% . Total number of mortgages that are managed under special servicing (Pre- 1,00% Emptive, Late and Sales) decreased from 464 in December 2017 to 330, of 0,80% which 276 Late and 54 Sales, mortgages in the first six months of 2018 0,60% 0,40% 0,20% 0,00% 0-3 months 3-6 months 6-9 months 9-12 months >12 months
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Private sales and foreclosures
Private sales
. 49 private sales in 2018 (2017: 69 private sales) Average sales proceeds Gross proceeds private 2017 HY 2018 sales / market value 105% NUMBER OF NUMBER OF . Average sale proceeds: 101.6% of the updated PERIOD FOR SALE market value in 2018 (2017: 100%) PRIVATE SALES PRIVATE SALES 100% 0 - 3 months 24 9 . Average time for a private sale: 3 - 6 months 19 17 8.2 months in 2017 (2017: 9.0 months) 95% 6 - 9 months 7 8 90% 9 - 12 months 8 6
Foreclosures 85% 12+ months 11 9 . 9 foreclosures in 2018 (2017: 11) Total 69 49 One-off increase due to acceleration protracted cases Private sales and foreclosures # Private sales # Foreclosures . Average proceeds 93.9% of the foreclosure value 200 at time of origination in 2018 (2017: 88%) 150 . Average proceeds 110.9 % of the updated foreclosure value in 2018 (2017: 120%) 100
50 NHG pay out ratio . 7 completed NHG, representing EUR 90.761,- 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 HY 2018 . Pay out ratio 99.6 %, benchmark NHG 96.8 %
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Arrears and Default management
Improvements in collection process OVERVIEW COLLECTION PROCESS BY DEPARTMENT . The recovery ratio has been trending lower since 2011 but made a Credit risk management . Prevent overdue payments by working together significant turnaround in the first half of 2015 (merge with Late) with the customer . Apart from an ongoing improvement of the Dutch housing market, Early . Direct contact in case of overdue payments. Focus on quick labour market and consumer confidence, Achmea Bank changed its (4.4 FTE) payment and insight in the situation of the customer processes with respect to special servicing and applied the following Late . Sustainable payment recovery. The customers situation and risks business practices: (8.0 FTE) are visible. Apply specific solutions together with the customer . Within 8 days in arrears, the customer is contacted by the division “Early Sales . Limitation of loss for customers and Achmea Bank. risk management”. If we can not reach the customers we conduct digital (1.8 FTE) Maximal sales profit investigations for contact details for example through google search Residual debt . Collection of residual debt. Collaboration with bailiff (external) . If regular customer contact fails, a home visit will be done within 38 days of arrears Recovery ratio . Low caseload at the department “Late credit risk management”. Up to 50 files (per fte), which improves customer focus and gives room for 90% personalized solutions 80% 70% . Clear processes in Late credit risk management; for each situation a specific procedure is in place. This allows us to help customers quickly 60% and effectively 50% 40% . Tools such as interest averaging, modifying the mortgage 30% or discharge have a proven positive influence on recoveries 20% 10% . Losses and write offs are still relatively low and delinquency rates 0% are among the lowest in the Dutch sector 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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Agenda Inhoudsopgave
Achmea Capital, Achmea Group and Achmea Achmea liquidity and Bank Closure Achmea Bank Bank savings funding mortgages Bank
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Market share savings portfolio
. In 2018 the development of fixed deposits Development fixed deposits and savings on demand Development Fixed Deposits remained stable. Due to low interest rates, 80 customers are less willing to choose fixed deposits 60 40 . The volume of savings on demand have 20 increased with approximately EUR 12 billion in the Netherlands in the past six 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 months -20 . Despite low interest rates, -40 the Dutch population continues to save -60 Achmea Bank market share Fixed Deposits Savings available on demand Total market share 7% 6% 5% . The market share of Achmea remains stable 4% . Achmea Bank monitors the interest rates of the 3% market 2% 1% 0% 2012 2013 2014 2015 2016 2017
Source: CBS / DNB
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Achmea Bank savings portfolio
In Loan-to-deposit ratio development Loan-to-deposit Total Savings (LHS) . The loan to deposit ratio decreased in line with the growth of the savings (in € million) Nominal Value Mortgage Portfolio (LHS) portfolio Loan-to-deposit ratio (RHS) 15000 300% . Achmea Bank reduced its dependency on wholesale funding 10000 200% Savings portfolio development 5000 100% . By being active in several saving markets Achmea Bank is able to grow in the preferred products or tenors, 0 0% resulting in a diversified savings portfolio 2013 2014 2015 2016 2017 HY 2018 . Achmea Bank introduced the long term deposit in August 2012, via the Centraal Beheer label. The long term deposits have grown from Savings on-demand EUR 225 million in 2012 to EUR 2.0 billion at the end of year-end 2015 Savings portfolio (in %) Spaarloon/Levensloop and is now declining to EUR 1.4 billion at HY 2018 Long-term deposits € 4.3bln € 4.7bln € 5.1bln € 5.1bln € 5.2bln € 5.1bln 100% . With the foundation of the Centraal Beheer General Pension Fund (APF), Achmea continues to position herself strongly in the pensions market. 75% Achmea Bank plays an important complementary role with her pension related savings products in this new marketing proposition. As a result the 50% portfolio grew from EUR 0.4 billion in 2013 to EUR 1.3 billion at HY 2018. 25% . At HY 2018 total savings at Achmea Bank remained stable at EUR 5.1 0% billion 2013 2014 2015 2016 2017 HY 2018
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Agenda Inhoudsopgave
Achmea Capital, Achmea Group and Achmea Achmea liquidity and Bank Closure Achmea Bank Bank savings funding mortgages Bank
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Contact details Corporate Finance
Rudi Kramer Senior Manager + 31 6 53 26 45 52 [email protected]
Abhishek Dutta Senior Manager + 31 6 22 49 69 80 [email protected]
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Achmea Bank – Investor Presentation Appendices RESTRICTED Naam van de indeling: Tekst & Content 50%/50%
Results HY 2018: Income Statement
. In HY 2018 the interest margin increased by EUR 8 million compared to the same period of last year due to the one off addition of EUR 4 million to the KEY FIGURES (IN EUR MILLION) provision compensation for income related to early redemptions in HY 2017 Achmea Bank NV HY 2018 FY 2017 HY 2017 . Furthermore the impact of lower funding costs for both the wholesale funding Interest income 197 426 219 and the retail savings portfolio exceeded the lower interest income on the Interest expenses 141 323 171 mortgage portfolio for an amount of EUR 6 million Interest margin 56 103 48 . Finally, the interest margin was negatively affected by the early redemption of debt securities (EUR 2 million) to compensate for the negative impact on Changes in fair value of financial instruments 0 2 4 Interest margin and changes in fair value of interest margin in coming years due to early redemptions of mortgage loans 56 105 52 and related compensation interest received financial instruments
. Compared to the same period last year, the operating expenses decreased by Other income 1 2 1 EUR 8 million Fees and commission income and expenses 2 5 2 . The number of employees decreased from 279 FTE to 203 FTE resulting in Operating income 59 112 55 lower staff costs of EUR 6 million. Furthermore, the project costs in HY 2018 Impairment on financial instruments and other decreased by EUR 2 million and Achmea Bank paid a lower contribution to -0 -7 -8 Achmea B.V for the implementation of the retirement benefit strategy (EUR 2 assets million) Operating expenses 41 95 49 Operating profit before taxes 18 24 13 . The operating expenses include an amount of EUR 6 million (HY 2017: EUR 6 million) for bank-related levies for the resolution fund and the deposit guarantee scheme Income tax expenses 4 6 3 Net profit 14 18 10
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Results HY 2018: Balance Sheet
(IN EUR MILLION) (IN EUR MILLION) Assets HY 2018 FY 2017 Equity and Liabilities HY 2018 FY 2017 Cash and cash equivalents 312 890 Total Equity 791 840 Derivative assets held for risk management 94 119 Derivative liabilities held for risk management 530 573 Loans and advances to banks 772 993 Deposits from banks 166 145 Loans and advances to public sector 1 1 Funds entrusted 6,051 6,172 Loans and advances to customers 11,424 11,730 Debt securities issued 5,433 6,363 Interest-bearing securities 405 403 Provisions 0 2 Current tax assets 0 0 Current tax liabilities 33 26 Prepayments and other receivables 55 63 Deferred tax liabilities 2 9 Accruals and other liabilities 49 61 Subordinated liabilities 8 8 Total 13,063 14,199 Total 13,063 14,199
Production of new mortgages increased to EUR 0.4 billion (HY 2017: EUR 0.8 The savings portfolio remained stable at EUR 6 billion billion) In January the Bank redeemed EUR 500 million senior unsecured notes and As the total prepayments stabilized at EUR 0.6 billion, the nominal value of made the preparations to further optimize the liquidity position. Achmea the regular mortgage portfolio of Achmea Bank decreased to EUR 10.1 billion Bank retained a sound liquidity position with liquidity ratios well above (FY 2017: 10.4 billion) internal limits Cash and cash equivalents decreased due to increased focus on optimisation of liquidity
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Achmea Bank interest margin
Interest margin Net interest margin development NIM (€bn) NIM (%) (FY 2015 – HY 2018, in € million and %) . Interest margin (excluding one off transaction results) gradually 120 0.98% increased in the period 2015 – HY 2018 mainly due to lower 0.99% 1.02% 1,20% 100 0.72% funding costs for both wholesale funding and retail savings 1,00% . Future interest margins are expected to be positively impacted by: 80 0,80% . Increase of the mortgage book in line 60 109 0,60% 90 103 with the retirement benefits strategy 40 0,40% 56 . Outsourcing of mortgage servicing and renewal 20 0,20% of the IT platform for savings 0 0,00% FY 2015 FY 2016 FY 2017 HY 2018
Achmea Bank HY 2018 results (in € million)
0 1 2 0 56 59 41 18 4 14
Interest margin Changes in fair value Other income Fees and commision Operating income Impairment on Operating expenses Operating profit Income tax expenses Net profit of instruments income and expenses assets before taxes
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Disclaimer
This presentation (the “Presentation”) is provided on a strictly private and confidential basis for information purposes only. By attending or reading this Presentation, you will be deemed to have agreed to the obligations and restrictions set out below. Without the express prior written consent of Achmea Bank N.V. (the “Company”), the Presentation and any information contained within it may not be (i) reproduced (in whole or in part), (ii) copied at any time, (iii) used for any purpose other than your evaluation of the Company or (iv) provided to any other person, except your employees and advisors with a need to know who are advised of the confidentiality of the information. This Presentation does not constitute or form part of, and should not be construed as, an offer, invitation or inducement to purchase or subscribe for securities nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This Presentation does not constitute either advice or a recommendation regarding any securities. The communication of this Presentation is restricted by law; it is not intended for distribution to or use by any person in, any jurisdiction where such distribution or use would be contrary to local law or regulation. To the fullest extent permitted by law in no circumstances will the Company, or any of its respective subsidiaries, shareholders, affiliates, representatives, partners, directors, officers, employees, advisers or agents be responsible or liable for any direct, indirect or consequential loss or loss of profit arising from the use of this Presentation, its contents (including the internal economic models), its omissions, reliance on the information contained within it, or on opinions communicated in relation thereto or otherwise arising in connection therewith. The information contained in this Presentation has not been independently verified. Recipients of this Presentation are not to construe its contents, or any prior or subsequent communications from or with the Company or its representatives as investment, legal or tax advice. In addition, this Presentation does not purport to be all-inclusive or to contain all of the information that may be required to make a full analysis of the Company. Recipients of this Presentation should each make their own evaluation of the Company and of the relevance and adequacy of the information and should make such other investigations as they deem necessary. This Presentation might contain illustrative returns, projections, estimates and beliefs and similar information (“Forward Looking Information”). Forward Looking Information is subject to inherent uncertainties and qualifications and is based on numerous assumptions, in each case whether or not identified in the Presentation. Forward Looking Information is provided for illustrative purposes only and is not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Nothing in this Presentation should be construed as a profit forecast. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company. Some important factors that could cause actual results to differ materially from those in any Forward Looking Information could include changes in domestic and foreign business, market, financial, political and legal conditions. There can be no assurance that any particular Forward Looking Information will be realised, and the performance of the Company may be materially and adversely different from the Forward Looking Information. The Forward Looking Information speaks only as of the date of this Presentation. The Company expressly disclaims any obligation or undertaking to release any updates or revisions to any Forward Looking Information to reflect any change in the Company’s expectations with regard thereto or any changes in events, conditions or circumstances on which any Forward Looking Information is based. Accordingly, undue reliance should not be placed upon the Forward Looking Information.
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