SlideShare ist ein Scribd-Unternehmen logo
1 von 31
Downloaden Sie, um offline zu lesen
Risk management in a challenging environment
Zanders Risico management seminar
Theo Berg ,, 27 maart 2014
Agenda
I. Over 200 years of reliability and trust
II. Delta Lloyd’s view on risk management
III. Changing regulatory environment
IV. Questions & answers
Building on 200 years of history
1807
1967
1969
1999
2002
2003
Hollandsche Societeit Nedlloyd
Delta
Nuts / OHRA
Delta Lloyd
Delta Lloyd Nuts OHRA
Amstleven
Delta Lloyd NV
ABN AMRO Insurance
IPO2009
1973
delisting
• A strong Group: Dutch market leader in
new Life business (NAPI € 431m)
• An €4.7bn GWP/76 bln. AuM company:
• Life & Pension
• General Insurance
• Asset Management
• Banking
• Brands: Delta Lloyd, OHRA and ABN AMRO
• Approx. 5,200 permanent staff, focus on
the Netherlands and Belgium
• Listed in Amsterdam and Brussels
Delta Lloyd Group: reliable partner since 1807
FY 2013FY 2012
IGD Group solvency ratio
184%177%
Net operational result (€m)
430404
FY 2013FY 2012
Financial services – A challenging environment....
Economic environment challenging
Uncertainty
on pensions
Real estate
crisis
Unemployment
rising
20
%
97 63 41 28
164
140
114
76
71
50
43
40
251
224
210
183
75
76
77
72
181
149
127
69
0
100
200
300
400
500
600
700
800
900
2009 2010 2011 2012
Mortgages
Term
Annuities
Funeral
Pension
Saving
• Unit-linked misseling, total compensation exceeds € 2 billion, 95% drop in sales
• Market CAGR -/- 18% a year!, New production halved in 4 years
• Bank savings increased with 39% in 2011 and exceeds individual life market
• Only in 2009 positive technical result
New Business (APE) in €m
Individual life market fastly contracting,
Group life market moving from DB to DC
839
702
612
468
Challenging Non-life market
• Sales volume follow GDP
• Limited profit on insurance
coverage
• Gradual decrease in CoR
• Crisis effects claims culture
• “In de brand, uit de brand”
• WGA-ER (disability) coverage
misperceived by insurers, effecting
capital ratio’s
Results of Non-life insurers, Combined operating Ratio
95
96
97
98
99
100
101
102
2006 2007 2008 2009 2010 2011 2012 2013
Investment result important part of surplus generation insurance
Agenda
I. Over 200 years of reliability and trust
II. Delta Lloyd’s view on risk management
III. Changing regulatory environment
IV. Questions & answers
History of Value reporting
• Dutch GAAP, using amortisation method
• Liabilities value @ historical cost price : 4% interest
• Embedded Value concept started in early ’90s
19/20th Century
2002/2005
• Introduction IFRS and regulatory reporting on market values
• Delta Lloyd decided to use market interest for valuing liabilities
• Assets at marked value
2010+
• New mortgages valued @ amortised cost
• Minimum replicating cost introduced for market interest
• Valuation difference with regulatory reporting
2008/2009
• Alignment with Solvency II
• Back to EEV/Cash flow reporting
• Introduction of UFR, IFRS and regulatory
Mismatch liability valuation and assets
1. What is the value of the liability?
2. Can we invest in the same curve?
Do we want to?
SWAP ECB – AAA
Collateralised –
AAA
Swap +
liquidity
premium
3. What is our actual investment
strategy?
Mix of debt, credit, equity and real estate
Difficult Possible Difficult
Possible, but
no exact
match
Mismatch  volatility; required capital
Corporates vs Swap
0
50
100
150
200
250
300
350
400
450
dec-07
mrt-08
jun-08
sep-08
dec-08
mrt-09
jun-09
sep-09
dec-09
mrt-10
jun-10
sep-10
dec-10
mrt-11
jun-11
sep-11
dec-11
mrt-12
jun-12
sep-12
dec-12
mrt-13
jun-13
sep-13
dec-13
Corp AA Corp A Corp BBB
Bond markets developments
Credit crisis
Euro crisis
QE
Volatile valuation curve developments
0,00%
1,00%
2,00%
3,00%
4,00%
5,00%
6,00%
2007
2008
2008
2008
2009
2009
2010
2010
2010
2011
2011
2011
2012
2012
2012
2013
COLL-AAA ECB AAA Swap
Credit crisis
Spanish
downgrades QE
Euro crisis
Effect of curve development
0
1.000
2.000
3.000
4.000
5.000
6.000
2007 2008 2009 2010 2011 2012 2013
IFRS equity IGD equity
Positive effect A/L
mismatch
Negative effect A/L
mismatch
IFRS profit 745 -153 -81 671 -153 -1.465 168
Align all balance sheet elements
Duration analysis impacted by valuation concept
Balance sheet of Delta Lloyd Group (Q3 2012 in bn)
Life Liabilities
Bank, GI, Germany,
AM, and Other
Shareholders’ Funds
UL Liabilities
Life Equity
Life UL
Life FI €29
€13
€3
€34
€23
€13
€3
€34
Life mortgages,
property
€6
ASSETS LIABILITIES
• Duration
13
• Duration
15
• Duration
0
Bank, GI, Germany,
AM, and Other)
Exit price vs. discounted cash flows
Exit price assets:
Transaction value assets:
• Representative similar
market instruments
• Sales value house, based
on similar transactions
• Sales value mortgages,
based on funding spreads
Exit value liabilities:
Value of liabilities for a
willing buyer:
• Expected value
• Option price
• Margin for uncertainty
Discounted cash flows, or matching adjustment:
• Matching cash flows of assets and liabilities per duration
• In case cash flows emerge in same time frame similar valuation
• Buffer needed for defaults and fluctuations in cash flows
Latest Solvency II proposals allow this mechanic, but not for rental income
Interest rate risk: limited downside risk
Interest rates ‘Normal’ times:
•Interest rate risk is non-
rewarding
•Hedging is cheap
In extremely low interest
rate environment: higher
probability of significant
increases than decreases
Current models already
reflect non-negativity of
interest rates
Equity hedging: downside protected, upside left open
• Derivatives on equity indices
― better liquidity and lower premium than
on individual stocks
― hedge against market risk, confident
about portfolio
• Preference for listed derivatives and long
puts, other instruments if needed in case of
high volatility
• Sensible spread
― different exercise dates (roof tile
construction)
― different exercise prices
• Hedge reduced after underlying equity
portfolio decreased
Equity derivatives - value scenarios
Matching spread risk is vitally important
•Exposure to credit spreads is vital for
supporting long-term guarantee business
•Investments by insurers are also important
for the Dutch and European economy,
especially with banks lending less
•As long as defaults are negligible, spread
risk should not ‘hurt’
•We strongly support the Volatility and
Matching Adjustment concepts
Agenda
I. Over 200 years of reliability and trust
II. Delta Lloyd’s view on risk management
III. Changing regulatory environment
IV. Questions & answers
Changing capital regimes
• Since beginning ’70’s Solvency I regime:
— legal framework, volume based required capital
— Liability Adequacy Test (“LAT”) in The Netherlands
— Europe: cost-price +
Solvency I
(current
regime)
Solvency II
(regime
as from
1-1-2016)
• End ’90’s decision to move to new European framework
— market value based, risk weighted capitals
— governance, risk management and information are
other key elements of this system
• 2013: DNB interim measures (Solvency 1.5)
— Theoretical Solvency Criterion (“TSC”) for dividend
payments of Dutch life insurance entities
— Dutch ORSA (“ERB”) included in regulatory returns
Solvency 1.5
(requirement
for 2014-2015)
Available
Capital
Build up of Solvency I capital
Assets Liabilities
Exit price
Best
Estimate
Liability
Best Estimate
Liability
Risk Margin2
Surrender
Floor1
Market Value
Buffer
Solvency I
• Required capital
― volume based
― 4% of life reserves; 18% of general
insurance premiums
• Available capital:
Market value of assets (based on exit price)
-/- Best Estimate Liability
-/- Risk Margin
-/- Surrender Floor
• Available capital ≠ embedded value
• Solvency ratio =
1. Safety margin against policyholders liquidating their assets
2. Margin for uncertainty around Best Estimate Liability
Available capital
Required capital
Required
Capital
(100%)
Build up of Solvency II capital
Assets Liabilities
Best
Estimate
Liability
Solvency II
• Required capital
― risk based
― based on 99.5% confidence interval
― based on BBB level (100%)
― buffer provides insight in credit standing
above BBB level
• Available capital:
Market value of assets (based on exit price)
-/- Best Estimate Liability
-/- Risk Margin
• Surrender Floor included as available capital
• Available capital ≠ embedded value
• Solvency ratio =
Available capital
Required capital
Available
Capital
Marktwaarde
Exit price
Best
Estimate
Liability
Best Estimate
Liability
Market Value
Buffer
Risk margin
Required
Capital
(100%)
Solvency I to Solvency II: from volume to risk based
Capital
elements
Solvency I
(current regime)
Solvency 1.5
(requirement for 2014-2015;
dutch life entities only)
Solvency II
(regime as from 1-1-2016)
Available Capital Excludes future value of UL
business (Surrender Floor)
Excludes future value of UL
business
Includes future value of UL
business
Liability
valuation
ECB AAA/Swap Curve ECB AAA/Swap Curve Swap + Volatility Adjustment,
or Matching Adjustment
Assets Market value Market value Market value
÷ ÷ ÷ ÷
Required Capital
(SCR)
Volume based, 4% of life
reserves, 18% of non-life
premiums
Risk based, using Solvency II,
with risk changes to
mortgages and loans
Risk based, but possibility to
use internal model to better
reflect risks
=
Solvency Ratio (%) Available / Required capital Available / Required capital
* scaling factor (0.90)
Available / Required capital
Dealing with multiple capital regimes
Insurance NL Insurance Foreign Other Bank
Local GAAPWFT: market value Basel II/IIIIFRS: market value
Insurance NL Insurance Foreign Other Bank
Delta Lloyd Group
Local GAAPWFT: market value Basel II/IIIIFRS: market value
Insurance NL Insurance Foreign Other Bank
Delta Lloyd Group
Local GAAPWFT: market value Basel II/IIIIFRS: market value
IGD Group
solvency
Regulatory
solvency
insurance
entities
Regulatory
solvency
Delta Lloyd
Levens-
verzekering
Delta Lloyd Group
And increasing number of prudential supervisors
Same risk, same rules principles should be applied
UWV
Banks
Pension funds
Effects of differences in prudential supervision
• OFS Q1 2013 : “Insurers provide high guarantees”
• Banking annuities based on funding (mainly mortgages)
• Insurance annuity based on risk free curve (exit value)
• Revenues move from insurance to banking sector
Capital regimes determines consumer price
t=0 t=10
premium
payment
S-II
S-I
S-II*
ECB AAA
Swap
Swap + VB of
MA
110
104
100
2,0%
1,8%
1,6%
Bank Mortgages 90
2,8%
Need to stay in control ourselves
• More rule leads the wrong mindset, and draws
attention away from the real risks
• In the end, it is not about models and systems, but
about people taking the right decisions at the right time
• In practice, it’s a small group of people taking the ‘real’
decisions, requiring:
Risk-intelligent’ people (Dylan Evans): experience and
knowlegde to balance risk and return
• Transparency (market valuation)
• Act swiftly between Board, investment and risk
specialists
Risk / Return tradeoff very important:
‘It is not so much about what you know, but about your
sense of reality what you don’t know’
Agenda
I. Over 200 years of reliability and trust
II. Delta Lloyd’s view on risk management
III. Changing regulatory environment
IV. Questions & answers

Weitere ähnliche Inhalte

Was ist angesagt?

ALCO Process - Liquidity Risk Management
ALCO Process - Liquidity Risk ManagementALCO Process - Liquidity Risk Management
ALCO Process - Liquidity Risk Managementenelson13
 
The Facts About Managed Futures
The Facts About Managed FuturesThe Facts About Managed Futures
The Facts About Managed FuturesManagedFunds
 
Risk management at Royal Dutch Shell
Risk management at Royal Dutch ShellRisk management at Royal Dutch Shell
Risk management at Royal Dutch ShellSlidary
 
13.11.2008 Alm Jan 2008
13.11.2008   Alm  Jan 200813.11.2008   Alm  Jan 2008
13.11.2008 Alm Jan 2008deepakumari
 
Forum asset liability_management
Forum asset liability_managementForum asset liability_management
Forum asset liability_managementMiguel Revilla
 
Asset Liability Management in India Banks
Asset Liability Management in India BanksAsset Liability Management in India Banks
Asset Liability Management in India BanksAbhijeet Deshmukh
 
Implication of COSO in Treasury Function
Implication of COSO in Treasury FunctionImplication of COSO in Treasury Function
Implication of COSO in Treasury FunctionRahul Magan,MBA Finance
 
Asset liability management
Asset liability managementAsset liability management
Asset liability managementfiroze p
 
Asset liability management
Asset liability managementAsset liability management
Asset liability managementTeena George
 
Managing Risk In Alternative Investment Strategies - Hedge Funds
Managing Risk In Alternative Investment Strategies - Hedge FundsManaging Risk In Alternative Investment Strategies - Hedge Funds
Managing Risk In Alternative Investment Strategies - Hedge FundsMark Tuminello
 
Asset liability management ppt @ bec doms bagalkot mba finance
Asset liability management ppt @ bec doms bagalkot mba financeAsset liability management ppt @ bec doms bagalkot mba finance
Asset liability management ppt @ bec doms bagalkot mba financeBabasab Patil
 
Financial risk management ppt @ mba finance
Financial risk management  ppt @ mba financeFinancial risk management  ppt @ mba finance
Financial risk management ppt @ mba financeBabasab Patil
 

Was ist angesagt? (20)

ALCO Process - Liquidity Risk Management
ALCO Process - Liquidity Risk ManagementALCO Process - Liquidity Risk Management
ALCO Process - Liquidity Risk Management
 
The Facts About Managed Futures
The Facts About Managed FuturesThe Facts About Managed Futures
The Facts About Managed Futures
 
Risk management at Royal Dutch Shell
Risk management at Royal Dutch ShellRisk management at Royal Dutch Shell
Risk management at Royal Dutch Shell
 
Financial Risk Management Strategies
Financial Risk Management StrategiesFinancial Risk Management Strategies
Financial Risk Management Strategies
 
13.11.2008 Alm Jan 2008
13.11.2008   Alm  Jan 200813.11.2008   Alm  Jan 2008
13.11.2008 Alm Jan 2008
 
ALM- an introduction
ALM- an  introductionALM- an  introduction
ALM- an introduction
 
Portpolio mgt.ch01
Portpolio mgt.ch01Portpolio mgt.ch01
Portpolio mgt.ch01
 
Ch01
Ch01Ch01
Ch01
 
WealthManagement_PPT
WealthManagement_PPTWealthManagement_PPT
WealthManagement_PPT
 
Forum asset liability_management
Forum asset liability_managementForum asset liability_management
Forum asset liability_management
 
Asset Liability Management in India Banks
Asset Liability Management in India BanksAsset Liability Management in India Banks
Asset Liability Management in India Banks
 
Implication of COSO in Treasury Function
Implication of COSO in Treasury FunctionImplication of COSO in Treasury Function
Implication of COSO in Treasury Function
 
Asset liability management
Asset liability managementAsset liability management
Asset liability management
 
Asset Liability Management
Asset Liability ManagementAsset Liability Management
Asset Liability Management
 
Finance digest
Finance digestFinance digest
Finance digest
 
Asset liability management
Asset liability managementAsset liability management
Asset liability management
 
Managing Risk In Alternative Investment Strategies - Hedge Funds
Managing Risk In Alternative Investment Strategies - Hedge FundsManaging Risk In Alternative Investment Strategies - Hedge Funds
Managing Risk In Alternative Investment Strategies - Hedge Funds
 
Asset liability management ppt @ bec doms bagalkot mba finance
Asset liability management ppt @ bec doms bagalkot mba financeAsset liability management ppt @ bec doms bagalkot mba finance
Asset liability management ppt @ bec doms bagalkot mba finance
 
Financial risk management ppt @ mba finance
Financial risk management  ppt @ mba financeFinancial risk management  ppt @ mba finance
Financial risk management ppt @ mba finance
 
Liquidity Risk Oct 4
Liquidity Risk Oct 4Liquidity Risk Oct 4
Liquidity Risk Oct 4
 

Andere mochten auch

Solvency II presentation Dublin July 2010
Solvency II presentation Dublin July 2010Solvency II presentation Dublin July 2010
Solvency II presentation Dublin July 2010kingphilip1
 
Economic Capital
Economic CapitalEconomic Capital
Economic CapitalEric Kuo
 
Econ315 Money and Banking: Learning Unit 18: Assets, Liabilities, and Capital...
Econ315 Money and Banking: Learning Unit 18: Assets, Liabilities, and Capital...Econ315 Money and Banking: Learning Unit 18: Assets, Liabilities, and Capital...
Econ315 Money and Banking: Learning Unit 18: Assets, Liabilities, and Capital...sakanor
 
Tagetik Solvency II introduction
Tagetik Solvency II introductionTagetik Solvency II introduction
Tagetik Solvency II introductionEntrepreneur
 
Solvency II professional knowledge presentation training 27032013
Solvency II professional knowledge presentation training 27032013Solvency II professional knowledge presentation training 27032013
Solvency II professional knowledge presentation training 27032013CGI Germany
 
Solvency ii and return on equity; optimizing capital and manage the risk
Solvency ii and return on equity; optimizing capital and manage the riskSolvency ii and return on equity; optimizing capital and manage the risk
Solvency ii and return on equity; optimizing capital and manage the riskTranscendent Group
 

Andere mochten auch (7)

Zanders Academy, Presentation Treasury regulations
Zanders Academy, Presentation Treasury regulationsZanders Academy, Presentation Treasury regulations
Zanders Academy, Presentation Treasury regulations
 
Solvency II presentation Dublin July 2010
Solvency II presentation Dublin July 2010Solvency II presentation Dublin July 2010
Solvency II presentation Dublin July 2010
 
Economic Capital
Economic CapitalEconomic Capital
Economic Capital
 
Econ315 Money and Banking: Learning Unit 18: Assets, Liabilities, and Capital...
Econ315 Money and Banking: Learning Unit 18: Assets, Liabilities, and Capital...Econ315 Money and Banking: Learning Unit 18: Assets, Liabilities, and Capital...
Econ315 Money and Banking: Learning Unit 18: Assets, Liabilities, and Capital...
 
Tagetik Solvency II introduction
Tagetik Solvency II introductionTagetik Solvency II introduction
Tagetik Solvency II introduction
 
Solvency II professional knowledge presentation training 27032013
Solvency II professional knowledge presentation training 27032013Solvency II professional knowledge presentation training 27032013
Solvency II professional knowledge presentation training 27032013
 
Solvency ii and return on equity; optimizing capital and manage the risk
Solvency ii and return on equity; optimizing capital and manage the riskSolvency ii and return on equity; optimizing capital and manage the risk
Solvency ii and return on equity; optimizing capital and manage the risk
 

Ähnlich wie Presentatie Theo Berg - Delta Lloyd voor Zanders Risicomanagement Seminar 2014

Aegon The Netherlands Strategy Update
Aegon The Netherlands Strategy UpdateAegon The Netherlands Strategy Update
Aegon The Netherlands Strategy UpdateAegon
 
Presentación Nordea: Funds Experience 2016
Presentación Nordea: Funds Experience 2016Presentación Nordea: Funds Experience 2016
Presentación Nordea: Funds Experience 2016Rankia
 
The Art of Risk Management- Hedging Un(der)rewarded Risk
The Art of Risk Management- Hedging Un(der)rewarded RiskThe Art of Risk Management- Hedging Un(der)rewarded Risk
The Art of Risk Management- Hedging Un(der)rewarded RiskRedington
 
Annual Report 2012 – Credit Suisse Group AG
Annual Report 2012 – Credit Suisse Group AG Annual Report 2012 – Credit Suisse Group AG
Annual Report 2012 – Credit Suisse Group AG Credit Suisse
 
European Market Infrastructure Regulation (EMIR)
European Market Infrastructure Regulation (EMIR)European Market Infrastructure Regulation (EMIR)
European Market Infrastructure Regulation (EMIR)Redington
 
Klöckner & Co SE Analysts' and Investors' Presentation FY 2014 Results
Klöckner & Co SE Analysts' and Investors' Presentation FY 2014 ResultsKlöckner & Co SE Analysts' and Investors' Presentation FY 2014 Results
Klöckner & Co SE Analysts' and Investors' Presentation FY 2014 ResultsKlöckner & Co SE
 
Presentacion Oddo: Funds Experience 2016
Presentacion Oddo: Funds Experience 2016Presentacion Oddo: Funds Experience 2016
Presentacion Oddo: Funds Experience 2016Rankia
 
Deutsche EuroShop | Annual Report 2012
Deutsche EuroShop | Annual Report 2012Deutsche EuroShop | Annual Report 2012
Deutsche EuroShop | Annual Report 2012Deutsche EuroShop AG
 
Morgan Stanley European Financials Conference (London)
Morgan Stanley European Financials Conference (London)Morgan Stanley European Financials Conference (London)
Morgan Stanley European Financials Conference (London)Aegon
 
Goldman Sachs European Financials Conference
Goldman Sachs European Financials ConferenceGoldman Sachs European Financials Conference
Goldman Sachs European Financials ConferenceAegon
 
En thomas palmblad
En thomas palmbladEn thomas palmblad
En thomas palmbladAnna Kowalik
 
Michael Stefan - Actuarial Society 2011 Convention Template
Michael Stefan - Actuarial Society 2011 Convention TemplateMichael Stefan - Actuarial Society 2011 Convention Template
Michael Stefan - Actuarial Society 2011 Convention TemplateMichael Stefan
 
Debt market in israel
Debt market in israelDebt market in israel
Debt market in israelNitzan Shiri
 
What are the Current Dynamics Driving UK Pensions Investment?
What are the Current Dynamics Driving UK Pensions Investment?What are the Current Dynamics Driving UK Pensions Investment?
What are the Current Dynamics Driving UK Pensions Investment?Redington
 
Company Profile 2012
Company Profile 2012Company Profile 2012
Company Profile 2012Credit Suisse
 

Ähnlich wie Presentatie Theo Berg - Delta Lloyd voor Zanders Risicomanagement Seminar 2014 (20)

2012 09 Infoline Guaranteed Life Bonds
2012 09 Infoline Guaranteed Life Bonds2012 09 Infoline Guaranteed Life Bonds
2012 09 Infoline Guaranteed Life Bonds
 
Aegon The Netherlands Strategy Update
Aegon The Netherlands Strategy UpdateAegon The Netherlands Strategy Update
Aegon The Netherlands Strategy Update
 
Presentación Nordea: Funds Experience 2016
Presentación Nordea: Funds Experience 2016Presentación Nordea: Funds Experience 2016
Presentación Nordea: Funds Experience 2016
 
The Art of Risk Management- Hedging Un(der)rewarded Risk
The Art of Risk Management- Hedging Un(der)rewarded RiskThe Art of Risk Management- Hedging Un(der)rewarded Risk
The Art of Risk Management- Hedging Un(der)rewarded Risk
 
Annual Report 2012 – Credit Suisse Group AG
Annual Report 2012 – Credit Suisse Group AG Annual Report 2012 – Credit Suisse Group AG
Annual Report 2012 – Credit Suisse Group AG
 
Erasmus college
Erasmus collegeErasmus college
Erasmus college
 
capstruc.ppt
capstruc.pptcapstruc.ppt
capstruc.ppt
 
European Market Infrastructure Regulation (EMIR)
European Market Infrastructure Regulation (EMIR)European Market Infrastructure Regulation (EMIR)
European Market Infrastructure Regulation (EMIR)
 
Lloyd's strategy 2010_2012
Lloyd's strategy 2010_2012Lloyd's strategy 2010_2012
Lloyd's strategy 2010_2012
 
Klöckner & Co SE Analysts' and Investors' Presentation FY 2014 Results
Klöckner & Co SE Analysts' and Investors' Presentation FY 2014 ResultsKlöckner & Co SE Analysts' and Investors' Presentation FY 2014 Results
Klöckner & Co SE Analysts' and Investors' Presentation FY 2014 Results
 
Presentacion Oddo: Funds Experience 2016
Presentacion Oddo: Funds Experience 2016Presentacion Oddo: Funds Experience 2016
Presentacion Oddo: Funds Experience 2016
 
Deutsche EuroShop | Annual Report 2012
Deutsche EuroShop | Annual Report 2012Deutsche EuroShop | Annual Report 2012
Deutsche EuroShop | Annual Report 2012
 
Morgan Stanley European Financials Conference (London)
Morgan Stanley European Financials Conference (London)Morgan Stanley European Financials Conference (London)
Morgan Stanley European Financials Conference (London)
 
Goldman Sachs European Financials Conference
Goldman Sachs European Financials ConferenceGoldman Sachs European Financials Conference
Goldman Sachs European Financials Conference
 
En thomas palmblad
En thomas palmbladEn thomas palmblad
En thomas palmblad
 
En thomas palmblad
En thomas palmbladEn thomas palmblad
En thomas palmblad
 
Michael Stefan - Actuarial Society 2011 Convention Template
Michael Stefan - Actuarial Society 2011 Convention TemplateMichael Stefan - Actuarial Society 2011 Convention Template
Michael Stefan - Actuarial Society 2011 Convention Template
 
Debt market in israel
Debt market in israelDebt market in israel
Debt market in israel
 
What are the Current Dynamics Driving UK Pensions Investment?
What are the Current Dynamics Driving UK Pensions Investment?What are the Current Dynamics Driving UK Pensions Investment?
What are the Current Dynamics Driving UK Pensions Investment?
 
Company Profile 2012
Company Profile 2012Company Profile 2012
Company Profile 2012
 

Mehr von Zanders Treasury, Risk and Finance

Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...Zanders Treasury, Risk and Finance
 
Presenatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 20...
Presenatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 20...Presenatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 20...
Presenatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 20...Zanders Treasury, Risk and Finance
 
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...Zanders Treasury, Risk and Finance
 
Presentatie Zanders Risicomanagement Seminar, Hermitage Amsterdam, 9 april 20...
Presentatie Zanders Risicomanagement Seminar, Hermitage Amsterdam, 9 april 20...Presentatie Zanders Risicomanagement Seminar, Hermitage Amsterdam, 9 april 20...
Presentatie Zanders Risicomanagement Seminar, Hermitage Amsterdam, 9 april 20...Zanders Treasury, Risk and Finance
 
Presentatie Pieter Emmen - Rabobank voor Zanders Risicomanagement Seminar 2014
Presentatie Pieter Emmen - Rabobank voor Zanders Risicomanagement Seminar 2014Presentatie Pieter Emmen - Rabobank voor Zanders Risicomanagement Seminar 2014
Presentatie Pieter Emmen - Rabobank voor Zanders Risicomanagement Seminar 2014Zanders Treasury, Risk and Finance
 
Presentatie Paul Hilbers - DNB voor Zanders Risicomanagement Seminar 2014
Presentatie Paul Hilbers - DNB voor Zanders Risicomanagement Seminar 2014Presentatie Paul Hilbers - DNB voor Zanders Risicomanagement Seminar 2014
Presentatie Paul Hilbers - DNB voor Zanders Risicomanagement Seminar 2014Zanders Treasury, Risk and Finance
 
Zanders Academy, EMIR draft regulatory technical standards on contracts havin...
Zanders Academy, EMIR draft regulatory technical standards on contracts havin...Zanders Academy, EMIR draft regulatory technical standards on contracts havin...
Zanders Academy, EMIR draft regulatory technical standards on contracts havin...Zanders Treasury, Risk and Finance
 
Coen Weerkamp - Zanders seminar pensioenfondsen, 7 februari 2013
Coen Weerkamp - Zanders seminar pensioenfondsen, 7 februari 2013Coen Weerkamp - Zanders seminar pensioenfondsen, 7 februari 2013
Coen Weerkamp - Zanders seminar pensioenfondsen, 7 februari 2013Zanders Treasury, Risk and Finance
 
Jon Vogelzang - Zanders seminar pensioenfondsen, 7 februari 2013
Jon Vogelzang - Zanders seminar pensioenfondsen, 7 februari 2013Jon Vogelzang - Zanders seminar pensioenfondsen, 7 februari 2013
Jon Vogelzang - Zanders seminar pensioenfondsen, 7 februari 2013Zanders Treasury, Risk and Finance
 
Oscar van Angeren - Zanders seminar pensioenfondsen, 7 februari 2013
Oscar van Angeren - Zanders seminar pensioenfondsen, 7 februari 2013Oscar van Angeren - Zanders seminar pensioenfondsen, 7 februari 2013
Oscar van Angeren - Zanders seminar pensioenfondsen, 7 februari 2013Zanders Treasury, Risk and Finance
 

Mehr von Zanders Treasury, Risk and Finance (20)

2022 Zanders Risk Management Seminar.pdf
2022 Zanders Risk Management Seminar.pdf2022 Zanders Risk Management Seminar.pdf
2022 Zanders Risk Management Seminar.pdf
 
Foto's be treasury_risk_seminar
Foto's be treasury_risk_seminarFoto's be treasury_risk_seminar
Foto's be treasury_risk_seminar
 
Onderzoek Zanders Risicomanagement Seminar
Onderzoek Zanders Risicomanagement SeminarOnderzoek Zanders Risicomanagement Seminar
Onderzoek Zanders Risicomanagement Seminar
 
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
 
Presenatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 20...
Presenatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 20...Presenatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 20...
Presenatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 20...
 
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
Presentatie Zanders Risicomanagement Seminar, Hermitage, Amsterdam, 9 april 2...
 
Presentatie Zanders Risicomanagement Seminar, Hermitage Amsterdam, 9 april 20...
Presentatie Zanders Risicomanagement Seminar, Hermitage Amsterdam, 9 april 20...Presentatie Zanders Risicomanagement Seminar, Hermitage Amsterdam, 9 april 20...
Presentatie Zanders Risicomanagement Seminar, Hermitage Amsterdam, 9 april 20...
 
Zanders NGO Event December 2014: UNHCR
Zanders NGO Event December 2014: UNHCRZanders NGO Event December 2014: UNHCR
Zanders NGO Event December 2014: UNHCR
 
Zanders NGO Event December 2014: Zanders
Zanders NGO Event December 2014: ZandersZanders NGO Event December 2014: Zanders
Zanders NGO Event December 2014: Zanders
 
Zanders seminar pensioenfondsen - Gerbert van Grootheest
Zanders seminar pensioenfondsen - Gerbert van GrootheestZanders seminar pensioenfondsen - Gerbert van Grootheest
Zanders seminar pensioenfondsen - Gerbert van Grootheest
 
Zanders seminar pensioenfondsen - Iris Sluiter
Zanders seminar pensioenfondsen - Iris SluiterZanders seminar pensioenfondsen - Iris Sluiter
Zanders seminar pensioenfondsen - Iris Sluiter
 
Zanders seminar pensioenfondsen - Jules Koekkoek
Zanders seminar pensioenfondsen - Jules KoekkoekZanders seminar pensioenfondsen - Jules Koekkoek
Zanders seminar pensioenfondsen - Jules Koekkoek
 
Zanders seminar pensioenfondsen - Oscar van Angeren
Zanders seminar pensioenfondsen - Oscar van AngerenZanders seminar pensioenfondsen - Oscar van Angeren
Zanders seminar pensioenfondsen - Oscar van Angeren
 
Presentatie Pieter Emmen - Rabobank voor Zanders Risicomanagement Seminar 2014
Presentatie Pieter Emmen - Rabobank voor Zanders Risicomanagement Seminar 2014Presentatie Pieter Emmen - Rabobank voor Zanders Risicomanagement Seminar 2014
Presentatie Pieter Emmen - Rabobank voor Zanders Risicomanagement Seminar 2014
 
Presentatie Paul Hilbers - DNB voor Zanders Risicomanagement Seminar 2014
Presentatie Paul Hilbers - DNB voor Zanders Risicomanagement Seminar 2014Presentatie Paul Hilbers - DNB voor Zanders Risicomanagement Seminar 2014
Presentatie Paul Hilbers - DNB voor Zanders Risicomanagement Seminar 2014
 
Zanders Academy, Q&A on EMIR implementation
Zanders Academy, Q&A on EMIR implementationZanders Academy, Q&A on EMIR implementation
Zanders Academy, Q&A on EMIR implementation
 
Zanders Academy, EMIR draft regulatory technical standards on contracts havin...
Zanders Academy, EMIR draft regulatory technical standards on contracts havin...Zanders Academy, EMIR draft regulatory technical standards on contracts havin...
Zanders Academy, EMIR draft regulatory technical standards on contracts havin...
 
Coen Weerkamp - Zanders seminar pensioenfondsen, 7 februari 2013
Coen Weerkamp - Zanders seminar pensioenfondsen, 7 februari 2013Coen Weerkamp - Zanders seminar pensioenfondsen, 7 februari 2013
Coen Weerkamp - Zanders seminar pensioenfondsen, 7 februari 2013
 
Jon Vogelzang - Zanders seminar pensioenfondsen, 7 februari 2013
Jon Vogelzang - Zanders seminar pensioenfondsen, 7 februari 2013Jon Vogelzang - Zanders seminar pensioenfondsen, 7 februari 2013
Jon Vogelzang - Zanders seminar pensioenfondsen, 7 februari 2013
 
Oscar van Angeren - Zanders seminar pensioenfondsen, 7 februari 2013
Oscar van Angeren - Zanders seminar pensioenfondsen, 7 februari 2013Oscar van Angeren - Zanders seminar pensioenfondsen, 7 februari 2013
Oscar van Angeren - Zanders seminar pensioenfondsen, 7 februari 2013
 

Kürzlich hochgeladen

MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.Arifa Saeed
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESKumarJayaraman3
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdfAdnet Communications
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfMichael Silva
 
The CBR Covered Bond Investor Roundtable 2024
The CBR Covered Bond Investor Roundtable 2024The CBR Covered Bond Investor Roundtable 2024
The CBR Covered Bond Investor Roundtable 2024Neil Day
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingHenry Tapper
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismBrian Lin
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Commonwealth
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?Stephen Perrenod
 
2024.03 Strategic Resources Presentation
2024.03 Strategic Resources Presentation2024.03 Strategic Resources Presentation
2024.03 Strategic Resources PresentationAdnet Communications
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfAdnet Communications
 
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINTACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINTindexPub
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent PreferencesGRAPE
 

Kürzlich hochgeladen (20)

MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
 
Effects & Policies Of Bank Consolidation
Effects & Policies Of Bank ConsolidationEffects & Policies Of Bank Consolidation
Effects & Policies Of Bank Consolidation
 
Monthly Economic Monitoring of Ukraine No.230, March 2024
Monthly Economic Monitoring of Ukraine No.230, March 2024Monthly Economic Monitoring of Ukraine No.230, March 2024
Monthly Economic Monitoring of Ukraine No.230, March 2024
 
Digital Financial Services Taxation in Africa
Digital Financial Services Taxation in AfricaDigital Financial Services Taxation in Africa
Digital Financial Services Taxation in Africa
 
E-levy and Merchant Payment Exemption in Ghana
E-levy and Merchant Payment Exemption in GhanaE-levy and Merchant Payment Exemption in Ghana
E-levy and Merchant Payment Exemption in Ghana
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdf
 
The CBR Covered Bond Investor Roundtable 2024
The CBR Covered Bond Investor Roundtable 2024The CBR Covered Bond Investor Roundtable 2024
The CBR Covered Bond Investor Roundtable 2024
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB funding
 
Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024
 
Mobile Money Taxes: Knowledge, Perceptions and Politics: The Case of Ghana
Mobile Money Taxes: Knowledge, Perceptions and Politics: The Case of GhanaMobile Money Taxes: Knowledge, Perceptions and Politics: The Case of Ghana
Mobile Money Taxes: Knowledge, Perceptions and Politics: The Case of Ghana
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?
 
2024.03 Strategic Resources Presentation
2024.03 Strategic Resources Presentation2024.03 Strategic Resources Presentation
2024.03 Strategic Resources Presentation
 
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
 
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINTACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent Preferences
 

Presentatie Theo Berg - Delta Lloyd voor Zanders Risicomanagement Seminar 2014

  • 1. Risk management in a challenging environment Zanders Risico management seminar Theo Berg ,, 27 maart 2014
  • 2. Agenda I. Over 200 years of reliability and trust II. Delta Lloyd’s view on risk management III. Changing regulatory environment IV. Questions & answers
  • 3. Building on 200 years of history 1807 1967 1969 1999 2002 2003 Hollandsche Societeit Nedlloyd Delta Nuts / OHRA Delta Lloyd Delta Lloyd Nuts OHRA Amstleven Delta Lloyd NV ABN AMRO Insurance IPO2009 1973 delisting
  • 4. • A strong Group: Dutch market leader in new Life business (NAPI € 431m) • An €4.7bn GWP/76 bln. AuM company: • Life & Pension • General Insurance • Asset Management • Banking • Brands: Delta Lloyd, OHRA and ABN AMRO • Approx. 5,200 permanent staff, focus on the Netherlands and Belgium • Listed in Amsterdam and Brussels Delta Lloyd Group: reliable partner since 1807 FY 2013FY 2012 IGD Group solvency ratio 184%177% Net operational result (€m) 430404 FY 2013FY 2012
  • 5. Financial services – A challenging environment....
  • 6. Economic environment challenging Uncertainty on pensions Real estate crisis Unemployment rising 20 %
  • 7. 97 63 41 28 164 140 114 76 71 50 43 40 251 224 210 183 75 76 77 72 181 149 127 69 0 100 200 300 400 500 600 700 800 900 2009 2010 2011 2012 Mortgages Term Annuities Funeral Pension Saving • Unit-linked misseling, total compensation exceeds € 2 billion, 95% drop in sales • Market CAGR -/- 18% a year!, New production halved in 4 years • Bank savings increased with 39% in 2011 and exceeds individual life market • Only in 2009 positive technical result New Business (APE) in €m Individual life market fastly contracting, Group life market moving from DB to DC 839 702 612 468
  • 8. Challenging Non-life market • Sales volume follow GDP • Limited profit on insurance coverage • Gradual decrease in CoR • Crisis effects claims culture • “In de brand, uit de brand” • WGA-ER (disability) coverage misperceived by insurers, effecting capital ratio’s Results of Non-life insurers, Combined operating Ratio 95 96 97 98 99 100 101 102 2006 2007 2008 2009 2010 2011 2012 2013 Investment result important part of surplus generation insurance
  • 9. Agenda I. Over 200 years of reliability and trust II. Delta Lloyd’s view on risk management III. Changing regulatory environment IV. Questions & answers
  • 10. History of Value reporting • Dutch GAAP, using amortisation method • Liabilities value @ historical cost price : 4% interest • Embedded Value concept started in early ’90s 19/20th Century 2002/2005 • Introduction IFRS and regulatory reporting on market values • Delta Lloyd decided to use market interest for valuing liabilities • Assets at marked value 2010+ • New mortgages valued @ amortised cost • Minimum replicating cost introduced for market interest • Valuation difference with regulatory reporting 2008/2009 • Alignment with Solvency II • Back to EEV/Cash flow reporting • Introduction of UFR, IFRS and regulatory
  • 11. Mismatch liability valuation and assets 1. What is the value of the liability? 2. Can we invest in the same curve? Do we want to? SWAP ECB – AAA Collateralised – AAA Swap + liquidity premium 3. What is our actual investment strategy? Mix of debt, credit, equity and real estate Difficult Possible Difficult Possible, but no exact match Mismatch  volatility; required capital
  • 13. Volatile valuation curve developments 0,00% 1,00% 2,00% 3,00% 4,00% 5,00% 6,00% 2007 2008 2008 2008 2009 2009 2010 2010 2010 2011 2011 2011 2012 2012 2012 2013 COLL-AAA ECB AAA Swap Credit crisis Spanish downgrades QE Euro crisis
  • 14. Effect of curve development 0 1.000 2.000 3.000 4.000 5.000 6.000 2007 2008 2009 2010 2011 2012 2013 IFRS equity IGD equity Positive effect A/L mismatch Negative effect A/L mismatch IFRS profit 745 -153 -81 671 -153 -1.465 168
  • 15. Align all balance sheet elements Duration analysis impacted by valuation concept Balance sheet of Delta Lloyd Group (Q3 2012 in bn) Life Liabilities Bank, GI, Germany, AM, and Other Shareholders’ Funds UL Liabilities Life Equity Life UL Life FI €29 €13 €3 €34 €23 €13 €3 €34 Life mortgages, property €6 ASSETS LIABILITIES • Duration 13 • Duration 15 • Duration 0 Bank, GI, Germany, AM, and Other)
  • 16. Exit price vs. discounted cash flows Exit price assets: Transaction value assets: • Representative similar market instruments • Sales value house, based on similar transactions • Sales value mortgages, based on funding spreads Exit value liabilities: Value of liabilities for a willing buyer: • Expected value • Option price • Margin for uncertainty Discounted cash flows, or matching adjustment: • Matching cash flows of assets and liabilities per duration • In case cash flows emerge in same time frame similar valuation • Buffer needed for defaults and fluctuations in cash flows Latest Solvency II proposals allow this mechanic, but not for rental income
  • 17. Interest rate risk: limited downside risk Interest rates ‘Normal’ times: •Interest rate risk is non- rewarding •Hedging is cheap In extremely low interest rate environment: higher probability of significant increases than decreases Current models already reflect non-negativity of interest rates
  • 18. Equity hedging: downside protected, upside left open • Derivatives on equity indices ― better liquidity and lower premium than on individual stocks ― hedge against market risk, confident about portfolio • Preference for listed derivatives and long puts, other instruments if needed in case of high volatility • Sensible spread ― different exercise dates (roof tile construction) ― different exercise prices • Hedge reduced after underlying equity portfolio decreased Equity derivatives - value scenarios
  • 19. Matching spread risk is vitally important •Exposure to credit spreads is vital for supporting long-term guarantee business •Investments by insurers are also important for the Dutch and European economy, especially with banks lending less •As long as defaults are negligible, spread risk should not ‘hurt’ •We strongly support the Volatility and Matching Adjustment concepts
  • 20. Agenda I. Over 200 years of reliability and trust II. Delta Lloyd’s view on risk management III. Changing regulatory environment IV. Questions & answers
  • 21. Changing capital regimes • Since beginning ’70’s Solvency I regime: — legal framework, volume based required capital — Liability Adequacy Test (“LAT”) in The Netherlands — Europe: cost-price + Solvency I (current regime) Solvency II (regime as from 1-1-2016) • End ’90’s decision to move to new European framework — market value based, risk weighted capitals — governance, risk management and information are other key elements of this system • 2013: DNB interim measures (Solvency 1.5) — Theoretical Solvency Criterion (“TSC”) for dividend payments of Dutch life insurance entities — Dutch ORSA (“ERB”) included in regulatory returns Solvency 1.5 (requirement for 2014-2015)
  • 22. Available Capital Build up of Solvency I capital Assets Liabilities Exit price Best Estimate Liability Best Estimate Liability Risk Margin2 Surrender Floor1 Market Value Buffer Solvency I • Required capital ― volume based ― 4% of life reserves; 18% of general insurance premiums • Available capital: Market value of assets (based on exit price) -/- Best Estimate Liability -/- Risk Margin -/- Surrender Floor • Available capital ≠ embedded value • Solvency ratio = 1. Safety margin against policyholders liquidating their assets 2. Margin for uncertainty around Best Estimate Liability Available capital Required capital Required Capital (100%)
  • 23. Build up of Solvency II capital Assets Liabilities Best Estimate Liability Solvency II • Required capital ― risk based ― based on 99.5% confidence interval ― based on BBB level (100%) ― buffer provides insight in credit standing above BBB level • Available capital: Market value of assets (based on exit price) -/- Best Estimate Liability -/- Risk Margin • Surrender Floor included as available capital • Available capital ≠ embedded value • Solvency ratio = Available capital Required capital Available Capital Marktwaarde Exit price Best Estimate Liability Best Estimate Liability Market Value Buffer Risk margin Required Capital (100%)
  • 24. Solvency I to Solvency II: from volume to risk based Capital elements Solvency I (current regime) Solvency 1.5 (requirement for 2014-2015; dutch life entities only) Solvency II (regime as from 1-1-2016) Available Capital Excludes future value of UL business (Surrender Floor) Excludes future value of UL business Includes future value of UL business Liability valuation ECB AAA/Swap Curve ECB AAA/Swap Curve Swap + Volatility Adjustment, or Matching Adjustment Assets Market value Market value Market value ÷ ÷ ÷ ÷ Required Capital (SCR) Volume based, 4% of life reserves, 18% of non-life premiums Risk based, using Solvency II, with risk changes to mortgages and loans Risk based, but possibility to use internal model to better reflect risks = Solvency Ratio (%) Available / Required capital Available / Required capital * scaling factor (0.90) Available / Required capital
  • 25. Dealing with multiple capital regimes Insurance NL Insurance Foreign Other Bank Local GAAPWFT: market value Basel II/IIIIFRS: market value Insurance NL Insurance Foreign Other Bank Delta Lloyd Group Local GAAPWFT: market value Basel II/IIIIFRS: market value Insurance NL Insurance Foreign Other Bank Delta Lloyd Group Local GAAPWFT: market value Basel II/IIIIFRS: market value IGD Group solvency Regulatory solvency insurance entities Regulatory solvency Delta Lloyd Levens- verzekering Delta Lloyd Group
  • 26. And increasing number of prudential supervisors
  • 27. Same risk, same rules principles should be applied UWV Banks Pension funds
  • 28. Effects of differences in prudential supervision • OFS Q1 2013 : “Insurers provide high guarantees” • Banking annuities based on funding (mainly mortgages) • Insurance annuity based on risk free curve (exit value) • Revenues move from insurance to banking sector
  • 29. Capital regimes determines consumer price t=0 t=10 premium payment S-II S-I S-II* ECB AAA Swap Swap + VB of MA 110 104 100 2,0% 1,8% 1,6% Bank Mortgages 90 2,8%
  • 30. Need to stay in control ourselves • More rule leads the wrong mindset, and draws attention away from the real risks • In the end, it is not about models and systems, but about people taking the right decisions at the right time • In practice, it’s a small group of people taking the ‘real’ decisions, requiring: Risk-intelligent’ people (Dylan Evans): experience and knowlegde to balance risk and return • Transparency (market valuation) • Act swiftly between Board, investment and risk specialists Risk / Return tradeoff very important: ‘It is not so much about what you know, but about your sense of reality what you don’t know’
  • 31. Agenda I. Over 200 years of reliability and trust II. Delta Lloyd’s view on risk management III. Changing regulatory environment IV. Questions & answers