Consolidated Interim Financial Statements for the first half year

Consolidated Interim Financial Statements for the first half-year of 2008 Brussels/Utrecht, 4 August 2008 2 | Consolidated Interim Financial Statements for the first half-year 2008 Contents Consolidated balance sheet .............................................................................................................................................. 4 Consolidated income statement ....................................................................................................................................... 5 Consolidated statement of changes in equity .................................................................................................................. 6 Consolidated cash flow statement.................................................................................................................................... 7 General Notes .................................................................................................................................................................... 9 1 Summary accounting policies and principles of consolidation .......................................................................... 10 1.1 Basis of accounting ..................................................................................................................................... 10 1.2 Changes in accounting policies.................................................................................................................... 10 1.3 Accounting estimates .................................................................................................................................. 11 1.4 Determination of accounting policies............................................................................................................ 11 1.5 Segment reporting....................................................................................................................................... 12 1.6 Scope of consolidation ................................................................................................................................ 12 1.7 Presentation and disclosures ....................................................................................................................... 13 Acquisitions and disposals................................................................................................................................... 14 2.1 Acquisitions ................................................................................................................................................. 14 2.2 Disposals..................................................................................................................................................... 14 Outstanding shares and earnings per share........................................................................................................ 16 Dividend ................................................................................................................................................................ 18 Supervision and solvency..................................................................................................................................... 19 5.1 Fortis consolidated ...................................................................................................................................... 19 5.2 Banking ....................................................................................................................................................... 19 5.3 Insurance..................................................................................................................................................... 20 5.4 Fortis core equity target and total capital...................................................................................................... 20 2 3 4 5 Explanatory notes to the balance sheet.......................................................................................................................... 23 6 7 8 9 Assets and liabilities held for trading ................................................................................................................... 24 Due from banks..................................................................................................................................................... 26 Due from customers ............................................................................................................................................. 27 Investments........................................................................................................................................................... 29 9.1 Investments available for sale....................................................................................................................... 30 9.2 Net unrealised gains and losses on Available for sale investments included in equity .................................... 31 9.3 Investments held at fair value through profit or loss ...................................................................................... 32 9.4 Structured Credit Instruments ...................................................................................................................... 33 9.5 Real estate .................................................................................................................................................. 35 Acquisition of ABN AMRO .................................................................................................................................... 36 10.1 Business units acquired ............................................................................................................................... 36 10.2 Recent developments .................................................................................................................................. 36 10.3 Accounting aspects ..................................................................................................................................... 38 Due to banks......................................................................................................................................................... 43 Due to customers ................................................................................................................................................. 44 Liabilities arising from insurance and investment contracts............................................................................... 45 10 11 12 13 Consolidated Interim Financial Statements for the first half-year 2008 | 3 Explanatory notes to the income statement ................................................................................................................... 47 14 15 16 17 18 19 20 21 Interest income ..................................................................................................................................................... 48 Insurance premiums ............................................................................................................................................. 49 Realised capital gains (losses) on investments ................................................................................................... 51 Other realised and unrealised gains and losses.................................................................................................. 52 Fee and commission income ............................................................................................................................... 53 Interest expense ................................................................................................................................................... 54 Insurance claims and benefits ............................................................................................................................. 55 Change in impairments......................................................................................................................................... 57 Explanatory note on segment reporting.......................................................................................................................... 59 22 Information on segments...................................................................................................................................... 60 22.1 General information...................................................................................................................................... 60 22.2 Banking ....................................................................................................................................................... 60 22.3 Insurance..................................................................................................................................................... 62 22.4 General........................................................................................................................................................ 63 22.5 Balance sheet by activity.............................................................................................................................. 64 22.6 Income statement by activity........................................................................................................................ 66 22.7 Income statement of Banking segments ...................................................................................................... 68 22.8 Income statement of Insurance segments .................................................................................................... 70 Explanatory note to the Insurance income statement.................................................................................................... 73 23 Technical and non-technical result ...................................................................................................................... 74 23.1 Reconciliation .............................................................................................................................................. 74 23.2 Technical result............................................................................................................................................ 75 23.3 Non-technical result..................................................................................................................................... 76 23.4 Technical result Life and Non-life by branch and insurance segment ............................................................ 77 23.5 Non-life financial information by branch ........................................................................................................ 78 23.6 Non-life ratios .............................................................................................................................................. 78 Additional explanatory notes........................................................................................................................................... 79 24 25 26 Assets under management................................................................................................................................... 80 Contingent liabilities ............................................................................................................................................. 82 Post-balance sheet date events .......................................................................................................................... 83 Statement of the Board of Directors ............................................................................................................................... 84 Review report ................................................................................................................................................................... 85 Annex – Quarterly income statements by activity and by segment ............................................................................... 87 Income statement – by activity ................................................................................................................................ 88 Income statement – Banking segments................................................................................................................... 98 Income statement – Insurance segments .............................................................................................................. 110 All amounts reported in these Interim Financial Statements are denominated in millions of euros, unless stated otherwise. Because figures have been rounded off, small differences with previously reported figures may occur. 4 | Consolidated Interim Financial Statements for the first half-year 2008 Consolidated balance sheet Note 30 June 2008 31 December 2007 Assets Cash and cash equivalents Assets held for trading Due from banks Due from customers Investments: Held to maturity Available for sale Held at fair value through profit or loss Investment property Associates and joint ventures 6 7 8 9 3,938 152,755 4,983 3,870 27,670 193,216 Investments related to unit-linked contracts Reinsurance and other receivables Property, plant and equipment Goodwill and other intangible assets Non-financial assets and disposal groups classified as held for sale Accrued interest and other assets Total assets 29,873 13,375 3,920 6,180 1,358 104,906 974,343 80,214 871,179 4,234 164,089 6,193 3,656 28,108 206,280 31,120 9,718 4,004 3,339 20,750 110,671 133,418 356,676 26,360 74,800 119,036 316,308 Liabilities Liabilities held for trading Due to banks Due to customers Liabilities arising from insurance and investment contracts Liabilities related to unit-linked contracts Debt certificates Subordinated liabilities Other borrowings Provisions Current and deferred tax liabilities Accrued interest and other liabilities Liabilities related to assets held for sale Total liabilities 6 11 12 13 129,557 216,101 290,737 67,296 30,533 109,054 23,150 1,678 1,001 2,566 72,078 181 943,932 836,985 89,589 192,431 262,298 64,732 31,788 102,073 21,925 3,018 899 2,490 65,742 Shareholders' equity Minority interests Total equity 29,243 1,168 30,411 33,047 1,147 34,194 Total liabilities and equity 974,343 871,179 Consolidated Interim Financial Statements for the first half-year 2008 | 5 Consolidated income statement First half-year Note Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 16 17 18 14 15 52,131 7,917 661 304 552 1,030 2,344 ( 2,218 ) 452 63,173 43,387 7,890 579 81 928 900 2,100 1,138 401 57,404 26,614 3,418 448 184 131 522 1,268 ( 390 ) 280 32,475 22,535 3,632 383 36 529 509 1,076 686 205 29,591 25,517 4,499 213 120 421 508 1,076 ( 1,828 ) 172 30,698 2008 First half-year 2007 Second quarter 2008 Second quarter 2007 First quarter 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses 21 19 20 ( 48,405 ) ( 7,686 ) 2,232 ( 1,235 ) ( 1,385 ) ( 367 ) ( 2,543 ) ( 1,686 ) ( 61,075 ) ( 39,636 ) ( 7,384 ) ( 1,548 ) ( 46 ) ( 1,141 ) ( 291 ) ( 2,396 ) ( 1,754 ) ( 54,196 ) ( 24,798 ) ( 3,567 ) 624 ( 711 ) ( 732 ) ( 199 ) ( 1,276 ) ( 875 ) ( 31,534 ) ( 20,594 ) ( 3,535 ) ( 688 ) ( 14 ) ( 577 ) ( 148 ) ( 1,231 ) ( 922 ) ( 27,709 ) ( 23,607 ) ( 4,119 ) 1,608 ( 524 ) ( 653 ) ( 168 ) ( 1,267 ) ( 811 ) ( 29,541 ) Profit before taxation 2,098 3,208 941 1,882 1,157 Income tax expense Net profit for the period ( 431 ) 1,667 ( 414 ) 2,794 ( 107 ) 834 ( 265 ) 1,617 ( 324 ) 833 Net gain on discontinued operations Net profit before minority interests 24 1,691 36 2,830 24 858 23 1,640 833 Net profit attributable to minority interests Net profit attributable to shareholders 53 1,638 48 2,782 28 830 25 1,615 25 808 Per share data (EUR) Basic earnings per share Basic earnings per share before net gain on discontinued operations Diluted earnings per share 3 0.75 0.74 0.74 1.80 1.77 1.77 6 | Consolidated Interim Financial Statements for the first half-year 2008 Consolidated statement of changes in equity Share Share Capital Premium reserve Other reserves Currency Translation Reserve Net profit attributable to Shareholders Unrealised gains and losses Share holders' Equity Minority Interests Total equity Balance at 1 January 2007 6,316 11,783 ( 5,689 ) ( 146 ) 4,351 4,029 20,644 907 21,551 Net profit for the period Revaluation of investments Foreign exchange differences Other non-owner changes in equity Total non-owner changes in equity 11 11 62 62 2,782 ( 1,282 ) (1) ( 18 ) 2,782 ( 1,301 ) 2,782 ( 1,282 ) 61 (7) 1,554 48 ( 44 ) 3 2,830 ( 1,326 ) 64 (7) 7 1,561 Transfer Dividend Increase of capital Treasury shares Other changes in equity Balance at 30 June 2007 6,325 11,828 9 45 4,351 ( 1,062 ) ( 4,351 ) ( 1,062 ) 54 ( 28 ) 20 ( 1,090 ) 74 38 (2) (2) 22,132 38 38 ( 2,351 ) ( 84 ) 2,782 2,728 21,228 904 Balance at 1 January 2008 11,132 22,723 ( 5,240 ) ( 164 ) 3,994 602 33,047 1,147 34,194 Net profit for the period Revaluation of investments Foreign exchange differences Other non-owner changes in equity Total non-owner changes in equity 47 47 ( 288 ) ( 288 ) 1,638 ( 5,401 ) 25 1,638 ( 5,401 ) ( 263 ) 47 53 ( 57 ) (6) 1,691 ( 5,458 ) ( 269 ) 47 1,638 ( 5,376 ) ( 3,979 ) ( 10 ) ( 3,989 ) Transfer Dividend Increase of capital Treasury shares Other changes in equity Balance at 30 June 2008 11,838 23,516 706 793 3,994 ( 1,368 ) ( 3,994 ) ( 1,368 ) 1,499 ( 11 ) ( 1,379 ) 1,499 17 42 1,168 69 30,411 17 27 ( 2,523 ) ( 452 ) 1,638 ( 4,774 ) 17 27 29,243 Consolidated Interim Financial Statements for the first half-year 2008 | 7 Consolidated cash flow statement First half-year 2008 Profit before taxation Adjustments on non-cash items included in profit before taxation: (Un)realised gains (losses) Share of profits in associates and joint ventures Depreciation, amortisation and accretion Provisions and impairments Share based compensation expense Changes in operating assets and liabilities: Assets and liabilities held for trading Due from banks Due from customers Reinsurance and other receivables Investments related to unit-linked contracts Due to banks Due to customers Liabilities arising from insurance and investment contracts Liabilities related to unit-linked contracts Net changes in all other operational assets and liabilities Dividend received from associates Income tax paid Cash flow from operating activities Purchases of investments Proceeds from sales and redemptions of investments Purchases of investment property Proceeds from sales of investment property Purchases of property, plant and equipment Proceeds from sales of property, plant and equipment Acquisition of subsidiaries, associates and joint ventures, net of cash acquired Divestments of subsidiaries, associates and joint ventures, net of cash sold Purchases of intangible assets Proceeds from sales of intangible assets Cash flow from investing activities Proceeds from the issuance of debt certificates Payment of debt certificates Proceeds from the issuance of subordinated liabilities Payment of subordinated liabilities Proceeds from the issuance of other borrowings Payment of other borrowings Proceeds from the issuance of shares (including minority interests) Purchases of treasury shares Proceeds from sales of treasury shares Dividends paid to shareholders of the parent company Dividends paid to minority interests Cash flow from financing activities Effect of exchange rate differences on cash and cash equivalents Net increase / decrease of cash and cash equivalents Cash and cash equivalents as at 1 January Cash and cash equivalents as at 30 June 5,208 ( 14,755 ) ( 43,382 ) ( 2,264 ) 1,226 22,539 30,491 2,689 ( 1,691 ) ( 18,771 ) 64 ( 337 ) ( 17,010 ) ( 40,748 ) 43,694 ( 144 ) 45 ( 315 ) 188 ( 39 ) 442 ( 226 ) 3 2,900 77,134 ( 68,088 ) 4,181 ( 2,746 ) 2,066 ( 2,172 ) 11 ( 383 ) 400 ( 1,368 ) ( 11 ) 9,024 ( 524 ) ( 5,610 ) 26,360 20,750 4,421 39,948 ( 19,638 ) 1,773 ( 671 ) 1,180 ( 1,113 ) 54 ( 568 ) 606 ( 914 ) ( 28 ) 20,629 105 6,852 20,413 27,265 9,174 ( 44,855 ) ( 37,246 ) ( 954 ) ( 2,257 ) 41,327 13,899 2,941 2,088 ( 3,795 ) 99 ( 538 ) ( 18,303 ) ( 66,007 ) 72,093 ( 245 ) 68 ( 272 ) 19 ( 1,087 ) 2 ( 150 ) ( 1,699 ) ( 304 ) 673 1,191 14 ( 1,796 ) ( 81 ) 420 52 11 2,098 First half-year 2007 3,208 Supplementary disclosure of operating cash flow information Interest received Dividend received from investments Interest paid 52,948 293 ( 46,081 ) 40,065 268 ( 35,522 ) 8 | Consolidated Interim Financial Statements for the first half-year 2008 Consolidated Interim Financial Statements for the first half-year 2008 | 9 General Notes 10 | Consolidated Interim Financial Statements for the first half-year 2008 1 1.1 Summary accounting policies and principles of consolidation Basis of accounting The Fortis Consolidated Interim Financial Statements for the first half of 2008, including the 2007 comparative figures, have been prepared in accordance with IAS 34, Interim Financial Reporting, and include condensed financial statements (balance sheet, income statement, statement of changes in equity, cash flow statement) and selected explanatory notes. The Fortis Consolidated Interim Financial Statements should be read in conjunction with the audited Fortis Consolidated Financial Statements 2007 (including the accounting policies) which are available at http://www.fortis.com/Shareholders/annualreports.asp. 1.2 Changes in accounting policies The accounting policies used to prepare the Consolidated Interim Financial Statements for the first half of 2008 are consistent with those applied in the Fortis Consolidated Financial Statements for the year ended 31 December 2007. A more extensive description of the accounting policies is included in the Fortis Consolidated Financial Statements 2007. On 10 January 2008, the IASB published a revised version of IFRS 3, Business Combinations and related revisions to IAS 27, Consolidated Separate Financial Statements. In the new version of IFRS 3, transaction costs directly attributable to the acquisition are no longer included in the cost of the business combination. Furthermore, under IFRS 3 the acquirer can elect to measure any non-controlling interest at fair value at the acquisition date, or at its proportionate interest in the fair value of the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis. This amendment is applicable as from the financial year 2010 (with earlier application permitted). Fortis is evaluating the effect of the changes. On 17 January 2008, the IASB issued an amendment to IFRS 2, Shared-based Payments. This amendment clarifies that vesting conditions are service conditions and performance conditions only and introduces non-vesting conditions. It also specifies that all cancellations, whether by the entity, the counterparty or by both parties, should receive the same accounting treatment. This amendment is applicable as from the financial year 2009 (with earlier application permitted). Fortis is evaluating the effect of the changes. On 14 February 2008, the IASB issued amendments to improve the accounting for particular types of financial instruments that have characteristics similar to those of ordinary shares but that at present are classified as financial liabilities. The amendments affect IAS 32, Financial Instruments: Presentation and IAS 1, Presentation of Financial Statements. These amendments are applicable as from the financial year 2009 (with earlier application permitted) and will have no material effect on Fortis. On 22 May 2008, the IASB issued ‘Improvements to IFRSs’, a collection of minor amendments to a number of IFRSs. These amendments have different application dates and have no material effect on Fortis. On the same date, the IASB issued an amendment to IFRS 1, First-time Adoption of International Financial Reporting Standards, related to the cost of an investment in a subsidiary in the separate financial statements of a parent. This amendment is applicable as from the financial year 2009 (with earlier application permitted) and will have no material impact on Fortis. Consolidated Interim Financial Statements for the first half-year 2008 | 11 1.3 Accounting estimates The preparation of the Consolidated Interim Financial Statements in conformity with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying these accounting policies. Actual results may differ from these estimates and judgemental decisions. Interim results are not necessarily indicative for full-year results. Judgements and estimates are principally made in the following areas: • estimation of the recoverable amount of impaired assets • determination of fair values of non-quoted financial instruments • determination of the useful life and the residual value of property, plant and equipment, investment property and intangible assets • measurement of liabilities for insurance contracts • actuarial assumptions related to the measurement of pension obligations and assets • estimation of present obligations resulting from past events in the recognition of provisions. 1.4 Determination of accounting policies IFRS allows in certain cases the application of different options. The following options were chosen by Fortis: • Trade date accounting: all purchases and sales of financial assets requiring delivery within the time frame established by regulation or market convention are recognised on the trade date, which is the date when Fortis becomes a party to the contractual provisions of the financial assets. Investment property, real estate held for own use, fixed assets and intangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment losses. Investments in joint ventures are accounted for using the equity method. Fortis uses three types of hedges: fair value hedges, cash flow hedges and net investment hedges. Fair value hedge accounting is applied as from 1 January 2005 for portfolio hedges of interest rate risk ('macro hedging'). In this context, the difference between the fair value and the carrying value of the hedged item at designation of the hedging relationship is amortised over the remaining life of the hedged item. For macro hedges, Fortis uses the 'carved out' version of IAS 39 adopted by the European Union which removes some of the limitations on fair value hedges and the strict requirements on the effectiveness of those hedges. Under this version, the impact of the changes in the estimates of the repricing dates is only considered ineffective if it leads to underhedging. At initial recognition or first-time adoption of IFRS, Fortis has irrevocably designated some financial assets and liabilities as held at fair value through profit or loss, because: - the host contract includes an embedded derivative that would otherwise require separation, or - it eliminates or significantly reduces a measurement or recognition inconsistency (‘accounting mismatch’), or - it relates to a portfolio of financial assets and/or liabilities that are managed and evaluated on a fair value basis. Fortis applies 'shadow accounting' to the changes in fair value of the available for sale investments and of assets and liabilities held for trading that are linked to and therefore affect the measurement of the insurance liabilities. These changes in fair value will therefore not be part of equity or net profit. The whole of the remaining unrealised changes in fair value of the available-for-sale portfolio – after application of 'shadow accounting' – that are subject to discretionary participation features are classified as a component of equity. • • • • • • 12 | Consolidated Interim Financial Statements for the first half-year 2008 • The adequacy of insurance liabilities ('liability adequacy test') is tested on the level of homogeneous product groups at each reporting date. Borrowing costs are generally expensed as incurred. Borrowing costs that are directly attributable to the acquisition or construction of an asset are capitalised while the asset is being constructed as part of the cost of that asset. Pensions: under IFRS, Fortis uses the corridor approach, i.e. not recording actuarial differences within defined limits. • • 1.5 Segment reporting On 5 November 2007, Fortis announced a reorganisation of its management structure as of 1 January 2008. A more adequate management structure will not only facilitate the successful integration of the acquired ABN AMRO businesses, but will also support the development of Fortis as a whole. The primary format for reporting segment information is based on business segments. Fortis's core activities are Banking and Insurance. As such, Fortis is organised on a worldwide basis into four businesses: • • • • Retail Banking Asset Management & Private Banking Merchant Banking Insurance. Activities not related to Banking or Insurance and elimination differences are reported separately from the Banking and Insurance activities. The acquired ABN AMRO businesses are reported in Other Banking. Fortis’s geographical segments for reporting purposes are as follows: • • • • • Benelux (Belgium, the Netherlands, Luxembourg) Other European countries North America Asia Other. 1.6 Scope of consolidation The Consolidated Interim Financial Statements include Fortis SA/NV and Fortis N.V. (the ‘Parent Companies’) and their subsidiaries. In combining the financial statements of Fortis SA/NV and Fortis N.V., Fortis applies consortium accounting in order to reflect its Banking and Insurance activities in the most reliable manner in accordance with the EU 7th Directive, dated 13 June 1983 (83/349/EEC). Fortis sponsors the formation of Special Purpose Entities (‘SPEs’) primarily for the purpose of asset securitisation transactions, structured debt issuance, or to accomplish another well-defined objective. Some of the SPEs are bankruptcy-remote companies whose assets are not available to settle the claims of Fortis. SPEs are consolidated if, in substance, they are controlled by Fortis. Investments in joint ventures – contractual agreements whereby Fortis and other parties undertake an economic activity that is subject to joint control – are accounted for using the equity method. Investments in associates – investments whereby Fortis has significant influence, but which it does not control – are accounted for using the equity method. Consolidated Interim Financial Statements for the first half-year 2008 | 13 1.7 Presentation and disclosures The Consolidated Interim Financial Statements are stated in euros, which is the functional currency of the Parent Companies of Fortis. Where IFRS allows a choice or is not descriptive in presentation or disclosures, Fortis opted for the following: • • • Interest on assets and liabilities held for trading and derivatives are reported in the interest margin. Dividends received are included in investment income. Realised and unrealised results on assets and liabilities held for trading are included in 'Other realised and unrealised gains and losses'. Changes in the clean fair value (i.e. excluding the interest accruals) of derivatives are also reported under 'Other realised and unrealised gains and losses'. Cash flow statement: Fortis reports cash flows from operating activities using the indirect method. Interest received and interest paid, are presented as cash flows from operating activities. Dividends paid are classified as cash flows from financing activities; dividends received are classified as cash flow from operating activities. • • 14 | Consolidated Interim Financial Statements for the first half-year 2008 2 Acquisitions and disposals In the first half year of 2008, no major acquisitions nor disposals were made. The following major acquisitions and disposals were made in 2007. Details on the acquisition of ABN AMRO businesses and the further separation and integration process are disclosed in note 10. Details on acquisitions and disposals that took place after the balance sheet date for the period are included in the note Post-balance sheet date events. 2.1 Acquisitions The acquisitions that took place in 2007 are: Capitalised Quarter of Acquired company acquisition Acquisition amount Percentage acquired intangible assets Goodwill/ (negative goodwill) Segment Dominet SA Fortis Insurance Company Asia (FICA) Captive Finance Limited Q1 2007 Q2 2007 Q2 2007 240 666 31 100 100 100 6 266 0 221 292 17 Retail Banking Insurance International Merchant Banking The amounts of the capitalised intangible assets and the goodwill presented above are the initial amounts, converted to euro and taking into account changes that were necessary because the accounting for a business combination was only determined provisionally by the end of the period in which the combination was effected. Subsequent changes due to net exchange differences and other changes are excluded. These acquisitions did not have a substantial impact on Fortis’ financial position and performance. Detailed information on the acquisition of Fortis Insurance Company Asia (FICA) and Dominet is provided in the Fortis Consolidated Financial Statements 2007. 2.2 Disposals VINCI and Fortis signed on 5 March 2008 a memorandum of understanding with a view to combining their respective activities in the public car park industry. This combination will be achieved through VINCI Park, a subsidiary of VINCI Concessions, and Interparking, a subsidiary of Fortis Real Estate. The new entity will manage 1.3 million parking places in 1,800 car parks in 16 countries worldwide and will be fully consolidated by VINCI. After a period of due diligence, the final agreement is expected to be signed in the third quarter of 2008. The completion of the transaction is subject to customary closing conditions and regulatory approvals and will have a positive impact on Fortis' solvency ratio. Consolidated Interim Financial Statements for the first half-year 2008 | 15 The key figures of Interparking as included in the consolidated figures of Fortis as at 30 June 2008 are: 30 June 2008 Total assets Total liabilities Net profit attributable to shareholders 983 438 18 On 2 April 2008, Ping An and Fortis signed an agreement to establish a global asset management partnership. Through this transaction, Ping An has agreed to acquire a 50% equity stake in Fortis Investments, the global asset management arm of Fortis, for a consideration of EUR 2.15 billion (RMB 24.02 billion), payable to Fortis in cash on completion of the transaction. Fortis Ping An Investments’ board will comprise twelve directors; six non-executive, two executive and four independents. Fortis and Ping An will each nominate three non-executive directors and propose two independents. The senior management of the Company will remain unchanged. As Fortis will retain control in this partnership, it will fully consolidate the new entity. The completion of the transaction remains subject to, among other things, receipt of applicable regulatory approvals and is expected to close in the second half of 2008. 16 | Consolidated Interim Financial Statements for the first half-year 2008 3 Outstanding shares and earnings per share Shares issued Treasury Shares Shares Outstanding The following table shows the number of outstanding shares. Number of shares at 31 December 2007 Issued Balance acquired / sold Number of shares at 30 June 2008 2,366,595,497 150,000,000 ( 174,633,029 ) 2,191,962,468 150,000,000 874,266 2,516,595,497 ( 173,758,763 ) 874,266 2,342,836,734 Shares issued and potential number of shares In addition to the shares already outstanding, Fortis issued options or instruments containing option features, which could upon exercise lead to an increase in the number of outstanding shares. The table below shows an overview of the shares issued and the potential number of shares as at 30 June 2008. Number of shares at 30 June 2008 Shares that may be issued: in connection with option plans, including warrants in connection with convertible securities 42,050,199 105,388,375 2,664,034,071 2,516,595,497 Total potential number of shares at 30 June 2008 On 25 September 2007 Fortis placed a fully underwritten Rights Issue of 896,181,684 new shares at a subscription price of EUR 15.00 per new share (with Fortis SA/NV VVPR Strip) on the basis of 2 new shares for every 3 existing shares held at market close on 24 September 2007. The subscription period for the Rights Issue concluded on 9 October 2007. On 26 June 2008, Fortis placed 150,000,000 new Fortis unified shares at EUR 10.00 per share on the market. The total gross proceeds of the offering amount to EUR 1.5 billion. Settlement of the offering took place at 2 July 2008. In accordance with IAS 39.14 which states that the issue of new instruments should be recognised at the moment that an entity becomes a party to the contractual provisions of the instrument, the new Fortis unified shares are included in shareholders’ equity as well as in the calculation of basic and diluted earnings per share from 26 June 2008 onwards. Earnings per share Fortis has adjusted the calculation of basic and diluted earnings per share for 2007 in accordance with IAS 33 Appendix 2. IAS 33A2 states that if the number of ordinary or potential ordinary shares outstanding increases as a result of a bonus element in a rights issue to existing shareholders after the balance sheet date but before the financial statements are authorised for issue, the per share calculations for those and any period financial statements presented shall be based on the new number of shares. The Fortis Rights Issue was offered to all existing shareholders, so the number of ordinary shares to be used in calculating basic and diluted earnings per share for all periods before the Rights Issue is the number of ordinary shares outstanding before the issue, multiplied by the following factor: Fair value per share immediately before the exercise of rights Theoretical ex-rights fair value per share Consolidated Interim Financial Statements for the first half-year 2008 | 17 The theoretical ex-rights fair value per share is calculated by adding the aggregate market value of the shares immediately before the exercise of the rights to the proceeds from the exercise of the rights, and dividing by the number of shares outstanding after the exercise of the rights. The adjustment factor related to this Rights Issue is 1.1945. The following table details the calculation of earnings per share, taking into account the adjustments as described above on the number of ordinary shares outstanding before the issue. First half-year 2008 First half-year 2007 Net profit attributable to shareholders Elimination of interest expense on convertible debt (net of tax impact) Net profit used to determine diluted earnings per share 1,638 192 1,830 2,782 42 2,824 Weighted average number of ordinary shares for basic earnings per share Adjustments for: assumed conversion of convertible securities share options restricted shares 2,194,809,351 1,548,191,859 270,384,198 842,901 1,205,729 2,467,242,179 39,684,066 6,798,010 1,170,388 1,595,844,323 Weighted average number of ordinary shares for diluted earnings per share Basic earnings per share (in euro per share) Basic earnings per share before net gain on discontinued operations (in euro per share) Diluted earnings per share (in euro per share) 0.75 0.74 0.74 1.80 1.77 1.77 In the first half year of 2008 weighted average options on 21,063,713 shares (first half year 2007: 738,441 shares) with weighted average exercise prices of EUR 26.30 per share (first half year 2007: EUR 29.12 per share) were excluded from the calculation of diluted EPS because the exercise price of the options was higher than the average market price of the shares. During the first half year 2008 (as in the first half year of 2007) no shares arising from convertible securities were excluded from the calculation of diluted earnings per share, because the interest per share saved on these securities was lower than the basic earnings per share. 18 | Consolidated Interim Financial Statements for the first half-year 2008 4 Dividend On 29 April 2008, the Annual General Meetings of Shareholders approved a total cash dividend of EUR 1.29 per share for 2007. As an interim dividend of EUR 0.70 per share was paid on 6 September 2007, the final dividend for 2007 amounted to EUR 0.59 per share. The dividend was payable as from 27 May 2008. Consolidated Interim Financial Statements for the first half-year 2008 | 19 5 Supervision and solvency As a financial institution, Fortis is subject to regulatory supervision. Fortis is supervised at Fortis consolidated level and at the level of the individual operating companies. 5.1 Fortis consolidated At Fortis consolidated level, Fortis is supervised jointly by the Belgian Banking, Finance and Insurance Commission (BFIC) and the Dutch Central Bank (DNB). Their prudential supervision includes verification that Fortis meets the solvency requirements of each different financial sector represented within Fortis. The elements of own funds and the solvency requirements for the Banking and Insurance activities are calculated in accordance with the corresponding sector rules. Fortis has been identified as a financial conglomerate and is subject on a semi-annual basis to the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate as provided for in the EU Directives CRD 2006/48/EC and CRD 2006/49/EC. The supplementary capital adequacy requirements demand that the own funds of the financial conglomerate calculated on the basis of the consolidated position of the group exceed the sum of the solvency requirements for each different financial sector represented in the group. The qualifying elements of own funds and the solvency requirements are calculated in accordance with the corresponding sector rules. Fortis met all requirements in the first half-year of 2008 as well as in 2007. 5.2 Banking Fortis adopted at 1 January 2008 the Basel II framework. This framework replaces Basel I and contains a set of more stringent rules regarding the capital adequacy requirements for banks developed by the Basel Committee on Banking Supervision. Fortis received approval from the BFIC and the DNB to adopt the most advanced approaches – the so-called Advanced Internal Ratings Based Approach (AIRBA) and the Advanced Measurement Approach (AMA - for operational risk) – on 7 March 2008. These approaches have been implemented throughout the whole banking business of Fortis The trading positions and credit commitments are weighted according to the level of risk involved (risk-weighted assets). The minimum capital requirement set out by the regulator amounts to 8% of the risk-weighted commitments. The regulatorlimits reductions in minimum-regulatory capital by way of a transitional floor on the risk-weighted assets figure calculated relative to what would have been required had Basel I remained in force. The transitional floor percentage is set at 90 per cent. The capital-adequacy ratios at 30 June 2008 are calculated on Basel I and Basel II compliant risk-weighted assets and capital. 30 June 2008 Banking Basel II Extended core equity (Tier 1) Total capital 23,400 27,774 Basel I 23,451 27,765 Basel I 25,692 27,231 30 June 2008 31 December 2007 Total weighted risk Credit risk Market risk Operational risk 257,409 228,369 13,172 15,868 285,405 261,536 23,869 270,207 249,280 20,927 Tier 1 ratio Total capital ratio 9.1% 10.8% 8.2% 9.7% 9.5% 10.1% 20 | Consolidated Interim Financial Statements for the first half-year 2008 5.3 Insurance Fortis’ insurance subsidiaries are required to maintain a minimum level of qualifying capital relative to the premiums received for Non-life insurance contracts and relative to the Life-insurance liabilities arising from insurance and investment contracts. The consolidated regulatory-solvency requirements of Fortis’ insurance subsidiaries are at 30 June 2008 EUR 4,090 million (31 December 2007: EUR 4,108 million) and are covered by the available qualifying total capital. 5.4 Fortis core equity target and total capital Fortis has introduced a new target-based model to manage and communicate on its solvency position as from 2007 onwards. Fortis’ core equity and total capital is composed as follows: General Banking 30 June 2008 Share capital and reserves Net profit attributable to shareholders Unrealised gains and losses Shareholders' equity Non-innovative hybrid capital instruments Minority interests Revaluation of real estate to fair value Revaluation of debt securities, net of tax and shadow accounting Revaluation of equity securities, net of tax and shadow accounting Goodwill Expected dividend Other Core equity Innovative capital instruments Extended core equity Subordinated loans Other prudential filters and deductions on total capital Total capital ( 13,535 ) 20,958 2,442 23,400 18,662 ( 14,288 ) 27,774 ( 433 ) 8,020 598 8,618 757 ( 246 ) 9,129 ( 4,440 ) 389 ( 4,051 ) ( 6,470 ) 60 ( 10,461 ) ( 13,968 ) 24,538 3,429 27,967 12,949 ( 14,474 ) 26,442 ( 4,089 ) ( 543 ) ( 4,632 ) 2,911 33,833 1,185 ( 3,368 ) 31,650 3,546 475 5,855 642 ( 1,435 ) 5,062 245 654 1,632 1,403 ( 15 ) ( 7,309 ) ( 189 ) 29 ( 7,469 ) 3,005 39 32,379 1,638 ( 4,774 ) 29,243 6,796 1,168 1,632 4,299 Insurance (incl. eliminations) Total Consolidated Interim Financial Statements for the first half-year 2008 | 21 General Banking 31 December 2007 Share capital and reserves Net profit attributable to shareholders Unrealised gains and losses Shareholders' equity Non-innovative hybrid capital instruments Minority interests Revaluation of real estate to fair value Revaluation of debt securities, net of tax and shadow accounting Revaluation of equity securities, net of tax and shadow accounting Goodwill Expected dividend Other Core equity Innovative capital instruments Extended core equity Subordinated loans Other prudential filters and deductions on total capital Total capital ( 12,897 ) 23,252 2,440 25,692 15,582 ( 14,043 ) 27,231 ( 405 ) 8,593 599 9,192 757 ( 293 ) 9,656 ( 8,888 ) ( 5,782 ) 494 ( 5,288 ) ( 3,600 ) 1,070 ( 385 ) ( 1,025 ) 32,235 1,768 ( 699 ) 33,304 2,756 429 676 1,556 235 ( 137 ) ( 490 ) ( 1,313 ) ( 17 ) (6) 3,399 2,534 1,225 7,158 ( 7,183 ) ( 308 ) 76 ( 7,415 ) 2,927 42 28,451 3,994 602 33,047 5,683 1,147 1,556 1,288 ( 528 ) ( 1,515 ) ( 1,313 ) ( 13,302 ) 26,063 3,533 29,596 12,739 ( 14,336 ) 27,999 Insurance (incl. eliminations) Total Participating interests - that are not fully consolidated - are deducted on the basis of 50% from Core equity and 50% from Total capital. The amounts deducted include the investment by Fortis in parts of ABN AMRO through RFS Holdings as this participation is currently accounted for using the equity method. Core equity target The three components of the Fortis’ equity model are: • a capital target for Fortis Bank equal to a ratio of 7% Tier 1 capital to risk-weighted commitments, including 1% hybrid capital. This implies a target of 6% core equity to risk-weighted commitments. • a capital target for Fortis Insurance equal to 225% of the regulatory minimum, which includes 50% of hybrid capital. This implies a core equity target of 175% of the regulatory minimum. • a Group leverage target (at General) equal to 15% of the target core equity of Banking plus the target core equity of Insurance, implying that 15% of Banking and Insurance’s combined target core equity could be financed by group debt. The key capital indicators of Fortis can be shown as follows: 30 June 2008 Fortis Basel II Core equity Core equity target Amount of core equity above target 24,538 Basel I 24,590 20,639 3,951 Basel I 26,063 19,892 6,171 30 June 2008 31 December 2007 Total capital Minimum solvency requirements Amount of total capital above minimum solvency requirements 26,442 24,760 1,682 26,434 27,999 25,725 2,274 22 | Consolidated Interim Financial Statements for the first half-year 2008 Consolidated Interim Financial Statements for the first half-year 2008 | 23 Explanatory notes to the balance sheet 24 | Consolidated Interim Financial Statements for the first half-year 2008 6 Assets and liabilities held for trading Assets held for trading The following table provides a specification of Assets held for trading. General Banking 30 June 2008 Securities held for trading: Treasury bills and other eligible bills Debt securities: Government bonds Corporate debt securities Structured credit instruments 9,217 10,054 2,524 38,897 64,323 ( 38 ) ( 345 ) ( 307 ) 9,217 9,747 2,524 38,859 63,978 3,631 3,631 Insurance (incl. eliminations) Total Equity securities Total trading securities Derivatives held for trading: Over the counter (OTC) Exchange traded Total trading derivatives 45,185 812 45,997 304 43 347 ( 454 ) 1 ( 453 ) 45,035 856 45,891 Other assets held for trading Total assets held for trading 802 111,122 347 ( 798 ) 802 110,671 31 December 2007 Securities held for trading: Treasury bills and other eligible bills Debt securities: Government bonds Corporate debt securities Structured credit instruments 7,840 9,815 3,249 23,845 45,856 ( 79 ) ( 470 ) ( 391 ) 7,840 9,424 3,249 23,766 45,386 1,107 1,107 Equity securities Total trading securities Derivatives held for trading: Over the counter (OTC) Exchange traded Total trading derivatives 28,447 478 28,925 257 2 259 ( 336 ) ( 336 ) 28,368 480 28,848 Other assets held for trading Total assets held for trading 566 75,347 259 ( 806 ) 566 74,800 Consolidated Interim Financial Statements for the first half-year 2008 | 25 Liabilities held for trading The table below shows the composition of Liabilities held for trading. General Banking 30 June 2008 Short security sales Derivative financial instruments: Over the counter (OTC) Exchange traded Total derivatives held for trading Other liabilities held for trading Total liabilities held for trading 46,627 1,115 47,742 45 129,749 42 ( 234 ) 42 ( 198 ) 42 ( 198 ) 46,471 1,115 47,586 45 129,557 81,962 ( 36 ) 81,926 Insurance (incl. eliminations) Total 31 December 2007 Short security sales Derivative financial instruments: Over the counter (OTC) Exchange traded Total derivatives held for trading Other liabilities held for trading Total liabilities held for trading 33,047 333 33,380 1 89,457 25 107 25 116 25 116 33,188 333 33,521 1 89,589 56,076 (9) 56,067 26 | Consolidated Interim Financial Statements for the first half-year 2008 7 Due from banks General Banking Insurance (incl. eliminations) Total Due from banks consists of the following: 30 June 2008 Interest-bearing deposits Loans and advances Reverse repurchase agreements Securities borrowing transactions Mandatory reserve deposits with central banks Held at fair value through profit or loss Other Fair value adjustments from hedge accounting Total Less impairments: specific credit risk incurred but not reported (IBNR) ( 11 ) ( 17 ) 131,585 2,207 ( 374 ) ( 11 ) ( 17 ) 133,418 4,500 12,843 72,158 38,771 2,801 147 411 ( 18 ) 131,613 2,207 ( 374 ) 166 ( 144 ) 19 ( 19 ) 1,440 582 ( 124 ) ( 87 ) 5,816 13,338 72,158 38,771 2,801 147 433 ( 18 ) 133,446 Due from banks 31 December 2007 Interest-bearing deposits Loans and advances Reverse repurchase agreements Securities borrowing transactions Mandatory reserve deposits with central banks Held at fair value through profit or loss Other Fair value adjustments from hedge accounting Total Less impairments: specific credit risk incurred but not reported (IBNR) ( 12 ) (5) 118,346 2,143 ( 1,453 ) ( 12 ) (5) 119,036 118,363 2,143 ( 1,453 ) 119,053 8,041 8,460 65,858 27,404 8,229 213 158 166 ( 147 ) 1,026 ( 1,026 ) 336 615 ( 191 ) ( 89 ) 8,186 8,986 65,858 27,404 8,229 213 177 Due from banks The impairments for specific credit risk and incurred but not reported (IBNR) on credit commitments to banks were below EUR 1 million as at 30 June 2008 and as at 31 December 2007. Consolidated Interim Financial Statements for the first half-year 2008 | 27 8 Due from customers General Banking Insurance (incl. eliminations) Total The composition of Due from customers is as follows: 30 June 2008 Government and official institutions Residential mortgage Consumer loans Commercial loans Reverse repurchase agreements Securities borrowing transactions Policyholder loans Financial lease receivables Factoring Other loans Loans available for sale Held at fair value through profit or loss Fair value adjustment from hedge accounting Total Less impairments: specific credit risk incurred but not reported (IBNR) ( 1,752 ) ( 246 ) 359,287 ( 35 ) (3) 6,721 ( 9,332 ) ( 1,787 ) ( 249 ) 356,676 12,745 1,938 1,013 180 1,459 ( 2,111 ) 361,285 6,759 ( 9,332 ) ( 13 ) 395 (8) 5,790 97,929 10,117 154,948 48,564 28,713 144 67 419 3,836 6 1,892 ( 7,128 ) ( 363 ) ( 1,821 ) 1 6,210 101,765 10,123 149,712 48,201 26,892 144 12,812 1,938 1,400 180 1,446 ( 2,111 ) 358,712 Due from customers 31 December 2007 Government and official institutions Residential mortgage Consumer loans Commercial loans Reverse repurchase agreements Securities borrowing transactions Policyholder loans Financial lease receivables Factoring Other loans Loans available for sale Held at fair value through profit or loss Fair value adjustment from hedge accounting Total Less impairments: specific credit risk incurred but not reported (IBNR) ( 1,778 ) ( 224 ) 315,301 ( 37 ) (3) 6,824 ( 5,817 ) ( 1,815 ) ( 227 ) 316,308 11,969 1,914 1,600 212 1,300 ( 1,415 ) 317,303 6,864 ( 5,817 ) 404 ( 11 ) 5,343 95,445 9,774 138,696 28,186 24,279 142 68 436 3,931 13 1,870 ( 2,565 ) ( 423 ) ( 2,819 ) 1 5,780 99,376 9,787 138,001 27,763 21,460 142 12,037 1,914 1,993 212 1,300 ( 1,415 ) 318,350 Due from customers 28 | Consolidated Interim Financial Statements for the first half-year 2008 The impairments on credit commitments to customers are as follows: General Banking 30 June 2008 Specific credit risk Incurred but not reported (IBNR) 455 70 525 455 70 525 Insurance (incl. eliminations) Total Total impairments 31 December 2007 Specific credit risk Incurred but not reported (IBNR) 398 48 446 398 48 446 Total impairments Consolidated Interim Financial Statements for the first half-year 2008 | 29 9 Investments General Banking Insurance (incl. eliminations) Total The composition of Investments is as follows: 30 June 2008 Investments: Held to maturity Available for sale Held at fair value through profit or loss Investment property Associates and joint ventures 3,938 98,624 5,274 769 27,169 135,774 57,970 1,147 3,183 509 62,809 ( 364 ) ( 1,438 ) ( 16 ) (8) ( 1,826 ) 3,938 156,230 4,983 3,936 27,670 196,757 Total, gross Impairments: on investments available for sale on investment property ( 3,091 ) (1) ( 3,092 ) ( 400 ) ( 65 ) ( 465 ) 16 ( 3,475 ) ( 66 ) Total impairments 16 ( 3,541 ) Total 132,682 62,344 ( 1,810 ) 193,216 31 December 2007 Investments: Held to maturity Available for sale Held at fair value through profit or loss Investment property Associates and joint ventures 4,234 105,669 5,718 689 27,572 143,882 61,663 1,883 3,049 551 67,146 ( 416 ) ( 1,408 ) ( 16 ) ( 15 ) ( 1,855 ) 4,234 166,916 6,193 3,722 28,108 209,173 Total, gross Impairments: on investments available for sale on investment property ( 2,489 ) (1) ( 2,490 ) ( 351 ) ( 65 ) ( 416 ) 13 ( 2,827 ) ( 66 ) Total impairments 13 ( 2,893 ) Total 141,392 66,730 ( 1,842 ) 206,280 30 | Consolidated Interim Financial Statements for the first half-year 2008 9.1 Investments available for sale The fair value and amortised cost of Fortis’ available for sale investments including gross unrealised gains and losses were as follows: Fair value Historical/ amortised cost 30 June 2008 Treasury bills and other eligible bills Government bonds Corporate debt securities Structured credit instruments Private equities and venture capital Equity securities Other investments Total investments available for sale 463 72,898 47,450 33,755 149 8,201 830 163,746 ( 442 ) ( 325 ) ( 23 ) (8) (3) ( 83 ) (1) ( 34 ) ( 3,197 ) (6) ( 214 ) ( 23 ) ( 3,475 ) 514 99 476 82 1,598 107 2,876 ( 2,724 ) ( 1,861 ) ( 3,179 ) ( 11 ) ( 2,161 ) ( 14 ) ( 9,950 ) 463 70,362 45,631 27,847 211 7,341 900 152,755 adjustment from hedge accounting Impairments Gross unrealised gains Gross unrealised losses Fair value 31 December 2007 Treasury bills and other eligible bills Government bonds Corporate debt securities Structured credit instruments Private equities and venture capital Equity securities Other investments Total investments available for sale 313 70,530 47,582 36,666 130 10,983 863 167,067 ( 260 ) ( 218 ) 3 (8) (2) ( 35 ) (4) ( 28 ) ( 2,568 ) (6) ( 199 ) ( 22 ) ( 2,827 ) 732 171 51 150 2,039 230 3,373 ( 3,264 ) ( 1,076 ) ( 930 ) ( 958 ) ( 11 ) ( 289 ) 313 69,964 46,798 33,183 261 12,499 1,071 164,089 Consolidated Interim Financial Statements for the first half-year 2008 | 31 9.2 Net unrealised gains and losses on Available for sale investments included in equity General Banking Insurance (incl. eliminations) Total 30 June 2008 Available for sale investments in equity securities and other investments: Carrying amount 3,535 4,930 ( 13 ) 8,452 Gross unrealised gains and losses Related tax ( 270 ) ( 44 ) ( 131 ) 17 ( 14 ) 5 2 ( 399 ) ( 27 ) Shadow accounting Related tax ( 314 ) 9 (3) 8 (5) 2 ( 429 ) Net unrealised gains and losses ( 123 ) Available for sale investments in debt securities: Carrying amount 91,998 52,640 ( 335 ) 144,303 Gross unrealised gains and losses Related tax ( 4,098 ) 1,187 ( 2,594 ) 733 613 ( 155 ) 17 (2) ( 6,675 ) 1,918 613 ( 155 ) Shadow accounting Related tax ( 2,911 ) Net unrealised gains and losses ( 1,403 ) 15 ( 4,299 ) 31 December 2007 Available for sale investments in equity securities and other investments: Carrying amount 4,440 9,438 ( 47 ) 13,831 Gross unrealised gains and losses Related tax 478 ( 93 ) 1,643 ( 166 ) ( 160 ) 49 (2) 2,119 ( 259 ) Shadow accounting Related tax 385 87 ( 30 ) 55 ( 73 ) 19 1,806 Net unrealised gains and losses 1,366 Available for sale investments in debt securities: Carrying amount 98,741 51,873 ( 356 ) 150,258 Gross unrealised gains and losses Related tax ( 1,435 ) 365 ( 584 ) 138 270 ( 59 ) 9 (1) 13 (4) 17 ( 2,010 ) 502 283 ( 63 ) ( 1,288 ) Shadow accounting Related tax ( 1,070 ) Net unrealised gains and losses ( 235 ) Available for sale investments in equity securities and other investments also include private equities and venture capital and all other investments, excluding debt securities. 32 | Consolidated Interim Financial Statements for the first half-year 2008 9.3 Investments held at fair value through profit or loss The following table provides information about the Investments that are held at fair value and for which unrealised gains or losses are recorded through profit or loss. General Banking 30 June 2008 Government bonds Corporate debt securities Structured credit instruments Private equities and venture capital Equity securities Other investments Total investments held at fair value through profit or loss 56 1,967 1,136 1,396 719 5,274 5 1,147 8 152 960 22 ( 1,099 ) ( 320 ) ( 1,438 ) 99 ( 118 ) 8 307 2,809 1,158 297 404 4,983 Insurance (incl. eliminations) Total 31 December 2007 Government bonds Corporate debt securities Structured credit instruments Private equities and venture capital Equity securities Other investments Total investments held at fair value through profit or loss 24 49 1,942 979 2,412 312 5,718 10 166 1,611 26 67 3 1,883 ( 1,212 ) ( 221 ) ( 1,408 ) 149 ( 124 ) 34 364 3,429 1,005 1,267 94 6,193 Consolidated Interim Financial Statements for the first half-year 2008 | 33 9.4 Structured Credit Instruments Fortis holds as part of its investment portfolio so called Structured Credit Instruments (SCI). Structured Credit Instruments are securities, created by repackaging cash flows from financial contracts and encompass asset-backed securities (ABS), mortgage-backed securities (MBS) and collaterised debt obligations (CDO’s). The exposure on Structured Credit Instruments is in the Consolidated Financial Statements reported by category of financial instrument and as such included in Investments available-for-sale, Investments held at fair value through profit or loss, Assets held for trading, Due from Customers and Other assets. The exposure includes the US subprime residential mortgage-related assets. At 30 June 2008 the net exposure on the global Structured Credit Instruments can be detailed as follows: Total net exposure Banking 30 June 2008 SCI under Assets held for trading SCI under Due from Customers (loans available for sale) SCI under Investments available for sale SCI under Investments held at fair value through profit or loss Other Total 2,524 180 26,625 1,967 5,069 36,365 2,064 1,222 842 2,524 180 27,847 2,809 5,069 38,429 2,959 180 27,979 2,927 5,069 39,114 Insurance excl. SPE assets Total net exposure incl. SPE assets 31 December 2007 SCI under Assets held for trading SCI under Due from Customers (loans available for sale) SCI under Investments available for sale SCI under Investments held at fair value through profit or loss Other Total 3,249 212 31,790 1,942 6,169 43,362 2,880 1,393 1,487 3,249 212 33,183 3,429 6,169 46,242 3,886 212 33,495 3,553 6,169 47,315 Other includes mainly the asset pools of Scaldis, as reported under Other assets in Banking. Scaldis is fully consolidated within Fortis and is a conduit that purchases eligible assets from investment grade, non-investment grade and unrated sellers. The asset pools contain continuous financing of third party clients’ assets such as consumer and auto loans, trade receivables, mortgages and lease receivables. Special Purpose Entities (SPE) assets relate to investments by entities of Fortis in debt securities of special Purpose Entities set up by Fortis for the purpose of asset securitisation or structured debt issuance and are included in the Fortis consolidation scope. The exposure of Special Purpose Entities is mainly reported under the balance sheet captions: Due from Customers (Residential Mortgages) and Due from Banks (Reverse repurchase agreements). On 11 January 2006, the European Commission endorsed IFRS 7, Financial Instruments: Disclosures. IFRS 7 is applied by Fortis as from 1 January 2007 and includes requirements to disclose whether fair values of financial assets are determined, in whole or in part, directly by reference to published price quotations in an active market or are estimated using a valuation technique based on assumptions that are or are not based on available observable market data. 34 | Consolidated Interim Financial Statements for the first half-year 2008 Structured Credit Instruments are mainly measured at fair value. The Structured Credit Instruments not carried at fair value mainly relate to the asset pools of Scaldis and are measured at amortised cost. The fair value measurement of financial assets, part of the Structured Credit Instruments, can be categorised based upon the valuation methods applied: • category 1: fair values determined in whole or in part, directly by reference to published price quotations in an active market; • category 2: fair values determined, in whole or in part, using a valuation technique based on assumptions that are supported by available observable market data; • category 3: fair values determined, in whole or in part, using a valuation technique based on assumptions that are not supported by available observable market data. The categorisation within the fair value hierarchy is based upon the lowest level of input that is significant for the fair value measurement. The note ‘Fair values of financial assets and financial liabilities’ of the Fortis Consolidated Annual Financial Statements, contains a description of the valuation methodologies applied for the measurement of the fair value. The following table presents the financial instruments measured at fair value included in the Structured Credit Instruments by category of fair value measurement, indicating the transparency of the inputs to measure the fair value as at 30 June 2008 and as at 31 December 2007: Banking 30 June 2008 Category 1 Category 2 Category 3 28% 65% 7% 99% 1% 33% 61% 6% Insurance Total 31 December 2007 Category 1 Category 2 Category 3 60% 33% 7% 99% 1% 63% 30% 7% The percentages reported are based on the net exposure including the assets held by Special Purposes Entities of Fortis. Since the second half of 2007 the market circumstances for Structured Credit Instruments changed dramatically leading to a significant decrease in the observability of the data used for market pricing of these assets. The impairment losses on Structured Credit Instruments are reported in the income statement under the caption Change in Impairments (note 21). The methodology applied for impairment testing on Structured Credit Instruments is described in note 19.4 of the Fortis Consolidated Financial Statements 2007. Fair value changes of Structured Credit Instruments reported as Assets held for trading or Investments held at fair value through profit or loss are reflected in the caption Other realised and unrealised gains and losses of the income statement (note 17). Consolidated Interim Financial Statements for the first half-year 2008 | 35 9.5 Real estate The fair value of Real estate, held as investment as well as for own use, of the Banking and Insurance businesses is set out below. General Banking 30 June 2008 Fair value: Investment property Land and buildings held for own use Total fair value Carrying amount: Investment property Land and buildings held for own use Total carrying amount Gross unrealised gain / loss Taxation Net unrealised gain / loss (not recognised in equity) 768 1,405 2,173 491 ( 156 ) 335 3,118 1,075 4,193 2,366 ( 650 ) 1,716 16 ( 16 ) 16 ( 16 ) 3,870 2,480 6,350 2,873 ( 806 ) 2,067 905 1,759 2,664 5,092 1,467 6,559 5,997 3,226 9,223 Insurance (incl. eliminations) Total 31 December 2007 Fair value: Investment property Land and buildings held for own use Total fair value Carrying amount: Investment property Land and buildings held for own use Total carrying amount Gross unrealised gain / loss Taxation Net unrealised gain / loss (not recognised in equity) 688 1,449 2,137 496 ( 176 ) 320 2,984 1,088 4,072 2,246 ( 611 ) 1,635 16 ( 16 ) 16 ( 16 ) 3,656 2,537 6,193 2,758 ( 787 ) 1,971 840 1,793 2,633 4,832 1,486 6,318 5,672 3,279 8,951 36 | Consolidated Interim Financial Statements for the first half-year 2008 10 Acquisition of ABN AMRO On 17 October 2007, Fortis acquired together with Royal Bank of Scotland (RBS) and Santander (together the Banks) ABN AMRO. The acquisition took place through a public offer for 100% of the issued and outstanding share capital of ABN AMRO. The acquisition was the conclusion of a bid process that started in March 2007 and that was legally accomplished through RFS Holdings B.V., an entity jointly owned by the Banks and that was set up specifically for this purpose. The total consideration paid by the Banks to ABN AMRO shareholders was EUR 71.1 billion. Of this total, Fortis contributed 33.81% or EUR 24 billion. 10.1 Business units acquired Fortis acquired the following business units of ABN AMRO: • the Business Unit Netherlands (excluding former Dutch wholesale clients, Interbank and DMC Consumer Finance). This Business Unit serves consumer and commercial banking clients in The Netherlands; • the Private Clients Business Unit (excluding Latin America). This Business Unit provides private banking services to wealthy individuals and institutions with EUR 1 million or more in net assets to invest; • the Asset Management Business Unit. This Business Unit provides asset management services directly to institutional clients (such as central banks, pension funds, insurance companies and leading charities) and to private investors through ABN AMRO’s consumer and private banking arms and through third-party distributors such as insurance companies and other banks; • a part of the shared assets, equal to Fortis’ share in the entire acquisition of ABN AMRO, and • the ABN AMRO brand name. 10.2 Recent developments Recent developments are related to the separation of activities out of ABN AMRO and to the integration process of these activities and entities in the Fortis organisational structure. 10.2.1 Asset Management On 27 February 2008, Fortis and Santander announced that they have reached an agreement by which Santander purchases from Fortis the Brazilian asset management activities of ABN AMRO, which Fortis acquired as part of the Consortium’s (RBS, Fortis and Santander) purchase of ABN AMRO. Fortis will retain the Latin American (ex-Brazil) institutional sales and some equity investment teams related to funds distributed through ABN AMRO/Fortis channels. On 31 January 2008, Fortis received the permission from the Dutch central bank (DNB) concerning the proposed demerger of ABN AMRO Asset Management Holding (AAAMH) from ABN AMRO. On 1 April 2008, this demerger became effective and subsequently the core activities of AAAMH were merged with Fortis Investments, the asset manager of Fortis. Fortis considers six asset management entities as non-core: Artemis, Montag & Caldwell (M&C), Veredus AM, River Road AM, International Asset Management Limited (IAM) and Teda (Fortis has sold IAM on 9 July 2008 to the management team of IAM, supported by certain third party investors). The entities have, except for Teda, not been included in Fortis Investments but in Fortis Bank NV/SA and are reported as discontinued operations in the segment Asset Management. Fortis has initiated active programmes to locate buyers for these investments. Two asset management entities of ABN AMRO were not demerged for regulatory reasons (Asset Management France and Asset Management Argentina). These entities will continue to be reported under the equity method. Consolidated Interim Financial Statements for the first half-year 2008 | 37 Global asset management partnership between Fortis and Ping An On 2 April 2008, Fortis and Ping An signed an agreement to establish a global asset management partnership. Ping An has agreed to acquire a 50% equity stake in Fortis Investments for a consideration of EUR 2.15 billion (RMB 24.02 billion), payable to Fortis in cash on completion of the transaction. The entity will be renamed Fortis Ping An Investments. The senior management of the company remains unchanged. Fortis will fully consolidate the new entity as it will retain control of this partnership. The completion of the transaction remains subject to, amongst others, receipt of applicable regulatory approvals and is expected to close in the second half of 2008. 10.2.2 EC Remedies Fortis, ABN AMRO and Deutsche Bank announced on 2 July 2008 that they have signed a Share Purchase Agreement (SPA) by which Deutsche Bank will acquire from ABN AMRO parts of its commercial banking activities in the Netherlands. The businesses to be acquired by Deutsche Bank are part of ABN AMRO Business Unit Netherlands (BU NL), which is part of the by Fortis acquired businesses from ABN AMRO, and comprise two corporate client units that provide a range of financial services to large corporate clients, 13 commercial advisory branches that serve medium-sized clients, parts of the well-known Rotterdam-based bank Hollandsche Bank Unie N.V., and the factoring services company IFN Finance B.V., the Dutch part of ABN AMRO’s factoring unit IFN Group Finance. The sale of those businesses to Deutsche Bank is in line with the commitments that Fortis made to the European Commission (EC) on 3 October 2007 aimed at addressing the EC’s concerns regarding concentration in the Dutch banking market resulting from Fortis’ acquisition of certain ABN AMRO assets. The initial sale price of EUR 709 million represents a discount of approximately EUR 300 million to the businesses net-asset value at the signing date. The terms and conditions of the sale provide for an adjustment of the initial purchase price at the closing date. The terms and conditions of the sale are such that ABN AMRO will provide initial credit risk coverage for the businesses to be acquired by Deutsche Bank for around EUR 10 billion of Risk Weighted Assets (RWAs). The capital required for this credit-risk coverage will be released over time. The transaction’s closing date is anticipated at the beginning of October 2008 as it is subject to several authorisations of De Nederlandsche Bank (DNB), the approval by the European Commission and other regulatory bodies. The closing is also subject to the completion of the restructuring by Fortis and ABN AMRO with regard to setting up an independent bank, New HBU II N.V., taking over the divested businesses of Hollandsche Bank Unie N.V. The IFRS Framework states that the effects of transactions are recorded in the accounting records and reported in the financial statements of the periods to which they relate. The transaction with Deutsche Bank has been signed on 2 July 2008 and is still subject to approval of customers, local regulators and the EC and is as such not a transaction to be accounted for as of the second quarter 2008. The expected impact of this transaction on net profit and solvency, as from the third quarter, is subject to the final structuring and completion of the transaction and will be impacted by: • the discount of EUR 300 million compared to the businesses net asset value, being the difference between the value of the divested assets and liabilities, calculated based on the stipulations of the SPA; • the difference between the net asset value of the divested assets and the divested liabilities, calculated based on the stipulations of the SPA and the net asset value of these assets and liabilities as accounted for by ABN AMRO; • the write down of the intangible assets related to the divested activities, as recognised by Fortis at the acquisition date. The expected impact of the write down of these intangibles will be around 10% of the total intangibles recognised for the ABN AMRO acquired businesses; • a charge related to the recognition of the liabilities of the credit risk coverage provided on the divested loan portfolio (initially for around EUR 10 billion of risk-weighted assets, decreasing over time). • the potential impact of the transitional services agreements related to this transaction; • the tax treatment of the different components of the transaction. The final accounting treatment of the transaction is still under analysis and will depend on the final structuring as well as the final solvency impact. 38 | Consolidated Interim Financial Statements for the first half-year 2008 10.3 Accounting aspects As reported in the Fortis Consolidated Financial Statements 2007 and in accordance with IAS 28 Investments in Associates, the shareholding of Fortis in RFS Holdings is considered as an investment in an associate, representing an entity over which Fortis has significant influence. RFS Holdings is consolidated as a subsidiary by RBS because of its control over RFS Holdings. The minority interest owned by Fortis in RFS Holdings is accounted for using the equity method. Under the equity method, the investment in RFS Holdings is initially recognised at cost and the carrying amount is increased or decreased to recognise Fortis’ share in the profit or loss and net assets of RFS Holdings after the date of acquisition. In accordance with IFRS 3, the acquired ABN AMRO businesses are accounted for using the purchase accounting method. This process includes the identification and the fair value calculation of the assets and liabilities acquired by Fortis and the recognition and valuation of intangible assets. This process is executed in different stages. The stages include: • review of the accounting policies as applied by ABN AMRO, recognition of differences and preparation of adjustments to align the accounting policies as applied by ABN AMRO with the accounting policies of Fortis; • preparation of the fair value accounting of the on-balance and off-balance sheet items of ABN AMRO at the date of acquisition; • recognition of intangible assets and their value and consequently the calculation of the goodwill paid. The review of the accounting policies, the preparation of the fair value of the balance sheet items, the recognition and measurement of the intangible assets and the calculation of the goodwill, as described above, are currently taking place and are planned to be finalised by the end of September 2008. Figures disclosed in relation to the recognition and valuation of ABN AMRO related assets and liabilities are therefore provisional. Consolidated Interim Financial Statements for the first half-year 2008 | 39 The provisional opening balance of the acquired ABN AMRO businesses and the part of Fortis in the shared assets, as well as the goodwill related to the acquisition as published in the Annual Financial Statements 2007 and not taking into account the changes resulting from the finalisation of the purchase accounting method, are presented as follows: 17 October 2007 Due from customers Investments Property, plant and equipment Intangible assets Deferred tax assets Other assets Total identifiable assets 139,202 3,856 1,721 3,075 652 14,440 162,946 Due to customers Deferred tax liabilities Other liabilities Total identifiable liabilities 125,187 138 32,923 158,248 Total net assets Minority interest Total net assets attributable to shareholders 4,698 99 4,599 Purchase price Net assets Goodwill 24,046 ( 4,599 ) 19,447 At Fortis level, the acquisition cost and the goodwill amount are reduced with EUR 92 million due to the elimination (33,81%) of the gains realised during the acquisition process on the exchange of the ABN AMRO shares previously held by Fortis entities. There were no major measurement differences between the accounting principles applied by ABN AMRO and the accounting principles applied by Fortis and as such not resulting in significant adjustments of the carrying value of assets and liabilities. Adjustments following to the application of fair value accounting on the on-balance and off-balance items of the acquired ABN AMRO businesses were mainly related to the mortgage portfolio, funding positions related to the asset and liability management (ALM), the property portfolio and the investments in associates. Intangible assets include an amount of EUR 195 million relating to intangible assets previously accounted for by ABN AMRO. Additionally, an amount of EUR 2,880 million has been recognised in relation to the application of IFRS 3 Business combinations. At this moment, Fortis has initially recognised the following intangible assets according to IFRS 3: core deposits, core overdrafts, client relations and the brand name. The value of a core deposit intangible asset arises from the deposit base of the acquired business being a source of funding at lower cost than wholesale or money market funding. The spread between the cost of deposit funding – i.e. the interest paid to customers – and the cost of wholesale funding represents the most significant component of value of the core deposit intangible. The value of a core overdraft intangible asset arises primarily from future interest income that will be received on revolving loans throughout the length of a relationship with current account customers. 40 | Consolidated Interim Financial Statements for the first half-year 2008 The value of the customer relationship intangible arises from future non-interest (i.e. fee and commission) income. These future benefits are not encompassed in the fair value of loans and receivable balances and are therefore recognised as a separate intangible asset. As part of the transaction, Fortis also took ownership of the ABN AMRO brand and has valued it as an intangible asset. The provisional purchase accounting applied on the assets and liabilities of the acquired ABN AMRO businesses and the part of Fortis in the shared assets, currently results in a goodwill of EUR 19.4 billion (EUR 24 billion acquisition price and EUR 4.6 billion net assets) subject to final determination in the third quarter 2008. The net intangible assets to be deducted in the local regulatory solvency calculation, assuming full consolidation of the acquired ABN AMRO businesses, are currently valued at EUR 2.9 billion, subject to final determination. In the Consortium and Shareholders’ Agreement (CSA), the partners guaranteed each other a minimum core equity to risk weighted assets of at least 4.95% for the businesses acquired by the individual partners as of 31 December 2006. Based on the provisional figures and according to the CSA, Fortis is entitled to capital support of the Consortium partners. The capital support can be structured in the form of an exchange of capital relief transactions or a subscription to core equity instruments. A condition related to the capital support is the acceptance of these transactions or instruments as core equity by the home regulators. The acquired ABN AMRO businesses contributed EUR 198 million to the net profit attributable to the shareholders of Fortis as of 30 June 2008. The share of Fortis in the net assets of acquired ABN AMRO businesses as at 30 June 2008 was EUR 4,869 million (31 December 2007: EUR 4,755 million). Consolidated Interim Financial Statements for the first half-year 2008 | 41 The income statement for the period 1 January to 30 June 2008 for the acquired ABN AMRO businesses and the shared assets part of Fortis is as follows: First half-year 2008 Net interest income Net commissions and fees Realised and unrealised gains and losses Other income Total income Change in impairments Net revenues 1,682 845 300 ( 43 ) 2,784 ( 236 ) 2,548 Staff expenses Depreciation and amortisation Other expenses Total expenses ( 907 ) ( 434 ) ( 881 ) ( 2,222 ) Profit before taxation 326 Income tax expenses Net profit for the period ( 118 ) 208 Net profit attributable to minority interests Net profit attributable to shareholders 10 198 Fourth quarter 2007 (since 17 October 2007) Net interest income Net commissions and fees Realised and unrealised gains and losses Other income Total income Change in impairments Net revenues 727 472 37 159 1,395 ( 61 ) 1,334 Staff expenses Depreciation and amortisation Other expenses Total expenses ( 410 ) ( 184 ) ( 496 ) ( 1,090 ) Profit before taxation 244 Income tax expenses Net profit for the period ( 56 ) 188 Net profit attributable to minority interests Net profit attributable to shareholders 9 179 42 | Consolidated Interim Financial Statements for the first half-year 2008 The following table provides further information on the total assets and liabilities of the acquired ABN AMRO businesses and the shared-assets part of Fortis as at 30 June 2008: 30 June 2008 31 December 2007 Total assets Total liabilities Total net assets 171,109 166,169 4,940 164,118 159,263 4,855 Minority interests Total net assets attributable to shareholders 71 4,869 100 4,755 The net-assets evolution between 17 October 2007 and 30 June 2008 is explained by the following elements: Net assets arising on the opening balance (17 October 2007) Result of the year (76 days-period) Unrealised gains and losses (net) Currency translation differences Other changes in equity Net assets at 31 December 2007 Result of the period Unrealised gains and losses (net) Foreign exchanges differences Other changes in equity Net assets at 30 June 2008 4,599 179 ( 23 ) ( 11 ) 11 4,755 198 239 63 ( 386 ) 4,869 Valuation of the investment in RFS Holdings B.V. Fortis recently (17 October 2007) made an investment in RFS Holdings B.V., representing the ABN AMRO businesses that Fortis has acquired. On 30 June 2008, Fortis assessed, whether the fair value of its stake (investment in an associate) in RFS Holdings B.V. still permits the recovery of the cost of that investment, taking into account the change in general economic conditions and more specifically the on-going financial market turmoil. According to IFRS, the best evidence of an investment’s fair value in the case of a recent acquisition is the consideration paid for that investment, adjusted for changes in economic circumstances occurring since the acquisition date. In order to estimate the fair value of its investment in RFS Holdings B.V. as at 30 June 2008, Fortis has prepared an updated forecast of the results in future years, including an update of the expected synergies (revenue and cost) and integration costs related to the ABN AMRO acquired businesses. The updated forecast is based on the 2008 year-to-date actual results of these activities, taking into account the impact of the changed economic conditions. The acquisition costs of the investment in RFS Holdings B.V. as at 30 June 2008 can be substantiated on the basis of this assessment. However, Fortis's ability to reach the goals set for the acquired ABN AMRO activities in terms of budgets, outlooks and synergies is subject to changes in general economic conditions and more specifically in financial market conditions in the quarters and years ahead. Furthermore, the level and timing of the implementation of integration plans can also impact budgets and forecasts. Fortis will reassess before year-end, and in line with IFRS requirements, whether it will be necessary to recognise an impairment loss on its investment in RFS Holdings B.V. The assessment will be based on the yearly budgeting process that takes place in the second half of the year. This process will also include a detailed review of the longterm targets and budgets of the acquired ABN AMRO activities and the related expected synergies and integration costs. Consolidated Interim Financial Statements for the first half-year 2008 | 43 11 Due to banks General Banking Insurance (incl. eliminations) Total The table below shows the components of Due to banks. 30 June 2008 Deposits from banks: Demand deposits Time deposits Other deposits 8,120 77,477 321 85,918 794 933 128 1,855 ( 1,216 ) ( 284 ) ( 932 ) 8,630 77,478 449 86,557 Total deposits Repurchase agreements Securities lending transactions Advances against collateral Held at fair value through profit or loss Other Total due to banks 89,667 14,001 22,726 1,969 1,035 215,316 363 1,256 19 ( 363 ) ( 1,256 ) (1) 89,667 14,001 22,744 1,969 160 3,653 ( 32 ) ( 2,868 ) 1,163 216,101 31 December 2007 Deposits from banks: Demand deposits Time deposits Other deposits 10,243 77,537 136 87,916 128 621 162 911 ( 749 ) ( 128 ) ( 621 ) 10,243 77,537 298 88,078 Total deposits Repurchase agreements Securities lending transactions Advances against collateral Held at fair value through profit or loss Other Total due to banks 69,339 12,560 21,009 381 936 192,141 424 1,207 1,026 ( 423 ) ( 1,207 ) ( 1,000 ) 69,340 12,560 21,035 381 525 4,093 ( 424 ) ( 3,803 ) 1,037 192,431 44 | Consolidated Interim Financial Statements for the first half-year 2008 12 Due to customers General Banking Insurance (incl. eliminations) Total The components of Due to customers are as follows: 30 June 2008 Demand deposits Saving deposits Time deposits Other deposits Total deposits 91,311 50,182 81,251 129 222,873 6 6 ( 7,861 ) ( 1,046 ) ( 6,815 ) 84,496 50,182 80,205 135 215,018 Repurchase agreements Securities lending transactions Other borrowings Funds held under reinsurance agreements Held at fair value through profit or loss Fair value adjustments from hedge accounting Total due to customers 69,268 4,330 1,639 5 134 348 (5) 69,268 4,330 1,639 134 348 298,458 145 ( 7,866 ) 290,737 31 December 2007 Demand deposits Saving deposits Time deposits Other deposits Total deposits 87,191 50,795 79,245 301 217,532 11 11 ( 5,021 ) ( 1,677 ) ( 3,344 ) 83,847 50,795 77,568 312 212,522 Repurchase agreements Securities lending transactions Other borrowings Funds held under reinsurance agreements Held at fair value through profit or loss Fair value adjustments from hedge accounting Total due to customers 41,857 5,425 2,320 5 154 30 25 267,164 170 ( 5,036 ) ( 40 ) 41,857 5,425 2,285 154 30 25 262,298 Consolidated Interim Financial Statements for the first half-year 2008 | 45 13 Liabilities arising from insurance and investment contracts Total Insurance contracts Investment contracts Life contracts Non-life contracts Other (incl. eliminations) Total The following table provides an overview of the Liabilities arising from insurance and investment contracts. 30 June 2008 Liability for future policyholder benefits Claims reserves Unearned premiums Reserve for policyholder profit sharing Shadow accounting adjustment Gross Reinsurance Net 314 ( 698 ) 38,916 ( 59 ) 38,857 21,054 118 9 21,054 432 ( 689 ) 59,970 ( 59 ) 59,911 39,300 20,927 60,227 7,273 1,933 3 2 9,211 ( 1,035 ) 8,176 (8) ( 1,885 ) 51 ( 1,834 ) ( 1,879 ) (2) 4 58,348 7,271 1,937 435 ( 695 ) 67,296 ( 1,043 ) 66,253 31 December 2007 Liability for future policyholder benefits Claims reserves Unearned premiums Reserve for policyholder profit sharing Shadow accounting adjustment Gross Reinsurance Net 291 ( 258 ) 38,117 ( 46 ) 38,071 19,870 278 35 19,870 569 ( 223 ) 57,987 ( 46 ) 57,941 3 8,696 ( 963 ) 7,733 ( 100 ) ( 1,951 ) 53 ( 1,898 ) 38,084 19,557 57,641 7,122 1,571 ( 1,835 ) ( 16 ) 55,806 7,106 1,571 569 ( 320 ) 64,732 ( 956 ) 63,776 46 | Consolidated Interim Financial Statements for the first half-year 2008 Consolidated Interim Financial Statements for the first half-year 2008 | 47 Explanatory notes to the income statement 48 | Consolidated Interim Financial Statements for the first half-year 2008 14 Interest income General Banking Insurance (incl. eliminations) Total The breakdown of Interest income by type of product is as follows: First half-year 2008 Interest income on cash equivalents Interest income on due from banks Interest income on investments Interest income on due from customers Interest income on derivatives held for trading Other interest income Total interest income 390 5,139 2,284 8,434 32,706 1,905 50,858 77 52 1,317 202 114 20 1,782 ( 67 ) ( 63 ) (7) ( 137 ) ( 226 ) (9) ( 509 ) 400 5,128 3,594 8,499 32,594 1,916 52,131 First half-year 2007 Interest income on cash equivalents Interest income on due from banks Interest income on investments Interest income on due from customers Interest income on derivatives held for trading Other interest income Total interest income 520 4,155 2,768 7,880 25,253 1,706 42,282 41 168 1,168 211 92 14 1,694 ( 28 ) ( 297 ) ( 13 ) ( 63 ) ( 178 ) ( 10 ) ( 589 ) 533 4,026 3,923 8,028 25,167 1,710 43,387 Second quarter 2008 Interest income on cash equivalents Interest income on due from banks Interest income on investments Interest income on due from customers Interest income on derivatives held for trading Other interest income Total interest income 114 2,624 1,183 4,260 16,773 1,002 25,956 42 29 670 103 55 15 914 ( 34 ) ( 32 ) (3) ( 69 ) ( 113 ) (5) ( 256 ) 122 2,621 1,850 4,294 16,715 1,012 26,614 Second quarter 2007 Interest income on cash equivalents Interest income on due from banks Interest income on investments Interest income on due from customers Interest income on derivatives held for trading Other interest income Total interest income 315 2,212 1,372 4,018 13,121 945 21,983 18 93 591 82 43 8 835 (8) ( 161 ) (6) ( 16 ) ( 87 ) (5) ( 283 ) 325 2,144 1,957 4,084 13,077 948 22,535 Consolidated Interim Financial Statements for the first half-year 2008 | 49 15 Insurance premiums First half-year 2008 First half-year 2007 The following table provides an overview of gross-insurance premiums earned. Life insurance Non-life insurance Eliminations Total gross earned premiums from Insurance activities Insurance premiums earned from Banking activities Eliminations Total gross earned premiums 5,159 2,835 ( 37 ) 7,957 4 ( 44 ) 7,917 5,325 2,632 ( 23 ) 7,934 5 ( 49 ) 7,890 Second quarter 2008 Life insurance Non-life insurance Eliminations Total gross earned premiums from Insurance activities Insurance premiums earned from Banking activities Eliminations Total gross earned premiums 2,002 1,454 ( 19 ) 3,437 2 ( 21 ) 3,418 Second quarter 2007 2,322 1,345 ( 11 ) 3,656 2 ( 26 ) 3,632 The table below shows the details of Life-insurance premiums. First half-year 2008 Unit-linked insurance contracts Single written premiums Periodic written premiums Group business total Single written premiums Periodic written premiums Individual business total Total unit-linked insurance contracts 76 154 230 86 478 564 794 362 178 540 137 477 614 1,154 First half-year 2007 Non unit-linked insurance contracts Single written premiums Periodic written premiums Group business total Single written premiums Periodic written premiums Individual business total Total non unit-linked insurance contracts 577 517 1,094 908 658 1,566 2,660 211 456 667 824 593 1,417 2,084 Investment contracts with DPF Single written premiums Periodic written premiums Total investment contracts with DPF 1,523 182 1,705 1,932 155 2,087 Total gross premiums Life insurance 5,159 5,325 Premium inflow recognised in income statement Premium inflow deposit accounting Total premium inflow Life insurance 5,159 1,828 6,987 5,325 1,678 7,003 50 | Consolidated Interim Financial Statements for the first half-year 2008 Total premium inflow Life insurance is gross premiums received by insurance companies for issued insurance and investment contracts. Premium inflow of insurance contracts and investment contracts with DPF is recognised in the income statement. Premium inflow of investment contracts without DPF, mainly unit-linked contracts, is – after deduction of fees – directly recognised as a liability (deposit accounting). Fees are recognised as fee income in the income statement. The table below shows the details of Non-life insurance premiums for the period. Premiums for Motor, Fire and other damage to property and Other, are grouped in Property & Casualty. Accident & Health First half-year 2008 Gross written premiums Change in unearned premiums, gross Gross earned premiums Ceded reinsurance premiums Reinsurers' share of unearned premiums Net earned premiums Non-life insurance 1,191 ( 202 ) 989 ( 162 ) 21 848 2,042 ( 196 ) 1,846 ( 178 ) 21 1,689 3,233 ( 398 ) 2,835 ( 340 ) 42 2,537 Property & Casualty Total First half-year 2007 Gross written premiums Change in unearned premiums, gross Gross earned premiums Ceded reinsurance premiums Reinsurers' share of unearned premiums Net earned premiums Non-life insurance 1,028 ( 183 ) 845 ( 105 ) 22 762 2,045 ( 258 ) 1,787 ( 193 ) 45 1,639 3,073 ( 441 ) 2,632 ( 298 ) 67 2,401 Below is a breakdown of the Non-life gross earned premiums by reporting segment. Accident & Health First half-year 2008 Insurance Belgium Insurance Netherlands Insurance International Gross earned premiums Non-life insurance 213 675 101 989 504 503 839 1,846 717 1,178 940 2,835 Property & Casualty Total First half-year 2007 Insurance Belgium Insurance Netherlands Insurance International Gross earned premiums Non-life insurance 193 548 104 845 471 486 830 1,787 664 1,034 934 2,632 Consolidated Interim Financial Statements for the first half-year 2008 | 51 16 Realised capital gains (losses) on investments General Banking Insurance (incl. eliminations) Total Realised capital gains (losses) on investments are broken down as follows: First half-year 2008 Debt securities Equity securities Real estate Subsidiaries, associates and joint ventures Other Realised capital gains (losses) on investments 236 189 ( 30 ) 74 3 ( 25 ) 286 44 5 (4) 306 1 10 9 164 265 118 8 (3) 552 First half-year 2007 Debt securities Equity securities Real estate Subsidiaries, associates and joint ventures Other Realised capital gains (losses) on investments 456 45 395 3 13 ( 111 ) 415 33 3 15 355 117 117 ( 66 ) 927 36 16 15 928 Second quarter 2008 Debt securities Equity securities Real estate Subsidiaries, associates and joint ventures Other Realised capital gains (losses) on investments 36 ( 28 ) (7) 70 1 ( 28 ) 95 21 1 (2) 87 1 8 7 ( 56 ) 95 91 2 (1) 131 Second quarter 2007 Debt securities Equity securities Real estate Subsidiaries, associates and joint ventures Other Realised capital gains (losses) on investments 250 55 183 1 11 ( 55 ) 186 17 3 4 155 124 124 493 18 14 4 529 52 | Consolidated Interim Financial Statements for the first half-year 2008 17 Other realised and unrealised gains and losses General Banking Insurance (incl. eliminations) Total Other realised and unrealised gains and losses as included in the income statement are presented below. First half-year 2008 Assets / liabilities held for trading Assets and liabilities held at fair value through profit or loss Hedging results Other Other realised and unrealised gains and losses 513 827 ( 65 ) 7 1,282 ( 30 ) ( 207 ) 2 2 ( 233 ) (6) ( 19 ) (4) (9) 479 611 ( 63 ) 3 1,030 First half-year 2007 Assets / liabilities held for trading Assets and liabilities held at fair value through profit or loss Hedging results Other Other realised and unrealised gains and losses 721 81 100 28 930 ( 27 ) ( 11 ) 1 1 ( 36 ) ( 76 ) 85 (1) (2) 6 618 155 100 27 900 Second quarter 2008 Assets / liabilities held for trading Assets and liabilities held at fair value through profit or loss Hedging results Other Other realised and unrealised gains and losses 280 316 ( 75 ) 4 525 ( 42 ) (2) ( 40 ) ( 50 ) 54 (1) 36 39 228 330 ( 76 ) 40 522 Second quarter 2007 Assets / liabilities held for trading Assets and liabilities held at fair value through profit or loss Hedging results Other Other realised and unrealised gains and losses 387 39 50 28 504 1 ( 19 ) ( 11 ) (9) ( 77 ) 106 (1) (4) 24 299 136 49 25 509 Consolidated Interim Financial Statements for the first half-year 2008 | 53 18 Fee and commission income General Banking Insurance (incl. eliminations) Total Fee and commission income were as follows: First half-year 2008 Securities and custodian services Reinsurance commissions and insurance and investment fees Asset management Payment services Guarantees and commitment fees Other service fees Total fee and commission income 587 151 862 349 171 128 2,248 69 284 ( 33 ) ( 188 ) 198 17 (5) ( 146 ) (4) 582 203 875 349 171 164 2,344 First half-year 2007 Securities and custodian services Reinsurance commissions and insurance and investment fees Asset management Payment services Guarantees and commitment fees Other service fees Total fee and commission income 504 155 709 342 145 158 2,013 76 271 ( 36 ) ( 184 ) 178 17 (1) ( 141 ) (6) 503 192 720 342 145 198 2,100 Second quarter 2008 Securities and custodian services Reinsurance commissions and insurance and investment fees Asset management Payment services Guarantees and commitment fees Other service fees Total fee and commission income 284 72 528 180 94 67 1,225 31 135 ( 17 ) ( 92 ) 98 6 (3) ( 70 ) (2) 281 100 532 180 94 81 1,268 Second quarter 2007 Securities and custodian services Reinsurance commissions and insurance and investment fees Asset management Payment services Guarantees and commitment fees Other service fees Total fee and commission income 261 80 371 176 72 85 1,045 36 121 ( 18 ) ( 90 ) 78 7 (1) ( 69 ) (2) 260 89 376 176 72 103 1,076 54 | Consolidated Interim Financial Statements for the first half-year 2008 19 Interest expense General Banking Insurance (incl. eliminations) Total The following table shows the breakdown of Interest expense by product. First half-year 2008 Interest expense due to banks Interest expense due to customers Interest expense on debt certificates Interest expense on subordinated liabilities Interest expense on other borrowings Interest expense on liabilities held for trading and derivatives Interest expense on other liabilities Total interest expense 5,193 4,893 2,101 647 65 33,433 1,976 48,308 38 48 101 52 308 67 2 ( 61 ) ( 153 ) 170 10 ( 36 ) ( 197 ) 56 ( 211 ) 5,199 4,742 2,271 695 77 33,337 2,084 48,405 First half-year 2007 Interest expense due to banks Interest expense due to customers Interest expense on debt certificates Interest expense on subordinated liabilities Interest expense on other borrowings Interest expense on liabilities held for trading and derivatives Interest expense on other liabilities Total interest expense 4,498 5,362 2,382 357 94 25,972 962 39,627 35 30 96 37 419 210 11 ( 188 ) ( 218 ) 131 24 ( 24 ) ( 174 ) 39 ( 410 ) 4,520 5,155 2,513 416 100 25,894 1,038 39,636 Second quarter 2008 Interest expense due to banks Interest expense due to customers Interest expense on debt certificates Interest expense on subordinated liabilities Interest expense on other borrowings Interest expense on liabilities held for trading and derivatives Interest expense on other liabilities Total interest expense 2,622 2,455 1,016 337 35 16,901 1,340 24,706 20 22 50 30 158 35 1 ( 30 ) ( 84 ) 97 5 ( 17 ) ( 86 ) 49 ( 66 ) 2,627 2,372 1,113 362 40 16,865 1,419 24,798 Second quarter 2007 Interest expense due to banks Interest expense due to customers Interest expense on debt certificates Interest expense on subordinated liabilities Interest expense on other borrowings Interest expense on liabilities held for trading and derivatives Interest expense on other liabilities Total interest expense 2,078 2,957 1,300 184 45 13,505 518 20,587 17 15 49 (2) 197 110 8 ( 96 ) ( 163 ) 134 11 ( 16 ) ( 82 ) 22 ( 190 ) 2,092 2,802 1,434 212 44 13,472 538 20,594 Consolidated Interim Financial Statements for the first half-year 2008 | 55 20 Insurance claims and benefits First half-year 2008 First half-year 2007 The details of Insurance claims and benefits are shown in the table below. Life insurance Non-life insurance Eliminations Total insurance claims and benefits from Insurance activities Insurance claims and benefits from Banking activities Eliminations Total insurance claims and benefits 5,682 2,148 ( 39 ) 7,791 11 ( 116 ) 7,686 5,515 1,980 ( 23 ) 7,472 3 ( 91 ) 7,384 Second quarter 2008 Second quarter 2007 Life insurance Non-life insurance Eliminations Total insurance claims and benefits from Insurance activities Insurance claims and benefits from Banking activities Eliminations Total insurance claims and benefits 2,470 1,154 ( 18 ) 3,606 10 ( 49 ) 3,567 2,630 960 ( 11 ) 3,579 ( 44 ) 3,535 Details of Life insurance claims and benefits, net of reinsurance, are shown below. First half-year 2008 First half-year 2007 Benefits and surrenders, gross Change in liabilities arising from insurance and investment contracts, gross Ceded reinsurance premiums Total Life insurance claims and benefits, gross Reinsurers' share of claims and benefits Total Life insurance claims and benefits, net 3,015 2,625 42 5,682 ( 22 ) 5,660 2,739 2,741 35 5,515 ( 30 ) 5,485 Second quarter 2008 Second quarter 2007 Benefits and surrenders, gross Change in liabilities arising from insurance and investment contracts, gross Ceded reinsurance premiums Total Life insurance claims and benefits, gross Reinsurers' share of claims and benefits Total Life insurance claims and benefits, net 1,599 858 13 2,470 (6) 2,464 1,480 1,138 12 2,630 ( 11 ) 2,619 56 | Consolidated Interim Financial Statements for the first half-year 2008 Details of Non-life insurance claims and benefits, net of reinsurance, are shown in the following table. First half-year 2008 First half-year 2007 Claims paid, gross Change in liabilities arising from insurance contracts, gross Ceded reinsurance premiums Reinsurers' share of unearned premiums Total Non-life insurance claims and benefits, gross Reinsurers' share of change in liabilities Reinsurers' share of claims paid Total Non-life insurance claims and benefits, net 1,652 198 340 ( 42 ) 2,148 ( 40 ) ( 158 ) 1,950 1,490 259 298 ( 67 ) 1,980 ( 78 ) ( 67 ) 1,835 Second quarter 2008 Second quarter 2007 Claims paid, gross Change in liabilities arising from insurance contracts, gross Ceded reinsurance premiums Reinsurers' share of unearned premiums Total Non-life insurance claims and benefits, gross Reinsurers' share of change in liabilities Reinsurers' share of claims paid Total Non-life insurance claims and benefits, net 811 171 142 30 1,154 ( 54 ) ( 97 ) 1,003 723 131 84 22 960 ( 21 ) ( 35 ) 904 Consolidated Interim Financial Statements for the first half-year 2008 | 57 21 Change in impairments General Banking Insurance (incl. eliminations) Total 3 13 (1) 167 42 66 82 2 3 1 18 7 1,088 151 (4) 2 (4) 889 88 2 5 1 18 7 1,235 Change in impairments were as follows: First half-year 2008 Cash and cash equivalents Due from banks Due from customers Credit commitments - banks Credit commitments - customers Investments in debt securities Investments in equity securities and other Investment property Reinsurance and other receivables Property, plant and equipment Goodwill and other intangible assets Accrued interest and other assets Total change in impairments First half-year 2007 Cash and cash equivalents Due from banks Due from customers Credit commitments - banks Credit commitments - customers Investments in debt securities Investments in equity securities and other Investment property Reinsurance and other receivables Property, plant and equipment Goodwill and other intangible assets Accrued interest and other assets Total change in impairments 6 36 (1) 10 General Banking Second quarter 2008 Cash and cash equivalents Due from banks Due from customers Credit commitments - banks Credit commitments - customers Investments in debt securities Investments in equity securities and other Investment property Reinsurance and other receivables Property, plant and equipment Goodwill and other intangible assets Accrued interest and other assets Total change in impairments Second quarter 2007 Cash and cash equivalents Due from banks Due from customers Credit commitments - banks Credit commitments - customers Investments in debt securities Investments in equity securities and other Investment property Reinsurance and other receivables Property, plant and equipment Goodwill and other intangible assets Accrued interest and other assets Total change in impairments 5 10 (1) 4 4 14 1 8 ( 42 ) 9 (1) 2 (4) ( 42 ) 9 7 2 (3) 38 (1) 37 2 1 3 5 640 75 (4) (3) 490 6 12 62 2 (1) (4) (3) 502 64 2 1 1 3 5 711 1 6 129 1 6 129 Insurance (incl. eliminations) Total 5 46 1 8 3 1 ( 35 ) 9 ( 35 ) 9 8 3 2 3 53 (2) 3 51 42 823 10 3 13 168 58 | Consolidated Interim Financial Statements for the first half-year 2008 Fortis applies a two step approach in the impairment testing process of financial instruments. Firstly, an assessment is made if objective evidence exists that a financial asset is impaired, followed by the recognition and measurement of an impairment loss. The assessment of objective evidence is based on observable data (‘triggers’) about loss events. Impairment losses are measured as the difference between the asset’ carrying amount and the present value of the estimated future cash flows. The impairment losses related to Investments in debt securities in the first half year of 2008, concern mainly Structured Credit Instruments and are more specific due to US subprime residential mortgage-related assets. Fortis Credit risk exposure towards Structured Credit Instruments and the valuation methods applied are described in note 9.4 Structured Credit Instruments. Consolidated Interim Financial Statements for the first half-year 2008 | 59 Explanatory note on segment reporting 60 | Consolidated Interim Financial Statements for the first half-year 2008 22 22.1 Information on segments General information Fortis is an international financial services provider whose core activities are Banking and Insurance. The primary format for the segment reporting is based on business segments. On 5 November 2007, Fortis announced a reorganisation of its management structure as of 1 January 2008. A more adequate management structure will not only facilitate the successful integration of the acquired ABN AMRO businesses, but will also support the development of Fortis as a whole. The 2007 figures have been changed for comparison purposes. Fortis is now organised on a worldwide basis into four businesses, further subdivided into business segments (for details see below): • • • • Retail Banking Asset Management & Private Banking Merchant Banking Insurance. Activities not related to Banking and Insurance and elimination differences are reported separately from the Banking and Insurance activities. Fortis’ segment reporting reflects the full economic contribution of the businesses of Fortis. The aim is direct allocation to the businesses of all balance sheet and income statement items for which the businesses have full managerial responsibility. Segment information is prepared based on the same accounting policies as those used in preparing and presenting Fortis’ Consolidated Financial Statements (as described in note 1) and by applying appropriate allocation rules. Transactions between the different businesses are executed under standard commercial terms and conditions. 22.2 Banking Retail Banking Retail Banking provides financial services to individuals, professionals and small businesses. Over six million active customers in eight countries currently use these integrated banking and insurance services through proprietary and thirdparty networks, all embedded in a multi-channel environment. Operating through a variety of distribution channels in the Benelux countries, service and advice on every aspect of banking, saving, investment, credit and insurance is delivered to a clearly segmented customer base. The extensive retail portfolio in Turkey is served by a comprehensive and tailored product offering. In Germany, the focus is on credit cards and consumer lending at innovative credit shops. Fortis in Poland targets affluent customers and small businesses, while the subsidiary Dominet is helping to rapidly roll out of consumer finance and mass retail businesses in this market. The financial services partnership with An Post in Ireland – Postbank – has a distribution network of 1,400 post offices and some 3,000 Post Point outlets. Third party distribution covers independent brokers (in Germany, Poland and the Netherlands), non-financial outlets (post offices in Belgium and Ireland and car dealers) and consumer finance co-branding deals. Consolidated Interim Financial Statements for the first half-year 2008 | 61 Asset Management & Private Banking Asset Management Fortis Investments is an asset manager with 21 autonomous investment centers across Europe, the US and Asia. Fortis Investments serves a global range of locally-based institutional and wholesale/retail investors. As from the second quarter 2008, the asset management activities of ABN AMRO which were transferred to Fortis Investments at 2 April 2008 are reported in this segment. Private Banking Private Banking offers integrated, worldwide asset and liability management solutions to high net worth individuals, their businesses and their advisors. Merchant Banking Merchant Banking combines market leadership in the Benelux region with a strong position on a European or worldwide scale in specific skills with growth perspectives. As part of its pursuit of optimum and economically rewarding relationships with its customers, the business provides a full range of services customised to meet customers’ needs, based on an indepth analysis of their expectations. Merchant Banking comprises Corporate & Public Banking, Commercial & Investment Banking, Global Markets and Specialised Finance. Corporate & Public Banking is responsible for the global relationship management of corporate and public-sector clients. Commercial Banking aims to be the partner of choice for Europe-oriented medium-sized enterprises by offering added-value solutions through a cohesive network of business centers. Investment Banking offers a wide variety of financial services, including corporate finance, structured finance and private equity. It provides integrated financial solutions in the fields of export and project finance, acquisition and leveraged finance, real estate finance and principal finance (primarily targeting transportation group companies). Global Markets includes Institutional Banking, and Clearing, Funds & Custody. Institutional Banking develops and delivers comprehensive, tailored and integrated solutions to top corporate clients, financial institutions, mid-caps, private banking clients, governments and public entities worldwide. It is present in 25 countries across Europe, America and Asia. Clearing, Funds & Custody offers high-value financial services in custody, clearing, fund administration and financing that support the trading and investment activities of financial professionals. Specialised Finance consists of Energy, Commodities & Transportation (ECT), leasing, commercial finance, trade finance, supply chain and cash management. This business line is made up of separate entities with different internal and external distribution channels and client bases. It develops a joint market approach that brings high-added value solutions to customers. Other Banking Balance sheet items, revenues and costs for support functions, operations and Asset and Liability Management (ALM) are reported in this section. The figures reported are those after allocation to the business segments. Besides the acquired ABN AMRO business units are Fortis Hypotheek Bank, Belgolaise and some other Fortis companies reported in Other Banking. 62 | Consolidated Interim Financial Statements for the first half-year 2008 Allocation rules Segment reporting within the Banking segments make use of balance sheet allocation rules, balance sheet squaring mechanisms, a fund transfer pricing system, rebilling of support and operation expenses and overhead allocation. The balance sheet allocation and squaring methodology aim at reporting information on segments to reflect Fortis’s business model. Under Fortis’s business model, segments do not act as their own treasurer in bearing the interest rate risk, the foreign exchange risk and the liquidity risk, by funding their own assets with their own liabilities, or by having direct access to the financial markets. The interest, currency and liquidity risks are removed by transferring them from the segments to the internal central bankers. This is reflected in the fund transfer pricing system. A key role in this system is attributed to Asset and Liability Management (ALM). The results of ALM are allocated to the segments based on the regulatory capital used and the interest margin generated within the segments. Support and operations departments provide services to the segments. These services include human resources and information technology. The costs and revenues of these departments are charged to the segments via a rebilling system on the basis of service level agreements (SLAs) reflecting the economic consumption of the products and services provided. SLAs ensure that the costs and revenues are charged based on actual use and at standard rates. Differences between the actual costs and the rebilled costs based on standard tariffs are passed through to the business segments in a final allocation. 22.3 Insurance Insurance leverages its existing skills in distribution, operations and products from its home markets in the Benelux region and has established leading positions in selected European and Asian markets. The insurance activities are executed by Insurance Belgium, Insurance Netherlands and Insurance International. Insurance Belgium Fortis Insurance Belgium offers its products, a comprehensive range of Life and Non-life covers, through a multitude of distribution channels. Independent intermediaries service the Private market as well as the Small and Medium Sized enterprise segment. Bank branches focus on the retail market. Fortis Employee Benefits offers Group Life and Health-Care solutions and services to large and medium-sized companies. Insurance Belgium – Life Life insurance includes both savings, with investment-focused unit-linked contracts, and traditional products with a guaranteed interest rate. Insurance Belgium – Non-Life Non-life insurance includes besides the Property & Casualty product range (Motor, Fire and Liability) also workmen’s' compensation and Accident & Health products. Insurance Netherlands Insurance Netherlands serves the market via independent insurance brokers, Fortis Retail Bank (bancassurance) and an own sales force (tied agents). Insurance Netherlands offers businesses and individuals a wide range of Life and Non-life products like health care and disability insurance and saving products. Insurance Netherlands - Life Life includes insurance contracts with coverage of the risk of the life and death of individuals. Life also includes investment contracts. Insurance Netherlands - Non-Life Non-life includes Accident & Health, Motor, Fire and Other insurance covering the risk of property losses or claim liabilities. Consolidated Interim Financial Statements for the first half-year 2008 | 63 Insurance International Insurance International comprises Fortis’s insurance activities outside Fortis's home markets, Belgium and the Netherlands. Insurance International also includes the Non-life activities of Fortis Corporate Insurance and Fortis Reinsurance. Fortis Corporate Insurance is a Non-life insurer for large and medium-sized national and international companies in the Benelux. Insurance International – Life In Life insurance, Insurance International is active through wholly-owned subsidiaries in France, Germany, Luxembourg, Russia, Turkey and Ukraine. In Portugal, Insurance International holds a 51% shareholding in Millenniumbcp Fortis. In Asia, Insurance International operates through minority shareholdings in Thailand, Malaysia and China. Insurance International – Non-Life In Non-Life, Insurance International is active through wholly-owned subsidiaries in Luxembourg and the United Kingdom. In Portugal, Non-life is sold through Millenniumbcp Fortis. In Asia, Insurance International operates through minority shareholdings in Thailand and Malaysia. Eliminations Eliminations include eliminations between Insurance segments. Allocation rules In accordance with Fortis’s business model, Insurance companies report support activities directly in the business. When allocating balance sheet items to business segments, a bottom-up approach is used based on the products sold to external customers. For the balance sheet items not related to products sold to customers, a tailor-made methodology adapted to the specific business model of each reportable segment is applied. 22.4 General This section comprises activities not related to the core Banking and Insurance business, such as group finance and other holding activities. 64 | Consolidated Interim Financial Statements for the first half-year 2008 22.5 Balance sheet by activity 30 June 2008 Banking Insurance General Eliminations Total Assets Cash and cash equivalents Assets held for trading Due from banks Due from customers Investments: Held to maturity Available for sale Held at fair value through profit or loss Investment property Associates and joint ventures 3,938 95,533 5,274 768 27,169 132,682 Investments related to unit-linked contracts Reinsurance and other receivables Property, plant and equipment Goodwill and other intangible assets Non-financial assets and disposal groups classified as held for sale Accrued interest and other assets Total assets 8,361 2,645 4,422 1,358 102,788 876,063 4,045 118,282 272 15,068 ( 2,199 ) ( 35,070 ) 57,570 1,147 3,118 509 62,344 30,093 3,515 1,275 1,758 1,541 1,328 1,031 297 ( 1,379 ) ( 1,735 ) ( 16 ) (8) ( 3,138 ) ( 220 ) ( 42 ) 3,938 152,755 4,983 3,870 27,670 193,216 29,873 13,375 3,920 6,180 1,358 104,906 974,343 21,813 111,122 131,585 359,287 5,977 347 2,207 6,721 8,877 2,939 111 ( 9,979 ) ( 909 ) ( 374 ) ( 18,209 ) 20,750 110,671 133,418 356,676 Liabilities Liabilities held for trading Due to banks Due to customers Liabilities arising from insurance and investment contracts Liabilities related to unit-linked contracts Debt certificates Subordinated liabilities Other borrowings Provisions Current and deferred tax liabilities Accrued interest and other liabilities Liabilities related to assets held for sale Total liabilities 101,783 26,219 1,414 947 1,782 68,035 181 843,938 112,566 19,903 ( 32,475 ) 129,749 215,316 298,458 54 42 3,653 145 69,091 30,533 5 1,600 1,453 54 558 5,432 206 561 20 ( 1,950 ) 8,052 2,843 4,826 ( 786 ) ( 7,512 ) ( 6,015 ) 277 2,818 320 ( 511 ) ( 5,686 ) ( 8,186 ) ( 1,849 ) 129,557 216,101 290,737 67,296 30,533 109,054 23,150 1,678 1,001 2,566 72,078 181 943,932 Shareholders' equity Minority interests Total equity 31,650 475 32,125 5,062 654 5,716 ( 4,874 ) 39 ( 4,835 ) ( 2,595 ) 29,243 1,168 ( 2,595 ) 30,411 Total liabilities and equity 876,063 118,282 15,068 ( 35,070 ) 974,343 Consolidated Interim Financial Statements for the first half-year 2008 | 65 31 December 2007 Banking Assets Cash and cash equivalents Assets held for trading Due from banks Due from customers Investments: Held to maturity Available for sale Held at fair value through profit or loss Investment property Associates and joint ventures 4,234 103,180 5,718 688 27,572 141,392 Investments related to unit-linked contracts Reinsurance and other receivables Property, plant and equipment Goodwill and other intangible assets Non-financial assets and disposal groups classified as held for sale Accrued interest and other assets Total assets 78,872 767,080 3,288 119,199 295 9,296 ( 2,241 ) ( 24,396 ) 80,214 871,179 6,546 2,715 1,559 61,312 1,883 2,984 551 66,730 31,395 3,178 1,289 1,780 134 2,225 1,031 1,194 ( 1,434 ) ( 2,602 ) ( 16 ) ( 15 ) ( 4,067 ) ( 275 ) ( 140 ) 4,234 164,089 6,193 3,656 28,108 206,280 31,120 9,718 4,004 3,339 27,002 75,347 118,346 315,301 2,313 259 2,143 6,824 1,171 130 11 5,330 ( 4,126 ) ( 936 ) ( 1,464 ) ( 11,147 ) 26,360 74,800 119,036 316,308 Insurance General Eliminations Total Liabilities Liabilities held for trading Due to banks Due to customers Liabilities arising from insurance and investment contracts Liabilities related to unit-linked contracts Debt certificates Subordinated liabilities Other borrowings Provisions Current and deferred tax liabilities Accrued interest and other liabilities Liabilities related to assets held for sale Total liabilities 733,347 111,365 13,952 ( 21,679 ) 836,985 95,054 23,097 2,666 841 1,424 61,464 89,457 192,141 267,164 39 25 4,093 170 66,599 31,788 5 1,356 2,037 58 784 4,450 230 693 52 ( 865 ) 7,920 1,760 1,836 ( 906 ) ( 4,288 ) ( 3,521 ) 482 1,006 25 ( 375 ) ( 4,809 ) ( 5,061 ) ( 1,906 ) 89,589 192,431 262,298 64,732 31,788 102,073 21,925 3,018 899 2,490 65,742 Shareholders' equity Minority interests Total equity 33,304 429 33,733 7,158 676 7,834 ( 4,698 ) 42 ( 4,656 ) ( 2,717 ) 33,047 1,147 ( 2,717 ) 34,194 Total liabilities and equity 767,080 119,199 9,296 ( 24,396 ) 871,179 66 | Consolidated Interim Financial Statements for the first half-year 2008 22.6 Income statement by activity First half-year 2008 Banking Insurance General Eliminations Total Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 200 55,218 50,858 4 162 228 236 1,282 2,248 1,782 7,957 512 69 306 ( 233 ) 284 ( 2,269 ) 336 8,744 35 259 ( 128 ) 1 351 ( 860 ) ( 44 ) ( 14 ) 7 10 109 ( 188 ) 51 ( 119 ) ( 1,048 ) 52,131 7,917 661 304 552 1,030 2,344 ( 2,218 ) 452 63,173 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 1,088 ) ( 742 ) ( 246 ) ( 2,059 ) ( 1,244 ) ( 53,698 ) ( 48,308 ) ( 11 ) ( 308 ) ( 7,791 ) 2,232 ( 151 ) ( 832 ) ( 121 ) ( 455 ) ( 499 ) ( 7,925 ) ( 23 ) ( 75 ) ( 614 ) (6) 132 1,162 4 189 ( 516 ) 727 116 ( 48,405 ) ( 7,686 ) 2,232 ( 1,235 ) ( 1,385 ) ( 367 ) ( 2,543 ) ( 1,686 ) ( 61,075 ) Profit before taxation 1,520 819 ( 355 ) 114 2,098 Income tax expense Net profit for the period ( 344 ) 1,176 ( 140 ) 679 52 ( 303 ) 1 115 ( 431 ) 1,667 Net gain on discontinued operations Net profit before minority interests 24 1,200 679 ( 303 ) 115 24 1,691 Net profit attributable to minority interests Net profit attributable to shareholders 15 1,185 37 642 1 ( 304 ) 115 53 1,638 Consolidated Interim Financial Statements for the first half-year 2008 | 67 First half-year 2007 Banking Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 129 45,963 42,282 5 104 44 456 930 2,013 1,694 7,934 481 37 355 ( 36 ) 271 1,140 322 12,198 55 471 128 2 ( 11 ) 4 ( 184 ) (2) ( 105 ) ( 1,228 ) 8 278 ( 867 ) ( 49 ) ( 14 ) 43,387 7,890 579 81 928 900 2,100 1,138 401 57,404 Insurance General Eliminations Total Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 36 ) ( 524 ) ( 179 ) ( 1,934 ) ( 1,277 ) ( 43,580 ) ( 39,627 ) (3) ( 419 ) ( 7,472 ) ( 1,548 ) ( 10 ) ( 801 ) ( 112 ) ( 427 ) ( 511 ) ( 11,300 ) ( 24 ) ( 82 ) ( 517 ) ( 11 ) 116 1,201 184 ( 411 ) 821 91 ( 39,636 ) ( 7,384 ) ( 1,548 ) ( 46 ) ( 1,141 ) ( 291 ) ( 2,396 ) ( 1,754 ) ( 54,196 ) Profit before taxation 2,383 898 ( 46 ) ( 27 ) 3,208 Income tax expense Net profit for the period ( 312 ) 2,071 ( 135 ) 763 33 ( 13 ) ( 27 ) ( 414 ) 2,794 Net gain on discontinued operations Net profit before minority interests 2,071 36 799 ( 13 ) ( 27 ) 36 2,830 Net profit attributable to minority interests Net profit attributable to shareholders 9 2,062 35 764 4 ( 17 ) ( 27 ) 48 2,782 68 | Consolidated Interim Financial Statements for the first half-year 2008 22.7 Income statement of Banking segments First half-year 2008 Retail Banking Asset Management Private Banking Merchant Banking Other Banking Eliminations Total Banking Income Interest income Interest expense Net interest income 6,528 ( 5,129 ) 1,399 16 ( 78 ) ( 62 ) 649 ( 544 ) 105 64,348 ( 63,026 ) 1,322 12,416 ( 12,630 ) ( 214 ) ( 33,099 ) 33,099 50,858 ( 48,308 ) 2,550 Fee and commission income Fee and commission expense Net fee and commission income 652 ( 112 ) 540 654 ( 381 ) 273 224 ( 23 ) 201 843 ( 336 ) 507 55 ( 70 ) ( 15 ) ( 180 ) 180 2,248 ( 742 ) 1,506 Insurance premiums Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 8 46 28 207 2,228 8 3 27 14 263 7 2 15 19 349 79 66 1,116 225 3,315 4 4 288 119 96 ( 253 ) 25 ( 12 ) ( 12 ) 390 236 1,282 200 6,168 Change in impairments Net revenues ( 81 ) 2,147 (3) 260 (3) 346 ( 981 ) 2,334 ( 20 ) 5 ( 12 ) ( 1,088 ) 5,080 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Insurance claims and benefits Allocation expense Total expenses ( 639 ) ( 1,437 ) (4) ( 259 ) ( 97 ) ( 258 ) ( 302 ) ( 1,468 ) ( 15 ) ( 195 ) ( 27 ) ( 92 ) (3) ( 44 ) ( 54 ) ( 338 ) ( 147 ) ( 587 ) ( 11 ) 1,042 ( 150 ) 12 ( 3,560 ) 12 ( 246 ) ( 1,244 ) ( 11 ) ( 588 ) ( 136 ) ( 114 ) ( 774 ) ( 447 ) ( 2,059 ) Profit before taxation 710 1 88 866 ( 145 ) 1,520 Income tax expense Net profit for the period ( 213 ) 497 6 7 ( 17 ) 71 ( 193 ) 673 73 ( 72 ) ( 344 ) 1,176 Net gain on discontinued operations Net profit before minority interests 497 24 31 71 673 ( 72 ) 24 1,200 Net profit attributable to minority interests Net profit attributable to shareholders 497 8 23 71 673 7 ( 79 ) 15 1,185 Net revenues from external customers Net revenues internal Net revenues 1,061 1,086 2,147 309 ( 49 ) 260 219 127 346 2,658 ( 324 ) 2,334 701 ( 696 ) 5 ( 12 ) ( 12 ) 4,948 132 5,080 Consolidated Interim Financial Statements for the first half-year 2008 | 69 First half-year 2007 Retail Banking Income Interest income Interest expense Net interest income 5,458 ( 4,153 ) 1,305 14 ( 19 ) (5) 595 ( 504 ) 91 51,917 ( 50,701 ) 1,216 8,267 ( 8,219 ) 48 ( 23,969 ) 23,969 42,282 ( 39,627 ) 2,655 Asset Management Private Banking Merchant Banking Other Banking Eliminations Total Banking Fee and commission income Fee and commission expense Net fee and commission income 654 ( 111 ) 543 464 ( 263 ) 201 265 ( 27 ) 238 748 ( 235 ) 513 58 ( 64 ) (6) ( 176 ) 176 2,013 ( 524 ) 1,489 Insurance premiums Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 9 4 24 349 2,234 4 1 5 2 208 2 22 13 42 408 78 109 714 290 2,920 5 5 56 320 174 ( 484 ) 113 (1) 148 456 930 ( 70 ) ( 71 ) 129 5,812 Change in impairments Net revenues ( 52 ) 2,182 208 6 414 18 2,938 (8) 105 ( 71 ) ( 36 ) 5,776 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Insurance claims and benefits Allocation expense Total expenses ( 659 ) ( 1,458 ) (5) ( 135 ) ( 82 ) ( 256 ) ( 291 ) ( 1,488 ) (9) ( 224 ) (6) ( 44 ) (4) ( 47 ) ( 40 ) ( 412 ) ( 120 ) ( 621 ) (3) 1,037 ( 127 ) 71 ( 3,393 ) 71 ( 179 ) ( 1,277 ) (3) ( 566 ) ( 80 ) ( 123 ) ( 745 ) ( 420 ) ( 1,934 ) Profit before taxation 724 73 158 1,450 ( 22 ) 2,383 Income tax expense Net profit for the period ( 141 ) 583 ( 18 ) 55 ( 20 ) 138 ( 144 ) 1,306 11 ( 11 ) ( 312 ) 2,071 Net gain on discontinued operations Net profit before minority interests 583 55 138 1,306 ( 11 ) 2,071 Net profit attributable to minority interests Net profit attributable to shareholders 583 2 53 138 1 1,305 6 ( 17 ) 9 2,062 Net revenues from external customers Net revenues internal Net revenues 1,262 920 2,182 214 (6) 208 264 150 414 1,931 1,007 2,938 2,006 ( 1,901 ) 105 ( 71 ) ( 71 ) 5,677 99 5,776 70 | Consolidated Interim Financial Statements for the first half-year 2008 22.8 Income statement of Insurance segments First half-year 2008 Insurance Belgium Life Non-life Life Insurance Netherlands Non-Life Life Insurance International Non-Life Eliminations Total Insurance Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income ( 643 ) 42 2,899 30 869 ( 1,062 ) 59 1,971 79 1,399 ( 564 ) 23 467 120 1,207 ( 17 ) ( 68 ) ( 2,269 ) 336 8,744 819 2,323 273 1 99 ( 83 ) 68 15 2 3 71 717 31 593 2,089 181 38 181 ( 116 ) 8 80 1,178 20 1 15 ( 32 ) 58 149 747 7 24 ( 12 ) 2 91 75 940 7 5 8 (6) 58 (2) (5) ( 37 ) (7) 1,782 7,957 512 69 306 ( 233 ) 284 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 30 ) ( 122 ) ( 133 ) ( 2,705 ) ( 17 ) ( 71 ) ( 67 ) ( 798 ) ( 33 ) ( 73 ) ( 135 ) ( 1,705 ) (4) ( 82 ) ( 59 ) ( 1,277 ) ( 33 ) ( 41 ) ( 47 ) ( 406 ) (4) ( 66 ) ( 80 ) ( 1,102 ) 22 68 ( 121 ) ( 455 ) ( 499 ) ( 7,925 ) ( 65 ) ( 2,758 ) 643 ( 83 ) ( 157 ) (4) ( 148 ) (7) ( 484 ) ( 175 ) ( 2,187 ) 1,035 ( 54 ) ( 83 ) (9) ( 236 ) ( 75 ) ( 30 ) ( 857 ) ( 27 ) ( 737 ) 554 (1) ( 135 ) 2 (9) ( 807 ) 5 39 ( 308 ) ( 7,791 ) 2,232 ( 151 ) ( 832 ) Profit before taxation 194 71 266 122 61 105 819 Income tax expense Net profit for the period 1 195 ( 15 ) 56 ( 58 ) 208 ( 30 ) 92 ( 15 ) 46 ( 23 ) 82 ( 140 ) 679 Net gain on discontinued operations Net profit before minority interests 195 56 208 92 46 82 679 Net profit attributable to minority interests Net profit attributable to shareholders 3 192 56 9 199 92 21 25 4 78 37 642 Total income from external customers Total income internal Total income 2,794 105 2,899 856 13 869 1,895 76 1,971 1,380 19 1,399 492 ( 25 ) 467 1,175 32 1,207 ( 68 ) ( 68 ) 8,592 152 8,744 Consolidated Interim Financial Statements for the first half-year 2008 | 71 First half-year 2007 Insurance Belgium Life Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 334 42 4,349 31 823 466 91 3,295 74 1,273 340 20 1,346 78 1,165 ( 14 ) ( 53 ) 1,140 322 12,198 807 2,719 278 2 110 (8) 65 6 2 3 82 664 35 522 1,918 154 21 125 ( 10 ) 8 28 ( 15 ) 57 81 1,034 14 142 688 6 10 73 (3) 70 66 934 4 4 13 (2) 68 (6) ( 23 ) ( 10 ) 1,694 7,934 481 37 355 ( 36 ) 271 Non-life Life Insurance Netherlands Non-Life Life Insurance International Non-Life Eliminations Total Insurance Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 25 ) ( 111 ) ( 124 ) ( 4,090 ) ( 15 ) ( 67 ) ( 66 ) ( 779 ) ( 32 ) ( 67 ) ( 158 ) ( 2,984 ) (3) ( 80 ) ( 62 ) ( 1,105 ) ( 32 ) ( 35 ) ( 50 ) ( 1,286 ) (5) ( 67 ) ( 75 ) ( 1,109 ) 24 53 ( 112 ) ( 427 ) ( 511 ) ( 11,300 ) ( 189 ) ( 3,156 ) ( 324 ) (2) ( 159 ) ( 139 ) ( 23 ) ( 469 ) ( 159 ) ( 1,657 ) ( 819 ) (8) ( 84 ) ( 226 ) ( 47 ) ( 146 ) ( 30 ) ( 704 ) ( 15 ) ( 702 ) ( 405 ) (9) ( 807 ) 6 23 ( 419 ) ( 7,472 ) ( 1,548 ) ( 10 ) ( 801 ) Profit before taxation 259 44 311 168 60 56 898 Income tax expense Net profit for the period (5) 254 ( 11 ) 33 ( 57 ) 254 ( 36 ) 132 ( 13 ) 47 ( 13 ) 43 ( 135 ) 763 Net gain on discontinued operations Net profit before minority interests 254 33 254 132 29 76 7 50 36 799 Net profit attributable to minority interests Net profit attributable to shareholders 2 252 1 32 6 248 132 20 56 6 44 35 764 Total income from external customers Total income internal Total income 4,162 187 4,349 797 26 823 3,212 83 3,295 1,250 23 1,273 1,337 9 1,346 1,140 25 1,165 ( 53 ) ( 53 ) 11,898 300 12,198 72 | Consolidated Interim Financial Statements for the first half-year 2008 Consolidated Interim Financial Statements for the first half-year 2008 | 73 Explanatory note to the Insurance income statement 74 | Consolidated Interim Financial Statements for the first half-year 2008 23 Technical and non-technical result Within the insurance segments Fortis manages its Life and Non-life businesses separately. Life business includes insurance contracts covering risks related to the life and death of individuals. Life business also includes investment contracts with and without discretionary participation features (DPF). Non-life business includes four branches: Accident & Health, Motor, Fire and other damage to property and Other covering the risk of property losses or claims liabilities. To analyse the insurance results, Fortis uses the concepts technical result, non-technical result and operating margin. The technical result includes premiums, fees and allocated financial income, less claims and benefits and less operating expenses. Realised capital gains and losses on investments backing certain insurance liabilities, such as separated funds, are part of the allocated financial income and thus included in technical result. Financial income, net of the related investment costs, is allocated to the various Life and Non-life branches based on the investment portfolios backing the insurance liabilities of these branches. The non-technical result includes all income and costs, not allocated to the insurance or investment contracts and thus not reported in the technical result. Realised and unrealised capital gains and losses on investments recognised in the income statement, backing the insurance liabilities of the various branches and not allocated to the technical result, are included in the operating margin. 23.1 Reconciliation The table below shows the reconciliation of the technical and non-technical result and the profit before taxation. First half-year 2008 Life Non-life Total Life First half-year 2007 Non-life Total Technical result Non-technical result Profit before taxation of Insurance activities 155 366 521 264 34 298 419 400 819 367 263 630 197 71 268 564 334 898 Consolidated Interim Financial Statements for the first half-year 2008 | 75 23.2 Technical result Technical result - Life First half-year 2008 First half-year 2007 Gross earned premiums Ceded reinsurance earned premiums Financial result and capital gains allocated to technical result Fee income Other income Total income 5,159 ( 42 ) ( 1,073 ) 96 7 4,147 5,325 ( 35 ) 2,568 84 7 7,949 Benefits and surrenders, gross Reinsurers' share of benefits and surrenders Change in liabilities arising from insurance and investment contracts including unit-linked contracts Reinsurers' share of change in liabilities Profit sharing Total technical charges ( 3,015 ) 14 ( 2,739 ) 22 ( 220 ) 8 ( 173 ) ( 3,386 ) ( 4,193 ) 8 ( 96 ) ( 6,998 ) Commission expenses Change in deferred acquisition costs and VOBA Administrative expenses Reinsurance commissions and profit participation Total operating expenses ( 307 ) ( 22 ) ( 293 ) 16 ( 606 ) ( 280 ) ( 37 ) ( 277 ) 10 ( 584 ) Technical result Life insurance, before taxation 155 367 76 | Consolidated Interim Financial Statements for the first half-year 2008 Technical result - Non-life First half-year 2008 First half-year 2007 Gross earned premiums Ceded reinsurance earned premiums Financial result and capital gains allocated to technical result Other income Total income 2,835 ( 298 ) 160 9 2,706 2,632 ( 231 ) 157 17 2,575 Claims paid, gross Reinsurers' share of claims paid Change in liabilities arising from insurance contracts Reinsurers' share of change in liabilities Claim handling expenses Total technical charges ( 1,652 ) 158 ( 198 ) 40 ( 102 ) ( 1,754 ) ( 1,490 ) 67 ( 259 ) 78 ( 98 ) ( 1,702 ) Commission expenses Change in deferred acquisition costs and VOBA Reinsurers' share of change in deferred acquisition costs and VOBA Administrative expenses Reinsurance commissions and profit participation Total operating expenses ( 515 ) 56 (6) ( 295 ) 72 ( 688 ) ( 508 ) 65 (9) ( 296 ) 72 ( 676 ) Technical result Non-life insurance, before taxation 264 197 23.3 Non-technical result First half-year 2008 Life Non-life Total Life First half-year 2007 Non-life Total Interest income Dividend and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Income related to investments for unit-linked contracts Interest expense Investment related expenses Financial income Financial result and capital gains allocated to technical result 1,561 461 268 ( 197 ) ( 2,269 ) ( 267 ) ( 218 ) ( 661 ) 1,073 412 226 58 38 ( 36 ) 1,787 519 306 ( 233 ) ( 2,269 ) 1,471 438 308 ( 21 ) 1,140 ( 363 ) ( 190 ) 2,783 ( 2,568 ) 215 48 263 229 53 47 ( 15 ) 1,700 491 355 ( 36 ) 1,140 ( 46 ) ( 29 ) 211 ( 160 ) 51 ( 17 ) 34 ( 313 ) ( 247 ) ( 450 ) 913 463 ( 63 ) 400 ( 62 ) ( 30 ) 222 ( 157 ) 65 6 71 ( 425 ) ( 220 ) 3,005 ( 2,725 ) 280 54 334 Other income and charges Non-technical result ( 46 ) 366 Consolidated Interim Financial Statements for the first half-year 2008 | 77 23.4 Technical result Life and Non-life by branch and insurance segment The technical result is broken down as follows: First half-year 2008 Life Technical result Life Accident & Health Motor Fire and other damage to property Other Total technical result Capital gains (losses) allocated to operating margin Operating margin Other non-technical result Profit before taxation 155 129 284 237 521 155 149 45 33 37 264 20 284 14 298 367 72 439 191 630 367 151 68 ( 51 ) 29 197 7 204 64 268 Non-life Life First half-year 2007 Non-life The table below shows a further breakdown of the Life and Non-life technical result by insurance segment. Life First half-year 2008 Insurance Belgium Insurance Netherlands Insurance International Total technical result 78 23 54 155 58 126 80 264 136 149 134 419 Non-life Total First half-year 2007 Insurance Belgium Insurance Netherlands Insurance International Total technical result 184 144 39 367 35 137 25 197 219 281 64 564 The table below shows a breakdown of the Non-life technical result by branch and by insurance segment. Accident & Health First half-year 2008 Insurance Belgium Insurance Netherlands Insurance International Total Non-life insurance 31 115 3 149 19 3 23 45 2 31 33 8 6 23 37 58 126 80 264 Motor Fire and other damage to property Other Total First half-year 2007 Insurance Belgium Insurance Netherlands Insurance International Total Non-life insurance 23 120 8 151 36 14 18 68 ( 26 ) (2) ( 23 ) ( 51 ) 2 5 22 29 35 137 25 197 78 | Consolidated Interim Financial Statements for the first half-year 2008 23.5 Non-life financial information by branch The table below shows financial information on Non-life Insurance activities broken down by branch. Gross written premiums First half-year 2008 Accident & Health Motor Fire and other damage to property Other Total Non-life insurance 1,191 828 646 568 3,233 989 796 581 469 2,835 ( 675 ) ( 535 ) ( 358 ) ( 282 ) ( 1,850 ) ( 121 ) ( 126 ) ( 90 ) ( 60 ) ( 397 ) ( 12 ) (8) 4 ( 18 ) ( 34 ) Gross earned premiums Gross claims incurred Gross operating expenses Result from reinsurance First half-year 2007 Accident & Health Motor Fire and other damage to property Other Total Non-life insurance 1,028 862 651 532 3,073 845 781 577 429 2,632 ( 556 ) ( 544 ) ( 409 ) ( 240 ) ( 1,749 ) ( 116 ) ( 121 ) ( 97 ) ( 60 ) ( 394 ) 17 27 ( 22 ) ( 45 ) ( 23 ) 23.6 Non-life ratios The ratios for the Non-life business broken down into insurance segment are shown below. Claims ratio First half-year 2008 Insurance Belgium Insurance Netherlands Insurance International Non-life 65.3% 61.3% 69.9% 65.1% 35.9% 30.4% 27.7% 31.1% 101.2% 91.7% 97.6% 96.2% Expense ratio Combined ratio First half-year 2007 Insurance Belgium Insurance Netherlands Insurance International Non-life 67.7% 57.9% 76.5% 66.8% 36.8% 31.7% 29.2% 32.2% 104.5% 89.6% 105.7% 99.0% Claims ratio: the cost of claims, net of reinsurance, as a percentage of the net earned premiums, excluding the internal costs of handling claims. Expense ratio: expenses as a percentage of the earned premiums, net of reinsurance. Expenses include internal costs of handling claims, plus net commissions charged to the period, less internal investment costs. Combined ratio: the sum of the claims ratio and the expense ratio. Consolidated Interim Financial Statements for the first half-year 2008 | 79 Additional explanatory notes 80 | Consolidated Interim Financial Statements for the first half-year 2008 24 Assets under management Assets under management include investments for own account, unit-linked investments on behalf of insurance policy holders and funds under management. Funds under management include investments that are managed on behalf of clients, either private or institutional, and on which Fortis earns a management or advice fee. Discretionary capital (capital actively managed by Fortis) as well as advisory capital are included in funds under management. As from the second quarter 2008 the asset management activities of ABN AMRO which were transferred to Fortis Investments at 2 April 2008 are reported within Assets under management. Eliminations in the various tables relate to the funds under management of clients invested in funds managed by Fortis that otherwise would be counted double. The following table provides a breakdown of Assets under management by investment type and origin. General Banking 30 June 2008 Investments for own account: - Debt securities - Equity securities - Real estate - Other Total investments for own account 97,960 6,054 768 27,900 132,682 53,759 4,361 3,119 1,105 62,344 ( 355 ) ( 1,111 ) ( 16 ) ( 328 ) ( 1,810 ) 151,364 9,304 3,871 28,677 193,216 Insurance (incl. eliminations) Total Investments related to unit-linked contracts 30,093 ( 220 ) 29,873 Funds under management: Debt securities Equity securities Real estate Eliminations 168,506 125,929 517 ( 21,047 ) 273,905 9,078 2,760 3,184 3,134 171,266 129,113 3,651 ( 21,047 ) 282,983 Total funds under management Total assets under management 406,587 101,515 ( 2,030 ) 506,072 31 December 2007 Investments for own account: Debt securities Equity securities Real estate Other 104,991 7,822 688 27,891 141,392 53,661 8,942 2,984 1,143 66,730 ( 330 ) ( 1,259 ) ( 16 ) ( 237 ) ( 1,842 ) 158,322 15,505 3,656 28,797 206,280 Total investments for own account Investments related to unit-linked contracts 31,395 ( 275 ) 31,120 Funds under management: Debt securities Equity securities Real estate Eliminations 119,721 102,989 587 ( 25,283 ) 198,014 9,817 3,061 3,767 2,989 122,782 106,756 3,576 ( 25,283 ) 207,831 Total funds under management Total assets under management 339,406 107,942 ( 2,117 ) 445,231 Consolidated Interim Financial Statements for the first half-year 2008 | 81 Changes in the funds under management per segment are presented below. Retail Banking Asset Management Private Banking Merchant Banking Other Eliminations Total Closing balance at 31 December 2007 In / out flow Market gains / losses Other Balance at 30 June 2008 7,403 ( 934 ) ( 519 ) 132,916 ( 2,485 ) ( 9,953 ) 88,707 82,318 1,829 ( 3,861 ) ( 992 ) 79,294 279 ( 18 ) ( 23 ) 1 239 10,198 ( 50 ) ( 786 ) ( 25,283 ) 1,143 3,086 7 207,831 ( 515 ) ( 12,056 ) 87,723 282,983 5,950 209,185 9,362 ( 21,047 ) The column Other includes funds under management within the insurance segments as well as funds managed by operating companies reported in the Other banking segment. The line Other includes the transfers between segments, the impact of acquisitions and divestments and the currency translation differences. 82 | Consolidated Interim Financial Statements for the first half-year 2008 25 Contingent liabilities Like any other financial institution, Fortis is involved as a defendant in various claims, disputes and legal proceedings arising in the ordinary course of the Banking and Insurance business. There were no significant developments in the contingent liabilities compared with the reporting at year-end 2007. Consolidated Interim Financial Statements for the first half-year 2008 | 83 26 Post-balance sheet date events There have been no material events after the balance sheet date that would require adjustment to the Consolidated Interim Financial Statements at 30 June 2008. Fortis, ABN AMRO and Deutsche Bank announced on 2 July 2008 that they had signed an agreement by which Deutsche Bank will acquire from ABN AMRO parts of its commercial banking activities in the Netherlands. Fortis has sold International Asset Management Limited (IAM) on 9 July 2008 to its management team, supported by certain third party investors. Further details on these transactions are provided in note 10 Acquisition of ABN AMRO. 84 | Consolidated Interim Financial Statements for the first half-year 2008 Statement of the Board of Directors The Board of Directors of Fortis is responsible for preparing the Fortis Consolidated Interim Financial Statements as at 30 June 2008 in accordance with International Financial Reporting Standards as adopted by the European Union as well as with the European Transparency Directive (2004/109/EC). The Board of Directors reviewed the Fortis Consolidated Interim Financial Statements on 1 August 2008 and authorised their issue. The Board of Directors of Fortis declares that, to the best of its knowledge, the Fortis Consolidated Interim Financial Statements give a true and fair view of the assets, liabilities, financial position and profit or loss of Fortis and that the information contained herein has no omissions likely to modify significantly the scope of any statements made. Brussels/Utrecht, 1 August 2008 Board of Directors Chairman Deputy Chairman Chief Executive Officer Deputy Chief Executive Officer Directors Count Maurice Lippens Jan-Michiel Hessels Jean-Paul Votron (till 11 July 2008) Herman Verwilst (from 11 July 2008) Herman Verwilst (till 11 July 2008) Baron Philippe Bodson Louis Cheung (from 29 April 2008) Richard Delbridge Clara Furse Reiner Hagemann Jacques Manardo Aloïs Michielsen Ronald Sandler Rana Talwar Baron Piet Van Waeyenberge (till 29 April 2008) Klaas Westdijk Consolidated Interim Financial Statements for the first half-year 2008 | 85 Review report Introduction We have reviewed the accompanying consolidated balance sheet of Fortis as at 30 June 2008 and the related consolidated statements of income, changes in equity and cash flows for the six months period then ended, and a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and fair presentation of this interim financial information in accordance with IAS 34 ‘Interim Financial Reporting’ of the International Financial Reporting Standards as adopted by the European Union. Our responsibility is to express a conclusion on this interim financial information based on our review. Scope We conducted our review in accordance with International Standard on Review Engagements 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity.’ A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not give a true and fair view of the financial position of the entity as at 30 June 2008, and of its financial performance and its cash flows for the six months period then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Emphasis of matter We draw your attention to note 10.3 in the Consolidated Interim Financial Statements for the first half-year 2008, in which Fortis describes that it will reassess before year-end whether it would be necessary to recognise an impairment loss on its investment in RFS Holdings B.V., representing the business activities acquired from ABN AMRO. Amstelveen, 1 August 2008 KPMG ACCOUNTANTS N.V. Represented by S.J. Kroon RA Brussels, 1 August 2008 PricewaterhouseCoopers Reviseurs d’Enterprises S.C.C.R.L. Represented by Y. Vandenplas and L. Discry 86 | Consolidated Interim Financial Statements for the first half-year 2008 Consolidated Interim Financial Statements for the first half-year 2008 | 87 Annex – Quarterly income statements by activity and by segment 88 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – by activity Fortis total First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 25,517 4,499 213 120 421 508 1,076 ( 1,828 ) 172 30,698 26,614 3,418 448 184 131 522 1,268 ( 390 ) 280 32,475 52,131 7,917 661 304 552 1,030 2,344 ( 2,218 ) 452 63,173 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 23,607 ) ( 4,119 ) 1,608 ( 524 ) ( 653 ) ( 168 ) ( 1,267 ) ( 811 ) ( 29,541 ) ( 24,798 ) ( 3,567 ) 624 ( 711 ) ( 732 ) ( 199 ) ( 1,276 ) ( 875 ) ( 31,534 ) ( 48,405 ) ( 7,686 ) 2,232 ( 1,235 ) ( 1,385 ) ( 367 ) ( 2,543 ) ( 1,686 ) ( 61,075 ) Profit before taxation 1,157 941 2,098 Income tax expense Net profit for the period ( 324 ) 833 ( 107 ) 834 ( 431 ) 1,667 Net gain on discontinued operations Net profit before minority interests 833 24 858 24 1,691 Net profit attributable to minority interests Net profit attributable to shareholders 25 808 28 830 53 1,638 Consolidated Interim Financial Statements for the first half-year 2008 | 89 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 20,852 4,258 196 45 399 391 1,024 452 196 27,813 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 22,535 3,632 383 36 529 509 1,076 686 205 29,591 25,566 3,478 245 40 390 199 1,053 ( 134 ) 208 31,045 25,916 3,566 262 238 815 77 1,247 ( 356 ) 243 32,008 94,869 14,934 1,086 359 2,133 1,176 4,400 648 852 120,457 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 19,042 ) ( 3,849 ) ( 860 ) ( 32 ) ( 564 ) ( 143 ) ( 1,165 ) ( 832 ) ( 26,487 ) ( 20,594 ) ( 3,535 ) ( 688 ) ( 14 ) ( 577 ) ( 148 ) ( 1,231 ) ( 922 ) ( 27,709 ) ( 23,683 ) ( 3,328 ) 69 ( 215 ) ( 553 ) ( 159 ) ( 1,244 ) ( 968 ) ( 30,081 ) ( 24,035 ) ( 3,363 ) 53 ( 2,781 ) ( 650 ) ( 162 ) ( 1,340 ) ( 1,076 ) ( 33,354 ) ( 87,354 ) ( 14,075 ) ( 1,426 ) ( 3,042 ) ( 2,344 ) ( 612 ) ( 4,980 ) ( 3,798 ) ( 117,631 ) Profit before taxation 1,326 1,882 964 ( 1,346 ) 2,826 Income tax expense Net profit for the period ( 149 ) 1,177 ( 265 ) 1,617 ( 167 ) 797 816 ( 530 ) 235 3,061 Net gain on discontinued operations Net profit before minority interests 13 1,190 23 1,640 20 817 957 427 1,013 4,074 Net profit attributable to minority interests Net profit attributable to shareholders 23 1,167 25 1,615 19 798 13 414 80 3,994 90 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – by activity Banking First quarter 2008 Income Interest income Interest expense Net interest income 24,902 ( 23,602 ) 1,300 25,956 ( 24,706 ) 1,250 50,858 ( 48,308 ) 2,550 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Fee and commission income Fee and commission expense Net fee and commission income 1,023 ( 300 ) 723 1,225 ( 442 ) 783 2,248 ( 742 ) 1,506 Insurance premiums Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 2 2 4 137 200 757 96 3,215 253 36 525 104 2,953 390 236 1,282 200 6,168 Change in impairments Net revenues ( 448 ) 2,767 ( 640 ) 2,313 ( 1,088 ) 5,080 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Insurance claims and benefits Allocated expense Total expenses ( 1,727 ) ( 1,833 ) ( 3,560 ) ( 1,027 ) ( 108 ) ( 591 ) (1) ( 1,032 ) ( 138 ) ( 653 ) ( 10 ) ( 2,059 ) ( 246 ) ( 1,244 ) ( 11 ) Profit before taxation 1,040 480 1,520 Income tax expense Net profit for the period ( 315 ) 725 ( 29 ) 451 ( 344 ) 1,176 Net gain on discontinued operations Net profit before minority interests 725 24 475 24 1,200 Net profit attributable to minority interests Net profit attributable to shareholders 4 721 11 464 15 1,185 Net revenues from external customers Net revenues internal Net revenues 2,704 63 2,767 2,244 69 2,313 4,948 132 5,080 Consolidated Interim Financial Statements for the first half-year 2008 | 91 First quarter 2007 Income Interest income Interest expense Net interest income 20,299 ( 19,040 ) 1,259 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 21,983 ( 20,587 ) 1,396 24,968 ( 23,665 ) 1,303 25,403 ( 24,094 ) 1,309 92,653 ( 87,386 ) 5,267 Fee and commission income Fee and commission expense Net fee and commission income 968 ( 242 ) 726 1,045 ( 282 ) 763 1,009 ( 267 ) 742 1,221 ( 387 ) 834 4,243 ( 1,178 ) 3,065 Insurance premiums Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 3 2 2 2 9 61 206 426 62 2,743 87 250 504 67 3,069 62 214 259 62 2,644 298 211 89 112 2,855 508 881 1,278 303 11,311 Change in impairments Net revenues ( 26 ) 2,717 ( 10 ) 3,059 ( 164 ) 2,480 ( 2,635 ) 220 ( 2,835 ) 8,476 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Insurance claims and benefits Allocated expense Total expenses ( 1,677 ) ( 1,716 ) ( 1,755 ) ( 1,905 ) ( 7,053 ) ( 942 ) ( 89 ) ( 643 ) (3) ( 992 ) ( 90 ) ( 634 ) ( 1,016 ) ( 100 ) ( 639 ) ( 1,076 ) ( 102 ) ( 726 ) (1) ( 4,026 ) ( 381 ) ( 2,642 ) (4) Profit before taxation 1,040 1,343 725 ( 1,685 ) 1,423 Income tax expense Net profit for the period ( 132 ) 908 ( 180 ) 1,163 ( 136 ) 589 807 ( 878 ) 359 1,782 Net gain on discontinued operations Net profit before minority interests 908 1,163 589 ( 878 ) 1,782 Net profit attributable to minority interests Net profit attributable to shareholders 5 903 4 1,159 2 587 3 ( 881 ) 14 1,768 Net revenues from external customers Net revenues internal Net revenues 2,664 53 2,717 3,013 46 3,059 2,426 54 2,480 151 69 220 8,254 222 8,476 92 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – by activity Insurance First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 868 4,520 177 23 219 ( 191 ) 149 ( 1,815 ) 114 4,064 914 3,437 335 46 87 ( 42 ) 135 ( 454 ) 222 4,680 1,782 7,957 512 69 306 ( 233 ) 284 ( 2,269 ) 336 8,744 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 150 ) ( 4,185 ) 1,608 ( 76 ) ( 449 ) ( 60 ) ( 225 ) ( 244 ) ( 3,781 ) ( 158 ) ( 3,606 ) 624 ( 75 ) ( 383 ) ( 61 ) ( 230 ) ( 255 ) ( 4,144 ) ( 308 ) ( 7,791 ) 2,232 ( 151 ) ( 832 ) ( 121 ) ( 455 ) ( 499 ) ( 7,925 ) Profit before taxation 283 536 819 Income tax expense Net profit for the period ( 44 ) 239 ( 96 ) 440 ( 140 ) 679 Net gain on discontinued operations Net profit before minority interests 239 440 679 Net profit attributable to minority interests Net profit attributable to shareholders 20 219 17 423 37 642 Net revenues from external customers Net revenues internal Net revenues 3,956 108 4,064 4,636 44 4,680 8,592 152 8,744 Consolidated Interim Financial Statements for the first half-year 2008 | 93 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 859 4,278 166 18 200 ( 17 ) 150 455 160 6,269 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 835 3,656 315 19 155 ( 19 ) 121 685 162 5,929 905 3,501 205 25 175 ( 59 ) 128 ( 145 ) 182 4,917 913 3,586 190 32 697 ( 111 ) 146 ( 369 ) 184 5,268 3,512 15,021 876 94 1,227 ( 206 ) 545 626 688 22,383 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 222 ) ( 3,893 ) ( 860 ) (6) ( 416 ) ( 54 ) ( 209 ) ( 217 ) ( 5,877 ) ( 197 ) ( 3,579 ) ( 688 ) (4) ( 385 ) ( 58 ) ( 218 ) ( 294 ) ( 5,423 ) ( 224 ) ( 3,397 ) 69 ( 51 ) ( 370 ) ( 59 ) ( 218 ) ( 328 ) ( 4,578 ) ( 208 ) ( 3,387 ) 53 ( 146 ) ( 364 ) ( 60 ) ( 247 ) ( 378 ) ( 4,737 ) ( 851 ) ( 14,256 ) ( 1,426 ) ( 207 ) ( 1,535 ) ( 231 ) ( 892 ) ( 1,217 ) ( 20,615 ) Profit before taxation 392 506 339 531 1,768 Income tax expense Net profit for the period ( 37 ) 355 ( 98 ) 408 ( 49 ) 290 1 532 ( 183 ) 1,585 Net gain on discontinued operations Net profit before minority interests 13 368 23 431 20 310 957 1,489 1,013 2,598 Net profit attributable to minority interests Net profit attributable to shareholders 16 352 19 412 16 294 13 1,476 64 2,534 Net revenues from external customers Net revenues internal Net revenues 6,121 148 6,269 5,777 152 5,929 4,771 146 4,917 5,099 169 5,268 21,768 615 22,383 94 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – by activity General First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 17 327 18 ( 68 ) 35 259 157 ( 285 ) ( 128 ) 1 1 152 199 351 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 11 ) ( 36 ) ( 276 ) ( 12 ) ( 39 ) ( 338 ) ( 23 ) ( 75 ) ( 614 ) ( 229 ) ( 287 ) ( 516 ) Profit before taxation 51 ( 406 ) ( 355 ) Income tax expense Net profit for the period 35 86 17 ( 389 ) 52 ( 303 ) Net gain on discontinued operations Net profit before minority interests 86 ( 389 ) ( 303 ) Net profit attributable to minority interests Net profit attributable to shareholders 1 85 ( 389 ) 1 ( 304 ) Consolidated Interim Financial Statements for the first half-year 2008 | 95 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 29 134 (8) 1 112 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 166 112 183 573 7 2 2 12 128 10 ( 10 ) ( 186 ) 128 ( 194 ) 26 337 1 105 14 13 70 589 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 11 ) ( 33 ) ( 221 ) ( 13 ) ( 49 ) ( 296 ) ( 12 ) ( 44 ) ( 244 ) ( 13 ) ( 43 ) ( 351 ) ( 49 ) ( 169 ) ( 1,112 ) ( 19 ) ( 19 ) ( 177 ) ( 234 ) ( 188 ) ( 276 ) ( 875 ) Profit before taxation ( 87 ) 41 ( 139 ) ( 338 ) ( 523 ) Income tax expense Net profit for the period 20 ( 67 ) 13 54 18 ( 121 ) 26 ( 312 ) 77 ( 446 ) Net gain on discontinued operations Net profit before minority interests ( 67 ) 54 ( 121 ) ( 312 ) ( 446 ) Net profit attributable to minority interests Net profit attributable to shareholders 2 ( 69 ) 2 52 1 ( 122 ) (3) ( 309 ) 2 ( 448 ) 96 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – by activity Eliminations First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 2 ( 215 ) ( 96 ) ( 13 ) ( 55 ) ( 810 ) ( 405 ) ( 23 ) (5) ( 455 ) ( 21 ) (9) 7 8 324 ( 92 ) 64 ( 64 ) ( 238 ) ( 860 ) ( 44 ) ( 14 ) 7 10 109 ( 188 ) 51 ( 119 ) ( 1,048 ) Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses (4) 60 593 (2) 72 569 (6) 132 1,162 96 4 93 4 189 374 67 353 49 727 116 Profit before taxation ( 217 ) 331 114 Income tax expense Net profit for the period ( 217 ) 1 332 1 115 Net gain on discontinued operations Net profit before minority interests ( 217 ) 332 115 Net profit attributable to minority interests Net profit attributable to shareholders ( 217 ) 332 115 Consolidated Interim Financial Statements for the first half-year 2008 | 97 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income (7) ( 10 ) ( 94 ) (3) ( 55 ) ( 615 ) ( 418 ) ( 23 ) (5) Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 ( 449 ) ( 26 ) (9) ( 419 ) ( 25 ) (8) (1) ( 583 ) ( 22 ) (6) ( 16 ) ( 93 ) 285 ( 120 ) 13 ( 67 ) ( 609 ) ( 1,869 ) ( 96 ) ( 28 ) ( 17 ) ( 103 ) 298 ( 388 ) 22 ( 209 ) ( 2,390 ) (4) 14 ( 90 ) 1 ( 50 ) ( 613 ) 1 9 ( 84 ) 11 ( 37 ) ( 553 ) Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses (3) 61 596 (8) 55 605 2 43 592 (4) 71 755 ( 13 ) 230 2,548 94 90 84 120 388 397 47 424 44 394 69 543 25 1,758 185 Profit before taxation ( 19 ) (8) 39 146 158 Income tax expense Net profit for the period ( 19 ) (8) 39 ( 18 ) 128 ( 18 ) 140 Net gain on discontinued operations Net profit before minority interests ( 19 ) (8) 39 128 140 Net profit attributable to minority interests Net profit attributable to shareholders ( 19 ) (8) 39 128 140 98 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Banking segments Retail Banking First quarter 2008 Income Interest income Interest expense Net interest income 3,239 ( 2,543 ) 696 3,289 ( 2,586 ) 703 6,528 ( 5,129 ) 1,399 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Fee and commission income Fee and commission expense Net fee and commission income 322 ( 55 ) 267 330 ( 57 ) 273 652 ( 112 ) 540 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 4 3 13 150 1,133 4 43 15 57 1,095 8 46 28 207 2,228 Change in impairments Net revenues ( 30 ) 1,103 ( 51 ) 1,044 ( 81 ) 2,147 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses ( 298 ) (7) ( 93 ) ( 320 ) ( 718 ) ( 290 ) (8) ( 102 ) ( 319 ) ( 719 ) ( 588 ) ( 15 ) ( 195 ) ( 639 ) ( 1,437 ) Profit before taxation 385 325 710 Income tax expense Net profit for the period ( 115 ) 270 ( 98 ) 227 ( 213 ) 497 Net gain on discontinued operations Net profit before minority interests 270 227 497 Net profit attributable to minority interests Net profit attributable to shareholders 270 227 497 Net revenues from external customers Net revenues internal Net revenues 562 541 1,103 499 545 1,044 1,061 1,086 2,147 Consolidated Interim Financial Statements for the first half-year 2008 | 99 First quarter 2007 Income Interest income Interest expense Net interest income 2,618 ( 1,956 ) 662 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 2,840 ( 2,197 ) 643 3,316 ( 2,633 ) 683 3,305 ( 2,596 ) 709 12,079 ( 9,382 ) 2,697 Fee and commission income Fee and commission expense Net fee and commission income 336 ( 55 ) 281 318 ( 56 ) 262 154 119 273 143 138 281 951 146 1,097 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 5 4 11 130 1,093 13 219 1,141 4 6 13 102 1,077 (1) 54 12 46 1,101 8 64 49 497 4,412 Change in impairments Net revenues ( 33 ) 1,060 ( 19 ) 1,122 ( 72 ) 1,005 ( 18 ) 1,083 ( 142 ) 4,270 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses ( 287 ) (8) ( 114 ) ( 346 ) ( 755 ) ( 279 ) (1) ( 110 ) ( 313 ) ( 703 ) ( 290 ) (7) ( 112 ) ( 335 ) ( 744 ) ( 290 ) (7) ( 123 ) ( 337 ) ( 757 ) ( 1,146 ) ( 23 ) ( 459 ) ( 1,331 ) ( 2,959 ) Profit before taxation 305 419 261 326 1,311 Income tax expense Net profit for the period ( 46 ) 259 ( 95 ) 324 ( 59 ) 202 ( 109 ) 217 ( 309 ) 1,002 Net gain on discontinued operations Net profit before minority interests 259 324 202 217 1,002 Net profit attributable to minority interests Net profit attributable to shareholders 259 324 202 217 1,002 Net revenues from external customers Net revenues internal Net revenues 655 405 1,060 607 515 1,122 575 430 1,005 669 414 1,083 2,506 1,764 4,270 100 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Banking segments Asset Management First quarter 2008 Income Interest income Interest expense Net interest income 10 ( 14 ) (4) 6 ( 64 ) ( 58 ) 16 ( 78 ) ( 62 ) Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Fee and commission income Fee and commission expense Net fee and commission income 231 ( 130 ) 101 423 ( 251 ) 172 654 ( 381 ) 273 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense (1) 1 102 5 3 3 28 13 161 8 3 27 14 263 Change in impairments Net revenues (3) 99 161 (3) 260 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses ( 59 ) (4) ( 24 ) (2) ( 89 ) ( 77 ) ( 23 ) ( 68 ) (2) ( 170 ) ( 136 ) ( 27 ) ( 92 ) (4) ( 259 ) Profit before taxation 10 (9) 1 Income tax expense Net profit for the period (2) 8 8 (1) 6 7 Net gain on discontinued operations Net profit before minority interests 8 24 23 24 31 Net profit attributable to minority interests Net profit attributable to shareholders 1 7 7 16 8 23 Net revenues from external customers Net revenues internal Net revenues 103 (4) 99 206 ( 45 ) 161 309 ( 49 ) 260 Consolidated Interim Financial Statements for the first half-year 2008 | 101 First quarter 2007 Income Interest income Interest expense Net interest income 8 ( 10 ) (2) Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 6 (9) (3) 4 (8) (4) 9 ( 10 ) (1) 27 ( 37 ) ( 10 ) Fee and commission income Fee and commission expense Net fee and commission income 224 ( 127 ) 97 240 ( 136 ) 104 250 ( 137 ) 113 277 ( 155 ) 122 991 ( 555 ) 436 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 3 1 100 1 3 1 2 1 108 3 1 116 3 3 (1) 3 2 128 11 5 452 10 Change in impairments Net revenues 100 108 116 (9) 119 (9) 443 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses ( 38 ) (4) ( 21 ) (2) ( 65 ) ( 42 ) (2) ( 23 ) (3) ( 70 ) ( 48 ) (3) ( 23 ) (4) ( 78 ) ( 46 ) (4) ( 34 ) (3) ( 87 ) ( 174 ) ( 13 ) ( 101 ) ( 12 ) ( 300 ) Profit before taxation 35 38 38 32 143 Income tax expense Net profit for the period (9) 26 (9) 29 ( 10 ) 28 (7) 25 ( 35 ) 108 Net gain on discontinued operations Net profit before minority interests 26 29 28 25 108 Net profit attributable to minority interests Net profit attributable to shareholders 1 25 1 28 1 27 (3) 28 108 Net revenues from external customers Net revenues internal Net revenues 103 (3) 100 111 (3) 108 119 (3) 116 122 (3) 119 455 ( 12 ) 443 102 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Banking segments Private Banking First quarter 2008 Income Interest income Interest expense Net interest income 298 ( 244 ) 54 351 ( 300 ) 51 649 ( 544 ) 105 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Fee and commission income Fee and commission expense Net fee and commission income 109 (7) 102 115 ( 16 ) 99 224 ( 23 ) 201 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 9 13 181 3 4 2 6 6 168 7 2 15 19 349 Change in impairments Net revenues (1) 180 (2) 166 (3) 346 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses ( 58 ) (2) ( 20 ) ( 51 ) ( 131 ) ( 56 ) (1) ( 24 ) ( 46 ) ( 127 ) ( 114 ) (3) ( 44 ) ( 97 ) ( 258 ) Profit before taxation 49 39 88 Income tax expense Net profit for the period (9) 40 (8) 31 ( 17 ) 71 Net gain on discontinued operations Net profit before minority interests 40 31 71 Net profit attributable to minority interests Net profit attributable to shareholders 40 31 71 Net revenues from external customers Net revenues internal Net revenues 102 78 180 117 49 166 219 127 346 Consolidated Interim Financial Statements for the first half-year 2008 | 103 First quarter 2007 Income Interest income Interest expense Net interest income 290 ( 244 ) 46 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 305 ( 260 ) 45 321 ( 268 ) 53 327 ( 272 ) 55 1,243 ( 1,044 ) 199 Fee and commission income Fee and commission expense Net fee and commission income 130 ( 17 ) 113 135 ( 10 ) 125 107 (9) 98 130 ( 15 ) 115 502 ( 51 ) 451 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 1 22 6 14 202 7 28 206 1 9 2 5 3 170 2 (1) 5 10 186 13 23 23 55 764 Change in impairments Net revenues 4 206 2 208 1 171 (3) 183 4 768 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses ( 61 ) (2) ( 21 ) ( 37 ) ( 121 ) ( 62 ) (2) ( 26 ) ( 45 ) ( 135 ) ( 62 ) (2) ( 18 ) ( 41 ) ( 123 ) ( 66 ) (1) ( 23 ) ( 49 ) ( 139 ) ( 251 ) (7) ( 88 ) ( 172 ) ( 518 ) Profit before taxation 85 73 48 44 250 Income tax expense Net profit for the period (9) 76 ( 11 ) 62 (5) 43 ( 12 ) 32 ( 37 ) 213 Net gain on discontinued operations Net profit before minority interests 76 62 43 32 213 Net profit attributable to minority interests Net profit attributable to shareholders 76 62 43 32 213 Net revenues from external customers Net revenues internal Net revenues 148 58 206 116 92 208 74 97 171 101 82 183 439 329 768 104 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Banking segments Merchant Banking First quarter 2008 Income Interest income Interest expense Net interest income 31,925 ( 31,249 ) 676 32,423 ( 31,777 ) 646 64,348 ( 63,026 ) 1,322 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Fee and commission income Fee and commission expense Net fee and commission income 409 ( 147 ) 262 434 ( 189 ) 245 843 ( 336 ) 507 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 35 40 656 157 1,826 44 26 460 68 1,489 79 66 1,116 225 3,315 Change in impairments Net revenues ( 404 ) 1,422 ( 577 ) 912 ( 981 ) 2,334 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses ( 387 ) ( 26 ) ( 173 ) ( 152 ) ( 738 ) ( 387 ) ( 28 ) ( 165 ) ( 150 ) ( 730 ) ( 774 ) ( 54 ) ( 338 ) ( 302 ) ( 1,468 ) Profit before taxation 684 182 866 Income tax expense Net profit for the period ( 231 ) 453 38 220 ( 193 ) 673 Net gain on discontinued operations Net profit before minority interests 453 220 673 Net profit attributable to minority interests Net profit attributable to shareholders 453 220 673 Net revenues from external customers Net revenues internal Net revenues 1,355 67 1,422 1,303 ( 391 ) 912 2,658 ( 324 ) 2,334 Consolidated Interim Financial Statements for the first half-year 2008 | 105 First quarter 2007 Income Interest income Interest expense Net interest income 24,748 ( 24,242 ) 506 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 27,169 ( 26,459 ) 710 33,781 ( 33,205 ) 576 32,674 ( 32,042 ) 632 118,372 ( 115,948 ) 2,424 Fee and commission income Fee and commission expense Net fee and commission income 341 ( 103 ) 238 407 ( 132 ) 275 319 ( 61 ) 258 537 ( 209 ) 328 1,604 ( 505 ) 1,099 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 36 47 361 117 1,305 42 62 353 173 1,615 39 75 177 83 1,208 62 34 67 73 1,196 179 218 958 446 5,324 Change in impairments Net revenues 7 1,312 11 1,626 ( 91 ) 1,117 ( 2,604 ) ( 1,408 ) ( 2,677 ) 2,647 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses ( 346 ) ( 16 ) ( 193 ) ( 143 ) ( 698 ) ( 399 ) ( 24 ) ( 219 ) ( 148 ) ( 790 ) ( 395 ) ( 26 ) ( 179 ) ( 150 ) ( 750 ) ( 450 ) ( 20 ) ( 211 ) ( 163 ) ( 844 ) ( 1,590 ) ( 86 ) ( 802 ) ( 604 ) ( 3,082 ) Profit before taxation 614 836 367 ( 2,252 ) ( 435 ) Income tax expense Net profit for the period ( 66 ) 548 ( 78 ) 758 ( 29 ) 338 909 ( 1,343 ) 736 301 Net gain on discontinued operations Net profit before minority interests 548 758 338 ( 1,343 ) 301 Net profit attributable to minority interests Net profit attributable to shareholders 1 547 758 338 (1) ( 1,342 ) 301 Net revenues from external customers Net revenues internal Net revenues 841 471 1,312 1,090 536 1,626 1,017 100 1,117 ( 1,434 ) 26 ( 1,408 ) 1,514 1,133 2,647 106 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Banking segments Other Banking First quarter 2008 Income Interest income Interest expense Net interest income 6,059 ( 6,181 ) ( 122 ) 6,357 ( 6,449 ) ( 92 ) 12,416 ( 12,630 ) ( 214 ) Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Fee and commission income Fee and commission expense Net fee and commission income 24 ( 33 ) (9) 31 ( 37 ) (6) 55 ( 70 ) ( 15 ) Insurance premiums Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 2 2 4 90 157 80 ( 215 ) ( 17 ) 198 ( 38 ) 16 ( 38 ) 42 288 119 96 ( 253 ) 25 Change in impairments Net revenues ( 10 ) ( 27 ) ( 10 ) 32 ( 20 ) 5 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Insurance claims and benefits Allocated expense Total expenses ( 225 ) ( 69 ) ( 291 ) (1) 525 ( 61 ) ( 222 ) ( 78 ) ( 296 ) ( 10 ) 517 ( 89 ) ( 447 ) ( 147 ) ( 587 ) ( 11 ) 1,042 ( 150 ) Profit before taxation ( 88 ) ( 57 ) ( 145 ) Income tax expense Net profit for the period 42 ( 46 ) 31 ( 26 ) 73 ( 72 ) Net gain on discontinued operations Net profit before minority interests ( 46 ) ( 26 ) ( 72 ) Net profit attributable to minority interests Net profit attributable to shareholders 3 ( 49 ) 4 ( 30 ) 7 ( 79 ) Net revenues from external customers Net revenues internal Net revenues 582 ( 609 ) ( 27 ) 119 ( 87 ) 32 701 ( 696 ) 5 Consolidated Interim Financial Statements for the first half-year 2008 | 107 First quarter 2007 Income Interest income Interest expense Net interest income 4,677 ( 4,630 ) 47 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 3,590 ( 3,589 ) 1 7,900 ( 7,905 ) (5) 6,029 ( 6,115 ) ( 86 ) 22,196 ( 22,239 ) ( 43 ) Fee and commission income Fee and commission expense Net fee and commission income 27 ( 30 ) (3) 31 ( 34 ) (3) 36 ( 36 ) 163 ( 175 ) ( 12 ) 257 ( 275 ) ( 18 ) Insurance premiums Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense 3 2 2 2 9 19 133 45 ( 167 ) 77 37 187 129 ( 317 ) 36 12 131 61 ( 125 ) 76 231 125 2 ( 19 ) 243 299 576 237 ( 628 ) 432 Change in impairments Net revenues (4) 73 (4) 32 (2) 74 (1) 242 ( 11 ) 421 Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Insurance claims and benefits Allocated expense Total expenses ( 210 ) ( 59 ) ( 328 ) (3) 528 ( 72 ) 509 ( 55 ) 530 ( 63 ) ( 210 ) ( 61 ) ( 293 ) ( 221 ) ( 62 ) ( 310 ) ( 224 ) ( 70 ) ( 334 ) (1) 552 ( 77 ) ( 865 ) ( 252 ) ( 1,265 ) (4) 2,119 ( 267 ) Profit before taxation 1 ( 23 ) 11 165 154 Income tax expense Net profit for the period (2) (1) 13 ( 10 ) ( 33 ) ( 22 ) 26 191 4 158 Net gain on discontinued operations Net profit before minority interests (1) ( 10 ) ( 22 ) 191 158 Net profit attributable to minority interests Net profit attributable to shareholders 3 (4) 3 ( 13 ) 1 ( 23 ) 7 184 14 144 Net revenues from external customers Net revenues internal Net revenues 917 ( 844 ) 73 1,089 ( 1,057 ) 32 641 ( 567 ) 74 693 ( 451 ) 242 3,340 ( 2,919 ) 421 108 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Banking segments Banking - Eliminations First quarter 2008 Income Interest income Interest expense Net interest income ( 16,629 ) 16,629 ( 16,470 ) 16,470 ( 33,099 ) 33,099 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Fee and commission income Fee and commission expense Net fee and commission income ( 72 ) 72 ( 108 ) 108 ( 180 ) 180 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense ( 10 ) ( 10 ) (2) (2) ( 12 ) ( 12 ) Change in impairments Net revenues ( 10 ) (2) ( 12 ) Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses 10 2 12 10 2 12 Profit before taxation Income tax expense Net profit for the period Net gain on discontinued operations Net profit before minority interests Net profit attributable to minority interests Net profit attributable to shareholders Net revenues from external customers Net revenues internal Net revenues ( 10 ) ( 10 ) (2) (2) ( 12 ) ( 12 ) Consolidated Interim Financial Statements for the first half-year 2008 | 109 First quarter 2007 Income Interest income Interest expense Net interest income ( 12,042 ) 12,042 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 ( 11,927 ) 11,927 ( 20,354 ) 20,354 ( 16,941 ) 16,941 ( 61,264 ) 61,264 Fee and commission income Fee and commission expense Net fee and commission income ( 90 ) 90 ( 86 ) 86 143 ( 143 ) ( 29 ) 29 ( 62 ) 62 Dividend, share in result of associates and joint ventures and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Other income Total income, net of interest expense ( 33 ) ( 34 ) ( 37 ) ( 37 ) (2) (3) 1 ( 72 ) ( 73 ) (1) (1) 1 (1) Change in impairments Net revenues ( 34 ) ( 37 ) (3) 1 ( 73 ) Expenses Staff expenses Depreciation and amortisation of tangible and intangible assets Other expenses Allocated expense Total expenses 34 37 3 (1) 73 34 37 3 (1) 73 Profit before taxation Income tax expense Net profit for the period Net gain on discontinued operations Net profit before minority interests Net profit attributable to minority interests Net profit attributable to shareholders Net revenues from external customers Net revenues internal Net revenues ( 34 ) ( 34 ) ( 37 ) ( 37 ) (3) (3) 1 1 ( 73 ) ( 73 ) 110 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Insurance segments Insurance Belgium – Life First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 408 1,355 104 1 96 ( 56 ) 34 ( 517 ) 19 1,444 3 ( 27 ) 34 ( 126 ) 23 1,455 411 968 169 819 2,323 273 1 99 ( 83 ) 68 ( 643 ) 42 2,899 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 32 ) ( 1,583 ) 517 ( 44 ) ( 82 ) ( 15 ) ( 61 ) ( 61 ) ( 1,361 ) ( 33 ) ( 1,175 ) 126 ( 39 ) ( 75 ) ( 15 ) ( 61 ) ( 72 ) ( 1,344 ) ( 65 ) ( 2,758 ) 643 ( 83 ) ( 157 ) ( 30 ) ( 122 ) ( 133 ) ( 2,705 ) Profit before taxation 83 111 194 Income tax expense Net profit for the period 10 93 (9) 102 1 195 Net gain on discontinued operations Net profit before minority interests 93 102 195 Net profit attributable to minority interests Net profit attributable to shareholders 1 92 2 100 3 192 Total income from external customers Total income internal Total income 1,391 53 1,444 1,403 52 1,455 2,794 105 2,899 Consolidated Interim Financial Statements for the first half-year 2008 | 111 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 399 1,504 96 1 79 ( 10 ) 29 101 19 2,218 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 408 1,215 182 1 31 2 36 233 23 2,131 437 1,135 105 1 42 ( 33 ) 30 ( 83 ) 16 1,650 440 1,115 122 1 82 ( 62 ) 31 ( 94 ) 33 1,668 1,684 4,969 505 4 234 ( 103 ) 126 157 91 7,667 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 90 ) ( 1,712 ) ( 92 ) (1) ( 80 ) ( 12 ) ( 56 ) ( 61 ) ( 2,104 ) ( 99 ) ( 1,444 ) ( 232 ) (1) ( 79 ) ( 13 ) ( 55 ) ( 63 ) ( 1,986 ) ( 98 ) ( 1,342 ) 85 (2) ( 78 ) ( 14 ) ( 57 ) ( 64 ) ( 1,570 ) ( 95 ) ( 1,298 ) 82 ( 36 ) ( 77 ) ( 14 ) ( 68 ) ( 74 ) ( 1,580 ) ( 382 ) ( 5,796 ) ( 157 ) ( 40 ) ( 314 ) ( 53 ) ( 236 ) ( 262 ) ( 7,240 ) Profit before taxation 114 145 80 88 427 Income tax expense Net profit for the period 21 135 ( 26 ) 119 9 89 (1) 87 3 430 Net gain on discontinued operations Net profit before minority interests 135 119 89 87 430 Net profit attributable to minority interests Net profit attributable to shareholders 1 134 1 118 1 88 2 85 5 425 Total income from external customers Total income internal Total income 2,128 90 2,218 2,034 97 2,131 1,550 100 1,650 1,538 130 1,668 7,250 417 7,667 112 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Insurance segments Insurance Belgium – Non-life First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 14 429 16 440 30 869 13 2 2 1 2 15 2 3 33 352 13 38 365 18 71 717 31 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses (4) ( 82 ) (9) ( 35 ) ( 25 ) ( 395 ) ( 66 ) (8) ( 36 ) ( 42 ) ( 403 ) (4) ( 148 ) ( 17 ) ( 71 ) ( 67 ) ( 798 ) (3) ( 237 ) (4) ( 247 ) (7) ( 484 ) Profit before taxation 34 37 71 Income tax expense Net profit for the period (7) 27 (8) 29 ( 15 ) 56 Net gain on discontinued operations Net profit before minority interests 27 29 56 Net profit attributable to minority interests Net profit attributable to shareholders 27 29 56 Total income from external customers Total income internal Total income 423 6 429 433 7 440 856 13 869 Consolidated Interim Financial Statements for the first half-year 2008 | 113 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 20 409 2 5 40 329 13 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 42 335 22 42 340 14 47 353 17 171 1,357 66 1 2 1 3 1 1 16 25 3 1 5 11 414 18 419 23 457 72 1,699 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 75 ) (8) ( 34 ) ( 24 ) ( 410 ) ( 64 ) (7) ( 33 ) ( 42 ) ( 369 ) ( 67 ) (8) ( 32 ) ( 41 ) ( 369 ) (5) ( 67 ) (8) ( 44 ) ( 46 ) ( 412 ) (5) ( 273 ) ( 31 ) ( 143 ) ( 153 ) ( 1,560 ) ( 11 ) ( 258 ) ( 12 ) ( 211 ) ( 14 ) ( 207 ) ( 13 ) ( 229 ) ( 50 ) ( 905 ) Profit before taxation (1) 45 50 45 139 Income tax expense Net profit for the period 4 3 ( 15 ) 30 ( 19 ) 31 ( 10 ) 35 ( 40 ) 99 Net gain on discontinued operations Net profit before minority interests 3 30 31 35 99 Net profit attributable to minority interests Net profit attributable to shareholders 3 1 29 31 35 1 98 Total income from external customers Total income internal Total income 396 13 409 401 13 414 404 15 419 444 13 457 1,645 54 1,699 114 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Insurance segments Insurance Netherlands – Life First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 290 1,408 54 5 124 ( 112 ) 4 ( 871 ) 22 924 303 681 127 33 57 (4) 4 ( 191 ) 37 1,047 593 2,089 181 38 181 ( 116 ) 8 ( 1,062 ) 59 1,971 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 85 ) ( 1,227 ) 662 ( 24 ) ( 43 ) ( 16 ) ( 36 ) ( 79 ) ( 848 ) ( 90 ) ( 960 ) 373 ( 30 ) ( 40 ) ( 17 ) ( 37 ) ( 56 ) ( 857 ) ( 175 ) ( 2,187 ) 1,035 ( 54 ) ( 83 ) ( 33 ) ( 73 ) ( 135 ) ( 1,705 ) Profit before taxation 76 190 266 Income tax expense Net profit for the period ( 18 ) 58 ( 40 ) 150 ( 58 ) 208 Net gain on discontinued operations Net profit before minority interests 58 150 208 Net profit attributable to minority interests Net profit attributable to shareholders 6 52 3 147 9 199 Total income from external customers Total income internal Total income 887 37 924 1,008 39 1,047 1,895 76 1,971 Consolidated Interim Financial Statements for the first half-year 2008 | 115 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 281 1,181 58 7 66 (4) 9 210 26 1,834 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 241 737 96 14 59 (6) (1) 256 65 1,461 277 564 76 6 120 ( 25 ) 6 ( 80 ) 41 985 283 626 46 10 516 ( 41 ) 5 ( 267 ) 52 1,230 1,082 3,108 276 37 761 ( 76 ) 19 119 184 5,510 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 101 ) ( 845 ) ( 588 ) (4) ( 45 ) ( 16 ) ( 32 ) ( 61 ) ( 1,692 ) ( 58 ) ( 812 ) ( 231 ) (4) ( 39 ) ( 16 ) ( 35 ) ( 97 ) ( 1,292 ) ( 83 ) ( 580 ) 46 ( 42 ) ( 36 ) ( 16 ) ( 36 ) ( 97 ) ( 844 ) ( 72 ) ( 594 ) ( 12 ) ( 79 ) ( 33 ) ( 14 ) ( 35 ) ( 102 ) ( 941 ) ( 314 ) ( 2,831 ) ( 785 ) ( 129 ) ( 153 ) ( 62 ) ( 138 ) ( 357 ) ( 4,769 ) Profit before taxation 142 169 141 289 741 Income tax expense Net profit for the period ( 28 ) 114 ( 29 ) 140 ( 29 ) 112 19 308 ( 67 ) 674 Net gain on discontinued operations Net profit before minority interests 114 140 112 308 674 Net profit attributable to minority interests Net profit attributable to shareholders 3 111 3 137 5 107 5 303 16 658 Total income from external customers Total income internal Total income 1,796 38 1,834 1,416 45 1,461 955 30 985 1,193 37 1,230 5,360 150 5,510 116 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Insurance segments Insurance Netherlands – Non-life First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 22 628 57 771 79 1,399 40 568 1 1 ( 11 ) ( 22 ) 29 26 ( 10 ) 29 40 610 19 80 1,178 20 1 15 ( 32 ) 58 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses (2) ( 133 ) (2) ( 41 ) ( 25 ) ( 596 ) (7) ( 103 ) (2) ( 41 ) ( 34 ) ( 681 ) (9) ( 236 ) (4) ( 82 ) ( 59 ) ( 1,277 ) ( 15 ) ( 378 ) ( 15 ) ( 479 ) ( 30 ) ( 857 ) Profit before taxation 32 90 122 Income tax expense Net profit for the period ( 16 ) 16 ( 14 ) 76 ( 30 ) 92 Net gain on discontinued operations Net profit before minority interests 16 76 92 Net profit attributable to minority interests Net profit attributable to shareholders 16 76 92 Total income from external customers Total income internal Total income 619 9 628 761 10 771 1,380 19 1,399 Consolidated Interim Financial Statements for the first half-year 2008 | 117 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 40 653 42 511 1 1 19 (3) 42 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 39 523 13 (1) 9 ( 12 ) 15 38 512 7 1 (2) (2) 21 38 544 1 (1) 80 (6) 17 157 2,090 22 106 ( 23 ) 95 34 620 35 610 42 715 151 2,598 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 126 ) (1) ( 39 ) ( 22 ) ( 581 ) ( 100 ) (2) ( 41 ) ( 40 ) ( 524 ) (8) ( 91 ) (1) ( 37 ) ( 55 ) ( 561 ) ( 21 ) ( 84 ) (2) ( 40 ) ( 93 ) ( 657 ) ( 29 ) ( 401 ) (6) ( 157 ) ( 210 ) ( 2,323 ) ( 15 ) ( 378 ) ( 15 ) ( 326 ) ( 16 ) ( 353 ) ( 15 ) ( 402 ) ( 61 ) ( 1,459 ) Profit before taxation 72 96 49 58 275 Income tax expense Net profit for the period ( 17 ) 55 ( 19 ) 77 ( 11 ) 38 3 61 ( 44 ) 231 Net gain on discontinued operations Net profit before minority interests 55 77 38 61 231 Net profit attributable to minority interests Net profit attributable to shareholders 55 77 38 61 231 Total income from external customers Total income internal Total income 641 12 653 609 11 620 601 9 610 709 6 715 2,560 38 2,598 118 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Insurance segments Insurance International – Life First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 64 394 4 13 (1) 3 49 ( 427 ) 18 117 85 353 3 11 ( 11 ) (1) 42 ( 137 ) 5 350 149 747 7 24 ( 12 ) 2 91 ( 564 ) 23 467 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 36 ) ( 16 ) ( 19 ) ( 29 ) ( 81 ) ( 39 ) ( 17 ) ( 22 ) ( 18 ) ( 325 ) ( 75 ) ( 33 ) ( 41 ) ( 47 ) ( 406 ) (8) ( 402 ) 429 ( 19 ) ( 335 ) 125 ( 27 ) ( 737 ) 554 Profit before taxation 36 25 61 Income tax expense Net profit for the period (8) 28 (7) 18 ( 15 ) 46 Net gain on discontinued operations Net profit before minority interests 28 18 46 Net profit attributable to minority interests Net profit attributable to shareholders 11 17 10 8 21 25 Total income from external customers Total income internal Total income 96 21 117 396 ( 46 ) 350 492 ( 25 ) 467 Consolidated Interim Financial Statements for the first half-year 2008 | 119 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 34 144 16 619 67 318 3 8 29 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 75 370 3 2 44 (3) 36 196 4 727 76 454 5 14 10 72 469 7 22 ( 11 ) 2 290 1,611 18 46 72 (1) 161 350 23 2,570 38 18 2 617 53 (8) 1 607 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses ( 17 ) ( 15 ) ( 15 ) ( 27 ) ( 585 ) ( 30 ) ( 17 ) ( 20 ) ( 23 ) ( 701 ) (3) ( 328 ) ( 180 ) ( 12 ) ( 374 ) ( 225 ) (2) ( 408 ) ( 62 ) 1 ( 41 ) ( 19 ) ( 20 ) ( 19 ) ( 570 ) (8) ( 429 ) ( 17 ) (2) ( 51 ) ( 20 ) ( 25 ) ( 17 ) ( 569 ) ( 25 ) ( 1,539 ) ( 484 ) (1) ( 139 ) ( 71 ) ( 80 ) ( 86 ) ( 2,425 ) Profit before taxation 34 26 47 38 145 Income tax expense Net profit for the period (8) 26 (5) 21 (6) 41 (7) 31 ( 26 ) 119 Net gain on discontinued operations Net profit before minority interests 10 36 19 40 15 56 782 813 826 945 Net profit attributable to minority interests Net profit attributable to shareholders 10 26 10 30 8 48 5 808 33 912 Total income from external customers Total income internal Total income 612 7 619 725 2 727 614 3 617 609 (2) 607 2,560 10 2,570 120 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Insurance segments Insurance International – Non-life First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 27 556 93 651 120 1,207 36 461 5 3 (2) (6) 32 26 39 479 2 2 10 75 940 7 5 8 (6) 58 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses (2) ( 74 ) (2) ( 33 ) ( 35 ) ( 534 ) 1 ( 61 ) (2) ( 33 ) ( 45 ) ( 568 ) (1) ( 135 ) (4) ( 66 ) ( 80 ) ( 1,102 ) (9) ( 379 ) ( 428 ) (9) ( 807 ) Profit before taxation 22 83 105 Income tax expense Net profit for the period (5) 17 ( 18 ) 65 ( 23 ) 82 Net gain on discontinued operations Net profit before minority interests 17 65 82 Net profit attributable to minority interests Net profit attributable to shareholders 2 15 2 63 4 78 Total income from external customers Total income internal Total income 540 16 556 635 16 651 1,175 32 1,207 Consolidated Interim Financial Statements for the first half-year 2008 | 121 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income 46 563 34 1 2 33 447 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 33 487 4 3 11 (2) 34 36 513 1 3 2 36 491 138 1,938 5 7 14 (4) 29 (6) 141 34 39 32 602 77 666 44 620 199 2,451 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses (1) ( 73 ) (2) ( 33 ) ( 34 ) ( 532 ) 1 ( 73 ) (3) ( 34 ) ( 41 ) ( 577 ) ( 59 ) (1) ( 36 ) ( 63 ) ( 694 ) (3) ( 52 ) (2) ( 35 ) ( 55 ) ( 601 ) (3) ( 257 ) (8) ( 138 ) ( 193 ) ( 2,404 ) (5) ( 384 ) (4) ( 423 ) ( 12 ) ( 523 ) (7) ( 447 ) ( 28 ) ( 1,777 ) Profit before taxation 31 25 ( 28 ) 19 47 Income tax expense Net profit for the period (9) 22 (4) 21 7 ( 21 ) (3) 16 (9) 38 Net gain on discontinued operations Net profit before minority interests 3 25 4 25 5 ( 16 ) 175 191 187 225 Net profit attributable to minority interests Net profit attributable to shareholders 2 23 4 21 2 ( 18 ) 1 190 9 216 Total income from external customers Total income internal Total income 548 15 563 592 10 602 647 19 666 606 14 620 2,393 58 2,451 122 | Consolidated Interim Financial Statements for the first half-year 2008 Income statement – Insurance segments Insurance – Eliminations First quarter 2008 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income (8) ( 34 ) (9) ( 34 ) ( 17 ) ( 68 ) (1) (1) (2) (3) ( 18 ) (4) (2) ( 19 ) (3) (5) ( 37 ) (7) Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses 10 34 12 34 22 68 1 1 2 2 21 3 18 5 39 Profit before taxation Income tax expense Net profit for the period Net gain on discontinued operations Net profit before minority interests Net profit attributable to minority interests Net profit attributable to shareholders Total income from external customers Total income internal Total income ( 34 ) ( 34 ) ( 34 ) ( 34 ) ( 68 ) ( 68 ) Consolidated Interim Financial Statements for the first half-year 2008 | 123 First quarter 2007 Income Interest income Insurance premiums Dividend and other investment income Share in result of associates and joint ventures Realised capital gains (losses) on investments Other realised and unrealised gains and losses Fee and commission income Income related to investments for unit-linked contracts Other income Total income (7) ( 27 ) (3) ( 12 ) (5) Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 (3) ( 11 ) (5) (1) ( 17 ) (3) (3) ( 12 ) (3) ( 10 ) ( 52 ) ( 16 ) (2) (2) (7) ( 26 ) (7) ( 30 ) ( 11 ) ( 29 ) ( 32 ) ( 112 ) Expenses Interest expense Insurance claims and benefits Charges related to unit-linked contracts Change in impairments Fee and commission expense Depreciation and amortisation of tangible and intangible assets Staff expenses Other expenses Total expenses 12 27 12 26 11 30 9 23 44 106 2 2 3 12 3 11 1 16 2 12 9 51 Profit before taxation (6) (6) Income tax expense Net profit for the period (6) (6) Net gain on discontinued operations Net profit before minority interests (6) (6) Net profit attributable to minority interests Net profit attributable to shareholders (6) (6) Total income from external customers Total income internal Total income ( 27 ) ( 27 ) ( 26 ) ( 26 ) ( 30 ) ( 30 ) ( 29 ) ( 29 ) ( 112 ) ( 112 ) 124 | Consolidated Interim Financial Statements for the first half-year 2008 Technical result – Life First quarter 2008 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Gross earned premiums Ceded reinsurance earned premiums Financial result and capital gains allocated to technical result Fee income Other income Total income 3,157 ( 29 ) ( 1,304 ) 47 ( 21 ) 1,850 2,002 ( 13 ) 231 49 28 2,297 5,159 ( 42 ) ( 1,073 ) 96 7 4,147 Benefits and surrenders, gross Reinsurers' share of benefits and surrenders Changes in liabilities arising from insurance and investment contracts including unit-linked contracts Reinsurers' share of change in liabilities Profit sharing Total technical charges ( 1,416 ) 5 ( 1,599 ) 9 ( 3,015 ) 14 ( 58 ) 11 ( 101 ) ( 1,559 ) ( 162 ) (3) ( 72 ) ( 1,827 ) ( 220 ) 8 ( 173 ) ( 3,386 ) Commission expenses Change in deferred acquisition costs and VOBA Administrative expenses Reinsurance commissions and profit participation Total operating expenses ( 155 ) ( 15 ) ( 142 ) 9 ( 303 ) ( 152 ) (7) ( 151 ) 7 ( 303 ) ( 307 ) ( 22 ) ( 293 ) 16 ( 606 ) Technical result Life insurance, before taxation ( 12 ) 167 155 Consolidated Interim Financial Statements for the first half-year 2008 | 125 First quarter 2007 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 Gross earned premiums Ceded reinsurance earned premiums Financial result and capital gains allocated to technical result Fee income Other income Total income 3,003 ( 23 ) 1,127 38 8 4,153 2,322 ( 12 ) 1,441 46 (1) 3,796 2,153 ( 29 ) 439 43 1 2,607 2,210 ( 18 ) 136 57 ( 12 ) 2,373 9,688 ( 82 ) 3,143 184 (4) 12,929 Benefits and surrenders, gross Reinsurers' share of benefits and surrenders Change in liabilities arising from insurance and investment contracts including unit-linked contracts Reinsurers' share of change in liabilities Profit sharing Total technical charges ( 1,259 ) 8 ( 1,480 ) 14 ( 1,190 ) 14 ( 1,535 ) 2 ( 5,464 ) 38 ( 2,440 ) 11 ( 23 ) ( 3,703 ) ( 1,753 ) (3) ( 73 ) ( 3,295 ) ( 936 ) (3) ( 106 ) ( 2,221 ) ( 413 ) ( 11 ) ( 302 ) ( 2,259 ) ( 5,542 ) (6) ( 504 ) ( 11,478 ) Commission expenses Change in deferred acquisition costs and VOBA Administrative expenses Reinsurance commissions and profit participation Total operating expenses ( 138 ) ( 23 ) ( 135 ) 5 ( 291 ) ( 142 ) ( 14 ) ( 142 ) 5 ( 293 ) ( 148 ) ( 15 ) ( 163 ) 7 ( 319 ) ( 161 ) 2 ( 166 ) 7 ( 318 ) ( 589 ) ( 50 ) ( 606 ) 24 ( 1,221 ) Technical result Life insurance, before taxation 159 208 67 ( 204 ) 230 126 | Consolidated Interim Financial Statements for the first half-year 2008 Technical result – Non-life First quarter 2008 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Gross earned premiums Ceded reinsurance earned premiums Financial result and capital gains allocated to technical result Other income Total income 1,381 ( 125 ) 66 (1) 1,321 1,454 ( 173 ) 94 10 1,385 2,835 ( 298 ) 160 9 2,706 Claims paid, gross Reinsurers' share of claims paid Change in liabilities arising from insurance contracts Reinsurers' share of change in liabilities Claim handling expenses Total technical charges ( 841 ) 61 ( 27 ) ( 14 ) ( 51 ) ( 872 ) ( 811 ) 97 ( 171 ) 54 ( 51 ) ( 882 ) ( 1,652 ) 158 ( 198 ) 40 ( 102 ) ( 1,754 ) Commission expenses Change in deferred acquisition costs and VOBA Reinsurers' share of change in deferred acquisition costs and VOBA Administrative expenses Reinsurance commissions and profit participation Total operating expenses ( 287 ) 60 (9) ( 144 ) 38 ( 342 ) ( 228 ) (4) 3 ( 151 ) 34 ( 346 ) ( 515 ) 56 (6) ( 295 ) 72 ( 688 ) Technical result Non-life insurance, before taxation 107 157 264 Consolidated Interim Financial Statements for the first half-year 2008 | 127 First quarter 2007 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 Gross earned premiums Ceded reinsurance earned premiums Financial result and capital gains allocated to technical result Other income Total income 1,287 ( 125 ) 73 12 1,247 1,345 ( 106 ) 84 5 1,328 1,365 ( 144 ) 71 9 1,301 1,388 ( 155 ) 61 11 1,305 5,385 ( 530 ) 289 37 5,181 Claims paid, gross Reinsurers' share of claims paid Change in liabilities arising from insurance contracts Reinsurers' share of change in liabilities Claim handling expenses Total technical charges ( 767 ) 32 ( 128 ) 57 ( 49 ) ( 855 ) ( 723 ) 35 ( 131 ) 21 ( 49 ) ( 847 ) ( 747 ) 44 ( 192 ) 73 ( 50 ) ( 872 ) ( 763 ) 98 ( 160 ) ( 19 ) ( 47 ) ( 891 ) ( 3,000 ) 209 ( 611 ) 132 ( 195 ) ( 3,465 ) Commission expenses Change in deferred acquisition costs and VOBA Reinsurers' share of change in deferred acquisition costs and VOBA Administrative expenses Reinsurance commissions and profit participation Total operating expenses ( 272 ) 51 (3) ( 148 ) 51 ( 321 ) ( 236 ) 14 (6) ( 148 ) 21 ( 355 ) ( 218 ) ( 24 ) 7 ( 154 ) 27 ( 362 ) ( 194 ) ( 34 ) 1 ( 161 ) 29 ( 359 ) ( 920 ) 7 (1) ( 611 ) 128 ( 1,397 ) Technical result Non-life insurance, before taxation 71 126 67 55 319 128 | Consolidated Interim Financial Statements for the first half-year 2008 Non-technical result – Total First quarter 2008 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Interest income Dividend and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Income related to investments for unit-linked contracts Interest expense Investment related expenses Financial income Financial result and capital gains allocated to technical result 871 181 219 ( 191 ) ( 1,815 ) ( 152 ) ( 113 ) ( 1,000 ) 1,238 238 916 338 87 ( 42 ) ( 454 ) ( 161 ) ( 134 ) 550 ( 325 ) 225 ( 13 ) 212 1,787 519 306 ( 233 ) ( 2,269 ) ( 313 ) ( 247 ) ( 450 ) 913 463 ( 63 ) 400 Other income and charges Non-technical result Life and Non-life ( 50 ) 188 First quarter 2007 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 Interest income Dividend and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Income related to investments for unit-linked contracts Interest expense Investment related expenses Financial income Financial result and capital gains allocated to technical result 862 171 200 ( 17 ) 455 ( 225 ) ( 110 ) 1,336 ( 1,200 ) 136 838 320 155 ( 19 ) 685 ( 200 ) ( 110 ) 1,669 ( 1,525 ) 144 28 172 906 208 175 ( 59 ) ( 145 ) ( 225 ) ( 129 ) 731 ( 510 ) 221 ( 16 ) 205 916 193 697 ( 111 ) ( 369 ) ( 210 ) ( 101 ) 1,015 ( 197 ) 818 ( 132 ) 686 3,522 892 1,227 ( 206 ) 626 ( 860 ) ( 450 ) 4,751 ( 3,432 ) 1,319 ( 94 ) 1,225 Other income and charges Non-technical result Life and Non-life 26 162 Consolidated Interim Financial Statements for the first half-year 2008 | 129 Non-technical result – Life First quarter 2008 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Interest income Dividend and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Income related to investments for unit-linked contracts Interest expense Investment related expenses Financial income Financial result and capital gains allocated to technical result 762 162 219 ( 165 ) ( 1,815 ) ( 125 ) ( 99 ) ( 1,061 ) 1,304 243 799 299 49 ( 32 ) ( 454 ) ( 142 ) ( 119 ) 400 ( 231 ) 169 ( 10 ) 159 1,561 461 268 ( 197 ) ( 2,269 ) ( 267 ) ( 218 ) ( 661 ) 1,073 412 ( 46 ) 366 Other income and charges Non-technical result Life ( 36 ) 207 First quarter 2007 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 Interest income Dividend and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Income related to investments for unit-linked contracts Interest expense Investment related expenses Financial income Financial result and capital gains allocated to technical result 747 157 174 ( 14 ) 455 ( 194 ) ( 95 ) 1,230 ( 1,127 ) 103 724 281 134 (7) 685 ( 169 ) ( 95 ) 1,553 ( 1,441 ) 112 20 132 790 186 172 ( 58 ) ( 145 ) ( 183 ) ( 114 ) 648 ( 439 ) 209 (8) 201 795 175 587 ( 101 ) ( 369 ) ( 175 ) ( 86 ) 826 ( 136 ) 690 ( 71 ) 619 3,056 799 1,067 ( 180 ) 626 ( 721 ) ( 390 ) 4,257 ( 3,143 ) 1,114 ( 31 ) 1,083 Other income and charges Non-technical result Life 28 131 130 | Consolidated Interim Financial Statements for the first half-year 2008 Non-technical result – Non-life First quarter 2008 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 Full year 2008 Interest income Dividend and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Income related to investments for unit-linked contracts Interest expense Investment related expenses Financial income Financial result and capital gains allocated to technical result 109 19 117 39 38 226 58 38 ( 36 ) ( 26 ) ( 10 ) ( 27 ) ( 14 ) 61 ( 66 ) (5) ( 19 ) ( 15 ) 150 ( 94 ) 56 (3) 53 ( 46 ) ( 29 ) 211 ( 160 ) 51 ( 17 ) 34 Other income and charges Non-technical result Non-life ( 14 ) ( 19 ) First quarter 2007 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 Full year 2007 Interest income Dividend and other investment income Realised capital gains (losses) on investments Other realised and unrealised gains and losses Income related to investments for unit-linked contracts Interest expense Investment related expenses Financial income Financial result and capital gains allocated to technical result 115 14 26 (3) 114 39 21 ( 12 ) 116 22 3 (1) 121 18 110 ( 10 ) 466 93 160 ( 26 ) ( 31 ) ( 15 ) 106 ( 73 ) 33 ( 31 ) ( 15 ) 116 ( 84 ) 32 8 40 ( 42 ) ( 15 ) 83 ( 71 ) 12 (8) 4 ( 35 ) ( 15 ) 189 ( 61 ) 128 ( 61 ) 67 ( 139 ) ( 60 ) 494 ( 289 ) 205 ( 63 ) 142 Other income and charges Non-technical result Non-life (2) 31