Jaarverslag SNS REAAL 2007 by liwenting

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									Annual Report 2008
Stronger together
       Profile
       SNS REAAL is a Dutch financial institution with a particular focus on the Dutch
       retail market, including small and medium-sized enterprises. The product range
       consists of three core product groups: mortgages and property finance, savings and
       investments, and insurance.
       SNS REAAL ranks among the largest banking and insurance companies in the
       Netherlands, with a balance sheet total of € 124 billion and 7,500 employees (FTEs).
       The SNS REAAL share is listed on NYSE Euronext Amsterdam, and is included in the
       Amsterdam MidKap Index.


Responsible banking and insurance                         REAAL Verzekeringen works primarily through
SNS REAAL’s roots date back approximately 130 years       independent intermediaries to sell life insurance,
to regional savings banks and insurance companies         including unit-linked policies and pensions, and
with a public utility function. As a purely Dutch bank    non-life insurance, for example for home cover,
and insurer, we wish to be close to our clients, know     mobility and disability insurance. Zwitserleven is a
what moves them and offer them accessible and             leading provider of pension products for the retail,
transparent products. We are aware that we must           SME and large corporate markets.
never take our clients’ trust for granted. We want to
earn that trust by handling the funds entrusted to us     SNS Asset Management manages the investments
in a responsible manner.                                  of REAAL Verzekeringen and the SNS REAAL Pension
                                                          Fund, as well as the investment funds of SNS Bank
Corporate sustainability is in our organisation’s         and ASN Bank. SNS Asset Management also provides
genes, which is manifested by our moderate risk           asset management for institutional investors and
profile. We deliberately opt for specific products,       performs specialised investment research in the
clients and investments and deliberately apply            field of corporate sustainability. Zwitserleven Asset
certain restrictions. SNS REAAL conducts business         Management manages the investments of Zwitser-
based on the core values client focus, integrity,         leven’s clients.
professionalism and commitment. See the chapter
on Corporate responsibility for more details.

Coherence and focus
SNS REAAL has built strong positions in the Dutch
market with SNS Bank, SNS Property Finance, REAAL
Verzekeringen, Zwitserleven and its other labels. We
combine a clear focus on client groups and markets
with sound coherence between systems, distribution
and supporting services aimed at generating cost
and income synergies.

SNS Bank sells its products in the field of residential
and commercial mortgages, savings, investments
and insurance through its own distribution channels,
SNS Regio Bank and other intermediaries. ASN Bank
is market leader in the Netherlands in the field of
sustainable savings and investments. SNS Property
Finance is one of the major financiers of property
investments and projects in the Netherlands.
SNS Property Finance is, to a limited extent, also
active internationally.

                                                                                            SNS REAAL    Annual Report 2008   II
Table 1:   Key figures SNS REAAL
In € millions                                                       2008            2007            2006           2005            2004
Result

Result Banking activities
Net interest income                                                    773             783            567             595             571
Net fee and commission income                                          116             129            120             114             109
Other income                                                            67              26             81              56              13

Total banking activities                                               956             938            768             765             693

Result insurance activities
Net premium income                                                  4,302           2,523           1,960           1,745          1,650
Investment income                                                   1,219             834             561             545            618
Investment income for account of policy holders                    (1,691)             96             215             394            126
Other income                                                          337              94              68              48             41

Total insurance activities                                           4,167          3,547           2,804           2,732          2,435

Other income and eliminations                                           30             58               4             (17)            46
Total income                                                         5,153          4,543           3,576           3,480          3,174
Total expenses                                                       5,881          3,974           3,117           3,064          2,816

Result before tax                                                     (728)            569            459             416             358
Taxation                                                              (208)            101             88              93              70
Net result discontinued operations                                      22              --             --              --              --
Minority interest                                                        6               3             --              --              --

Net result for the financial year                                     (504)            465            371             323             288

Net result Banking activities                                          144             272            214             204             151
Net result Insurance activities                                       (550)            205            170             140             128
Net result Group activities                                            (98)            (12)           (13)            (21)              9


Earnings per ordinary share (EPS) (€)                                (1.93)           1.87           1.65            1.55            1.38
Diluted earnings per ordinary share (€)                              (1.93)           1.87           1.65            1.55            1.38
Earnings per B share (€)                                                --              --             --              --              --
Diluted earnings per B share (€)                                        --              --             --              --              --


In € millions                                                    31-12-2008 31-12-2007 31-12-2006 31-12-2005 31-12-2004
Balance sheet

Total assets                                                       124,414         103,074          79,742         68,088          59,972
Investments                                                         29,296          21,055          10,626          9,953           8,233
Investments for account of policyholders                            10,724           7,235           3,955          3,426           2,798
Loans and advances to customers                                     67,704          63,045          56,700         46,143          42,551
Loans and advances to banks                                          4,722           1,631           3,769          4,207           3,421
Group equity                                                         4,892           3,591           3,200          2,528           1,880
Capital base                                                         7,017           5,620           4,864          4,144           3,323
Debt certificates                                                   32,679          35,212          31,259         25,654          23,464
Insurance contracts                                                 36,067          24,956          13,283         12,658          11,330
Savings                                                             21,859          19,179          13,678         12,333          10,973
Amounts due to banks                                                10,612           6,887           7,534          3,419           2,442


In percentages                                                      2008            2007            2006           2005            2004
Ratios

Return on shareholders' equity (ROE)                               (13.3%)          13.7%           12.7%          14.1%           16.6%
Double Leverage                                                    113.7%          116.3%          107.8%         105.3%          114.3%
Average number of employees (FTE)                                   7,287           6,245           5,609          5,336           5,383

Banking activities
Efficiencyratio                                                      62.8%          60.3%           62.6%           59.8%          63.1%
BIS-ratio ¹                                                          14.0%          11.5%           11.2%           11.9%          11.7%
Tier 1-ratio ¹                                                       10.5%           8.4%            8.2%            8.7%           8.7%

Insurance activities
New annual premium equivalent (in € millions)                          456            207             196             176            172
Operating cost/premium ratio                                         15.9%          14.1%           13.8%           13.5%          13.2%
Solvency REAAL Life                                                   165%           272%            236%            233%           192%
Solvency Zwitserleven                                                 206%             --              --              --             --
Solvency REAAL Non-Life                                               307%           255%            279%            275%           261%

) 2008 figures are calculated based on Basel II, taking into account the 80% floor as of 1 January 2009, 2007 figures are calculated based
1

  on Basel I.
   1        Net result SNS REAAL                                                    2       Total equity SNS REAAL

 € millions                                                                     € millions

  600                                                                           6,000

  400                                                                           5,000

  200                                                                           4,000

       0                                                                        3,000

 -200                                                                           2,000

 -400                                                                           1,000

 -600                                                                                0
                 2004           2005    2006         2007        2008                           2004          2005       2006     2007      2008

           Net result                                                                    Securities capital
           Net underlying result                                                         Reserves and retained earnings
                                                                                         Share premium
                                                                                         Issued share capital




   3        Solvency levels SNS Bank                                                4       Solvency levels insurance activities


 15%                                                                            350%
 14%
                                                                                300%
 13%
 12%                                                                            250%
 11%                                                                            200%
 10%
  9%                                                                            150%
  8%                                                                            100%
  7%
                                                                                 50%
  6%
  5%                                                                               0%
                 2004           2005    2006         2007        2008                           2004          2005       2006     2007      2008

           BIS-ratio                   Financial target BIS ratio (≥11.0%)               REAAL Non-life
           Tier 1-ratio                Financial target Tier 1 ratio (≥8.0%)             REAAL Life
           Core capital-ratio                                                            Financial target Solvency REAAL non-life (≥200%)
                                                                                         Financial target Solvency REAAL life (≥150%)
                                                                                         Total (2008: including Zwitserleven)
                                                                                         Coverage ratio (as from 2007)




   5        Double leverage SNS REAAL                                               6       Development Liquidity position SNS Bank

                                                                               € millions

120%                                                                           11,000
                                                                               10,000
                                                                                9,000
115%                                                                            8,000
                                                                                7,000
                                                                                6,000
110%
                                                                                5,000
                                                                                4,000
105%                                                                            3,000
                                                                                2,000
                                                                                1,000
100%                                                                                0
                 2004           2005    2006         2007        2008                           2004          2005       2006     2007      2008

           Double leverage                                                               Cash
           Financial target B 115%                                                       Liquid assets
Table 2:   Activities overview
Business unit           Label                 Product groups                       Clients                           Distribution channels
SNS Retail Bank         SNS Bank              Mortgages, savings,                  Retail, SME                       SNS shops, internet, inter-
                                              investments, payments,                                                 mediaries, telephone
                                              loans, insurance,
                                              commercial credit
                        ASN Bank              Savings, investments,                Retail                            Internet
                                              payments
                        SNS Regio Bank        Mortgages, savings,                  Retail, SME                       Franchise offices
                                              investments
                        BLG Hypotheken        Mortgages                            Retail, SME                       Intermediaries, distribution
                                                                                                                     partners
                        SNS Securities        Securities research,                 Institutional (international),    Account management
                                              institutional brokerage,             wealthy individuals
                                              corporate finance, asset
                                              management
                        SNS Fundcoach         Investment funds                     Retail                            Internet
                        SNS Assurantiën       Insurance, pensions                  SME                               Offices, sales staff
SNS Property            SNS Property          Property finance                     Companies, professional           Offices
Finance                 Finance               (investments, projects,              investors, project
                                              participations)                      developers, housing
                                                                                   corporations
REAAL                   REAAL                 Individual life and group life Retail, SME and larger                  Intermediaries, agents,
Verzekeringen           Verzekeringen         including pensions, non-life companies                                 distribution partners
                                              and disability insurance
                        DBV                   Individual life                      Retail                            Intermediaries, distribution
                                                                                                                     partners
                        Proteq                Non-life, funeral insurance          Retail                            Internet, telephone,
                                                                                                                     alliances
                        Route Mobiel          Breakdown assistance                 Retail                            Internet, telephone
Zwitserleven            Zwitserleven          Individual life and group life Large companies, SME and                Intermediaries, fee advisers,
                                              including pensions             retail                                  advice lounges, internet
Group activities        SNS and            Asset management, particu- SNS, ASN and Zwitser-                          Account management
                        Zwitserleven Asset larly for pensions, research leven investment funds,
                        Management         on sustainable investments investment portfolio REAAL
                                                                        Verzekeringen, institutional
                                                                        investors and segregated
                                                                        investments large
                                                                        companies


Table 3:   Market shares and market positions according to product group
Product group                                                                    2008                                 2007                  2006
Savings                                                                         8.8%                                  8.3%                  6.3%
Mortgages (new inflow)                                                          8.2%                                  7.7%                  8.0%
Property finance                                                         not available (n.a.)                         no. 3
Individual life insurance 1                                                    17.9%                                  16.5%              15.7%
Non-life insurance 2                                                            5.3%                                  3.9%                  3.4%
) Market share 2007 includes AXA NL (presented without AXA NL in annual report 2007).
1

) REAAL Non-life’s own estimate for 2008. Note: market share non life 2007 in the annual report 2007 was an estimate, definite figure is 3.9%.
2




Table 4:   Profit contribution according to activity
Business unit                                              Underlying net                Underlying net
                                                                                                                              Net profit
                                                              result 1                 result contribution 1
                                                               2008                            2008                 2008        2007          2006
SNS Retail Bank                                                   187                           60.9%                116        186           208
SNS Property Finance                                               28                            9.1%                 28         86                6
REAAL Life                                                         80                           26.1%               (473)       177           145
REAAL Non-life, including disability insurance                     49                           16.0%                 26         23            21
REAAL Other                                                          1                           0.3%               (32)           5               4
Zwitserleven, as per 29-4-2008                                     17                            5.5%               (71)         --            --
Group activities                                                  (55)                       (17.9%)                (98)        (12)          (13)
Total SNS REAAL                                                   307                            100%               (504)       465           371
) Excluding the impact of volatility on the financial markets and non-recurring items
1
Stronger together
In the past few years, SNS REAAL has developed into a fully-fledged financial
institution. This growth was driven by the success of a number of our core activities
as well as our acquisition policy. Acquisitions have enabled balanced growth of our
activities, while enhancing their diversification. Our organisation now comprises
several powerful brands and niche players.


It has become a ‘solid building’. Now we must work on creating optimum synergies
between the various brands. We aim to generate more growth and value by working
together more efficiently. To this end, we are using a dynamic and sophisticated
distribution model and profiling ourselves as a sustainable organisation. This will
allow us to generate even more with our present resources. Stronger together.
Contents
6     SNS REAAL in brief
      7     Foreword
      10    The SNS REAAL share
      14    SNS REAAL Executive Board
      16    Supervisory Board
      17    Mission, strategy and objectives

22    Report of the Executive Board
      23    Strategy update
      26    Outlook 2009
      30    Financial outlines
      34    Developments banking activities
      42    Developments insurance activities
      52    Developments Group activities
      55    Risk and Capital management
      66    Funding and credit ratings
      69    Human resources
      72    Corporate responsibility

76    Report of the Supervisory Board
      77    Report of the Supervisory Board

82    Corporate governance
      83    Corporate governance
      95    Capital structure

101   Financial Statements 2008

230   Other information
      231   Provisions regarding profit or loss appropriation
      232   Auditor’s report

236   Definitions, ratios and abbreviations
      237   Definitions
      243   List of abbreviations




                                                                SNS REAAL   Annual Report 2008   3
Direction
SNS Bank serves its clients through the internet and with mobile, expert advisors.
We are building a nationwide network of shops where clients can come to talk
with our advisors. In addition, clients will be able to purchase all simple products
with a mere five clicks on the internet by 2010. SNS Bank will also be offering
products of other financial institutions to provide more choice to our clients.
The combination of internet, our advisory strength and third-party products
allows SNS Bank to give direction to a new way of banking.
SNS REAAL in brief
        Foreword
        In the unprecedented turbulent conditions of 2008, SNS REAAL maintained its market
        position with a satisfactory underlying performance. In general, our clients showed
        unabated trust in our products and services. However, the financial result, a net loss of
        € 504 million, was very disappointing.

Key figures                                                                      Key points
   Net loss of € 504 million (2007: € 465 million                                  SNS REAAL hit by turmoil in financial markets.
    net profit).                                                                    Strengthening its most important market
   Underlying net profit of € 307 million                                           positions, increased number of clients.
    (2007: € 359 million).                                                          Improved solvency and synergy potential offer
   Total equity increases to € 4.9 billion                                          good prospects.
    (2007: € 3.6 billion).



Due to the extraordinary market conditions and ditto net       economies of scale, this will enable us to play a leading
result, SNS REAAL was unable to fulfil the growth and          role in the Netherlands in this area as well. If we also
profitability expectations of its shareholders in 2008.        succeed in further reducing our risks in the field of
The Executive Board deeply regrets this. The lower value       investments and property financing, we can face the
of the investment portfolios, particularly in the fourth       future with a certain degree of confidence despite the
quarter, a high but costly liquidity position, the costs for   gloomy times we are experiencing.
the compensation scheme for unit-linked insurance, the
provisions for loans of SNS Property Finance, and the          SNS REAAL has been hit hard
restructuring costs at SNS Bank resulted in a substantial      SNS REAAL has a relatively moderate risk profile. After all,
net loss. For that reason, SNS REAAL will not be distrib-      we are not active in large corporate banking. Of our loan
uting any final dividend for 2008, following the interim       portfolio 74% comprises Dutch residential mortgages,
dividend of € 0.41.                                            we hardly invest in unusual, more risky products and
At the same time, we are confident that in the end,            92% of our investments for own account comprises fixed-
we will be able to cope with this difficult period. That       income securities. However, we too proved not immune
confidence is primarily based on the loyalty of our            to the worldwide confidence crisis and the ensuing
clients, the professionalism of our employees, the satis-      crises in the financial markets. The credit crisis caused
factory underlying result of 2008 and the potential value      huge volatility in the financial markets, which we had
development and growth that has yet to be realised.            not believed to be possible and which was very hard to
The liquidity and solvency levels are currently in order.      deal with. Looking back, we should have been even more
In addition, we have a unique and distinct position on         conservative. All over the world, particularly in the fourth
the Dutch market. The growing reputation of our labels         quarter, the major stock markets plummeted dramati-
is confirmed by various surveys: SNS Bank best major           cally by some 50%, the risk surcharge for bonds rose
bank according to consumers1, ASN Bank the best in             to record levels, interest rates fell sharply and many
‘always there for its customers’ and ‘value for money’2,       countries entered into a recession.
REAAL Verzekeringen the best pension insurer in terms of
administrative performance3, and Zwitserleven the best         So, despite the relatively moderate risk profile, SNS REAAL
overall pension insurer.4                                      was hit hard by the effects of this crisis. The increasing
The significant cost reductions we have envisaged will         use of current valuations of investments, with the
improve our cost base. Together with the increased             active market completely disappearing for part of the
                                                               investments, added to the negative impact. In addition,
1) Source: IEX Netprofiler Brokeronderzoek 2008
                                                               the sensitivity of the insurer’s solvency to external factors
2) Source: Independer Consumenten Monitor, research 2008       increased sharply due to falling interest rates combined
3) Source: IG&H Consulting & Interim, Nationaal Performance
           Onderzoek Pensioen 2008
                                                               with growing risk surcharges for bonds. In order to meet
4) Source: VB-VerzekeringsBarometer, research 2008             the more stringent capital requirements for financial



                                                                            SNS REAAL     Annual Report 2008 sns reaal in brief   7
    institutions and as a precautionary measure, SNS REAAL         even more the accessibility, transparency and structure
    attracted € 500 million tier 1 capital from Stichting Beheer   of our products. The website of SNS Bank, the product
    SNS REAAL (‘the trust’) and € 750 million tier 1 capital       guides of SNS Bank and REAAL Verzekeringen, the
    from the Dutch State. About 75% of this amount had to          REAAL insurance policies for minorities and the talking
    be used for capital reinforcement of our insurers, whose       SNS digipass for older and disabled people are all
    investment portfolio dropped in 2008 more than one             examples of this improvement. In 2008 we reduced the
    billion Euro in value despite a protective put option.         remuneration policy for our board members. And the
                                                                   trust annually donates a substantial amount for charity
    Satisfactory underlying performance                            through the SNS REAAL Fund, in 2008 € 16 million.
    The underlying profit of € 307 million (− 14.5%), i.e.
    excluding the impact of the volatile financial markets         But we still have some homework to do. We are looking
    and non-recurring items, indicates that our banking and        to gain still more insight into and control of our loans
    insurance activities are developing relatively positively.     and investments. We are monitoring the solvency
    In savings, our portfolio grew from € 19.2 billion to € 21.9   levels of our banking and insurance activities more
    billion, while our market share increased from 8.3% to         sharply and frequently than before. We have listened
    8.8%.                                                          carefully to the wishes of our clients and the consumer
                                                                   organisations. They are asking for, and are getting,
    Profitability and volumes in mortgages were continu-           more transparency in costs and product structure,
    ously under pressure due to a strongly contracting             simpler products tailored to individual needs and more
    mortgage market and also higher costs for attracting           guarantees on terminal funding capital. SNS REAAL
    and maintaining capital. The market share of 8.2% was          links up with the outcome of the national debate and
    within the intended range of 8 to 10%. SNS Property            the sector-wide adjustments. In 2008 we adjusted our
    Finance’s profit contribution of € 28 million was 67.4%        existing unit-linked insurance portfolio in accordance
    less than in 2007 due to several substantial provisions        with the advice of the commissie-De Ruiter and the
    for loans abroad. REAAL Verzekeringen grew across the          Ombudsman Financial Services. We expect to reach an
    board, primarily driven by the integration of AXA NL and       agreement with representatives of policy holders on
    the acquisition of Zwitserleven. The profit contribution       a financial settlement in the first half of 2009. In 2009
    of REAAL Verzekeringen amounted to € 147 million               and onwards, we will further improve the transparency
    (+ 13.1%). A negative exception was the market for             and accessibility of all our products, with product
    unit-linked insurance, which saw a steep decline due to        information that is as easy to understand as possible,
    the debate on costs and transparency.                          more rapidly available product conditions and more
                                                                   online and real time information and change options.
    Corporate responsibility
    The events in 2008 have made it clear that no financial        SNS REAAL is preparing measures that will allow us to
    institution can take the trust placed in it by its clients,    offer clients additional time, space and refinancing
    shareholders and the public for granted. Stakeholders          options under certain circumstances, if they might
    expect financial institutions to act responsibly and           be unable to meet their (mortgage) obligations as
    to demonstrate that responsibility with transparent            a result of the increasing unemployment rate in the
    policies, risk management, products and services and           Netherlands.
    with the relationships they maintain with clients and
    suppliers. The financial sector is facing the challenge of     Strategy update
    giving more meaning to the concept of corporate respon-        In accordance with our schedule, we have implemented
    sibility, in the broadest sense of the word.                   our strategy in which the cooperation between the
                                                                   business units increased. REAAL Verzekeringen
    In our opinion, SNS REAAL has made good progress               completed the integration of the AXA Nederland and
    in this respect in the past few years. We have excluded        Winterthur product range. We will generate the targeted
    non-sustainable companies from investments by REAAL            cost synergy benefits of € 50 million as early as 2010
    Verzekeringen. We have introduced rules and cultural           instead of the scheduled 2011. The integration of Zwitser-
    initiatives to monitor and promote the integrity of            leven was prepared. Our market positions in savings,
    day-to-day activities and, in particular, in relations with    mortgages, SME non-life and disability insurance
    our clients. ASN Bank reinforced its leading position          products have improved. Clients of SNS Bank received
    in sustainable asset growth for retail clients. SNS Asset      better online purchasing and information options,
    Management has made headway in the institutional               more processes were automated; employees’ sales and
    market for sustainable asset growth. We have improved          advisory services were enhanced. ASN Bank, showed



8   SNS REAAL    Annual Report 2008 sns reaal in brief
excellent development and will be able to continue its            additional activities. Together we have become stronger
growth as a result of the sustainable current account that        and the ‘stronger together’ principle also applies to the
was recently introduced.                                          future of SNS REAAL. After having had the privilege of
                                                                  managing this beautiful and special company for more
Transition year 2009                                              than six years, I pass the baton with great confidence to
Our preparations for the future were not delayed by               Ronald Latenstein van Voorst. I have always experienced
the extraordinary market conditions. However, these               our collaboration as very good and extremely pleasant.
conditions did result in higher costs for maintaining             I am convinced that Ronald will lead SNS REAAL to a new
and attracting capital to reduce balance sheet risks,             future with a great deal of enthusiasm and expertise.
and lower yields on mortgages and investments. For the            SNS REAAL is not only unique and distinct in the market,
period 2007-2009, we will not achieve our performance             but also as an employer. Short lines, developing ideas
targets of an average growth of earnings per share of             together, doing business together and making clearly
10% and a return on equity of 15%. Once the financial             visible contributions make working at SNS REAAL
markets have become more quiet and stable again and               different from working at other major banks and
there is more insight and consensus in the financial              insurers. I have always experienced this open corporate
sector with regard to capitalisation requirements and             culture as highly inspiring. I would like to thank everyone
risk, growth and profitability expectations, we will              who has contributed ideas and worked together with us,
determine and announce our new targets.                           the Executive Board, either directly or indirectly, in the
                                                                  past few years.
The high capital and liquidity costs, low prices on the
equity markets, the recession, the low interest rates             Sjoerd van Keulen
combined with high risk surcharges and the volatility
of the yield curve will also lead to difficult market
conditions in 2009. For that reason, we took additional
cost-cutting measures in the course of 2008. In addition
to the integration programmes of AXA NL and Zwitser-
leven (€ 85 million) and the efficiency programme of
SNS Bank, with an increased focus on sales and distri-
bution (€ 35 million), another group-wide programme for
efficiency improvement has been scheduled, which will
result in cost savings of € 20 million. All in all, these plans
will involve cost savings of € 140 million, the major part of
which must be realised by the end of 2010.

Profitability of financial institutions will remain under
pressure until confidence and economic growth return to
the market. However, the market will also require more            Chairman of the Executive Board
reserve capital in the years to come, i.e. higher solvency        of SNS REAAL
levels and fewer risks for financial institutions, which will
result in profitability that is lower than before the credit
crisis.

Stronger together
SNS REAAL is set to continue the further development
and growth of its activities. In this respect, we focus on
closer collaboration between business units in the areas
of purchasing, product development and distribution.
The theme of this annual report is ‘stronger together’
and together we make it a reality. An example is Groen
Pensioen, which was introduced on a collaborative basis
between Zwitserleven and ASN Bank at the end of 2008.

Finally, in the past few years, SNS REAAL has grown
of its own accord and by reinforcing itself with new,



                                                                              SNS REAAL     Annual Report 2008 sns reaal in brief   9
            The SNS REAAL share
     Shares and listing                                               In August 2008, the company commissioned research
     SNS REAAL’s share capital comprises ordinary shares and          into the ownership distribution of the SNS REAAL free
     B-shares. In addition there are two types of securities          float. Based on its own research, SNS REAAL estimates
     capital.                                                         that the proportional shareholdings of institutional and
                                                                      private investors are 85% and 15% respectively.
     The SNS REAAL ordinary shares are listed on NYSE
     Euronext Amsterdam. The share has been included in the
     Amsterdam MidKap Index since 2007. The ticker symbol                 7       Distribution of free float at year-end
     is SR NA and the ISIN code is NL0000390706.

                                                                        32%
     Issue of B-shares to Stichting
     Beheer SNS REAAL (‘the trust’)                                     10%
     In addition to the free float, six B-shares were issued to
                                                                        25%
     the trust at a total issue price of € 600 million in cash in
     the second quarter of 2008. The B-shares are not listed            15%
     on the stock exchange. The capital of this issue was used
                                                                        18%
     to finance the acquisition of Zwitserleven at favourable
     terms. For more information on the issue of B-shares, see
     the chapter on Corporate governance, page 95.
                                                                              NL Institutional
     Issue of securities capital to the                                       NL Retail
     trust and to the Dutch State                                             North America
                                                                              Eurpe (incl. UK)
     In December 2008, SNS REAAL reinforced its solvency
                                                                              Other
     by € 500 million of core capital issued to the trust,
     and € 750 million of core capital issued to the Dutch
     State. SNS REAAL has the authority to repay the capital.         Share ownership directors
     The structure chosen gives SNS REAAL both security and           For information concerning the allocation of shares
     flexibility. The core capital provided by the trust cannot       to members of the Executive Board as part of the
     be converted into ordinary shares. Any future dilution           remuneration policy, please refer to the section
     for ordinary shareholders is thus limited. For more              Remuneration report in the chapter Corporate
     information on the issue of securities capital, see the          Governance.
     chapter on Corporate governance, page 95.
                                                                      Price movements 2008
     Ownership spread for ordinary shares                             The year 2008 was a turbulent year for stock markets all
     At year-end 2008, the trust held an interest of 54.3% of         over the world, and particularly for shares of financial
     the ordinary shares in SNS REAAL. Aviva plc has reported         institutions. This also impacted the development of the
     a 5.85% interest. The duty to report this interest to            SNS REAAL share. The share closed at € 3.92 at year-end,
     the stock exchange in accordance with the Financial              which was 74.5% below the price at year-end 2007
     Supervision Act (Wft) came into force on 22 June 2007.           (€ 15.36).



     Table 5:   Overview of outstanding shares and securities capital at year-end 2008
                                                           Number of securities                  Nominal value             Issue price
     Ordinary shares                                              261,472,608                         1.63
     B-shares                                                                 6                       1.63            100,000,000.00
     Securities capital Stichting Beheer SNS REAAL                  5,000,000                       100.00                      100.00
     Securities capital Dutch State                               142,857,140                         1.63                        5.25




10   SNS REAAL     Annual Report 2008 sns reaal in brief
    8         Share price development

     Share price in €
     18.0
     16.0
     14.0
     12.0
     10.0
        8.0
        6.0
        4.0
        2.0
        0.0
                    Volume
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
        0




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           31-12-2008
               02-01-2008
                             09-01-2008
                                          16-01-2008
                                                       23-01-2008
                                                                    30-01-2008
                                                                                  06-02-2008
                                                                                               13-02-2008
                                                                                                            20-02-2008
                                                                                                                         27-02-2008
                                                                                                                                      05-03-2008
                                                                                                                                                      12-03-2008
                                                                                                                                                                   19-03-2008
                                                                                                                                                                                26-03-2008
                                                                                                                                                                                             02-04-2008
                                                                                                                                                                                                          09-04-2008
                                                                                                                                                                                                                       16-04-2008
                                                                                                                                                                                                                                    23-04-2008
                                                                                                                                                                                                                                                 30-04-2008
                                                                                                                                                                                                                                                              07-05-2008
                                                                                                                                                                                                                                                                           14-05-2008
                                                                                                                                                                                                                                                                                        21-05-2008
                                                                                                                                                                                                                                                                                                     28-05-2008
                                                                                                                                                                                                                                                                                                                  04-06-2008
                                                                                                                                                                                                                                                                                                                               11-06-2008
                                                                                                                                                                                                                                                                                                                                            18-06-2008
                                                                                                                                                                                                                                                                                                                                                          25-06-2008
                                                                                                                                                                                                                                                                                                                                                                       02-07-2008
                                                                                                                                                                                                                                                                                                                                                                                    09-07-2008
                                                                                                                                                                                                                                                                                                                                                                                                 16-07-2008
                                                                                                                                                                                                                                                                                                                                                                                                               23-07-2008
                                                                                                                                                                                                                                                                                                                                                                                                                            30-07-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                         06-08-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                      13-08-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                   20-08-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                27-08-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             03-09-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          10-09-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       17-09-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    24-09-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 01-10-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              08-10-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           15-10-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        22-10-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     29-10-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  05-11-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               12-11-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            19-11-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         26-11-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      03-12-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    10-12-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 17-12-2008
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              24-12-2008
              Share price
              Volume



    9         Share price development versus indices

     02-01-2008 = 100
     125

     100

        75

        50

        25

         0
                02-01-2008




                                                                                 02-02-2008




                                                                                                                                                   02-03-2008




                                                                                                                                                                                                                 02-05-2008




                                                                                                                                                                                                                                                                               02-06-2008




                                                                                                                                                                                                                                                                                                                                             02-07-2008




                                                                                                                                                                                                                                                                                                                                                                                                              02-08-2008




                                                                                                                                                                                                                                                                                                                                                                                                                                                                            02-09-2008




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          02-10-2008




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         02-11-2008




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       02-12-2008




              SNS REAAL
              AMX
              DJ EURO STOXX Financial Services
              AEX




Key figures per ordinary share 2008

Table 6:       Key figures per ordinary share (in Euro)
                                                                                                                                                                                                                                                                                                                                                              2008                                                                                                                                                       2007                                                                                                                                                       2006
Highest listing                                                                                                                                                                                                                                                                                                                                                  15.64                                                                                                                                                     18.59                                                                                                                                                      18.19
Lowest listing                                                                                                                                                                                                                                                                                                                                                          3.40                                                                                                                                               14.20                                                                                                                                                      15.15
Year-end                                                                                                                                                                                                                                                                                                                                                                3.92                                                                                                                                               15.36                                                                                                                                                      16.43
Earnings per share                                                                                                                                                                                                                                                                                                                                              (1.93)                                                                                                                                                              1.87                                                                                                                                                     1.65
Dividend                                                                                                                                                                                                                                                                                                                                                                0.41                                                                                                                                                        0.82                                                                                                                                                     0.71
Market capitalisation at year-end (in € millions)                                                                                                                                                                                                                                                                                                                1,025                                                                                                                                                     4,016                                                                                                                                                      3,857
Average daily trading volume (in shares)                                                                                                                                                                                                                                                                                                          808,530                                                                                                                                                    453,970                                                                                                                                                   619,077



                                                                                                                                                                                                                                                                                                                                                                                                                                         SNS REAAL                                                                      Annual Report 2008 sns reaal in brief                                                                                                                                                                           11
     Table 7:   Statement of changes in outstanding ordinary shares SNS REAAL 2008
                                                                        Total            Other shareholders              The trust
     Total number of shares per 31-12-2007                           261,472,608             119,581,148               141,891,460
     Total number of shares per 31-12-2008                           261,472,608             119,581,148               141,891,460


     As per 28 April 2008, a total of 261,472,608 ordinary              per ordinary share, which is the amount distributed to
     shares and six B-shares were issued. The number of                 ordinary shareholders as an interim dividend.
     ordinary shares outstanding remained unchanged in
     2008. The average weighted number of ordinary shares               Payment on securities capital
     outstanding rose by 5.4% (2007: 248,155,233).                      The coupon of the securities will only be paid if dividend
                                                                        is distributed to the holders of ordinary shares.
     Additional information per share is provided in the                The coupon of the securities issued to the trust is 6%.
     subsections Key figures, Financial statements pages 218,           For the coupon period through 31 December 2008,
     219, 224 and 225.                                                  SNS REAAL will pay the trust a coupon of € 1.75 million.
                                                                        The coupon of the securities issued to the Dutch State
     Dividend policy                                                    is 8.5%. For the coupon period through 8 June 2009,
     SNS REAAL pursues a stable dividend policy. Assuming               SNS REAAL will pay the Dutch State a coupon of € 31.88
     the company achieves its internal solvency and funding             million. For more information on the payments on
     targets, SNS REAAL aims at distributing a dividend                 securities capital and redemption conditions, see the
     of 40-45% of distributable net profit. In principle                chapter on Corporate Governance, pages 96 and 97.
     SNS REAAL intends to declare both an interim dividend
     and a final dividend payable to the shareholders.                  Agenda AGM
     SNS REAAL will annually present a proposal to the Annual           The agenda for the AGM will be published on our website
     General Meeting (AGM) regarding the dividend distri-               www.snsreaal.nl. Printed copies may be requested
     bution. The dividend can be distributed in cash, in shares         by phone (+ 31 30 291 4844) or by e-mail
     or in a combination of both.                                       (aandeelhoudersvergadering@snsreaal.nl).

     If it is decided to distribute dividend, dividend will also        Investor Relations
     be distributed on B-shares. It has been established that           SNS REAAL values a good relationship with investors
     the dividend yield on B-shares will never exceed that              and analysts and strives for optimum transparency and
     on ordinary shares. For more information on dividend               consistency in its communications. Any publications
     on B-shares, see the chapter on Corporate governance,              that are issued regarding our financial performance,
     page 84.                                                           strategy and activities can be viewed and downloaded
                                                                        from our website, www.investor.snsreaal.nl, as soon as
     Dividend proposal                                                  they are published. In addition, the Executive Board gives
     SNS REAAL will not distribute any final dividend for 2008.         regular presentations to analysts, investors and other
     Consequently, the dividend for 2008 amounts to € 0.41              interested parties. SNS REAAL also maintains contacts


     Table 8:   Important dates 2009

     19 February           Publication of 2008 results
     13 March              Annual report 2008 available on the company website
     25 March              Record date for AGM
     31 March              Publication of European Embedded Value report 2008
      3 April              Publication of Pillar 3 report Basel II
     15 April              AGM in Jaarbeurs, Utrecht
     19 May                Trading update 1st quarter 2009 (before opening hours)
     18 August             Publication half-year results 2009 (before opening hours)
     10 November           Trading update 3rd quarter (before opening hours)
     19 November           Investor Day
     18 February 2010      Publication of 2009 results



12   SNS REAAL     Annual Report 2008 sns reaal in brief
with investors and analysts by means of one-on-one          particularly private shareholders to get acquainted with
meetings, presentations and telephone conferences.          the company.
In November 2008, an Investor Day was held, where
members of the Executive Board and the management           Other information
team gave presentations on strategy, recent acquisitions    More information on the SNS REAAL share can be found
and integration plans, market developments, growth          on www.investor.snsreaal.nl. The site also includes an
opportunities, asset and risk management and financial      interactive version of this annual report with a search
objectives. We participated in the Investor Day to enable   function.




                                                                        SNS REAAL    Annual Report 2008 sns reaal in brief   13
            SNS REAAL Executive Board




     Ronald Latenstein van Voorst                                 Rien Hinssen
     Ronald Latenstein van Voorst (1964) has been Chief           Rien Hinssen (1956) has been a member of the Executive
     Financial Officer (CFO) on the Executive Board               Board since 1999 and as COO focuses on the banking
     since 2002 and as of 14 August until 31 December             and insurance business operations.
     2008 acting chairman of the Board of Directors
     of REAAL Verzekeringen. He is also charged with              About his mission: ‘We want to be close to our clients
     supervising SNS Asset Management and the group               in every respect. We achieve this by using the Internet
     staff departments Group Risk Management, Investor            and through the 812 branches of SNS Bank and
     Relations, Group Finance, ICT, Fiscal Affairs and Facility   SNS Regiobank, but also by offering attractive and
     Management. On 15 April 2009 the Supervisory Board           accessible products. Organising your finances well
     intends to appoint Ronald Latenstein van Voorst CEO of       should be easy for everyone.’
     SNS REAAL, as the successor of Sjoerd van Keulen.
                                                                  Rien Hinssen is a legal expert, and specialised in
     About his mission: ‘Through SNS REAAL we show how to         financial and business management. He held various
     grow in a profitable way in a saturated market. We have      positions at Rabobank and started at SNS Bank in 1982
     achieved that by further conquering the Randstad urban       as District Director for North and Central Limburg.
     area, by alertly responding to new market opportunities
     and by regularly adding new sources of income to our
     existing ones.’

     After graduating in economics, Ronald Latenstein van
     Voorst specialised in business administration. Following
     several national and international financial management
     positions, he joined SNS REAAL in 1995. After a brief
     intermezzo as CFO at Bank Insinger de Beaufort, he
     returned to SNS REAAL in 2002.



14   SNS REAAL    Annual Report 2008 sns reaal in brief
Ference Lamp                                             Sjoerd van Keulen, chairman
On 15 April 2009 the Supervisory Board of SNS REAAL      Sjoerd van Keulen (1946) has been Chairman of the
intends to appoint Ference Lamp (1971) as member of      Executive Board and CEO since the end of 2002.
the Executive Board and CFO.                             He is also charged with supervising the group staff
                                                         departments Legal, Compliance and Operational
Ference Lamp has extensive experience in the financial   Risk Management, Group Audit, Human Resources,
services industry. He worked in various positions,       Corporate Communications, Corporate Strategy and
including as Managing Director of the Financial          International Affairs. Sjoerd van Keulen will step down as
Institutions Group at Lehman Brothers and as Associate   chairman as per 15 April 2009.
Corporate Finance & Capital Markets at Fortis Bank in
Amsterdam.                                               About his mission: ‘SNS REAAL is a modern, and at the
                                                         same time purely Dutch, bank assurance institution.
                                                         More and more people notice and appreciate this.
                                                         We distinguish ourselves by combining innovation
                                                         and entrepreneurship with level-headedness and
                                                         accessibility.’

                                                         Sjoerd van Keulen started his professional career as an
                                                         organisational consultant. As a banker, he was previously
                                                         a member of the Executive Board of MeesPierson and
                                                         Fortis.



                                                         More extensive CVs of the Executive Board members can
                                                         be found on www.snsreaal.nl. Their external positions are
                                                         outlined on pages 85 and 86 of this annual report.



                                                                     SNS REAAL    Annual Report 2008 sns reaal in brief   15
            Supervisory Board
     Joop Bouma (1934), chairman until 16 April 2008              Jaap Lagerweij
                                                                  Jaap Lagerweij (1947) is managing director of the
     Hans van de Kar, chairman                                    Sperwer Groep and a member of the board of Superunie,
     ad interim and vice-chairman                                 a purchasing organisation for a large number of Dutch
     Hans van de Kar (1943) is vice-chairman of the               supermarket organisations.
     Supervisory Board. Van de Kar taught financial
     management at Leiden University and is a former vice-        Henk Muller
     chairman of the Raad voor het Binnenlands Bestuur. He        Henk Muller (1942) is vice-chairman of the Supervisory
     is also chairman of various boards.                          Board of ASN Beleggingsfondsen NV, and chairman or
                                                                  board member of various other organisations. Muller is a
     Jos van Heeswijk (1938), until 16 April 2008                 former board member of the FNV trade union federation
                                                                  and a former member of the Sociaal-Economische Raad.
     Bas Kortmann                                                 Muller is also a board member of Stichting Beheer
     Bas Kortmann (1950) is chancellor (rector magnificus)        SNS REAAL and Stichting SNS REAAL Fonds.
     at Radboud University Nijmegen and also professor
     of civil law at this institution. He is chairman of the      Herna Verhagen
     board of Stichting Grotius Academie, deputy judge            Herna Verhagen (1966) is managing director of HR
     of the Court of Appeal of Arnhem, and a member of            at TNT. She is a former sales director of TNT Post.
     the Supervisory Board of Dela Coöperatie. He is also         Herna Verhagen is a member of the advisory council of
     chairman or member of various boards of anti-takeover        Rijkswaterstaat (Directorate-General for Public Works
     foundations of listed companies and a trust office. He is    and Water Management).
     also chairman of the Insolvency Law Committee (which
     at the request of the Minister of Justice is preparing a     For more information about the Supervisory Board
     new Bankruptcy law). Kortmann is also a board member         members, please refer to the chapter on Corporate
     of Stichting Beheer SNS REAAL and Stichting SNS REAAL        Governance, pages 86, 87 and 88.
     Fonds.

     Robert-Jan van de Kraats
     Robert-Jan van de Kraats (1960) is vice-chairman of
     the Executive Board and CFO of Randstad Holding
     NV. In addition to finance including M&A and Investor
     Relations, Van de Kraats is also responsible for corporate
     IT and for a number of operating companies in various
     countries.




16   SNS REAAL    Annual Report 2008 sns reaal in brief
        Mission, strategy and objectives
        SNS REAAL strives to be the preferred financial specialist for retail and SME clients1 in
        the Netherlands. SNS REAAL wants to help its clients grow in terms of their financial
        opportunities by offering accessible and transparent banking and insurance products.
        SNS REAAL focuses mainly on the Dutch market. Its activities cover three main product
        groups: mortgages and property finance, asset growth (i.e. savings and investments),
        insurance and pensions

Mission                                                              SWOT analysis of the strengths and weaknesses of the
SNS REAAL wants to distinguish itself in the market it               organisation and the opportunities and threats in the
operates in by:                                                      market.
 Strong market positions based on a tight focus on
   core product and client groups.                                   Strengths
 Recognisable governance based on the core values                    Focus on the Netherlands, client groups and core
   integrity, client focus, accessibility and commitment.                products.
 Innovative capacity.                                                   SNS REAAL has developed a great deal of expertise
 Largely standardised products and operational                          in developing, selling and distributing financial
   processes.                                                            retail products in the Netherlands. Resources
 Complementary brands and distribution methods.                         and management focus are concentrated on core
                                                                         product and client groups, which to a certain extent
Strategy                                                                 explain the organisation’s great innovative capacity.
SNS REAAL has a clear, straightforward strategy. Clear                   SNS REAAL is one of the big players in the Dutch
choices were made in our marketing strategy regarding                    market for retail mortgages, savings, property
product groups, client groups and market regions.                        finance, life insurance and pensions.
SNS REAAL also decided to optimise client access by                     Innovation.
using complementary brands and distribution channels.                    Thanks to its efficient organisation, its good client
In this regard, SNS REAAL uses shared centres for                        and market information, its specialisation in the
product development and administrative processing for                    retail and SME markets and a stimulating business
its core product groups.                                                 culture, SNS REAAL is frequently able to create
                                                                         outstandingly innovative products and services.
In implementing this strategy, SNS Bank, SNS Property                   Distribution.
Finance, REAAL Verzekeringen and Zwitserleven make                       Diversification in distribution channels leads to a
their own choices regarding the best possible products,                  high return on sales effort, by capitalising on specific
services, product/market combinations, labelling and                     opportunities in each distribution channel and on
distribution channels. They do so in order to achieve                    cross-selling opportunities. Cooperation with inter-
their operational and financial objectives, while using                  mediaries is also strong. This is important particu-
joint purchasing options within the group and using each                 larly in the mortgage and insurance markets.
other’s market and product knowledge and distribution                   Moderate risk profile.
channels.                                                                Focusing on a limited number of banking and
                                                                         insurance products for retail and SME clients in the
The Group activities, including SNS Asset Management                     Netherlands, and properly balancing risk, capital
and Zwitserleven Asset Management, are holding                           and return by means of continuous and proactive risk
activities aimed primarily at supporting the banking and                 management, mitigates the risk profile.
insurance activities.                                                   Operational organisation and ICT infrastructure.
                                                                         In the Dutch banking sector, SNS REAAL has a strong
SNS REAAL’s strategic priorities and operational                         efficiency ratio and in the Dutch insurance sector, a
objectives for the coming years are based in part on a                   strong operational costs/premium ratio. SNS REAAL


1) The Dutch authorities consider 250 employees the upper limit of a medium-sized company. With some products, SNS REAAL also focuses on larger
   companies. This is the case, in particular, with property finance and pensions.




                                                                                   SNS REAAL      Annual Report 2008 sns reaal in brief           17
       is a flexible and efficient organisation, partly because    Corporate responsibility, savings and investment.
       of its increasing automation, with short time-to-            The need for sustainable commercial operations,
       market for products. It is capable of rapidly making a       sustainable savings and investment products
       good return on the companies it acquires, inter alia,        is increasing. With its specialist knowledge in
       through cost synergies, as has been demonstrated in          this area, SNS REAAL could capitalise on this
       recent years.                                                development.
      Supply of sustainable products.                             Distribution of third-party products.
       ASN Bank has a solid position in the retail market and       Selected sales of third-party banking and insurance
       SNS Asset Management is establishing a position in           products will contribute to improving our total
       the institutional market for sustainable products.           product range and to profitable growth.
                                                                   More efficient use of client contacts.
     Weaknesses                                                     By sharing and analysing the joint client contacts,
      Dependence on individual life insurance and                  we will be able to offer products and services that
       mortgages.                                                   are more adequately tailored to individual needs
       The strong market position in individual life                and to sell more to existing clients.
       insurance means that a disappointing performance
       by this product group would have a relatively major        Threats
       adverse effect on the overall results. The same             The international credit crisis.
       applies to mortgages, albeit to a lesser extent.               Should the credit crisis continue, it will remain
      Scale.                                                         costly to attract and maintain the required
       In comparison to the largest players in the market, in         liquidities and capital. Also could the value of the
       a number of operations, SNS REAAL’s scale benefits             investment portfolios further decrease and more
       are more limited.                                              supervisory rules could limit entrepreneurial
      Brand recognition.                                             freedom.
       Compared to the brands of the major players, some             The recession in the Netherlands.
       of SNS REAAL’s brands are not as well known.                   Reduced spending and investments may have a
      Limited synergy benefits between bank and insurer.             negative impact on sales in all our product groups.
       SNS Bank, REAAL Verzekeringen and Zwitserleven                Price competition in mortgages and life insurance.
       focus mainly on their own distribution channels to             Our margins are permanently under pressure as a
       make optimum use of changes in the market and                  result of strong price competition in the market for
       client needs. The synergy benefits are therefore               mortgages and life insurance.
       limited.                                                      Vulnerability in the event of unfavourable interest
                                                                      and stock market developments.
     Opportunities                                                    Banks and insurance companies are dependent on
      Ageing.                                                        the interest rates on the money and capital markets
       The increasing number of elderly people in the                 and thus on the risks that accompany volatile
       Netherlands leads to a greater demand for pensions             interest rates.
       and other asset growth products for old age                   Increasingly legislative environment.
       provisions.                                                    In the financial sector, changes in legislation and
      Reduction in group benefits provisions.                        regulations demand frequent changes to products
       As a result of leaner or reduced group benefit                 and data management. This leads to an increase
       provisions, private individuals and entrepreneurs will         in staffing and IT costs. Moreover, the risk of legal
       increasingly have to insure themselves or arrange              claims is also increasing.
       supplementary insurance, for example through
       disability insurance products and pension products.        Strategic challenges
      Growth opportunities in the Randstad urban area.           SNS REAAL has identified a number of strategic
       As a result of the increasing number of internet sales     challenges based on the complex of strengths,
       and the recently enforced network of SNS shops and         weaknesses, opportunities and threats. The most
       SNS Regio Bank franchise offices, our market share in      important strategic challenges are:
       the Randstad urban area could be further improved.          SNS REAAL employs its strong operational efficiency
      Under-representation in the SME market.                       and its experience with business integration by
       There are opportunities for applying our knowledge            improving the cost structure of its activities.
       and distribution channels more adequately in the SME        SNS REAAL uses the diversity in market positions,
       market for both banking and insurance products.               specialised brands and client contacts by achieving



18   SNS REAAL    Annual Report 2008 sns reaal in brief
  more synergy benefits through joint purchasing,           2   Focus on retail and SME clients in the Netherlands
  product development, flexible distribution and                SNS REAAL primarily targets retail and SME clients in
  more unity in the trademark policy.                           the Netherlands and confines itself to three product
 SNS REAAL capitalises on the diversification and              groups: mortgages and property finance, asset
  effectiveness of its flexible distribution channels           growth (savings and investment) and insurances (life,
  by reinforcing the range of banking and insurance             non-life, disability and pensions). In 2008 almost all
  products with third-party products, enhancing the             income was generated in the Netherlands. This leads
  distribution share in a cost-efficient way.                   to the efficient use of resources, distinctive brands
 SNS REAAL reduces its dependence on individual                and market positioning, and a moderate risk profile.
  life insurance and mortgages by increasing its
  focus on growth markets, including sustainable            3   Structural growth
  asset growth, pensions, SME non-life insurance and            SNS REAAL seeks profitable growth in its activities.
  disability insurance.                                         This is necessary to ensure continuity and to maintain
 SNS REAAL offsets its limited cost benefits from              and improve our market positions. In a competitive
  economies of scale with short time-to-market for              market like the Netherlands, scaling up can often
  its products and services thanks to an efficient              make an important contribution to achieving risk
  organisation and the efficient use of the joint client        and return improvements. Broadening income flows
  contacts of the business units.                               and looking for new sources of income, for example,
                                                                through alliances, is a central point of focus.
Strategic priorities
Also based on the SWOT analysis, SNS REAAL has                  For mortgages and individual life insurance, in which
determined a main strategic course with three                   we have already attained leading market positions,
priorities: structural value development, focus on retail       we expect a limited growth in the coming years.
and SME clients in the Netherlands, and structural              SNS REAAL wants to generate growth for the coming
growth.                                                         years mainly through: savings and investment,
                                                                sustainable products, the SME market, pensions,
1   Structural value development                                distribution, non-life insurance and disability
    SNS REAAL aims to create value for all its stake-           insurance.
    holders: in particular clients, employees, share-
    holders, bondholders and society in general. We         Strategy per business unit
    create growth and return for our shareholders while     SNS Bank, SNS Property Finance, REAAL Verzekeringen,
    adequately controlling risks; we create accessible      Zwitserleven, SNS Asset Management and Zwitser-
    and transparent products for our clients that allow     leven Asset Management translate the strategy of
    them to manage their financial future. Our staff        SNS REAAL into their own strategy and yearly initiatives
    is best served in this capacity by offering them        and objectives. The strategies of these business units
    the scope to develop their talents, while we serve      are explained in the chapters Developments banking
    society best through the sustainable development        activities, Developments insurance activities and
    of our company based on a balanced concern for          Developments Group activities.
    social, ethical and environmental issues.
                                                            Objectives
    Central features of SNS REAAL’s value management        For the financial and operational objectives and the
    are: diversification of income, the distribution        extent to which these objectives have been achieved in
    function, synergy and sufficient return with a          2008, we refer to the chapter Strategy Update starting on
    moderate risk profile.                                  page 23.




                                                                         SNS REAAL   Annual Report 2008 sns reaal in brief   19
Blossoming
In 2008, SNS REAAL took notable steps in respect of corporate responsibility.
Halfway through the year, SNS Asset Management launched a balanced
combination of index tracking based on social and ethical principles. SNS Asset
Management also developed into a major player on the global micro financing
market. 2008 was also a fruitful year for ASN Bank, which continued to post
excellent growth figures and introduced the sustainable ASN current account.
Report of the Executive Board
       Strategy update
       SNS REAAL is continuously working on the implementation of its strategy. In this chapter,
       we report on our performance and strategic initiatives in 2008 in relation to our strategic
       priorities and operational and financial objectives.

Strategic priorities                                            crisis. Positive factors were particularly growth
1 Structural value development                                  in savings balances, SME non-life, pensions and
Central features of SNS REAAL’s value management are:           disability insurance. Negative factors were mainly
 Diversification of income.                                    the decreases in sales of unit-linked insurance and
   The increased income diversity was mainly accom-             mortgages, despite increased market shares.
   plished by a strong increase of income in savings,
   SME non-life insurance, disability insurance and          2 Focus on retail and SME clients
   pensions, in particular due to the consolidation of         in the Netherlands
   Zwitserleven as per 29 April 2008.                         Client groups.
 The distribution function.                                   As a result of SNS Property Finance’s growth, the
   SNS Bank reinforced its distribution through                share of income from banking activities in respect of
   improved purchasing options and information                 corporate clients further increased. REAAL Verzeker-
   services on its website. The service process for            ingen increased its share in the retail and SME
   opening and managing online savings accounts was            markets, particularly as a result of the integration of
   almost fully automated and the central sales function       AXA NL. REAAL Verzekeringen gained better access
   through customer service was enhanced. The growth           to higher income clients in the disability insurance
   of ASN Bank and SNS Regio Bank also contributed to          market, and it attracted new clients and gained
   the reinforcement of distribution.                          better access to existing clients in the retail and SME
 Synergy.                                                     non-life markets. The acquisition of Zwitserleven
   In the product groups of mortgages and individual           particularly resulted in an increase of clients in the
   life insurance, the focus on cost synergies was             SME and larger-company markets.
   intensified. In April 2008, REAAL Verzekeringen            Product groups.
   presented its new integrated product range, based           SNS Bank’s top priorities comprised savings
   on the existing products of REAAL Verzekeringen             campaigns and optimisation of her savings
   and AXA NL, to intermediaries. The first part of the        products. The integration of AXA NL resulted in a
   integration of AXA NL was thus completed. REAAL             more complete and cost-efficient non-life insurance
   Verzekeringen will realise the aspired cost benefits of     product range. New and additional products in the
   approximately € 50 million in 2010 instead of 2011 as       SME market included liability and corporate non-life
   previously announced. In the growth markets, focus          insurance. Insurance for motorbikes and pleasure
   is on income synergies. Examples include the intro-         boats was added in the retail market, as well as
   duction of the ‘sustainable ASN current account’,           several other insurance modules. The acquisition of
   which runs on SNS Bank’s systems, and the intro-            Zwitserleven resulted in an expansion of pensions for
   duction of the Groen Pensioen (‘green pension’) of          SME and larger companies and, in the retail segment,
   Zwitserleven on the basis of ASN investment funds. In       for higher remunerated clients.
   the coming years the integration of Zwitserleven will      The Netherlands.
   offer substantial synergies.                                SNS REAAL will continue to focus primarily on the
 Sufficient return with a moderate risk profile.              Dutch market. At year-end 2008, 86.3% of the total
   Return on total equity (ROE) decreased from 13.7%           loan portfolio of the banking activities consisted of
   to − 13.3%, mainly due to depreciation of the               loans in the Netherlands. Only SNS Property Finance
   investment portfolios and due to higher costs for           has a limited focus on foreign operations
   attracting and maintaining liquidities and capital.
   It was disappointing that the risk profile proved         3 Structural growth
   unable to withstand the enormous impact of the            SNS REAAL wants to generate structural growth mainly
   volatility on the financial markets. In the market        through savings and investment, the corporate market,
   of our retail and SME products SNS REAAL did              pensions, non-life insurance, disability insurance, distri-
   manage to set off the negative impact of the credit       bution and strategic partnerships.



                                                             SNS REAAL     Annual Report 2008 report of the executive board   23
      Savings and investments.                                        situation and wishes and to purchase products more
       Our share of the savings market increased from                  frequently without assistance. SNS Bank automated
       8.3% to 8.8%. New funds amounted to € 2.7 billion               a major part of the sales and service processes,
       net, mainly thanks to successful campaigns and                  particularly with regard to savings. The sales and
       marketing campaigns aimed at retaining clients.                 advice function of the central customer service was
       SNS Bank’s savings portfolio including SNS Regio                dovetailed with the improved DIY (‘Do It Yourself’)
       Bank increased with € 1.4 billion (+ 8.7%) and                  options for the client. The integration of SNS Regio
       the savings portfolio of ASN Bank increased with                Bank positively contributed to the growth in savings.
       € 1.3 billion (+ 37.9%). SNS Regio Bank delivered               ASN Bank, the 100% internet bank for sustainable
       20.4% of the total net growth of savings balances.              capital growth, reaped the fruits of consistent
       The assets managed by the SNS and ASN investment                marketing and a high service level for clients. Again
       funds decreased from € 4.2 billion to € 3.3 billion             the number of clients increased significantly with
       (− 21.4%), mainly due to sharp price falls. On                  15.7%.
       balance, the new inflow amounted to € 137 million, to           REAAL Verzekeringen improved its distribution
       which particularly SNS Bank contributed positively.             through intermediaries by integrating the AXA NL
       The income from investment fees on transactions and             product range, which improved access to SME and
       management decreased to € 14.6 million (− 45.7%)                larger clients. Distribution through underwriting
       due to the deteriorating stock exchange climate.                agents and writing insurance (co-insurance) also
       The assets managed by SNS Fundcoach, our digital                improved. REAAL Verzekeringen improved communi-
       investment fund supermarket, decreased from € 802               cation with intermediaries by expanding the current
       million to € 381 million (− 52.5%). The investments             online information through the extranet Mijn REAAL.
       in connection with insurance contracts for account              By the end of 2008, Proteq (the direct sales channel
       of policyholders increased from € 7.2 billion to € 10.7         of REAAL Verzekeringen) marketed a second brand,
       billion. Excluding Zwitserleven, they fell by 16.7%.            i.e. Zelf.nl. Based on advanced internet marketing, a
      Corporate market.                                               new retail non-life portfolio has been set up. At the
       SNS Bank increased the number of specialist advisors            start, this resulted in a substantial increase in sales.
       for SME commercial mortgages, which has provided               Pensions.
       a much broader basis for growth in this market.                 The pension insurance portfolio grew mainly as a
       The integration of AXA NL products resulted in better           result of the acquisition of AXA NL and the consoli-
       access to liability insurance, non-life insurance               dation of Zwitserleven as of 29 April 2008. Together
       and disability insurance and to economies of scale              with Zwitserleven, SNS REAAL will be one of the
       and a larger market share in semi-group pensions.               largest pension insurers in the Netherlands. Zwitser-
       In 2009, all pension products will be incorporated              leven particularly contributes to a strengthened
       into Zwitserleven and the individual life insurance             position in the large corporate and SME markets.
       products of Zwitserleven will be incorporated into              Thanks to Zwitserleven’s centralised production of
       REAAL Verzekeringen.                                            pension products, the cost structure will improve and
      Property finance.                                               the long-term growth potential will also increase.
       SNS Property Finance’s total new loan production                REAAL Verzekeringen and Zwitserleven will maintain
       decreased from € 5.6 billion to € 4.7 billion (− 16.1%).        their own product assortment.
       The total value of the property finance portfolio              Non-life insurance.
       increased from € 11.6 billion at year-end 2007 to               Net premium income of non-life insurance activities
       € 13.6 billion at year-end 2008. In the second half             rose from € 542 million to € 750 million (+ 38.4%).
       of 2008 the growth objectives were subordinated to              In April 2008, seven months after completion of the
       margin goals, due to changing market conditions.                AXA NL takeover, REAAL Verzekeringen presented
      Distribution.                                                   intermediaries with its new range of non-life
       SNS Bank is improving the effectiveness and                     products. REAAL Verzekeringen selected the best
       efficiency of its distribution by starting a three-year         products for each product group. Logical coherence,
       upgrading programme. This programme aims                        product leadership, accessibility and transparency
       at increasing direct sales via the website and by               were important preconditions. Access was improved
       telephone, more options for the client, automation              in both retail and the SME market.
       of sales, marketing and service processes and                  Disability insurance products.
       centralised high-quality advice. In 2008, the website           As a result of the integration of the AXA NL product
       was redesigned. It is now easier for clients to quickly         range, REAAL Verzekeringen now has a full product
       obtain product information according to their own               range of individual and group disability insurance



24   SNS REAAL    Annual Report 2008 report of the executive board
  products. The production and the systems were                               The sale of the Belgian activities to Delta Lloyd
  centralised in one location. In 2009, Zwitserleven                          Group was finalised on 30 June 2008. The sales
  wants to add disability insurance products of REAAL                         price was € 142 million. For more details on the
  Verzekeringen to its current product range. Net                             acquisition price, see page 140 of this annual
  premium income, excluding Zwitserleven, increased                           report.
  from € 41 million to € 89 million (+ 117.1%).                               The strategic interests represented by this
 Acquisitions and strategic partnerships.                                    acquisition are a substantial increase of market
  The takeover of Zwitserleven as per 29 April 2008                           share in pensions, cost and income synergies
  signifies a major strengthening in the Dutch                                in life insurance products, collaboration within
  life insurance market, in particular in pensions.                           SNS REAAL and the addition of a strong brand and
  The market share individual regular premium                                 market knowledge.
  products in the life insurance market rose
  from 16.5% in 2007 to 17.9% at year-end 2008.                          Objectives
  The market share individual single premium                             In connection with the developments in the financial
  products increased from 11.8% in 2007 to 22.6% in                      markets and their huge impact on the financial results,
  2008. The acquisition price of the Dutch and Belgian                   SNS REAAL will adjust its objectives in the course of
  activities of Swiss Life Holding was € 1,530 million.                  2009.


Table 9: Financial targets

Return                                                                   2008          2007       Target
Growth in earnings per share                                           (203.2%)         13.3%     10% on average per year,
                                                                                                  from 2006 through 2009

Efficiency                                                               2008          2007       Target
Return on total equity after tax                                       (13.3%)         13.7%      15% on average per year after taxation
Efficiency ratio SNS Bank                                                 62.8%        60.3%      55% at year-end 2009
Operating cost/premium ratio REAAL Verzekeringen                          15.9%        14.1%      13% at year-end 2009
Combined ratio non-life activities                                        92.3%        95.9%      97% at year-end 2009

Solvency                                                                 2008          2007       Medium-term target
Double Leverage SNS REAAL                                               113.7%        116.3%      ≤ 115%
BIS ratio SNS Bank    1
                                                                         14.0%          11.5%     ≥ 11%
Tier 1 ratio   1
                                                                         10.5%           8.4%     ≥ 8%
Solvency REAAL Life                                                        165%          272%     ≥ 150%
Solvency REAAL Non-life                                                    307%          255%     ≥ 200%
) 2008 figures are calculated based on Basel II, taking into account the 80% floor as of 1 January 2009
1

  2007 figures are calculated based on Basel I



Table 10: Operational targets

                                                                         2008          2007       Target 2009
Market share new mortgages                                                8.2%          7.7%      8 to 10%
Market share savings                                                      8.8%          8.3%      7 to 9%
Market share individual life insurance                                   17.9%        16.5%       18 to 22%
Market share non-life insurance                                           5.3%          4.2%      5 to 7%
(excluding healthcare insurance)
Top five position disability insurance in 2009                            n.a.         no. 4      top 5




                                                                          SNS REAAL       Annual Report 2008 report of the executive board   25
            Outlook 2009
            Market conditions continue to be extremely challenging in 2009. SNS REAAL wants to
            maintain a strong capital and liquidity position and is taking measures to further limit the
            balance sheet risk and the negative impact of market volatility on solvency levels and net profit.

     Turmoil in 2008                                                  10 Stock indices
     The market turmoil of 2008 had a great impact on
     SNS REAAL’s financial results. The credit crisis gained         %
                                                                     110
     momentum at the end of the third quarter of 2008,
                                                                     100
     following the forced bankruptcy of the US investment
                                                                      90
     bank Lehman Brothers. Uncertainty about the viability
                                                                      80
     of financial institutions grew exponentially. Risk-free
     interest rates plummeted whilst spreads rocketed,                70

     the equity markets’ loss rates hit double digits in only         60

     a short period of time and the mutual extension of               50

     credit among banks came to a standstill. This effect             40



                                                                              dec-07




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                                                                                                                           jun-08


                                                                                                                                    jul-08


                                                                                                                                             aug-08
     spread to companies and consumers, causing all
                                                                           DJ EURO STOXX 50
     non-essential spending to be suspended. In the fourth
                                                                           AEX
     quarter in particular, this caused a strong downturn in
     the US economy and unemployment rates were rising
     fast. The Euro zone has formally been experiencing a
     recession since the second quarter of 2008.
                                                                      11 Credit risk surcharge

     The graphs on the right show the highly increased risk          Base points
     surcharges in general and those for financial institutions      400

     in particular. They indicate a great reluctance among           350
                                                                     300
     market players to extend funding capital. This resulted in
                                                                     250
     high funding costs for all financial institutions, including
                                                                     200
     SNS REAAL.                                                      150
                                                                     100
     In the United States, the Dow Jones index lost 33.8%.            50
     In Europe, the DJ Stoxx 600 index had to give up 45.6%            0
                                                                              dec-07




                                                                                                mar-08




                                                                                                                  may-08




                                                                                                                                                      sep-08


                                                                                                                                                               oct-08


                                                                                                                                                                        nov-08


                                                                                                                                                                                 dec-08
                                                                                                         apr-08
                                                                                       jan-08




                                                                                                                           jun-08


                                                                                                                                    jul-08


                                                                                                                                             aug-08




     and the DJ Euro Stoxx 46.3%. It was striking that
     many emerging markets experienced dramatic losses.                    Itraxx (Synthetic)
                                                                           Iboxx (Cash)
     The India stock exchange, for example, lost 52.2% and
     the Shanghai stock exchange as much as 57.9%. In
     Japan, the Nikkei dropped by 42.1%. Our own AEX lost
     52.3%.
                                                                      12 Risk free interest rates
     The sharp price falls on stock exchanges across the globe
     led to considerable losses in the value of the investment        %
     portfolios of SNS Bank, REAAL Verzekeringen and                 5.5
     Zwitserleven. These losses in value had a great impact
                                                                       5
     on the financial results and, especially for the insurer,
     combined with higher liabilities as a result falling            4.5

     interest rates, adversely affected solvency levels.               4

                                                                     3.5
     Thanks to capital injections from Stichting Beheer
     SNS REAAL (‘the trust’) and the Dutch State, SNS REAAL            3
                                                                              dec-07




                                                                                                mar-08




                                                                                                                  may-08




                                                                                                                                                      sep-08


                                                                                                                                                               oct-08


                                                                                                                                                                        nov-08


                                                                                                                                                                                 dec-08
                                                                                                         apr-08
                                                                                       jan-08




                                                                                                                           jun-08


                                                                                                                                    jul-08




     raised its solvency to a level which should allow
                                                                                                                                             aug-08




     SNS REAAL to effectively respond to continuous turmoil                20 yrs Swap rate
     on the financial markets in 2009, if necessary.                       20 yrs Government rate




26   SNS REAAL    Annual Report 2008 report of the executive board
Financial markets in 2009                                           Mortgages
Practically all Western economic regions are experi-                In the Netherlands, the mortgage market and the
encing a recession in the beginning of 2009, which                  markets for individual life insurance products are
makes the downturn all the more worrying. The growth in             showing indications of saturation. Graph 13 shows the
consumption and production in the emerging countries                new mortgage production of the past five years in the
also showed a clear decrease. The economic momentum                 Netherlands.
is negative, and particularly the first part of 2009 will be
difficult.                                                             13 Production of new mortgages

                                                                      In thousands
Governments all over the world take severe measures
                                                                      700
to counter a collapse in demand. The measures are not
                                                                      600
a coordinated effort, but the problems’ concurrence
                                                                      500
creates a kind of consensus that stimulates policymakers
                                                                      400
everywhere to take action. The US introduced a highly
                                                                      300
extensive set of incentive measures. Together with the
supportive effect that lower inflation rates will have on             200

purchasing power, this will enable the US economy to                  100

stabilise in the second half of the year, according to our              0
                                                                                 2004      2005       2006      2007      2008
most positive scenario. In this scenario, we assume that                                                               (estimate)
the effects of the monetary incentives will also begin                 Source: The Netherlands’ Cadastre, Land Registry and Mapping
to manifest themselves by then. However, it is exactly                         Agency, NVM and CBS
because of the credit crisis’ disruption of normal cyclic
patterns that the uncertainties are greater than usual.             For 2009, we expect to see a sharp decline in new
                                                                    production on the mortgage market. Profitability will also
It will be difficult for the European economies to restore          continue to be under pressure. This is mainly due to falling
themselves independently. It also holds true for Europe             home sales, pressure on residential property prices, low
that lower inflation rates stimulate purchasing power,              interest rates, flat yield curves and pressure on margins
but they have less impact than in the US. Tax incentives            due to high costs for funding and competition.
are limited in Euroland and the impulse will have to
come from dynamic economies outside the zone.                       In 2009, SNS Bank will capitalise on the trend towards
                                                                    more security and guarantees for the long term. That is
Equity markets tend to be somewhat ahead of the                     why the range of savings mortgages and mortgages with
economy, but in view of the seriousness of the economic             long maturities will be enhanced.
downturn, investors will probably be considerably more
sceptical this time. One positive aspect is that shares are         Individual life insurance
reasonably priced according to practically all valuation            Graph 14 shows the gross premium income from life
standards. Both in the US and in Europe, dividend                   insurance products over five years until 2007 in the
yields exceeded the 10-year interest rates. Compared                Netherlands. The market for individual single premium
to realised profits, share prices are relatively low in all         products showed hardly any growth. The market
major regions. One counterargument could be that the                for individual regular premium products decreased
applied profit standards are perhaps too high.                      with 7.7%.

SNS REAAL keeps a cautious view as regards the equity               For 2009, we expect to see a slightly decreasing market
market. During the first half of the year, the markets will         for individual life insurance products. The market for
go through a bottoming-out process before they will                 unit-linked insurances, which are largely linked to
start to rise again later in the year. It is vital for a definite   new mortgages, will continue to be under pressure.
recovery of the equity markets and the economy that the             Growth segments include simple savings and guarantee
interbanking market and, secondly, the lending activities           products and term insurance products. The single-
will pick up again.                                                 premium market will remain stable. The focus on cost
                                                                    savings will be intensified. Other priorities include
Product markets in 2009                                             increased product transparency, more collaboration
The Dutch economy will probably be experiencing a strong            with other business units in the field of purchasing,
growth slowdown in 2009. The impact of the economic                 product development and distribution with a view to
climate has various effects on our product markets.                 costs and income synergies and portfolio preservation.



                                                                    SNS REAAL        Annual Report 2008 report of the executive board   27
        14 Gross premium income from                                      of the number of potential buyers and due to a deterio-
              life insurance products                                     ration of the credit facilities. Many foreign investors who
                                                                          financed their transactions based on relative large debt
        € billions
                                                                          leverage, disappeared from the market. Fundamental
        30
                                                                          market factors, such as the property’s quality, the location
        25
                                                                          and the attractiveness for sale and lease, became more
        20                                                                important again. The high-net-worth long-term investors
        15                                                                have returned to the market but remained rather hesitant.
        10
                                                                          In 2009 too, transaction volume will be under pressure
         5
                                                                          due to the aforementioned factors. We expect that
         0
                     2003     2004      2005       2006      2007
                                                                          impairments in the credit portfolio will be significant for
                                                                          the coming period.
             Collective
             Individual
                                                                          SNS Property Finance intensified its focus on active
        Source: CVS                                                       management of the current loan portfolio and the pricing
                                                                          of loans, so that there is adequate return on the capital
     Non-life insurance                                                   requirement. For investment loans, the primary focus is
     The non-life insurance market experienced a slight                   on relatively small projects with renowned parties on a
     growth in the five years until 2007, as shown in graph 15.           break-even basis.

        15 Gross premium income from                                      Growth markets
              non-life insurance products                                 Growth markets for SNS REAAL include savings,
                                                                          sustainable asset growth, pensions and disability
        € billions
                                                                          insurance. This is demonstrated by the development of
        14
                                                                          these markets in the five years until 2007.
        12
        10
                                                                          For 2009, we expect to see a further growth of total savings
         8
                                                                          deposits on the Dutch market. The economic uncer-
         6
                                                                          tainties and risk perception with regard to investment are
         4
                                                                          the main factors in this respect. The banking activities
         2
                                                                          are positioned well with a view to further growth, despite
         0
                     2003     2004      2005       2006      2007         intensified price competition since the second half of
                                                                          2008. The savings market will remain competitive in 2009.
        Source: CVS
                                                                          Due to the worldwide recession and damaged confidence
     For 2009 as a result of the recession, we expect no market           among many investors, the investment market will
     growth in the SME non-life market. REAAL Verzeker-                   not improve until the second half of 2009. Large-scale
     ingen is well positioned to gain market share. The private           investment appetite can only slowly pick up again and will
     non-life market will continue to be under pressure,                  possibly not return until after 2009.
     mainly because simple products are increasingly sold
     through the direct channel. After the integration of                 The causes and effects of the international credit crisis
     AXA NL’s product range in 2008, in 2009 REAAL Verzeker-              are stimulating demand for sustainable asset growth
     ingen will be mainly focusing on cost savings and capital-           products. ASN Bank is market leader in this field in the
     ising on the improved access to SME niche markets for                Netherlands. The competition from non-sustainable banks
     products with added value. Other priorities of REAAL                 introducing sustainable products is increasing. ASN Bank,
     Verzekeringen include the further development of direct              which applies sustainability criteria for all its products and
     distribution, for example through SNS Bank, the further              for the entire process chain, is well-positioned to face this
     integration of systems and processes regarding AXA NL,               competition and continue to grow, partly as a result of the
     as well as portfolio preservation.                                   introduction of a sustainable current account at the end of
                                                                          2008.
     Property finance
     The credit crisis left deep marks on the (inter)national             The growth in the pensions market continues, due to
     real estate markets in 2008. Transaction volume                      demographic developments, growth in supplementary
     decreased substantially, particularly due to a reduction             insurance products and a gradually gaining of market



28   SNS REAAL         Annual Report 2008 report of the executive board
    16 Total savings deposits                                             17 Marketshare sustainable investment products

   € billions                                            € thousands       %

   300                                                           18        5
                                                                 16
   250                                                                     4
                                                                 14
   200                                                           12
                                                                           3
                                                                 10
   150
                                                                 8
                                                                           2
   100                                                           6
                                                                 4         1
    50
                                                                 2
      0                                                          0         0
                2003     2004   2005   2006    2007 1st half year                      2003     2004       2005      2006      2007
                                                        2008
          Savings per capita                                                   Savings
          Savings                                                              Investments

    Source: DNB statistical bulletin September 2008                       Source: VBDO report: Sustainable savings and investments in
                                                                                  the Netherlands 1987-2007


share on pension funds. Zwitserleven and REAAL                            18 Invested assets pensions
Verzekeringen jointly have a broad product range and
considerable expertise to capitalise on the general                       € billions

growth and to reach several niche markets in a cost-                     900
                                                                         800
effective manner. In 2009, the pension production will
                                                                         700
be incorporated into Zwitserleven. Both brands will                      600
continue to carry their own products. In marketing                       500
and sales, much attention will be devoted on retaining                   400
                                                                         300
existing clients and intensifying collaboration with other
                                                                         200
SNS REAAL business units.                                                100
                                                                           0
The growth in the disability insurance market will continue.                           2003     2004       2005      2006      2007

The integration of AXA NL’s product range completed in                    Source: DNB statistical bulletin September 2008
2008 led to a more complete product range and improved
accessibility of commercial niche markets. REAAL Verzeker-
ingen will be able to capitalise on this in 2009.
                                                                          19 Gross premium income from
                                                                                disability insurance products
Objectives
Our long-term operational and financial objectives are                    € billions

set out in the chapter Mission, strategy and objectives                    5
starting on page 17. SNS REAAL will not be able to realise
                                                                           4
the current financial objectives in 2009. In the course
of the year, SNS REAAL will set and communicate new                        3

financial objectives.                                                      2

                                                                           1
Development of results
With stock prices at a constant level, the impairments                     0
and losses realised on the equity portfolio will sharply                               2003     2004       2005      2006      2007

decrease compared to 2008. The fair value reserve for                     Source: CVS
shares amounted to € 67 million negative at year-end
2008. The impairments of SNS Property Finance are
expected to stay at a level similar to that of 2008.                   programmes in order to reduce operating costs. In view
In addition to capitalising on the aforementioned                      of the continuing turmoil and volatility on the financial
commercial possibilities, we also focus on the current                 markets, we do not give any concrete forecast of the
integrations and additional efficiency and improvement                 profit and revenue development of SNS REAAL in 2009.




                                                                       SNS REAAL          Annual Report 2008 report of the executive board   29
            Financial outlines
            In 2008 SNS REAAL reported a net loss of € 504 million consisting of a net profit of € 144
            million at banking activities, a net loss of € 550 million at insurance activities and a net loss
            of € 98 million at Group activities.

     Result                                                          results on Hermes and SNS funding securities. In 2007,
     The 2008 loss of € 504 was negatively impacted by € 726         the impact of volatile financial markets on SNS Bank was
     million as a result of volatile financial markets and by        limited, amounting to negative € 4 million.
     € 85 million of one-off items. Underlying net profit for the
     full year 2008 amounted to € 307 million, a decrease of         Insurance activities
     € 52 million compared to 2007 (− 14.5%), mainly due to          The negative net impact of volatile financial markets on
     the adverse net impact of increased impairment charges          the 2008 result of Insurance activities was € 619 million.
     at SNS Property Finance of € 75 million.                        Of this amount, losses on the equity portfolio accounted
                                                                     for € 423 million, consisting of € 594 million losses, partly
     Impact of volatile financial markets                            compensated by positive results of € 171 million on put
     The turmoil in global financial markets intensified in the      options. There were also realised losses and impairments
     second half of 2008. Equity markets deteriorated further,       on the fixed-income portfolio of € 71 million, and
     credit spreads increased sharply, interest rates declined       impairments on investments in associated companies
     rapidly and access to liquidity worsened. The 2008 net          of € 14 million. Widening credit spreads caused an
     result of SNS REAAL was negatively impacted by volatile         unrealised loss of € 33 million on the originated Dutch
     financial markets for a net total of € 726 million, of          mortgage portfolio of DBV, which is accounted for at fair
     which € 488 million was related to losses on the equity         value through the profit and loss account.
     portfolio.
                                                                     To further hedge solvency against decreasing interest
     Accounting rules resulted in the recognition of this loss       rates, interest rate hedges at Insurance activities were
     in the income statement, as unrealised losses on the            expanded in the last quarter of 2008. These transactions
     equity portfolio for own account that have already been         resulted in an unrealized negative impact of € 85 million
     charged against total equity and that are significant or        due to volatile and increasing interest rates in December
     prolonged have to be impaired through profit or loss            2008. Finally, a positive result of € 7 million was included
     eventually. Furthermore, IFRS rules regarding acqui-            in the impact of volatile financial markets, consisting of
     sitions prescribe that assets are recognised in the             results on other derivatives and investment portfolios
     opening balance sheet at fair value and therefore without       accounted for at fair value through the profit and loss
     revaluation buffers. As a result, a significant proportion      account.
     of the impact of falling equity markets on the equity
     portfolios acquired with the acquisitions of AXA NL and         In 2007, the impact of volatile financial markets was
     Zwitserleven was reflected in the 2008 income statement         € 87 million positive, mainly due to realised gains on the
     of the Insurance activities. In 2007 the impact of volatile     equity portfolio.
     financial markets had been € 83 million positive, mainly
     due to realised gains on the equity portfolio.                  Group activities
                                                                     The impact of volatile financial markets on the result of
     Banking activities                                              Group activities was € 65 million negative and consisted
     The adverse net impact of volatile financial markets on         almost completely of realised losses and impairments on
     the result of SNS Bank was € 42 million. The estimated net      equities. The value of this portfolio, excluding SNS REAAL’s
     impact of the negative interest margin on the extra cash        stake in Van Lanschot NV, amounted to € 23 million at
     position maintained during 2008 and other increased             year-end, with a fair value reserve of nil and was disposed
     funding costs amounted to € 56 million. Furthermore, an         of (excluding Van Lanschot NV) in early 2009.
     unrealised loss of € 4 million related to SNS Bank’s trading
     portfolio, impairments on investments of € 4 million and        One-off items
     SNS Bank’s share in the Icesave claim of € 5 million were       SNS REAAL’s net loss for 2008 included a negative € 85
     charged to the income statement. These adverse impacts          million impact of one-off items compared to a positive
     were partly compensated by € 27 million positive buy-back       effect of € 23 million in 2007. The one-off items in 2008



30   SNS REAAL    Annual Report 2008 report of the executive board
included an addition to the provision of € 78 million in     On 28 April 2008, SNS REAAL issued six B-shares to the
anticipation of a settlement with holders of unit-linked     trust in connection with the acquisition of Zwitserleven
policies. The impact on solvency is significantly higher     for a total consideration of € 600 million. Because the
and fully reflected in solvency ratios as at the end of      B-shares do not participate in the negative net result,
2008. SNS REAAL is in discussion with representa-            the interim dividend payment of € 4.9 million over the
tives of policyholders, with the aim of reaching an          first half year was deducted from the other reserve and
agreement as soon as possible.                               the weighted earnings per B-share amounted to nil for
                                                             the full year 2008.
In 2008, SNS Retail Bank took a restructuring charge of
€ 29 million net of which € 26 million in the second half    SNS REAAL will forgo a final dividend for 2008. Conse-
year. This was related to the repositioning of SNS Bank      quently, the dividend for 2008 will be € 0.41 per ordinary
as announced in June 2008.                                   share being the amount already paid out to ordinary
                                                             shareholders as an interim dividend. There will also be
At REAAL Life, in the second half of 2008, a life            no final dividend on the B-shares.
reinsurance transaction booked in the first half of 2008
was cancelled due to the failure of Lehman Brothers.         Reinforcement of capital position
This resulted in impairments on receivables in the           In December 2008, SNS REAAL strengthened its capital
second half of 2008 of € 29 million which negated            with € 500 million in capital securities issued to the
the gain of € 29 million reported in the first half year     trust and € 750 million in capital securities issued to
of 2008. The € 29 million, which represented the             the Dutch State. SNS REAAL used the proceeds of these
discounted gains on a book of life insurance business,       transactions to increase SNS Bank’s core capital by
will now be released to the result in line with the          € 260 million and to strengthen the Insurance activities’
duration of the underlying policies.                         capital by € 975 million. Including the benefit from
                                                             the second release of capital under Basel II, effective
In the first half of 2008, a book profit of € 22 million     from 1 January 2009, the Core capital ratio was 8.1%,
related to the sale of Swiss Life Belgium was included in    the Tier 1 ratio was 10.5% and the BIS ratio was 14.0%.
the result from Group activities.                            The sharp decline in interest rates from the end of
In 2007, one-off items consisted of a € 35 million           October onwards had an adverse impact on solvency
gain on the sale of stakes in Van Lanschot NV and            of the Insurance activities. For this reason, solvency of
La Ser Lafayette Services Netherlands included in the        Insurance activities was strengthened by € 975 million
result of Group activities and a € 12 million net charge     rather than the € 775 million originally announced on
related to the Kyrill storm included in REAAL Non-Life       13 November 2008. At year-end 2008, solvency at the
result.                                                      Insurance activities was 176%, corresponding with a
                                                             coverage ratio of 248%. All solvency ratios at SNS Bank
Earnings per share and dividend                              and the Insurance activities met their respective targets.
Because of the reported net loss for the year of € 504
million net earnings per ordinary share fell to € 1.93       Total equity amounted to € 4,892 million at the end of
negative for 2008, down from € 1.87 positive in 2007.        2008, an increase of € 1,301 million compared to the
The weighted average number of outstanding ordinary          level of € 3,591 million at year-end 2007. This increase
shares of 261,488,582 increased compared to 2007             came mainly from the € 1,250 million issue of capital
(248,155,233). The total number of outstanding               securities to strengthen solvency and the € 600 million
ordinary shares of 261,472,608 did not change in 2008,       issue of B-shares related to the funding of the Zwitser-
compared to year-end 2007.                                   leven acquisition. Furthermore, the fair value reserve
                                                             increased by € 132 million and the cash flow hedge
On 11 December 2008, SNS REAAL issued capital                reserve by € 69 million. The increase of the fair value
securities to the trust for € 500 million and to the         reserve was the net effect of significantly lower equity
Dutch State for € 750 million. In respect of the dividend    markets and widened credit spreads, more than
coupon period until 31 December 2008, a dividend             offset by the impact of decreased interest rates and
coupon of € 1.75 million will be paid to the trust, based    impairments and realised losses on the equity and bond
on a 6% dividend coupon. The first dividend coupon           portfolio. These positive impacts were partly offset
for the securities issued to the Dutch State is fixed at a   by the net loss of € 504 million, the payment of the
dividend rate of 4.25% for the period of 11 December         final 2007 dividend and interim dividend 2008 (€ 232
2008 till 9 June 2009, resulting in € 31.88 million          million in total) and € 34 million dividend coupons
payable to the Dutch State in June 2009.                     payable on the capital securities issued in December



                                                             SNS REAAL     Annual Report 2008 report of the executive board   31
     2008. Compared to 30 June 2008 (€ 3,611 million), the           of € 550 million and other capital movements of € 15
     equity attributable to shareholders was slightly higher at      million. Overall solvency was 176%, corresponding with a
     € 3,623 million.                                                coverage ratio of 248%. The solvency ratio of REAAL Life
                                                                     was 165%, the solvency ratio of Zwitserleven 206% and
     Solvency                                                        the solvency ratio of REAAL Non-Life amounted 307%
     The double leverage, which is the ratio between the book        at the end of 2008. All the solvency ratios of Insurance
     value of the subsidiaries and SNS REAAL’s equity, improved      activities remained above their targets.
     from 116.3% at year-end 2007 to 113.7% at the end of 2008
     and is therefore below the target maximum of 115%.              Funding of SNS Bank
                                                                     In 2008, a significant focus was placed on reinforcing the
     SNS Bank’s total capital increased from € 3,889 million         funding position of SNS Bank in addition to strength-
     to € 4,093 million (+ 5.2%), mainly due to the injected         ening the bank’s solvency position. At the end of 2008,
     core capital of € 260 million, net profit of € 144 million      the total available liquidity position amounted to € 10.7
     and an increase of the fair value reserve of € 108 million      billion, compared to € 14.3 billion at the end of June 2008
     due to lower interest rates. Furthermore, the capital base      and € 8.7 billion at year-end 2007. The cash position
     was reinforced with subordinated loans (€ 11 million)           amounted to € 1.6 billion and SNS Bank had € 9.1 billion
     and other capital developments (€ 1 million). The intro-        in liquid assets and assets eligible for collateral with the
     duction of Basel II (with a floor of 90% in 2008) has           ECB. In the second half of 2008 SNS Bank used part of its
     lowered SNS Bank’s capital requirement significantly.           extra cash position built up in the first half, while at the
     This allowed a dividend upstream to SNS REAAL of € 320          same time increasing the liquid assets and assets eligible
     million, which was executed in the first half of 2008.          for collateral with the ECB by € 2.5 billion. At the end
     In the coming years SNS Bank may be able to realise             of 2008, € 2.1 billion of the ECB facility has been drawn
     additional capital releases, however the timing and             upon. SNS Bank improved its retail funding position
     amount of these releases are subject to developments            during the year, with retail funding as a percentage of
     with regard to capital requirements set by regulators           retail loans increasing from 56% at year-end 2007 to
     in response to the distressed financial markets. Tier           61%. Furthermore, in January 2009, SNS Bank success-
     1 capital amounted to € 2.7 billion (+ 3.8%) as at 31           fully issued a three year note under the Credit Guarantee
     December 2008.                                                  Scheme of the Dutch State to a widely spread range of
                                                                     national an international investors. This note has a total
     As at 31 December 2008, based on the applicable 90%             size of € 2 billion and carries an effective coupon rate of
     floor, SNS Bank’s Core capital ratio was 7.2%, Tier 1 ratio     3% and a surcharge from the Dutch State of 0.87%. In
     9.4% and the BIS ratio 12.4%. Based on a floor of 80%,          addition in February 2009 a back-up facility of € 1 billion
     which became applicable on 1 January 2009, the Core             was closed with a renowned counterparty. In March 2009,
     capital ratio was 8.1%, the Tier 1 ratio 10.5% and the BIS      SNS Bank again issued a note (in the amount of € 1.6
     ratio 14.0%.                                                    billion) under the Credit Guarantee Scheme of the Dutch
                                                                     State. The five year note carries a coupon rate of 3.5%
     The capital base of the Insurance activities increased by       and is issued to a widely spread range of national and
     € 1,674 million to € 4,123 million (+ 68.4%) at the end         international investors. As a result, the bank’s wholesale
     of 2008, helped by the capital injection of € 975 million       funding is secured into 2010. For more information on
     from the capital securities issued by SNS REAAL. Earlier        funding we refer to the chapter on Funding and credit
     in 2008, as part of the funding of the acquisition of           ratings.
     Zwitserleven, SNS REAAL strengthened the capital base
     of Insurance activities with a € 700 million paid-in share      Balance sheet
     premium. The capital base was further reinforced with           SNS REAAL’s balance sheet total grew by € 21.3 billion,
     subordinated loans (€ 431 million) and an increase of           from € 103.1 billion at year-end 2007 to € 124.4 billion at
     € 133 million in the fair value reserve and the cash flow       the end of 2008 (+ 20.7%). Excluding the impact of the
     hedge reserve. This was partly offset by the net loss           acquisition of Zwitserleven, the balance sheet total grew

     Table 11: Liquidity position SNS Bank

     In € millions                                                           December 2008                     December 2007
     Cash                                                                          1,649                            3,022
     Liquid assets                                                                 9,058                            5,688
     Total Liquidity position                                                    10,707                             8,710



32   SNS REAAL    Annual Report 2008 report of the executive board
by € 4.5 billion. Zwitserleven contributed € 16.8 billion to   (€ 500 million) and the Dutch State (€ 750 million)
the increase of the balance sheet including a € 2.3 billion    and the six B-shares to the trust (€ 600 million) were
impact of securities lending contracts. Compared to the        partly offset by the net loss for 2008 of € 504 million,
end of June 2008, the securities lending position was          the distribution of the final dividend for 2007 (€ 120
reduced by € 0.9 billion to € 2.3 billion.                     million) and the interim dividend for 2008 (€ 112
                                                               million) and the dividend coupons payable to the
Goodwill and other intangible fixed assets rose by € 791       Dutch State and the trust (€ 34 million).
million mainly due to the recognition of intangible
fixed assets related to Zwitserleven. No impairments on        The fair value reserve increased by € 132 million
goodwill from the acquisitions of SNS Property Finance,        and the cash flow hedge reserve by € 69 million.
AXA NL, Regio Bank and Zwitserleven were necessary.            The increase in the fair value reserve was the net
                                                               result of significantly lower equity markets and
Related to AXA NL the final valuation of acquired net          widened credit spreads, more than offset by the
assets resulted in an increase of goodwill of € 134 million,   impact of decreased interest rates and impairments
whereas the Value of Business Acquired decreased by            and realised losses on the equity and bond portfolios.
€ 58 million and the technical provision increased by          Technical provisions increased by € 11.1 billion,
€ 98 million, mainly due to the provision for unit-linked      mainly due to the acquisition of Zwitserleven (€ 11.6
policies settlements. These adjustments for AXA NL were        billion).
made in the 2007 opening balance sheet.
                                                               Successful deposit campaigns by SNS Bank and
Investments for own account increased by € 8.2 billion to      strong growth at ASN Bank resulted in an increase in
€ 29.3 billion (+ 38.9%) as a result of the consolidation      savings of € 2.7 billion (+ 14.0%). This translated into
of Zwitserleven (€ 8.5 billion), partly offset by a decrease   an increase in retail funding as a percentage of the
due to market developments.                                    retail loan book to 61% (year-end 2007: 56%).

On the liability side, SNS REAAL’s group equity grew by        The growth of both loans and advances to banks of
€ 1,301 million to € 4,892 million (+ 36.2%) compared to       € 3.1 billion and liabilities due to banks of € 3.7 billion
year-end 2007. The issues of capital securities to the trust   was due to increased structured tax investments.




                                                               SNS REAAL      Annual Report 2008 report of the executive board   33
              Developments banking activities
              The net result decreased by € 128 million to € 144 million (− 47.1%). This result includes the
              negative impact of volatile financial markets of € 42 million, impairments of SNS Property
              Finance of € 75 million and € 29 million in incidental restructuring costs.

      Table 12:   Key figures banking activities
      In € millions                                                                                             2008       2007     Change
      Income SNS Retail Bank                                                                                       738       751      (1.7%)
      Income SNS Property Finance                                                                                  218       187      16.6%
      Total income                                                                                                 956       938          1.9%
      Expenses SNS Retail Bank                                                                                     592       525      12.8%
      Expenses SNS Property Finance                                                                                181        76     138.2%
      Total expenses                                                                                               773       601      28.6%
      Underlying net profit SNS Retail Bank                                                                        187       190      (1.6%)
      Underlying net profit SNS Property Finance                                                                    28        86     (67.4%)
      Total underlying net profit                                                                                  215       276     (22.1%)
      Net profit                                                                                                   144       272     (47.1%)
      Total assets                                                                                             76,695      70,584         8.7%
      Return on total equity                                                                                     6.7%      12.6%     (46.8%)


        20 Distribution income banking activities 2008                      21 Distribution income banking activities 2007


        7%                                                                 3%


       12%                                                                14%


       23%                                                                20%


       58%                                                                63%




             Net income SNS Retail Bank                                         Net income SNS Retail Bank
             Net interest income SNS Property Finance                           Net interest income SNS Property Finance
             Net commission and management fees                                 Net commission and management fees
             Other income                                                       Other income




     SNS Retail Bank
     Strategy                                                           distributes third-party products and uses REAAL Verzeker-
     The clients of SNS Retail Bank comprise private                    ingen’s distribution channels. Joint and central product
     individuals and SME in the Netherlands. Its key product            development and data administration for the brands of the
     groups are mortgages, savings and investments. Distri-             retail banking business result in a cost efficient and flexible
     bution takes place mainly through the internet, location-          organisation.
     independent advisers, SNS shops, SNS Regio Bank
     franchises, and independent intermediaries. SNS Retail             SNS Retail Bank’s strategy mainly focuses on the further
     Bank uses different brands for its products, each having           development of distribution capacity. Other strategic
     a distinct market position. Each brand is linked to the            spearheads include expansion in the Randstad urban area,
     most suitable distribution channel or to an optimum                in savings, commercial mortgages, as well as sustainable
     mix of distribution channels. SNS Retail Bank also                 asset growth through ASN Bank.



34   SNS REAAL       Annual Report 2008 report of the executive board
Financial developments                                        Expenses
Result                                                        Total expenses at SNS Retail Bank increased with € 67
SNS Retail Bank’s net result declined by € 70 million to      million from € 525 million to € 592 million (+ 12.8%).
€ 116 million (− 37.6%) mainly as a result of the negative    Impairment charges to loans and advances increased by
impact of volatile financial markets of € 42 million and      € 17 million to € 37 million. The impairment charges on
€ 29 million of one-off restructuring costs. These mainly     mortgages increased by € 13 million to € 33 million, of
concern the balance of a redundancy provision of gross        which € 4 million was the result of methodology changes
€ 26 million and gross € 15 million impairments of            due to the implementation of Basel II and € 9 million was
furniture and fixtures.                                       due to the downturn of the economic environment in the
                                                              second half of 2008. The impairment charges for retail
The underlying net result of € 187 million was in line with   loans as a percentage of risk-weighted assets showed an
the previous year. The positive contribution of SNS Regio     increase from 11 basis points in 2007 to 20 basis points in
Bank of € 20 million was offset by lower net fee and          2008, both based on Basel I for comparative reasons.
commission income and higher total net impairment
charges.                                                      The other impairment charges of € 20 million consisted
                                                              of one-off restructuring costs of € 15 million and a € 5
Income                                                        million impairment of investments resulting from the
Total income at SNS Retail Bank of € 738 million decreased    impact of volatile financial markets.
by € 13 million (− 1.7%) from € 751. Without the impact
of the volatile financial markets and the one-off item        SNS Retail Bank’s operating expenses increased by € 30
(totalling € 35 million) the underlying income increased      million mainly due to the restructuring provision of € 26
by € 22 million (+ 2.9%), mainly caused by higher interest    million. Underlying operating expenses decreased by € 3
income and increased investment income. Interest income       million; within this, underlying staff costs increased by
was up due to the € 46 million contribution of SNS Regio      € 13 million (+ 4.4%) due to the addition of SNS Regio
Bank. Net interest income from savings was up consid-         Bank and underlying other expenses showed a decrease
erably, partly offset by lower interest income on mortgages   of € 18 million (− 10.0%) due to lower marketing, advisory
and the SME portfolio. Margins in the mortgage business       and integration costs. Total staff at SNS Retail Bank at
remained low, although there was an increase in the           year-end was 2,966 FTEs, up by 38 FTE. The planned
second half of the year.                                      restructuring programme, as announced in June 2008,
                                                              will lead to a reduction of 380 FTEs by the end of 2010.
The difficult capital market circumstances were
noticeable in lower net fee and commission income.            The efficiency ratio of SNS Retail Bank deteriorated to
Insurance commissions decreased compared to 2007              72.5% for 2008, (2007: 67.2%) due to the impact of
mainly due to a decline in sales of insurance products        volatile financial markets and the restructuring costs.
related to retail mortgages and the absence of                However, the underlying efficiency ratio improved by 2.3
non-recurring profit-sharing commissions received in          percentage points to 64.4%.
2007. In total, net fee and commission income declined
by € 16 million (− 12.5%).                                    Organisation and distribution
                                                              In June, SNS Retail Bank started a three-year programme
Investment income increased by € 69 million. Adjusted         to improve distribution capacity. The programme
for the impact of volatile financial markets (mainly          focuses on a high-quality web shop which enables
positive buy-back results on funding paper), underlying       the client to make purchases in five clicks, location-
investment income increased by € 24 million to € 46           independent advisers, centralisation of the advisory
million, mainly due to realised gains on the fixed income     organisation, more third-party products in the product
investment portfolio, € 12 million increased results on       range, nationwide branch coverage and withdrawing and
bond portfolios and the sale of SNS Retail Bank’s partici-    depositing money by using cash machines, depositing
pation in Equens (€ 8 million).                               machines and pickup and delivery service. The internet
                                                              and telephone will become even more important sales
The result on financial instruments decreased by € 27         channels. Our clients can make an appointment with
million to € 15 million negative. The impact of volatile      our advisers at home, in an SNS shop or somewhere
financial markets was € 11 million negative in 2008           else. With its network of SNS Regio Bank branches, its
compared to € 17 million positive in 2007. Adjusted for       own SNS shops, and SNS shops with a strict franchise
this, the underlying result on financial instruments of € 4   formula, SNS Retail Bank wants to offer national
million negative remained stable.                             coverage for advice and service in 2010.



                                                              SNS REAAL     Annual Report 2008 report of the executive board   35
     The inflow of new clients also continued in 2008.                    22 Mortgage loans SNS Bank
     SNS Retail Bank and ASN Bank obtained approximately
     162,000 new clients. In 2008, the SNS website was               € millions

     greatly improved and the major part of the purchase and         60,000
     service processes was automated, the savings process in         50,000
     particular. Data processing for existing clients is entirely
                                                                     40,000
     paperless. The improvement of the DIY options for clients
                                                                     30,000
     and the process automation entail that a large part of the
     personal process support becomes obsolete. That is why          20,000

     a decrease in staffing levels of approximately 380 FTEs         10,000
     is estimated for 2010. The restructuring costs in 2008                0
     were € 29 million, particularly in relation to laying-off                      2004         2005   2006   2007     2008
     of employees, training and education and in relation to                   Other mortgages
     changing locations.                                                       Residential mortgage


     At the beginning of 2008, SNS Regio Bank had some                    23 Volume of new mortgages SNS Bank
     start-up problems when switching to systems and
     products of SNS Retail Bank. Partly for this reason, the        € millions

     commercial objectives for mortgages and insurance                9,000
     could not be achieved. After the summer, the problems            8,000
                                                                      7,000
     were solved. SNS Regio Bank was very successful in
                                                                      6,000
     attracting savings deposits. The growth potential                5,000
     continues to be good. SNS Regio Bank benefits from               4,000
     SNS Retail Bank’s efforts in the areas of joint purchasing,      3,000
                                                                      2,000
     front office applications and process automation.
                                                                      1,000
                                                                           0
     SNS Retail Bank is adjusting its payment system to                                2006             2007          2008

     international developments and participates in the                        ASN Bank
     Single Euro Payments Area (SEPA). SEPA is an initiative                   SNS Regio Bank
     of the joint European banks and will result in a single                   BLG Hypotheken
                                                                               SNS Retail Bank
     European payment market. Within SEPA, there is no
     longer any difference between domestic payments and
     foreign payments in euros in Europe. In January 2008,           The amount of newly registered mortgages in the
     SNS Retail Bank received the first new European funds           Netherlands was € 97.9 billion in 2008 (2007: € 115
     transfers.                                                      billion). The mortgage refinancing market decreased
                                                                     because the rates of many outstanding mortgages are
     The number of clients at ASN Bank showed another sharp          lower than the rates upon refinancing. The deteriorating
     increase (+ 15.7%). This growth increasingly generates          economic climate resulted in reservations of potential
     synergy benefits for ASN Bank within SNS Retail Bank            buyers to enter the residential property market, while
     and SNS REAAL. In December, ASN Bank launched a                 house prices hardly decreased (yet). As a result the
     sustainable current account. The corresponding debit            transaction market decreased.
     card will obtain all payment functions in the course of
     2009. Furthermore, ASN Bank entered into a partnership          Due to economic uncertainties, the demand for savings
     with Zwitserleven to link its investments funds with            mortgages and mortgages with long fixed-rate periods
     Zwitserleven mortgages.                                         increased. These trends ensure stable housing costs and
                                                                     reduce the risk of payment problems. The foundations
     Mortgages                                                       of the Dutch mortgage market continue to be sound,
     The size of the total mortgage portfolio rose from € 46.2       partly due to the structural housing shortage, the
     billion to € 48.7 billion (+ 5.4%). The total number of         mortgage interest tax relief and appropriate govern-
     outstanding mortgages in the Netherlands decreased.             mental regulation. Particularly the lower and middle
     SNS Retail Bank’s market share in mortgages, including          segments of the residential market, in which SNS Retail
     BLG and SNS Regio Bank, rose in this bear market from           Bank is well represented, has relatively limited sensitivity
     7.4% to 7.5%. As a result of the credit crisis, several         for a decline in prices. The average mortgage amount
     providers withdrew.                                             for residential property at SNS Retail Bank was € 218,000



36   SNS REAAL    Annual Report 2008 report of the executive board
compared to a national average of approximately               competition, mainly as a result of the credit crisis. An
€ 250,000. The amount of SME corporate mortgages rose         increasing number of banks experienced rising costs
and the (still moderate) market share in this segment         for other forms of financing. In the second half year,
increased. The expansion of the number of SME advisers        the turmoil and mobility in the savings market also
resulted in new sectors being entered and will mainly         increased sharply following Icesave’s bankruptcy.
bear fruit as of 2009.                                        When rates sharply increased, our banks managed to
                                                              consolidate their market shares without being drawn
SNS Retail Bank capitalised on the increasing demand          into price competition. Success factors were successful
for mortgages with a long fixed-rate period, starting at      retention measures aimed at maturing deposits, active
10 years, with third-party products. The SNS Budgethy-        acquisition, a personal approach, and the separate
potheek is particularly competitive with shorter fixed-rate   deposit guarantees for SNS Retail Bank, SNS Regio Bank
periods. In collaboration with partner Maatwerk,              and ASN Bank. The risk of savings funds flowing out is
SNS Retail Bank introduced SNS Hypotheekservice,              relatively limited at our banks as a result of a low average
allowing clients to apply for an appraisal, a structural      savings amount per client.
survey, inspection upon completion, mortgage deed,
energy label and an Energy Performance Certificate.           SNS Retail Bank, SNS Regio Bank and ASN Bank were
                                                              considered safe havens by the largest part of our clients.
BLG’s mortgages, which are sold only through interme-         In its autumn campaigns, SNS Bank focused more on
diaries, are specialised products that have achieved good     information relating to savings in general and introduced
penetration in a number of niche markets. Accordingly,        Spaarplan. By using a simple programme on the website,
BLG’s mortgages are a good addition to SNS Budgethy-          clients can choose and combine the best forms of saving
potheek. BLG won a Zilveren Spreekbuis award for good         based on their own needs and possibilities.
development in 2008, partly because of better brand
recognition and a growing preferential position with          At ASN Bank, deposited savings increased from € 3,553
intermediaries. The award was issued by market research       million to € 4,964 million (+ 37.9%). The popularity of
bureau Blauw Research.                                        sustainable asset growth is still gaining momentum, and
                                                              ASN Bank is well-positioned to benefit, being the market
Savings                                                       leader. ASN Bank particularly focuses on the retail
The total Dutch savings market grew from € 234.7 billion      market. In addition, ASN Bank also accepts social organi-
to € 251.3 billion (+ 7.1%) in 2008. The joint savings        sations and companies as clients if they do not conduct
balances of SNS Bank, ASN Bank and SNS Regio Bank,            business conflicting with the business principles of ASN
including accrued interest, rose from € 19.2 billion to       Bank. ASN Bank devotes a lot of attention to optimising
€ 21.9 billion (+ 14.1%). ASN Bank contributed € 1.3          its service levels. In 2008, this was reflected once again in
billion (+ 37.9%) to this growth; SNS Regio Bank              the quality research by Independer, which granted ASN
contributed € 550 million (+ 11.1%). The joint market         Bank the highest average customer satisfaction score,
share increased from 8.3% to 8.8%. The total number           with the highest scores for ‘availability to clients’ and
of savings accounts (withdrawal on demand) at                 ‘value for money’. For more information, see
SNS Retail Bank, ASN Bank and SNS Regio Bank rose             http://weblog.independer.nl.
from 2.2 million to 2.3 million (+ 4.5%).
                                                              The assets managed by the investment funds of
In the first half year, SNS Retail Bank, SNS Regio Bank       SNS Retail Bank decreased from € 3.0 billion to € 2.3
and ASN Bank were very successful in deposit actions.         billion (−23.3%). On balance, an amount of € 0.2 billion
In the second half year, there was a sharp increase in        was added, which was negated by the decrease in share


Table 13: Distribution of mortgages and savings products (new products/inflow)

                                                                                      Mortgages 2008 1         Savings 2008 2
Direct      SNS Shops, internet and customer service SNS Retail Bank                          22%                    28%
            ASN Bank                                                                           --                    52%
Indirect    BLG Hypotheken                                                                    33%                     --
            SNS Regio Bank                                                                     9%                    20%
            Other intermediaries, purchasing combinations, distribution partners              36%                     --
) New production
1

) New inflow
2




                                                              SNS REAAL     Annual Report 2008 report of the executive board    37
         24 Distribution invested capital SNS Retail Bank                securities sector, SNS REAAL was the financial institution
                                                                         that scored best with three Gouden Stieren awards.
      € millions                                                         Fund manager Corné van Zeijl of the SNS Nederlands
      6,000                                                              Aandelenfonds was the best investment expert, ASN
                                                                         Milieu & Waterfonds the best sustainable product and
      5,000
                                                                         SNS Fundcoach the best investment fund provider.
      4,000

      3,000                                                              The presentation of investment products on the
      2,000                                                              SNS website was improved, and SNS Fundcoach became
      1,000                                                              a more distinct part of the SNS investment product
                                                                         range. Clients can now see the differences and similar-
           0
                      2006             2007              2008            ities between the various investment options more
                                                                         quickly and more easily. The assets invested via the funds
               SNS Fundcoach
               ASN Beleggingsfondsen                                     of SNS Fundcoach decreased, both due to lower share
               SNS Beleggingsfondsen                                     prices and due to reduced investment appetite. The new
                                                                         inflow fell from € 221 million to an outflow of € 97 million.
         25 New net inflow investment                                    The number of clients decreased from 27,400 to 26,900
                funds SNS Retail Bank                                    (− 1.8%).


       € millions                                                        When investing for investment funds and savings
        700                                                              accounts, ASN Bank only chooses companies, organisa-
        600                                                              tions and governments that meet the investment criteria
        500                                                              for a sustainable society. The bank uses unequivocal
        400
                                                                         admission and exclusion criteria. These can be found
        300
        200                                                              at www.asnbank.nl. Topics such as child labour, animal
        100                                                              suffering, climate, human rights and genetic engineering
           0                                                             play a decisive role in all investments. However, ASN
       -100
                                                                         Bank obviously also strives for optimal financial return.
       -200
                      2006             2007              2008
                                                                         In 2008, ASN Bank was the first Dutch bank that had a
               SNS Fundcoach
               ASN Beleggingsfondsen                                     study conducted into the carbon dioxide emissions of the
               SNS Beleggingsfondsen                                     companies included in the investment funds. The funds
                                                                         concerned were the ASN Aandelenfonds, the ASN Small
     prices. The assets managed through the ASN funds                    & Midcap Fonds and the ASN Milieu & Waterfonds.
     decreased from € 1.2 billion to € 1.0 billion (− 16.7%)             For this purpose, 190 companies were investigated.
     due to a decrease of both the new net inflow and the fair           By using strict investment criteria, ASN Bank wants to
     value. The decrease of the fair value was relatively limited        contribute to keeping the climate burden of the funds to
     and significantly better than the average decrease of the           a minimum. See for more details on this study:
     market.                                                             www.asnbank.nl. ASN Bank’s high service levels
                                                                         and effective marketing communication contribute
     SNS Retail Bank aims at an above-average return with                to high customer loyalty. One of the initiatives for
     a sound risk for the SNS funds. The Elsevier Top 100                2008 was setting up the social internet platform
     scoreboard of December 2008 listed ten SNS funds,                   www.voordewereldvanmorgen.nl, a meeting place for
     two of which in the top 10. Elsevier measures the stock             people who want to contribute to a sustainable society
     market return adjusted for the risk that a fund shows               by discussing about or taking action for humans, animals
     major negative peaks. The SNS investment funds                      and the environment.
     also received good reviews from the Dutch Investors’
     Association (VEB). The VEB rating measures the returns              SNS Securities managed to keep its profit contribution
     achieved, but also takes into account the costs and                 stable in the deteriorating stock market climate, partic-
     risks. The ten investment funds with a maximum score                ularly thanks to its strong position in the bonds trade.
     of five stars included both the SNS Wereld Aandelen-                Securities broker FBS Bankiers, which was acquired
     fonds and the SNS Euro Obligatiefonds. In total, ten                in late 2007 en has meanwhile been integrated, also
     SNS investment funds currently have a VEB rating. At                contributed to the profit. Due to the credit crisis, the
     the Gouden Stieren awards, organised by the Dutch                   markets for assisted share transactions and private asset



38   SNS REAAL        Annual Report 2008 report of the executive board
management clearly lagged behind compared to 2007.             and Belgium. The majority of these transactions relate to
Joining the European Securities Network (ESN) in 2007          foreign activities by Dutch clients.
generated greater interest from Dutch and foreign insti-
tutional investors. ESN has joint research information         Investment loans are medium or long-term loans for
at its disposal from more than a thousand listed               existing residential housing, shops, shopping centres,
companies in Europe. SNS Securities has a relatively           offices and industrial premises, particularly in the
small market position in private asset management,             Netherlands. The clients are mainly professional investors
which will be boosted in 2009 when joining the market          and specialised property investment companies.
for independent asset managers.
                                                               For both project financing and investment loans,
SNS Securities provides securities services (shares, bonds     SNS Property Finance sometimes uses structured loan
and derivatives) to national and international profes-         solutions, such as syndicated loans. SNS Property Finance
sional investors. In addition, it supports companies           acts as an expert centre for commercial property finance
in private and public capital market transactions and          within SNS REAAL.
gives advice to high-net-worth private investors in the
field of asset management and securities. The securities       Financial developments
research conducted by SNS Securities mainly focuses on         Result
Dutch small-cap and mid-cap funds. The macroeconomic           Net result decreased with € 58 million from € 86 million
research is also used for SNS REAAL’s risk management.         to € 28 million (− 67.4%). The net result before
                                                               impairment charges increased 17.5% to € 114 million,
SNS Property Finance                                           due to higher net interest income. However, the net
Strategy                                                       negative impact of higher impairments was € 75 million
SNS Property Finance operates in all phases of the             (pre-tax increase: € 101 million).
property cycle, from short-term (project) loans for land
purchase, construction and trading transactions to             Income
long-term loans for investment properties. SNS Property        Total income increased by € 31 million from € 187 million
Finance participates in several projects as a risk-bearing     to € 218 million (+ 16.6%). Interest income experienced
participant in the results if a number of conditions           significant growth of € 29 million to € 216 million
are strictly complied with. SNS Property Finance does          (+ 15.5%), due to organic growth and re-pricing of the
not provide loans to property companies that are not           loan portfolio. The re-pricing enabled SNS Property
(mortgage) secured and usually does not provide working        Finance to pass on most of the higher costs of funding
capital funding.                                               to its customers. Recurring interest revenue accounted
                                                               for 94% of total net interest income, with the remainder
Project financing comprises short-term loans for               sourced from transaction-related income. Furthermore,
building land, (re)development of offices, shopping            non-recurring income, included in commissions and
centres, shops, industrial premises, residential housing       management fees and other income, increased by € 2
and mixed projects, as well as bridging loans. Project         million.
financing partly takes place abroad. The clients are profes-
sional project developers, property entrepreneurs and          Expenses
building contractors who are also developers themselves.       Total expenses increased with € 105 million from € 76
In participation projects, this concerns both relatively       million to € 181 million (+ 138.2%). Impairment charges
small projects and knowledge-intensive, large-scale and        increased sharply to € 116 million, mainly due to higher
long-term projects. Part of the portfolio, 28% at year-end     provisioning for international project finance in the
2008, comprises projects and participations abroad, in         second half of 2008. The impairment charges as a
particular in the United States, Germany, France, Spain        percentage of risk-weighted assets (for comparison


Table 14: Investment options via SNS Retail Bank

Independent investment                      Joint investment                             Asset management
SNS Effectenrekening                        SNS Privérekening met depot                  SNS Vermogensbeheer
(‘investment account’)                      (‘current account with deposit’)             (‘asset management’)
SNS Fundcoach                               SNS Effectenadvies                           SNS Managed Account
                                            (‘investment advise’)
                                            SNS Spaarmix (‘savings mix’)



                                                               SNS REAAL       Annual Report 2008 report of the executive board   39
     purposes based on Basel I) increased by 77 basis points         SNS Property Finance’s total loan production
     to 90 basis points. The impairment charges in the               decreased from € 5.6 billion to € 4.7 billion (− 16.1%).
     second half of 2008 were mainly related to impairments          The total value of the property finance portfolio
     in North America and Spain plus a limited number                increased from € 11.6 billion at year-end 2007 to € 13.6
     of loans in other European countries. SNS Property              billion at year-end 2008 (+ 17.2%), with the growth
     Finance continues to monitor all projects carefully             particularly manifesting itself in the first half year of
     and the impairment charges in 2008 were based on a              2008. In the second half year of 2008, growth was
     thorough analysis of the portfolio.                             deliberately curbed. At year-end 2008, the total loan
                                                                     portfolio consisted for € 7.6 billion of investment
     Total operating expenses increased to € 65 million from         loans (+ 8.6%) and for € 6.1 billion of project financing
     € 61 million (+ 6.6%). In spite of the growth of the loan       (+ 29.8%). The portfolio’s focus continued to be on the
     portfolio operating expenses were kept under control.           Netherlands (72%).
     Staff costs were up with € 9 million and other operating
     expenses decreased with € 4 million because of the
     absence of restructuring costs which were accounted             The total share of the portfolio that relates to residential
     for in 2007. Depreciation and amortisation of property          property decreased slightly to 34%, compared to 37%
     and equipment decreased by € 1 million. Total staff             at year-end 2007. Compared to year-end 2007, the
     increased to 268 FTE (2007: 247 FTE).                           portfolio in North America grew by 1 percentage point
                                                                     to 8% of the total portfolio, whereas Spain remained
     Combined with the significant increase in total income,         unchanged at 3%. SNS Property Finance aims for
     the increase in operating expenses led to a considerable        a limitation of the balance-sheet risk by reducing
     improvement in the efficiency ratio of SNS Property             exposure to projects for international project financing,
     Finance to 29.8% for 2008, compared to 32.6% in 2007.           particularly in Spain and the US. In the second half
                                                                     year of 2008, a very limited amount of new loans was
     Organisation                                                    extended in this area, and in the first half of 2009, a
     SNS Property Finance reinforced its organisation                decrease is expected in the advances.
     in 2008. Centralisation of supporting tasks for the
     different departments resulted in more transparency,            Project financing
     efficiency and effectiveness in the finance department,         The project financing portfolio increased to € 6.2
     risk management and decision-making. The transfer of            billion (+ 34.8%). The domestic portfolio, including
     the portfolio of larger business loans (€ 1.8 billion) from     participation finance, increased to € 2.3 billion
     SNS Retail Bank to SNS Property Finance was completed           (+ 36%). Particularly in the second half of 2008, there
     in early 2008. The corresponding administration could           was a reduction in the number of new projects and
     be incorporated into existing processes and systems.            participations in the order book. In the offices market,
                                                                     used properties on less attractive locations mainly
     Portfolio growth                                                faced sharply declining prices or non-occupancy.
     Whereas the demand for property finance was still               This problem could partly be resolved by redeveloping
     at a stable level in the first half of 2008, it decreased       these properties.
     substantially during the second half year. Under the            Property prices have decreased and are expected to
     influence of the effects of the credit crisis several foreign   further decrease in 2009. However, supply declined
     competitors withdrew from the Dutch market. As the              over the year. SNS Property Finance applies strict
     market potential decreased, SNS Property Finance’s              criteria to offices, shopping centres and residential
     relative market position improved as a result. After            property in respect of pre-leasing and pre-sale.
     a period of several years of decreasing margins and             New projects often involve redevelopment of inner
     increasing volumes, 2008 marked a turning point.                city areas. These are usually complex projects with
     The focus on better margins, a better risk/return ratio and     mixed-use functions. SNS Property Finance shows
     efficient capital requirement for new transactions was          its added value in such projects by offering creative,
     intensified. With regard to interest rate reviews of existing   structured solutions. An example is the redevelopment
     agreements and renewals, the prices were adjusted to            of the former public library in Amsterdam.
     the changing market conditions. The market conditions           SNS Property Finance financed the purchase
     and the strict acceptance policy resulted in a lower            and redevelopment. The former public library of
     organic volume growth than in 2007. In 2009, the focus          Amsterdam at Prinsengracht is included in the city’s
     will also be on management of risk, returns and existing        plans for more representative accommodation for the
     portfolios.                                                     creative sector. An innovative concept was designed in



40   SNS REAAL    Annual Report 2008 report of the executive board
which the new functions of the building are geared to the   Investment finance
needs of this sector, including a museum, a design hotel    The investment finance portfolio increased to € 7.4
and office space in the Creative Industry section.          billion (+ 5.7%). The production dropped by 24%, but
                                                            this was offset by better margins and value creation as a
The foreign property finance portfolio, which almost        result of lower solvency requirements. After several years
entirely consists of project loans, increased to € 3.9      of pressure, the initial yields started to rise again in most
billion (+ 32.2%). At year-end 2008, 29% of these loans     markets. Interest from major investors, such as pension
originated in North America, 19% in Germany, 11% in         funds and insurance companies, remained stable, but
Spain, 12% in France, 8% in Belgium and 21% in other        the number of transactions continued to be low, for
countries. Most projects relate to foreign activities by    reasons including the increased relative share of property
Dutch clients and to office buildings, shopping centres     in investment portfolios as a result of the substantial
and logistics centres.                                      decreases in value of shares and bonds.




                                                            SNS REAAL     Annual Report 2008 report of the executive board   41
                      Developments insurance activities
                      The net result decreased by € 755 million from € 205 million positive to € 550 million
                      negative (− 368.3%), particularly due to the substantial negative impact of the volatile
                      financial markets of € 619 million and a one-off charge of € 78 million in anticipation of an
                      arrangement with the policyholders of unit-linked insurance.

     Table 15:         Key figures insurance activities
     In € millions                                                                                             2008     2007        Change
     Net result for the period                                                                                 (550)     205       (368.3%)
     Net impact volatile financial markets                                                                     (619)      87
     One-off items                                                                                              (78)     (12)
     Underlying net result                                                                                      147      130            13.1%

                                                                                    27 Distribution of gross premium income
             26 Distribution of income insurance activities                            REAAL Verzekeringen 2008

         € millions

         5,000
                                                                                18%
         4,000

         3,000
                                                                                15%
         2,000

         1,000
                                                                                67%
              0

         -1,000
                          2006             2007              2008

                  Net provision                                                       Life
                  Other income                                                        Zwitserleven
                  Investment income                                                   Non-Life
                  Net premium income


     Table 16: Distribution of insurance products (new products/premium income)

                                                                    REAAL Life 2008 1           REAAL Non-life 2008 2   Zwitserleven 2008 1
     Indirect Independent intermediaries                                 61.8%                         58.7%                    62.8%
                        Purchase organisations                           28.9%
                        Distribution partners                                4.1%
                        Underwriting agents                                                            29.3%
     Direct             Internet (Zwitserleven and Proteq)                                              6.4%                    6.4%
                        SNS Retail Bank                                      5.2%                       5.6%
                        Independent business consultants                                                                        30.8%
     1
      ) New products
     2
      ) Premium income


     REAAL Verzekeringen                                                      comprise private individuals, SME and larger companies
     Strategy                                                                 in the Netherlands. The product groups are: individual
     REAAL Verzekeringen wants to have a realistic                            life, group life, non-life and disability insurance
     approach towards insurance and, as a specialist in                       products.
     risk and probability calculations, which is the essence
     of insurance, provide its clients with accessible and                    Indirect distribution mainly takes place through interme-
     transparent products. REAAL Verzekeringen’s clients                      diaries. Besides these mortgage chains, purchase organi-



42   SNS REAAL            Annual Report 2008 report of the executive board
sations, banks and underwriting agents also play a major      and in further chain integration. The online availability
role. REAAL Verzekeringen also uses SNS Retail Bank’s         of current information on the extranet Mijn REAAL has
distribution channels. It is essential to respond alertly     improved significantly. REAAL Verzekeringen introduced
and creatively to new opportunities in each distribution      special, low rates for intermediaries using MP4ALL, the
channel.                                                      Meetingpoint digital transaction platform for inter-
                                                              mediaries. The reduced rates are applicable to car,
Direct distribution of REAAL non-life, representing a         residence and residence contents insurances. As a result,
minor part of the total income (6.4% in 2008), is effected    the number of digital transaction increased sharply.
through REAAL’s subsidiary Proteq. This direct distri-        Meetingpoint, a cooperation between 13 Dutch insurers,
bution involves simple non-life products, which can be        does not only aim at chain integration between inter-
purchased without advice. As a result of central and joint    mediary and insurer, but also chain integration between
product development and data administration, REAAL            intermediary and consumer. Using a web module on its
Verzekeringen is a flexible organisation.                     website, the intermediary can offer the visitor the option
                                                              to calculate his own premiums and apply for insurances.
The strategy is mainly aimed at maintaining the strong        Digital transactions, including the preliminary and
market position in individual life insurance and growth       follow-up stage, result in cost savings for both the
in the SME non-life market and disability insurance. In       insurer and the intermediary due to standardisation and
addition, REAAL Verzekeringen wants to improve the cost       efficiency. As a result, the competitiveness in relation to
base significantly in the coming years.                       providers of non-life insurance using the direct channel
                                                              is increasing.
Organisation and distribution                                 REAAL Verzekeringen’s marketing communication
In early 2008, within nine months after the acquisition,      focused on the Dutch network of highways, using
REAAL Verzekeringen completed the integration of the          billboards and mobile advertising with texts such as ’70%
AXA NL product range. During this process, approxi-           chance that you didn’t see me coming. Stay alert. REAAL.
mately 800 employees obtained a new position, many            A realistic approach towards insurance’. By means of this
of which in a new location. Production sites have been        kind of statements, REAAL Verzekeringen wants to show
centralised, duplications have been eliminated, new           that insurance is simply a matter of risk and probability
products and options have been added, and the best            calculations based on past facts and experiences.
elements of REAAL Verzekeringen, AXA and Winterthur
have been combined. In April, REAAL Verzeker-                 In 2008, REAAL Verzekeringen became main sponsor of
ingen presented its new product range to intermedi-           the Dutch tennis federation, the KNLTB. REAAL Verzeker-
aries. The production sites for all product groups were       ingen wishes to supports the social role tennis plays in
centralised. SNS REAAL is convinced that the estimated        the Netherlands and contributes to improved facilities
synergies of € 50 million a year will be achieved at          for street tennis, school tennis and wheelchair tennis.
year-end 2010. A year ahead of the original plan.             The name REAAL can also be seen at local clubs and
                                                              other tennis events in the Netherlands. In addition,
In 2009 the pension production of REAAL Verzekeringen         REAAL supports young, talented professional tennis
will be incorporated into Zwitserleven’s pension activities   players. With this sponsorship contract, effective
and the production of individual life insurance products      through 2011, REAAL Verzekeringen wants to boost
and disability insurance products of Zwitserleven will        its brand recognition and reputation in broad layers
be incorporated into REAAL Verzekeringen’s service            of the population. Approximately 700,000 Dutchmen
centre. The joint platform for systems and processes will     are member of a tennis club, and some 500,000
be completed before 2012. Both brands will continue to        non-members more are regularly renting a tennis court.
market their own products. Total savings for SNS REAAL        After football, tennis is the most popular sport in the
are expected to amount to € 35 million a year as of           Netherlands.
2012. The market positions and distribution channels of
Zwitserleven and REAAL Verzekeringen complement each          Unit-linked insurances: more
other. REAAL Verzekeringen has a strong position in the       transparency and guarantee
SME market and among retail clients with an average           REAAL Verzekeringen, also on behalf of Zwitserleven,
income level, and Zwitserleven has a strong position          is still in discussion with representatives of unit-linked
mainly in the large corporate and SME markets and             policyholders, with the aim of reaching a settlement.
among retail clients with higher incomes.                     It is expected that an agreement will be reached in the
REAAL Verzekeringen has invested once more in                 first half of 2009. During 2008 the legal adjustments
coaching of, and information services to intermediaries       were carried through. Additional adjustments of unit



                                                              SNS REAAL     Annual Report 2008 report of the executive board   43
     linked policies and other individual life insurances            Reinsurance premiums rose by € 7 million to € 20 million,
     will follow in 2009, so that they meet the needs and            due to the consolidation of AXA NL. The life reinsurance
     wishes of the current consumers. Central issues are             transaction of € 29 million booked in the first half of
     transparent product structure, accessible product               2008 was cancelled in the second half and the related
     information, cautious return forecasts, more protection         premiums were reversed.
     against negative market factors, more guarantees on
     terminal funding capital and fewer options for the              The share in the result of associates of negative € 14
     consumer.                                                       million is included in the impact volatile markets.
                                                                     This was due to an investment fund (Ducatus).
     REAAL Leven
     Financial developments                                          The result on investment income for own account
     Result                                                          increased by € 132 million compared to 2007 (+ 18.6%).
     The net result of REAAL life was down by € 650 million          Without the impact of the volatile financial markets of
     from € 177 million in 2007 to negative € 473 million            € 127 million negative in 2008 and € 120 million positive
     in 2008. This decrease was due to the adverse impact            in 2007, the underlying investment income increased by
     of the volatile financial markets of € 570 million and          € 379 million, of which € 288 million was related to the
     the negative one-off of € 77 million recorded in 2008.          acquisition of AXA NL. Excluding this impact, investment
     The latter was a result of the provision taken for the          income for own account increased by € 91 million, mainly
     unit-linked policies arrangement in the second half of          as a result of increased interest income of structured
     2008.                                                           tax investments of € 46 million. The increased interest
                                                                     expenses concerning these investments were € 34
     Underlying net profit decreased by € 3 million (− 3.6%),        million. Interest income rose due to higher bond rates
     to which AXA NL contributed an amount of € 27 million.          and higher cash deposit levels. Finally, the settlement
     Underlying net profit of REAAL Life declined organically        of a co-insurance contract resulted in € 10 million
     by € 30 million, mainly as a result of higher operating         investment income, almost fully offset by corresponding
     expenses in relation to integration programmes,                 charges included in other expenses.
     impairment charges on property for own use and the
     absence of surrender fees in 2008.                              Unlike investments for own account, the investments
                                                                     for insurance contracts on behalf of policyholders have
     AXA NL Life’s contribution to the underlying result             a significant exposure to equity markets whose decline
     AXA NL Life made a contribution of € 31 million to the          caused a sharp loss on investment income for account of
     underlying net profit of life Insurance activities for the      policyholders. This was offset by a gain in the technical
     full year 2008. For the four months ended 31 December           claims and benefits.
     2007, the underlying contribution had been € 4 million.
     The higher contribution from AXA NL to the underlying           The result on financial instruments improved by € 70
     net profit is caused by the full year consolidation and         million to € 101 million, including a positive impact of
     higher investment income.                                       volatile financial markets of € 31 million compared to € 22
                                                                     million positive in 2007. This impact consisted mainly
     Income                                                          of unrealised losses on interest rate derivatives (€ 108
     Total income of REAAL life was down by € 348 million            million) to protect solvency against volatile interest
     from € 2,864 million to € 2,516 million (− 12.2%).              rates, more than offset by unrealised profits on equity
     Due to the consolidation of AXA NL, total life premiums         hedges (€ 139 million). The underlying result on financial
     increased substantially by € 917 million compared               instruments improved by € 61 million, mainly due to
     to 2007 (+ 46.0%). Regular life premiums grew by                unrealised profits on swaption agreements (€ 59 million).
     € 422 million (+ 36.6%) and single premiums grew by             This result largely compensated extra additions to
     € 495 million (+ 58.9%). Excluding AXA NL regular life          insurance contracts for guaranteed products, included in
     premiums rose by € 16 million (+ 1.7%) and single life          technical claims and benefits, as a result of the currently
     premiums fell by € 71 million (− 10.5%). The latter was         low interest rate environment.
     due to a deliberately lower production of yearly annuity
     products.                                                       Other operating income consisted mainly of the one-off
                                                                     item of € 39 million gross (€ 29 million net) ceding
     Taking into account AXA NL 2007 pro forma figures,              commission related to the reinsurance transaction in the
     regular life premiums declined by € 33 million (− 2.1%)         first half of 2008 already noted. Following the cancel-
     and single premiums grew by € 15 million (+ 1.1%).              lation of this transaction, in the second half of 2008 an



44   SNS REAAL    Annual Report 2008 report of the executive board
impairment on receivables of € 39 million (€ 29 million      income (€ 10 million), should be eliminated. This resulted
net) was included in impairment charges. The € 39            in an increase of € 25 million, for € 14 million caused
million, representing the discounted gains on a book         by additional costs for temporary employees as staff
of life insurance business, will now be released to net      turnover was higher than expected. At the end of 2008
earnings in line with the duration of underlying policies.   this situation stabilised and temporary staff was reduced
In 2007, other income was € 7 from received surrender        by more than 215 FTE. Finally, expenses increased
fees.                                                        as a result of general cost increases (€ 5 million) and
                                                             the amortisation of a new layer of capitalised internal
Expenses                                                     acquisition costs (€ 5 million).
Total expenses increased with € 520 million from € 2,641
million to € 3,161 million (+ 19.7%). Total technical        Other interest expenses rose by € 107 million to € 186
claims and benefits were down by € 262 million to            million of which AXA NL contributed € 61 million,
€ 1,910 million. Charges for account of policyholders        including funding costs related to the acquisition.
were down by € 1,123 million because of lower stock          Organically, excluding the impact of AXA NL, interest
markets. Technical claims and benefits for own account       costs increased by € 63 million due to funding costs
increased by € 861 million. Organically, excluding the       related to structured tax investments (€ 34 million) and
impact of AXA NL of € 891 million, and the pre-tax one-off   increased repo activities to improve the liquidity position
item of € 103 million concerning the unit-linked policies    of SNS REAAL in current volatile markets (€ 27 million).
arrangement (€ 77 million net), technical claims and
benefits decreased by € 133 million. The decrease was        The operating cost/premium ratio remained stable at
due to lower single life premiums partly compensated by      12.8% compared to 2007.
the extra additions to insurance contracts for guaranteed
products as a result of the currently low interest rate      Taxes
environment. The latter was largely offset by results on     The effective tax rate changed from 19.7% to 27.1% due
swaption agreements.                                         to the relative smaller amount of tax exempted results in
                                                             total result.
Acquisition costs for Insurance activities increased by
€ 9 million to € 187 million, of which AXA NL contributed    New Annual Premium Equivalent
€ 28 million. Excluding AXA NL the acquisition costs         The new annual premium equivalent life (NAPE) rose
decreased by € 19 million due to lower single life           by € 49 million to € 256 million. The positive impact of
premiums and the adjustment of € 15 million in 2007 to       the full year contribution of AXA NL was partly offset
better align the amortisation period of acquisition costs    by weakened demand for unit-linked products and
with premiums from policyholders.                            competitive insurance markets.

Impairment charges increased from € 27 million to € 600      Value of New Business
million, mainly due to the impact of volatile financial      For 2008, the value of new business (VNB) was nil (2007:
markets of € 532 million (compared to € 16 million in        € 14 million). The VNB remains under pressure due to
2007) and the impairment related to the reinsurance          competitive markets for regular and individual single
transaction of € 39 million which was included in the        premiums, as wel as tightening rates on the market for
one-off items. The underlying impairment charges             immediate annuities.
amounted to € 29 million, an increase of € 18 million
compared to 2007, due to impairments on property for         Commercial developments
own use. The remaining impairment charges consisted
of impairments on loans to intermediaries, which were        Individual life
comparable with 2007.                                        The market for products based on regular premiums
                                                             was under pressure due to a decreasing number of new
Operating expenses, which consist of staff expenses,         mortgage-related life insurance contracts. The total
depreciation and other expenses, rose by € 93 million,       market for regular individual life insurance fell by 7.7%.
mainly due to the acquisition of AXA NL (€ 55 million)       Particularly the market for unit-linked insurance saw a
including the balance of integration costs (€ 14 million)    steep decline, as a result of changes in tax legislation and
and synergy benefits (€ 11 million) related to the           the debate on transparency in investment products and
integration of AXA NL. To arrive at the organically cost     due to the current financial markets. Individual premium
rise, € 13 million charges in respect of a co-insurance      income increased with € 826 million (+ 43.7%) as a result
settlement, which were almost fully offset by investment     of the acquisition of AXA NL as per 5 September 2007.



                                                             SNS REAAL     Annual Report 2008 report of the executive board   45
     The organic decrease of premium income (4.7%) was                   The market for individual single life premium policies
     due to the large volume and market share in unit-linked             has stabilised compared to 2007. REAAL Verzekeringen
     insurances.                                                         increased its market share, from 11.8% to 18.7%, mainly
     The Combi Budget Plus Hypotheek from AXA-NL                         as a result of the favourable development of individual
     was incorporated into the REAAL product range and                   pension insurances and as a result of the contribution
     showed strong development despite a difficult market.               by DBV Verzekeringen. DBV Verzekeringen, which was
     This mortgage scored mainly because of a competitive                acquired as part of AXA NL in 2007, operates under its
     interest rate for fixed-rate periods up to and including            own brand name and specialises in released annuity
     10 years and a low interest rate surcharge of 0.10%.                capital, life insurance, pensions and mortgages.
     In connection with the poor financial climate and the
     discussion about unit-linked insurance, the demand for              Group and semi-group life insurance
     savings and guarantee products increased. At year-end               The group and semi-group pension portfolios grew by
     2008, REAAL Verzekeringen introduced a simple savings               21.3%. REAAL Verzekeringen is market leader in the
     mortgage that may be linked to different capital providers.         segment of defined contribution products and conducted
     REAAL Verzekeringen assessed the full product range                 several successful campaigns, including pension
     of individual regular premium products as to the effect             check-ups in order to determine the demand for comple-
     of a maximum consumer premium price of 2.5%, as                     mentary pension schemes. One of the most successful
     recommended by the Financial Services Ombudsman in                  products was once again the Group Individual Pension
     2008. It turned out that the savings insurance products             Plan for the SME segment. For purposes of the duty of
     could not meet the new standard and were therefore                  care, a life cycle manager was incorporated on the basis
     removed from the product range.                                     of SNS Optimaalfondsen, thus reducing the risk as the
                                                                         retirement age nears.
     The annual performance survey by DAK, NBVA and NVA
     showed again that REAAL Verzekeringen is one of the                 On the basis of elements from REAAL, AXA and Winterthur
     best insurers in the individual life insurance category.            products, REAAL Verzekeringen developed, also for the
     In 2008, REAAL Verzekeringen was judged the third best              SME market, the Vast&Zeker Pensioen, which combines
     insurer (source: VB Insurance Barometer).                           defined contributions with guaranteed terminal funding.
                                                                         This way, REAAL Verzekeringen aims at the increasing
        28 Size of new production individual Life
                                                                         demand for more guarantees without losing budgetable
                                                                         pension costs for the employer. At year-end 2008,
                                                                         additional warranty provisions were included in the Group
        9%
                                                                         Individual Pension Plan. For the other products, price
                                                                         reductions were introduced in order to secure growth.

                                                                         REAAL Non-life
                                                                         Financial developments
       91%                                                               Result
                                                                         The net result of non-life activities was up by € 3 million
                                                                         to € 26 million (+ 13.0%). This result included an adverse
                                                                         impact of volatile financial markets of € 23 million
             Individual Life - regular                                   almost entirely related to losses on the equity portfolio.
             Individual Life - single                                    Excluding the adverse impact of volatile financial

     Table 17: REAAL Life premium income

                                               Premium income            Premium income            Growth            Organic growth
                                                    2008                      2007                                 (excluding AXA NL)
     Individual regular premiums                     1,436                    1,087                 32.1%                   0.3%
     Individual single premiums                      1,281                       804                59.3%                (11.8%)
     Total individual                                2,717                    1,891                 43.7%                  (4.7%)
     Group regular premiums                             139                       66               110.6%                  14.9%
     Group single premiums                              55                        37                48.6%                  33.0%
     Total group                                        194                      103                88.3%                  20.8%
     Total premium income                            2,911                    1,994                 46.0%                   3.4%



46   SNS REAAL        Annual Report 2008 report of the executive board
markets and the one-off item regarding the Kyrill storm        temporary employees as staff turnover was higher than
of € 12 million in 2007, the underlying result improved by     expected. At the end of 2008 this situation stabilised and
€ 13 million to € 49 million. This improvement was mainly      temporary staff was reduced by more than 85 FTE.
driven by the increased profit contribution from AXA NL
of € 26 million.                                               Other interest expenses rose by € 14 million of which
The organic underlying net result declined from € 27           AXA NL contributed € 13 million (mainly funding costs
million to € 14 million due to higher technical claims         related to the acquisition). Organically the other interest
and benefits, as a consequence of a higher regular claim       expenses remained virtually flat.
charge and higher operating expenses.
                                                               Claims ratio and combined ratio
Income                                                         The claims ratio of 50.1% improved compared to 2007
Total income increased with € 234 million from € 598           (53.2%: excluding the impact of the Kyrill storm).
million to € 832 million (+ 39.1%). Total non-life             The higher level of the regular claim charges was partly
premiums increased substantially by € 219 million              compensated by positive run-off results of AXA NL.
from € 590 to € 809 million (+ 37.1%), mainly due to           This resulted in an improved combined ratio of 92.3%,
the consolidation of AXA NL. Organically, premiums             compared to 2007 (95.9% excluding Kyrill).
increased by 2.6% to € 471 million.
                                                               Commercial developments
Investment income increased by € 24 million compared           The premium income of REAAL Non-life rose from € 590
to 2007 (+ 57.1%) despite impact volatile financial            million to € 809 million (+ 37.1%), including the consoli-
markets of € 10 million negative. The underlying               dation of AXA NL as per 5 September 2007. The share
investment income rose by € 34 million (+ 81.0%), mainly       of premium income in the total income of REAAL
due to the increased contribution of AXA NL.                   Non-life decreased from 98.7% to 97.2%. Premiums
                                                               grew organically to € 471 million (+ 2.6%), with the
Expenses                                                       higher income from transport premiums partially being
Total expenses increased with € 228 million from € 568         negated by lower motor vehicle and disability insurance
million to € 796 million (+ 40.1%). Total technical claims     premiums. Estimates suggest that the total non-life
and benefits increased by € 107 million to € 410 million       market stabilised. The market share achieved for 2007
(+ 35.3%). Excluding the impact of the Kyrill storm of € 16    was 3.9% and the estimated market share for 2008 is
million gross in 2007, underlying technical claims and         approximately 5.3%.
benefits increased by € 123 million. AXA NL contributed
€ 97 million to this increase. Organically, technical claims   SME and corporate non-life insurance activities, partic-
and benefits increased by € 26 million due to the higher       ularly transport insurance, mainly contributed to the
number of medium claim charges in the business lines           growth. REAAL Verzekeringen was able to substantially
motor and Transport (Marine).                                  increase the number of policies and contract renewals as
                                                               a result of AXA NL’s contribution. REAAL Verzekeringen
Acquisition costs for insurance activities were € 46           approaches the corporate market in three ways: through
million higher, of which AXA NL contributed € 42 million.      the retail channel, through tailor-made solutions for
Organically, acquisition costs for insurance activities        specific companies and through co-insurance via under-
increased by € 4 million, in line with increased gross         writing. The improved position in the higher segment
premium development.                                           contributes to better brand recognition and a better
                                                               reputation throughout the corporate market. Many
Impairment charges increased from € 2 million in 2007 to       intermediaries increased their efforts for the corporate
€ 20 million in 2008, fully driven by the volatile financial   non-life segment to compensate for the slowdown of the
markets.                                                       individual life insurance market, which had a beneficial
                                                               effect on turnover.
Operating expenses (staff costs, depreciation and
amortisation of fixed assets and other expenses) rose          REAAL Verzekeringen expanded its retail market product
by € 43 million, mainly due to the acquisition of AXA NL       range with pleasure craft and moped insurances and
(€ 37 million), including the € 2 million balance of           with outdoor insurance as an extension of the residence
integration costs (€ 7 million) and synergy benefits (€ 5      contents insurance, in response to an increasing
million) related to the integration of AXA NL. Excluding       demand for this product in the market. The outdoor
the impact of AXA NL operating expenses increased by           insurance insures objects which a client often takes
€ 6 million due to higher staff costs, caused by additional    away from home against theft, loss and material damage



                                                               SNS REAAL     Annual Report 2008 report of the executive board   47
     at a maximum insured amount. There are only a few                  order. Zelf.nl started in 2008 by offering car insurance
     companies offering this product. This insurance can be             and is gradually expanding its product range.
     taken out by a private individual, but also by freelancers
     for business purposes.                                             The Proteq brand continues to aim at retaining and
                                                                        further developing the existing portfolio. Proteq has built
     Disability insurance                                               a substantial position with large closed groups which are
     Income from disability insurance premiums increased                provided with tailor-made products. Dier en Zorg (animal
     by 117.1% to € 89 million, mainly thanks to the contri-            insurance) showed substantial growth. The number of
     bution by AXA NL. Disability insurance premiums, as a              policies increased by approximately 13%. This was partly
     percentage of the total income from non-life premiums,             the result of new marketing techniques, mainly aimed at
     consequently increased by 4 percentage points to 11%.              awareness of the medical costs for animals. The number
                                                                        of clients of Route Mobiel (vehicle breakdown assistance
     AXA NL’s product range formed the basis for REAAL                  insurance) decreased by 6.4% and the number of policies
     Verzekeringen’s new product range, the production and              decreased by 6%.
     management of which takes place at a single location.
     REAAL Verzekeringen offers three product groups in                 REAAL Other activities
     this market: individual disability, group disability and           REAAL Verzekeringen’s other activities comprise business
     absenteeism insurance. In 2008, we focused on process              units that are not managed directly by REAAL Life or
     optimisation, market research, survey of existing degrees          REAAL Non-life. The net loss of the other activities was
     of cover for new products and better access to specific            € 32 million, compared to a profit of € 5 million in 2007.
     target groups, such as freelancers and branches in the             This loss was mainly caused by the impact of the volatile
     SME market.                                                        financial markets. The increasing spreads for loans
                                                                        generated an unrealised net loss of € 33 million on DBV’s
     Direct distribution                                                mortgage portfolio, which is recognised at fair value
     REAAL’s subsidiary Proteq distributes its retail non-life          through profit and loss.
     and funeral insurances through the direct channel,
     i.e. without intervention of intermediaries. In the                The underlying net profit decreased from € 11 million to
     Dutch retail non-life market, approximately 20% of the             € 1 million, mainly as a result of the full impairment of
     turnover is generated through direct distribution and              the intangible assets of Route Mobiel (€ 7 million), net
     this percentage is growing each year. Proteq’s income              integration costs of € 8 million, and higher staff costs due
     was slightly lower compared to 2007, partly due to a               to one-off net pension costs of € 4 million. This was partly
     comprehensive strategic reorientation. In September                set off by positive results on interest hedges on the DBV
     2008, Proteq launched Zelf.nl, a new consumer brand                mortgage portfolio in the amount of € 12 million.
     with its own website. This resulted in a very substantial
     increase of new production in the last quarter.                    Zwitserleven
     Zelf.nl is based on advanced internet marketing,                   Strategy
     centralising on mainly automated behaviour and                     Zwitserleven wants to be the most important pension
     demands analysis, monitoring, database management,                 insurer in the Netherlands. As a leading specialist
     information management and cost control for each                   pension insurer, Zwitserleven offers its clients a varied
                                                                        package of services and products aimed at income for
        29 Income non-life 2008                                         the future. Zwitserleven’s clients are large companies,
                                                                        SME companies and private individuals in the
                                                                        Netherlands. In order to provide clients with optimum
                                                                        service, Zwitserleven uses market teams that focus on
       16%
                                                                        specific market segments.

                                                                        Zwitserleven has a well-balanced distribution mix.
                                                                        Zwitserleven offers its products and services in
       84%
                                                                        collaboration with intermediaries and professional
                                                                        advisers, through its own website and in the Zwitserleven
                                                                        advice lounges.

             Direct distribution                                        Zwitserleven’s strategy aims at further growth in the
             Indirect distribution                                      market for pensions by further strengthening its position



48   SNS REAAL       Annual Report 2008 report of the executive board
in the large corporate market, by gaining market share        information on the best (customised) solutions for
in the SME market on the basis of intense collaboration       their clients. Zwitserleven’s high-quality services were
with intermediaries and by efficiently using the strong       highlighted by the annual performance survey by DAK,
brand ‘Het Zwitserleven Gevoel’ in the retail market.         NBVA and NVA. Zwitserleven was awarded the title ‘best
Clients in the higher income segment constitute the target    insurer’ in the group life insurance category. (source:
group. Client satisfaction and employee satisfaction are      VB Insurance Barometer). In the Nationaal Performance
important long-term objectives. Zwitserleven considers        Onderzoek PensioenInsurers by IG&H Consulting
its employees’ professionalism and commitment one of          & Interim, intermediaries also awarded Zwitserleven the
the cornerstones for the company’s success. Zwitserleven      highest rating for its performance in the group market.
aims for cost and income synergies in production and
distribution by working together with other business units    Financial developments
of SNS REAAL.                                                 Result
                                                              Zwitserleven’s net result was € 71 million negative.
Organisation and distribution                                 Excluding the adverse impact of volatile financial
The acquisition of Zwitserleven as per 29 April 2008          markets of € 87 million, the underlying result was € 17
signifies a major strengthening of SNS REAAL’s insurance      million positive. This included € 22 million net additional
activities. Zwitserleven is a strong brand with high brand    funding costs and € 12 million net impact purchase
recognition and a good reputation, particularly in the        price allocation (ppa) relating to the acquisition.
field of pensions.                                            The underlying net result before ppa and funding costs
                                                              resulted in a profit of € 51 million.
The pension market is changing rapidly and offers
great growth potential. For example, consumers have           The adverse impact of volatile financial markets of € 87
obtained more responsibility for their own pensions           million consisted of losses on the equity portfolio partly
due to a retreating government and the Dutch people’s         compensated by equity hedges (in total € 51 million),
life expectancy is increasing. Encouraged by the trend        losses on the fixed income portfolio (€ 28 million) and
that smaller pension funds are willing to place their         unrealised losses of € 8 million on investments at fair
pensions with private parties, pension insurers position      value through profit or loss.
themselves in such a way that they can claim a larger
portion of the pension market. In addition, pension           Income
insurers are able to offer better terminal funding capital    After consolidation of Zwitserleven as of 29 April 2008
guarantees on their insurances than pension funds on          premium income was € 664 million, of which € 400
their pensions.                                               million was pension premium income. Pensions are a
                                                              highly seasonal business, with the majority of premiums
In 2008, preparations were made for the reverse               accounted for in the first quarter of each calendar year.
integration of Zwitserleven, pursuant to which REAAL          For 2008, including the period from 1 January to 29 April,
Verzekeringen’s pension production will be incorporated       Zwitserleven’s premium income of € 1,252 million was
into Zwitserleven’s pension activities.                       10.6% lower than pro forma 2007.

Zwitserleven invested in the relationships with               Expenses
intermediaries and independent business consultants,          Total expenses from 29 April to December 2008 were
who received even better, individually tailored               € 815 million. Total technical claims and benefits charge


Table 18: Zwitserleven total premium income

                                      Premium income         Premium income         Premium income         Pro forma growth
                                     2008, as of 29 April     pro forma 2008         pro forma 2007
Individual Regular premiums                  130                    219                     228                    (3.9%)
Individual Single premiums                   134                    258                     184                    40.2%
Total individual                             264                    477                     412                    15.8%
Group regular premiums                       204                    461                     421                     9.5%
Group single premiums                        196                    314                     567                   (44.6%)
Total group                                  400                    775                     988                   (21.6%)
Total premium income                         664                  1,252                   1,400                   (10.6%)



                                                              SNS REAAL     Annual Report 2008 report of the executive board   49
     amounted to € 461 million, impacted by a € 66 million           The result on financial instruments improved by
     release attributable to policy holders due to lower equity      € 32 million to € 46 million, mainly due to unrealised
     markets. The impairment charge of € 141 million was fully       positive results on equity hedges of € 45 million, which
     driven by the volatile financial markets. Restructuring         partly compensated the impairments and realised
     costs for 2008 were negligible.                                 losses on equities of € 118 million. Excluding the
                                                                     increased impact of volatile financial markets of € 43
     Pro forma figures Zwitserleven                                  million positive, the result on financial instruments
     For comparison purposes, pro forma figures have been            declined by € 11 million due to unrealised losses on
     prepared for full-year 2008 and 2007. These figures take        inflation swaps.
     into account the effects of the ppa, normalisations, the        The income on invested collateral securities lending
     impact of volatile financial markets and additional funding     remained virtually flat.
     costs. The figures for the period 29 April 2008 until 31
     December 2008 are included in the SNS REAAL financial           Expenses
     statements.The determination of the ppa continued               Technical claims and benefits decreased by € 700
     during the second half year of 2008 and will be finalised       million. This decrease mainly consisted of lower
     within 12 months from the date of the acquisition.              expenses on behalf of policyholders due to lower equity
                                                                     markets for an amount of € 464 million. The lower
     Result                                                          expenses, technical claims and benefits for own
     Zwitserleven’s pro forma net result for 2008 was a loss         account of € 236 million was mainly attributable to the
     of € 49 million, a decrease of € 64 million compared            high level of new group business in 2007 which was not
     to pro forma 2007. This decrease was mainly due to              repeated in 2008 and the conversion of a large group
     the adverse impact of the volatile financial markets of         contract from traditional to unit-linked.
     € 67 million and a negative one-off item of € 1 million.        The acquisition costs for insurance activities of
     The improvement of the underlying net result by € 4             € 20 million were in line with 2007.
     million to € 27 million (+ 17.4%) was mainly related to         Impairment charges increased sharply to € 141 million
     higher direct investment income due to the growth of            in 2008, which was entirely due to the volatile financial
     the investment portfolio, partly compensated by higher          markets.
     profit-sharing. Furthermore, the growth of the more
     profitable part of the traditional insurance portfolio,         Operating expenses (staff costs, depreciation and
     driven by new business concluded in previous years              amortisation fixed assets and other expenses)
     contributed to the improved result. These positive              increased by € 7 million. The increase was due to higher
     impacts were partly compensated by lower disability             staff costs, related to implementing the ‘Pension law’
     results and increased operating expenses.                       and increased staff pension costs.

     Income                                                          The interest expenses securities lending decreased
     On a pro forma basis premium income at Zwitserleven             by € 5 million to € 148 million in line with the decline
     decreased by 10.6% to € 1,252 million. Regular premiums         in the portfolio. As part of the SNS REAAL’s de-risking
     showed an increase of 4.8% to € 680 million due to the          initiatives, the securities lending portfolio was reduced
     group insurance activities, whereas regular premiums            during 2008 by € 0.9 billion to € 2.3 billion and will be
     from individual clients were stable compared to last year.      reduced further during 2009.
     Single premiums fell by 23.8% to € 572 million mainly           Other interest expenses rose by € 9 million, mainly
     within group business due to the lower number of large          due to interest charges related to reinsurance and
     new corporate clients contracts. Net fee and commission         co-insurance settlements in previous years, which were
     income improved by € 7 million to positive € 4 million,         partly compensated by higher investment income for
     mainly driven by lower rates paid for asset management          own account.
     services.
                                                                     Operating cost/premium ratio
     Investment income for own account was € 15 million              The operating cost/premium ratio of 13.5% decreased
     higher. Excluding the impact of volatile financial              as compared to 2007 (12.8%) mainly driven by higher
     markets of € 8 million, this income rose by € 23 million        incidental staff costs related to implementation
     mainly due to increased interest income resulting               of the ‘Pension Law’ and increased staff pension
     from growth of the fixed income investment portfolio.           costs. The ratio did not benefit from integration cost
     The investment income for risk of policy holders declined       synergies: these benefits will start to come through as
     by € 550 million.                                               of 2009.



50   SNS REAAL    Annual Report 2008 report of the executive board
New Annual Premium Equivalent (NAPE)                           30 Volume new production pro forma 2008
The NAPE slightly decreased by € 22 million to € 200                 group life Zwitserleven
million (− 9.9%). The NAPE improved for individual
clients with € 5 million, in line with the increased
traditional single premiums. This improvement was more        16%

than compensated by the decline of € 27 million within
group business mainly due to the lower number of large
new corporate clients contracts as compared to 2007.

Value of New Business (VNB)                                   84%

The VNB decreased by € 5 million to € 8 million and was
calculated on an European Embedded Value basis (EEV).
The VNB remains under pressure due to competitive
                                                                    Group Life - regular
markets for regular and individual single premiums,                 Group Life - single
as well as tightening rates in the market for immediate
annuities.
                                                            product line, the Zwitserleven i-Pensioen, also developed
Commercial developments                                     positively.
Group life
In the total market for group pension insurance, REAAL      Individual life
Verzekeringen and Zwitserleven belong to the major          New production of individual regular premiums
providers. In the large corporate pension market,           decreased by € 7 million (− 41.2%). New production of
Zwitserleven is a top 3 player with a market share of       individual single premiums increased by € 86 million
approximately 11% (source: AM Year book 2008). In this      (+ 56.2%), mainly as a result of a sound development
market, Zwitserleven also focuses on risk reinsurance, in   in the individual single premiums within the traditional
respect of which it is the second player.                   retail segment. In the current market conditions, retail
                                                            clients prefer the traditional single premiums over
On a pro forma basis group regular premium income           investment products.
increased to € 461 million (+ 9.5%). The group single       Regular premiums were under pressure as a result of
premium income decreased to € 314 million (− 44.6%)         the slowdown in the market for mortgages, mortgage-
also on a pro forma basis. The premium income was           related insurance and unit-linked policies. The premium
adversely affected by uncertainty among major clients       income was positively affected by the retention of clients
about Zwitserleven’s future in the period prior to the      with terminable annuity policies, more customised
intended acquisition in late 2007. Furthermore, income      solutions for intermediaries and the further development
in 2007 showed an exceptional picture as a result of        of direct distribution.
the one-off impact of a few major contracts. Price
competition increased in 2008. Zwitserleven was looking     Zwitserleven responded very well to the changes
for a healthy balance between margins and market            in the retail market in 2008. Whereas the markets
share, with its market share showing a slight decrease.     for unit-linked insurance and mortgages sharply
In late 2008, Zwitserleven realised several substantial     decreased, the markets for traditional products and
orders in the large corporate market, which may serve as    single premiums improved. In the second half of the
reference in 2009.                                          year, Zwitserleven launched a new mortgage line aimed
                                                            at consumers in the premium segment. Zwitserleven
In the SME market, Zwitserleven developed positively        emphatically highlighted the life cycle product, and
in 2008. Zwitserleven’s tailor-made product based           launched the Groen Pensioen in collaboration with ASN
on investments, the Zwitserleven Pensioen, strongly         Bank. This product gives consumers the opportunity to
contributed to this increase. Zwitserleven’s web-based      build up a pension in a sustainable way.




                                                            SNS REAAL         Annual Report 2008 report of the executive board   51
              Developments Group activities
              The net result from Group activities decreased by € 86 million to a loss of € 98 million
              (− 716.7%).


     SNS REAAL’s Group activities comprise SNS Asset                    the external market for sustainable institutional asset
     Management, Zwitserleven Asset Management,                         management.
     SNS REAAL Invest and the staff departments. These
     activities are managed directly by the Executive Board.            The strategy for the management of the investment
     Income and expenses that are directly attributable                 funds comprises:
     are allocated to SNS Bank or REAAL Verzekeringen.                   Independent management of the investment funds
     Consequently, the result on Group activities is the                   focusing on the Netherlands and on sustainable asset
     balance of income and expenses that are not directly                  growth.
     attributable.                                                       Joint management of a number of other investment
                                                                           funds with a partner, pooling joint expertise and
     Financial developments                                                management capacity.
     The negative impact of the volatile financial markets on            Management of investment funds composed
     the Group activities’ net loss of € 98 million amounted               of specialised funds of other investment fund
     to € 65 million and consisted almost entirely of                      managers.
     realised losses and impairments on shares. The value
     of this portfolio, excluding SNS REAAL’s stake in                  SNS Asset Management performs complete company
     Van Lanschot NV, amounted to € 23 million at year-end,             analyses, whereby in addition to the financial situation,
     with a fair value reserve of nil. At the beginning of              governance, environmental policy and social policy of
     2009, this portfolio was sold excluding the stake in               enterprises is evaluated.
     Van Lanschot NV.
                                                                        Developments 2008
     SNS Asset Management                                               SNS Asset management’s assets under management
     Strategy                                                           increased from € 18.7 billion to € 22.9 billion (+ 22.5%),
     SNS Asset Management’s primary objective is the                    particularly as a result of the transfer of the AXA NL
     responsible management of the investments of                       portfolios. Organic growth of the assets under
     SNS Bank and REAAL Verzekeringen for own account                   management was slightly positive (+ 1.1%). The decrease
     and the investment funds of SNS Bank and ASN Bank.                 in share prices had great impact. Growth of the number
     In addition, SNS Asset Management takes care of the                of clients of SNS Bank and ASN Bank, the large share of
     administration for a large number of funds of REAAL                fixed-income securities in the portfolios for own account,
     Verzekeringen and SNS Regio Bank and focuses on                    the portfolio composition of the ASN investment funds

        31 Distribution assets under management                            32 Distribution assets under management
              SNS Asset Management 2008                                          SNS Asset Management 2007


       18%                                                                24%



       34%                                                                37%



        7%                                                                 9%



       41%                                                                30%




             SNS Bank                                                           SNS Bank
             REAAL Verzekeringen for own account                                REAAL Verzekeringen for own account
             REAAL Verzekeringen on behalf of policyholders                     REAAL Verzekeringen on behalf of policyholders
             Third party                                                        Third party




52   SNS REAAL       Annual Report 2008 report of the executive board
were all positive factors. The increase in the number of    Zwitserleven Asset Management
external clients for institutional asset management also    Strategy
contributed positively. On balance, there was limited       Zwitserleven Asset Management is the asset manager for
inflow in the SNS and ASN investment funds.                 Zwitserleven and for the Zwitserleven investment funds.
                                                            Zwitserleven Asset Management provides high-quality
Institutional asset management                              and transparent investment solutions for Zwitserleven’s
SNS Asset Management is one of the market leaders           pension and life insurance clients. For this purpose,
in sustainable institutional asset management in            Zwitserleven Asset Management invests in the financial
the Netherlands. In the course of 2008 the market           markets throughout the world. Those investments and
for institutional asset management deteriorated             the ensuing proceeds constitute Zwitserleven’s hedge for
considerably, mainly because the capital positions of       its obligations to clients.
pension funds were under pressure. Throughout the year,
SNS Asset Management’s assets under management              For pension funds and large corporate clients of
increased according to plan to € 22.9 billion. In early     Zwitserleven, Zwitserleven Asset Management performs
2008, the first SNS Institutional Microfinance Fund was     asset management on the basis of extensive knowledge
founded with a total deposit of € 161 million. A second     of pension matters and tailor-made solutions. A separate
fund in the amount of € 113 million was founded in          target group consists of the independent advisers of
November 2008. These funds aim to achieve a healthy         large companies and pension funds performing their
risk-return ratio and to contribute to social development   services on commission for Zwitserleven’s (potential)
in emerging countries by means of providing loans to        clients. Zwitserleven Asset Management furthermore
small businesses and independent entrepreneurs.             performs the management of the investment funds that
                                                            are linked to Zwitserleven’s insurance products (unit-
SNS Asset Management became a fully responsible asset       linked investment funds).
manager in 2008. This means that major investors who
want to invest in arms manufacturers or in companies        As a specialised asset manager for pensions,
that are somewhat casual about human rights and labour      Zwitserleven Asset Management uses an
conditions can no longer call on SNS Asset Management.      active investment style based on the following
With other institutional asset managers, the decision       characteristics: limited deviations from benchmarks,
whether or not to invest responsibly usually lies with      responsible risks, long-term focus, consistent and
the client.                                                 disciplined approach. In this investment style,
                                                            Zwitserleven Asset Management uses instruments for
The demand by pension funds for responsible                 active risk limitation.
investment is increasing. Smaller pension funds are
facing the challenge of guaranteeing sufficient return,        33 Distribution assets under management
                                                                     Zwitserleven Asset Management 2008
cost efficiency and limited risks. For this target group,
SNS Asset Management introduced, in collaboration
with ‘Pensioenfonds (pension fund) voor de Predikanten’       11%

of the Protestant Church Netherlands, a responsible
European index fund: the SNS Responsible Index                69%
Fund Equity Europe. The fund has its own exclusion
criteria, as a result of which this index corresponds         20%
with the European MSCI Index minus twelve excluded
companies. The miners’ pension funds AMF and BFM
were also acquired for this responsible European
index fund. In addition, the Gemeenschappelijk
Beleggingsfonds FNV invested in the ‘SNS Responsible                Traditional life
Index World-fund’. In 2009, a US and Pacific index fund             Separate accounts
will be added.                                                      Unit-linked investments


At year-end 2008, SNS Asset Management introduced           Developments 2008
together with partner Climate Change Capital a              As per 29 April 2008, Zwitserleven Asset Management
sustainable property fund in the Dutch market, which        has been included in the Group activities. Zwitserleven
only invests in office properties that are operated         Asset Management works closely together with SNS Asset
sustainable.                                                Management, amongst others in determining its vision



                                                            SNS REAAL         Annual Report 2008 report of the executive board   53
     on investments and developing new investment                    (− 79.8%) due to downward revaluations and partial sale
     products. The assets under management increased                 of the equity portfolio in financial institutions.
     from € 12.5 billion to € 12.8 billion (+ 2.6%) as a result
     of inflow and the increased value of the fixed-income           Staff
     portfolio.                                                      The staff departments aim for a high level of service
                                                                     and efficiency in their support activities. Centralisation,
     SNS REAAL Invest                                                standardisation and automation are major drivers of this
     SNS REAAL Invest participates and invests in                    strategy. In 2008, several staff departments of SNS REAAL
     companies. The size of the total portfolio decreased            were confronted with continuous cost pressure, related
     from € 114 million at year-end 2007 to € 23 million             to compliance with laws and regulations and the
     (excluding Van Lanschot NV) at year-end 2008                    integration of AXA NL.




54   SNS REAAL    Annual Report 2008 report of the executive board
       Risk and Capital management
        In 2008, the financial markets showed a negative development and a volatility that is rare
        in historic perspective. The effects were more extreme than anticipated. A number of risk
        management measures taken by SNS REAAL had a mitigating effect. Despite these decisions,
        the exceptional circumstances lead to a substantial negative result.


Main developments for 2008                                    Tighter focus on reducing risks
Capital and solvency                                          The credit crunch, which started in 2007, continued
SNS REAAL strengthened her capital position by the issue      and intensified significantly in the second half of 2008.
of € 600 million B-shares to Stichting Beheer SNS REAAL       With this, volatility in global capital markets increased.
(‘the trust’) to fund the acquisition of Zwitserleven. In     The turmoil and volatility on the stock, bond and
addition solvency was strengthened by the issue of € 500      derivative markets caused balance sheets and income
million capital securities to the trust and € 750 million     statements of many financial institutions to be severely
securities capital to the Dutch State. With the proceeds      impacted. At the same time, the global macro economic
of these last two transactions SNS REAAL strengthened         climate deteriorated sharply into a pronounced
SNS Bank’s core capital position with € 260 million and       slowdown in many countries and an outright recession
REAAL’s core capital with € 975 million.                      in some.

Liquidity                                                     The charts below illustrate the large movements and
In the first half year of 2008 a solid liquidity buffer was   extreme volatility in credit spreads, equity prices and
set up, significantly contributed by rapid growth of          interest rates during 2008, especially in the last quarter
savings, caused by increase in customer base, and high        of the year.
retention rates.
                                                                 34 Equity prices
At the end of 2008, the liquidity position amounted
to € 10.7 billion. In addition in January 2009 SNS Bank          %
issued a three year notes of € 2 billion under the Credit       110
Guarantee Scheme of the Dutch State. Furthermore, in            100
February 2009 a back-up facility was closed of € 1 billion       90
with a renowned counterparty. In March 2009 SNS Bank             80
issued a five year note of € 1.6 billion under the Credit        70
Guarantee Scheme of the Dutch State. This secures the            60
wholesale funding into 2010.                                     50
                                                                 40
Market risk
                                                                         dec-07




                                                                                             mar-08




                                                                                                               may-08




                                                                                                                                                   sep-08


                                                                                                                                                            oct-08


                                                                                                                                                                     nov-08


                                                                                                                                                                              dec-08
                                                                                                      apr-08
                                                                                  jan-08




                                                                                                                        jun-08


                                                                                                                                 jul-08


                                                                                                                                          aug-08




The impact of falling share prices on the equity portfolio            DJ EURO STOXX 50
of the insurance activities was mitigated by hedges.                  AEX

During the fourth quarter of 2008 a specific hedging
                                                                 35 Credit spreads
programme to reduce adverse impact of any further falls
in interest rates on the insurance activities took place.       Base points
The equity exposure of the investment portfolio of the          400
insurance activities will be further reduced in 2009 to         350

limit potential downward impact on both solvency and            300
                                                                250
profit.
                                                                200
                                                                150
Credit risk                                                     100
SNS Retail Banking loan book remained sound. The loss            50
indicators for retail mortgages showed only a limited             0
                                                                         dec-07




                                                                                             mar-08




                                                                                                               may-08




                                                                                                                                                   sep-08


                                                                                                                                                            oct-08


                                                                                                                                                                     nov-08


                                                                                                                                                                              dec-08
                                                                                                      apr-08
                                                                                  jan-08




                                                                                                                        jun-08


                                                                                                                                 jul-08


                                                                                                                                          aug-08




rise. The impairments at SNS Property Finance increased,
mainly due to developments in international real estate               Itraxx (Synthetic)
markets.                                                              Iboxx (Cash)




                                                              SNS REAAL                    Annual Report 2008 report of the executive board                                            55
        36 Interest rates                                                                                                   In addition, in 2008 the following improvements in
                                                                                                                            operational risk management systems have been
         %
        5.5
                                                                                                                            implemented within SNS REAAL:
                                                                                                                             Tighter monitoring of counterparty risks, bank
         5                                                                                                                      liquidity and insurance activities solvency.
        4.5                                                                                                                  Coordination and centralisation of management of
                                                                                                                                the investment portfolio.
         4
                                                                                                                             Increased frequency of the meetings of the risk
        3.5                                                                                                                     committees.
                                                                                                                             Greater focus on Earnings-at-Risk (EaR) and
         3
                                                                                                                                Solvency-at-Risk.
                dec-07




                                  mar-08




                                                    may-08




                                                                                        sep-08


                                                                                                 oct-08


                                                                                                          nov-08


                                                                                                                   dec-08
                                           apr-08
                         jan-08




                                                             jun-08


                                                                      jul-08


                                                                               aug-08


              20 yrs Swap rate
              20 yrs Government rate                                                                                        Capital and solvency
                                                                                                                            The issues of B-shares and securities have consid-
                                                                                                                            erably strengthened the capital position and solvency
     The unprecedented market conditions have severely                                                                      of the Group, the banking activities and the insurance
     tested risk management within all financial services                                                                   activities. The double leverage, which is the ratio
     companies. In response, many financial companies,                                                                      between the book value of the subsidiaries and
     including SNS REAAL, are re-evaluating their strategic,                                                                SNS REAAL’s equity, improved from 116.3% at year-end
     tactical and operational risk management. The major                                                                    2007 to 113.7% at the end of 2008, below the target
     adjustments are:                                                                                                       maximum of 115%.
      De-risking of balance sheet exposures by issuing
         more capital.                                                                                                      The solvency ratios of the bank activities as at year-end
      Re-evaluating the possible impact of correlated                                                                      2008, based on the applicable 90% transition floor were
         shocks on diversified business portfolios.                                                                         7.2% for the core capital ratio, 9.4% for the Tier 1 ratio
      More collaboration between risk management and                                                                       and 12.4% for the BIS ratio. Based on a transition floor
         the businesses.                                                                                                    of 80%, which became applicable on 1 January 2009, the
      More elaborate evaluation of model assumptions                                                                       Core capital ratio was 8.1%, the Tier 1 ratio 10.5% and the
         and stress test scenarios.                                                                                         BIS ratio 14.0%.
      Reviewing compensation arrangements for senior
         management and employees.                                                                                          As a result of the capital increase of € 975 million in the
                                                                                                                            fourth quarter the solvency of Insurance activities was
     SNS REAAL’s business activities have inherently                                                                        strengthened to 176% at year-end 2008. The coverage
     a moderate risk profile as SNS REAAL sells                                                                             ratio was 248%. The solvency ratio of REAAL Life was
     straightforward banking and insurance products and                                                                     165%, the solvency ratio of Zwitserleven 206% and
     services with little exposure to higher risk activities (for                                                           the solvency ratio REAAL Non-Life amounted 307%
     example, proprietary trading), complex products or                                                                     at the end of 2008. All solvency ratios of insurance
     foreign exchange. The predominantly Dutch customer                                                                     activities remained above internal and external targets.
     base is well diversified within the retail and SME market                                                              The solvency ratios include the surplus value of the
     segments. Furthermore, the asset portfolios in the                                                                     technical provisions of REAAL Life and Zwitserleven as
     group have very little exposure to so-called ‘toxic’                                                                   calculated by the liability adequacy test.
     asset classes, including no exposure to US sub-prime
     mortgages.                                                                                                             New legislation, which came into effect in 2007
                                                                                                                            (Financial Supervision Act, Wft), allows the surplus of
     SNS REAAL’s commitment to maintaining a moderate                                                                       the liability-adequacy test to be recognised as available
     risk profile is even more important in these times                                                                     capital. The liability-adequacy test compares the
     of extremely volatile financial markets. This is why                                                                   technical provisions for insurance contracts with the
     SNS REAAL wants to further de-risk the balance sheet,                                                                  present value (based on best-estimate) of all cash flows
     while maintaining higher capital levels. In 2009                                                                       including embedded options and guarantees stemming
     SNS REAAL will take the appropriate steps, principally                                                                 from insurance contracts. The Dutch Central Bank
     relating to the investment portfolio for own risk of                                                                   granted SNS REAAL permission to recognise this surplus
     the insurance activities and the international project                                                                 as available capital in 2008. The recognised surplus out
     finance loan book of SNS Property Finance.                                                                             of the liability-adequacy test at year-end 2008 was € 248
                                                                                                                            million against € 659 million at year-end 2007.



56   SNS REAAL            Annual Report 2008 report of the executive board
Table 19: Solvency REAAL Verzekeringen

In € millions                                                                                             2008                      2007
Available capital coverage (a)                                                                           3,681                      3,183
Excess margin of conservatism       1
                                                                                                         1,070                      1,110
Available regulatory capital (b)                                                                         2,611                      2,073
Regulatory capital (c)                                                                                   1,485                      1,045
Regulatory solvency (b/c)                                                                                 176%                      198%
Coverage ratio (a/c)                                                                                      248%                      305%
) In the available capital based on regulations by the Dutch Central Bank, a margin of conservatism must be accounted for in excess of the best
1

  estimate. In order to obtain the IFRS based best estimate of available capital the main corrections are the surrender value minimum and the
  discount factor (the Dutch Central Bank curve with an add on to ECB all government yields).


Liquidity Risk                                                         at year-end 2007. The cash position amounted to € 1.6
SNS Bank increased its liquidity buffers significantly in              billion and the amount of other liquid assets was € 9.1
the first half of 2008. A series of long-term funding trans-           billion, including assets eligible for collateral with the
actions in the financial markets raised € 4.6 billion of new           ECB. Furthermore, in the beginning of 2009 the liquidity
wholesale funding. Furthermore, SNS Bank carried out                   position was strengthened by the successful issue of
three on-balance sheet securitisations. As almost all of               a 3-year note under the Credit Guarantee Scheme of
the notes were retained and as they can be pledged as                  the Dutch State to several national and international
ECB collateral, this contributed to the liquidity buffer.              investors. The note has a total size of € 2 billion and an
                                                                       effective coupon rate of 3.0% and a surcharge to the
In addition SNS Bank attracted significant new savings.                Dutch State of 87 basis points. Besides this, in February
Retail funding increased by € 2.7 billion to € 21.9 billion            2009 a back-up facility of € 1 billion was closed with a
(+ 14.1%). SNS Bank’s share of the Dutch savings market                renowned counterparty. In March 2009, SNS Bank again
grew from 8.3% at year-end 2007 to 8.8%.                               issued a note (in the amount of € 1.6 billion) under the
                                                                       Credit Guarantee Scheme of the Dutch State. The five
At the end of 2008, the total available liquidity position             year note carries a coupon rate of 3.5% and is issued
amounted to € 10.7 billion, compared to € 8.7 billion                  to a widely spread range of national and international
                                                                       investors. As a result, the bank’s wholesale funding is
     37 Distribution funding instruments 2008                          secured into 2010.


    9%                                                                 Market risk: SNS Bank
    10%
                                                                       Interest rate risk
                                                                       The main market risk faced by SNS Bank is interest-rate
    2%
                                                                       risk. SNS Bank uses duration of equity and the Earnings-
    10%
                                                                       at-Risk (95% confidence level) as the main indicators for
    32%                                                                managing interest rate risk.
    37%
                                                                       The yield curve declined in 2008. Furthermore, it
                                                                       steepened in the last quarter of 2008 significantly
                                                                       exposing SNS Bank to changes in short-term interest
          Covered Bonds
                                                                       rates. Anticipating a drop in short term interest rates,
          Securitisation
          Retail funding
                                                                       SNS Bank lowered its EaR and lowered the EaR limit
          Medium Term Notes                                            to € 25 million (net income) in September 2008.
          Other                                                        Furthermore, the duration limit of SNS Bank was raised
          Benchmark Bonds
                                                                       in 2008 from 8 to 10 to capture the opportunities arising

Table 20: Development liquidity position SNS Bank

In € millions                                                                                      December 2008             December 2007
Cash                                                                                                      1,649                    3,022
Liquid assets                                                                                             9,058                    5,688
Total Liquidity position                                                                                10,707                     8,710



                                                                         SNS REAAL      Annual Report 2008 report of the executive board          57
     from the steepening of the yield curve. SNS Bank                   The existing equity hedges put in place to protect
     steered its EaR in the fourth quarter to below the new             solvency and profit covered 70% of the nominal amount
     limit. The average EaR amounted to € 27 million (2007:             of REAAL Verzekeringen’s equity exposure, leaving
     € 25 million). At year-end 2008 the EaR amounted to                30% therefore not hedged. Following the acquisition of
     € 20 million. The duration of equity was raised to 8.4             Zwitserleven in April 2008, additional protection was put
     (year-end 2007: nil). Overall these measures resulted in           in place.
     a more balanced interest-rate sensitivity over the entire
     yield curve.                                                       The equity hedge for the equity portfolio of the insurance
                                                                        activities was executed through ‘out-of-the-money’
     In line with the increased duration of equity the average          options, with strike prices 10% below the initial levels at
     level of the Value-at-Risk (VaR) with a 99% confidence             the moment of execution. As a result of this, the insurance
     level in 2008 was € 204 million (2007: € 109 million).             activities bore the full impact of falling equity markets
                                                                        on the unhedged portion (30% of REAAL Verzekeringen’s
     Trading portfolio                                                  equity portfolio) plus the first 10% for the hedged portion
     The trading portfolio of SNS Bank is small and matches             in 2008. As equity markets fell during the course of
     SNS Bank’s risk profile. Reflecting this profile, the total        2008 and decreased below the initial 10% threshold, the
     limit, in terms of VaR (99% confidence level on a daily            effectiveness of the equity hedge in place increased. At
     basis), was set at only € 3.3 million. As in 2007, little use      year-end 2008, the total equity portfolio for own account
     was made in 2008 of the allowable limit.                           of the insurance activities was € 2.1 billion (7.7% of total
                                                                        investments), excluding the value of the equity hedge.
     Market risk insurance activities
     Investment portfolio for own account                               In 2009 the equity exposures in the investment portfolio
     The total investment portfolio at the insurance activities         of the insurance activities will be further reduced, to
     at year-end 2008 amounted to € 27.6 billion, of which              limit potential negative impact on both solvency and
     92.3% was invested in fixed-income and 7.7% in equities,           profit. In addition, the associated put options will be
     of which 2.6% in fixed income and real estate funds. Of            unwound. In 2009 the equity portfolio for own account of
     the fixed-income portfolio 85% was rated ‘A’ or higher.            Zwitserleven and the associated hedging instruments have
                                                                        been almost fully sold.
     The investment portfolio contains no direct or indirect
     investments in the US sub prime mortgage market. Only              Interest rate risk
     a small amount (€ 8 million) is invested in sub prime SME          The insurance activities of SNS REAAL use duration
     and residential mortgages outside of the United States.            of equity and VaR (99% confidence level) as key risk
     In addition, the portfolio holds investments in CDOs               indicators to manage interest rate and ALM-risks.
     and CLOs, these constitute less than 1% of the total
     investment portfolio. Moreover, over 50% of the CDO /              The duration of equity of which the lower limit is set
     CLO portfolio has a credit rating of AA or higher.                 at – 10 and the upper limit at + 5 was minus 10 at
                                                                        year-end 2008. The VaR, reflecting all market risks,
                                                                        expressed as a percentage of the market value of equity,
         38 Fixed Income Portfolio at year-end 2008                     increased from 29% at year-end 2007 to 54.9% at
                                                                        year-end 2008, above the current limit of 40%. The limit
       12%                                                              was mainly breached as a consequence of the increase
                                                                        in fair value of liabilities and hence the decrease of the
        3%
                                                                        fair value of equity. The VaR will be managed within the
       48%
                                                                        limit after the aforementioned de-risking programme is
                                                                        implemented.
       26%
                                                                        In relation to the abrupt fall in interest rates in late of
       11%
                                                                        2008, in the fourth quarter of 2008, REAAL Life entered
                                                                        into interest rate swaps agreements with an average
                                                                        maturity of 20 years and an underlying amount of
             AAA
                                                                        € 2 billion to partially hedge its solvency against further
             AA
             A                                                          declines in interest rates. These swaps mitigate the
             BBB                                                        impact on solvency of a decline of 1% in interest rates
             No rating                                                  by 15% points.



58   SNS REAAL       Annual Report 2008 report of the executive board
Sensitivities                                                  housing. In addition, SNS Property Finance has also
The sensitivities of the solvency position of the insurance    significantly tightened its lending criteria and has
activities as at year-end 2008 to movements in financial       ensured that at a revision of interest rates, a large part
markets were as follows:                                       of the higher costs of funding can be passed on to the
                                                               customer. The existing portfolio has been reviewed on a
Table 21: Market sensitivity of solvency
                                                               line-by-line basis, with regard to cash generation ability
                                       Regulatory              and the value of the collateral.
                                    Solvency ratio (%)
Interest rates − 1%                         (9)                By a reduction of the international project finance
Credit spreads + 0.5%                       (8)                portfolio in terms of commitments to borrowers,
Equity prices − 10%                         (3)                especially in Spain and the USA the balance sheet risk
                                                               of the banking activities will be reduced in 2009. Very
Credit Risk                                                    limited new loans were granted in the second half of
The total credit portfolio of the banking activities           2008 and we expect to see a further decline in the first
amounted to € 65.8 billion at the end of 2008, the             half of 2009.
majority of which (71.7%) consisted of Dutch residential
mortgages. The total volume of commercial mortgages            Insurance risks
at year-end of 2008 was € 13.6 billion.                        Underwriting risks
                                                               The increase in provisions at group-life insurances in
SNS Retail Banking                                             2008 was mainly related to the acquisition of Zwitser-
SNS Retail Bank’s loan portfolio at year-end 2008 was          leven. The distribution of the gross provision of life
€ 52.2 billion, of which € 48.7 billion consisted of Dutch     insurance changed accordingly since year-end 2007.
residential mortgages. Of these mortgages, 10.5% fell
                                                                  39 Gross provision life 2008
under the Dutch National Mortgage Guarantee Scheme
(NHG mortgages), which carries a 0% risk weighting.
In addition, 43.4% of the Dutch residential mortgage             13%
portfolio has been securitised. Of the securitised
mortgages 37.1% is held on own book.                             16%


The two key risk indicators for the Dutch residential            53%
mortgage portfolio, the Probability of Default (PD) and
the Loss Given Default (LGD) showed that credit quality          18%

deteriorated slightly in 2008. The default percentage of the
Dutch retail mortgage portfolios rose from 0.54% to 0.61%
and the LGD rose from 11.1% to 12.6%.                                  Individual insurances money
                                                                       Individual insurances investments
SNS Property Finance                                                   Group insurances money
At SNS Property Finance the loan portfolio at year-end                 Group insurances investments

2008 was € 13.6 billion, of which 72% originated in the
Netherlands.                                                      40 Gross provision life 2007


The infection rate for SNS Property Finance, a measure            4%
of credit quality, rose in 2008 compared to 2007.
At year-end 2008, the infection rate stood at 3.3%                9%
versus 0.9% at year-end 2007. This is higher than the
historical long-term average and reflects the difficult          28%
circumstances in several markets.
                                                                 59%

Of SNS Property Finance’s total loan portfolio 8% is
outstanding in the USA and 3% in Spain. In connection
with the current economic environment in the these
                                                                       Individual insurances money
countries SNS Property Finance has intensified its                     Individual insurances investments
monitoring of the loan portfolio, in particular as                     Group insurances money
regarding loans for the construction of residential                    Group insurances investments




                                                               SNS REAAL        Annual Report 2008 report of the executive board   59
     In 2008, the overall provisioning policy of non-life            SNS Bank applies prudential surcharges to the economic
     activities was re-defined.                                      capital calculations. SNS Bank will take into account that
                                                                     its clients’ credit quality may deteriorate in the years
     A liability adequacy test was performed on a consoli-           ahead. For this reason, the release of capital will be lower
     dated basis for life and non-life activities. This test         in the next few years, which will be used to strengthen
     indicated that the total technical provision was adequate       our buffers.
     at year-end 2008.                                               SNS Bank adopts the Basel II conceptual framework
                                                                     and compares the ICAAP capital required with the entire
     Reinsurance arrangements                                        capital available (‘eligible capital’). The established ICAAP
     Reinsurance is used to cover the insurance risks within         capital required is the standard and must be higher than
     the various portfolios of the life and non-life insurance       the economic capital determined using models (including
     activities. As of 1 January 2008, the various reinsurance       model risk). The capital available must, at all times, be
     contracts were integrated into SNS REAAL’s reinsurance          at least equal to the level of ICAAP capital required. This
     programmes, where possible.                                     is in line with the calibration of the economic capital
                                                                     model to SNS REAAL’s current rating ambition, as well
     As a result of the economic environment, there                  as the requirement that we accept a very small chance
     was less capacity available for the renewal of the              that SNS Bank may no longer be able to meet its interest
     reinsurance programs for 2009 in the reinsurance                payment and repayment obligations. Within the capital
     market. Furthermore, there was an upward pressure on            required, a standard for Tier 1 capital required has also
     the reinsurance premiums. From a risk management                been established. Up till the third quarter in 2008,
     perspective, where possible the number of reinsurers            the capital available (Tier 1 plus Tier 2) exceeded the
     was expanded on the various reinsurance contracts. This         ICAAP capital required, and the Tier 1 capital available
     lessened concentration risk.                                    exceeded the Tier 1 capital required. The economic capital
                                                                     information regarding the fourth quarter was not yet
     Consequences of Basel II for                                    available upon publishing the annual report.
     the banking activities                                          In 2008, SNS Bank calculated the value of its activities
     In 2008, SNS Bank reviewed the capital adequacy for the         in terms of the risk adjusted return on capital (RAROC).
     banking activities of SNS REAAL in accordance with the          The RAROC measures the performance of the bank and
     Basel II supervisory framework. The review is compliant         its units, taking into account the amount of risk that
     with the ‘ICAAP policy’ in which all internal and external      was taken. The amount of risk affects the ICAAP capital
     aspects are considered that may affect the level of capital     required. When looking ahead in the annual budgeting
     required. The economic capital calculations, the results        round as well as when looking back in the quarterly
     of the stress tests and the Basel II pillar I calculations      performance assessment, the RAROC is compared
     provide valuable information for the decision making            against the return requirements imposed by the parties
     process on capital adequacy. Besides this quantitative          providing the capital available.
     information, it is also important to consider the business
     forecasts, the situation on the financial markets and the       Preparations insurance activities for Solvency II
     discussions held between SNS Bank and the supervisory           In 2008, REAAL Verzekeringen took further steps in
     authority, analysts and rating agencies to determine            its preparations for Solvency II, the new supervisory
     what SNS REAAL should pursue as minimum level of                framework for European insurers which is expected to
     capital required.                                               be introduced in around 2012. Solvency II offers solvency
     The 2008 quarterly reports, in which we compare the             requirements that are more closely matched to the
     results from the economic capital calculations against          risks facing insurers and will be fully integrated into the
     the capital available, showed that the transfer to the          business operations of insurers. Solvency II requires the
     Basel II supervisory framework resulted in a substantial        valuation of investments and liabilities based on fair
     release of required capital. This is due to, on the one         value.
     hand, the application of advanced models for SNS Bank’s
     major loan portfolios and, on the other, the relatively         In the months of April through July, REAAL Verzekeringen
     low risk profile of SNS Bank’s activities. In the Basel II      took part in an industry-wide implementation of the
     supervisory framework, this low risk profile translates         fourth quantitative impact study: QIS4. Both the holding
     into a lower level of capital required, compared to the         REAAL Verzekeringen as well as various legal entities,
     Basel I supervisory framework. Such a release can be            including Zwitserleven, took part. Firstly, QIS4 gave an
     seen in both the pillar I and the pillar II calculations.       in-dept view of the impact of Solvency II on the financial
     As a number of the models used are still relatively new,        position. Secondly, QIS4 provided better insight into the



60   SNS REAAL    Annual Report 2008 report of the executive board
    41 Framework for business control


                Assigning accountability

                                                                 Strategic
l   Strategic goals and plan                                     l Executive Board provides direction and               l Annual Report
l   Strategic risk analysis                                        creates frameworks and conditions                    l Executive
l   Executive Board framework                                    l Main business units develop                            Board Risks
l   Policy framework                                               frameworks and provide support                         reports
                                                                 l Supervisory Board monitors




                                                 Tactical                                                l Management reports
l Business plans                                                                                         l Quarterly reports business
                                                 l Management is given overall
l Control objectives                                                                                        units
l Risk analyses                                    responsibility and can be held                        l Quarterly reports audit
                                                   accountable                                           l Risk reports




l Balanced Business
                                                                                           l   Risk analyses
  Scorecard                     Operational                                                l   Internal control investigation
l Administrative
                                l Management manages own areas                             l   Safety investigations
  Organisation
l Performance and               l Business units (central and local)                       l   Credit risk management
  Competen-                        offer support per function area                         l   Compliance investigation
  ce Assess-                                                                               l   Audit reports
                                   at the request of management
  ment                                                                                     l   Other reports

                                                                                            Rendering accountability

elements (data/models) that do not yet fully meet the            Required economic capital
expected Solvency II regulations. Thirdly, QIS4 generated        SNS REAAL uses economic capital in as far as possible
an overview of the business units and processes that             to gear the management of the company and the
will be affected by Solvency II. Fourthly, QIS4 offered          business units towards value creation. To this end, the
an excellent opportunity for mutually comparing the              economic capital must first be calculated as precisely as
methods of REAAL and Zwitserleven. Besides the QIS4              possible, without incorporating a margin of conservatism
calculations based on a prescribed standard method,              in the estimate of the components of the economic
REAAL Verzekeringen also examined the results of the             capital formulas and the economic capital calculations
internal Economic Capital model.                                 themselves. The economic capital thus calculated provides
                                                                 a basis for value creation and performance management.
REAAL Verzekeringen started a Solvency II programme              The capital adequacy assessment takes into account any
organisation in 2008. One of the first activities was to         uncertainties in the economic capital calculations. These
take stock of the models that are already being applied          uncertainties are translated into separate surcharges
within REAAL Verzekeringen and to standardise the                and added to the unadjusted economic capital. For more
methods of the internal Economic Capital model.                  information on determining economic capital we refer to
A further rollout of the Solvency II implementation              the financial statements as from page 185.
programme is planned for 2009.
                                                                 Stress tests
Capital adequacy                                                 Annually, a stress test analysis is performed in order to
In assessing capital adequacy, SNS REAAL takes into              assess whether the banking activities could endure stress
account the economic risks of the underlying activities.         scenarios. In addition, the outcome of the stress tests
These are assessed using economic capital and stress             can be a reason to improve the economic capital models.
tests. SNS REAAL aims for capitalisation that allows an          The 2008 stress test for SNS Retail Bank and SNS Property
‘A’-rating. SNS REAAL’s capital management comprises             Finance, showed that the losses in the various stress
the following main activities: determining the required          scenarios, in all relevant risk categories, could be offset
economic capital, performing stress tests on the capital         within the existing capital buffers. The scenarios for
adequacy and a qualitative capital adequacy assessment.          SNS Property Finance and SNS Retail Bank take into



                                                                     SNS REAAL   Annual Report 2008 report of the executive board         61
     account the specific nature of their businesses. Besides           Management, Compliance and Operational Risk
     this annual analysis, SNS Retail Bank performs additional          Management, Legal Affairs and the internal audit
     stress tests, if necessary.                                        departments.
                                                                       Group Audit which reviews the process and
     Integrated risk management                                         performance of the risk organisation and reports to
     SNS REAAL integrated its risk management into the                  the Executive Board.
     day-to-day operations. In this context, SNS REAAL
     continuously aims for the right balance between                  The group staff departments and internal audit
     commercially high-potential initiatives and limitation           departments advice line management and may inform
     of risks. The key preconditions are to guarantee                 inform the Executive Board if predefined standards are
     adequate liquidity and solvency. SNS REAAL monitors              exceeded.
     its risk appetite by using a system of standards and
     limits. SNS REAAL coordinates the management of                  The total risk management is embedded in the
     the product-independent risks as much as possible                day-to-day operations via policy, jobs and committees.
     at group level, particularly through liquidity risk              The processes of guaranteeing (control of ) the risk
     management, capital management, funding and asset                management are comprehensible and relatively simple
     and liability management. The ALCO Group has a                   for SNS REAAL due to the focus on the Netherlands
     leading role in this process. For product-dependent              and on the retail and SME markets. For that reason,
     risks, such as credit risk, duty of care and operational         SNS REAAL has a transparent risk management process
     risk, the risk management is primarily performed                 and transparent information on risk is very well
     by the business units, with the frameworks being                 possible to provide. For a summary of risk management
     determined for the entire group. Within the business             committees and departments we refer to page 145 of the
     units, special risk management committees work on                financial statements.
     pricing, portfolio management and non-financial risks.
     The group staff departments have a supporting role in            Upon implementing the Corporate Governance Code,
     this process.                                                    SNS REAAL has chosen to realise as much synergy as
                                                                      possible between the risk management demands of
     SNS REAAL distinguishes as main risk type’s credit risks,        this code and compliance with legal risk management
     market risks, insurance risks, liquidity risks, strategic        requirements for financial institutions. In the day to day
     risks, operating risks and integrity risks. These are            operations, this enables the use of one framework for an
     explained in the financial statements as from page 144.          adequate management of the risks.
     SNS REAAL uses a balanced risk management framework
     which comprises three lines of defence:                          Standards for risk tolerance
      Line management, which manages the risks and is                SNS REAAL uses a framework of risks and checks in
         ultimately responsible.                                      the management of market risks. Table 22 provides an
      Group staff departments, such as Group Risk                    overview.


     Table 22:   Risk standards of SNS REAAL
                                                                Standard                              Year-end 2008          Limit
     Banking activities
     Interest rate risk Bank book    Duration fair value of total equity                                    8.4          0 < d < 10
     EaR Bank book                   Effect EaR (95%)                                                   € 20 million      € 25 million
     Solvency                        BIS ratio                                                             14.0%             ≥ 11%
                                     Tier 1 ratio                                                          10.6%               ≥ 8%
                                     Core capital ratio                                                     8.1%               ≥ 6%
     Insurance activities
     Interest rate risk              Duration market value of shareholders’ equity                          (10)        (10) < d < 5
     ALM risk                        VaR (99%) as % market value of shareholders’ equity                   54.9%             ≤ 40%
     Solvency REAAL Live             Present vs. required capital life insurance activities                 165%            ≥ 150%
     Solvency REAAL non-life         Present vs. required capital non-life insurance activities             307%            ≥ 200%
     Solvency Zwitserleven           Present vs. required capital of life insurance activities              206%            ≥ 150%
     Regulatory solvency             Present vs. required capital consolidated insurance activities         176%               --



62   SNS REAAL     Annual Report 2008 report of the executive board
SNS REAAL uses the following risk indicators for                 Managing non-financial risks
measuring and analysing market risks:                            The types of non-financial risk that SNS REAAL distin-
                                                                 guishes are strategic risks, integrity risks and operational
Fair value duration of total equity                              risks. See the financial statements as from page 144 for
This indicates the sensitivity of the fair value of total        more information.
equity. A duration of 7 indicates that the fair value of total
equity increases (decreases) by 7% if the yield curve            Compliance and integrity
decreases (increases) in a parallel line by 1%.                  Integrity is essential to keep the trust of clients,
                                                                 employees, shareholders and other stakeholders. In
EaR and VaR                                                      2008, too, we paid much attention to the integrity of
The EaR and VaR are based on scenario models.                    employees, clients, products (including duty of care) and
These models generate scenarios for market prices for            partnerships.
the future and are calibrated based on historical market
data.                                                            Employee integrity
For the VaR applies that many scenarios involving                SNS REAAL does not only want employees to gain insight
market prices, such as interest rates, credit spreads, and       into our standards and values, but also that they learn
stock prices, the 1% worst outcome of the change in fair         how to deal with dilemmas in day-to-day activities.
value of total equity will be calculated over a period of 12     Through workshops, training, discussions following soap
months. For EaR, the interest rate margin (before costs,         strips developed especially for this purpose, and other
after tax) is calculated for each scenario in a scenario         methods, they focused on the practical application of
set for a period of twelve months. EaR is the 5% worst           the code of conduct ‘Gezond verstand, gezond geweten’
outcome compared to the basic scenario.                          (‘Common sense, clear conscience’) and the business
                                                                 principles, as well as on how to proceed when confronted
Solvency                                                         with a dilemma, and making integrity measurable
 Solvency of the banking activities is calculated on the         by reviewing performance on the basis of integrity
basis of both the Basel I and the Basel II guidelines.           requirements.
There is a transition scheme in place for the transition
from Basel I to Basel II. The Basel I guideline imposes the      Client integrity
highest capital requirement on SNS Bank. In 2008, the            One of SNS REAAL’s key business principles is client
risk-weighted assets of SNS Bank were determined with            focus. However, it is also important to assess clients’
a transition floor of 90% under Basel I. As per 1 January        integrity. SNS REAAL does not want to participate in
2009, the transition floor is reduced to 80%.                    any possible criminal activities, money laundering,
                                                                 fraud or terrorist financing. For that purpose, we limit
The insurer’s solvency is determined by the ratios as            our services by not providing services or providing only
to be calculated under the Financial Supervision Act             limited services to certain sectors or business activities.
(Wft). The insurer calculates the existing solvency ratio        In 2008, the policy was again compared against
including the excess value of the Wft adequacy test.             market conditions and laws and regulations, and the
                                                                 harmonisation between business units was improved.
Economic Capital                                                 The principles of our integrity policy in respect of
Furthermore, SNS REAAL has an integrated risk                    clients are: knowing the client, the client’s integrity as
model, Economic Capital, which generates the capital             a precondition for doing business, the client’s meeting
requirements based on internal models for the major              standards of decency, meaning that clients must refrain
financial risks. For SNS REAAL, all banking activities           from expressing threats or showing violent behaviour,
individually and all insurance activities individually,          and the client’s providing honest and transparent
the required Economic Capital must be covered by the             information. SNS REAAL teaches its employees how to
existing qualifying capital. SNS Bank and SNS Property           deal with the relevant risks and incidents.
Finance also use the Economic Capital model for the
calculation of the risk-weighted performance based on            Product integrity
RAROC.                                                           SNS REAAL systematically tests its products, the design of
                                                                 new products and its services against legal and social
The risk standards below are reviewed and calibrated, if         requirements. On the publication date of this report,
necessary, by the ALCO Group once every year. The risk           REAAL Verzekeringen, also on behalf Zwitserleven, was
standards reflect SNS REAAL’s risk appetite for possible         still negotiating with representatives of policyholders of
volatility of the results, economic value and solvency ratios.   unit-linked insurance regarding a compensation scheme.



                                                                 SNS REAAL     Annual Report 2008 report of the executive board   63
     Consensus is expected to be reached in the first half            Management development programmes, to
     of 2009. In 2008, the adjustments required by law                 manage staff quality and appoint the right person
     were already introduced. In 2009, more adjustments                in the right place.
     will follow, for both unit-linked insurance and other            The remuneration structure, to manage the
     individual life insurance, in order to further align              conduct of our employees in order to achieve goals.
     our policies with the wishes and needs of today’s                Requirements for internal processes, to
     consumers. Central issues are transparent product                 steer predictability of performance, prevent
     structure, accessible product information, cautious               unforeseen losses and ensure the reliability of
     return forecasts, more protection against negative                information.
     market factors, more guarantees on terminal funding
     capital and fewer options for the consumer.                     The management boards of the business units are
                                                                     responsible for day-to-day operations within these
     Partnership integrity                                           frameworks and each year draw up operational plans
     SNS REAAL distributes a large part of its products              that are approved by the Executive Board.
     through independent intermediaries and intermediaries
     more closely linked to the organisation. The policies           The internal risk management and control system
     for appointing intermediaries, as well as for managing          is geared towards the strategic objectives of
     and terminating relationships with intermediaries               SNS REAAL and inherent risks are amongst others
     were further improved, partly through the enhanced              exposure to financial markets. The framework
     harmonisation between business units. This way, the             for business control (see Figure 41) sets out how
     integrity of the sector is promoted.                            responsibility is awarded within SNS REAAL and how
                                                                     accountability is assumed. This process is similar to
     Improvements to operational risk management                     the COSO Enterprise Risk Management system (ERM).
     The logical access security for all employees of SNS Bank       This framework forms the basis for controlling (risk)
     and REAAL Verzekeringen was improved by structuring             management processes in areas such as strategy,
     and centrally administrating and monitoring the rights of       operations, integrity (including compliance) and
     access to the operational systems. A separation of duties       (financial) reporting and reports.
     combined with smart cards limits the chances of abuse.
                                                                     The framework for business control is based on
     SNS REAAL updated its prevention, detection and                 an assessment of risks and does not guarantee,
     follow-up policy for countering third-party fraud and its       for instance, that human error, the deliberate
     policy for the prevention of internal fraud by having the       circumvention of control procedures by employees and
     coordination investigation take place at an earlier stage       third parties acting in concert, or the evasion of control
     and by safeguarding the interests of stakeholders that          mechanisms by management will not occur.
     may be directly involved. Senior management will follow         SNS REAAL has set up a procedure to determine
     the developments via regular reports.                           biannually the extent to which the management boards
                                                                     of each business unit are demonstrably ‘in control’.
     Framework for business control                                  This particularly concerns the review of risks in the
     Doing business always requires taking risks and                 business operations and if necessary the measures
     demands a consistent and transparent assessment                 taken in this respect. Key inputs for this procedure are
     of opportunities and risks, aimed at growth and                 the regular in-control reports per business unit.
     the continuity of the company. The Executive Board              In each half-year report the management board of
     of SNS REAAL has established frameworks for the                 each business unit states, with due observance of
     management boards in order to properly steer such               changes to internal and external factors, whether
     assessments. The framework principles are:                      they have identified the main risks and corresponding
      The strategy and strategic risk analyses, to direct the       control measures with a reasonable degree of
         activities of the business units and the organisation       certainty, which improvements have been made to
         as a whole.                                                 the (risk) management procedures, whether the
      The moderate risk profile, which sets limits for taking       established control measures function adequately,
         and managing risks.                                         whether the provision of information is sufficient
      The management structure, to streamline                       and which aspects the relevant business unit intends
         management focus, to allocate tasks and                     to improve further. The management boards state
         responsibilities, and to deal with changes e.g.             whether they expect the risk management system to
         through takeovers and reorganisations.                      work adequately during the next one-year period.



64   SNS REAAL    Annual Report 2008 report of the executive board
The Executive Board assesses the internal statements by         is needed to emerge from the crisis stronger than
the various business units and group staff departments.         before. Against the backdrop of the recession and the
Together with a strategic risk analysis, these assessments      announced staff reductions, this is a major point of
form the basis for the internal statement that every            attention.
Executive Board member prepares. The statements from           The national and international real estate markets
the management boards translate into the external               are under great pressure and prices and demand are
in-control statement, which is discussed with the Audit         dropping. SNS REAAL has extensive loan portfolios
Committee.                                                      collateralised by real estate. It mainly concerns Dutch
                                                                residential property, but also some other properties,
In-control statement                                            including Spain and the USA. Risk management
The design of SNS REAAL’s risk management and control           systems are already adapted and are regularly
systems, as described in the framework for business             reviewed and improved.
control, supplemented with frequent research into the          The integration of AXA is progressing and is expected
effectiveness of essential control measures gives the           to be completed a year earlier than scheduled. The
Executive Board reasonable assurance that the main risks        integration with Zwitserleven was started in 2008 and
are recognised and controlled adequately.                       will be completed in 2012. Realisation of two parallel
                                                                integrations requires a major effort of the organi-
SNS REAAL is active in different financial markets and          sation and is closely monitored.
is exposed to movements and changes, such as interest
rates, capital markets and actuarial assumptions.             The system of demonstrable measures for controlling
The unprecedented downward trend of these markets in          the financial reporting risk functioned adequately
2008 has strongly influenced our financial results, also      throughout 2008. Based on that, we have obtained
intensified by the IFRS framework. As far as we know, risk    a reasonable degree of certainty that the financial
management systems in the financial sector were not           reporting does not contain any material misstatements.
immune to these extreme circumstances.                        The financial reporting process at this time gives us no
                                                              reason to expect that it should not work adequately in
Based on these insights the key issues are:                   2009.
 The public has lost confidence in the financial sector.
   In spite of all its efforts and the increase in number     A major point of attention for 2009 is the difficulty
   of clients, SNS REAAL has been unable to avoid this        of determining the correct fair value of non-liquid
   development. Working to restore lasting confidence         investments. Although all measures have been taken
   in a time of recession is essential in the coming years.   and a cautious approach was adopted, it cannot be ruled
   A new balance will be found between the interests of       out that differences may arise between the valuation
   customers, shareholders, employees and other stake-        included now and the ultimate value upon realisation.
   holders.
 SNS REAAL is still known to savers and investors in         Transparancy statement
   bonds. In 2008 savings continued to increase. This         SNS REAAL prepares the consolidated financial
   can be adversely influenced by negative perceptions        statements in accordance with International Financial
   on SNS REAAL. Focus on communication with stake-           Reporting Standards (IFRS), as adopted within the
   holders wherever possible is a means in preventing         European Union (EU) and with Title 9 of the Dutch Civil
   this.                                                      Code. To the best of our knowledge they give a true
 The speed and extent of the credit crisis has surprised     and fair view of the assets, liabilities, financial position
   many including SNS REAAL. We have learned                  and financial result of the Group and its consolidated
   important lessons and have taken measures in               companies.
   the areas of risk management, stress testing, risk
   information and risk models. SNS REAAL aims at             The annual report gives, to the best of our knowledge, a
   maintaining the moderate risk profile, with consistent     true and fair view of the position as per the balance sheet
   market capital ratios as expected by the market.           date and the development during the financial year.
 It is essential to SNS REAAL’s success to have – and        The principle risks SNS REAAL NV faces are described in
   keep – the right staff on board. A positive mindset        the annual report.




                                                              SNS REAAL      Annual Report 2008 report of the executive board   65
              Funding and credit ratings
              Money and capital markets were difficult to access throughout the year. In connection with
              the uncertain situation on these markets, SNS Bank maintained an above-average liquidity
              buffer, while SNS REAAL availed itself of the opportunity to attract additional capital from
              Stichting Beheer SNS REAAL (‘the trust’) and the Dutch State.


     Our public funding strategy is aimed at funding the                incidental opportunities. SNS Bank was the only ‘A’-party
     growth of SNS REAAL and SNS Bank at competitive                    who successfully realised a public transaction: a two-year
     levels, i.e. at minimal cost and while limiting risks. This        floating note of € 800 million. In the second half of 2008,
     strategy is based on two pillars. The first pillar is to           it became impossible for any financial party to attract
     secure adequate liquidity in good time, thus avoiding              capital, whether in the form of senior unsecured loans
     the risk that at a late stage considerable funding must            or in the form of subordinated loans. It was not until the
     be obtained at unfavourable terms. The second pillar               national governments provided guarantees for their major
     is diversification, in terms of funding instruments,               retail banks that funding opened up a bit.
     type of investor and geographic area. By diversifying
     instruments, SNS Bank can opt for the most suitable                In 2008 SNS Bank was also successful in attracting savings
     instrument in various market conditions and depending              deposits, totalling a net amount of approximately € 2.7
     on its capital requirements.                                       billion, or 37% (2007: 42%) of total funding. As a result,
                                                                        the scope of retail funding expressed as a percentage
        42 Composition funding instruments 2008                         of retail loans rose from 56% at year-end 2007 to 62%
                                                                        at year-end 2008. A number of private placements were
        9%                                                              also made in Europe, the largest one amounting to € 600
                                                                        million with a maturity of six years.
       10%

        2%
                                                                        On 11 December 2008, SNS REAAL issued € 750 million
       10%
                                                                        worth of non-voting tier 1 capital securities to the Dutch
       32%                                                              State. In addition, € 500 million worth of non-convertible
       37%                                                              and non-voting tier 1 capital securities were issued to the
                                                                        trust. This raised SNS Bank’s tier 1 capital by € 260 million
                                                                        as per 31 December 2008, raised REAAL Verzekeringen’s
                                                                        solvency levels by € 975 million and lowered SNS REAAL’s
             Covered Bonds
                                                                        double leverage by € 15 million.
             Securitisation
             Retail funding
             Medium Term Notes                                          Liquidity risk management
             Other                                                      Group Risk Management department has created stress
             Benchmark Bonds                                            scenarios in collaboration with SNS Financial Markets.
                                                                        In the Treasury and ALM meetings, the scenarios and
     Key developments                                                   outcomes are frequently tested and assessed.
     In the past year, the bank’s liquidity position was very
     carefully managed. In anticipation of deteriorating market         Public funding 2008
     conditions, the cash position was already increased                In the first half year, SNS Bank succeeded in continuing
     considerably in 2007 by way of precaution. In 2008 on              all its money market programmes and commercial
     average, it was approximately four times as much as under          financing programmes. A securitisation transaction of
     normal circumstances. In addition, the liquidity position          NHG mortgages was implemented for an amount of
     of SNS Bank comprised liquid assets and assets eligible            € 800 million. NHG is short for Nationale Hypotheek
     for collateral with the Dutch Central Bank. In total, the          Garantie, or National Mortgage Guarantee.
     liquidity position amounted to € 10.7 billion at year-end
     2008.                                                              Four private placements amounting to approximately
     Money and capital markets were difficult to access                 € 700 million were made under the covered bond
     throughout the year. The capital market presented some             programme, with maturities varying from two to ten



66   SNS REAAL       Annual Report 2008 report of the executive board
years. The covered bond programme was introduced at              43 MTN funding according to type of investor
SNS Bank at the end of 2007. It was given an AAA-rating
by Moody’s, S&P and Fitch. Covered bonds are a special          9%
kind of bonds that give the holders double security.            2%
The first security for the investors concerns the solvency      5%
of SNS Bank as a financial institution, while the second        3%
security consists of a delineated portfolio of retail
                                                               81%
mortgages provided by SNS Bank as collateral.

In addition, SNS Bank was the first and only European
bank with an A-rating to successfully issue a public
senior unsecured bond in May worth € 500 million with
                                                                     Asset Manager
a maturity of two years under its EMTN programme
                                                                     Bank
(European Medium Term Notes). The value of this bond                 Insurer
was even increased to € 800 million in June.                         Investment Fund
                                                                     Other

In the second half of 2008, SNS Bank managed to
                                                                 44 Regional distribution MTN funding 2008
complete a limited number of transactions under the
EMTN programme, particularly short-term issues.
SNS Bank also effected a second transaction on the              1%
Italian retail market, with a maturity of six years.            1%
                                                                9%
In January 2009, SNS Bank successfully issued a note            1%

with a maturity of three years under the guarantee              3%
                                                               85%
scheme of the Dutch State. The note, comprising € 2
billion and an effective coupon rate of 3.0%, was well
oversubscribed. The premium paid to the Dutch State
amounted to 87 basis points. In March 2009, SNS Bank
again issued a note (in the amount of € 1.6 billion)                 France
under the Credit Guarantee Scheme of the Dutch                       Germany
State. The five year note carries a coupon rate of 3.5%.             Ireland
                                                                     Italy/Spain
The note was issued to a widely spread range of national
                                                                     Scandinavia
and international investors.                                         Benelux


SNS Bank has two commercial paper programmes – a
European and a French programme – each with a                Risk surcharge
maximum size of € 4 billion. Commercial papers have          In 2008, confidence in the international capital markets,
maturities of one to twelve months. SNS Bank used            which had fallen in 2007 as well, continued its downward
these short-term money programmes to a limited               trend. This, in turn, resulted in even higher risk surcharges
extent to attract liquidities. However, as SNS Bank uses     for financial institutions. As from August 2008, the
this source of funding to a very limited extent only,        markets became practically inaccessible and locked up
the fact that this market dried up did not create any        entirely following the insolvency of Lehman Brothers.
problems. The amount outstanding under the European
programme was nil at year-end 2008 and the funding           Table 23:   Benchmark bonds outstanding at year-end 2008
through the French programme amounted to € 750
                                                             Funding                                             Redemption date
million.
                                                             € 1.25 billion floating rate note                   October 2009

Issues of liquid benchmark bonds contribute to the           € 1 billion fixed rate 6.125%                       April 2010
broadening of the investor base. These benchmark             € 800 million floating rate note                    June 2010
bonds can be actively traded on the European                 € 800 million floating rate note                    October 2011
exchanges. SNS Bank’s policy enables investors to            € 1.25 billion floating rate note                   February 2012
adjust the maturity of their portfolio to the credit curve
                                                             € 500 million fixed rate 5.625%                     June 2012
of SNS Bank. A liquid bond also makes it more attractive
                                                             € 900 million fixed rate 4.625%                     February 2014
for institutional investors to invest in an SNS Bank bond.



                                                              SNS REAAL        Annual Report 2008 report of the executive board    67
     Worldwide measures by central banks and governments,             secondary RMBS market will again not be accessible or will
     varying from capital injections and liquidity support to         be very difficult to access in 2009.
     the option of issuing bond loans under a government
     guarantee, sadly failed to enable interbanking lending           Credit ratings
     and borrowing to recover in 2008. One of the objectives of       In November 2008, Moody’s changed all long-term
     these support operations was to enable banks to maintain         prospects of the ratings of SNS REAAL and her subsidiaries
     their credit facility to private individuals and businesses.     from stable to negative. The adjustment was the result of
     In January 2009, SNS Bank availed itself of the guarantee        the net loss reported for the third quarter of 2008. Standard
     scheme set up by the Dutch State.                                & Poor’s and Fitch also changed all long-term prospects
                                                                      of the ratings from stable to negative in December 2008.
     The price development on the secondary capital market            In the beginning of 2009, Moody’s announced that it
     for securities based on residential mortgages (Residential       had lowered SNS Bank’s long-term rating from A1 to A2.
     Mortgage Backed Securities (RMBS) notes) did not                 The long-term prospect was changed to stable. Moody’s
     offer any possibilities for new issues. The spreads for          expects that the bank’s profitability will be under pressure
     these secondary RMBS notes greatly increased, not so             due to the deteriorating economic climate. At the same
     much reflecting the increased credit risk, but rather as         time, Moody’s lowered SNS REAAL’s rating to Baa1 with
     a consequence of forced sales of hedge funds and, in             a stable long-term prospect. In the beginning of March,
     some cases, of conduits and SIVs. It is expected that the        Fitch lowered the short-term and long-term ratings.


     Table 24:   Credit ratings
     Long-term                                                                 S&P                 Moody’s                 Fitch
     SNS REAAL                                                           A− (negative)         Baa1 (stable)          BBB+ (negative)
     SNS Bank                                                            A (negative)          A2 (stable)            A (negative)
     REAAL Verzekeringen                                                 A− (negative)
     REAAL Life insurance                                                A (negative)          A2 (negative)          A− (negative)
     REAAL Non-Life                                                      A (negative)          A2 (negative)          A− (negative)
     Short-term                                                                S&P                 Moody’s                 Fitch
     SNS REAAL                                                                 A− 2                  P− 2                   F2
     SNS Bank                                                                  A− 1                  P− 1                   F1




68   SNS REAAL     Annual Report 2008 report of the executive board
         Human resources
         Our employees are decisive for SNS REAAL’s success. In 2008, we focused on attracting and
         developing talent, the integration of AXA NL, collaboration with Zwitserleven and improving
         the distribution capacity at SNS Bank.


Table 25:   Key figures employees
                                                              2008              2007                2006               2005
Average number (FTEs)                                         7,287             6,245              5,609               5,336
Number of FTEs at year-end                                    7,535             6,713              5,776               5,442
Male/female ratio                                      m(58%) f(42%)       m(57%) f(43%)      m(56%) f(44%)       m(55%) f(45%)
Full-time/part-time ratio                             ft(68%) pt(32%)     ft(68%) pt(32%)     ft(70%) pt(30%)    ft(70%) pt(30%)
Training costs (euros per FTE)                                2,086             1,912              1,644               1,582
Absenteeism                                                   4.4%               4.1%               4.1%                4.4%
Inflow                                                        15.3%             14.2%              14.4%               12.4%
Outflow                                                       13.9%             16.5%              12.7%               11.4%


The number of SNS REAAL employees increased from                SNS REAAL also wants to stand out in the labour market.
6,713 to 7,535 (FTEs), an 12.2% increase. The growth            In campaigns aimed at newcomers and professionals,
was generated by the approximately 758 Zwitserleven             SNS REAAL uses its strength as a relatively small player
employees (FTEs) and by the inflow exceeding the                by using slogans like ‘You’ll find more challenges if you
outflow.                                                        don’t choose the largest company.’ A new theme was
                                                                introduced to recruit new employees for SNS Bank:
The acquisitions of AXA NL and Zwitserleven are expected        working for the bank of the future. REAAL Verzekeringen
to lead to a total reduction of 400 FTEs in the insurance       ran a campaign for the recruitment of talented pension
activities, mostly due to natural turnover. Already this is     experts. Zwitserleven stands out in the labour market
partially realised. At SNS Bank, there will be a reduction      through various programmes. In addition, managers and
of approximately 380 FTEs after completion of the               recruiters gave presentations and guest lectures on a
three-year programme to reinforce the distribution              variety of subjects at universities. In addition to printed
capacity in 2010. This will be effected through reassign-       advertisements and online recruitment, SNS REAAL
ments and natural turnover.                                     strives for personal contact with the target group, partly
                                                                through in-house days and open evenings in SNS Shops.
SNS REAAL as an employer                                        Both the candidates and the managers recruiting the
SNS REAAL invests considerable effort in maintaining            new employees appreciate this approach. Partly thanks
its reputation as an attractive employer. In 2008,              to these efforts, the total number of applicants increased
SNS REAAL was again chosen by the Corporate Research            by 49.4% compared to 2007.
Foundation (CRF) as one of the best employers of the
Netherlands, and also one of the best ICT employers.            Young Insurance Meetingpoint (YIM)
CRF is an independent research agency that identifies           In November, the first edition of the Young Insurance
and certifies top companies in the field of human               Meetingpoint was held. This initiative by the Dutch
resources. SNS REAAL achieved high scores particularly          Association of Insurers and several insurance companies
for employment conditions, work atmosphere and                  – including REAAL Verzekeringen – is meant to inform
working conditions. SNS REAAL conducts its own                  Financial Services Management students of all the
employee satisfaction survey once every two years.              opportunities within the insurance industry. In the
The next survey will be conducted in 2009. The annual           first half of 2008, the insurance industry faced 3,000
employee satisfaction survey of Zwitserleven will then          vacancies, most of them for positions intended for
be included. Zwitserleven’s survey of 2008 showed that          higher vocational education (‘hbo’) graduates. The event
commitment rose to a high rate of 7.4 on a scale of 0 to        was visited by 1,700 hbo-students, who were given a
10, in what proved to be a very exciting and eventful year      business presentation by REAAL Verzekeringen and an
for employees.                                                  interactive workshop about Lean Six Sigma. Furthermore,



                                                                 SNS REAAL    Annual Report 2008 report of the executive board     69
     the students could speed date with REAAL recruiters            result of a new distribution model, SNS Bank set up
     and examine the internship, traineeships and starter           new training paths for the various advisory jobs and the
     positions within REAAL Verzekeringen on a laptop.              employees of SNS Customer Service. Advisers are offered
                                                                    job-specific training, alternated with sales training.
     Training and talent development                                The required professional knowledge is measured by
     Successful, motivated and happy employees are essential        means of an annual knowledge test.
     to the success of our organisation. That is why SNS REAAL
     invests continuously in the knowledge and professional         REAAL Verzekeringen brings the professional skills of
     skills of its employees. In 2008, SNS REAAL set up a           its employees at the appropriate level mainly by means
     Learning Management System, a Learning Portal on its           of sector-specific training. REAAL’s Service Center
     intranet. This platform offers employees and managers          Verzekeren offers a wide range of training programmes,
     a list of all training opportunities, such as courses,         including vocational diplomas WFT, customised training
     e-learning modules and tests. In 2008, the sales organi-       and exams. In addition, it offers competency-based
     sation of SNS Bank and the Service Center Verzekeren of        training in the field of effective communication and
     REAAL Verzekeringen joined the platform, and in 2009           professionalism.
     the entire organisation will have access.
                                                                    Traineeships
     Career development                                             The three-year SNS REAAL programme for management
     SNS REAAL would like to see employees take control of          trainees centralises on intensive coaching and personal
     their own (career) development, so they can continue           development. In this period, the trainees participate
     developing themselves in the event of changes in our           in projects and assignments in various departments.
     organisation and in society and always stay employable.        After an intensive selection procedure, sixteen new
     The training programmes were renewed and expanded,             management trainees were hired in 2008.
     so that they meet the development demands by
     employees and managers even better. The programmes             In addition to the management trainee programme,
     comprise courses in the field of communication,                SNS REAAL also has a programme for financial trainees.
     personal effectiveness and project management.                 In two years students who have just graduated
     Management courses were introduced in the field of             are trained to be financial specialists. During this
     management by coaching and inspiring management,               programme, trainees become acquainted with various
     which follow on the basic management course. All               activities within SNS REAAL’s financial chain.
     information on career development can be found on
     the special SNS REAAL career site, which also includes a       Management Development
     career scan and tips.                                          Management Development focuses on managers and
                                                                    specialists for the second and third highest management
     The Talent Development (TD) programme plays a key              levels, including the potential candidates for these
     role in career development. This programme focuses             positions. In 2008, it was the first time that follow-up
     on talented managers and specialists in middle                 scenarios for the short and longer term were also
     management. SNS REAAL wants to challenge the partici-          discussed in the evaluation interviews between the
     pants to get their teeth into vital corporate issues and       current directors and their direct supervisors in order to
     fulfil a stimulating role in the organisation with an          be able to identify any bottlenecks in good time. Every
     innovative approach. The training groups are structured        three months, the Executive Board met with a group of
     in such a way as to enable the participants to build up        25 potential candidates and discussed topical corporate
     a network throughout the organisation. In 2008, more           issues with them. This group was closely involved in the
     than 100 new talented employees were reported by               composition of the management programme which
     their managers. An online community (TD Sharepoint)            started early 2009.
     was introduced by and for the participants, enabling
     them to participate in forum discussions, chat sessions,       Employment conditions and labour relations
     blogs and show an interest in current projects within          Collective Labour Agreement
     SNS REAAL.                                                     On 19 May 2008, SNS REAAL and the trade unions
                                                                    finalised negotiations on a new Collective Labour
     Job-specific training                                          Agreement (CLA), which is effective from 1 June 2008 up
     SNS REAAL brings the professional skills of its employees      to and including 31 May 2009. Employee salaries and job
     (at least) to the level required by the regulatory             grading scales were raised by 3.25% as per 1 June 2008
     authorities by means of job-specific training. As a            and by 0.5% as per 1 January 2009. The CLA also contains



70   SNS REAAL   Annual Report 2008 report of the executive board
agreements on the study of sustainable employability,        Improvement distribution capacity SNS Bank
replacing the life-phase aware staff policy, and a joint     SNS Bank started a three-year programme to improve
study of the remuneration policy. The agreements from        distribution capacity. On 14 March 2008, the request
the SNS Property Finance harmonisation protocol were         for advice was submitted to the SNS Bank Works
included in the CLA for SNS REAAL, as a result of which      Council. After the advice had been received in mid-May,
the CLA also became applicable to SNS Property Finance.      SNS Bank informed its employees of the consequences
                                                             of the programme. Based on consultations with trade
Working conditions                                           unions, the SNS Bank Works Council and employees,
Average absenteeism rose slightly to 4.4%. SNS REAAL         SNS Bank took several additional measures to ease
introduced the NIPED Prevention Compass for employees,       the restructuring process. These measures included an
which indicates whether their health is ‘on course’. In      accelerated selection of a second location for customer
addition, this test provides a helping hand for lifestyle    service and setting up an employer committee which
adjustments and/or other interventions, if necessary.        deals with complaints by employees with regard to the
                                                             placement procedure or the result ensuing from this
At the end of 2008, SNS REAAL concluded a new contract       procedure.
with Arbo Services, effective through 2011. SNS REAAL
engages this health and safety agency for matters such       SNS Bank started preparing the introduction of
as coaching in the event of absenteeism, reintegration of    variable remuneration. It set up the system and
employees and tests on the basis of the NIPED Prevention     started consultations with the trade unions and the
Compass.                                                     SNS Bank Works Council. The continuation of this
                                                             process is linked to the joint remuneration study, as
Integration AXA NL                                           agreed in the CLA.
The integration of AXA NL led to adjustments to the jobs
of a large number of AXA NL employees. In the first half     Collaboration with Works Councils
of 2008, these employees were mainly reassigned within       The Executive Board has had constructive meetings
SNS REAAL. The integration also had consequences for         with the Central Works Council, in which the Works
the work locations of most of the AXA NL employees and       Councils of SNS Bank, REAAL Verzekeringen and the
several REAAL Verzekeringen employees. In the event of       staff departments are represented.
changing locations, the current Social Plans were applied.
                                                             The discussion between the Executive Board and the
Agreement was reached with the relevant trade unions         Central Works Council covered the following:
and employee representation bodies on the harmoni-            The harmonisation of AXA NL and the acquisition
sation of the employment conditions and the date on             of Zwitserleven and the associated integration and
which the transition to legal employer SNS REAAL NV             organisation plans.
could be effected. The new employment conditions came         ‘Het Nieuwe Werken’ (‘New World of Work’, formerly
into effect on 1 January 2009.                                  known as organisation-based accommodation),
                                                                where the Central Works Council gets involved in
Acquisition Zwitserleven                                        the decision-making process on this subject and
In 2008, the request for advice on the acquisition of           the employee participation is represented in the
Zwitserleven by SNS REAAL and the request for advice on         consultation structure for this programme.
the synergy and collaboration between Zwitserleven and        The approach of the joint remuneration study, as set
REAAL Verzekeringen were submitted to and discussed             out in the CLA, which also involves the results from
with the relevant employee representation bodies. They          the evaluation of the performance and competency-
approved the plans under certain conditions. The conse-         based remuneration system which was already done
quences for the relevant employees of Zwitserleven,             earlier on in 2008. The results of this study regarding
SNS REAAL, REAAL Verzekeringen and AXA NL will                  the present and future remuneration policy will serve
become clear in 2009. At the end of 2008, an agreement          as input for the 2009 CLA negotiations.
in principle was reached with the trade unions regarding      The CLA agreement about sustainable employability,
a Zwitserleven Social Plan and a set of retention               while making an inventory of what SNS REAAL is
measures. This prevents or limits any negative conse-           already doing in this field and what must be done to
quences for employees to the greatest extent possible.          further flesh out sustainable employability.




                                                             SNS REAAL     Annual Report 2008 report of the executive board   71
            Corporate responsibility
            The developments in 2008 have shown that the survival of the financial world is dependent on
            the trust of stakeholders among which clients, employees, shareholders, note holders, business
            partners and society. SNS REAAL wants to maintain and promote sustainable trust in its
            activities through corporate responsibility.


     Public opinion and a major part of private and corporate        reaches its decisions. This goes beyond simply complying
     clients hold the financial sector, including the Dutch          with laws and regulations. It involves being aware of
     financial sector, responsible for the credit crisis and         one’s responsibility, being conscious of the role we
     its consequences. SNS REAAL can only continue to be             play as employees of an organisation and as partici-
     successful if directors, managers and employees take            pants in society. Based on open and honest information,
     clear responsibility for their work and its effects. We do      SNS REAAL wants to find the most suitable solution for
     so, based on the core values ‘client focus’, ‘integrity’,       each of its clients, without losing track of the interests of
     ‘professionalism’ and ‘commitment’.                             SNS REAAL. In addition to transparent products and clear
                                                                     product documents, the execution of the duty of care and
     Client focus                                                    the quality of verbal explanations are paramount in this
     SNS REAAL takes the wishes of its clients as the starting       respect.
     point for the development of responsible products and
     services. SNS REAAL wants to help its clients grow in           SNS REAAL has developed clear standards for ethical
     terms of their financial opportunities. Products and            conduct of employees, which are used to transfer
     services are responsible if they are easy to understand,        the common values and standards within the Group,
     accessible and practical. Products should offer clients         based on the integrity issues that play a role at the
     various purchasing and information options and                  various business units. Culture programmes trigger the
     furthermore transparent, comprehensible information             discussion on specific integrity aspects and norms and
     about product features and costs until expiry should be         integrate compliance with laws and regulations in the
     offered.                                                        day-to-day operations. For more information on these
                                                                     culture programmes and the integrity standards, please
     In recent years, our client focus has been further              see www.snsreaal.nl on corporate responsibility.
     enhanced at all levels of our organisation. The website
     of SNS Bank, the increased number of (franchise) bank           Professionalism
     branches and cash dispensers, the improved structure of         SNS REAAL wants to provide its clients with profes-
     our customer service and the bank and insurer product           sional services and conduct its business in a professional
     documentation and the manner in which they are offered          manner.
     are all examples of this drive. SNS REAAL has learned
     from the debate on costs and transparency of unit-linked        Professional and responsible services require dedication,
     insurance. In 2008 these products are adjusted. In              up-to-date knowledge and skills of employees and the
     2009 more adjustments will be made. Central issues              awareness to deliver the agreed quality of services.
     are transparent product structure, accessible product           In the context of the culture programme workshops,
     information, cautious return forecasts, more protection         courses and training are offered, with which SNS REAAL
     against negative market factors, more guarantees on             promotes its employees to act responsibly in the
     terminal funding capital and fewer options for the              performance of their jobs. In addition, SNS REAAL
     consumer. It is expected that an agreement will be              aims to collaborate with suppliers that take corporate
     reached in the first half of 2009 with representatives of       responsibility seriously. Principles for more sustainable
     unit-linked policyholders. This means that SNS REAAL            cooperation and guiding policies for responsible and
     has taken responsibility with retroactive effect as regards     professional collaboration have been set out in the
     the price/quality ratio of these products.                      sustainability declaration of SNS REAAL. Please see
                                                                     www.snsreaal.nl/CorporateResponsibility.
     Integrity
     SNS REAAL takes account of the various interests of             Professional and responsible management requires
     stakeholders by being transparent about the way it              a balanced internal management model tailored to



72   SNS REAAL    Annual Report 2008 report of the executive board
the challenges facing SNS REAAL. This model is based            an important role in shaping our social responsibility.
on explicit targets, tasks and responsibilities for all         Additional activities are initiated by the Executive Board,
employees, a moderate risk profile and the principles of        the management boards of the business units and the
the Dutch Corporate Governance Code. The SNS REAAL              employees.
management model, as described in the Framework for
business control, leads to an organisation with built-in        SNS REAAL Fonds
checks and balances, frameworks, limits and boundaries          Stichting SNS REAAL Fonds supports hundreds of projects
for policy and implementation. Structural, periodic             in the areas of culture, cultural education and science.
and incidental reports, actions, monitoring and checks          These concern large as well as small, national and local
are inherent in this model. The key SNS REAAL models            projects.
for professional and responsible management are the             One of the projects supported by SNS REAAL Fonds is
Business Control Framework, on page 64 of this report,          the ‘Prix de Rome’. This project is known throughout the
and the general business principles, on                         Netherlands and is the most important Dutch award aimed
www.snsreaal.nl/CorporateGovernance.                            at encouraging young and talented plastic artists. In 2008,
                                                                the SNS REAAL Fonds donated over € 16 million to a wide
Inherent in professional management is the accounta-            range of activities and projects. The hall of projects on
bility of this management and its effects to stakeholders.      the funds’ new website (www.snsreaalfonds.nl) provides
SNS REAAL aims to be transparent about its policy,              a good overview of the various projects that we support.
objectives and results in its financial reports and other       The fund’s annual budget for supporting projects is made
progress reports and publications.                              available by Stichting Beheer SNS REAAL.

Commitment                                                      SNS REAAL Waterfonds
SNS REAAL wants to be committed by knowing its stake-           SNS REAAL Waterfonds has lower return requirements
holders and being aware of its responsibilities in society      than SNS REAAL’s commercial activities. This fund
and its development. SNS REAAL shows its commitment             is intended for investment projects that promote
with its responsible conduct of business and by contrib-        sustainable development, entrepreneurship and
uting actively and financially to socially relevant projects.   innovation in water control and water management.
                                                                It aims to develop into a knowledge centre in the field of
SNS REAAL defines responsible business conduct by               sustainable water investment. It promotes the exchange
steering on the desired quality of its services and dealing     of specific knowledge between all parties involved in
economically with environmental matters. SNS REAAL              water projects, such as governments, NGOs, companies,
prefers products and processes that require fewer raw           local banks and, of course, the end-users. SNS REAAL
materials and energy and produce less waste. This is            Waterfonds’ objective is in line with one of the United
manifest, for example, in the use of building materials         Nations’ eight millennium goals: promoting access
and office supplies with and FSC label. SNS REAAL is            to safe drinking water and sanitary facilities. Despite
increasingly enabling its employees to work from home,          considerable growth in 2008, the size of the fund remains
cutting back commuter travel and saving on SNS REAAL’s          limited. In 2009, the fund aims to generate additional
long-term office costs.                                         growth by investments that are combined with micro
                                                                financing.
Responsible business conduct also includes offering
employees sufficient training and development oppor-            More information on the website
tunities and providing them with a working environment          For more (financial) information on how SNS REAAL
that inspires and motivates them to take their responsi-        shapes its corporate responsibility, please visit our
bility and make a valuable contribution to the common           website www.snsreaal.nl/CorporateResponsibility.
result. In 2009 SNS REAAL starts with the ‘New World of
Work’ which expands opportunities for telecommuting
and flexible working.

Being socially responsible has traditionally been part          Utrecht, 12 March 2009
of SNS REAAL’s history. At the end of the 19th century,
the first regional savings banks and the first insurance        Sjoerd van Keulen
companies were already committed to supporting                  Rien Hinssen
social and cultural activities. SNS REAAL Fonds plays           Ronald Latenstein van Voorst




                                                                SNS REAAL     Annual Report 2008 report of the executive board   73
Simplicity
SNS REAAL is looking to simplify its structure in order to increase
cross-collaboration between the various labels. The core of the management
now comprises the Executive Board, the Management Committee and the
management teams of the four business units. This organisational structure
makes it possible to enhance uniformity in our products, prices and distribution
on a group-wide level. At the same time, it offers a platform for the creation of
new, distinctive products for our clients.
Report of the Supervisory Board
       Report of the Supervisory Board
       In addition to the usual topics, the Supervisory Board mainly focused on the consequences of
       the credit crunch for SNS REAAL. This was, in the second half-year, in an increasing difficult
       and uncertain climate, an important agenda item. The consequences of the crunch on the
       results are disclosed elsewhere in this report and in the financial statements.


Composition of the Supervisory Board                           the full Executive Board was in attendance. The (deputy)
The composition of the Supervisory Board was changed           chairman discussed the agenda with the chairman of the
during the year under review. At the closing of the Annual     Executive Board and the CFO prior to every meeting.
General Meeting (AGM) of 16 April 2008, Joop Bouma,
the Supervisory Board’s chairman, and Jos van Heeswijk,        At the meeting of January, the Supervisory Board
chairman of the Audit Committee, resigned. Hans van            discussed the Management Letter 2007 of the external
de Kar, vice chairman of the Supervisory Board, is (co-)       auditor, which among other things dealt with the
chairman ad interim as of the AGM. At the AGM Herna            achievement of key financial projects, in-control
Verhagen is appointed under condition of consent by            programmes, continuity of operations and compliance.
the supervisor, the Dutch Central Bank. This consent           The Supervisory Board discussed the preliminary results
has been obtained. In august it appeared that Henjo            of the company for the 2007 financial year and met with
Hielkema who was also appointed at the AGM under               the Board of Directors of REAAL Verzekeringen to discuss
condition of consent by the supervisor, would not join         unit-linked insurance, the progress of the integration of
the Supervisory Board due to a difference of opinion           AXA NL, Zwitserleven and the proposed resale of Swiss
with the supervisory authority. In the fourth quarter of       Life Belgium.
2008 the Group announced the nomination of three
new members. For more information on the members               At the meeting of February, the draft versions of the
of the Supervisory Board and the composition of the            annual report 2007, the financial statements 2007 and the
committees, please see page 88 of this annual report.          corresponding press release were discussed. The external
                                                               auditor and external actuary, who presented their views,
Regarding the independence of the Supervisory                  were in attendance during the decision-making regarding
Board members, we refer to the chapter on Corporate            these subjects. At that meeting, the Supervisory Board
Governance subsection Compliance Tabaksblat Code.              also discussed the agenda for the AGM and gave its
                                                               approval to the deed of issuance of B-shares intended to
Composition of the Executive Board                             partly fund the acquisition of Zwitserleven. Furthermore,
The composition of the Executive Board changed during          the Supervisory Board examined the integral quarterly
the year under review. In August, Cor van den Bos              risk reports, which every quarter deal with the identified
resigned in good agreement from the Executive Board,           risks for the company’s business operations and the
and then Ronald Latenstein van Voorst temporarily              concomitant complex of scenarios and control measures
managed his portfolio. Due to the announced departure          required to face those risks.
of Sjoerd van Keulen as chairman of the Executive Board
and the proposed succession by Ronald Latenstein van           At the meeting of March, the Supervisory Board
Voorst, a vacancy arose for the position of Chief Financial    discussed the integration programmes for AXA NL,
Officer (CFO). This vacancy will be filled by the proposed     including the legal mergers with REAAL Levensverzeker-
appointment of Ference Lamp as of 15 April 2009. For           ingen and REAAL Schadeverzekeringen, and the plan for
more information on the members of the Executive               the reverse integration of Zwitserleven. The Supervisory
Board, please see page 14 and 15 of this report.               Board also discussed the final version of the annual
                                                               report and the subject of corporate responsibility.
Meetings of the Supervisory Board
The Supervisory Board convened seven times in 2008 for         At the meeting of May, the Supervisory Board discussed
an ordinary meeting and eight times for an additional          the trading update, the internal management reports
meeting, with two meetings held by telephone.                  and the capital structure of SNS REAAL. The Supervisory
The Supervisory Board convened four times without the          Board also devoted attention to the subject of VIF
presence of the Executive Board. At the other meetings,        Monetisation, a funding instrument that is practically



                                                              SNS REAAL   Annual Report 2008 report of the supervisory board   77
     new to the Netherlands. The quarterly report on risk              meetings. The Executive Board, Group Audit, the external
     management was explained by Group Risk Management                 auditor and the certified external actuary provide the AC
     and was discussed, as well as the governance regarding            with information.
     Zwitserleven.
                                                                       At the meeting of January, the AC discussed the
     At the meeting of August, the Supervisory Board                   preliminary results of 2007, the status of the annual
     discussed the draft version of the half-year report               report, the Management Letter 2007 of the external
     and the integral quarterly risks reports. The results             auditor, the half-year report on (potential) high-risk
     were discussed with the external auditor and the                  claims and litigation and the report from the Group Audit
     external actuary. The Supervisory Board approved                  department on the fourth quarter of 2007.
     the revised regulations for the Boards of Directors of
     REAAL Verzekeringen and SNS Bank.                                 In February, the AC discussed a report on the supervision
                                                                       of the company by DNB, the internal management
     At additional meetings in August, October and early               reports, the press release on the 2007 results and the
     November, all attention was focused on the company’s              reports by the external auditor and external actuary.
     strategic options in connection with the developments             Operational risk management, in particular with regard
     on the capital markets.                                           to data protection and continuity of operations, was
                                                                       discussed based on the corporate in-control statement.
     At the meeting of November, the Supervisory Board
     was given a presentation on the developments at the               In the meetings of January and February, the operational
     Human Resources department and the subjects of                    risk management of SNS Fundcoach was discussed.
     management development and talent development.
     The Supervisory Board discussed the figures for the third         At the meeting of May, the AC spoke with the
     quarter, the Investor Relations activities, the integral          management of SNS Property Finance about risk
     quarterly risk reports and corporate governance, based            management at international SNS Property Finance
     on the proposals from the Frijns Monitoring Committee.            projects. The AC also discussed tax issues, the organi-
     At this meeting, the Supervisory Board also discussed             sation’s liquidity position, the valuation of the insurer’s
     the liquidity and solvency position.                              equity portfolio and the first quarterly report of Group
                                                                       Audit, including its findings on the quarterly closing.
     At the final meeting of the year, in December, the                The report on the GriB project (automated authori-
     Supervisory Board focused on the operational plan                 sation management) was also discussed. In August,
     2009-2011                                                         discussion focused on the situation on the markets, the
                                                                       subjects of rating agencies and reporting – press release,
     In a separate meeting without the presence of the                 half-year figures, reports by the external auditor and the
     Executive Board, the Supervisory Board reviewed its               external actuary – and the litigation statement for the
     own functioning and that of the Executive Board.                  first six months of 2008 including the relevant provision.
     The contributions of the individual members, the                  The bank’s mortgage foreclosure procedures were
     competences within the Supervisory Board, the                     discussed with the CFO of SNS Bank. In addition, the AC
     quality of the agenda and the quality of the available            dealt with the audit engagement for KPMG and the Audit
     information were discussed separately in this evaluation.         Plan.
     The Supervisory Board discussed with the members of the
     Remuneration, Selection and Appointment Committee                 In November, discussion focused on the subjects of
     the functioning of each member of the Executive Board             liquidity and solvency, the trading update for the third
     based on the evaluation meetings conducted with each.             quarter, risk management at SNS Fundcoach and the
                                                                       issue on the transparency of unit-linked insurance.
     Committee meetings                                                The AC also discussed current issues with regard to
     Audit Committee meetings                                          the supervision by the Netherlands Authority for the
     The Audit Committee (‘AC’) met six times, the meeting             Financial Markets (AFM) and the Dutch Central Bank
     of May being the first one chaired by its new chairman,           (DNB).
     Robert-Jan van de Kraats. In accordance with its mandate,         The AC dedicated itself to the quality of SNS REAAL’s
     the AC mainly assessed the design and operation of                financial management.
     the risk management organisation. The chairman of
     the Executive Board, the CFO, the head of the Group               In December, discussion focused on the operational plan
     Audit department and the external auditor attended the            for the budget year 2009. The AC exchanged thoughts



78   SNS REAAL    Annual Report 2008 report of the supervisory board
with the Group Audit department and the external             chairman of the Board of Directors of REAAL Verzeker-
auditor, each separately, on the course of affairs at the    ingen. Based on these meetings, proposals were made
company in terms of risk management.                         to the Supervisory Board. The RSA Committee also
                                                             discussed the composition of the Supervisory Board
Credit Committee meetings                                    committees and the subject of remuneration for the
The Credit Committee met twice, in May and December,         senior levels of the company.
each time in the presence of, inter alia, the chairman
of the Board of Directors of SNS Bank and the CFO of         All committees reported to the plenary Supervisory
SNS Bank and the management of SNS Property Finance.         Board.
In both meetings, loan proposals exceeding € 100 million
were presented and assessed. In the meantime, the            Contacts with the Central Works Council
Credit Committee devoted much time to the periodic           Two members of the Supervisory Board twice attended a
loan proposals of SNS Property Finance.                      Central Works Council meeting, including the December
                                                             meeting, in which the operational plan for 2009 was
Meetings of the Remuneration, Selection                      discussed.
and Appointment Committee
The Remuneration, Selection and Appointment                  Financial statements and dividend
Committee (‘RSA Committee’) met eight times: in              The Supervisory Board reviewed the 2008 financial
January, February, March, May, August, October,              statements at the meeting of 12 March 2009. Prior to
November and December. That is three times more              that meeting, the press release in February were dealt
than in 2007. These meetings mainly pertained to the         with. KPMG, the external auditor, issued an unqualified
succession of the chairman of the Executive Board, the       opinion on the financial statements. In view of the
CFO, the vacancies in the Supervisory Board and the          extraordinary developments, SNS REAAL was forced to
unexpected fact that Henjo Hielkema was not appointed.       abstain from distributing a final dividend for 2008; total
In the first three meetings of 2008, the RSA Committee       dividend remained limited to € 0.41 per ordinary share.
reviewed the remuneration report, the evaluation of          The financial statements will be presented to our share-
the Supervisory Board members and also bonuses and           holders on 15 April 2009.
targets for the Executive Board.
                                                             The Supervisory Board is well aware of the tough
The RSA Committee interviewed candidates for                 circumstances SNS REAAL faced and therefore
various management positions, including, in May, for         explicitly expresses her gratitude and appreciation to
the position of chairman of the Management Board             management and employees for their dedication in this
of Zwitserleven and the vacancy for the position of          difficult year.



                                                             Utrecht, 12 March 2009
                                                             On behalf of the Supervisory Board,
                                                             Hans van de Kar, chairman ad interim




                                                            SNS REAAL    Annual Report 2008 report of the supervisory board   79
More colour
On 29 April 2008, SNS REAAL acquired Zwitserleven: a label that immediately
received a prominent place in our organisation. The pension activities of
REAAL Verzekeringen (including the former AXA Nederland and Winterthur) are
transferred to Zwitserleven. SNS REAAL is now one of the leading life insurers in
the Netherlands. It did not take long to develop new activities either.
One example is GroenPensioen, an additional sustainable pension product
developed by Zwitserleven and ASN Bank in December.
Corporate governance
       Corporate governance
       SNS REAAL added a number of important changes to its governance in 2008 and early 2009,
       on the one hand in connection with the capital injection by the Dutch State and, on the other,
       to promote further collaboration between the business units.


SNS REAAL has maintained a transparent governance            Governance structure
structure. The allocation of powers and responsi-            SNS REAAL is what is known as a two-tier company.
bilities is aimed at efficient business operations           The company has an Executive Board, as well as
and transparent accountability for those business            a Supervisory Board carrying all powers allocated
operations. In this context, SNS REAAL aims for              to the Supervisory Board of a two-tier company by
optimum compliance with the principles and best-             law. In addition, the Supervisory Board has certain
practice provisions of the Tabaksblat Code (‘Code’).         additional powers as laid down in the regulations of
Where it deviates from the Code, SNS REAAL provides          the Executive Board and the Articles of Association.
reasons on the basis of the interests of its stakeholders.   The Supervisory Boards of SNS REAAL, SNS Bank
                                                             and REAAL Verzekeringen are comprised of the same
Consequences of the capital injection                        individuals. The Supervisory Board oversees the policy
On 11 December 2008, SNS REAAL issued € 750 million          of the Executive Board and the Boards of Directors of
worth of non-voting securities capital to the Dutch          SNS Bank and REAAL Verzekeringen and advises them.
State.                                                       For information about the current Supervisory Board
                                                             members, please refer to page 16.
As part of the agreement between SNS REAAL and the
Dutch State, the latter acquired the right to nominate       In the beginning of 2009, in addition to the Executive
two members for the Supervisory Board. The Dutch             Board, a new Management Committee was formed,
State has meanwhile exercised that right. At the AGM         comprising the Executive Board, the chairmen of
on 15 April 2009, votes will be cast regarding the           the boards of the retail activities of SNS Retail Bank,
appointment of Ludo Wijngaarden and Charlotte                SNS Property Finance, REAAL Verzekeringen and
Insinger as members of the Supervisory Board.                Zwitserleven, the Chief Information Officer and
On the basis of the agreement, they will then also           the director of Human Resources. The tasks of the
be appointed as members of the Audit Committee,              Management Committee are aimed at further improving
the Remuneration, Selection and Appointment                  efficiency, business development and the performance in
Committee and the Supervisory Boards of SNS Bank             a group-wide context.
NV and REAAL Verzekeringen NV. In the period up to
15 April 2009, they will be attending the meetings as        Stichting Beheer SNS REAAL
observers. At the moment the following Supervisory           Stichting Beheer SNS REAAL (‘the trust’) is an
Board approval items already require the affirmative         independent trust and was established in 1988. The goals
vote or consent of the two Supervisory Board nominees        of the trust are to participate in SNS REAAL’s capital
(not exhaustive): issue, acquisition and disposal of         in the form of shares and to represent SNS REAAL’s
shares of SNS REAAL, significant acquisition or partici-     interests in such a way that the interests of the company
pation by SNS REAAL in the share capital of another          and all those involved in it are safeguarded, and to make
company, significant investments, proposals to amend         disbursements of a philanthropic or social nature.
the Articles of Association, proposals to unwind, file
for bankruptcy, reduction of issued share capital of         The trust is majority shareholder of SNS REAAL. At the
SNS REAAL and a change in the remuneration policy            IPO in 2006, it reduced its interest from 100% to 65.5%.
of SNS REAAL.                                                In May 2007, the trust sold another 15.2 million shares
                                                             at the issue to finance the acquisition of AXA NL. As a
In this context, the members of the Executive Board          result, the liquidity and free float of the SNS REAAL stock
also waived their bonuses for 2008. Also on the basis of     was increased and the trust’s interest in SNS REAAL was
the agreement with the Dutch State, their exit schemes       further reduced from 65.5% to 54.3%. In the beginning
have been restricted to a maximum of one time the fixed      of April 2008, because of the acquisition of Zwitser-
annual salary.                                               leven, six B-shares were issued to the trust at a total issue



                                                                    SNS REAAL     Annual Report 2008 corporate governance    83
     price of € 600 million in cash. In December 2008, € 500        SNS REAAL is not authorised to cooperate in the issue of
     million worth of non-voting securities capital was issued      depositary receipts.
     to the trust, in addition to the issue of securities capital
     to the Dutch State. The securities issued to the trust are     Rules regarding the appointment and dismissal of
     not convertible.                                               Executive Board and Supervisory Board members
                                                                    and amendments to the Articles of Association
     At the end of 2008, the Board of the trust comprised           Members of the Executive Board are appointed by the
     of Rob Zwartendijk (chairman), Jan Overmeer (vice-             Supervisory Board with due observance of Book 2,
     chairman), Jean den Hoed, Bas Kortmann and Henk                Section 162 of the Dutch Civil Code. The Supervisory
     Muller. Kortmann and Muller are also members of                Board may at all times suspend or dismiss a member of
     the Supervisory Board of SNS REAAL. On 19 February             the Executive Board, provided that dismissal is subject to
     2009 Chairman Rob Zwartendijk resigned his duty in             consultation with the AGM.
     connection with the proposed appointment as Chairman
     of the Supervisory Board of SNS REAAL in the AGM of 15         Members of the Supervisory Board are appointed by
     April 2009.                                                    the AGM on the nomination of the Supervisory Board.
                                                                    The AGM and the Works Council may recommend
     Articles of Association and Rules                              persons to be nominated for the position of Supervisory
     The following Articles of Association and Rules may be         Board member. To that end, the Supervisory Board will
     consulted on www.snsreaal.nl: Articles of Association          inform these bodies in good time of the term, position
     Stichting Beheer SNS REAAL, Articles of Association            and profile of the vacancy to be filled. Alternatively, if
     SNS REAAL NV, Profile Outline Supervisory Board,               the reinforced right of recommendation as referred to
     Regulations Supervisory Board, Regulations Executive           in Article 18.4 of the SNS REAAL Articles of Association
     Board, Regulations Remuneration, Selections and                applies to the vacancy, the Supervisory Board shall also
     Appointment Committee, Regulations Audit Committee,            make this known.
     Whistleblower Scheme and the Private Investment
     Transactions Regulations.                                      One third of the members of the Supervisory Board is
                                                                    nominated by the Supervisory Board on the recommen-
     Restrictions on voting rights, periods                         dation of the Works Council, unless the Supervisory
     for the exercise of voting rights and                          Board objects to this recommendation on the grounds
     the issue, with the cooperation of the                         that it expects that the recommended person will be
     company, of depositary receipts.                               unsuitable to act as a member of the Supervisory Board
     SNS REAAL has not set any restrictions to the exercise of      or that the Supervisory Board would not be properly
     the voting rights. Majority shareholders have the same         constituted if that person were appointed. If the
     voting rights as any other shareholders.                       Supervisory Board objects to the recommendation of the
                                                                    Works Council for these reasons, the Supervisory Board
     The Executive Board may resolve to designate as entitled       will immediately consult with the Works Council. If no
     to vote or entitled to attend the meeting, those who (I) are   agreement is reached concerning the recommendation,
     shareholders on a record date set by the Executive Board       the Enterprise Section of the Amsterdam Court of Appeal
     and (II) are registered as such in a register designated       will issue a ruling. The AGM may reject the recommen-
     by the Executive Board (or one or more parts thereof ),        dation by an absolute majority of the votes cast, repre-
     provided (III) the holder of the register, at the request of   senting at least one third of the issued share capital. If at
     the applicant, has given notice in writing to the company      least one third of the share capital is not represented at
     prior to the AGM that the relevant shareholder intends to      the meeting, a new meeting will be called, in which the
     attend the AGM, regardless of who the shareholder is at        appointment may be rejected by an absolute majority
     the time of the AGM. The requirement stated under (III)        of the votes cast. If the nomination is then rejected, the
     also applies to the holder of a written proxy provided by a    Supervisory Board will make a new recommendation in
     shareholder. The notice must contain the name and the          accordance with the abovementioned procedure. If the
     number of shares which the shareholder is entitled to          AGM does not appoint the nominated person and does
     attend the AGM. The record date and the date by which the      not resolve to reject the nomination, the Supervisory
     intention to attend the AGM has to be made known cannot        Board will appoint the nominated person.
     be earlier than the period set by law. The convocation of
     the AGM will contain those dates (insofar as applicable), as   A member of the Supervisory Board can only be
     well as the place and the manner in which registration and     dismissed by the Enterprise Section of the Amsterdam
     notification will take place.                                  Court of Appeal for neglecting his duties, other serious



84   SNS REAAL    Annual Report 2008 corporate governance
considerations or a drastic change in circumstances                reserves required to be maintained by law or the
due to which the company can no longer be reasonably               Articles of Association; and
expected to retain the Supervisory Board member.              (II) the nominal amount of the shares in its capital that
A Supervisory Board member may be suspended by                     the company would acquire, hold or hold in pledge
the Supervisory Board. The AGM may pass a motion of                or that would be held by any subsidiary, does not
no confidence in the Supervisory Board by an absolute              exceed one-tenth of the issued share capital.
majority of the votes cast, representing at least one third
of the issued share capital. If at least one third of the     The AGM must specify in the authorisation, which shall
issued share capital was not represented at the meeting,      be valid for at most 18 months, the number of shares that
a new meeting may be convened at which the AGM, by an         may be acquired, the way in which they may be acquired
absolute majority of the votes cast, may pass the motion      and the limits within which the price must be set.
of no confidence in the Supervisory Board, irrespective       The Executive Board is authorised by the AGM to procure
of the portion of capital represented at that meeting.        the acquisition, for consideration, of fully paid-up shares
This motion will result in the immediate dismissal of the     in its own share capital. The authorisation will end on
entire Supervisory Board. If a motion of no confidence        16 October 2009, unless the AGM extends the authori-
has been passed, the Executive Board will request the         sation.
Enterprise Section of the Amsterdam Court of Appeal
to temporarily appoint one or more Supervisory Board          In principle, every shareholder has a pre-emptive right
members without delay.                                        to shares issued by SNS REAAL in proportion to the
                                                              aggregate amount of his shareholding. No pre-emptive
The AGM may resolve to amend the Articles of                  right exists in respect of shares that are issued for consid-
Association. A motion to amend the Articles of                eration other than in cash or shares issued to employees
Association requires a majority of at least two thirds of     of SNS REAAL or any of its group companies. Pre-emptive
the votes cast at a shareholders’ meeting.                    rights may be limited or excluded by a resolution of the
                                                              AGM. Such a resolution requires at least a two-third
The powers of the Executive Board, particularly               majority of the votes cast if less than half of the issued
with regard to the issue of SNS REAAL shares and              share capital is represented at the meeting. The AGM
the acquisition by SNS REAAL of its own shares                may designate the Executive Board as the competent
The AGM has delegated to the Executive Board the              body. In that case, the Executive Board may limit or
authority to issue shares. This authority can only be         exclude the pre-emptive right subject to the approval
delegated for a fixed period of no more than five years       of the Supervisory Board. The Executive Board may only
and may each time be extended for no more than five           be designated for a limited period of no more than five
years. The authority of the Executive Board will end on 16    years, which designation may be extended each time by
October 2009, unless extended by the AGM. A resolution        no more than five years. The Executive Board has been
by the Executive Board to issue shares requires the           designated by the AGM as the body competent to decide
approval of the Supervisory Board. If the AGM has             on restricting or excluding the pre-emptive right. This
delegated the authority to issue shares to the Executive      authority will end on 16 October 2009, unless the AGM
Board, it will determine the price and further conditions     extends the designation.
of any issue, subject to the approval of the Supervisory
Board, taking into account the relevant provisions of the     Information on Executive Board members
Articles of Association.                                      The Executive Board is comprised of Sjoerd van Keulen
                                                              (chairman and CEO), Rien Hinssen (also chairman of the
The above applies correspondingly to the granting of          Board of Directors of SNS Bank) and Ronald Latenstein
rights to subscribe for ordinary shares, such as options,     van Voorst (CFO).
but does not apply to an issue of ordinary shares
pursuant to rights previously acquired.                       Summarised CVs are provided on page 14 and 15 of
                                                              this report and more extensive CVs are available at
The Executive Board, subject to the authorisation of the      www.snsreaal.nl.
AGM and subject to Book 2, Section 98d of the Dutch
Civil Code, may procure the repurchase of fully paid-up       Other positions
SNS REAAL shares for consideration. However, such             Sjoerd van Keulen
repurchases are only permitted if, and to the extent that:    Member of the Executive Board of PharmAccess Inc.,
(I) the shareholders’ equity, minus the purchase price,       member of the Board of Stichting Health Insurance
    is not less than the issued share capital plus the        Fund, chairman of Stichting Investment Fund for Health



                                                                     SNS REAAL     Annual Report 2008 corporate governance    85
     in Africa (IFHA), member of the Supervisory Board of          Bestuur. Mr Van de Kar is chairman of the board of
     Heijmans NV, member of the Supervisory Committee              Stichting Uitgeverij Aksant, chairman of the board of
     of the World Wide Fund for Nature and member of the           the International Institute for Social History, former
     Supervisory Board of APG Group.                               chairman of the Pension Fund Trust for the Dutch
                                                                   Theatre, auditor of the International Institute of
     Rien Hinssen                                                  Public Finance and chairman of Stichting Aandelen en
     Member of the Executive Board of the Netherlands              Arbeidsvoorwaarden Kunst en Cultuur.
     Bankers’ Association (NVB), board member of the
     Stichting Bevorderen Efficiënt Betalen, member of the         Bas Kortmann
     European Savings Banks Group and board member of              Bas Kortmann (1950) is chancellor (rector magnificus)
     the World Savings Banks Institute.                            at Radboud University Nijmegen and also professor
                                                                   of civil law at this institution. He is chairman of the
     Ronald Latenstein van Voorst                                  board of Stichting Grotius Academie, deputy judge
     Member of the Supervisory Board of Sligro Food Group NV       of the Court of Appeal of Arnhem, and a member of
     (since 12 March 2008), vice-chairman of the Supervisory       the Supervisory Board of Dela Coöperatie. He is also
     Committee of Stichting Kinderopvang Humanitas, board          chairman or member of various boards of anti-takeover
     member of Climate Change Capital Holdings Ltd. and            foundations of listed companies and a trust office. He is
     board member of Duisenberg School of Finance.                 also chairman of the Insolvency Law Committee (which
                                                                   at the request of the Minister of Justice is preparing a
     Unless stated otherwise the other functions held concern      new Bankruptcy law). Kortmann is also a board member
     the situation at year-end 2008                                of Stichting Beheer SNS REAAL and Stichting SNS REAAL
                                                                   Fonds.
     Nomination for appointment as
     Executive Board member                                        Robert-Jan van de Kraats
     The Supervisory Board of SNS REAAL is nominating              Robert-Jan van de Kraats (1960) is vice-chairman of
     Ference Lamp to be appointed member of the Executive          the Executive Board and CFO of Randstad Holding
     Board and Chief Financial Officer of SNS REAAL. He will       NV. In addition to finance including M&A and Investor
     be succeeding Ronald Latenstein van Voorst, the current       Relations, Mr Van de Kraats is also responsible for
     CFO of SNS REAAL. The Supervisory Board plans to              corporate IT and for a number of operating companies
     nominate Ronald Latenstein van Voorst to be appointed         in various countries. He is a former member of the
     Chairman of the Executive Board of SNS REAAL.                 Executive Board and CFO of NCM Holding NV. Van de
                                                                   Kraats is currently also a member of the Supervisory
     Ference Lamp                                                  Board of Ordina NV and a member of the Executive Board
     Ference Lamp (1971) has extensive experience in the           of New Venture.
     financial services industry. Since 2000, Ference Lamp had
     been working for Lehman Brothers. His final position was      Jaap Lagerweij
     Managing Director of the Financial Institutions Group,        Jaap Lagerweij (1947) is managing director of the
     which is responsible for advising financial institutions in   Sperwer Groep and a member of the board of Superunie,
     the Benelux. From 1996 until 2000, he worked at Fortis        a purchasing organisation for a large number of Dutch
     Investment Bank in Amsterdam as Associate Corporate           supermarket organisations. He is a former chairman of
     Finance & Capital Markets, among other positions. Other       the board of retailers HEMA and Praxis Groep. He is on
     present position of Ference Lamp: board member of             the Supervisory Boards of Quantore Europe BV, Cool
     Radio Netherlands Worldwide                                   Cat Fashion BV, Beerens Group and the Dutch National
                                                                   Lottery. He is also chairman of the advisory council of
     The proposed appointment has been approved by DNB             the National Food Congress and chairman of the board
     and the Central Works Council issued a positive opinion.      of the Stichting Leerstoel Detailhandelsmarketing of the
                                                                   University of Amsterdam.
     Information on Supervisory Board members
     CVs and other positions                                       Henk Muller
     Hans van de Kar                                               Henk Muller (1942) is vice-chairman of the Supervisory
     Hans van de Kar (1943) is vice-chairman of the                Board of ASN Beleggingsfondsen NV, chairman of the
     Supervisory Board. Van de Kar taught financial                Nederlands Participatie Instituut, chairman of the
     management at Leiden University and is a former               Supervisory Committee of Welder, formerly Breed
     vice-chairman of the Raad voor het Binnenlands                Platform Verzekerden en Werk, board member of



86   SNS REAAL    Annual Report 2008 corporate governance
Pension Fund FNV and member of Vereniging Aegon.                 persons are Charlotte Insinger, member of the Board of
Muller is also a member of the board of Stichting Beheer         Directors of Erasmus MC, and Ludo Wijngaarden, former
SNS REAAL and Stichting SNS REAAL Fonds. Muller is a             chairman of the board of ING Divisie Intermediair and
former board member of the FNV trade union federation            board member of ING Nederland.
and a former member of the Sociaal-Economische Raad
and Stichting van de Arbeid. He is also a former chairman        Charlotte Insinger
of the Supervisory Board of ABF Het Andere Beleggings-           Charlotte Insinger (1965) has been a member of the
fonds Webefo and a former employee-chairman of the               Board of Directors of the Erasmus MC hospital since May
pension committee of Stichting van de Arbeid.                    2005, where her portfolio includes finance, in addition
                                                                 to various medical areas. Before that, she used to work
Herna Verhagen                                                   for the Robeco Group, where she held various positions.
Herna Verhagen (1966) is managing director of HR at              Her final position was director of Fund Administration
TNT. She is a former sales director of TNT Post. Verhagen        Services. From 1989 until 1998, she held various financial
is a member of the advisory council of Rijkswater-               positions at Shell. It is intended to also appoint Insinger
staat (Directorate-General for Public Works and Water            as a member of the Supervisory Board of SNS Bank NV
Management).                                                     and REAAL Verzekeringen NV.

A number of the Supervisory Board members were                   Other positions: Charlotte Insinger is a member of
also on the Supervisory Board of a legal predecessor of          the Advisory Board of Stichting Diergaarde Blijdorp,
SNS REAAL NV.                                                    member of the Executive Board of Erasmus MC, member
                                                                 of Supervisory Board of Havenziekenhuis and board
Additional information on the Supervisory Board                  member of the Anti Doping Organisation.
A Supervisory Board member is appointed for a period of
four years. Re-appointment only takes place after careful        Ludo Wijngaarden
consideration. Board members can only be re-appointed            Until recently, Ludo Wijngaarden (1947) was chairman of
twice, each time for a period of four years. The profile of      the board of ING Divisie Intermediair (inter alia Nationale
the Supervisory Board, the member’s performance and the          Nederlanden) and board member of ING Nederland.
time the member has already served are then taken into           Before that, he was the chairman of the board of Postbank
account. As of 24 March 2004, the Articles of Association        and the ING Retail division. As of 1988, he was working
of SNS REAAL state that members of the Supervisory Board         at ING Group in various positions in both the banking
that are part of the Board at that date can be re-appointed      and the insurance division. Until October 2008, he was
twice for a period not exceeding four years.                     chairman of the Association of Insurers (Verbond van
                                                                 Insurers), board member of VNO-NCW and member of the
Nomination for appointment as                                    Bank Council of the Dutch Central Bank. As per 1 January
Supervisory Board members                                        2009, he has been holding various Supervisory Board
The Dutch State is exercising its right to nominate two          memberships in the business sector. It is intended to also
members for appointment to the Supervisory Board, in             appoint Wijngaarden as a member of the Supervisory
the context of reinforcing SNS REAAL’s core capital. Those       Board of SNS Bank NV and REAAL Verzekeringen NV.


Table 26:   Re-appointments
Name                         Nationality      First           Expiry of                  Membership committees
                                           appointment          term
Hans van de Kar                 Dutch          1997            2011         Remuneration, Selection and Appointment
                                                                            Committee, Credit Committee (chairman), Audit
                                                                            Committee
Bas Kortmann                    Dutch          1990            2011         Remuneration, Selection and Appointment
                                                                            Committee, Credit Committee
Robert-Jan van de Kraats        Dutch          2006            2010         Audit Committee (Chairman)
Jaap Lagerweij                  Dutch          2006            2010         Credit Committee
Henk Muller                     Dutch          1997            2009         Remuneration, Selection and Appointment
                                                                            Committee, Credit Committee
Herna Verhagen                  Dutch          2008            2012         Remuneration, Selection and Appointment
                                                                            Committee



                                                                          SNS REAAL   Annual Report 2008 corporate governance   87
     Other positions: Ludo Wijngaarden is chairman of              Other positions: Rob Zwartendijk is Chairman of the
     the Supervisory Board of Oasen, chairman of the               Supervisory Board of Nutreco Holding NV and Blokker
     Supervisory Board of LTP and also a member of the             Holding NV and member of the Supervisory Board of
     Advisory Council of Oracle Nederland.                         Randstad Holding BV.

     In addition, the Supervisory Board is recommending            The SNS REAAL AGM will be requested to adopt a resolution
     Jos Nijhuis and Rob Zwartendijk to the AGM to be              regarding the appointment of Charlotte Insinger, Ludo
     appointed member of the Supervisory Board. Nijhuis            Wijngaarden , Jos Nijhuis and Rob Zwartendijk as members
     is being recommended for the vacancy that arose as a          of the Supervisory Board.
     result of the departure of Jos van Heeswijk. Zwartendijk
     is being recommended for the vacancy that arose as            Remuneration
     a result of the departure of chairman Joop Bouma.             Remuneration in 2009
     The Supervisory Board has the intention to appoint            A new sustainable remuneration policy will be developed
     Zwartendijk to be its chairman, after the appointment         for the Executive Board and the senior management
     by the AGM.                                                   of SNS REAAL. This policy will partly be based on the
                                                                   recommendations from sector associations, the Tabaksblat
     Jos Nijhuis                                                   Code, supervisory authorities and committees, such as
     Jos Nijhuis (1957) is a board member of Schiphol              the Maas committee. A number of trends can by now be
     Group and succeeded Mr Cerfontaine as President               distinguished:
     & CEO of Schiphol Group as per 1 January 2009. He             1 Well-balanced between fixed and variable remuneration.
     had been working for PriceWaterhouseCoopers and               2 Well-balanced between short-term and long-term
     its legal predecessors for many years, from 2002 until             bonuses.
     2008 as chairman of the Executive Board. During               3 Performance criteria are becoming more of a long-term
     that period, Nijhuis was in charge of the strategic                nature.
     reorientation of PriceWaterhouseCoopers and took
     the initiative to make corporate responsibility an            The draft of this new remuneration policy is expected to
     integral part of its business operations. In addition,        be finalised in mid-2009. The following has already been
     the diversity policy was put on the agenda and has            agreed for 2009:
     been implemented under his leadership. In addition             The limitation of the exit fees to a maximum of the one
     to his management skills, Nijhuis is being nominated              year fixed part of the annual income has by now been
     because of his extensive knowledge and experience                 laid down in the employment contracts of the Executive
     with regard to strategy, finance and risk management.             Board members. A change-of-control clause has also
     There is also the intention to appoint Nijhuis as                 been added.
     member of the Supervisory Boards of SNS Bank NV and            The regular CLA increase of the fixed salary by 0.5% as
     REAAL Verzekeringen NV.                                           per 1 January 2009 has been cancelled for the members
                                                                       of the Executive Board.
     Other positions: Jos Nijhuis is a member of the Supervisory    The short-term and long-term bonuses for the Executive
     Committee of Stichting Kids Moving the World, chairman            Board are put on hold in anticipation of the new
     of Stichting Water Right and board member of Stichting            remuneration policy.
     Common Purpose. He was chairman of the Ambassa-                In connection with the appointment of Ronald
     deursnetwerk from 2005 until 2007.                                Latenstein van Voorst as chairman of the Executive
                                                                       Board as per 15 April 2009, his fixed annual salary has
     Rob Zwartendijk                                                   been set at € 532,000 as per that date. The short-term
     Rob Zwartendijk (1939) has worked for many years at               bonus at target level is maximised at 40% of the fixed
     Ahold NV (1977 - 1999), where in 1981 he was appointed            part of the annual income, and maximised at 60% if
     as a member of the Executive Board. In addition, he               the performance is exceptional. His present other
     was President and CEO of Ahold USA from 1989 to 1999.             employment conditions will remain unchanged for the
     Zwartendijk is nominated because of his extensive                 time being, until the new remuneration scheme has
     management skills and knowledge of financial services.            been determined and implemented.
     Because of his role as chairman at Stichting Beheer
     SNS REAAL he is already familiar with SNS REAAL.              Policy principles 2008
     There is also the intention to appoint Zwartendijk as         The remuneration policy aims to enable SNS REAAL to
     member of the Supervisory Boards of SNS Bank NV and           attract, retain and motivate qualified Executive Board
     REAAL Verzekeringen NV.                                       members. In addition, it aims to promote a performance-



88   SNS REAAL    Annual Report 2008 corporate governance
driven culture that supports the achievement of                           3 A long-term bonus, linked to the performance over a
SNS REAAL’s strategic objectives.                                           period of three years (the performance period), paid
The remuneration package consists of a fixed and a                          out in SNS REAAL shares.
variable component, and a pension scheme. The variable                    4 Other benefits and emoluments, including a pension
component is performance-linked and consists of a                           scheme.
short-term bonus and a long-term bonus. The bonuses
are based on achieving pre-set targets that can, insofar                  1   Fixed salary
as possible, be measured and influenced.                                      The fixed salary is the same for all Executive Board
                                                                              members, the sole exception being the chairman,
The pre-set targets, both with regard to the short-term                       who receives a higher fixed salary. The fixed salary
bonus and the long-term bonus, are related to a                               is increased by the salary increases in terms of
combination of financial, operational, strategic and                          percentage as laid down in the collective labour
individual targets. The Supervisory Board considers this                      agreement.
combination of performance measures an adequate
indication of the company’s short-term and long-term                      2 Short-term bonus
performance.                                                                If the targets are achieved on an at-target level, the
The Supervisory Board assesses these targets and                            Executive Board members will receive 40% of the
formulates the ambition levels annually, ensuring                           fixed salary as an annual bonus. In that case, the
that they are challenging yet realistic. The targets are                    chairman of the Executive Board can receive a bonus
explained in more detail below.                                             of 50% of his gross fixed annual salary. Under the
                                                                            short-term bonus scheme, if the performance was
The total income of the Executive Board members will be                     excellent, the maximum bonus for the Executive
compared to that of the peer group at least once every                      Board members can amount to 60%, and to 75%
three years (for the composition of the peer group, we                      in the case of the chairman of the Executive Board.
refer to the table ‘Performance criteria’). More general                    The short-term bonus is fully paid in cash.
market conditions will also be taken into account.
In this, the Remuneration, Selection and Appointment                          For the short-term bonus, the Supervisory Board
Committee is advised by an independent remuner-                               assesses the performance of the members of the
ation specialist. It is the intention to position the overall                 Executive Board in three areas:
remuneration package at a level slightly above the                            1 Financial and operational performance
average package of the peer group.                                                (weighting factor 50%), including the return on
                                                                                  total equity, earnings per share, risk control and
Remuneration policy 2008                                                          the efficiency ratio and operating cost/premium
The remuneration structure for the members of the                                 ratio.
SNS REAAL Executive Board comprises the following four                        2 The contribution to the achievement of the
components:                                                                       strategic objectives (weighting factor 25%),
1 The fixed salary.                                                               including acquisitions, the progress of the
2 A short-term bonus, linked to the performance over                              integration of acquired companies and the
   the financial year.                                                            development of market shares.

Table 27:   Performance criteria
                                                                                                               Target                       Bonus 1
Average ROE for three calendar years                                                                             15%                       0% - 70%
Total Shareholder Return, weighted based on:
- Sector peer group: comparable financial institutions 2                                            At least 6th position                  0% - 70%
- The Amsterdam MidKap Index                                                                        At least 11th – 13th position
Scores from:                                                                                        At the discretion of the
- Employee satisfaction survey                                                                      Supervisory Board                      0% - 10%
- Customer satisfaction survey                                                                                                             0% - 10%
                                                                                                                                           0% - 10%
- Business partner satisfaction survey
Total                                                                                                                                     0% - 170%
1
 ) The bonus to be granted is calculated by multiplying the relevant bonus percentage stated in the table by the number of shares conditionally granted.
2
  ) The sector peer group comprises ten other companies besides SNS REAAL: CNP Assurance, Nordea Bank, Storebrand, Unipol, Swiss Life, Fortis,
    Irish Life & Permanent, ING, DnB NOR ASA and Grupo Catalana Occidente. Substantial amendments are subject to the Supervisory Board’s
    decision.




                                                                                  SNS REAAL       Annual Report 2008 corporate governance                  89
        3 Individual performance based on individual                     There is a ‘share matching model’ in force related to
          competencies (weighting factor 25%).                           this mandatory build-up, whereby the company will
                                                                         match a payment into the deposit with SNS REAAL
        Information about specific targets are considered                shares equal to 25% of the net value of the payment
        commercially sensitive and will therefore not be                 until the target level is reached.
        disclosed.
                                                                         The shares already vested must be held by the
     3 Long-term bonus                                                   Executive Board members for a three-year period, for
       The long-term bonus scheme for the members of                     which reason their transfer has been restricted. One
       the Executive Board aims to match the interests of                exception is the one-off shares award for 2006, whose
       the shareholders and the board members, as well as                transfer has been restricted for a five-year period.
       promoting SNS REAAL share ownership.                              The shares vested for 2006 were transferred in 2008.

        The long-term bonus for the members of the                    4 Other benefits and emoluments
        Executive Board is granted annually in the form                 Pensions
        of a conditional entitlement to SNS REAAL shares.               The members of the Executive Board participate
        The value of the SNS REAAL shares to be conditionally           in the same pension scheme as all employees of
        granted to the members of the Executive Board at                SNS REAAL NV. Thus, the members of the Executive
        the time of the conditional award will amount to                Board pay a member’s contribution of 4.5% in
        40% of their gross fixed annual salary. A percentage            accordance with the SNS REAAL collective labour
        of 50% of his gross annual fixed salary applies to the          agreement. Mr Van Keulen pays a contribution of
        chairman of the Executive Board.                                5%, because he falls under the pension scheme
                                                                        for employees born before 1 January 1949.
        Three years after the conditional granting of the               This contribution is levied on the pensionable salary.
        shares, the shares are vested by the Supervisory                The transition from a final-pay pension scheme to
        Board. The number of shares to be vested is                     an average-pay pension scheme also applies to the
        calculated based on the conditional award and the               members of the Executive Board.
        extent to which the performance criteria mentioned              In principle, a retirement age of 62 applies to the
        in table 27 have been satisfied.                                members of the Executive Board. Rien Hinssen’s
                                                                        retirement age is 60. Due to the introduction of
        Participation in the long-term bonus scheme by the              the Early Retirement, Pre-pension and Life Course
        members of the Executive Board is conditional on the            Savings Act (VPL Act) on 1 January 2006, this is no
        Executive Board members building up an SNS REAAL                longer possible in combination with the original
        shareholding from their own funds and holding these             accrual rate for the lifelong retirement pension,
        shares in deposit. A target level has been established          1.85%. Therefore, this accrual rate has been reduced
        for the board members of one gross fixed annual                 to 1.55%. Rien Hinssen and Cor van den Bos have
        salary and a maximum period of six years in which               as of that date been compensated for this change
        this deposit must be built up gradually. There is an            by means of a supplementary pension right of 0.3%
        annual test to confirm that the conditions have been            accrual per participation year. This compensation
        satisfied. If the build-up is insufficient, the board           makes use of the fiscal possibility to grant additional
        member must supplement the deposit.                             pension rights if and to the extent that in the past




     Table 28:   Long-term bonus
                                      Shares 2007 long-term bonus                Shares 2008 long-term bonus        Market value as at
                                    Conditionally     Unconditionally         Conditionally      Unconditionally    31 December 2008
                                      granted            granted                granted             granted             (x € 1,000)
     S. van Keulen                     16,898                    --                --                    --                 66
     C.H. van den Bos                      --                10,183                --                 9,017                 75
     M.W.J. Hinssen                    10,183                    --                --                    --                 40
     R.R. Latenstein van Voorst        10,183                    --                --                    --                 40
     Total                             37,264                10,183                --                 9,017                221



90   SNS REAAL     Annual Report 2008 corporate governance
Table 29:   Gross remuneration Executive Board
In € thousands                             Pension and                                 Bonus
                         Fixed salary                                                                                       Other 2       Total
                                              other           Short-term                      Long-term 1
                                                                                                Amortisation
                                                                                                 in 2008 of
                                                                                 Granted         previously
                       2008      2007     2008       2007    2008     2007       in 2008          granted          2007     2008      2008       2007
S. van Keulen            623       604         162    125     --        421           --              22             704      --       807 1.854
C.H. van den Bos         471       459         94      95     --        249         268               --             424 1.023 1.856 1.227
M.W.J. Hinssen           474       459         116     95     --        249           --              13             424      --       603 1.227
R.R. Latenstein
 van Voorst              474       459         108     95     --        249           --              13             424      --       595 1.227
Total                  2.042 1.981             480    410     --     1.168          268               48          1.976 1.023 3.861 5.535
1
 ) The fair value of the shares conditionally granted in the long-term bonus scheme are recognised as an expense under staff costs during the
   performance period (three years). In 2008, the portion of the 2007 conditional award attributed to 2008 was recognised as staff costs. As regards
   van den Bos, this part of the unconditional award for both 2007 and 2008 attributed to 2008.
2
 ) Cor van den Bos’ termination fee amounts to € 910.000; furthermore, an amount of € 113,070 was paid out as a compensation for the salary and
   employers contribution in the pension scheme in relation to notice period not taken into account. Under application of the sub district court
   formula, the termination fee is based on the fixed part of the annual salary, the average of the short-term bonus of the past three years and the
   employer’s contribution in the pension.



Table 30:   Mortgage loans to directors
In € thousands                    Outstanding as at 31 December                 Average interest rate                       Redemptions
                                        2008                2007              2008                2007               2008                2007
M.W.J. Hinssen                           529                541                4.5%               4.5%                 12                    8


    fewer pension rights were accrued than permitted                     Ference Lamp commenced employment as per
    under tax rules. The pensions are administered by                    1 November 2008. He is the intended Chief Financial
    SNS REAAL’s independent pension fund.                                Officer. Ference Lamp will be appointed Executive
                                                                         Board member and CFO by the Supervisory Board.
    Other remuneration components                                        The ultimate appointment date is the first date on which
    The other secondary remuneration components                          the next AGM of SNS REAAL will take place, which will be
    are in line with the market and the conditions that                  15 April 2009.
    apply to most other employees. The board members
    receive an expense allowance consisting of a gross                   The members of the Executive Board have permanent
    and a net component. For business travel (including                  employment contracts.
    commuting), the board members are allocated a                        Ference Lamp has a fixed-term employment contract
    company car with driver. For some components, the                    with a term of 4 years. If the employment is terminated
    board members pay a contribution.                                    by the company for reasons not attributable to Ference
                                                                         Lamp, he will be eligible for a redundancy payment of
Members of the Executive Board                                           one annual salary. Annual salary means the fixed part of
On 12 August 2008 an agreement was reached on the                        the income.
termination of the employment of Cor van den Bos and
the conditions under which the contract is terminated.                   Remuneration over the year 2008
The employment of Cor van den Bos was ended on                           1 Fixed salary
31 December 2008.                                                        The fixed salary of the Executive Board members has been
                                                                         increased by 3.25% as per 1 June 2008 in accordance with
In consultation with Sjoerd van Keulen, the Supervisory                  the SNS REAAL collective labour agreement.
Board decided that Mr Van Keulen will retain his position
as chairman of the Executive Board until Ronald Latenstein               2    Short-term bonus
van Voorst is officially appointed by the Supervisory                    The members of the Executive Board do not receive a
Board as chairman of the Executive Board. The ultimate                   short-term bonus for 2008. This decision is part of the
appointment date is the first date on which the next AGM                 commitments made to the Dutch State following the
of SNS REAAL will take place, which will be 15 April 2009.               capital reinforcement.



                                                                                 SNS REAAL       Annual Report 2008 corporate governance                91
     Table 31:   Gross remuneration of the Supervisory Board
     In € thousands                                                            As Supervisory          As member of a
                                                                                                                                       Total
                                                                               Board member              committee 1
                                                                              2008        2007         2008        2007        2008            2007
     J.L. Bouma (until 16 April 2008)                                          23           45          12          19          35             64
     H.M. van de Kar                                                           35           35          16          13          51             48
     J.V.M. van Heeswijk (until 16 April 2008)                                   9          30           4           9          13             39
     J. den Hoed (until 9 May 2007)                                            --           11          --           3          --             14
     S.C.J.J. Kortmann                                                         30           30          15          15          45             45
     R.J. van de Kraats                                                        30           30           9           9          39             39
     J.E. Lagerweij                                                            30           30           2           2          32             32
     H. Muller                                                                 30           30          13          13          43             43
     H.W.P.M.A. Verhagen (as of 16 April 2008)                                 21           --           3          --          24             --
     Total                                                                    208         241           74          83         282             324
     1
      ) Including other remunerations. The amounts behind Muller’s name include an amount of € 4,500 as compensation for his Supervisory Board
        activities provided on behalf of SNS REAAL to ASN Beleggingsfondsen NV.


     Table 32:   Mortgage loans to Supervisory Board members
     In € thousands                                                          Outstanding as at             Average
                                                                                                                                 Redemption
                                                                               31 December               interest rate
                                                                              2008        2007         2008        2007        2008            2007
     H.M van de Kar                                                            120         120        6.6%         6.6%           --             --
     J.V.M. van Heeswijk                                                       155         155        5.0%         5.0%           --           156
     S.C.J.J. Kortmann                                                          91           97       4.4%         4.4%            6             5
     H. Muller                                                                  18           68       6.3%         6.7%           50             --
     Total                                                                     384         440                                    56           161

     The bonus realisation for 2007 was adopted by the                    Table 29 sets out the total remuneration paid to the
     Supervisory Board in 2008 and stated in the annual                   individual Executive Board members.
     report 2007. This bonus was recognised in 2007 as an
     expense in the income statement under staff costs.                   Remuneration of the Supervisory Board in 2008
                                                                          The fixed annual remuneration is € 30,000 for Supervisory
     3   Long-term bonus                                                  Board members, € 35,000 for the vice-chairman of the
     In connection with the commitments made by SNS REAAL                 Supervisory Board and € 45,000 for the chairman of
     to the Dutch State upon the capital reinforcement,                   the Supervisory Board. The annual remuneration for
     there will be no conditional award of shares for 2008.               membership of the Audit Committee is € 7,000, and
     In addition, the mandatory build-up of shares has been               € 3,250 for membership of the Credit Committee or the
     cancelled to the extent necessary in 2008.                           Remuneration, Selection and Appointment Committee,
     One of the conditions concerning the departure of                    respectively. Finally, members of the Supervisory Board
     Cor van den Bos is the unconditional granting of the                 receive a fixed annual expense allowance of € 1,617,
     conditional award of the long-term bonus for 2007 in                 whilst the chairman of the Supervisory Board receives a
     full and 8/12 of the conditional award of the long-term              fixed annual expense allowance of € 2,156.
     bonus for 2008. The bonus percentage was set at 100%.                The Supervisory Board members are not holding any
     The shares will be at Cor van den Bos’ free disposal as              shares in SNS REAAL NV.
     per 1 March 2009.
                                                                          The total remuneration paid to the individual Supervisory
     The fair value on granting date of during the book year              Board members is set out above.
     unconditionally (€ 268,000) and conditionally (€ 0)
     granted shares to Cor van den Bos amounts to € 268,000.              Tabaksblat Code
     The fair value of the shares conditionally granted during            Compliance Tabaksblat Code
     the performance period (three years) is recognised as an             As a result of the IPO in 2006, the Dutch Corporate
     expense under Staff costs. The total of not recognised               Governance Code (the Tabaksblat Code, ‘the Code’)
     expenses related to equity amounts to € 114,657.                     now formally applies to SNS REAAL. When the Code



92   SNS REAAL     Annual Report 2008 corporate governance
was created, SNS REAAL had already decided to follow                 The shares in SNS REAAL granted to the members of
it to a significant degree. The Code was adopted by the              the Executive Board in the context of the long-term
Tabaksblat Committee on 9 December 2003. It contains                 bonus scheme are conditionally awarded for a period of
21 principles and 113 best-practice provisions relating to           three years. The shares vest upon expiry of this period.
the Executive Board, the Supervisory Board, shareholders             The number of shares that vest is calculated on the basis
and the AGM, financial reporting and the auditor.                    of the conditional award and the extent to which the
                                                                     performance criteria have been satisfied. Transfer of
The Code applies to all companies listed on the Dutch                these shares is restricted for a period of three years after
stock exchange. In their annual report, these companies              the vested shares in SNS REAAL have been transferred
are obligated to comment on their compliance with the                to the members of the Executive Board. Formally, then,
principles and best practices of the Code with regard to             this does not constitute a period of five years. However,
the Executive Board and the Supervisory Board of the                 SNS REAAL is of the opinion that this term is in fact
company. In the event a company has not applied these                complied with, as the term of the conditional award
principles or best practices, or does not plan to do so in           should also be taken into account. In the event a member
the current and following annual accounting period, it               of the Executive Board has reached his target level, this
must explain its reasons in the annual report.                       three-year transfer restriction period does not apply to the
                                                                     number of SNS REAAL shares that exceed the target level.
In connection with the Code, SNS REAAL has set up an                 The free shares acquired by the members of the Executive
Audit Committee and a Remuneration, Selection and                    Board in the event they purchase SNS REAAL shares
Appointment Committee. While the Tabaksblat Code                     are not dependent on the achievement of the targets
assumes the existence of a remuneration committee in                 specified beforehand. Here the long-term bonus scheme
addition to a selection and appointment committee,                   thus deviates from the Code as well. The reason for this
SNS REAAL has opted to merge these committees.                       deviation is that SNS REAAL wants to promote SNS REAAL
The reason is that the Supervisory Board wished to                   shareholding until the target level has been reached.
appoint the same individuals to these committees, and
that in its opinion, partly in view of the related spheres of        Best-practice provision II.2.7: ‘The maximum remuneration
activity, it would not be efficient to have two committees.          in the event of dismissal is one year’s salary (the ‘fixed’
                                                                     remuneration component). If the maximum of one year’s
Deviations from the Code                                             salary would be manifestly unreasonable for a management
The Code states that the company is also in compliance               board member who is dismissed during his first term of office,
with the Code if the AGM has approved the corporate                  such board member shall be eligible for a severance pay not
governance structure and sanctions the deviations from               exceeding twice the annual salary.’
the Code’s principles.                                               The terms of employment of the current members of
                                                                     the Executive Board were contracted before the intro-
Best-practice provision II.1.1: ‘A management board member           duction of the Code and deviate from this principle. The
is appointed for a maximum period of four years. A member            employment contracts have been recently amended;
may be reappointed for a term of not more than four years at         for more information, please refer to the text below
a time.’                                                             regarding the capital injection. In August 2008 it was
The members of the Executive Board were appointed for                agreed that the employment of Cor van den Bos would
an indefinite period, in line with the statutory provisions          be terminated.
prevailing at the time of their appointment, before                  The substance of the agreements made with him is
the Code came into existence. SNS REAAL considers it                 described in the remuneration report. His employment
inappropriate to change the terms of the employment                  contract was also concluded prior to the Code. As a
contracts in this respect. Ference Lamp will be appointed            result, SNS REAAL was unable to comply with all relevant
as CFO for a period up to four years, naturally with the             principles and best practices of the Code.
option of reappointment.
                                                                     Best-practice provision III.2.1: ‘All Supervisory Board members,
Best-practice provision II.2.3: ‘Shares granted to management        with the exception of no more than one person, shall be
board members without financial consideration shall be               independent within the meaning of best-practice provision
retained for a period of at least five years or until at least the   III.2.2.’
end of the employment, if this period is shorter. The number of      The Code’s point of departure is that a Supervisory Board
shares to be granted shall be dependent on the achievement           member is not independent if he is a management board
of clearly quantifiable and challenging targets specified            member at a legal entity that holds at least 10% of the
beforehand.’                                                         shares in the company. Stichting Beheer SNS REAAL (‘the



                                                                             SNS REAAL     Annual Report 2008 corporate governance      93
     trust’) holds more than 10% of the shares in SNS REAAL.            reasons, it has been decided that (I) the two members of
     Two of the eight members of the Supervisory Board of               the Supervisory Board who sit also on the trust’s board
     SNS REAAL are members of the trust’s board. Although               will not take part in discussions and decisions taken
     the majority of the members of the Supervisory Board               within the Supervisory Board on agreements between
     are independent, two members do not qualify according              SNS REAAL and the trust and (II) in principle, in all other
     to the above description. SNS REAAL is of the opinion              cases they will take part in the discussions and decision-
     that the nature and aims of the majority shareholder               making in the Supervisory Board.
     can and should be distinguished from those of majority
     shareholders of many other companies. The majority                 Best-practice provision IV.1.5: ‘The proposal to distribute
     shareholder in this case is a trust (and thus has no               dividend shall be assessed as a separate point on the agenda at
     members or shareholders), whose objects are limited.               the AGM.’
     The trust’s objectives include the promotion of the                Partly in connection with the issue of six B-shares in
     interests of SNS REAAL. This objective is anchored in the          the capital of SNS REAAL to the trust in order to finance
     Articles of the trust. The Supervisory Board members of            the acquisition of Zwitserleven, SNS REAAL’s Articles
     SNS REAAL are also obligated by law to be guided by the            of Association were amended on 28 April 2008. As a
     interests of the company and its associated business in            result of this amendment to the Articles of Association,
     the performance of their duties. Given this equivalence,           SNS REAAL’s authorised capital has been increased by six
     SNS REAAL sees no reason to change the current                     B-shares and the provisions in the Articles of Association
     situation.                                                         pertaining to profits, losses and dividend have been
                                                                        changed.
     Best-practice provision III.6.2: ‘A Supervisory Board member       The amended Articles of Association provide, inter
     shall not take part in a discussion and/or decision-making on a    alia, that as a result of the adoption of the financial
     subject or transaction in relation to which he has a conflict of   statements, the freely distributable profits, to the extent
     interest with the company.’                                        there are no losses to be cleared and after reservation
     Depending on the specific circumstances, a situation               of the ordinary reservation amount (both as defined
     may arise in which the two members of the Supervisory              in the Articles of Association), will be distributed to
     Board who also sit on the board of the trust may have              the holders of ordinary shares and holders of B-shares
     a conflict of interest with regard to certain topics or            in accordance with the proportions stipulated in the
     transactions, in connection with their position on the             Articles of Association. Accordingly, it ensues from the
     trust’s board. SNS REAAL believes that such a conflict             Articles of Association that upon adoption of the financial
     of interest, in view of the special objectives of the trust,       statements, the dividend is declared and, moreover, is
     will rarely come to pass in actual practice. For these             distributable.




94   SNS REAAL     Annual Report 2008 corporate governance
       Capital structure
       SNS REAAL’s capital comprises four components: ordinary shares, B-shares, securities issued
       to Stichting Beheer SNS REAAL (‘the trust’) and securities issued to the Dutch State. In 2008,
       SNS REAAL’s capital was increased by six B-shares issued to the trust, an amount of € 500
       million for securities capital issued to the trust and an amount of € 750 million for securities
       capital issued to the Dutch State.

Major developments                                                that the dividend yield of the B-shares (expressed
On 28 April 2008, SNS REAAL issued six B-shares to the            as a percentage of the total nominal amount of the
trust. The B-shares were issued for an aggregate issue            B-shares and the share premium reserve and share
price of € 600 million in cash. This amount was used for          premium recovery reserve) will amount to ninety
the acquisition of Zwitserleven.                                  percent (90%) of the dividend yield of the ordinary
                                                                  shares (expressed as a percentage of the average
On 11 December 2008, € 500 million worth of non-voting            closing price of the ordinary shares in the final three
securities capital was issued to the trust. The securities        months of the relevant financial year).
issued to the trust are not convertible.                      4   The Articles of Association of SNS REAAL contain
                                                                  a formula in connection with the dividend to be
On 11 December 2008, SNS REAAL issued € 750 million               paid on the B-shares, where it is assumed that 45%
worth of non-voting securities capital to the Dutch State.        of the freely distributable profits, after deduction
SNS REAAL may convert these securities into ordinary              of the dividend for the B-shares, will be paid as
shares, with the Dutch State being entitled to opt for            dividend to the holders of the ordinary shares each
payment in cash.                                                  year. However, SNS REAAL’s dividend policy allows
                                                                  for the distribution of a lower percentage in any
Ordinary shares and B-shares                                      given financial year. For such an event, the trust and
SNS REAAL has issued ordinary shares and six B-shares             SNS REAAL agreed in the deed of issuance that the
(‘B-shares’). The trust is majority shareholder of                trust will relinquish, for the benefit of SNS REAAL, any
SNS REAAL. At the IPO in 2006, it reduced its interest            excess dividend on the B-shares that was paid out.
from 100% to 65.5%. In May 2007, the trust sold another       5   If in any financial year the pay-out ratio in respect of
15.2 million shares at the issue to finance the acquisition       the ordinary shares should be higher than 45%, the
of AXA NL. As a result, the liquidity and free float of           trust will not receive any compensation.
the SNS REAAL stock was increased and the trust’s             6   Insofar as any future losses are charged against the
interest in SNS REAAL was further reduced from 65.5%              share premium amount to be paid on the B-shares,
to 54.3%. Aviva Plc has reported an interest of 5.85%             any profits made subsequently will be used to clear
in SNS REAAL. The duty to report this interest came in            the deficit.
force on 22 June 2007 in accordance with the Financial        7   The B-shares are not freely transferable (see below).
Supervision Act (Wft). All ordinary shares of SNS REAAL       8   In the deed of issuance of the B-shares, SNS REAAL
are listed on the Euronext NYSE in Amsterdam. There               and the trust agreed that if a material change occurs
are no special controlling rights attached to the ordinary        in the control of SNS REAAL, including the situation
SNS REAAL shares. The B-shares have the following                 that the trust is no longer the major shareholder of
characteristics:                                                  SNS REAAL, SNS REAAL will submit a proposal to the
1 No preferential voting rights are attached to the               trust for refinancing of the amount of € 600 million
    B-shares. Accordingly, the B-shares entitle the               that is to be paid on the B-shares.
    holder to cast a total of six votes at the AGM of             SNS REAAL has set no restrictions on the transfer of
    SNS REAAL.                                                    the ordinary shares. The Articles of Association of
2 The B-shares do not entitle the holder to any accrued           SNS REAAL contain no share transfer restriction clause
    or future profit reserves.                                    and there is no agreement between the company and
3 The dividend yield on the B-shares will always be               any shareholder that might result in the restriction
    lower than that on the ordinary shares. The B-shares          of the transfer of shares. The B-shares can only be
    entitle the holder to a dividend that depends on              transferred with the prior consent of the Executive
    the dividend distributed on ordinary shares, such             Board after approval by the Supervisory Board.



                                                                     SNS REAAL     Annual Report 2008 corporate governance   95
     Securities trust and Dutch State                               Payments to the trust and the Dutch State
     On 11 December, SNS REAAL issued two types of                  Payment to the trust and the Dutch State is dependent
     securities. The trust received 5,000,000 securities, each      on the payment of (interim) dividend to ordinary
     with a nominal value of € 100.00, for a total amount of        shareholders. If no dividend is distributed to ordinary
     € 500 million. The Dutch State received 142,857,140            shareholders, then no payment is owed by SNS REAAL to
     securities, each with a nominal value of € 1.63, at an issue   the holders of the securities. If dividends are distributed,
     price of € 5.25, for a total amount of € 750 million.          payments to the trust and the Dutch State will be as
                                                                    follows.
     The yields increased the core Tier 1 capital of SNS Bank
     by € 260 million, and that of REAAL Verzekeringen by           Trust:
     € 975 million. The remaining € 15 million will be used in      The payment for the financial year 2008 (to be paid in
     SNS REAAL NV to reduce the double leverage ratio.              2009) is 6% of the issue price, on a time-weighted basis;
                                                                    the payment for the subsequent years is 6% of the issue
     Characteristics of the securities issued to the trust:         price.
      The securities are non-voting securities.
      The securities are perpetually subordinated, and rank        Dutch State:
        (pari passu) with the ordinary shares and B-shares.         The payment for the financial year 2008 (to be paid in
      The Dutch Central Bank qualifies the securities as           2009) is 4.25% of the issue price;
        core Tier 1 capital.                                        payment for the subsequent years is either 8.5% of the
      The securities cannot be converted into ordinary             issue price or, per security, the dividend paid for each
        shares.                                                     ordinary share multiplied by a factor of 1.1 for 2009,
      A loss absorption clause.                                    factor 1.2 for 2010 and factor 1.25 for the years 2011 and
                                                                    onwards.
     SNS REAAL can, at all times, purchase all or part of the
     securities at 120% of the original issue price, subject to     Loss absorption clause regarding
     the approval of the Dutch Central Bank.                        securities issued to the trust
                                                                    The trust shares in the losses of SNS REAAL as follows
     Characteristics of the securities issued to the Dutch State:   (‘loss absorption’), both during the term of the issued
      The securities are non-voting securities.                    securities to the trust (Trust Securities) and upon any
      The securities are perpetually subordinated, and rank        dissolution and liquidation of SNS REAAL.
        (pari passu) with the ordinary shares and B-shares.
      The Dutch Central Bank qualifies the securities as           Loss absorption during the term
        core Tier 1 capital.                                        of the Trust Securities
      No loss absorption clause.                                   If SNS REAAL were to incur any losses during the term of
                                                                    the Trust Securities, these losses will partially be borne by
     SNS REAAL is entitled to repurchase € 250 million              the trust. This loss participation is realised by reducing
     worth of securities within a year after the issue date         the nominal value of the Trust Securities (issue price
     (11 December 2008), at the price of € 5.25 per security,       € 100.00 per Trust Security), with the maximum reduction
     increased by either the interest accrued in the relevant       of the nominal value of each Trust Security being € 0.01.
     period, or the coupon calculated in accordance with the
     coupon formula increased by a fee, depending on the            The amount of this reduction constitutes part of the
     value of the SNS REAAL stock, whichever is the highest,        losses, to the extent that these losses exceed the
     to a maximum of € 32.5 million.                                SNS REAAL net profit reserves attributable to the period
                                                                    after 1 January 2009. The part referred to is a fraction
     SNS REAAL may convert the securities into ordinary             comprising the aggregate of the nominal values of the
     shares (at a 1 to 1 ratio) after 10 Februari 2012. In this     outstanding Trust Securities prior to the application of loss
     situation, the Dutch State may opt for repayment in cash       absorption, divided by the sum of (a) the aggregate of the
     at the issue price of € 5.25 per security, increased by the    nominal values of the outstanding Trust Securities prior
     interest accrued up until then.                                to the application of loss absorption, (b) the aggregate
                                                                    of the nominal values of the outstanding ordinary shares
     SNS REAAL is at all times entitled to repurchase all or part   of SNS REAAL, increased by the corresponding share
     of the securities at € 7.875 per security (i.e. 150% of the    premium reserves and the share premium recovery
     issue price), increased by the interest accrued up until       reserves, as well as all other free reserves and reserves
     then, subject to the approval of the Dutch Central Bank.       required by law and the Articles of Association, and (c)



96   SNS REAAL    Annual Report 2008 corporate governance
the aggregate of the nominal values of the outstanding      Loss absorption upon dissolution and liquidation
B-shares, increased by the corresponding share premium      In the event of any dissolution and liquidation of
reserves and share premium recovery reserves.               SNS REAAL, the trust will share in any losses of
                                                            SNS REAAL as follows. The balance that remains
If SNS REAAL makes a profit in any of the following         after full settlement of the amounts owed to all other
years, this profit will partly be used for increasing       creditors of SNS REAAL will be distributed pro rata
the nominal value of the Trust Securities, up to a          among the holders of the Trust Securities (at this
maximum of the initial nominal value of € 100.00 per        moment the trust), the ordinary shares and the B-shares
Trust Security. The amount of this increase is calculated   based on the initial nominal value of the Trust Securities
in a manner similar to the reduction of the nominal         as well as the nominal value of the ordinary shares and
value described above.                                      the B-shares.




                                                                   SNS REAAL    Annual Report 2008 corporate governance   97
Diversity
After a series of acquisitions, SNS REAAL may now rightfully be considered a
full-service financial institution. In both insurance and banking, we have built a
strong position in the Dutch market. REAAL Verzekeringen, SNS Bank, SNS Property
Finance and Zwitserleven are our major brands. In addition, we target specific
markets or groups through multiple players such as ASN Bank, BLG Hypotheken,
DBV Verzekeringen, Proteq and SNS Regio Bank. A powerful ensemble.
Financial Statements 2008
      Contents
      104    Consolidated financial statements                               200   Equity attributable to shareholders and
             104     Consolidated balance sheet                                    securityholders
             105     Consolidated income statement                           200   Participation certificates and subordinated
             106     Consolidated statement of changes in total                    debt
                     equity                                                  201   Debt certificates
             108     Consolidated cash flow statement                        203   Insurance and reïnsurance contracts
             109     Accounting principles for the consolidated              205   Provision for employee benefits
                     balance sheet and income statement                      207   Other provisions
                                                                             207   Savings
      131    Segmented financial statements                                  208   Other amounts due to customers
             131     Information by segment                                  208   Amounts due to banks
             133     Balance sheet by segment                                208   Other liabilities
             134     Income statement by segment                             208   Off balance sheet commitments
             135     Balance sheet SNS Bank by segment                       209   Related parties
             136     Income statement SNS Bank by segment                    211   Notes to the consolidated income statement
             137     Balance sheet REAAL Verzekeringen by                    211   Net interest income
                     segment                                                 212   Net premium income
             138     Income statement REAAL Verzekeringen by                 213   Net fee and commission income
                     segment                                                 213   Share in result of associates
             139     Income statement REAAL Verzekeringen                    213   Investment income
                                                                             214   Investment income for account of
      140    Acquisitions                                                          policyholders
                                                                             215   Result on financial instruments
      144    Risk management                                                 215   Other operating income
             144     Key points risk profile SNS REAAL                       215   Technical claims and benefits
             147     Risk management Bank                                    216   Charges for account of policyholders
             160     Risk management Insurer                                 216   Acquisition costs for insurance operations
             176     Valuation methods for recognition at fair value         216   Impairment charges/(reversals)
             178     Hedging and hedge accounting                            216   Staff costs
             181     Fair value of financial assets and liabilities          217   Other operating expenses
             184     Capital management                                      217   Other interest expenses
                                                                             218   Taxation
      188    Notes to the consolidated financial statements                  218   Net result discontinued operations
             188     Notes to the consolidated balance sheet                 218   Net result per share / security
             188     Intangible assets
             189     Property and equipment                            220   Company financial statements
             190     Investments in associates                               220   Company balance sheet
             191     Investment properties                                   220   Company income statement
             192     Investments                                             221   Notes to the company balance sheet
             195     Investments for account of policyholders                221   Subsidiaries
             195     Invested collateral and liabilities securities          221   Receivables from subsidiaries
                     lending
             196     Derivatives                                       221   Notes to the company financial statements
             196     Deferred tax assets and liabilities                     222   Investments
             197     Loans and advances to customers                         222   Derivatives
             199     Loans and advances to banks                             222   Cash and cash equivalents
             199     Corporate income tax                                    223   Equity
             199     Other assets                                            225   Subordinated debt
             200     Cash and cash equivalents                               226   Debt certificates




102   SNS REAAL Financial Statements 2008 financial statements 2008
      226   Other amounts due to customers
      226   Amounts due to banks
      227   Notes to the company income statement
      227   Notes to the audit fees

228   Overview of principal subsidiaries
      228   Banking operations
      228   Insurance operations
      228   Group activities
      228   Other capital interests




                                                    SNS REAAL Financial Statements 2008 financial statements 2008
                                                                                        financial                   103
      Consolidated balance sheet
      Before result appropriation and in € millions                                                               31-12-2008                31-12-2007

      Assets
      Intangible assets 1                                                                                               2,907                    2,116
      Property and equipment 2                                                                                            433                      418
      Investments in associates 3                                                                                         110                      127
      Investment properties 4                                                                                             210                      169
      Investments 5                                                                                                    29,296                   21,055
      Investments for account of policyholders 6                                                                       10,724                    7,235
      Invested collateral securities lending 7                                                                          2,310                       --
      Derivatives 8                                                                                                     1,761                    1,161
      Deferred tax assets 9                                                                                               483                      329
      Reinsurance contracts 18                                                                                            402                      483
      Loans and advances to customers 10                                                                               67,704                   63,045
      Loans and advances to banks 11                                                                                    4,722                    1,631
      Corporate income tax 12                                                                                             374                      216
      Other assets 13                                                                                                   1,017                      851
      Cash and cash equivalents 14                                                                                      1,961                    4,341

      Total assets                                                                                                   124,414                   103,177

      Equity and liabilities
      Share capital                                                                                                       426                      426
      Other reserves                                                                                                    3,933                    2,791
      Retained earnings                                                                                                  (736)                     371

      Shareholders' equity 15                                                                                           3,623                    3,588

      Equity attributable to securityholders 15                                                                         1,249                        --
      Minority interests                                                                                                   20                         3

      Total equity                                                                                                      4,892                    3,591

      Participation certificates and subordinated debt 16                                                               2,125                    2,032
      Debt certificates 17                                                                                             32,679                   35,212
      Insurance contracts 18                                                                                           36,067                   24,956
      Provision for employee benefits 19                                                                                  389                      201
      Other provisions 20                                                                                                  56                       46
      Securities lending liabilities 7                                                                                  2,377                       --
      Derivatives 8                                                                                                     2,358                      959
      Deferred tax liabilities 9                                                                                          754                      507
      Savings 21                                                                                                       21,859                   19,179
      Other amounts due to customers 22                                                                                 7,412                    7,247
      Amounts due to banks 23                                                                                          10,612                    6,887
      Other liabilities 24                                                                                              2,834                    2,360

      Total equity and liabilities                                                                                   124,414                   103,177




      Some of the comparative figures have been restated for comparison purposes, mainly as a result of the purchase price adjustments concerning AXA NL.
      Reference is made to the notes in subsection 2.3 of the accounting principles for the consolidated balance sheet and income statement.
      The numbers next to the balance sheet items refer to the notes starting on page 188.




104   SNS REAAL Financial Statements 2008 consolidated financial statements
Consolidated income statement
In € millions                                                                                                     2008                      2007

Income
Interest income                                                                                                   3,836                    3,356
Interest expense                                                                                                  2,986                    2,522

Net interest income 25                                                                                              850                       834

Premium income                                                                                                    4,384                    2,584
Reinsurance premiums                                                                                                 82                       61

Net premium income 26                                                                                             4,302                    2,523

Fee and commission income                                                                                           202                       202
Fee and commission expense                                                                                            9                        19

Net fee and commission income 27                                                                                    193                       183

Share in result of associates 28                                                                                    (13)                        9
Investment income 29                                                                                              1,242                       842
Investment income for account of policyholders 30                                                                (1,696)                       96
Result on financial instruments 31                                                                                  119                        43
Income invested collateral securities lending                                                                       106                        --
Other operating income 32                                                                                            50                        13

Total income                                                                                                      5,153                    4,543

Expenses
Technical claims and benefits 33                                                                                  3,423                    1,979
Charges for account of policyholders 34                                                                            (642)                     496
Acquisition costs for insurance operations 35                                                                       392                      327
Impairment charges/ (reversals) 36                                                                                1,020                       63
Staff costs 37                                                                                                      814                      604
Depreciation and amortisation of fixed assets 1, 2                                                                   95                       67
Other operating expenses 38                                                                                         310                      256
Interest expense securities lending                                                                                  95                       --
Other interest expenses 39                                                                                          374                      182

Total expenses                                                                                                    5,881                    3,974
Result before tax                                                                                                  (728)                      569
Taxation 40                                                                                                        (208)                      101

Net result continued operations                                                                                    (520)                      468
Net result discontinued operations 41                                                                                22                        --

Net result for the financial year                                                                                  (498)                      468

Attribution:
Net result for the financial year                                                                                  (498)                      468
Net result attributable to securityholders                                                                           --                        --
Net result attributable to minority interests                                                                        (6)                       (3)

Net result attributable to shareholders                                                                            (504)                      465

Specification earnings per share - shareholders 42
Earnings per ordinary share                                                                                       (1.93)                     1.87
Diluted earnings per ordinary share                                                                               (1.93)                     1.87
Earnings per B share                                                                                                 --                        --
Diluted earnings per B share                                                                                         --                        --
Specification earnings per share - securityholders 42
Earnings per security issued to the Stichting Beheer SNS REAAL                                                       --                        --
Diluted earnings per security issued to the Stichting Beheer SNS REAAL                                               --                        --
Earnings per security issued to the Dutch State                                                                      --                        --
Diluted earnings per security issued to the Dutch State                                                              --                        --


Some of the comparative figures have been restated for comparison purposes, mainly as a result of the purchase price adjustments concerning AXA NL.
Reference is made to the notes in subsection 2.3 of the accounting principles for the consolidated balance sheet and income statement.
The references next to the income statement items relate to the notes starting on page 211.




                                                               SNS REAAL Financial Statements 2008 consolidated financial statements
                                                                                                                financial                           105
      Consolidated statement of changes in total equity
      In € millions




                                                                         Share premium reserve
                                                 ordinary and B-shares


                                                                         ordinary and B-shares




                                                                                                                                                                                                                             Equity attributable to
                                                                                                                                                              Profit sharing reserve
                                                 Issued share capital




                                                                                                 Revaluation reserve




                                                                                                                                                                                                         Retained earnings
                                                                                                                                         Fair value reserve




                                                                                                                                                                                                                                                       Securities capital


                                                                                                                                                                                                                                                                            Minority interest
                                                                                                                       Cash flow hedge




                                                                                                                                                                                        Other reserves




                                                                                                                                                                                                                             shareholders




                                                                                                                                                                                                                                                                                                      Total equity
                                                                                                                       reserve
      Balance as at 1 January 2008                      426                     675                          50                36            (70)                          12          2,088                 371             3,588                                --                        3        3,591

      Transfer of 2007 net result                            --                      --                      --                --                   --                     --              465           (465)                           --                       --                  --                     --
      Transfer of distributed
        interim dividend 2007                                --                      --                      --                --                   --                     --              (94)                    94                    --                       --                  --                     --

                                                             --                      --                      --                --                   --                     --              371           (371)                           --                       --                  --                     --
      Unrealised revaluations from
       cash flow hedges                                      --                      --                      --                61                   --                     --                   --                 --                    61                       --                  --                     61
      Deferred interest income
       from cash flow hedges                                 --                      --                     --                  7          --                              --                   --                 --              7                              --                  --                7
      Unrealised revaluations                                --                      --                      7                 --        (532)                             --                   --                 --           (525)                             --                  --             (525)
      Impairments                                            --                      --                     (2)                --         542                              --                   --                 --            540                              --                  --              540
      Realised revaluations through equity                   --                      --                     --                 --          --                              --                   --                 --             --                              --                  --               --
      Realised revaluations
       through profit or loss                                --                      --                      --                 1            122                           --                   --                 --                123                          --                  --                 123
      Change in profit-sharing reserve                       --                      --                      --                --             --                           (3)                   3                 --                 --                          --                  --                  --
      Other movements                                        --                      --                      --                --             --                           --                   (1)                --                 (1)                         --                  17                  16

      Amounts charged directly to equity                     --                      --                       5                69            132                           (3)                   2         --                    205                              --                  17              222
      Net result 2008                                        --                      --                      --                --             --                           --                   --       (504)                  (504)                             --                  --             (504)

      Total result 2008                                      --                      --                            5           69            132                           (3)                       2   (504)                  (299)                             --                  17             (282)
      Share issue                                            --                 600                          --                --                   --                     --                   --                 --                600                 --                           --               600
      Securities issue                                       --                  --                          --                --                   --                     --                   --                 --                 --              1,250                           --             1,250
      Costs in connection with
        securities issue                                     --                      --                      --                --                   --                     --               --             --                     --                              (1)                 --               (1)
      Coupon payable on securities                           --                      --                      --                --                   --                     --              (34)            --                    (34)                             --                  --              (34)
      (Interim) dividend paid                                --                      --                      --                --                   --                     --               --           (232)                  (232)                             --                  --             (232)

      Transactions with shareholders
        and securityholders                                  --                 600                          --                --                   --                     --              (34)          (232)                       334              1,249                           --             1,583
                                                                                                                                                                                                                                                                                                --
      Total changes in equity 2008                           --                 600                                5           69            132                           (3)             339 (1,107)                                   35           1,249                           17             1,301

      Balance as at 31 December 2008                    426              1,275                               55             105                     62                             9   2,427             (736) 3,623                                  1,249                           20             4,892




      In 2008, SNS REAAL’s capital was increased by six B-shares (each with a nominal value of € 1.63) issued to Stichting Beheer SNS REAAL
      (the trust) totalling € 600 million, an amount of € 750 million for core Tier 1 securities issued to the Dutch State and an amount of
      € 500 million core Tier 1 securities issued to the trust. For more information, please refer to the chapter on Capital structure starting
      on page 95.

      The share premium reserve includes the paid-up capital that has been contributed in addition to the nominal value on the ordinary
      and B-shares issued.

      The revaluation reserve concerns land and buildings in own use.

      The cash flow hedge reserve comprises the effective portion of the accumulated net change in the fair value of cash flow hedge
      instruments for hedged transactions that have not yet taken place. In cash flow hedge accounting, the changes in the fair value of
      derivatives are accounted for in the cash flow hedge reserve. This cash flow hedge reserve is released during the period that the cash
      flows from the hedged risk are realised.

      The fair value reserve comprises the accumulated net change in the fair value of investments available for sale.




106   SNS REAAL Financial Statements 2008 consolidated financial statements
In € millions




                                                                   Share premium reserve
                                           ordinary and B-shares


                                                                   ordinary and B-shares




                                                                                                                                                                                                                       Equity attributable to
                                                                                                                                                        Profit sharing reserve
                                           Issued share capital




                                                                                           Revaluation reserve




                                                                                                                                                                                                   Retained earnings
                                                                                                                                   Fair value reserve




                                                                                                                                                                                                                                                Securities capital


                                                                                                                                                                                                                                                                     Minority interest
                                                                                                                 Cash flow hedge




                                                                                                                                                                                  Other reserves




                                                                                                                                                                                                                       shareholders




                                                                                                                                                                                                                                                                                          Total equity
                                                                                                                 reserve
Balance as at 1 January 2007                      383                     376                          49                89            202                           25          1,757                 319             3,200                               --                  --        3,200

Transfer of 2006 net result                            --                      --                      --                --                   --                     --              371           (371)                           --                      --                  --                --
Transfer of distributed
  interim dividend 2006                                --                      --                      --                --                   --                     --              (52)                    52                                            --                  --                --

                                                       --                      --                      --                --                   --                     --              319           (319)                           --                      --                  --                --
Unrealised revaluations from
 cash flow hedges                                      --                      --                      --             (62)                    --                     --                   --                 --                (62)                        --                  --            (62)
Deferred interest income
 from cash flow hedges                                 --                      --                     --                  9          --                              --                   --                 --              9                             --                  --           9
Unrealised revaluations                                --                      --                      7                 --        (175)                             --                   --                 --           (168)                            --                  --        (168)
Realised revaluations through equity                   --                      --                     (6)                --          --                              --                    6                 --             --                             --                  --          --
Realised revaluations
 through profit or loss                                --                      --                      --                --        (106)                      --                          --                 --           (106)                            --                  --        (106)
Change in profit-sharing reserve                       --                      --                      --                --           9                      (13)                          4                 --             --                             --                  --          --
Other movements                                        --                      --                      --                --          --                       --                           2                 --              2                             --                  --           2

Amounts charged directly to equity                     --                      --                       1             (53)         (272)                     (13)                         12            --                (325)                            --                  --        (325)
Net result 2007                                        --                      --                      --              --            --                       --                          --           465                 465                             --                   3         468

Total result 2007                                      --                      --                            1        (53)         (272)                     (13)                         12           465                     140                         --                        3       143
Share issue                                            34                 316                          --                --                   --                     --                   --            --                     350                         --                  --            350
Costs in connection with share issue                   --                  (8)                         --                --                   --                     --                   --            --                      (8)                        --                  --             (8)
(Interim) dividend paid                                 9                  (9)                         --                --                   --                     --                   --           (94)                    (94)                        --                  --            (94)

Transactions with shareholders                         43                 299                          --                --                   --                     --                   --           (94)                    248                         --                  --            248
Total changes in equity 2007                           43                 299                                1        (53)         (272)                     (13)                    331                     52                388                         --                        3       391

Balance as at 31 December 2007                    426                     675                          50                36            (70)                          12          2,088                 371             3,588                               --                        3   3,591




The profit-sharing reserve is maintained for insurance contracts with discretionary profit-sharing rights in the insurance portfolio.
Profit sharing is awarded annually, largely on the basis of the surplus interest realised on fixed-income securities in the investment
portfolio. Unrealised gains and losses on these fixed-interest securities are taken to the fair value reserve. The part of the unrealised
revaluations which might be available as profit sharing for future distribution to policyholders is taken to the profit-sharing reserve.

The other reserves mainly comprise retained profits.

The securities capital includes also the share premium reserve regarding the paid-up capital that has been contributed in addition to
the nominal value on the securities issued. As regards the securities issued to the Dutch State, this is an amount of € 517 million. For
the securities issued to the trust, this is not applicable.

SNS REAAL will not distribute any final dividend for 2008. Upon publication of the half-year results 2008, SNS REAAL declared and
paid an interim dividend of € 0.41 per ordinary share and € 810,746 per B-share. A coupon is payable to the securities holders
amounting to € 2 million for the trust and € 32 million for the Dutch State. The payments on securities to the Dutch State and
Stichting Beheer are charged to the other reserves, and are recognised under other liabilities.

For more information, please refer to the statement of changes in equity in the notes to the company balance sheet of SNS REAAL
starting on page 223.




                                                                                           SNS REAAL Financial Statements 2008 consolidated financial statements
                                                                                                                                            financial                                                                                                                                                    107
       Consolidated cash flow statement
       In € millions                                                                                                     2008                      2007

       Cash flow from operating activities
       Result before taxation                                                                                             (728)                      569
       Adjustments for:
       Depreciation and amortisation of fixed assets                                                                       303                       206
       Changes in technical provisions own risk                                                                            819                       272
       Changes in other provisions                                                                                         107                      (238)
       Impairment charges / (reversals)                                                                                  1,020                        35
       Unrealised results on investments through profit or loss                                                             19                        83
       Retained share in the result of associates                                                                           25                        (5)

       Tax paid                                                                                                              (9)                     (58)

       Change in operating assets and liabilities
       Change in loans and advances to customers                                                                        (5,109)                     (941)
       Change in loans and advances to banks                                                                               694                     2,892
       Change in savings                                                                                                 2,680                     2,531
       Change in trading portfolio                                                                                         313                      (681)
       Change in other operating activities                                                                                339                       396

       Net cash flow from operating activities                                                                              473                    5,061

       Cash flow from investing activities
       Proceeds from the sale of intangible assets                                                                           1                        --
       Proceeds from the sale of property and equipment                                                                      6                         2
       Proceeds from the sale of subsidiaries                                                                              156                        61
       Proceeds from the sale of investment property                                                                        10                        25
       Proceeds from the sale and redemption of investments and derivatives                                             13,400                     4,065
       Purchase of intangible fixed assets                                                                                 (90)                     (166)
       Purchase of property and equipment                                                                                  (43)                      (46)
       Purchase of subsidiaries                                                                                         (1,552)                   (1,670)
       Purchase of investment property                                                                                     (10)                       (9)
       Purchase of investments and derivatives                                                                         (12,828)                   (6,044)

       Net cash flow from investment activities                                                                           (950)                   (3,782)

       Cash flow from financing activities
       Proceeds from issue of shares                                                                                       600                       342
       Proceeds from issue of securities capital                                                                         1,249                        --
       Proceeds from issue of subordinated loans                                                                           415                       377
       Proceeds from issue of debt certificates                                                                          8,813                    11,868
       Redemption of subordinated loans                                                                                   (321)                      (24)
       Redemption of debt certificates                                                                                 (12,427)                  (10,367)
       Dividends paid on ordinary and B-shares                                                                            (232)                      (94)

       Net cash flow from financing activities                                                                          (1,903)                    2,102

       Cash and cash equivalents as at 1 January                                                                         4,341                       960
       Cash from acquisitions                                                                                               21                       219
       Change in cash and cash equivalents                                                                              (2,401)                    3,162

       Cash and cash equivalents as at 31 December                                                                       1,961                     4,341

       Additional disclosure with regard to cash flows from operating activities
       Interest income received                                                                                          5,276                     3,393
       Dividends received                                                                                                  178                       103
       Interest paid                                                                                                     3,215                     2,431




      Some of the comparative figures have been restated for comparison purposes, mainly as a result of the purchase price adjustments concerning AXA NL.




108    SNS REAAL Financial Statements 2008 consolidated financial statements
Accounting principles for the consolidated balance sheet and
income statement
        Adoption financial statements
        The consolidated financial statements of SNS REAAL NV (SNS REAAL) for the year ended on 31 December 2008 were authorised
        for publication by the Executive Board following their approval by the Supervisory Board on 12 March 2009.



   1    General information

        SNS REAAL NV, incorporated and established in the Netherlands, is a public limited liability company incorporated under the
        laws of the Netherlands. SNS REAAL NV’s registered office is located at Croeselaan 1, 3521 BJ Utrecht. SNS REAAL NV is the
        parent company of SNS Bank NV, REAAL Verzekeringen NV, SNS REAAL Invest NV, SNS Asset Management NV, Zwitserleven
        Asset Management NV and their subsidiaries (referred to as the ‘Group’ or ‘SNS REAAL’). The consolidated financial
        statements of the Group comprise the accounts of all the companies controlled by SNS REAAL and the interest of SNS REAAL in
        associated subsidiaries and entities.

        A number of corporate staff departments are shared. The costs of the corporate staff departments are recharged on the basis
        of the services provided, and, if more appropriate, proportionally allocated to the Group’s subsidiaries. The costs of the Group
        Executive Board and other specific company costs are not allocated to group subsidiaries.
        The main accounting principles used in the preparation of the consolidated financial statements and the company financial
        statements are set out in this section.


   2    Basis of preparation

  2.1   Statement of IFRS compliance
        SNS REAAL prepares the consolidated financial statements in accordance with International Financial Reporting Standards
        (IFRS), as adopted within the European Union (EU).
        Pursuant to the option offered under Book 2, Title 9 of the Dutch Civil Code, SNS REAAL prepares its company financial
        statements in accordance with the same accounting principles as those used for the consolidated financial statements.

2.1.1   Changes in published Standards and Interpretations effective in 2008
        As of the financial year 2007, SNS REAAL applies IFRS standard 8 Operating Segments early.
        IFRS 8 requires that information by segment is recognised in the same way as in the internal management reporting.
        The application of this standard only impacts the notes, but not the, presentation or accounting principles.

        On 13 October 2008, the IASB issued amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7
        Financial Instruments: Disclosures. The amendment to the standard permits an entity to reclassify non-derivative financial
        assets (other than those designated by the entity upon initial recognition at fair value through profit or loss) out of the fair
        value through profit or loss category in particular circumstances. The amendment also permits an entity to reclassify a
        financial asset that would have met the definition of loans and receivables at initial recognition out of the available for sale
        category into the loans and receivables category, if the entity has the intention and ability to hold that financial asset for the
        foreseeable future. The amendment is retroactive to 1 July 2008. The effect on the consolidated financial statements of
        SNS REAAL is disclosed in paragraph Changes in presentation.

        IFRIC 11 Group and Treasury Share Transactions has been published and is effective as of the accounting periods starting on or
        after 1 March 2007. This standard has no material effect on the consolidated financial statements of SNS REAAL.

        IFRIC 12 Service Concession Arrangements and IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding
        Requirements, and their Interaction have been published and are effective as of the accounting periods starting on or after 1
        January 2008. IFRC 12, unlike IFRC 14, has not been adopted yet by the EU. These standards have no material effect on the
        consolidated financial statements of SNS REAAL.

2.1.2   Interpretations of existing standards or changes in standards, not yet effective in 2008
        On 10 January 2008, the IASB published a revised IFRS 3 Business Combinations and related revisions to IAS 27 Consolidated and
        Separate Financial Statements. In the revised IFRS 3, transaction costs that can be directly attributed to the acquisition are no
        longer allocated to the purchase price of the business combination. In addition, IFRS 3 allows the acquirer, on a transaction by
        transaction basis, to value any non-controlling interest at fair value on the acquisition date, or at the proportionate interest in the




                                                              SNS REAAL Financial Statements 2008 consolidated financial statements
                                                                                                               financial                      109
             fair value of the acquiree’s identifiable assets and liabilities. This amendment will be effective as of the financial year 2010 (early
             adoption is permitted), and yet has to be adopted by the EU. The amendment affects transactions as of the effective date and not
             the current consolidated financial statements of SNS REAAL, which include the acquisition of Zwitserleven in 2008.

             On 17 January 2008, the IASB issued an amendment to IFRS 2 Share-based Payment. This amendment clarifies that vesting
             conditions are service conditions and performance conditions only and introduces the term ‘non-vesting conditions’. It also
             determines that all cancellations, whether by the entity or by the other party or both, should receive the same accounting
             treatment. This amendment will be effective as of the financial year 2009 (early adoption is permitted) and is adopted by the EU.
             SNS REAAL is investigating the effects of the amendments.

             On 14 February 2008, the IASB issued amendments to improve the accounting for particular financial instruments that have
             characteristics similar to ordinary shares but are, at present, classified as financial liabilities. The amendments affect IAS 32
             Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements. This amendment will be effective as of the
             financial year 2009 (early adoption is permitted) ), and is adopted by the EU. The amendment will have no material effect on the
             consolidated financial statements of SNS REAAL.

             On 22 May 2008, the IASB published ‘Improvements to IFRSs’, a collection of minor changes to a number of IFRS standards. These
             amendments have different effective dates and have no material effect on SNS REAAL. On the same date, the IASB issued an
             amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards, relating to the cost of an investment in a
             subsidiary in the separate financial statements of a parent company. This amendment will be effective as of the financial year
             2009 (early adoption is permitted), and yet has to be adopted by the EU. The amendment will have no material effect on the
             consolidated financial statements of SNS REAAL.

             The amendment to IAS 1 Presentation of Financial Statements published in September 2007 is effective for accounting periods
             beginning on or after 1 January 2009, with early adoption permitted. The standard separates owner and non-owner changes in
             shareholders’ equity. The statement of changes in shareholders’ equity will only include details of transactions with owners. All
             non-owner changes in shareholders’ equity are presented on a single line. In addition, the standard introduces the statement of
             comprehensive income. It contains all income and expenses recognised in the income statement, and is presented together with
             all other income and expenses directly recognised in shareholders’ equity. This amendment is adopted by the EU, and will have
             no material effect on the consolidated financial statements of SNS REAAL.

             IAS 23 Borrowing Costs, issued in March 2007, supersedes IAS 23 Borrowing Costs (revised in 2003). IAS 23 is effective for
             accounting periods beginning on or after 1 January 2009, with early adoption permitted. The main change compared to the
             previous version is the cancellation of the option to directly recognise as expenses borrowing costs relating to assets with a
             considerable lead time prior to their sale. This amendment is adopted by the EU, and will have no material effect on the
             consolidated financial statements of SNS REAAL.

             The amendment to IAS 39 Financial Instruments: Recognition and Measurement published on 31 July 2008 is effective for
             accounting periods beginning on or after 1 July 2009, with early adoption permitted. This amendment explains how to apply, in
             exceptional situations, the principles that determine whether a hedged risk or part of a cash flow qualifies for designation of a
             hedging relationship. This amendment yet has to be adopted by the EU, and will have no material effect on the consolidated
             financial statements of SNS REAAL.

             IFRIC 13 Customer Loyalty Programmes is effective for accounting periods beginning on or after 1 July 2008, with early adoption
             permitted. This interpretation addresses the accounting methods to be applied of granted loyalty award credits to customers.
             This amendment is adopted by the EU, and will have no material effect on the consolidated financial statements of SNS REAAL.

             IFRIC 15 Agreements for the Construction of Real Estate is effective for accounting periods beginning on or after 1 January 2009,
             with early adoption permitted. This interpretation serves as a guideline for determining whether an agreement for the
             construction of real estate falls within the scope of IAS 11 Construction Contracts or IAS 18 Revenue and when income from the
             construction of real estate should be recognised. This amendment yet has to be adopted by the EU, and will have no material
             effect on the consolidated financial statements of SNS REAAL.

             IFRIC 16 Hedges of a Net Investment in a Foreign Operation is effective for accounting periods beginning on or after 1 October
             2008, with early adoption permitted. This interpretation applies to entities that hedge currency risks arising from net
             investments in foreign operations and further wish to qualify for hedge accounting in accordance with IAS 39. This amendment
             yet has to be adopted by the EU, and will have no material effect on the consolidated financial statements of SNS REAAL.

             Except for IFRS 8, all other amendments in published standards and interpretations effective as of 2009 are not adopted early by
             SNS REAAL.




110   SNS REAAL Financial Statements 2008 consolidated financial statements
 2.2    Accounting principles used in the preparation of the financial statements
        The accounting principles set out below have been applied consistently to all the periods presented in these consolidated
        financial statements, except in the key figures for 2004. The 2004 key figures have been restated for IFRS, excluding IAS 32
        (Financial Instruments: Disclosure and Presentation), IAS 39 (Financial Instruments: Recognition and Measurement) and IFRS
        4 (Insurance Contracts), accepted by IFRS 1.
        The group entities have applied the accounting principles consistently to all periods.
        Several accounting methods have been used in the preparation of these annual accounts. Fair value is used for land and
        buildings in own use, investment property, part of the loans and advances to customers, investments classified at fair value
        through profit or loss, for investments classified as available for sale, for derivatives and for investments and liabilities on
        behalf of policyholders. All other financial assets (including loans and advances) and liabilities are measured at amortised
        cost. The book value of assets and liabilities that are measured at amortised cost that are part of a fair value hedge is restated
        to reflect the change in fair value that is attributable to the hedged risk. Non-financial assets and liabilities are generally
        measured at historical cost. Except for the cash flow information, the financial statements have been prepared on an
        accrual basis.

 2.3    Changes in principles, estimates and presentation
2.3.1   Changes in accounting principles
        As of 1 January 2008, a change in accounting principle has taken place with respect to the Liability Adequacy Test (LAT).
        The LAT is executed on the basis of Dutch Central Bank regulations, but as from 2008 the base surrender value and the risk
        margin are left out of consideration. The used discount rate is the Dutch Central Bank curve with an add on to ECB all
        government yields.
        This change in accounting method has no effect on the equity or results for any of the previous book years presented in these
        annual accounts.

2.3.2   Changes in presentation
        The acquisition of the Dutch activities of Swiss Life Holding led to an expansion of the presentation of the information by
        segment regarding our insurance business with the segment Zwitserleven. The insurance operations of Zwitserleven NV are
        recognised in this segment.

        In 2008, SNS REAAL changed its intention to actually hold fixed income investments in the held-to-maturity category until
        maturity, resulting in a reclassification of this investment category. The investments have been reclassified into the available-
        for-sale category and restated at fair value. At the time of reclassification, the book value of the investments held to maturity
        amounted to € 2,481 million. The fair value of this investment category amounted to € 2,490 million. The difference between
        book value and fair value (€ 9 million) has been included in shareholders’ equity.

        As a result of the distressed financial markets SNS REAAL changed its intention to actually hold a part of the investments for
        trading purposes. During October 2008 SNS REAAL decided to reclassify the investments held for trading purposes at fair
        value through profit or loss into available-for-sale category for an amount of € 590 million. In accordance with the IAS 39
        amendment, the reclassification was effected as from 1 July 2008.
        As from the date of reclassification the negative fair value change of these investments amounts to € 23 million and is charged
        to the fair value reserve. If the reclassification had not occurred, this fair value change was recognised in the income
        statement. Some of the comparative figures have been restated for comparison purposes. Also the purchase price accounting
        adjustments concerning AXA NL have led to restatements in the comparative figures. Reference is made to the section
        Acquisitions, starting on page 140.

2.3.3   Changes in definitions
        The claims ratio is a reflection of the own-risk claims in relation to gross premium income. As from 2008 this definition has
        been tightened and non-life insurance covered by the compensation scheme for takeovers is disregarded.

 2.4    Principles of consolidation
2.4.1   Subsidiaries
        Subsidiaries, i.e. all companies and other entities (including special purpose entities) in respect of which SNS REAAL has the
        power to determine the financial and operating policies, whether directly or indirectly, are consolidated. This is the case if
        more than half of the voting rights may be exercised, or if SNS REAAL has control in any other manner.
        Subsidiaries are fully consolidated from the date on which control is transferred to SNS REAAL. They are de-consolidated from
        the date control ceases. The financial statements of these group companies are fully consolidated, with uniform accounting
        principles being applied. The interests of third parties are separately included in the consolidated balance sheet and income
        statement.




                                                            SNS REAAL Financial Statements 2008 consolidated financial statements
                                                                                                             financial                   111
      2.4.2    Joint ventures
               Joint ventures are entities over which the Group has joint control, this control is laid down in an agreement, and strategic
               decisions on the financial and operational policy are taken unanimously. These entities are accounted for in the financial
               statements in accordance with the same method as used for the investments in associated companies (see 3.3), from the date
               that SNS REAAL first obtained joint control to the moment that control ceases.

       2.4.3   Associates
               Investments in associates are those entities in which SNS REAAL has significant influence on the operational and financial
               policy, but no control. This is generally the case when the Group has between 20% and 50% of the voting rights.
               The consolidated financial statements include the Group’s share in the total results of associated companies, from the date
               that the Group acquires significant influence to the date that significant influence ceases. The result is accounted using the
               equity method, after adjusting the result to comply with the Group’s accounting principles.
               A number of investments in associates and joint ventures hold commercial property projects, as well as housing projects
               under construction or under development. Property under development for third parties is valued at the sum of direct costs
               incurred up to the balance sheet date, including the interest incurred during the construction phase and less any
               impairments. Profits are recognised on completion date (completed contract method).
               Property under development for third parties, whereby a specific contract has been concluded with a third party, is valued
               according to the percentage of completion method.
               Expected losses are recorded directly in the income statement.
               Commercial and residential property held for sale is measured at cost price or lower fair value. The fair value is the estimated
               sales price under normal conditions, less any relevant variable sales costs. If the fair value is lower than the book value, an
               impairment is recognised in the income statement.

       2.4.4   Securitisations
               SNS REAAL has securitised mortgage receivables in special purpose entities (SPEs). With these transactions, the economic
               ownership of the mortgage receivables is transferred to separate entities. SNS REAAL does not have direct or indirect interests
               in these entities.
               SNS REAAL fully consolidates these SPEs in its financial statements if, on the basis of the economic reality of the relationship
               between SNS REAAL and the SPE, SNS REAAL controls the SPE, or if SNS REAAL retains the majority of the risks and rewards.

       2.4.5   Elimination of group transactions
               Intra-group transactions, intra-group balances and unrealised gains arising from intra-group transactions were eliminated in
               the preparation of the consolidated financial statements.
               Unrealised gains on transactions between SNS REAAL and its associated companies and joint ventures are eliminated to the
               extent of SNS REAAL’s interest in these investments.
               Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of
               impairment.

        2.5    The use of estimates and assumptions in the preparation of the financial statements
               The preparation of the consolidated financial statements requires SNS REAAL to make estimates and assumptions that affect
               the reported amounts of assets and liabilities and the contingent assets and liabilities at the balance sheet date, and the
               reported income and expenses for the financial year. It mainly concerns the methods for determining the provisions for
               insurance contracts and capitalised acquisition costs, determining the provisions for bad debts, determining the fair value of
               assets and liabilities and determining impairments. This involves assessing the situations on the basis of available financial
               data and information. Although these estimates with respect to current events and actions are made to the best of the
               management’s knowledge, actual results may differ from the estimates.
               Estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognised in
               the period in which the estimate is revised, or in the period of revision and future periods if the revision impacts both the
               reporting period and future periods.
               For further details about these accounting principles, please refer to the corresponding notes to the consolidated financial
               statements and to the information below.

        2.6    Accounting based on transaction date and settlement date
               All purchases and sales of financial instruments, which have been settled in accordance with standard market practices, are
               recognised on the transaction date, in other words, the date on which SNS REAAL commits itself to buy or sell the asset or
               liability. All other purchases or sales are recorded as forward transactions (derivatives) until they are settled.

        2.7    Offsetting of financial instruments
               Financial assets and liabilities are offset and the net amount reported on the balance sheet if there is a legally enforceable
               right to set off the recognised amounts, and there is an intention to settle the items on a net basis, or to settle the asset and
               the liability simultaneously. If these conditions are not fulfilled, amounts will not be offset.



112   SNS REAAL Financial Statements 2008 consolidated financial statements
  2.8    Conversion of foreign currencies
         The consolidated financial statements have been prepared in millions of euros (€ ). The euro is the functional currency of the
         Group.
         Upon initial recognition, transactions in foreign currencies are converted into euros at the exchange rate at the transaction
         date. Balance sheet items denominated in foreign currencies are translated into euros at the exchange rate applicable on the
         reporting date. Exchange rate differences from these transactions and from converting monetary balance sheet items into
         foreign currency are recorded in the income statement under ‘investment income’ or ‘result on financial instruments’,
         depending on the balance sheet item to which they relate.
         The exchange rate differences of non-monetary balance sheet items measured at fair value, with changes in the fair value
         being taken to the income statement, are accounted for as part of these changes in the value of the asset in question.
         Exchange rate differences of non-monetary balance sheet items measured at fair value, with changes in the fair value being
         taken to shareholders’ equity, are incorporated in shareholders’ equity. Non-monetary items measured at historical cost are
         measured at the exchange rate applicable on the initial transaction date.

  2.9    Insurance contracts
         Insurance contracts are those contracts that bear significant insurance risks. These contracts can also involve financial risks.
         SNS REAAL has insurance contracts for Life and Non-life.

 2.9.1   Life insurance
         Life insurance contracts can be separated into individual policies and group contracts. These contracts provide mostly
         long-term insurance for events that lead to a payment in cash, or of the countervalue of investment units, upon maturity or
         death of the insured.

2.9.1.1 Life insurance in cash
         REAAL’s individual life insurance contracts in cash can be divided into the following product groups: savings mortgages,
         annuities, term insurance policies, savings policies, and funeral insurance policies. These contracts primarily concern life
         insurance whereby the risk is borne by SNS REAAL.
         In addition to non-profit sharing insurance contracts, the insurance portfolio also contains insurance contracts with
         discretionary or contractual profit-sharing rights. Discretionary profit sharing schemes are connected to the contractual right
         of individual policyholders to receive additional benefit payments over and above any insured or guaranteed capital.
         The determination of the amount and timing of these additional benefits is at the discretion of the SNS REAAL Executive
         Board. In view of the discretionary nature of this profit-sharing obligation, a designated amount has been included in
         shareholders’ equity.
         In addition to discretionary profit sharing, there are also individual and group contracts with contractual (i.e.
         non-discretionary) profit sharing. These include profit-sharing based on a share of any surplus interest profits and profit
         sharing based on a share of any insurance profits.

2.9.1.2 Unit-linked life insurance
         The claims from these insurance contracts are directly linked to the underlying investments. Given this link, the technical
         provisions held in respect of these policies move in line with movements in the value of these investments. The policyholder
         determines how SNS REAAL should invest the amount of any premiums paid after deduction of costs and risk premium. To this
         end, SNS REAAL has created separate investment funds. The investment risk is borne by the unit-linked policyholders. In
         addition to deciding how funds should be invested, policyholders are also free to alter the policy at any time depending upon
         their personal and/or financial situation.
         Within investment insurance, SNS REAAL issues guarantees on returns for a limited number of investment funds.
         Group insurance contracts with segregated pools are recognised under unit-linked group insurance contracts.

2.9.2    Non-life insurance
         Non-life insurance policies are insurance policies that provide cover that is not related to the life or death of the insured
         persons. These contracts generally provide cover for a shorter period (relative to life insurance). SNS REAAL’s non-life
         insurance contracts can be divided into the following product groups: illness/ accidents, motor vehicles, fire, transport and
         other.
         Payments made after the occurrence of a specified insured event are either fixed (in the event of disability, for example) or
         linked to the scale of the economic loss suffered by the policyholder (in accordance with the indemnity principle).

 2.10    Information by segment
         A segment is a clearly distinguishable component of SNS REAAL that provides services with a risk or return profile (business
         segment) that differs from other segments, or that delivers the services to a particular economic market (market segment)
         that is subject to a risk and return profile that differs from other segments.




                                                            SNS REAAL Financial Statements 2008 consolidated financial statements
                                                                                                             financial                      113
               The activities of SNS REAAL are organised in seven primary business units. The Executive Board defines the performance
               targets and authorises and monitors the budgets that have been prepared by these business units. The management of the
               business units defines the policy of the business units, in accordance with the strategy and the performance targets as
               formulated by the Executive Board. The business segments are:
                Retail Banking
                Property finance
                REAAL Verzekeringen Life
                REAAL Verzekeringen Non-life
                Zwitserleven
                REAAL Other activities
                Group activities


               More information on the different segments can be found in the section ‘Segmented financial statements’ starting on page 131.

        2.11   Recognition of securities lending
               Investments that are lent under a lending and borrowing arrangement remain accounted for in the consolidated balance sheet
               and are recognised in accordance with the accounting principles for financial assets recognised at fair value through profit or
               loss or available for sale.



          3    Specific balance sheet principles

         3.1   Intangible assets
       3.1.1   Goodwill
               Acquisitions by SNS REAAL are accounted for according to the purchase method, with the cost of the acquisitions being
               allocated to the fair value of the acquired identifiable assets, liabilities and contingent liabilities. Goodwill, being the
               difference between the cost of the acquisition and SNS REAAL’s interest in the fair value of the acquired identifiable assets,
               liabilities and contingent liabilities on the acquisition date, is capitalised as an intangible fixed asset. Any negative goodwill is
               recognised immediately in the income statement.
               If the provisionally determined fair value of acquired assets or liabilities is adjusted within a year of the acquisition date, the
               adjustment is recognised as an adjustment charged to goodwill. Any subsequent adjustments that occur after a period of one
               year are recognised in the income statement. Adjustments to the purchase price that are contingent on future events, insofar
               as not already included in the purchase price, are included in the purchase price of the acquisition at the time when the
               adjustment is likely and can be measured reliably.
               Goodwill is not amortised. Instead, an impairment test is performed annually or more frequently if there are indications of
               impairment. For this impairment test, goodwill is attributed to cash-generating units. The book value of the cash-generating
               unit (including goodwill) is compared to the calculated recoverable amount. The recoverable amount is the higher of the
               cash-generating unit’s fair value less costs to sell, and its value in use. The recoverable amount of a cash-generating unit is
               determined by the calculation of the present value of the expected future cash flows of the cash-generating unit. The key
               assumptions used in this calculation are based on various financial and economic variables, including operational plans,
               interest rates, applicable tax rates and the inflation forecasts. These variables are determined by the management. If the
               recoverable amount is lower than the book value, the difference will be recognised as an impairment in the line item
               ‘impairment charges / (reversals)’ in the income statement.

       3.1.2   Software
               Costs that are directly related to the development of identifiable software products that SNS REAAL controls, and that are
               likely to generate economic benefits that exceed these costs, are capitalised as intangible fixed assets. The direct costs
               comprise external costs and staff costs directly attributable to software development. All the other costs associated with the
               development or maintenance of computer software are included as an expense in the period during which they are incurred.
               The capitalised development costs for computer software are amortised on a straight-line basis over the useful life, with a
               maximum of three years. An impairment test is carried out at every reporting date for possible impairments.

       3.1.3   Capitalised acquisition costs insurance activities
               Acquisition costs are the direct or indirect costs related to the production of new life insurance business and savings
               mortgages that depend on, and relate to, the acquisition of new contracts and the renewal of existing contracts. The amount
               to be capitalised annually is offset against the commissions provisions reclaimed during the year.
               Non-commission acquisition expenses are capitalised to the extent that they can be recovered from the projected gross
               profits of the underlying new business in a given year. Acquisition costs are amortised based on the expected average term
               over which premiums will be received. Capitalised commissions are amortised over the period over which they are earned i.e.
               either 5 or 10 years, and this varies by product. These terms are re-assessed on a regular basis. If applicable, the amortisation
               charge will be adjusted for the shortened period.



114   SNS REAAL Financial Statements 2008 consolidated financial statements
        An impairment test is performed at each balance sheet date. Capitalised acquisition costs are part of the balance sheet
        provision and are included as such in the life-insurance liability adequacy test. For a more detailed explanation and
        recognition of any deficits demonstrated by that test, please refer to paragraph 3.19.
        The test on internal acquisition costs is combined with the test on VOBA as described in paragraph 3.1.4.

3.1.4   VOBA
        SNS REAAL accounts for acquisitions on the basis of the purchase method. As a result, the difference between the fair value
        and the book value of the acquired insurance portfolios is included in the balance sheet as an intangible fixed asset. The VOBA
        (Value of Business Acquired) is determined using the net present value of expected future cash flows generated by the
        acquired insurance contracts as at the acquisition date. Best estimates of actuarial assumptions for interest rates, mortality
        and expenses are used to determine this net present value.
        SNS REAAL amortises the VOBA on the basis of profit flows of the underlying portfolios. The amortisation charge is thus in line
        with the results from the underlying portfolios.
        An impairment test is performed at each balance sheet date to confirm that future profits from acquired insurance contracts
        are sufficient to cover the amount of any capitalised VOBA. The test makes use of the calculations that are part of the annual
        (compulsory) liability adequacy test (LAT) on insurance liabilities. Not only the VOBA, but also the internal acquisition costs
        are tested simultaneously. If the combined book value of the VOBA and the capitalised internal costs is higher than the
        difference between the balance sheet provision of the liabilities and the best estimate market value provision, an additional
        part will be charged against the results until the values are at an equal level.

3.1.5   Other intangible fixed assets
        The other intangible fixed assets include intangible assets with a specific and an indefinite useful life, such as trademarks and
        client portfolios stemming from acquisitions. The assets with a definite useful life are amortised in accordance with the
        straight-line method over their useful life, in general between five and ten years. If objective indications so require, an
        impairment test will be performed. The assets with an indefinite useful life are not amortised. These intangible fixed assets
        are assessed for impairment at each balance sheet date.

 3.2    Property and equipment
3.2.1   Land and buildings in own use
        Property in own use primarily comprises offices (land and buildings) and is measured at fair value based on appraisals by
        independent external surveyors, less depreciation of buildings and any accumulated impairment losses. The appraisals are
        performed every three years based on a rotation schedule, as a result one third of the portfolio is appraised annually.
        The fair value of property for own use is determined based on the market value of the vacant property. Property in own use in
        the view of the group, but which REAAL Verzekeringen considers an investment property, is measured at its market value when
        leased. In determining the market values, use is made of observable prices of recent transactions.
        Increases in the fair value exceeding the cost price as a result of the appraisals are added to the revaluation reserve in
        shareholders’ equity, less deferred taxes. Positive revaluations, insofar as these result in the reversal of earlier write-downs on
        the same asset, are credited to the income statement. Decreases in the fair value, insofar as these result in the reversal of
        prior positive revaluations of the same asset, are charged to the revaluation reserve. All other decreases in the fair value are
        accounted for in the income statement.
        Buildings are depreciated over their economic life using the straight-line method, with a maximum of 50 years, taking into
        account the possible residual value. Land is not depreciated. Regular impairment tests are carried out on property.
        Repairs and maintenance expenses are recognised under ‘other operating expenses’ when the expense is incurred. Expenses
        after the property has been recognised in the accounts are capitalised if it is probable that the future advantages will accrue
        to SNS REAAL and the costs can be determined in a reliable manner.
        Upon the sale of a property, the part of the revaluation reserve related to the sold property is transferred to ‘other reserves’.

3.2.2   IT equipment and other tangible fixed assets
        All other tangible fixed assets included in this item are measured at cost net of accumulated depreciation and, if applicable,
        accumulated impairment losses.
        The cost price comprises the expenses directly attributable to the acquisition of the asset.
        The cost of the other tangible fixed assets is depreciated on a straight-line basis over the useful life, taking into account any
        residual value. The estimated useful life is three to ten years.
        Regular impairment tests are performed on the other tangible fixed assets. If the book value of the tangible asset exceeds the
        recoverable amount, it is immediately written down to the recoverable amount.
        Repairs and maintenance expenses are recognised under ‘other operating expenses’ when the expense is incurred. Expenses
        incurred after the acquisition of an asset that increase or extend the future economic benefits of the other fixed assets in
        relation to their original use are capitalised and then amortised.
        Results on the sale of tangible fixed assets are defined as the balance of the disposal proceeds less transaction costs and the
        book value. These results are recognised as part of ‘other operating income’.




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        3.3    Investments in associates
               Investments in associates are entities in which SNS REAAL generally owns between 20% and 50% of the voting power, or of
               which the Group does not have control, but can exercise significant influence.
               Upon recognition, participations in associated companies are initially accounted for at the cost price and subsequently
               according to the equity method. The item also includes goodwill paid upon acquisition less accumulated impairment losses,
               where applicable.
               Under the equity method, the share of SNS REAAL in the result of associates is recognised in the income statement under
               ‘share in the result of associates’. The share of SNS REAAL in changes in the reserves of associates, after the acquisition, is
               recognised directly in shareholders’ equity. The value of the associates is adjusted for these results and changes in reserves.
               If the book value of the associated company falls to zero, no further losses are accounted for, unless the Group has entered
               into commitments or made payments on its behalf.
               Where necessary, the accounting principles applied by the associated companies have been adjusted to ensure consistency
               with the accounting principles applied by SNS REAAL.
               Associates held for sale are classified as ‘Held for sale’. These associated companies are measured at the lower of the book
               value and the sales price less sales costs. The result on the sale of an investment in an associated company is presented in the
               income statement as a total amount, consisting of the sales price less transaction costs and the book value of the associated
               company.

        3.4    Investment properties
               Investment properties, comprising retail and office properties and land, are held to generate long-term rental income. If
               property is held partly as investment property and partly for own use, the property is included under tangible fixed assets,
               unless the part in own use is less than 20% of the total number of square metres.
               Investment properties are measured at fair value, including transaction costs, upon initial recognition. Property investments
               are treated as long-term investments and measured at fair value, being the value of the property in a let state. The fair value is
               based on the appraisals performed at least every three years by independent external appraisers with sufficient expertise and
               experience in property locations and categories. These appraisal are based on recent market transactions. In the time
               between the three-yearly external appraisal, SNS REAAL uses alternative valuation methods based on the total net annual
               rental income of that property and, where applicable, the associated costs.
               Changes in the fair value of investment property are recognised in the income statement under ‘investment income’.

        3.5    Investments
       3.5.1   Classification
               SNS REAAL classifies its investments in one of the following categories: (1) held to maturity, (2) loans and receivables, (3)
               available for sale and (4) at fair value through profit or loss. The category depends on the purpose for which the investments
               were acquired. The management decides in which category they will be placed.
               Upon recognition, investments are measured at fair value including transaction costs, with the exception of the category ‘at
               fair value through profit or loss’, where transaction costs are taken directly to the income statement. The fair value of
               investments is based on listed bid prices or derived from cash flow models.

      3.5.2    Held to maturity
               Investments, with the exception of derivates, with a fixed term whereby the management intends, and is able, to hold the
               investment to maturity, are classified as held to maturity.
               Investments held to maturity are measured at amortised cost using the effective interest method, less a provision for
               impairment if necessary. The effective interest method is based on the estimated future cash flows, taking into account the
               risk of early redemption of the underlying financial instruments and the direct costs and income, such as the transaction costs
               charged, brokerage fees and discounts or premiums.

       3.5.3   Loans and receivables
               The category loans and receivables comprises unlisted investments with a fixed term as well as the saving components of
               savings mortgages that the insurance company has concluded. These loans and receivables are measured at amortised cost
               using the effective interest method, less a provision for impairment if necessary.

       3.5.4   Available for sale
               Investments that do not meet the criteria defined by management for ‘held to maturity’ or ‘fair value through profit or loss’,
               are classified as available for sale.
               After recognition, investments available for sale are restated at fair value in the balance sheet. Unrealised gains and losses
               resulting from the fair value adjustments of investments available for sale are recognised in shareholders’ equity, taking
               account of deferred taxes. Investments in the form of shares of which the fair value cannot be estimated reliably are measured
               at cost less impairment.




116   SNS REAAL Financial Statements 2008 consolidated financial statements
        When the investments are sold, the related accumulated fair value adjustments are recognised in the income statement as
        ‘investment income’. SNS REAAL uses the average cost method to determine the results.

3.5.5   Fair value through profit or loss
        An instrument is classified at fair value through profit or loss if it is held for trading purposes or if it was designated as such
        upon initial recognition. Financial instruments are only designated as valued at fair value through profit or loss if:
        1 it eliminates or considerably limits an inconsistency in valuation or recognition that would otherwise arise from the
            valuation of assets or liabilities or from the recognition of the profits or losses on those instruments based on various
            principles; or
        2 the Group manages and assesses the investments on the basis of fair value.

        Upon initial recognition, the attributable transaction costs are recognised as a loss in the income statement at the time they
        are incurred. The financial instruments are measured at fair value. Realised and unrealised gains and losses are recognised in
        the income statement under ‘investment income’.
        Interest income earned on securities is recognised as interest income under ‘interest income, banking operations’ at
        SNS Bank and under ‘investment income’ at REAAL Verzekeringen. Dividend received is recorded under ‘investment income’.

3.5.6   Impairment charges / (reversals)
        At each balance sheet date, SNS REAAL assesses whether there are objective indications of impairment of investments
        classified as held to maturity, loans and receivables and available for sale. Impairment losses are recognised directly in the
        income statement under ‘impairment charges / (reversals)’. With investments available for sale, any revaluation of
        shareholders’ equity is first deducted.
        An equity investment is considered to be impaired if the book value exceeds the recoverable amount in the long term, in other
        words, a decline in the fair value of:
         25% or more below its cost; or
         for at least 9 months below its cost.


        The recoverable amount of the investments in the form of unlisted shares is determined using well-established valuation
        methods. The standard method used is based on the relationship in the market between the profit and the value of
        comparable companies. The recoverable amount of listed investments is determined on the basis of the market price of the
        shares.
        Investments in debt securities are tested for impairment if there are objective indications of financial problems with the
        counterparty, dwindling markets or other indications.
        If, during a subsequent period, the amount of the impairment of an investment classified as held to maturity or an investment
        classified as available for sale decreases, and the decrease can objectively be related to an event occurring after the
        impairment was recognised, the previously recorded impairment loss is reversed in the income statement. This does not apply
        to investments in shares, where an increase in value following impairment is treated as a revaluation.

 3.6    Investments for account of policyholders
        Investments on behalf of policyholders are measured at fair value. Amounts due by policyholders in this context are
        recognised in the income statement as ‘premium income’. Adjustments in the value of investments and results on the sale of
        investments are recorded in the income statement under ‘investment income for policyholders’.

 3.7    Invested collateral securities lending
        Collateral is obtained through securities lending and invested through lending and borrowing programmes. SNS REAAL
        cannot freely dispose over the investments. The investments can only be used to redeem the collateral provided by the
        borrower in connection with the lending and borrowing transaction. The obligation to repay the collateral provided in cash is
        included in the balance sheet under ‘securities lending liabilities’. The investments are measured at fair value. Unrealised
        revaluations are transferred net of tax to the fair value reserve. In the event of an impairment loss, the book value will be
        written down to the recoverable amount.

 3.8    Derivatives
        Derivative financial instruments, such as currency contracts, interest rate futures, forward contracts, currency and interest
        rate swaps, currency and interest rate options (both written and purchased) and other derivative financial instruments are
        measured at fair value upon entering into the contract.
        The fair value of publicly traded derivatives is based on listed bid prices for assets held or liabilities to be issued, and listed
        offer prices for assets to be acquired or liabilities held.




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               The fair value of non-publicly traded derivatives depends on the type of instrument and is based on a discounted cash flow
               model or an option valuation model. SNS REAAL recognises derivatives with a positive market value as assets and derivatives
               with a negative market value as liabilities.
               Adjustments in the fair value of derivatives held for trading are accounted for in the income statement under ‘result on
               financial instruments’.

       3.8.1   Embedded derivatives
               An embedded derivative is treated as a separate derivative if there is no close relation between the economic characteristics
               and risks of the derivative and the host contract, if the host contract is not measured at fair value through profit or loss and if
               a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. These
               embedded derivatives are measured at fair value, while changes in value are recognised in the income statement.

      3.8.2    Hedge accounting
               SNS REAAL uses derivatives as part of asset and liability management and risk management. These instruments are used for
               hedging interest rate and foreign currency risks, including the risks of future transactions.
               SNS REAAL can designate certain derivatives as either (1) a hedge of the fair value of a recognised asset or liability (fair value
               hedge); or (2) a hedge of a future cash flow that can be attributed to a recognised asset or liability, an expected transaction or
               a definite obligation (cash flow hedge).
               Hedge accounting in accordance with IAS 39 is applied for derivatives that are thus designated and that satisfy the conditions
               set by SNS REAAL. SNS REAAL sets the following conditions for the application of hedge accounting:
                Formal documentation of the hedging instrument, the hedged position, the risk management objective, strategy and
                  relationship of the hedge is completed before hedge accounting is applied;
                The documentation shows that the hedge is expected to be effective in offsetting the risk in the hedged position for the
                  entire hedging period;
                The hedge continues to be effective during the term.


               A hedge is considered to be effective if SNS REAAL, at the inception of and during the term, can expect that adjustments in the
               fair value or cash flows of the hedged position will be almost fully offset by adjustments in the fair value or cash flows of the
               hedging instrument, insofar as they are attributable to the hedged risk, and the actual results remain within a bandwidth of
               80% to 125%.
               SNS REAAL ceases hedge accounting as soon as it has been established that a derivative is no longer an effective hedge, or
               when the derivative expires, is sold, terminated or exercised; when the hedged position expires, is sold or redeemed; or when
               an expected transaction is no longer deemed highly likely to occur.

      3.8.2.1 Fair value hedge accounting
               Derivatives designated as a hedge of the fair value of recognised assets or of a definite obligation are stated as fair value
               hedges. Changes in the fair value of the derivatives that are designated as a hedge are recognised immediately in the income
               statement and reported together with corresponding fair value adjustments to the hedged item attributable to the hedged
               risk.
               If the hedge no longer meets the conditions for hedge accounting, an adjustment in the book value of a hedged financial
               instrument is amortised and taken to the income statement during the expected residual term of the hedged instrument.
               If the hedged instrument is no longer recognised, in other words, if it is sold or redeemed, the non-amortised fair value
               adjustment is taken directly to the income statement.

      3.8.2.2 Cash flow hedge accounting
               Derivatives can be designated as a hedge of the risk of future variability of the cash flows of a recognised asset or liability or highly
               likely expected transaction. Adjustments in the fair value of the effective portion of derivatives that are designated as a cash flow
               hedge and that meet the conditions for cash flow hedge accounting are stated in the cash flow hedge reserve as a separate
               component of shareholders’ equity. The underlying transaction, which is designated as part of a cash flow hedge, does not change
               as far as the administrative processing is concerned.
               If the expected transaction leads to the actual inclusion of an asset or a liability, the accumulated gains and losses that were
               previously taken to the cash flow hedge reserve are transferred to the income statement and classified as income or expense in the
               period during which the hedged transaction influences the result.
               When determining the portion of the fair value adjustment that is included in the cash flow hedge reserve, the portion of the gain
               or loss on the hedging instrument that is considered an effective hedge of the cash flow risk is included in shareholders’ equity,
               while the ineffective portion is recognised in the income statement.
               If the hedging instrument itself expires or is sold, terminated or exercised, the accumulated gain or loss that was included in the
               cash flow hedge reserve, remains in the cash flow hedge reserve until the expected transaction actually takes place. If the hedging
               instrument no longer satisfies the conditions for hedge accounting, the accumulated gain or loss that was included in
               shareholders’ equity remains in shareholders’ equity until the expected transaction takes place.




118   SNS REAAL Financial Statements 2008 consolidated financial statements
         If the transaction in question is no longer expected to take place, the accumulated result reported in shareholders’ equity is
         immediately transferred to the income statement.

  3.9    Deferred tax assets
         Deferred tax assets and liabilities are recorded for temporary differences between the tax base of assets and liabilities and the
         book value. This is based on the tax rates applicable as at the balance sheet date and that are expected to apply in the period
         in which the deferred tax assets are realised or the deferred tax liabilities are settled. Deferred taxes are measured at nominal
         value.
         Deferred tax assets are only recognised if sufficient tax profits are expected to be realised in the near future to compensate
         these temporary differences. A provision for deferred taxes is made for temporary differences between the book value and the
         value for tax purposes of investments in group companies and participating interests, unless the Group can determine the
         time at which these temporary differences are realised or settled and if it is likely that these differences will not be realised or
         settled in the near future.
         Deferred tax assets are assessed at balance sheet date and if it is no longer likely that the related tax asset can be realised, the
         asset is reduced to the recoverable amount.
         The most significant temporary differences arise from the revaluation of tangible fixed assets, certain financial assets and
         liabilities, including derivatives contracts and the application of hedge accounting, provisions for pensions and other
         post-retirement employee plans, technical provisions, deductible losses carried forward; and, as far as acquisitions are
         concerned, from the difference between (a) the fair value balance of the acquired assets and obligations entered into and (b)
         the book value.
         Tax due on profits is recognised in the period during which the profits were generated, based on the applicable local tax laws.
         Deferred taxes with respect to the revaluation of the aforementioned assets and liabilities of which value adjustments are
         recognised directly in shareholders’ equity, are also charged or credited to shareholders’ equity and upon realisation included
         in the income statement together with the deferred value adjustments.

 3.10    Reinsurance contracts
         Contracts entered into with reinsurance companies and by virtue of which SNS REAAL receives compensation for losses on
         insurance contracts SNS REAAL has issued, are designated as ceded reinsurance contracts.
         Insurance contracts entered into where the contract holder is another insurance company are classified as incoming
         reinsurance contracts and are recognised as insurance contracts.
         Reinsurance premiums, commissions, payments and technical provisions for reinsurance contracts are accounted for in the
         same way as the direct insurance policies that are reinsured. The share of reinsurance companies in the technical provisions
         and the benefits to which SNS REAAL is entitled by virtue of its reinsurance contracts are accounted for as a reinsurance asset.
         These assets comprise short-term receivables from reinsurance companies (presented under other assets), and long-term
         receivables (presented under reinsurance contracts). These receivables depend on the expected claims and benefits arising
         from the insurance contracts that SNS REAAL has reinsured.
         The amounts receivable from, and payable to, reinsurance companies are valued in accordance with the terms and conditions
         of each reinsurance contract. Reinsurance obligations relate primarily to premiums payable for reinsurance contracts. These
         premiums are recognised as an expense over the period in which they are due.
         Reinsurance receivables are assessed for impairment at each reporting date.

  3.11   Loans and advances to customers
3.11.1   Mortgages and mortgage-backed property finance
         These are defined as loans and advances to customers with mortgage collateral. These loans and advances are measured at
         amortised cost using the effective interest method. Loans and advances adjusted after renegotiations or otherwise adjusted
         due to financial restructuring of the borrower are measured on the basis of the original effective interest rate before the terms
         and conditions were revised.
         Several securitised mortgages, mortgages to be securitised, the derivatives and related liabilities are measured on the basis
         of fair value. This relates to the mortgages of the Holland Homes MBS securitisation programme. The fair value is determined
         on the basis of the current swap curve, including a risk mark-up derived from the development of the mortgage rate in relation
         to the swap interest rate. Besides this, the probability of early repayment is also taken into account. Details of securitised
         mortgages are given in the notes.
         As far as the loans and advances are concerned, a provision for impairment is made if there are objective indications that
         SNS REAAL will not be able to collect all the amounts in accordance with the original contract. For loans and advances that are
         individually significant, the provision made equals the difference between the book value of the total position and the
         recoverable amount. The recoverable amount equals the present value of the expected future cash flows, including the
         amounts realised by virtue of guarantees and collateral, discounted at the effective interest rate of the loans and advances.
         Smaller homogenous loans and advances (corresponding credit risk) are tested collectively for impairment. The provision with
         respect to the collective approach is calculated using a range of model-based instruments, including risk-rating models for




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               homogenous pools of consumer and SME loans. The loss factors developed using these models are based on historic loss data
               of SNS REAAL, and are adjusted on the basis of current information that, in the opinion of the management, can affect the
               recoverability of the portfolio on the assessment date.
               The provision for impairment also covers losses where there are objective indications of losses likely to be incurred in the loan
               portfolio (IBNR: incurred but not reported). These are estimated on the basis of historic loss patterns of loans and advances
               that carry similar risk characteristics as the loans and advances held in the portfolio and are a reflection of the current
               economic climate in which the borrowers operate.
               If the amount of the impairment subsequently decreases due to an event occurring after the impairment, the previously
               recognised impairment loss is reversed in the income statement.
               When a loan is uncollectible, it is written off against the relevant provision for impairment. Amounts that are subsequently
               collected are deducted from the addition to the provision for impairment in the income statement.

      3.11.1.1 Credit guarantees
               SNS REAAL has concluded a credit guarantee for the credit risk of part of the mortgage portfolio. As a result, impairment
               losses of the mortgage portfolio in question can be recovered from the guarantor. Impairment of mortgages is included under
               ‘impairment charges/ (reversals)’. The amount receivable under the guarantee is also recognised on this line in the income
               statement.

      3.11.2   Non-mortgage backed property finance and other loans and advances
               This comprises loans and advances to business and retail clients without mortgage collateral. Loans and advances are
               measured at amortised cost on the basis of the effective interest method. Loans and advances adjusted after renegotiations
               or otherwise adjusted due to financial restructuring of the borrower are measured on the basis of the original effective
               interest rate before the terms and conditions were revised.
               As far as the loans are concerned, a provision for impairment is formed if there are objective indications that SNS REAAL will
               not be able to collect all the amounts due in accordance with the original contract.
               The criteria for impairment are applied to the entire loan portfolio, except to smaller, homogenous loans, such as consumer
               credit, which are assessed collectively for impairment. Smaller business loans managed in a portfolio are also assessed
               collectively for impairment.
               For loans and advances that are individually significant, the provision made equals the difference between the book value of
               the total position and the recoverable amount. The recoverable amount equals the present value of the expected future cash
               flows, including the amounts realised by virtue of guarantees and collateral, discounted at the effective interest rate of the
               loans and advances.
               The provision with respect to the collective approach is calculated using a range of model-based instruments, including
               risk-rating models for homogenous pools of consumer and SME loans. The loss factors developed using these models are
               based on historic loss data of SNS REAAL, and are adjusted according to clear current information that, in the opinion of the
               management, can affect the recoverability of the portfolio on the assessment date.
               The provision for impairment also covers losses where there are objective indications of losses likely to be incurred on the loan
               portfolio (IBNR: incurred but not reported). These are estimated on the basis of historic loss patterns in every division and the
               creditworthiness of the borrowers, and are a reflection of the current economic climate in which the borrowers operate.
               If the amount of the impairment subsequently decreases due to an event occurring after the impairment, the previously
               recognised impairment loss is reversed in the income statement.
               When a loan is uncollectible, it is written off against the relevant provision for impairment. Amounts that are subsequently
               collected are deducted from the addition to the provision in the income statement.

      3.11.2.1 Lease
               SNS REAAL as lessee
               The lease agreements that SNS REAAL enters into are operational leases. The total amounts paid under the lease agreements
               are accounted for according to the straight-line method over the term of the agreement.

               SNS REAAL as lessor
               SNS REAAL has entered into a number of financial lease agreements. These are agreements for which the Group has
               transferred almost all of the risks and benefits of the property to the lessee. The balance sheet value of the lease receivable is
               equal to the present value of the lease instalments, calculated on the basis of the implicit interest rate and, if applicable, any
               guaranteed residual value.

        3.12   Loans and advances to banks
               These concern receivables to banks not in the form of interest-bearing securities. These receivables are measured at
               amortised cost using the effective interest method, if necessary less any impairment losses.




120   SNS REAAL Financial Statements 2008 consolidated financial statements
  3.13   Corporate income tax
         Corporate income tax is tax levied on taxable profits. Current tax receivables are measured at nominal value according to the
         tax rate applicable at the reporting date. Dividend withholding tax recovered through the corporate income tax return is also
         included in this item.

 3.14    Other assets
         Other assets consist of receivables from direct insurance policies, property under development, other taxes, other receivables
         and accrued assets. Accrued assets also include the accumulated interest on financial instruments measured at amortised
         cost, as well as other accruals, which item includes amounts receivable by SNS Bank from clients and the clearing house in
         respect of option positions.
         Property under development included in other assets consists of property under development for third parties. No specific
         contract has been concluded with a third party related to the property under development. The property under development
         for third parties is valued at the sum of direct costs incurred up to the balance sheet date, including the interest incurred
         during the construction phase and development and guidance costs of the Group, less any impairments. Profits are
         recognised on completion date (completed contract method).

  3.15   Cash and cash equivalents
         Cash and cash equivalents include the demand deposits with the Dutch Central Bank and at other banks. Demand deposits
         that SNS Bank has with other banks are included under loans and advances to banks.

  3.16   Total equity
3.16.1   Issued share capital and share premium reserve
         The share capital comprises issued and paid-up share capital on ordinary shares and B-shares. Costs directly attributable to
         the issue of equity instruments are deducted net of tax from the share issue income.
         The share premium reserve concerns the paid-in surplus capital in addition to the nominal value of the issued ordinary and
         B-shares.

3.16.2   Ordinary and B-share dividend
         Dividend for a financial year, which is payable after the balance sheet date, is disclosed in ‘Provisions regarding profit and loss
         appropriation’ under ‘Other information’.

3.16.3   Revaluation reserve
         Revaluations of property in own use (see 3.2.1) are included in the revaluation reserve.

3.16.4   Cash flow hedge reserve
         The cash flow hedge reserve of the effective part of cumulative changes to the fair value of the derivatives used in the context
         of cash flow hedges, net of taxes, providing the hedged transaction has not yet taken place (see 3.8).

3.16.5   Fair value reserve
         Gains and losses as a result of changes in the fair value of assets that are classified as available for sale are taken to the fair
         value reserve, less deferred taxes. If the particular asset is sold or redeemed, in other words, the asset is no longer recognised,
         the corresponding cumulative result will be transferred from the fair value reserve to the income statement (see 3.5.4.). In
         addition, exchange rate differences on non-monetary financial assets that are classified as available for sale are stated in this
         reserve (see 2.8).

3.16.6   Profit-sharing reserve
         The insurance portfolio contains contracts that are entitled to discretionary profit-sharing amounts. This profit-sharing is
         awarded annually, primarily on the basis of the excess interest realised on the fixed-interest securities in the existing portfolio
         during the financial year. Unrealised gains and losses on these fixed-interest securities are taken to the fair value reserve; the
         part of these unrealised revaluations which might be available for future distribution to policyholders as profit sharing is
         taken to the profit-sharing reserve.

3.16.7   Other reserves
         Other reserves mainly comprise SNS REAAL’s retained profits.

3.16.8   Securities capital
         The securities capital comprises the securities capital issued and paid up by the Dutch State and the trust. Costs directly
         attributable to the issue of the securities capital are deducted net of tax from the share issue income of the securities.




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      3.16.9    Securities capital share premium reserve
                The securities capital share premium reserve concerns the paid-in surplus capital in addition to the nominal value of the
                issued securities.

      3.16.10   Securities dividend
                Securities dividend for a financial year, which is payable after the balance sheet date, is disclosed in ‘Provisions regarding
                profit and loss appropriation’ under ‘Other information’.

       3.17     Participation certificates and subordinated debt
      3.17.1    Participation certificates
                SNS Bank issues participation certificates to third parties. The certificates have an open-ended term, with SNS Bank
                maintaining the right to early redemption in full after 10 years, provided permission is given by the regulator. The amount of
                the dividend, in the form of a coupon rate, is fixed over a period of 10 years and equal to the CBS (Statistics Netherlands)
                return on 9-10 year Government bonds plus a mark-up. Participation certificates are initially measured at fair value, in other
                words, the issue income (the fair value of the received payment) net of the transaction costs incurred. Thereafter, they are
                measured at amortised cost, using the effective interest method. Benefit payments on participation certificates are recorded
                under ‘interest expenses, banking operations’.
                The participation certificates are classified as debt capital in the financial statements. For SNS Bank’s solvency reports to the
                Dutch Central Bank, this item is part of the Tier 1 capital.

      3.17.2    Subordinated debts
                The subordinated (bond) loans are included under the subordinated loans. The Dutch Central Bank takes these loans into
                consideration for the solvency test at SNS Bank. These are initially measured at fair value, in other words, the issue income (the
                fair value of the received payment) net of the transaction costs incurred. Thereafter, they are measured at amortised cost,
                using the effective interest method.

      3.17.3    Final bonus account
                The final bonus account concerns final bonus commitments in relation to certain life insurance policies. Entitlement to a final
                bonus applies only to specific individual policies that become payable upon expiry of the agreed term or upon the death of the
                insured party. Entitlement to a final bonus is cancelled when the policy is surrendered. Entitlements to final bonuses not yet
                paid out are subordinated to all other debts. It is also stipulated that entitlement to a final bonus is cancelled if and insofar as
                the results erode the capital base to the extent that the regulatory solvency requirements can or may no longer be complied
                with.
                The final bonus account is determined actuarially based on the same accounting principles that are applied for determining
                the profit additions, which form part of the provision for insurance contracts. The estimated probability of early termination
                of insurance contracts is hereby taken into account.
                Part of the final bonus account is converted annually, according to a fixed method, into an unconditional right of the
                policyholder and added to the provision for insurance contracts.
                These obligations arising from the final bonus scheme are classified as debt capital in the financial statements. This item is
                part of the available regulatory capital for the solvency reports by REAAL Verzekeringen to the Dutch Central Bank.

        3.18    Debt certificates
                Outstanding debt certificates are measured at fair value upon recognition, in other words, the issue income (the fair value of
                the received payment) net of the transaction costs incurred. Thereafter, they are measured at amortised cost, using the
                effective interest method. The conditions for applying hedge accounting for derivatives to hedge outstanding debt
                certificates are described in 3.7.
                A specific category of outstanding debt certificates are initially included at fair value whereby subsequent value adjustments
                are accounted for in the income statement so that an inconsistency in the valuation is eliminated that would otherwise arise
                from the valuation of assets and liabilities.
                When SNS REAAL purchases its own debt securities in the context of market maintenance, these debt certificates are removed
                from the balance sheet.

        3.19    Insurance contracts
      3.19.1    Insurance contracts
                The provision for insurance contracts is determined on the basis of a sufficiently conservative prospective actuarial method
                taking into account all future benefit payments and premiums to be received, to the extent applicable. The calculation
                deviates from using a prospective method if the nature of the relevant type of life insurance does not allow the application of
                this method.
                Actual payments and the timing of payment depend on factors such as social, economic and demographic trends, inflation,
                investment returns, the behaviour of policyholders and other factors, and, for life insurance contracts, assumptions about




122   SNS REAAL Financial Statements 2008 consolidated financial statements
       developments in mortality and disability rates. Using different assumptions for these factors than have been used in
       preparing these accounts (i.e. premium calculation principles) could have a significant effect on the technical provisions and
       related expenses for insurance contracts (see also under Adequacy test 3.19.2).

3.19.1.1 Life insurance policies for own account
       An obligation to make future contractual payments is recognised as soon as the policy takes effect. The provision for life
       insurance policies for own account and risk consists of the discounted value, based on the premium calculation principles for
       interest and mortality, of expected future benefits payments (including profit sharing already granted) to policyholders or
       other beneficiaries, less future premiums.
       The technical provision for life insurance for own account and risk is calculated using the net premium method for which
       assumptions are used for mortality, interest and in case of some risk products lapse. The accounting principles used are based
       on pricing assumptions at the outset of the policy. The discount rate remains constant throughout the life of the policy, and is
       3% for contracts issued after 1999 and a maximum of 4% for contracts issued prior to this time. For savings mortgages and
       other guaranteed products, the rate of return guaranteed in the contract is used. The actuarial interest for these products
       equals the investment return achieved on the corresponding investments. In this case, the interest rate risk has been fully
       hedged. Particularly with regard to the pension portfolio, the provisions may become insufficient due to the extended life
       expectancy of the insured persons. For this reason, additional allocations were made to the provision in the past in order to
       hedge this ‘long-life risk’. As a result, these elements of the portfolio are, in fact, valued on the basis of rather more modern
       principles than the premium calculation principles.
       Gross premiums include loadings to cover expenses. When the premiums are received or fall due, the amount of any expenses
       loading is released and is then available to cover actual expenses, including renewal expenses, acquisition costs and the
       amortisation of capitalised acquisition costs.
       The provisions are net of capitalised interest rate rebates. These interest rate rebates are amortised on an actuarial basis.
       A provision is maintained for the entitlement to a waiver of premium in the event of disability and for the no-claim disability
       annuities. This provision is based on a factor times the annual premium that applies for the disability risk. The level of the
       factor is determined, inter alia, based on IBNR techniques derived form empirical data for claim behaviour. The principles for
       valuation of disability cover that has entered into force, including the waiver of premium, are the same as the principles for the
       main insurance policy.

3.19.1.2 Provisions for profit sharing, bonuses and rebates
       The present value of any profit sharing that has been awarded but not yet distributed is included under the provision for profit
       sharing, bonuses and rebates.

3.19.1.3 Life insurance contracts on behalf of policyholders
       These contracts concern insurance policies where the investment risk is borne by the policyholders. The technical provisions
       for these insurance policies are set equal to the balance sheet value of the related underlying investments. As a result, these
       technical provisions are recorded at fair value through profit or loss. Transaction costs and commission are not included in the
       initial valuation but charged to the income statement as these transactions are concluded.
       Interest rate guarantees have been issued with a number of unit-linked insurance policies. The guarantee provided is a fixed
       annual return on the amount invested, and only applies at the maturity date of the insurance policy. Prior to maturity, the
       provision held for these policies is equal to at least the accumulated amount of premiums paid plus interest less any expense
       and mortality charge deductions, adjusted for future lapses and early surrenders. If the income from investments is not
       sufficient to cover the obligations due to minimum returns, an additional provision is made and charged to the income
       statement.

3.19.1.4 Non-life insurance
       The provision for unearned premiums reflects premiums related to the period of any unexpired cover as at the balance sheet
       date. The provision is equal to the unearned gross premiums, whereby the commission paid is deducted from the gross
       premium. The provision for unearned premiums is calculated separately for each insurance contract using the 365ths method,
       adjusted where necessary for variations in risk and claim frequencies over the term of the insurance contract.
       The change in the provision for unearned premiums is recorded in the income statement in order to recognise income over the
       period of exposure to risk.
       The provision for current risks is made to meet obligations stemming from:
        Claims and claim-handling expenses that may arise after the balance sheet date and which are covered by contracts issued
          prior to that date, insofar as the amount estimated in connection with this exceeds the provision for unearned premiums
          and the premiums claimable in relation to these contracts.
        The premiums received, be they single or regular, for contracts where the underlying risk increases over time. This is
          particularly the case for disability insurance.




                                                               SNS REAAL Financial Statements 2008 consolidated financial statements
                                                                                                                financial               123
               The provision for claims payable has been set aside to meet claims arising from the current and preceding years that have not
               been settled as at the balance sheet date. The provision is determined systematically on a policy by policy basis. In the case of
               disability claims, this provision is referred to as the ‘provision for periodic payments’.
               REAAL Verzekeringen holds co-insurance contracts, mainly relating to the transport sector. In the calculation of the technical
               provision, all risks entered into as of the balance sheet date are accounted for, as are incurred claims, both reported and
               unreported. The expected balances for risks covered and losses incurred arising from transport insurance are determined on
               an underwriting-year basis.
               The provision for claims incurred but not reported (IBNR) is intended for events that have occurred prior to the balance sheet
               date but have not yet been reported as at that date. In the case of disability contracts, the provision is partially calculated on the
               basis of risk premiums and claims ratios in recent years and partially based on actuarial analyses of claims development patterns.
               For other non-life insurance contracts this provision is estimated based on analyses of claims development patterns.
               In performing this analysis, projected subrogation amounts are deducted from this provision. The actuarial analyses used to
               calculate the IBNR provision are used in particular for estimating the projected final costs of more complex claims that can be
               affected by both internal and external factors such as claims handling procedures, inflation, changes in legislation and
               regulations, court rulings, history and trends.
               A separate provision for claims handling costs is formed for claims handling and loss adjustment expenses. This provision
               provides an estimate of the expenses involved in dealing with payments to be made in respect of claims arising from insured
               events that have already occurred. In accordance with general practice in the industry, SNS REAAL does not discount the
               non-life provisions, with the exception of disability claims provisions. This also applies with regard to the provision for claims
               handling costs. Changes in estimates are reflected in the result in the period during which the estimates are adjusted.

      3.19.2   Liability adequacy tests for technical provisions on insurance activities
               The technical provisions reported at the balance sheet date are valued using premium calculation principles for interest and
               mortality (for life insurance and disability contracts) or historically observed claim development patterns (non-life insurance).
               The adequacy of the provisions is tested periodically during the reporting period. For the life activities this test is performed
               according to two different principles: IFRS and Dutch Central Bank.

               Liability adequacy test life insurance IFRS
               In accordance with IFRS rules an IFRS LAT is performed. This is a test of the balance sheet provision to establish whether it is
               adequate to be able to meet the commitments vis-à-vis the policyholders with a large degree of certainty. When performing
               this test, future contractual cash flows are projected on the basis of estimates of current and future developments with regard
               to mortality, disability, the behaviour of policyholders, claim handling and management costs, and differences in the
               valuation of investments (to the extent they are not recognised at fair value) that serve to meet these commitments. Profit
               sharing is included in these cash flows. This estimate has been increased by an uncertainty margin. If this realistic provision
               turns out to be lower than the existing technical provision, then it can be ascertained that the existing balance sheet provision
               is adequate to satisfy the future commitments vis-à-vis the policyholders. Any shortfall is charged directly to the income
               statement.
               This LAT is performed every quarter for the entire life insurance portfolio to determine whether the reported technical
               provision, based on the most current assumptions, is still adequate.
               The following current assumptions were used in performing the LAT as at 31 December 2008:
                Discount rate                                  Calculated on the Dutch Central Bank curve with an add on to ECB all
                                                                government yields
                Profit allocation                              Where surplus interest exceeds assumed interest plus 0.5%, with tranches of
                                                                surplus interest running off over time
                Inflation                                      1.5%
                Synergy                                        Based on the interpretations of business cases
                Projected mortality                            Historical data based on internal research
                Lapse and early surrender                      Historical data based on internal research
                Salary increases, group policies               Maximum 1.5%
                Guarantees                                     Fair value

               Liability adequacy test life insurance Dutch Central Bank
               In accordance with the Dutch Central Bank regulations an adequacy test must also be carried out. This test differs on a few
               aspects with the LAT. The discount rate used is the ECB AAA State Curve and a surrender value of the insurance contracts has
               been taken into account.

               Liability adequacy test non-life insurance
               A test is carried out twice a year to establish the adequacy of the provisions for non-life claims. This test first determines a Best
               Estimate, followed by a Risk Margin. The Best Estimate serves as a realistic estimate of future claim payments.
               The Risk Margin is based on the Cost of Capital method.




124   SNS REAAL Financial Statements 2008 consolidated financial statements
         The test is performed on individual portfolios. The division in portfolios (according to branches and distribution channels) has
         been carried out in such a manner that the portfolios can be considered homogenous as far as risk is concerned. In this case, a
         distinction has been made between material damage and bodily injury. Practically the entire portfolio is subjected to a
         quantitative test; only part of the underwriting agents’ portfolio is subjected to a qualitative test only.
         The test is augmented with the assessment of actual claims development results and the effects that the reserve policy for
         case estimates has on the size of the claims provision. The adequacy of the non-life provisions for the entire non-life portfolio
         is assessed by combining these various test elements.
         For the part of the provision that was acquired upon the acquisition of AXA Nederland, the provisions are determined based on
         a best-estimate assessment increased with a safety margin. The required safety margin is derived from a risk model that takes
         into account specific characteristics of the business in the various portfolios. The provision equals the best estimate plus the
         desired safety margin and as a result the provision is adequate by definition. This renders an explicit adequacy test for this
         part of the provision unnecessary.
         Any shortfall is recorded directly to the income statement by first writing down any capitalised costs and then, where
         necessary, by making an additional provision.

         Liability adequacy test disability insurance
         The testing method for the disability portfolio is performed twice a year. A provision for disability claims is made; this is
         calculated based on rate assumptions for interest, recovery and mortality. The size of this provision, therefore, does not
         reflect the actual developments of these principles.
         By periodically carrying out a test based on actual principles, SNS REAAL ensures the adequacy of the provision.
         This test first determines a Best Estimate, followed by a Risk Margin. The Best Estimate serves as a realistic estimate of future
         claim payments. The Risk Margin is based on the Cost of Capital method.

         The outcome of the test is particularly sensitive to changes in the discount rate. The discount rate used in performing the
         adequacy testing is based on the most recent yield curve published by the Dutch Central Bank for this purpose, and which
         must be used as the norm as of 2007 (the nominal interest rate structure to the Financial Regulatory Framework).
         The outcome of the adequacy test should be seen as the difference between the outcome of the calculated minimum test
         provision and the book value of the technical provision.
         Any shortfall is recorded directly to the income statement by first writing down any capitalised costs and then, where
         necessary, by making an additional provision.

3.19.3   Derivatives embedded in insurance contracts
         SNS REAAL does not separately recognise derivatives embedded in insurance contracts, or options to surrender insurance
         contracts at a fixed amount, or a fixed amount and an interest rate, and thus closely linked to the basic insurance contract,
         but recognises these under the main contract from which they stem. The embedded derivatives are measured as soon as the
         technical provision made for the host contract drops below the guaranteed minimum; the time value of the derivative is not
         included in full in the measurement of the contract.

 3.20    Employee benefits
3.20.1   Pension benefits
         SNS REAAL has different pension plans, most of which are collective defined contribution plans. A defined contribution plan is
         a pension plan in which SNS REAAL pays fixed contributions to a separate entity, the independent Stichting Pensioenfonds
         SRG (the pension fund). SNS REAAL has no legally enforceable or actual obligation to pay extra contributions if the fund has
         insufficient assets to make all the benefit payments in connection with staff performance during the reporting and prior
         periods.
         For the collective defined contribution plans, SNS REAAL pays contributions to the pension fund. The regular contributions are
         considered to be net periodic costs for the year in which they are due, and are recognised as such in the staff costs. Employee
         contributions are deducted from the net period costs.
         SNS REAAL also has a number of defined benefit pension plans. The Group’s net commitments arising from defined benefit
         pension plans are calculated separately for each plan by making an assessment of the pension entitlements that staff have
         accrued in exchange for their services during the reporting period and prior periods. These pension entitlements are discounted
         in order to determine the present value, and the fair value of the separate fund investments is deducted from this. The discount
         rate represents the return as at the balance sheet date of bonds with an AAA credit rating whose maturities approach the term of
         the Group’s commitments. The present value of the pension entitlements for self-administered pension plans are included
         separately in the balance sheet. The investments related to these pension plans are recognised under ‘investments’.
         The actuarial gains and losses arising from defined benefit pension plans, insofar as any non-recognised accumulated
         actuarial gains and losses exceed 10% of the higher of the present value of the defined benefit obligation, or the fair value of
         the plan assets, are recognised in the income statement for the average expected remaining period of services rendered of the
         employees participating in the plan. Otherwise, the actuarial gains or losses are not included in the income statement.




                                                             SNS REAAL Financial Statements 2008 consolidated financial statements
                                                                                                              financial                      125
               When the calculation results in a positive balance for the Group, the asset is stated at an amount no higher than the balance of
               any non-recognised actuarial losses and past service pension charges and the present value of any future repayments by the
               fund or lower future premiums.

      3.20.2   Other employee commitments
               The other employee commitments refer mostly to discounts granted for bank and insurance products to (former) employees
               after the date of their retirement. The size of the provision is based on the present value of the discounts offered after the
               retirement date, taking into account actuarial assumptions about mortality and interest. Furthermore, a provision has been
               made for reimbursement of medical expenses.
               To qualify for these benefits, the employment contract of the employee should normally have continued until the retirement
               age, and it should have lasted for a specified minimum period. A liability is taken for the estimated costs of these benefits
               during the term of employment using a method that corresponds with that used for defined benefit pension plans. This
               liability is determined annually on the basis of actuarial principles.

      3.20.3   Short-term remunerations for employees
               Short-term remunerations for employees include, inter alia, salaries, short paid leave, profit sharing and bonus schemes.
               These short-term remunerations are accounted for over the period in which the services are rendered. In the event that
               employees have not made use of their entitlements at the end of the period, a liability is formed for this for the nominal
               amount.

      3.20.4   Share-based remunerations
               The costs of share-based remunerations are accounted for over the period in which the services are rendered.
               The performance period has been determined in the ‘Long-Term Bonus Plan’ regulations. When the share-based remuneration
               is settled in shares this results in an increase of shareholders’ equity. If the share-based remuneration is settled in cash, a
               liability is taken into account. The fair value of the share-based remuneration based on shares that will be settled in shares is
               determined on the date of granting. The number of shares to be granted is determined on each balance sheet date. The fair
               value of the share-based remuneration that will be settled in cash is also determined on every balance sheet date.

       3.21    Other provisions
               Provisions are made if there is a legally enforceable or present obligation arising from events in the past, the settlement of
               which is likely to require an outflow of assets, and a reliable estimate of the size of the obligation can be made. Provisions are
               measured at the present value of the expected future cash flows. Additions and any subsequent releases are recorded in the
               income statement.

      3.21.1   Restructuring provision
               The restructuring provision consists of anticipated severance payments and other costs that are directly related to
               restructuring programmes. These costs are accounted for in the period in which a legally enforceable or actual obligation to
               make the payment arises. No provision is formed for costs or future operating losses stemming from continuing operations.
               SNS REAAL recognises severance payments if the Group has demonstrably committed itself, either through a constructive or
               legally enforceable obligation, to:
                Termination of the employment contract of current employees in accordance with a detailed formal plan without the
                  option of the plan being withdrawn; or
                Payment of termination benefits as a result of an offer to encourage voluntary redundancy.


               Benefits that are due after more than twelve months after the balance sheet date are discounted.

      3.21.2   Other provisions
               A provision for legal proceedings is made at the balance sheet date for the estimated liability with respect to ongoing legal
               proceedings. Claims against SNS REAAL in legal proceedings are disputed. Although the outcome of these disputes cannot be
               predicted with certainty, it is assumed on the basis of legal advice obtained and information received that they will not have a
               substantial unfavourable effect on the financial position of SNS REAAL. The provision comprises an estimate of the legal costs
               and payments due during the course of the legal proceedings, to the extent that it is more likely that an obligation exists at the
               balance sheet date than that such an obligation does not exist.

       3.22    Securities lending liabilities
               Due to the existing obligation to repay the funds received from the borrowers, SNS REAAL recognises the collateral obtained in
               cash from the borrowers as a financial liability. These liabilities are stated at amortised cost.

       3.23    Derivatives
               See 3.8 of these notes.




126   SNS REAAL Financial Statements 2008 consolidated financial statements
3.24    Deferred tax liabilities
        Deferred tax liabilities concern tax payable in future periods in connection with taxable temporary differences. See 3.9 for
        detailed information.

3.25    Savings
        This item consists of balances on savings accounts, savings deposits and term deposits of retail clients. Upon initial
        recognition, savings are stated at fair value, including transaction costs. Thereafter, they are measured at amortised cost. Any
        difference between the income and the redemption value based on the effective interest method is recognised under interest
        expenses, banking operations, in the income statement during the term of the savings.

3.26    Other amounts due to customers
        Amounts owed to customers represent unsubordinated debts to non-banks, other than in the form of debt certificates. Upon
        initial recognition, these debts are measured at fair value, including transaction costs. Thereafter, they are stated at amortised
        cost. Any difference between the income and the redemption value based on the effective interest method is recognised
        under interest expenses, banking operations, in the income statement during the term of these amounts owed to customers.

3.27    Amounts due to banks
        Upon initial recognition, these debts are measured at fair value, including transaction costs. Thereafter, they are stated at
        amortised cost. Any difference between the income and the redemption value based on the effective interest method is
        recognised under interest expenses, banking operations, in the income statement during the term of these amounts owed to
        banks.

3.28    Corporate income tax
        Corporate income tax relates to tax on the taxable profit for the period under review, and taxes due from previous periods, if
        any. Dividend withholding tax recovered through the corporation tax return is also included in this item.

3.29    Other liabilities
        Other liabilities primarily consist of interest accrued on financial instruments that are stated at amortised cost. This item also
        includes creditors, other taxes and accrued liabilities, which item also includes amounts due by SNS Bank to clients and the
        clearing house in respect of option positions.



   4 Specific income statement accounting principles

  4.1   Income
        Income represents the fair value of the services, after elimination of intra-group transactions within SNS REAAL. Income is
        recognised as follows:

4.1.1   Interest income
        The interest income comprises interest on monetary financial assets of SNS Bank attributable to the period. Interest on
        financial assets is accounted for using the effective interest method based on the actual purchase price.
        The effective interest method is based on the estimated future cash flows, taking into account the risk of early redemption of
        the underlying financial instruments and the direct costs and income, such as the transaction costs charged, brokerage fees
        and discounts or premiums. If the risk of early redemption cannot be reliably determined, SNS REAAL calculates the cash flows
        over the full term of the financial instruments.
        Commitment fees, together with related direct costs, are deferred and recognised as an adjustment of the effective interest
        on a loan if it is likely that SNS REAAL will conclude a particular loan agreement. If the commitment expires without SNS REAAL
        extending the loan, the fee is recognised at the moment the commitment term expires. If it is unlikely that a particular loan
        agreement will be concluded, the commitment fee is recognised pro rata as a gain during the commitment term.
        Interest income on monetary financial assets that have been subject to impairment and written down to the estimated
        recoverable amount or fair value is subsequently recognised on the basis of the interest rate used to determine the
        recoverable amount by discounting the future cash flows.

4.1.2   Interest expenses
        Interest expenses comprise the interest expenses arising from financial liabilities of the banking operations. Financial
        liabilities not classified at fair value through profit or loss are recognised using the effective interest method. Financial
        liabilities that are classified at fair value through profit or loss are accounted for based on the nominal interest rates.




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       4.1.3   Premium income
               The premium income consists of the premiums that policyholders owe to REAAL Verzekeringen for concluded insurance
               contracts. Premium income is divided into Regular Life (including pensions), Single-premium Life and Non-life premiums.
               Gross premiums, excluding taxes and other charges stemming from life insurance contracts, are recognised as income when
               payment by the policyholder falls due. The premiums for single-premium contracts and limited-premium life insurance
               policies are recognised as income when payment falls due; possible cost, cost loadings and risk coverage are deferred and
               allocated to results proportionately over the lifetime of the current policy or, in the case of annuities, proportional to the
               amount of the benefits. Interest rate rebates and rate rebates are included in gross premium income and charged to claims
               burden and benefits during the amortisation period.
               The premiums for non-life policies, usually insurance contracts with a maximum term of twelve months, are recognised as
               income during the term of the contract in proportion to the elapsed insurance term. The movement in the provision for
               unearned premium is also accounted for under the net premium income.

       4.1.4   Reinsurance premiums
               This item represents the premiums on reinsurance contracts. These are recognised as a charge to the income statement
               proportionally during the term of the contract.

       4.1.5   Fee and commission income
               Fee and commission income include income from securities transactions for clients, asset management, commission from the
               insurance operations and other related services offered by SNS REAAL. These are recognised in the reporting period in which
               the services are performed. Commission related to transactions in financial instruments for own account are incorporated in
               the amortised cost of this instrument, unless the instrument is measured at fair value through profit or loss, in which case the
               commission is included in the revaluation result.

       4.1.6   Fee and commission expense
               Commission and management fees due are included under fee and commission expense. These costs are recognised in the
               reporting period in which the services are provided.

       4.1.7   Share in the result of associates
               The share in the result of associates concerns the share of SNS REAAL in the results of the participations. If the book value of
               the associated company falls to zero, no further losses are accounted for, unless the Group has entered into commitments or
               made payments on its behalf.
               Where necessary, the accounting principles applied by the associated company have been adjusted to ensure consistency with
               the accounting principles applied by SNS REAAL.

       4.1.8   Investment income
               The result on investments consists of Interest, Dividend, Rental income and Revaluations.

      4.1.8.1 Interest
               The item interest comprises the interest income in respect of group activities and the interest income from investments of
               REAAL Verzekeringen.

      4.1.8.2 Dividend
               Dividend income is recognised in the income statement as soon as the entity’s right to payment is established. In the case of
               listed securities, this is the date on which the dividend is paid out.

      4.1.8.3 Rental income
               Rental income consists of the rental income from investment property. This rental income is recognised as income on a
               straight-line basis for the duration of the lease agreement.

      4.1.8.4 Revaluations
               This item relates to the realised and unrealised increases and decreases in the value of investments in the category fair value
               through profit or loss and realised increases and decreases in the value of the investments in the other categories. Realised
               increases in value concern the difference between the sales price and the amortised cost price. Unrealised increases in value
               concern the difference between the fair value and the book value over the period.

       4.1.9   Investment income for account of policyholders
               These investments are held on behalf of life insurance policyholders and are measured at fair value. Increases and decreases
               in the value of investments are recognised in the income statement as ‘investment income for account of policyholders’.
               The dividend and interest on behalf of policyholders are also accounted for in this item.




128   SNS REAAL Financial Statements 2008 consolidated financial statements
4.1.10   Result on financial instruments
         The result on derivatives and other financial instruments is recognised under this item. Derivatives are measured at fair value.
         Gains and losses from readjustments to fair value are taken directly to the income statement under ‘result on financial
         instruments’. However, if derivatives are eligible for hedge accounting, the recognition of a resulting gain or a resulting loss
         depends on the nature of the hedged item. The ineffective portion of any gains or losses is recognised directly under ‘result on
         financial instruments’.
         The profit or loss from the revaluation of the outstanding debt certificates, which after recognition are measured at fair value
         with the processing of value adjustments in the income statement, is also accounted for under this item.

4.1.11   Other operating income
         Other operating income comprises all the income that cannot be accounted for under other headings.

  4.2    Technical claims and benefits
         Expenses include the losses and charges arising from ordinary business activities. Expenses are recognised in the income
         statement on the basis of a direct relationship between the costs incurred and the corresponding income. If future economic
         benefits are expected to be derived across different reporting periods, expenses are recognised in the income statement using a
         systematic method of allocation. Expenses are immediately included in the income statement if they are not expected to
         generate any future economic benefits.

4.2.1    Technical claims
         Net movements in technical provisions are recorded under this item. This includes mainly the addition of required interest and
         premium payments to cover future payouts, less payments due (life and non-life) and developments in the portfolio, such as
         the actuarial result on surrender, cancellation and mortality.

4.2.2    Charges for account of policyholders
         The changes in provisions for insurance contracts for the account and risk of policyholders are accounted for under this item.
         (See the subsection on life insurance contracts for account and risk of policyholders in the notes to insurance contracts in
         section 3.) Payments to policyholders are also recorded under this item.

4.2.3    Acquisition costs for insurance operations
         Acquisition costs comprise the direct and indirect costs associated with acquiring an insurance contract or the conclusion of a
         mortgage in combination with an insurance product, including brokerage fees, the costs of medical check-ups and
         administrative costs for administering new policies in the portfolio. Amortisation of capitalised acquisition costs is included in
         this item, to the extent that the charge relates to capitalised external costs. The amortisation of capitalised internal costs is
         included in depreciation and amortisation on tangible and intangible fixed assets. The change in the provision for unearned
         commissions is also accounted for under acquisition costs.

4.2.4    Impairment charges / (reversals)
         This item includes downward revaluations of assets for which the book value exceeds the recoverable value. Intangible fixed
         assets, tangible fixed assets, associated companies, investments, receivables and other assets may be subject to impairment.
         As soon as impairment is identified, it is included in the income statement. The specific principles for impairment are
         explained in more detail in section 3 under the applicable items.

4.2.5    Staff costs
         These costs concern all costs that pertain to the personnel. This includes, inter alia, salaries, social security costs, pension
         costs and rebates granted to employees.

4.2.6    Depreciation and amortisation of fixed assets
         This item comprises all depreciation and amortisation of tangible and intangible fixed assets. The specific principles for
         depreciation and amortisation are explained in more detail in section 3 under the applicable items.

4.2.7    Other operating expenses
         This includes office, accommodation and other operating costs.

4.2.8    Other interest expenses
         Other interest expenses comprise the interest expenses in respect of financial obligations arising from insurance operations
         and group operations. The interest expenses are recognised in the income statement under the effective interest method.




                                                              SNS REAAL Financial Statements 2008 consolidated financial statements
                                                                                                               financial                    129
          5   Contingent liabilities and commitments

              Contingent liabilities are liabilities not recognised in the balance sheet because the existence is contingent on one or more
              uncertain events that may or may not occur in the future not wholly within the control of SNS REAAL. It is not possible to make
              a reliable estimate of such liabilities.
              The maximum potential credit risk arising from pledges and guarantees given by SNS REAAL is stated in the notes. In
              determining the maximum potential credit risk, it is assumed that all the counterparties will no longer live up to their
              contractual obligations and that all the existing collateral is without value.



          6   Cash flow statement

              The cash flow statement is prepared according to the indirect method, and distinguishes between cash flows from
              operational, investment and financing activities. Cash flows in foreign currency are converted at the exchange rate applicable
              on the transaction date. With regard to cash flow from operations, operating results before taxation is adjusted for gains and
              losses that did not result in income and payments in the same financial year and for movements in provisions and accrued and
              deferred items.
              Investments in (consolidated) subsidiaries and associates are stated under cash flow from investing activities. The cash and
              cash equivalents available at acquisition date in these interests are deducted from the purchase price.
              In the context of the cash flow statement, cash and cash equivalents are equal to the balance sheet item cash and cash
              equivalents.




130   SNS REAAL Financial Statements 2008 consolidated financial statements
Information by segment
SNS REAAL is a banking and insurance company that focuses mainly on the Dutch retail and SME markets. The product range consists
of three core products: mortgages and property finance, savings and investments, insurance and pensions. In 2008, the acquisition
of Zwitserleven added a new business unit to the insurance activities. The services to private individuals and the SME clients are
mostly rendered through the main brands SNS Bank, REAAL Verzekeringen and Zwitserleven and through several distribution
channels.

The activities of SNS REAAL are organised in seven primary business segments. The Executive Board defines the strategy, the
performance targets and authorises and monitors the budgets that have been prepared by these business units. The management
board of the business unit determines business unit policy, in accordance with the strategy and performance targets.

For the business segments, the same principles for valuation and determination of the result are used as set out in the accounting
principles for the consolidated balance sheet and the income statement of SNS REAAL. For the settlement of transactions between
business units, the prices are used that would ensue from regular market conditions (‘at arm’s length’).

SNS REAAL has drawn up the information by segment under application of IFRS 8 Segmented information. SNS REAAL has availed
itself of the possibility to adopt this standard earlier than the 1 January 2009 effective date. The acquisition of the Dutch activities of
Swiss Life Holding led to an expansion of the presentation of the information by segment regarding our insurance business.
The presentation of the information by segment now includes the Zwitserleven segment, where the insurance activities of
Zwitserleven NV are recognised.



     1   SNS Bank
   1.1   Retail Banking
         This business segment offers banking products in the field of mortgages, asset growth and asset protection for both the retail
         and SME markets. In addition to SNS Bank, this segment also comprises the units ASN Bank, BLG Hypotheken, SNS Regio Bank
         and SNS Securities.

   1.2   Property Finance
         This business segment carries out banking activities in the field of investment and property finance.



    2    REAAL Verzekeringen
   2.1   Life
         This business segment offers life and pension insurance to the retail and SME markets. The REAAL Verzekeringen Life segment
         includes REAAL Levensverzekeringen, Proteq Levensverzekeringen and DBV Levensverzekeringen. In 2008, AXA Leven NV and
         Winterthur Levensverzekeringen Maatschappij NV legally merged with REAAL Levensverzekeringen NV.

  2.2    Zwitserleven
         This business segment, as a specialist pension insurer, offers products aimed at future income: ranging from pensions to
         mortgages and investment products. Zwitserleven focuses on both business and private customers. For distribution
         purposes, Zwitserleven works closely together with intermediaries, which play a vital role in advising consumers and
         businesses.

  2.3    Non-life
         This business segment offers non-life insurance for property, mobility, bodily injury, invalidity and disability. The REAAL
         Verzekeringen Non-life segment includes the units REAAL Schadeverzekeringen and Proteq Schadeverzekeringen. In 2008,
         AXA Schade NV, Winterthur Schadeverzekering Maatschappij NV and DBV Schadeverzekeringsmaatschappij NV legally
         merged with REAAL Schadeverzekeringen NV.

  2.4    Other activities
         This business segment includes the activities of REAAL Verzekeringen which are separate in terms of management from the
         business segments REAAL Verzekeringen Life and REAAL Verzekeringen Non-life. These include funding activities as well as
         activities of the group companies REAAL Verzekeringen, DBV Holding, SNS Verzekeringen, Route Mobiel and DBV Finance.
         This business segment also includes the values of the life and non-life subsidiaries. In 2008, AXA Nederland BV,
         AXA Verzekeringen NV and Winterthur Verzekeringen Holding BV legally merged with REAAL Verzekeringen NV.




                                                               SNS REAAL Financial Statements 2008 segmented financial statements
                                                                                                             financial                        131
          3   Group activities
              Group activities include the business units that are managed directly by the Executive Board and whose income and expenses
              are not attributed to the other business segments. The group activities segment also includes SNS REAAL Invest, SNS Asset
              Management and Zwitserleven Asset Management.


      Allocation of group costs
      A number of group staff departments are shared. The costs of the corporate staff are charged based on the services provided or
      proportionally allocated to the group’s subsidiaries. The costs of the Executive Board and other specific holding company costs are
      not allocated to group subsidiaries.


      Income statement REAAL Verzekeringen
      This statement sets out the result of the insurance business broken down by insurance classification. In this overview, a distinction is
      made between the technical and non-technical result of REAAL Verzekeringen. The non-technical result also includes investment
      income that can be allocated to shareholders’ equity.




132   SNS REAAL Financial Statements 2008 segmented financial statements
Balance sheet by segment
In € millions                              SNS Bank            REAAL              Group              Eliminations        Total
                                                           Verzekeringen         activities
                                         2008     2007     2008      2007     2008      2007        2008     2007     2008      2007

Assets
Intangible assets                          291      285     2,443    1,831       173        --          --      --   2,907     2,116
Property and equipment                     119      139       221      191         6         3          87      85     433       418
Investments in associates                   47       53        53       66        11        11          (1)     (3)    110       127
Subsidiaries                                --       --        --       --     5,549     4,118      (5,549) (4,118)     --        --
Investment properties                       10        6       287      248        --        --         (87)    (85)    210       169
Investments                              3,942    4,056    27,573   17,627       150       238      (2,369)   (866) 29,296    21,055
Investments for account
  of policyholders                           --       --   10,844    7,349        --        --        (120)   (114) 10,724     7,235
Invested collateral securities lending       --       --    2,310       --        --        --          --      --   2,310        --
Derivatives                               1,113    1,041      620      119        28         1          --      --   1,761     1,161
Deferred tax assets                         227      128      247      189        13        12          (4)     --     483       329
Reinsurance contracts                        --       --      402      483        --        --          --      --     402       483
Loans and advances to customers          65,794   60,236    3,956    3,912       956       856      (3,002) (1,959) 67,704    63,045
Loans and advances to banks               2,783    1,092    1,929      539     1,210       300      (1,200)   (300) 4,722      1,631
Corporate income tax                        106      100      198       32        71        87          (1)     (3)    374       216
Other assets                                571      307      404      554       193        76        (151)    (86) 1,017        851
Cash and cash equivalents                 1,692    3,141    1,214    1,006         8     1,025        (953)   (831) 1,961      4,341

Total assets                             76,695   70,584   52,701   34,146     8,368     6,727 (13,350) (8,280) 124,414 103,177

Equity and liabilities
Equity attributable to shareholders      2,134    2,209     2,168    1,909     3,623     3,588      (4,302) (4,118)   3,623      3,588
Equity attributable to securityholders     260       --       975       --     1,249        --      (1,235)     --    1,249         --
Minority interests                          10        2        13        4        --        --          (3)     (3)      20          3

Total equity                             2,404    2,211     3,156    1,913     4,872     3,588      (5,540) (4,121)   4,892      3,591

Participation certificates and
  subordinated debt                       1,689    1,678      967      536       720          639   (1,251)   (821) 2,125      2,032
Debt certificates                        30,282   32,182    2,215    2,524       285          533     (103)    (27) 32,679    35,212
Insurance contracts                          --       --   36,096   24,984        --           --      (29)    (28) 36,067    24,956
Provision for employee benefits              --       --      319      133        41           39       29      29     389       201
Other provisions                             30       17       25       28         1            1       --      --      56        46
Securities lending liabilities               --       --    2,377       --        --           --       --      --   2,377        --
Derivatives                               2,144      938      194       14        20            7       --      --   2,358       959
Deferred tax liabilities                    285      151      462      356         7           --       --      --     754       507
Savings                                  21,859   19,179       --       --        --           --       --      -- 21,859     19,179
Other amounts due to customers           10,184    7,846      689    1,040     1,013          952   (4,474) (2,591) 7,412      7,247
Amounts due to banks                      6,491    5,066    4,676    1,565     1,276          888   (1,831)   (632) 10,612     6,887
Corporate income tax                         --       --       --       --        --            3       --      (3)     --        --
Other liabilities                         1,327    1,316    1,525    1,053       133           77     (151)    (86) 2,834      2,360

Total equity and liabilities             76,695   70,584   52,701   34,146     8,368     6,727 (13,350) (8,280) 124,414 103,177




                                                           SNS REAAL Financial Statements 2008 segmented financial statements
                                                                                                         financial                       133
      Income statement by segment
      In € millions                               SNS Bank             REAAL               Group              Eliminations          Total
                                                                   Verzekeringen          activities
                                                2008      2007     2008        2007     2008     2007         2008     2007     2008      2007

      Income
      Interest income third parties              3,836    3,356       --          --       --          --        --       --     3,836      3,356
      Interest income group companies               47        3       --          --       --          --       (47)      (3)       --         --
      Interest expense third parties             2,986    2,522       --          --       --          --        --       --     2,986      2,522
      Interest expense group companies             124       54       --          --       --          --      (124)     (54)       --         --

      Net interest income                          773       783      --          --       --          --        77       51      850        834

      Premium income                                --       --     4,384      2,584       --          --        --       --     4,384      2,584
      Reinsurance premiums                          --       --        82         61       --          --        --       --        82         61

      Net premium income                            --       --     4,302      2,523       --          --        --       --     4,302      2,523

      Fee and commission
       income third parties                        128       125      67          68        7           9        --       --      202        202
      Fee and commission income
       group companies                              24       38            6      1        28          17       (58)     (56)      --         --
      Fee and commission ex-
       pense third parties                          22       22      (17)         (3)       4          --        --       --        9         19
      Fee and commission ex-
       pense group companies                        14       12       31          18       --          --       (45)     (30)      --         --

      Net fee and commission income                116       129      59          54       31          26       (13)     (26)     193        183

      Share in result of associates                 (4)      (3)      (13)        --     (402)         490      406     (478)      (13)        9
      Investment income                             84       14     1,219        834      136           71     (197)     (77)    1,242       842
      Investment income for account
        of policyholders                            --       --    (1,691)        96       --          --        (5)      --    (1,696)       96
      Result on financial instruments              (15)      13       137         29       (3)          1        --       --       119        43
      Income invested collateral
        securities lending                          --       --      106          --       --          --        --       --      106         --
      Other operating income                         2        2       48          11        8          --        (8)      --       50         13

      Total income                                 956       938    4,167      3,547     (230)         588      260     (530)    5,153      4,543

      Expenses
      Technical claims and benefits                 --       --     3,423      1,979       --          --        --       --     3,423      1,979
      Charges for account of policyholders          --       --      (642)       496       --          --        --       --      (642)       496
      Acquisition costs for
        insurance operations                        --        --     398         333       --          --        (6)      (6)      392       327
      Impairment charges/ (reversals)              173        35     768          29       79          (1)       --       --     1,020        63
      Staff costs                                  380       332     341         184       93          88        --       --       814       604
      Depreciation and amortisation
        of fixed assets                             32        31      56          35        7            1       --       --       95         67
      Other operating expenses                     188       203     147          88       (8)         (26)     (17)      (9)     310        256
      Interest expense securities lending           --        --      95          --       --           --       --       --       95         --
      Other interest expenses                       --        --     329         144      168           76     (123)     (38)     374        182

      Total expenses                               773       601    4,915      3,288      339          138     (146)     (53)    5,881      3,974

      Result before tax                            183       337    (748)        259     (569)         450      406     (477)    (728)       569

      Taxation                                      36       64     (201)         52      (43)         (15)      --       --     (208)       101

      Net result continued operations              147       273    (547)        207     (526)         465      406     (477)    (520)       468
      Net result discontinued operations            --        --      --          --       22           --       --       --       22         --

      Net result for the financial year            147       273    (547)        207     (504)         465      406     (477)    (498)       468
      Minority interests                             3         1       3           2       --           --       --       --        6          3

      Net result attributable to
       shareholders and securityholders            144       272    (550)        205     (504)         465      406     (477)    (504)       465




134   SNS REAAL Financial Statements 2008 segmented financial statements
Balance sheet SNS Bank by segment
In € millions                                      Retail Banking        Property         Eliminations          Total
                                                                         Finance
                                                   2008      2007     2008     2007       2008    2007     2008         2007

Assets
Intangible assets                                     288      281         3        4      --       --    291          285
Property and equipment                                118      138         1        1      --       --    119          139
Investments in associates                              --       --        47       53      --       --     47           53
Subsidiaries                                           --       --        --       --      --       --     --           --
Investment properties                                   1       --         9        6      --       --     10            6
Investments                                         3,942    4,056        --       --      --       --  3,942        4,056
Derivaten                                           1,113    1,041        --       --      --       --  1,113        1,041
Deferred tax assets                                   211      128        16       --      --       --    227          128
Loans and advances to customers                    52,211   48,661    13,583   11,575      --       -- 65,794       60,236
Loans and advances to banks                        16,349   11,883       670       14 (14,236) (10,805) 2,783        1,092
Corporate income tax                                  106      100        --       --      --       --    106          100
Other assets                                          468      254       192       53     (89)      --    571          307
Cash and cash equivalents                           1,686    3,134         6        7      --       --  1,692        3,141

Total assets                                       76,493   69,676    14,527   11,713 (14,325) (10,805) 76,695      70,584

Equity and liabilities
Equity attributable to shareholder                  1,348    1,451       786        758      --       --    2,134       2,209
Equity attributable to securities                     260       --        --         --      --       --      260          --
Minority interests                                     10        2        --         --      --       --       10           2

Total equity                                        1,618    1,453       786        758      --       --    2,404       2,211

Participation certificates and subordinated debt    1,689    1,678        --       --      --       --   1,689       1,678
Debt certificates                                  30,282   32,182        --       --      --       -- 30,282       32,182
Other provisions                                       30       15        --        2      --       --      30          17
Derivatives                                         2,144      938        --       --      --       --   2,144         938
Deferred tax liabilities                              269      141        16       10      --       --     285         151
Savings                                            21,859   19,179        --       --      --       -- 21,859       19,179
Other amounts due to customers                     10,841    8,001        --       --    (657)    (155) 10,184       7,846
Amounts due to banks                                6,491    4,825    13,579   10,805 (13,579) (10,564) 6,491        5,066
Corporate income tax                                   --       --        --       --      --       --      --          --
Other liabilities                                   1,270    1,264       146      138     (89)     (86) 1,327        1,316

Total equity and liabilities                       76,493   69,676    14,527   11,713 (14,325) (10,805) 76,695      70,584




                                                   SNS REAAL Financial Statements 2008 segmented financial statements
                                                                                                 financial                      135
      Income statement SNS Bank by segment
      In € millions                                                Retail Banking       Property         Eliminations         Total
                                                                                        Finance
                                                                   2008      2007     2008     2007      2008     2007     2008     2007

      Income
      Interest income                                              3,682     3,174      782        578    (581)    (393)   3,883      3,359
      Interest expense                                             3,125     2,578      566        391    (581)    (393)   3,110      2,576

      Net interest income                                             557      596      216        187      --       --      773       783

      Fee and commission income                                       148      162        4         1       --       --      152       163
      Fee and commission expense                                       36       34       --        --       --       --       36        34

      Net fee and commission income                                   112      128       4          1       --       --      116       129

      Share in result of associates                                    --       (1)      (4)       (2)      --       --       (4)       (3)
      Investment income                                                82       13        2         1       --       --       84        14
      Result on financial instruments                                 (15)      12       --         1       --       --      (15)       13
      Other operating income                                            2        3       --        (1)      --       --        2         2

      Total income                                                    738      751      218        187      --       --      956       938

      Expenses
      Impairment charges/ (reversals)                                  57       20      116        15       --       --      173        35
      Staff costs                                                     335      296       45        36       --       --      380       332
      Depreciation and amortisation of fixed assets                    31       29        1         2       --       --       32        31
      Other operating expenses                                        169      180       19        23       --       --      188       203

      Total expenses                                                  592      525      181        76       --       --      773       601

      Result before tax                                               146      226       37        111      --       --      183       337

      Taxation                                                         27       39        9        25       --       --       36        64
      Minority interests                                                3        1       --        --       --       --        3         1

      Net result attributable to shareholder
       and securityholder                                             116      186       28        86       --       --      144       272




136   SNS REAAL Financial Statements 2008 segmented financial statements
Balance sheet REAAL Verzekeringen by segment
In € millions                         Life           Zwitserleven      Non-life           Other            Eliminations       Total
                                                                                         activities
                                 2008        2007    2008    2007   2008     2007       2008    2007       2008     2007   2008    2007

Assets
Intangible assets                 1,538 1,630          690     --     215      193         --       8     --      -- 2,443 1,831
Property and equipment              124     49          50     --      --       19         47     123     --      --   221    191
Investments in associates            45     64          --     --       6       --      3,578   2,832 (3,576) (2,830)   53     66
Investment properties               253    248          34     --      --       --         --      --     --      --   287    248
Investments                      18,473 16,219       8,482     --   1,749    1,705        284     265 (1,415) (562) 27,573 17,627
Investments for account
  of policyholders               6,152       7,349   4,692     --       --        --      --          --     --       -- 10,844    7,349
Invested collateral
  securities lending                --         --    2,310     --       --         --     --          --      --      -- 2,310         --
Derivatives                        487         48       50     --        2          2     87          69      (6)     --   620        119
Deferred tax assets                136        175      158     --        9         23     70          23    (126)    (32)  247        189
Reinsurance contracts              166        187        2     --      234        333     --          --      --     (37)  402        483
Loans and advances
  to customers                   1,173       1,077     21      --       10         10   2,752 2,825     --      -- 3,956           3,912
Loans and advances to banks      1,976         564     75      --       21         32    (143)  (68)    --      11 1,929             539
Corporate income tax               130          68      4      --        8          1      56    21     --     (58)  198              32
Other assets                       533         867    164      --       38        121   1,347   951 (1,678) (1,385)  404             554
Cash and cash equivalents          995         878     40      --       91         28      88   100     --      -- 1,214           1,006

Total assets                     32,181 29,423 16,772          --   2,383    2,467      8,166   7,149 (6,801) (4,893) 52,701 34,146

Equity and liabilities
Equity attributable
 to shareholder                  1,705       2,389    983      --      483        442   2,168   1,909 (3,171) (2,831) 2,168        1,909
Equity attributable
 to securities                     280         --     125      --       --        --     975          --    (405)     --    975       --
Minority interests                  13          4      --      --       --        --      --          --      --      --     13        4

Total equity                     1,998       2,393   1,108     --      483        442   3,143   1,909 (3,576) (2,831) 3,156        1,913

Participation certificates
  and subordinated debt             107     55    215          --       1       --        775     586       (131)   (105)    967    536
Debt certificates                    --     --     --          --      --       --      2,215   2,524         --      -- 2,215 2,524
Insurance contracts              23,047 23,465 11,631          --   1,484    1,619         --      --        (66)   (100) 36,096 24,984
Provision for employee
  benefits                          32         34      188     --       15        18      84          81      --      --   319        133
Other provisions                    16         15        2     --        1         2       6          11      --      --    25         28
Securities lending liabilities      --         --    2,377     --       --        --      --          --      --      -- 2,377         --
Derivatives                        173          1       --     --        2        --      25          13      (6)     --   194         14
Deferred tax liabilities           326        295      197     --       48        47      17          44    (126)    (30)  462        356
Other amounts due
  to customers                   1,112         746    366      --       69         70    427      681 (1,285) (457)     689        1,040
Amounts due to banks             3,987         984     --      --       --          5    689      576     --      -- 4,676         1,565
Corporate income tax                --          17     --      --       --          2     --       38     --     (57)    --           --
Other liabilities                1,383       1,418    688      --      280        262    785      686 (1,611) (1,313) 1,525        1,053

Total equity and liabilities     32,181 29,423 16,772          --   2,383    2,467      8,166   7,149 (6,801) (4,893) 52,701 34,146




                                                              SNS REAAL Financial Statements 2008 segmented financial statements
                                                                                                            financial                       137
      Income statement REAAL Verzekeringen by segment
      In € millions                         Life           Zwitserleven      Non-life           Other             Eliminations       Total
                                                                                               activities
                                       2008        2007    2008     2007   2008    2007       2008     2007       2008    2007    2008     2007

      Income
      Premium income                    2,911      1,994    664       --    809         590     --          --      --      --    4,384    2,584
      Reinsurance premiums                 20         13      3       --     59          48     --          --      --      --       82       61

      Net premium income                2,891      1,981    661       --    750         542     --          --      --      --    4,302    2,523

      Fee and commission income           45         43       3       --      2          2      24          24      (1)     --      73       69
      Fee and commission expense           8          4      (1)      --    (11)        (8)     18          19      --      --      14       15

      Net fee and commission
       income                             37         39       4       --     13         10       6          5       (1)     --      59       54

      Share in result of associates      (14)        --      --       --      1         --     (518)    200        518    (200)   (13)        --
      Investment income                  842        710     217       --     66         42      147      94        (53)    (12) 1,219        834
      Investment income for
        account of policyholders       (1,383)       96     (308)     --     --         --      --          --      --      -- (1,691)       96
      Result on financial
        instruments                      101         31      39       --     (1)         1      (2)         (3)     --      --     137       29
      Income invested collateral
        securities lending                --         --     106       --     --         --      --          --      --      --     106       --
      Other operating income              42          7      --       --      3          3       3           1      --      --      48       11

      Total income                      2,516      2,864    719       --    832         598    (364)    297        464    (212) 4,167      3,547

      Expenses
      Technical claims and benefits     2,537      1,676    476       --    410         303     --          --      --      --    3,423    1,979
      Charges for account
        of policyholders                (627)       496     (15)      --     --         --      --          --      --      --     (642)     496
      Acquisition costs for
        insurance operations             187        178      11       --    203         157     (2)         (2)     (1)     --     398       333
      Impairment charges/
        (reversals)                      600         27     141       --     20          2       7          --      --      --     768        29
      Staff costs                        174        117      56       --     92         57      19          10      --      --     341       184
      Depreciation and
        amortisation of fixed assets      40         25       5       --      8          5       3          5       --      --      56       35
      Other operating expenses            64         43      23       --     43         38      17          7       --      --     147       88
      Interest expenses
        securities lending                --         --      95       --     --         --      --          --      --      --      95        --
      Other interest expenses            186         79      23       --     20          6     153          71     (53)    (12)    329       144

      Total expenses                    3,161      2,641    815       --    796         568    197          91     (54)    (12) 4,915      3,288

      Result before tax                 (645)       223     (96)      --     36         30     (561)    206        518    (200)    (748)     259

      Taxation                          (175)        44     (25)      --     10          7     (11)          1      --      --     (201)     52
      Minority interests                   3          2      --       --     --         --      --          --      --      --        3       2

      Net result attributable
       to shareholder and
       securityholder                   (473)       177     (71)      --     26         23     (550)    205        518    (200)    (550)     205




138   SNS REAAL Financial Statements 2008 segmented financial statements
Income statement REAAL Verzekeringen
In € millions                                                                     Life              Zwitserleven            Non-life
                                                                           2008          2007       2008      2007        2008       2007

Technical account
Premium income own account:
- Gross premium income                                                      2,911         1,994       664          --       798         542
- Outward reinsurance premiums                                                (20)          (13)       (3)         --       (60)        (47)

                                                                            2,891         1,981       661          --       738         495
Change in technical provision for unearned premiums and current risks:
- Gross                                                                        --           --         --          --        11          48
- Reinsurers’ share                                                            --           --         --          --         1          (1)

                                                                               --           --         --          --        12          47
Investment income:
- Investments for own account                                                 929          741        362          --        66          43
- Investments for account of policyholders                                 (1,383)          96       (308)         --        --          --
- Investment income attributed to non-technical account                        52          (70)        --          --        (5)         (9)

                                                                             (402)         767         54          --        61          34
Benefits/claims:
- Gross                                                                    (2.194)       (1,588)     (491)         --      (526)        (323)
- Reinsurers' share                                                            32            27         2          --        66           22

                                                                           (2,162)       (1,561)     (489)         --      (460)        (301)
Changes in provisions:
- Gross                                                                       254         (565)       (20)         --       118             1
- Reinsurers' share                                                            22          (16)        --          --       (71)            5

                                                                              276         (581)       (20)         --        47             6

Profit sharing and rebates                                                    (20)         (29)        47          --        --          --

Total expenses
Operating expenses                                                           (252)        (152)       (80)         --      (142)         (94)
Acquisition costs                                                            (187)        (178)       (11)         --      (203)        (157)
Deducted commission and profit sharing
 received from reinsurance contracts                                              3             2      --          --        13             8

                                                                             (436)        (328)       (91)         --      (332)        (243)
Investment expenses:
- Investment expenses                                                        (186)         (79)      (118)         --       (20)         (6)
- Impairment changes investments                                             (552)         (23)      (140)         --       (21)         (2)
- Investment expenses attributed to non-technical account                      30           18         --          --        --          --

                                                                             (708)         (84)      (258)         --       (41)         (8)
Other technical expenses                                                       (4)          (1)        --          --            3       (8)

Result technical account                                                     (565)         164        (96)         --        28          22

In € millions                                                                                              2008                  2007

Non-technical account
Technical result Life                                                                                             (565)                  164
Technical result Zwitserleven                                                                                      (96)                   --
Technical result Non-life                                                                                           28                    22

Total technical result                                                                                            (633)                  186
Investment income transferred from technical account                                                               (47)                   79
Investment expenses transferred from technical account                                                             (30)                  (18)
Investment income Other activities                                                                                 145                    91
Investment expenses Other activities                                                                              (153)                  (71)
Other operating income                                                                                               8                    11
Other operating expenses                                                                                           (38)                  (19)

Operating result before taxation                                                                                  (748)                  259
Taxation                                                                                                          (201)                   52
Minority interests                                                                                                   3                     2

Net result attributable to shareholder and securityholder                                                         (550)                  205




                                                            SNS REAAL Financial Statements 2008 segmented financial statements
                                                                                                          financial                             139
      Acquisitions

      Acquisition of Zwitserleven
      On 29 April 2008, SNS REAAL acquired the Dutch and Belgian activities from Schweizerische lebensversicherungs- und
      rentenanstalt (Swiss Life). The activities are acquired with the purchase of the:
      1 assets and liabilities of Zwitserleven Nederland (including the shares in the companies Zwitserleven Vermogensbeheer and
        Pensioen ESC);
      2 shares in the company Swiss Life Asset Management (Netherlands);
      3 shares in the company Swiss Life Belgium (Belgium).

      The assets and liabilities of Zwitserleven Nederland were acquired by a newly established company called Zwitserleven NV.
      The name of Swiss Life Asset Management (Netherlands) has been changed to Zwitserleven Asset Management.
      On 30 June 2008 all shares in Swiss Life Belgium (Belgium) were resold by SNS REAAL to Delta Lloyd Groep for the sum of € 142
      million in cash. This transaction includes the same guarantees and indemnifications as Swiss Life provided to SNS REAAL.

      Zwitserleven NV
      Zwitserleven NV contributed a net loss of € 71 million to SNS REAAL’s results after taxes for the period from 29 April 2008 through 31
      December 2008, including the effects of purchase price accounting (€ 12 million) and additional financing costs (€ 22 million).

      The breakdown of the acquired assets, liabilities and goodwill is as follows:

      In € millions

      Acquisition price                                                                                                                  1,373
      Interest paid between the effective date of the acquisition (19 November 2007) and the closing date (29 April 2008)                   23
      Costs directly related to the acquisition                                                                                             11

      Total cost price acquisition                                                                                                       1,407
      Fair value of the assets and liabilities acquired (see notes)                                                                      1,221

      Goodwill                                                                                                                             186


      The impact of the acquisition on SNS REAAL’s cash flows
      In € millions

      Acquisition price                                                                                                                  1,407
      Less: cash and cah equivalents of the acquired companies                                                                              15

      Cash outflows due to the acquisition                                                                                               1,392


      New identifiable intangible fixed assets included in the acquisition
      The fair value of the acquired net assets has been provisionally determined as supplementary information will become available for
      the definite valuation of the item technical insurance contracts after the balance sheet date. Any adjustments as a result of the
      availability of more accurate fair values will be treated as adjustments to the fair value and/or goodwill originally recognised, should
      these adjustments become known within 12 months of the acquisition date. The goodwill is assigned to the cash flow generating
      unit Zwitserleven.

      The current provisional valuation of the balance sheet items is based on the most accurate estimate possible provided by
      SNS REAAL’s management. Calculating the adjustment will be completed in 2009 and goodwill will be subsequently corrected.

      In view of the acquisition, SNS REAAL identifies the following intangible fixed assets: VOBA, distribution network, client relations,
      brand name and software. These intangible fixed assets have been valued at fair value on the acquisition date. VOBA will be
      amortised based on profit flows. The distribution network, client relations and software will be amortised over 17 years, 2 years and
      10 years, respectively. The useful life of the brand name is indefinite and will not be amortised. After the acquisition of Zwitserleven
      the brand name and software have been transferred to SNS REAAL Invest NV, within the Group activities segment.

      Goodwill
      Goodwill represents the expected income and expense synergies of the acquisition, as well as the value of the staff of
      Zwitserleven NV that cannot be accounted for separately.




140   SNS REAAL Financial Statements 2008 acquisitions
The provisional value of the acquired assets and liabilities can be specified as follows:

In € millions                                                                        Bookvalue                      Fair value
                                                                                   Zwitserleven NV               Zwitserleven NV
                                                                                    29 April 2008                 29 April 2008

Acquired identifiable assets
Intangible assets                                                                                       --                             689
Property and equipment                                                                                  50                              50
Investment properties                                                                                   37                              37
Investments                                                                                          7,714                           7,581
Investments for account of policyholders                                                             5,238                           5,238
Invested collateral securities lending                                                                  --                           3,815
Derivatives                                                                                             11                              11
Loans and advances to customers                                                                         20                              20
Loans and advances to banks                                                                             60                              60
Other tax assets                                                                                         6                               6
Other assets                                                                                           476                             383
Cash and cash equivalents                                                                               15                              15

                                                                                                  13,627                         17,905

Acquired liabilities
Insurance contracts                                                                               11,591                         11,633
Provision for employee benefits                                                                      144                            179
Non-financial liabilities                                                                              5                              5
Securities lending liabilities                                                                        --                          3,843
Other amounts due to customers                                                                       639                            635
Other liabilities                                                                                    396                            389

                                                                                                  12,775                         16,684

Net balance of the acquired identifiable
 assets and acquired liabilities.                                                                     852                            1,221


The fair value of the assets, liabilities and contingent liabilities acquired is based on the discounted cash flow model. No provisions
have been recognised for the purchase of the subsidiary.

Zwitserleven NV’s net loss for the full year 2008 amounts to € 49 million, and total income amounts to € 1,431 million. These figures
for the full year 2008 concern pro-forma figures.

Zwitserleven Asset Management
Zwitserleven Asset Management contributed € 0.3 million to SNS REAAL’s results after taxes for the period from 29 April 2008 through
31 December 2008.

The breakdown of the acquired assets, liabilities and goodwill is as follows:

In € millions

Acquisition price                                                                                                                       25
Fair value of the assets and liabilities acquired (see notes)                                                                            8

Goodwill                                                                                                                                17


The impact of the acquisition on SNS REAAL’s cash flows
In € millions

Acquisition price                                                                                                                       25
Less: cash and cah equivalents of the acquired company                                                                                   6

Cash outflows due to the acquisition                                                                                                    19


Goodwill
Goodwill represents the expected income and expense synergies of the acquisition, as well as the value of the staff of Zwitserleven
Asset Management that cannot be accounted for separately from goodwill. The calculated goodwill will be attributed to the cash flow
generating unit Group activities.




                                                                                  SNS REAAL Financial Statements 2008 acquisitions           141
      The fair value of the acquired net assets has been conclusively determined. The value of the assets and liabilities of the acquisition is
      as follows:

      In € millions                                                                     Book value Zwitserleven           Fair value Zwitserleven
                                                                                          Asset Management                  Asset Management
                                                                                             29 April 2008                      29 April 2008

      Acquired identifiable assets
      Other assets                                                                                                  3                                3
      Cash and cash equivalents                                                                                     6                                6

                                                                                                                    9                                9

      Acquired liabilities
      Other liabilities                                                                                             1                                1

                                                                                                                    1                                1

      Net balance of the acquired identifiable
       assets and acquired liabilities.                                                                             8                                8


      The fair value of the assets, liabilities and contingent liabilities acquired is based on the discounted cash flow model. No provisions
      have been recognised for the purchase of the subsidiary.

      Zwitserleven Asset Management’s net result for the full year 2008 amounts to € 0.9 million, and total income amounts to € 6.6 million.
      These figures for the full year 2008 are pro-forma figures.

      Swiss Life Belgium
      In the period of 29 April 2008 through 30 June 2008, Swiss Life Belgium contributed € 22 million to SNS REAAL’s results after taxes.
      Swiss Life Belgium’s results have been included in the segment Group activities.

      The breakdown of the acquired assets, liabilities and goodwill is as follows:

      In € millions

      Acquisition price                                                                                                                             120
      Fair value of the assets and liabilities acquired (see notes)                                                                                 120

      Goodwill                                                                                                                                      --


      The impact of the acquisition on SNS REAAL’s cash flows
      In € millions

      Acquisition price                                                                                                                             120
      Less: cash and cah equivalents of the acquired company                                                                                         --

      Cash outflows due to the acquisition                                                                                                          120


      The value of the acquired assets and liabilities
      The fair value of the acquired net assets has been conclusively determined. The value of the acquired assets and liabilities is as follows:

      In € millions                                                      Book value Swiss Life Belgium             Fair value Swiss Life Belgium
                                                                                 29 april 2008                              29 april 2008

      Assets
      Assets available for sale                                                                        3,346                                    3,346

      Total assets                                                                                     3,346                                    3,346

      Equity and liabilities
      Equity attributable to shareholders                                                                120                                      120
      Liabilities available for sale                                                                   3,226                                    3,226

      Total equity and liabilities                                                                     3,346                                    3,346




142   SNS REAAL Financial Statements 2008 acquisitions
The fair value of the assets, liabilities and contingent liabilities acquired is based on the discounted cash flow model. No provisions
have been recognised for the purchase of the subsidiary.

The sale of the acquired assets and liabilities
The breakdown of the assets and liabilities sold on 30 June 2008 and the sales price is as follows:

In € millions

Sold assets and liabilities:
Assets available for sale                                                                                                           3,346
Liabilities available for sale                                                                                                      3,226

                                                                                                                                     120
Proceeds from sale                                                                                                                   142

Result on sale                                                                                                                        22


The impact of the sale on SNS REAAL’s cash flows
In € millions

Proceeds from sale                                                                                                                   142
Less: cash and cah equivalents of the sold company                                                                                    --

Net cashflow as a result of the sale                                                                                                 142


Purchase price adjustments for AXA NL
As announced in the 2007 financial statements, the calculations of the IFRS purchase price adjustments for the insurance contracts
of AXA NL were completed in the course of 2008. On this basis, adjustments are made in the preliminary valuation of the acquired net
assets. Also additional information and improved insights resulted in adjustments in order to bring the valuation of the assets and
liabilities in line with the applicable laws and regulations. As a result of these adjustments the item intangible assets decreased by
€ 58 million and the item investments decreased by € 12 million in the opening balance sheet of AXA NL as at 5 September 2007.
The item insurance contracts increased by € 98 million as at 5 September 2007, partly in advance of reaching an agreement with
unit-linked policy holders. The adjustments have an effect on the size of the items deferred tax assets and goodwill. In the opening
balance sheet of AXA NL the item deferred tax assets increased by € 46 million and the item goodwill increased by € 134 million.

The purchase price adjustments have no material effect on the items in the income statement and the result for the year 2007.
The comparitive figures have been restated for comparison purposes in the balance sheet and the cash flow statement.

Other purchase price adjustments
In 2008, the definitive acquisition price was determined for the acquisition of FBS Bankiers as announced in 2007 financial
statements. The definitive acquisition price did not result in any changes in the valuation of the net assets.

An adjustment was made to the value of SNS Regio Bank’s assets and liabilities in respect of the value of client relations and pension
commitments. As a result of these adjustments, SNS Regio Bank’s opening balance sheet as at 1 July 2007 shows that the intangible
fixed assets decreased by € 1.4 million and the other liabilities increased by € 1.3 million. The cumulative effect of the adjustments has
been included for an amount of € 2.0 million under goodwill and for € 0.7 million under deferred tax assets.




                                                                                 SNS REAAL Financial Statements 2008 acquisitions         143
      Risk management
      1     Key points risk profile SNS REAAL

      1.1   Maintaining a moderate risk profile
      SNS REAAL proved not immune to market disruptions, in spite of its profile. In these times of highly volatile financial markets,
      SNS REAAL emphasises that it attaches great importance to maintaining a moderate risk profile. This means that the balance sheet
      risks will be further limited and higher capital levels will be maintained.
      SNS REAAL’s commercial activities, such as offering accessible banking and insurance products, involve low risks, while the
      exposure to high-risk activities, such as proprietary trading, complex products or foreign currencies, is limited. The mainly Dutch
      clients are well-diversified within the retail and SME market segments.
      SNS REAAL’s investment portfolios have very little exposure to what are known as ‘toxic investments’. SNS REAAL holds no American
      subprime mortgages. Various hedging strategies are in place to mitigate the impact of the negative market developments on the
      investments.

      The loan portfolio of SNS Bank’s retail activities amounted to € 52.2 billion at year-end 2008, 90% of which comprised Dutch
      residential mortgages. The second half of 2008 saw a slight decrease in this portfolio’s credit quality and the average house prices.
      Nevertheless, the average house prices in the Netherlands remained fairly stable. The impairments on residential mortgages
      amounted to 20 basis points (11 basis points in 2007) of the risk-weighted assets.

      SNS Property Finance’s loan portfolio amounted to € 13.6 billion at year-end 2008, 72% of which originated in the Netherlands. At
      year-end 2008, the contamination rate exceeded the historical long-term average, reflecting the difficult circumstances in the US
      and Spain in particular. In 2008, the impairments amounted to € 116 million, primarily in connection with international project
      financing and corresponding with 90 basis points (13 basis points in 2007) of the risk-weighted assets.

      At year-end 2008, the total investment portfolio of the insurance activities amounted to € 27.6 billion, largely invested in fixed-
      income securities (92.3%) and partly invested in shares (7.7%). 85% of the fixed-income portfolio had an A-rating or higher. Despite
      the conservative investment mix of this portfolio, the losses on shares (€ 797 million gross) and the fixed-income portfolio (€ 95
      million gross) showed a sharp increase. The losses on shares were partly compensated by unrealised profits on put options
      amounting to € 229 million.

      1.2   Risk management in pessimistic, volatile markets
      The main developments were as follows:

      Capital and solvency
       Issue of € 600 million worth of B-shares to the trust to finance the acquisition of Zwitserleven.
       Issue of € 500 million worth of securities capital to the trust and € 750 million worth of securities capital to the Dutch State to
         reinforce solvency levels.
       SNS Bank: Core capital ratio of 8.1% and Tier 1 ratio of 10.5% as per 1 January 2009.
       Insurance activities at year-end 2008 consolidated solvency of 176% (248% capital coverage ratio).
       SNS REAAL double leverage of 113.7% at year-end 2008.
      Liquidity
       A liquidity buffer was created in the first half of 2008 due to a sharp increase of savings.
       The position in the savings market was positively affected by the increased number of clients and a high retention rate.
       Total liquidity of € 10.7 billion at year-end 2008.
       Successful note issues of € 2 billion and € 1.6 billion under the Credit Guarantee Scheme of the Dutch State in the beginning of 2009.
       Wholesale financing secured until 2010.
      Market risk
       The influence of falling share prices on the insurance activities portfolio was partly mitigated by hedges in 2008.
       The positions in equities within the insurer’s investments will be further reduced in 2009 to limit the possible negative impact on
         both solvency levels and the results.
       A new hedging programme was introduced in the fourth quarter of 2008 to reduce the negative impact of a further decline in
         interest rates on insurance activities solvency.
      Credit risk
       The retail business’ loan portfolio remained healthy. Limited increase in loss indicators for retail mortgages.
       Impairments increased at SNS Property Finance, particularly due to the international property markets.


      1.3   Risk management organisation
      SNS REAAL has defined a number of risk principles for its risk management process in order to ensure a consistent approach to risk
      management. These principles ensure an integral risk management, geared to maintaining a moderate risk profile.




144   SNS REAAL Financial Statements 2008 risk management
The risk principles are:
 One group-wide risk type classification.
 A preset risk tolerance per risk type.
 Scenario analyses for stress situations and contingency planning with regard to the key risks.
 Testing and validating models that are used for risk management.
 Risk owners have been appointed for all defined risks.
 Monitoring and assessment of risks independently of commercial activities.


The responsibilities within the risk management structure have been clearly defined, whereby the ultimate responsibility for risk
management lies with the Executive Board. SNS REAAL’s Chief Financial Officer is also the Chief Risk Officer. Risk owners have been
appointed within the Executive Board and the Boards of Directors of SNS Bank, SNS Property Finance and REAAL Verzekeringen.
These risk owners are responsible for the formulation and execution of the risk policy for the appointed areas of attention.

SNS REAAL distinguishes three risk management responsibility levels:
 the line organisation, which is responsible for the risk and the management of the risk, and generally delegates risk
  management to risk committees;
 the risk management departments, which advise the line management and monitor positions;
 the internal auditor (the Group Audit Department), which reviews the process and performance of the risk organisation.


1.4   Risk committees
The following committees operate within the risk management structure:
 Audit Committee.
   This committee is comprised of members of the Supervisory Board and also supervises the quality and the activities associated
   with risk management.
 SNS REAAL Risk Policy Committee (CRG).
   This committee determines the strategic risk policy, structures the group-wide risk management organisation, translates the
   risk appetite of SNS REAAL into standards and limits, and determines the mandates of the other risk committees.
 Risk policy committees.
   The SNS Bank Risk Policy Committee (CRB), the SNS Property Finance Risk Policy Committee (CR PF) and the REAAL
   Verzekeringen Risk Management Committee manage the risks on an operational level.
 Integrity and Compliance Committee.
   This committee supervises the creation and safeguarding of the integrity levels desired by the Executive Board.
 SNS REAAL Asset & Liability Committee (ALCO Group).
   As a result of the turmoil on the financial markets, the ALCO Group has been given a more central role within its area of
   attention: the management of market risks, liquidity and solvency. In the last quarter, the ALM departments monitored all
   relevant positions on a daily basis and adjusted them where necessary. The boards of the banking and insurance activities were
   closely involved in this process. For the time being, the frequency of the ALCO Group meetings has been increased to once every
   week. Due to the more central role of the ALCO Group, the tasks of the ALCO Bank have been integrated into the ALCO Group.
   The operational ALCOs at REAAL Verzekeringen, DBV and Zwitserleven have been maintained.
 Credit committees.
   Separate credit committees at REAAL Verzekeringen, SNS Bank and SNS Property Finance take credit decisions and advise on
   credit limits, counterparty limits and the approval of large credit facilities.
 Price risk committees.
   The SNS Bank Price Risk Committee and the REAAL Verzekeringen Price Risk Committee provide advice on client rates and
   manage the volume, risk and return of product portfolios.
 Risk policy of DBV and Zwitserleven
   The ALM and investment policies of DBV and Zwitserleven were adopted and ratified by the ALCO Group in 2008.

1.5   Risk management departments
The risk management departments advise on risk management and report on the risk profile in order to promote efficiency and
uniformity. They act as group service centres for the banking and insurance activities. With regard to the risks, they are responsible
for modelling, measuring, monitoring, reporting and advising. They are not responsible for formulating definitions and determining
the policy. SNS REAAL has the following risk management departments:

Group Risk Management (GRM)
GRM supports the Executive Board and the management boards in:
 Identifying changed as well as changing market conditions and regulations that are relevant to the strategy and policy.
 Determining the desired risk profile of the SNS REAAL entities.
 Translating the desired risk profile into internal standards and risk limits.
 Choosing products and services that correspond with the desired risk profile.




                                                                           SNS REAAL Financial Statements 2008 risk management           145
         Determining the value of portfolios for steering structural value creation.
         Determining the prices of products and services on the basis of risk-weighted return.
         Structuring and implementing Asset & Liability Management for the group and the banking and insurance activities.
         Structuring and implementing the capitalisation and funding policies.
         Portfolio management and modelling credit risk.
         Portfolio management and modelling insurance risks.
         Setting frameworks for drawing up models and techniques and safeguarding their quality.
         Central and independent implementation of model validation.
         Implementing the reinsurance policy.

      Actuarial department
      The actuarial tasks are allocated across Group Actuarial Risk Management within GRM and the Actuarial department of REAAL
      Verzekeringen and Zwitserleven. Group Actuarial Risk Management’s areas of attention include drawing up policies, drawing up
      standards and frameworks, and monitoring risk and return. In addition, GRM also focuses on Reinsurance and Economic Capital
      with the following special arreas of attention: drawing up policies & frameworks, modelling, implementing and monitoring/
      advising. The main focal points in the activities of Group Actuarial Risk Management are the supervisory role and the explanation of
      recommendations and developments to the Group and the Business. The operational actuarial tasks are integrated within the
      Actuarial department of REAAL Verzekeringen and Zwitserleven. The main tasks in this context are modelling and carrying out
      analyses, implementing the adopted policies, and providing the Business with advice on insurance risk management.

      Compliance & Operational Risk Management (C&O)
      C&O advises the Executive Board and the management boards of the business units on the management of non-financial risks.
      These are the risks that are related to the conduct of persons and the structure of the business processes. The main duties of the
      department are drawing up policies, providing recommendations for ethical and controlled business conduct, and coordinating and
      promoting operational risk and integrity risk management. The SNS REAAL policy is detailed further by specialist staff
      departments, which support the line management in the execution of that policy. The key business units each have their own
      compliance officer. These local compliance officers functionally report to the C&O director.

      Legal Affairs (LA)
      Legal Affairs prepares policy and supports activities for risk management. The main responsibilities of this department are:
       Identifying and advising on present and future legislation and regulations.
       Advising on aspects of integrity and the duty of care.
       Preparing and implementing policy with respect to the exercise of integrity and the duty of care.


      Credit Risk Management (CRM)
      Within SNS Bank and SNS Property Finance, two separate and independent departments have been established for credit risk
      management. The departments focus on policy preparation and operational support of credit risk management and report to the
      CFOs of SNS Bank and SNS Property Finance. The main responsibilities of these departments are:
       Advising on the credit risk policy.
       Independent analysis of and advice on credit proposals. A separate mid-office has been established for retail and SME credit
         facilities that issues (binding) recommendations for credit facilities that do not satisfy the standard acceptance criteria.
       Administration and management of credit facilities and collateral.
       Administration and settlement of loans in arrears or in default.
       Preparing reports on the operational management in the area of credit risk.


      Internal Control
      The Internal Control departments of SNS REAAL, SNS Bank and REAAL Verzekeringen assess the effectiveness of the control
      measures in the procedures on behalf of line management. Their findings are ‘weighed’ against a pre-set standard, generating
      adequate management information in relation to the organisational and process goals.

      Group Audit Department (GA)
      GA reports to the chairman of the Executive Board and also has a reporting line to the Audit Committee of the Supervisory Board. In
      this way, the department is able to perform its activities independently of the business units and the departments of SNS REAAL.

      GA carries out its audits for the Executive Board. These audits are based on a predetermined risk analysis. The audits focus on
      internal risk management and control systems, the related processing procedures and the (reliability of) management information.
      In addition, various types of audits are performed at the request of the management boards, including certification activities for
      external parties.




146   SNS REAAL Financial Statements 2008 risk management
1.6   Zwitserleven
Zwitserleven’s risk organisation has not yet been fully integrated within SNS REAAL’s risk organisation and is operating according to
its existing structure. Zwitserleven’s risk management principles and risk classification are in line with the principles and
classification of SNS REAAL. Zwitserleven’s ALM and investment policies are determined through the ALCO Group. The Chief Risk
Officer of Zwitserleven is also a member of the ALCO Group. Zwitserleven’s ALM position is reported as part of REAAL
Verzekeringen’s position to the ALCO Group.
Tasks, responsibilities and authorities with regard to the risk management function have been assigned within Zwitserleven in a
clear manner.

Risk Committee
Tasks of the Risk Committee include determining risk management policy and assessing the effectiveness of the risk management
organisation. In addition, the Risk Committee appoints officers within the lower-tier risk committees and acts as an escalation
platform for the lower-tier risk committees, such as the ALM Committee, the Insurance Risk Committee, the Operational Risk
Committee and the Compliance Committee. The risk categories relating to market risks, credit risks, insurance risks, operational
risks, strategic risks and compliance risks are an integral part of the Risk Committee’s agenda.

ALM Committee (ALCO)
The ALCO is responsible for Zwitserleven’s ALM management and investment policy. In addition, limit proposals and investment
mandates ensuing from these proposals are submitted to the ALCO for approval.

Insurance Risk Committee
The Insurance Risk Committee gives advice on insurance risks in the insurance portfolio. Based on experience and market
developments, advice is given on the adjustments necessary and desired to insurance premium calculation principles and the
determination of the technical provision.

Operational Risk Committee
The Operational Risk Committee is responsible for the adequate management of operational risks. The Operational Risk
Management department operates on the basis of the Operational Risk Management Framework. In 2008, this framework was
rolled out further. This framework aims to make risk management part of the line organisation to the greatest extent possible.
The purpose is to increase commitment and safeguard risk management by creating a culture that capitalises on opportunities and
recognises and manages risks when they affect the chances of achieving Zwitserleven’s goals. The basic principle is that the line
department is responsible for recognising and measuring risks, making proposals in respect of risk management measures, and
implementing and continually monitoring these measures in business activities. In these processes, the line department is
supported by the Operational Risk Management department and the Operational Risks Coordinators appointed within each
division.

Compliance Committee
The Compliance Committee ensures that Zwitserleven complies with current and future laws and regulations and that Zwitserleven
will continue to do so in the future.

Internal Audit
The Internal Audit department carries out regular audits to determine whether risks the company faces are sufficiently recognised
and adequately managed on a continuous basis by an effective design and operation of the internal management mechanisms.
The purpose is to provide an unbiased opinion on this internal management system. For this reason, audits are performed and their
results reported to and discussed by the Internal Audit Committee. All reports drawn up by external and internal auditors and
supervisory bodies are discussed by the committee, as well as the follow-up on conclusions and the schedule for upcoming
investigations, including the annual audit plan.



2     Risk management Bank

2.1   Credit risk
Credit risk is the risk that a debtor defaults entirely or partly, or that its position deteriorates, resulting in negative consequences
for SNS Bank’s result or net financial position.

Credit risk profile SNS Bank
SNS Bank recognises various categories of credit risk. The main categories are loans and advances to customers, loans and
advances to banks, and investments. More than 90% of the loans and advances to customers are backed by mortgage security.




                                                                              SNS REAAL Financial Statements 2008 risk management          147
      Approximately three quarters of all loans and advances to customers concern private residential property financing. Private
      residential property financing is characterised by very low credit losses and inflation-proof collateral. The change in the tax regime
      in 2004, aimed at surplus residential property values, and the code of conduct of the Netherlands Bankers’ Association affect loan
      agreements concluded since that time. This has meanwhile led to a noticeably lower risk profile of the entire portfolio.
      Risk acceptance was also professionalised further in 2008.

      Private residential property financings are provided throughout the Netherlands. The south and east of the Netherlands comprise a
      large portion of the portfolio, although the focus now lies on growth in the west (the Randstad urban area). Our geographic spread
      contributes to the diversification of risks; the regional differences in the housing market and economy will also create differences in
      the number of defaults and the level of credit loss, or anticipated credit loss, in each region.

      Commercial mortgage loans increased in 2008. These property loans are concentrated at SNS Property Finance. The growth of the
      portfolio entails a relatively higher amount of loans related to the first phase of financing. These loans have a somewhat higher risk
      profile, which decreases as the projects progress. Not only did we realise growth, we were also able to realise a margin that is in line
      with the slightly higher risk profile. At the same time, the existing portfolio’s credit quality decreased as a result of last year’s
      unfavourable market conditions.

      Diversification benefits are realised as SNS Bank’s risks are spread across corporate and retail debtors. The credit quality of the
      portfolio develops more regularly than that of the various components of the portfolio.

      The majority of the loans portfolio comprises loans secured by mortgages. The other loans, which are not secured by mortgages,
      are mainly amounts due by banks and investments (mainly, bonds). The investments in connection with the company’s own liquidity
      management and held for trading have good ratings (see the table on page 149).

      Overview of credit risk SNS Bank
      SNS Bank’s overall credit exposure (before collateral and other credit enhancements) breaks down as follows:

      In € millions                                                                                          2008                 2007

      Investments                                                                                                   3,942                4,056
      Derivatives                                                                                                   1,113                1,041
      Mortgages and other loans and advances to customers                                               52,358               48,806
      Property finance                                                                                  13,681               11,637

      Total loans and advances to customers                                                                         66,039               60,443


      Loans and advances to banks                                                                                   2,783                1,092
      Other assets, no lending operations                                                                           1,447                1,018
      Cash and cash equivalents                                                                                     1,692                3,141

      Total                                                                                                         77,016               70,791


      Off-balance sheet commitments
      Liabilities from pledges and guarantees given                                                                   331                   485
      Liabilities from (ir)revocable facilities                                                                     3,614                2,187

      Total                                                                                                         80,961               73,463


      Credit management SNS Bank investments
      The investments are held particularly for the company’s own liquidity management. No investments have been made in (American)
      subprime mortgages, whether directly or indirectly.




148   SNS REAAL Financial Statements 2008 risk management
The investments have been classified according to industry as follows:

In € millions                                             Fair value through profit or loss
                                                        Held for trading        Designated          Available for sale           Total
                                                        2008       2007       2008       2007       2008       2007       2008           2007

Shares and similar investments:
Banks                                                        --           1          2        --         --         --           2              1
Trade, industry and other services                             5       13          --         --         --         20           5          33
Other                                                          6          6        --         --         16           4      22             10

                                                             11        20            2        --         16         24       29             44

Interest-bearing investments
Loans and receivables:
Banks                                                        --           1        --         --         --         --       --                 1


Bonds and fixed-income investments
Public sector - domestic                                     --        --          32         51        836        660      868            711
Public sector - foreign                                        2       27          88         451     1,981     1,648     2,071          2,126
Banks                                                      119        844            8        10        533         66      660            920
Trade, industry and other services                           21        55          --         --        129        111      150            166
Other                                                        14        88          --         --        150         --      164             88

                                                           156      1,015         128         512     3,629     2,485     3,913          4,012

Total                                                      167      1,035         130         512     3,645     2,509     3,942          4,056


SNS Bank decided to reclassify the investments held for trading purposes at fair value through profit or loss into available-for-sale
category. For more information we refer to page 192.

The interest-bearing investments can be classified according to rating as follows:

In € millions                                             Fair value through profit or loss
                                                        Held for trading        Designated          Available for sale           Total
                                                        2008       2007       2008       2007       2008       2007       2008           2007

AAA                                                          34        85          94         512     3,040     2,409     3,168          3,006
AA                                                           23       155          --         --        178         --      201            155
A                                                            62       656          34         --        323         12      419            668
BBB                                                            6          9        --         --           2          2          8          11
Below BBB                                                    --       105          --         --         72           5      72            110
Other                                                        31           5        --         --         14         57       45             62

Total                                                      156      1,015         128         512     3,629     2,485     3,913          4,012


Credit management SNS Bank loans and advances to customers
A distinction has been made in credit management between retail clients on the one hand and property finance and other
corporate clients on the other. In addition, there is a distinction between credit management for individual clients and credit
management on a portfolio level.

Loans to private clients consisting of mortgage loans or consumer credit are approved by the relevant authorised officers on the
basis of acceptance standards and policy rules. The acceptance standards and policy rules are determined by the Bank Price Risk
Committee. The acceptance procedure for mortgage loans is carried out at the central level, as this contributes to uniformity and
efficiency. Acceptance score models are used as support.

Credit management for established private clients takes place at client level by actively monitoring and following up on payments in
arrears. This process is supported by automated systems that categorise and prioritise clients with payments in arrears.

At the portfolio level, mortgage risks are managed by the ‘Portfolio Management Procedure’. The process consists of three
components: rating, monitoring and intervention. Intervention can take place through pricing policy, the acceptance and


                                                                              SNS REAAL Financial Statements 2008 risk management                   149
      management policies, specific (marketing) activities, product development and securitisations.

      The ‘Loan to Foreclosure Value’ (LtFV) is an important risk indicator for managing the portfolio. The LtFV shows the level of
      collateralisation by taking the outstanding loan as a percentage of the foreclosure value of the collateral. A low percentage is
      considered favourable.

      For SNS Bank’s mortgage portfolio, the weighted average LtFV at year-end 2008 was 92% (2007: 90%), based on an indexed LtFV of
      83% (2007: 79%). The foreclosure value known at the time of application is indexed for this purpose with the Land Registry Office’s
      WoningWaardeIndex. That index is updated every month. The WoningWaardeIndex is broken down into province and type of
      residence. Generally, no new valuation reports are requested for existing residential mortgages.

      In addition to the ‘Loan to Foreclosure Value’, the Probability of Default is another major risk indicator. Here, an estimate is made of
      the probability that obligations will not be met in the upcoming year. The estimate for residential mortgages is that almost
      everybody can meet their obligations. However, due to the deteriorating economic situation, the losses are increasing compared to
      the past year.

      The table below shows the risk classification of the private residential mortgages portfolio as a % of the outstanding residential
      mortgages:

      PD (Probability of Default) %      2008        2007

      1                                    87.0%      87.4%
      2-4                                   5.4%        4.8%
      5-7                                   0.0%        0.0%
      8-10                                  4.8%        5.0%
      11-13                                 0.0%        0.0%
      14-17                                 0.0%        0.0%
      18-99                                 1.9%        2.0%
      100                                   0.9%        0.8%


      Acceptance standards and policy rules also apply to property finance and other corporate clients. Moreover, acceptance score
      models have been developed for loans up to € 1 million. Property loans in excess of € 1 million are mainly provided by SNS Property
      Finance, although SNS Retail Bank does occasionally provide property finance up to € 5 million. Where loans over € 1 million are
      concerned, the loan proposal is always analysed by SNS Property Finance’s risk management department, which attaches its
      advice. Any deviation from the advice must be supported in writing. Participation finance is always submitted to the SNS Property
      Finance Risk Committee. SNS Bank does not engage in participation finance itself.

      Property finance clients and other corporate clients mainly have receivables in the ‘Construction and Real Estate’ industry. This
      generally concerns mortgage-backed finance of commercial property, business premises and residential/retail premises. The value
      of other securities is negligible.

      For the property loans clients and other corporate clients, credit monitoring takes place at client level, using an information system
      geared to the identification and monitoring of overdrafts and compliance with the provisions in the loan agreement. By quickly
      contacting the borrower, adequate steps can then be taken. In highly exceptional circumstances, the loan agreement may be
      amended.

      SNS Property Finance has guidelines in place on how to identify default indicators and on relevant decision-making. If notice of
      default needs to be given, this is done by the body that gave approval.

      At portfolio level, the risks of property loans and other corporate clients are monitored on the basis of detailed reporting of the
      developments in the portfolios. In addition to the contamination rate, the distribution across various segments, countries and the
      type of property investment are monitored, and adjusted where necessary. Adjustments are made by revising the pricing, easing or
      in fact tightening loan conditions, and by making choices when acquiring new clients. In addition, SNS Property Finance may
      manage projects itself under special circumstances.




150   SNS REAAL Financial Statements 2008 risk management
The loans and advances to customers can be specified as follows according to type of security and credit risk:

In € millions                                            Mortgages          Property Finance         Other                    Total
                                                       2008      2007       2008       2007      2008      2007        2008           2007

Residential property inside of the Netherlands:
- Mortgages ≤ 75% of foreclosure value                 20,272    21,008         862    1,055         --          --    21,134       22,063
- Mortgages > 75% of foreclosure value                  9,058     4,638      1,548     1,239         --          --    10,606         5,877
- Mortgages with National Mortgage Guarantee            4,973     5,579          --        --        --          --    4,973          5,579
Securitised mortgages                                  12,865    13,538          --        --        --          --    12,865       13,538
Residential property outside of the Netherlands           137        175     1,538     1,271         --          --    1,675          1,446

Non-residential property in the Netherlands
- Mortgage-backed loans                                 1,446     1,292      6,358     6,336         --          --    7,804          7,628
- Issued to goverment                                      --         --         --        --      733         784       733            784
- Other collateral                                         --         --        766       224        --          --      766            224
- Unsecured loans                                          --         --         --        --    2,874       1,792     2,874          1,792

Non-residential property outside
  of the Netherlands
- Mortgage-backed loans outside the Netherlands            --         --     2,017     1,287         --          --    2,017          1,287
- Other collateral                                         --         --        592       225        --          --      592            225

Provisions for bad debt
- Specific provisions                                     (60)       (56)       (91)      (59)     (75)        (80)     (226)          (195)
- IBNR                                                     (7)        (2)        (7)       (3)       (5)         (7)     (19)           (12)

Total                                                  48,684    46,172     13,583     11,575    3,527       2,489     65,794       60,236


The line item securitised mortgages in the above-mentioned table comprises only securitised mortgages of which the notes issued
by the SPV have been sold to investors. The underlying mortgages of securitisations which have been kept in own book,
(€ 7,644 million, 2007: € 1,948 million) are included in the line item mortgages.

The distribution of loans and advances to customers can be specified according to type branche or counterparty as follows:

In € millions                                                                                     Book value                  RWA
                                                                                                 2008      2007        2008           2007

Construction and property                                                                        13,583    10,714      12,703       10,641
Public sector                                                                                      736         784        13             25
Agriculture                                                                                          57          57       42             61
Industry                                                                                           347         144       258            265
Service sector companies                                                                           919       1,638     1,418            717
Banks                                                                                            2,876       1,342       700            488
Other commercial                                                                                   274         789       191            216
Private customers                                                                                47,002    44,768      5,140          5,103

Total                                                                                            65,794    60,236      20,465       17,516
Off-balance sheet items                                                                              --          --      622            484

Total                                                                                                --          --    21,087       18,000




                                                                            SNS REAAL Financial Statements 2008 risk management               151
      The distribution of loans and advances to customers can be specified as follows according to region:

      In € millions                                                                                         Book value                 RWA
                                                                                                          2008        2007      2008         2007

      The Netherlands                                                                                     56,813      52,679    16,921       14,892
      EMU                                                                                                  5,117      5,082      2,435       1,752
      Canada                                                                                                  131         56       122          47
      United Kingdom                                                                                       1,729      1,060        191         252
      United States of America                                                                             1,536         923     1,167         778
      Other                                                                                                   468        436       251         279

      Total                                                                                               65,794      60,236    21,087       18,000


      Special Credits department SNS Bank
      An essential part of the risk policy is the timely deployment of the Special Credits department. Special Credits distinguishes
      between loans to private customers and SME, and loans provided by SNS Property Finance.

      The Special Credits department, which is part of Credit Risk Management, focuses on retail clients and SME. It applies a uniform
      working method that is aimed at identifying items with risk exposure.

      The management of retail and SME client payment arrears has been almost completely computerised. It compares the costs
      involved in arrears monitoring to the combination of the probability of default and the expected credit loss amount. Based on past
      experience, an estimate is made of the measures required, such as contacting the client by telephone or writing a letter. This
      estimation is supported by a computer model.

      Obviously, the file is handled by the Special Credits department if the client no longer meets his obligations, but also if it is unlikely
      that the debtor will be able to continue to meet his obligations. This uniform procedure is aimed at rapid foreclosure.

      Every quarter, the Special Credits department proposes a provisions level to SNS Bank’s Credit Committee.

      At SNS Property Finance, the default notice decision is made on the basis of established default indicators. In the event of default,
      Risk Management develops a settlement and restructuring plan. In addition, a proposal is immediately made on the amount of the
      provision. The provisions are determined by the Risk Committee.

      The following table provides information regarding provisioned loans:

      In € millions                          Book value Book value          Specific        IBNR         Total book     Fair value collateral for
                                                 non-    provisioned       provisions     provision        value        provisioned receivables
                                             provisioned loans (gross                                                       and receivables
                                                loans     receivable)                                                          in arrears

      2008
      Mortgages and other loans
       and advances to customers                  51,049          1,309           (135)           (12)       52,211                          1,223
      Property finance                            13,129            552            (91)            (7)       13,583                            529

      Total                                       64,178          1,861           (226)           (19)       65,794                          1,752

      2007
      Mortgages and other loans
       and advances to customers                  47,567          1,239           (136)            (9)       48,661                          1,618
      Property finance                            11,354            283            (59)            (3)       11,575                            449

      Total                                       58,921          1,522           (195)           (12)       60,236                          2,067


      In 2008, 202 foreclosure sales were made in respect of private homes (2007: 167), which generated approximately 69% cover for the
      outstanding debt (2007: 70%).

      In determining the amount of the provisions, account is taken of defaults and the experience that credit loss may also be caused by
      non-defaults (IBNR).



152   SNS REAAL Financial Statements 2008 risk management
 In the event of a default in property loans, a proposal is made for each debtor with regard to the amount of the provision.
 The provision is made by the Credit Committee of SNS Bank or by the Risk Committee of SNS Property Finance. For private
 customers, the provision for credit in default is determined on the basis of a computer model, instead of for each individual debtor.
 The model takes various factors into account, e.g. the number of months in arrears.

 The credit provision in relation to the risk-weighted assets of SNS Bank increased from the 2007 value of 0.67% to 0.87%.

 SNS Bank’s mortgage portfolio’s credit quality shows a stable picture over 2008. In 2008, the credit quality of SNS Property Finance
 deteriorated to some extent. The growth of the portfolio entails a relatively higher amount of loans related to the first phase of
 financing. These loans have a somewhat higher risk profile, which decreases as the projects progress.
 In addition, last year’s unfavourable market conditions are affecting the credit quality of SNS Property Finance’s existing portfolio.
 In order to further limit the balance sheet risk, SNS Property Finance decided to reduce the international project financing portfolio
 as regards liabilities vis-à-vis debtors, particularly in Spain and the US.

 During 2008, the default percentage1 of mortgages remained stable at 0.61%. In 2007, this rate was lower on average (0.54%).

 Financial assets in arrears SNS Bank:

 In € millions                              No arrears     B 3 Months      > 3 Months      > 6 Months        > 1 year       Provision         Total
                                                                           B 6 Months        B 1 year

 2008
 Investments                                      3,942               --              --              --             --              --          3,942
 Derivatives                                      1,113               --              --              --             --              --          1,113
 Mortgages and other loans
   and advances to customers                     51,049              876            119             111             203            (147)        52,211
 Property finance                                13,129               --            552               --             --             (98)        13,583
 Loans and advances to banks                      2,783               --              --              --             --              --          2,783
 Other assets                                     2,942               --            197               --             --             (76)         3,063

 Total                                           74,958              876            868             111             203            (321)        76,695

 2007
 Investments                                      4,056               --              --              --             --              --          4,056
 Derivatives                                      1,041               --              --              --             --              --          1,041
 Mortgages and other loans
   and advances to customers                     47,567              770            124               96            249            (145)        48,661
 Property finance                                11,354               --            283               --             --             (62)        11,575
 Loans and advances to banks                      1,092               --              --              --             --              --          1,092
 Other assets                                     4,159               --              --              --             --              --          4,159

 Total                                           69,269              770            407               96            249            (207)        70,584


 Credit management SNS Bank with regard to loans and advances to banks and derivatives
 SNS Financial Markets enters into money and capital market transactions with various financial institutions as part of its treasury
 and funding activities.

 This concerns, among others, derivative transactions for the hedging of interest rate and currency risks. Derivative transactions
 that are subject to a Credit Support Annex (CSA) of the International Swaps and Derivatives Association agreement, have terms to
 maturity varying from 1 year to a maximum of 20 years. The emphasis is on longer maturities. These CSAs are primarily aimed at
 minimising counterparty risk. Changes in the present value of all existing transactions are settled periodically on a cash basis with
 the counterparty in question. In addition, a system with counterparty limits applies. This system reduces the concentration risk.

 Credit risk SNS Bank
 The table below gives an indication of the credit risk of SNS Bank, based on the weighting percentages used in regular reporting to
 the Dutch Central Bank (DNB). In 2007, these weighting percentages were based on Basel I for the last time. As from 2008,
 SNS Bank will be reporting based on the weighting percentages of Basel II. These percentages depend on the external credit rating
 of the counterparty. Generally, these percentages are 0% for loans and advances to or guaranteed by OECD governments, 20% for

1) The default percentage in the mortgage portfolio is the total number of clients with payment arrears of more than 3 months divided by the total
   number of clients




                                                                                      SNS REAAL Financial Statements 2008 risk management                153
      loans and advances to or guaranteed by OECD banks, 50% for loans entirely and fully covered by mortgages (at an LtFV equal to or
      below 75%) and 100% for the other loans and advances. Retail mortgages are weighted in accordance with the IRB method.


      In € millions                                                                                      Risk weighted           Capital
                                                                                                             assets           requirements
                                                                                                        2008      2007       2008      2007

      Standardised approach
      Central Government and Central Banks                                                                  13        25          1          2
      Institutions                                                                                         700       488         56         39
      Corporates                                                                                        14,613    11,900      1,169        952
      Retail                                                                                             1,163     1,688         93        135
      Equity                                                                                                63        75          5          6
      Other non credit obligations                                                                         772       611         62         49
      Securitization positions                                                                             975        --         78         --


      Internal ratings based approach
      Retail secured by real estate                                                                      2,788     3,213        223        257

                                                                                                        21,087    18,000      1,687       1,440

      Capital requirement for position, foreign exchange and commodity risks                               125        613        10          49
      Operational risk                                                                                   1,638     1,613        131        129
      Other and transitional Capital requirements                                                        5,200     8,987        416        719

      Total                                                                                             28,050    29,213      2,244       2,337


      2.2     Market risk
      Market risk is the risk that changes in market prices will have a negative impact on the results and net asset value of SNS Bank.
      Market prices include interest rates, stock prices and exchange rates.

      Interest rate risk is a significant component of SNS Bank’s moderate risk profile. Interest rate risks arise due to the fact that
      SNS Bank’s assets and liabilities have a different interest rate sensitivity. The assets on the bank’s balance sheet generally have a
      longer duration than the liabilities. Given this balance sheet structure, SNS Bank will normally benefit from a decreasing interest
      rate environment. The bank’s market risks, including those of SNS Property Finance, are managed by the ALCO Group. When
      managing SNS Bank’s interest rate position, assessments are made to establish whether the risks fall within pre-set limits.
      Managing within those limits takes place on the basis of risk/return considerations in conjunction with the short-term and
      medium-term expectations for interest rate movements.
      When managing interest rate risk, SNS Bank looks at the total of interest-bearing assets and liabilities, including interest rate
      swaps and not at separate balance sheet items. Interest rate swaps are used to steer the sensitivity of the present value of the cash
      flows of mostly (new) mortgages arising from changes in interest rates. See paragraph 5.1 ‘Hedging SNS Bank’ and 5.2 ‘Hedge
      accounting SNS Bank’ for more information.

      Market risk of SNS Bank’s bank book
      The interest rate risk in the bank’s portfolio is measured, monitored and managed using duration, Value-at-Risk (VaR), Earnings-
      at-Risk (EaR) and gapping analyses.

      The yield curve sharply fell and steepened in the final quarter of 2008, increasing SNS Bank’s sensitivity to changes in short-term
      interest rates. In anticipation of a decline in short-term interest rates, SNS lowered its Earnings-at-Risk limit to € 25 million in
      September 2008. In addition, SNS Bank’s duration limit was extended from 8 to 10 in the final quarter of 2008. This bandwidth is
      reviewed by the ALCO Group at least once a year. This promotes a more effective use of opportunities presenting themselves when
      the yield curve steepens, whilst maintaining a low Earnings-at-Risk. SNS Bank proactively steered the profit’s interest rate
      sensitivity of the net financial results to below the new limit. This resulted in a more balanced interest rate sensitivity across the
      entire yield curve.

      The duration of shareholders’ equity amounted to 8.4 at year-end 2008 (year-end 2007: nil). During the year 2008, the duration of
      total equity amounted to a maximum of 8.5.

      During 2008, the Value-at-Risk was € 204 million on average, with a maximum of € 526 million at the end of November, and a
      minimum of € 75 million at the end of January. At year-end 2008, the VaR was € 501 million.




154   SNS REAAL Financial Statements 2008 risk management
The Earnings-at-Risk limit was changed as per September 2008 from a level of € 40 million to € 25 million (95%). On average, the EaR
was approximately € 27 million, with a maximum of € 38 million in February 2008. At year-end 2008, the EaR was € 20 million.

Both VaR and EaR are determined based on scenario analyses. Changes in the fair value of total equity and changes in the interest
margin are determined for many underlying interest rate scenarios. The fair value of total equity is obtained by discounting the cash
flows from the total balance sheet with the cost-of-fund curve of SNS Bank. This curve is also used as the base yield curve to
simulate changes in interest rates. At a confidence level of 99%, the VaR is equal to the 1% worst outcome of changes in the fair
value of total equity. A fixed interest rate position is used as the basis for EaR, with a confidence level of 95%: how much does it
cost to refinance the interest rate gaps in one year given the current interest rate position and taking into account various interest
rate scenarios. For VaR, too, the balance sheet position at the reporting date is used for simulating the value adjustments. VaR and
VaR and EaR are both calculated using a 1-year horizon calculated as from the reporting date. The VaR figures are before taxation,
the EaR figures are after taxation.

Quotation risk is the risk that the bank runs due to increasing interest rates between the time the quotation is made and the time
the loan is extended. Each month a trade-off is made between the hedging costs and risk exposure of SNS Bank as a result of this
quotation risk. The quotation risk has a VaR limit of € 16 million. The average quotation VaR amounted to € 4 million in 2008.
The quotation VaR remained within the limit throughout 2008.

All of SNS Bank’s currency positions are measured monthly and hedged on a structural basis. The table below gives an indication of
the foreign currency position of SNS Bank.

In € millions                                   Balance debit           Balance credit              Balance             Hedge derivatives
                                              2008         2007        2008        2007         2008        2007        2008        2007

US dollar                                       1,048           848      1,579       1,928        (531)       (1,080)       474       1,051
Japanese yen                                         35           1        419           266      (384)        (265)        357         258
Pound Sterling                                     131            90       335           451      (204)        (361)        187         379
Swiss franc                                          3            12       222           108      (219)         (96)        218              97
Canadian dollar                                    135            55          98         143           37       (88)        (43)             92
Australian dollar                                    3            15       501           781      (498)        (766)        494         766
Hongkong dollar                                      4            7        341           383      (337)        (376)        300         391
Danish krone                                       194          256           7           3         187         253        (192)       (253)
Other                                                6            6        494           500      (488)        (494)        496         504

Total                                           1,559        1,290       3,996       4,563      (2,437)       (3,273)     2,291       3,285


The maturity of the hedged positions and of the hedge derivatives is practically the same.

Sensitivity test SNS Bank
The market risks of SNS Bank can be illustrated by the results of a sensitivity analysis. This analysis shows the impact of an
immediate parallel shift of the interest rate curve of + 1 and -1%, and an immediate shock in stock prices of -10% and + 10% on total
equity, the result and the fair value of total equity. In 2008, an improvement was made to the interest rate sensitivity model of the
fair value of total equity. The table shows the effects of the immediate parallel interest rate shift at year-end 2008 on the fair value
of total equity, including embedded options. The duration of total equity at year-end 2008 is higher than at year-end 2007, which is
expressed by the increased market value sensitivity in the + 1% scenario. Due to the positive duration, an increase in interest rates
negatively affects market value, but this is partly offset by the embedded options in the products. The sensitivity for a parallel 1%
decrease in interest rates is also reduced by the embedded options.
The sensitivity of the result to interest rate fluctuations is calculated in the following statistic method: for the first 12 monthly gaps
in the year-end 2008 balance sheet, the refinancing expenses and income is calculated in the event that interest rates immediately
rise or fall by 1% (parallel shift). The results are after tax.




                                                                               SNS REAAL Financial Statements 2008 risk management            155
      In € millions                                                      Fair value equity                     Result                 Total equity
                                                                         2008            2007           2008            2007        2008           2007

      Interest rate + 1%                                                     (84)               13             24              42      (147)         (118)
      Interest rate – 1%                                                     (10)               (8)         (21)             (42)          147            118
      Shares + 10%                                                              1               2              --              --           1              2
      Shares – 10%                                                              (1)             (2)            --              --           (1)           (2)


      Interest maturity calendar of SNS Bank
      In addition to the duration of total equity, Value-at-Risk and Earnings-at-Risk, the bank uses a gap profile as a risk management
      tool. A gap profile outlines the net position of redeeming nominal amounts per interest rate maturity from both assets and
      liabilities. The table below illustrates the interest maturity gap profile of SNS Bank on the basis of expected remaining interest
      maturity. This includes the estimates for early redemption behaviour in the mortgage and loan portfolios of SNS Retail Bank and
      SNS Property Finance. An estimate is also made of the outflow of savings and loans at SNS Bank. The gap profile is used to
      determine which maturities in the gap profile need to be adjusted to the desired level using interest rate swaps. Hence, duration of
      total equity and the interest maturity gaps are the main tools to manage the interest rate position of SNS Bank.


      In € millions                         B 1 Month    > 1 Month      > 3 Months        > 1 Year          > 5 Year           Provision          Total
                                                         B 3 Months       B 1 Year        B 5 Years

      2008
      Assets
      Investments (interest-bearing)               107           438             461                  747           2,160              --           3,913
      Derivatives                                  187           543             225                  56              102              --           1,113
      Loans and advances to customers           14,283         5,696         7,496              22,919              15,645          (245)          65,794
      Loans and advances to banks                1,615         1,044             124                  --                --             --           2,783
      Other assets                               1,281           166                --                30                --           (76)           1,401
      Cash and cash equivalents                  1,692            --                --                --                --             --           1,692

                                                19,165         7,887         8,306              23,752              17,907          (321)          76,696

      Off-balance sheet products                 8,058        22,740         6,730                    243           2,616              --          40,387

      Total assets                              27,223        30,627        15,036              23,995              20,523          (321)         117,083


      Liabilities
      Participation cetificates and
        subordinanted debt                         150           304         1,235                    --                --             --           1,689
      Debt certificates                          3,196        22,517             895             2,391              1,283              --          30,282
      Derivatives                                  494           318             278                  563             491              --           2,144
      Savings                                    1,404         2,811         6,433               7,305              3,906              --          21,859
      Other amounts due to customers             4,460         1,616         1,124               1,415              1,569              --          10,184
      Amounts due to banks                       1,827         2,546         2,118                    --                --             --           6,491
      Other liabilities                          1,642            --                --                --                --             --           1,642

                                                13,173        30,112        12,083              11,674              7,249              --          74,291

      Off-balance sheet products                 9,153         5,988         5,235              10,758              9,253              --          40,387

      Total liabilities                         22,326        36,100        17,318              22,432              16,502             --         114,678

      Interest rate sensitivity
        gap (assets-liabilities)                 4,897        (5,473)       (2,282)              1,563              4,021           (321)           2,405




156   SNS REAAL Financial Statements 2008 risk management
In € millions                         B 1 Month        > 1 Month     > 3 Months    > 1 Year     > 5 Year      Provision      Total
                                                       B 3 Months      B 1 Year    B 5 Years

2007
Assets
Investments (interest-bearing)                  197            58           429           779        2,549            --           4,012
Derivatives                                     336           400           246            16           43            --           1,041
Loans and advances to customers            14,118           5,105         8,170       20,747        12,303          (207)      60,236
Loans and advances to banks                     633           410            49            --           --            --           1,092
Other assets                                   1,062           --            --            --           --            --           1,062
Cash and cash equivalents                      3,141           --            --            --           --            --           3,141

                                           19,487           5,973         8,894       21,542        14,895          (207)      70,584
Off-balance sheet products                     9,450       11,265         6,931           453        1,213            --       29,312

Total assets                               28,937          17,238        15,825       21,995        16,108          (207)      99,896


Liabilities
Participation cetificates and
  subordinated debt                             100           472         1,106            --           --            --           1,678
Debt certificates                              3,642       19,427         2,148        4,448         2,517            --       32,182
Derivatives                                      54           132           263           260          229            --             938
Savings                                        1,011        2,021         5,412        6,809         3,926            --       19,179
Other amounts due to customers                 3,965          753           538        1,154         1,436            --           7,846
Amounts due to banks                           3,533        1,183           350            --           --            --           5,066
Other liabilities                              1,484           --            --            --           --            --           1,484

                                           13,789          23,988         9,817       12,671         8,108            --       68,373
Off-balance sheet products                       19           160         8,843       11,851         8,439            --       29,312

Total liabilities                          13,808          24,148        18,660       24,522        16,547            --       97,685


Interest rate sensitivity
  gap (assets-liabilities)                 15,129          (6,910)       (2,835)      (2,527)         (439)         (207)          2,211


Effective interest rates SNS Bank
The table below shows the average effective interest rate percentages of SNS Bank throughout the year with respect to monetary
financial instruments not held for trading.

In percentages                                                                                                 2008          2007

Assets
Investments held for sale (interest bearing)                                                                       4.3%            4.2%
Mortgages                                                                                                          4.9%            4.8%
Property finance                                                                                                   5.8%            5.7%
Other loans and advances to customers                                                                              6.8%            9.7%
Loans and advances to banks                                                                                        3.5%            3.0%

Liabilities
Participation cetificates and subordinated debt                                                                    6.1%            5.9%
Debt certificates                                                                                                  4.7%            4.1%
Savings                                                                                                            3.7%            3.1%
Other amounts due to customers                                                                                     3.8%            4.3%
Amounts due to banks                                                                                               2.8%            2.5%




                                                                             SNS REAAL Financial Statements 2008 risk management           157
      Market risk - SNS Bank’s trading portfolio
      The market risk of SNS Bank’s trading portfolio is calculated daily in terms of Value-at-Risk (99%) and stress tests. The following
      tables show the limits for the different trading portfolios. The total limit in terms of VaR for the trading portfolio amounted to € 3
      million. The system of limits functioned well in 2008. The Value-at-Risk methodology consists of (Monte Carlo) scenario analyses.
      The underlying scenarios for the Monte Carlo method are based on historical data. Stress tests are carried out on a regular basis by
      all trading desks. These, too, have defined limits.

      In € thousands                                                                                        Limit
                                                                   Value-at-Risk (99% on daily basis)                           Stress test
                                                                        2008                    2007                   2008                   2007

      Client desk                                                                100                      100                   300                    300
      Money market desk foreign currency                                         600                      700                 1,800                  2,100
      Money market desk euro                                                     150                      500                   450                  1,500
      Capital market desk                                                        600                      400                 1,800                  1,200
      Interest rate desk                                                         150                      250                   450                    750
      Off-balance desk                                                           300                      800                   900                  2,400
      Equity desk                                                                500                      750                 1,500                  2,250
      Bond desk                                                                  850                      600                 2,550                  1,800

      Total                                                                    3,250                   4,100                  9,750              12,300


      2.3     Liquidity risk
      Liquidity risk is the risk that SNS Bank does not have (sufficient) funding and liquidity to meet its financial obligations in the short
      term. SNS Bank manages its exposure to this risk to the extent that the group has sufficient reserves at its disposal and always
      remains able to meet its financial obligations. The liquidity risk management has been organised in such a way that SNS Bank is
      capable of absorbing the impact of banking-specific stress factors, for example, tension in the money and capital markets.

      SNS Bank is the largest borrower within SNS REAAL. The bank has a broad investor base, an extensive range of financing
      instruments, and relatively easy access to the international money and capital markets. Due to the credit crisis, a number of
      instruments and markets were (temporarily) unavailable in 2008. In the first half of 2008, SNS Bank effected a large number of
      funding transactions, attracting € 4.6 billion of new funding. To further reinforce its liquidity position, SNS Bank effected three
      on-balance securitisation transactions in 2008, keeping practically all securities issued in its own books. These securities may serve
      as collateral for loans taken out at the ECB. In addition, SNS Bank greatly improved its position on the savings market, thanks to
      successful savings campaigns. Total savings volume increased by € 2.7 billion in 2008. In the beginning of 2009, SNS Bank further
      reinforced its liquidity position by issuing three-year State guaranteed funding in the amount of € 2 billion. For more information on
      funding methods on the capital market in 2008, see the chapter on Funding and credit ratings.
      SNS Bank’s low risk profile is emphasised as SNS Bank has no subprime mortgages, conduits / asset-backed commercial paper
      (ABCP) or Special Investment Vehicles (SIVs).

      The liquidity risk policy of SNS Bank has four elements:                          45 Liquidity position SNS Bank
      1 Liquidity management on a going concern basis
                                                                                   € millions
      2 Diversification in the funding portfolio
                                                                                   11,000
      3 Liquidity of assets
                                                                                   10,000
      4 Planning for unforeseen events                                              9,000
                                                                                    8,000
                                                                                    7,000
      SNS Bank’s liquidity risk management is based on the composition of           6,000
      its funding portfolio as a going concern. The daily cash management           5,000
      activities of the central treasury are in line with the operational           4,000
                                                                                    3,000
      requirements of SNS Bank and take place in accordance with the                2,000
      regulatory guidelines in this field. An important indicator of liquidity      1,000
      risk is the surplus in the liquidity test of the Dutch Central Bank               0
                                                                                                   2004         2005     2006         2007      2008
      (weekly and monthly). A going concern situation is assumed with
      expiration of existing funding and a certain degree of stress on                      Cash
      savings and credits.                                                                  Liquid assets


      SNS Bank strives to diversify the funding portfolio with respect to maturity, instrument, currency and type of investor. SNS Bank
      also has a large portfolio of very liquid assets, such as government bonds. The graph above presents the development of the
      liquidity position (cash position + liquid assets) for 2008. The graph shows that, SNS Bank succeeded in maintaining a strong
      liquidity position in spite of unfavourable market conditions.



158   SNS REAAL Financial Statements 2008 risk management
In addition to the above, SNS Bank also has a liquidity contingency plan that contains planning for unforeseen events. The bank also
periodically carries out stress tests across the bank in which liquidity risk plays an important role. This test takes into account the
drying-up of funding on the money and capital markets as well as a downgrade of SNS Bank with 2 notches by the rating agencies.
For a more detailed description of the stress tests, reference is made to capital management in Chapter 7, Risk Management.

Management of liquidity risks
Liquidity risks are managed on the basis of the net (assets less liabilities) nominal amounts due per contractual maturity in a
liquidity gap profile. The table below represents the gap profile of SNS Bank at year-end 2007 and 2008 on the basis of the
remaining contractual maturity. With regard to the table below, it should be noted that savings due on demand and other amounts
due to clients on demand are presented in the ‘less than one month’ bucket. In practice, the products are presented with a longer
liquidity profile. For mortgages, the contractual maturity is maintained without taking into account prepayments.


In € millions                      B 1 Month      > 1 Month      > 3 Months       > 1 Year      > 5 Years     Provision       Total
                                                  B 3 Months       B 1 Year       B 5 Years

2008
Assets
Investments (interest-bearing)             110             91            550           1,261         1,901            --            3,913
Derivatives                                 34             45            209             437           388            --            1,113
Loans and advances
  to customers                           1,998            446         2,390            4,704        56,501          (245)       65,794
Loans and advances to banks              2,752              4              6              21            --            --            2,783
Other assets                             2,972             --             --             196            --           (76)           3,092

                                         7,866            586         3,155            6,619        58,790          (321)       76,695

Liabilities
Share holders' equity                       --             --             --              --         2,404            --            2,404
Participation certificates
  and subordinated debts                    --             --            136             422         1,131            --            1,689
Debt certificates                          574          1,531         3,111            9,397        15,669            --        30,282
Derivatives                                 46             64            265             909           860            --            2,144
Savings                                 13,404          1,916         3,828            2,207           504            --        21,859
Other amounts due
  to customers                           6,040            417         1,285            1,145         1,297            --        10,184
Loans and advances to banks              2,542            185         1,221            1,234         1,309            --            6,491
Other liabilities                        1,642             --             --              --            --            --            1,642

                                        24,248          4,113         9,846           15,314        23,174            --        76,695

Net liquidity gap                      (16,382)        (3,527)       (6,691)          (8,695)       35,616          (321)             --




                                                                              SNS REAAL Financial Statements 2008 risk management           159
      In € millions                          B 1 Month      > 1 Month      > 3 Months     > 1 Year        > 5 Years    Provision         Total
                                                            B 3 Months       B 1 Year     B 5 Years

      2007
      Assets
      Investments (interest-bearing)                  185           178            513         1,383          1,753             --          4,012
      Derivatives                                     27             47            106            475            386            --          1,041
      Loans and advances to customers              1,683            995          1,429         3,075         53,261           (207)       60,236
      Loans and advances to banks                     500            --             14                8          570            --          1,092
      Other assets                                 4,203             --             --             --             --            --          4,203

                                                   6,598          1,220          2,062         4,941         55,970           (207)       70,584

      Liabilities
      Shareholders’ equity                            --             --             --             --         2,211             --          2,211
      Participation certificates
        and subordinated debts                        --             --              5            501         1,172             --          1,678
      Debt certificates                               566           892          2,648        11,624         16,452             --        32,182
      Derivatives                                     58             23            303            325            229            --               938
      Savings                                     17,367             75            779            758            200            --        19,179
      Other amounts due to customers               5,731            233            208            533         1,141             --          7,846
      Loans and advances to banks                  1,293          1,375            207            775         1,416             --          5,066
      Other liabilities                            1,484             --             --             --             --            --          1,484

                                                  26,499          2,598          4,150        14,516         22,821             --        70,584

      Net liquidity gap                          (19,901)        (1,378)       (2,088)        (9,575)        33,149           (207)               --



      3      Risk management Insurer

      3.1 Insurance risk
      Insurance risk is the risk that volume and timing of future cash outflows in connection with, for example, mortality, disability,
      non-life claims development or insurance behaviour deviate from the insurer’s expectations.

      The insurance portfolio has a moderate risk profile. The life portfolio contains both insurance policies with a short-life risk and a
      longevity risk. All large non-life sectors are represented in the non-life portfolio. Both the life and the non-life insurance portfolios
      focus on the retail and SME markets in the Netherlands.

      Insurance risk policy
      The insurer manages its insurance risk using a system of procedures and criteria for product development, acceptance and
      provisioning. Risks that do not meet the criteria or risks that exceed preset limits - if accepted - are transferred to a reinsurance
      company as much as possible.
      A panel consisting of representatives of the Board of Directors of REAAL Verzekeringen, the Finance & Control department and the
      Actuarial department regularly monitor the portfolio’s development. For life insurance activities, this includes monitoring
      developments in expenses, interest and turnover; for the non-life insurance activities, the development of premiums and loss ratios
      are analysed by segment.

      Since AXA and Winterthur joined REAAL, REAAL Verzekeringen has been pursuing a joint risk policy. DBV will mainly continue to
      operate independently. As from 2008, the activities of Zwitserleven will also be included in REAAL Verzekeringen’s activities.

      Principles for determining the insurance risk
      The technical provisions for life and disability risks are generally based on the premium calculation principles, taking into account
      market-specific assumptions for the Netherlands and the cost level of the insurance activities.
      The provisions for non-life risks (including fire, bodily injury, and liability) are based on analysis of historical claims experience from
      REAAL Verzekeringen’s own portfolio.

      In the paragraphs below, the insurance risks for life, non-life and related reinsurance are discussed in more detail.




160   SNS REAAL Financial Statements 2008 risk management
3.1.1   Insurance risk Life
Composition of the life insurance portfolio
The life insurance portfolio contains individual and group insurance policies. Individual insurance policies are sold as policies with
cash benefits (traditional policies) and with payment in units (investment or unit-linked insurance policies). Within the individual
life insurance portfolio, the primary focus is on unit-linked policies, mortgage-related endowment policies and the pension and life
annuity insurance policies. The group insurance portfolio consists of both traditional contracts, for which the insurer bears the
investment risk, as well as segregated pools, for which the policyholder bears the investment risk.


Category                         Main conditions                  Main risks                  Guarantees              Profit sharing/interest
                                                                                             policyholders                 rate rebates
                                                                                                                          policyholders

Individual insurance
policies in cash
                                                                                        Interest rate equal tot
Savings mortgages                                            Mortality, expenses                                                No
                                                                                        mortgage interest rate
                              Premium (sum of risk                                                                       Interest rate rebate
                                premium, savings             Interest, mortality,
Life annuity                                                                              Life annuity is fixed           upon payment of
                                premium and cost                  expenses
                                                                                                                           single premium
                             loadings) is fixed from
                                                                                                                           Part of portfolio:
Risk                           the commencement              Mortality, expenses
                                                                                                                       company profit share
                             date of contract. With
                               the exception of the                                                                        Part of portfolio:
                                savings mortgage:                                                                          company profit
                              the savings premium            Interest, mortality,                                     share;part of portfolio:
Savings insurance
                               here is based on the               expenses                Total mortality ben-          interest rate rebate;
                             mortgage interest rate.                                      efit upon death and/         and part of portfolio:
                               When the mortgage                                           or maturity is fixed      share in surplus interest
                             interest rate changes,                                                                        Part of portfolio:
                              the savings premium                                                                      company profit share
                                                             Interest, mortality,
Funeral insurance                  also changes                                                                        at payment of single
                                                                  expenses
                                                                                                                       premium: sometimes
                                                                                                                         interest rate rebate
                                                                                             A number of
Individual life                                                                          insurance contracts
                             Variable premium, cost
insurance policies in                                        Mortality, expenses           carry a minimum                      No
                              and risk loading fixed
investment units                                                                         guaranteed return at
                                                                                          the maturity date
                                Premiums and the
                                                                                                                      Part of portfolio: share
                               cost loading are set
Group insurance                                              Interest, mortality,             Guaranteed               in surplus interest;
                                 for the durations
policies in cash                                                  expenses                  minimum return               part of portfolio:
                                  of the contract
                                                                                                                       interest rate rebate
                                 (usually 5 years)
                                                                                            On the maturity
                                Premiums and the                                         date of the contract,
Group insurance                cost loading are set                                        the amount of the
                                                                                                                         Share in surplus
policies in                      for the durations           Mortality, expenses            deposit equals at
                                                                                                                             interest
investment units                  of the contract                                            least the rights
                                 (usually 5 years)                                       accrued based on the
                                                                                         contract’s principles


Co-insurance
Various contracts were concluded in co-insurance with one or more other insurers, and have been spread across some 20 contracts.
In general, the risk estimates are based on information provided by the administrating company. In the event of co-assurance, the
co-insurers are, in principle, each liable for their part of the total obligations. If a co-insurer defaults, the insurance liabilities will be
transferred to the remaining co-insurers. The total size of the provisions for incoming co-insurance amounts to € 103 million (2007:
€ 112 million) and is spread across several contracts and insurers. In view of the limited interest and the diversification over several
insurers this concerns a limited risk.

Concentration of risk
In life insurance, the concentration of risks mainly occurs within the group insurance portfolio. The participants in a group contract
often work at the same location or undertake joint activities, which brings about a concentration of risks.




                                                                                 SNS REAAL Financial Statements 2008 risk management              161
      Such concentration of risk has been partly offset in 2008 by the use of reinsurance. For more information see paragraph 3.1.3
      ‘Insurance risk reinsurance’.

      The size of the various insurance categories is presented below in terms of the most important financial units:

      In € millions                           Annual premium       Insured capital      Insured annuity         Technical           Risk capital
                                                                                                                provisions
                                               2008       2007     2008      2007       2008       2007       2008     2007        2008     2007

      Individual insurance
        policies in cash                          739       665    61,095   53,830         756       528      18,181   14,116      46,320   41,597
      Savings mortgages                           302       306    15,778   15,797             6          6   3,977     3,811      11,832   12,031
      Life annuity                                    1      --        --        --        675       491      4,620     3,329        356       253
      Risk                                        123       107    27,495   23,953          63        19        348          302   27,873   23,920
      Savings insurance                           266       206    15,084   11,422          12        12      8,295     5,779      4,169     3,561
      Funeral insurance                            47        46    2,738     2,658          --        --        941          895   2,090     1,832


      Individual life insurance
        policies in investment units              933       821    50,836   43,947         498       488      6,504     6,568      48,569   41,791


      Group insurance policies in cash            263        75    10,004    1,537       1,584       618      5,730     2,118      23,627    5,038


      Group insurance policies
       in investment units                        331        58    9,384         54      1,133       305      4,567          885   15,513    3,229


      Reinsurance risk                             (8)       (6)    (476)       (469)       --        --        (13)         (14) (1,962) (1,545)
      Proportional reinsurance                    (11)      (10)    (540)       (566)       --        (1)      (154)     (173) (2,083)        (433)

      Total                                     2,247     1,603 130,303     98,333       3,971     1,938      34,815   23,500 129,984       89,677


      Insurance risks for the life insurance portfolio
      A life insurance policy entitles the policyholder to death benefits and/or a benefit payable on the maturity date of the policy.

      The most distinctive risk with respect to life insurance policies is the mortality risk. This risk mainly affects the duration and timing
      of the payment of the insured cash flows. The mortality risk indicates the death benefit risk of the policyholder dying earlier than
      calculated (short-life risk). In case of an endowment policy, the mortality risk for the insurer is that the policyholder might live
      longer than expected (longevity risk). The financial impact of the difference between the calculated timing of mortality and the
      realised mortality can be substantial, particularly with longevity risk.

      Other insurance risks for the life insurance portfolio are the risk of disability (the policyholder becomes incapacitated for work) and
      risks associated with the insurance behaviour of policyholders, such as lapse and early surrender (termination of the policy before
      the maturity date), and conversion to a paid-up status (whereby the policyholder terminates the periodic premium payment before
      the maturity date). For the disability risk, see also paragraph 3.1.2 ‘Insurance risk Non-Life’.

      Life insurance portfolio - Investment risk and interest rate guarantees
      With both traditional and unit-linked insurance contracts, the policyholder pays regular premiums and/or a single premium. For
      traditional policies, the insurer bears the investment risk of its commitments to policyholders. When a benefit or annuity payment
      is due, the insurer pays the policyholder a predetermined nominal amount. In contrast, on unit-linked contracts the insurer does
      not run a risk on the amount paid out. This insured amount is dependent on the value of the funds in which the units have been
      invested. The policyholder therefore bears the investment risk.

      In a number of cases, interest rate guarantees were issued for individual and group unit-linked insurance contracts. At the insurer,
      these interest guarantees pertain to an amount of € 4.4 billion of the total provision. See also the final table of paragraph 3.2.1
      ‘Interest rate risk’.

      A guaranteed minimum return at maturity applies to the individual unit-linked insurance policies with guarantee. In the intervening
      period, the technical provision is at least equal to the investment increased by the guarantee rate, taking into account the
      allowance for withdrawals, expenses and risk premiums as well as mortality, lapse and early surrender.




162   SNS REAAL Financial Statements 2008 risk management
In the case of group insurance policies with segregated pools, the contracting party bears the investment risk in principle. On the
expiry date of the contract, however, there should at least be a provision for contractual accrued rights. To compensate for
investment losses (up to a certain amount), a provision is created from premium loadings for a number of contracts where
necessary. If this buffer turns out to be insufficient on the expiry date of the contract, the remaining shortfall is then for the risk of
the insurer.

Managing risks in the life insurance portfolio
Risks are managed by means of risk policy (see also 3.1.3 ‘Insurance risk reinsurance’ and 3.2. ‘Market risk’), by understanding the
risk factors and by reviewing them.

Developments in the insurance risks of mortality and early surrender are investigated annually. The results of this investigation are
used for setting prices for new life insurance contracts and for the valuation of the insurance portfolio (embedded value). Risk
diversification in the composition of the life insurance portfolio is also aimed for. In addition, mismatches in connection with the
trend-based development of insurance risks (including the mortality trend) are limited as far as possible. Furthermore, an active
reinsurance policy is pursued. Uncertainties are further avoided by, for example, an adequate process control and adequate
monitoring procedures, and clearly documenting the insurance risks in agreements.

The effects of parameter changes observed in the context of embedded value provide insight into the portfolio’s sensitivity to
changes in risk exposure. As regards the operational parameters, the sensitivity resulting from changes in mortality and disability
probabilities, surrender probabilities and costs was investigated. This has shown that, relatively speaking, the insurer is less
sensitive to changes in assumptions on mortality and disability than with regard to the other assumptions. With regard to
mortality, the longevity risk in, for example, annuities and pension insurance is set off, from a cash perspective, by the short-life
risk in the other insurance policies.

As the technical provisions have been calculated on the basis of historical principles for premium calculation, changes in the
above-mentioned parameters do not immediately lead to an adjustment of the provisions in the balance sheet, and will not be
reflected immediately in the results. The related results become visible gradually, spread over the years to come.

The table below includes the sensitivity analysis of the embedded value of REAAL Verzekeringen.

In € millions                                                                                                                     2008       2007

Embedded value                                                                                                                     3,973      2,715
Impact of the sensitivities 1:
- 10% lower surrender                                                                                                                 71          42
- 5% lower mortality/disability                                                                                                       72          17
- 10% lower expenses                                                                                                                 107          85


At reporting dates, the adequacy of technical provisions for financial reporting is determined in accordance with IFRS and by the
Dutch Central Bank. This review shows the overall effect of the risk parameters. This outcome is included in the solvency
assessment.

For an explanation of investment and interest rate risk management, see paragraph 3.2 ‘Market risk’. The insurer also seeks to
maintain adequate solvency buffers (see chapter 7).

3.1.2   Insurance risk Non-Life
Composition of non-life insurance portfolio
The emphasis of the insurer’s non-life insurance portfolio is on four main product categories: Fire, Health and Accident, Motor
Vehicles and Other. These insurance policies are mostly sold through authorised agents, intermediaries and the distribution
channel of SNS Bank to retail and SME clients. The insurer is also active in a fifth segment: Transport. This segment is mostly
operated by co-assurance by the insurance exchange.

Co-insurance
REAAL Verzekeringen is represented at the Rotterdam Insurance Exchange. Risks in the segments Fire, Transport (including Marine)
and Miscellaneous are underwritten there. REAAL Verzekeringen mainly aims at the middle segment as well as the small enterprises
segment of the corporate insurance market. In 2008, REAAL Verzekeringen’s co-insurance portfolio posted a gross earned premium
income of € 98 million.



1) In the 2007 figures, the sensitivities of REAAL Verzekeringen and AXA NL were based on different methods, however this does not have great impact
   on the operational sensitivities.




                                                                                   SNS REAAL Financial Statements 2008 risk management                 163
      Catastrophe
      The insurer reinsures its catastrophe risk resulting from perils of nature, such as storms and terrorism (see paragraph 3.1.3 ‘Insurance
      risk reinsurance’).
      Catastrophes resulting from acts of violence, nuclear incidents or flooding are excluded under the policy conditions.

      Combined ratio and claims ratio
      The 2008 combined ratio was 92.3% (2007: 95.9%, excluding the one-off impact of the Kyrill storm) and the claims ratio amounted to
      50.1% (2007: 53.2%, excluding Kyrill). This means that the combined ratio remained well within the long-term target of 97%.

      Concentration of risk
      Geographically, the non-life portfolio risk is almost entirely concentrated in the Netherlands. Concentration of insurance risks
      occurs in the Fire segment, where storm risk plays an important role. Concentration of risk can also be associated with blocks of
      flats, rows of houses and office buildings.

      Concentration of risk can also arise in the group accident portfolio and the group disability schemes. The underwriting of group
      disability policies related to the Dutch disability act (WIA) takes place in co-insurance with another Dutch insurer. In this
      collaboration, both insurers bear half of the insurance risk; the other insurer carries out the administration. See paragraph 3.1.3
      ‘Insurance risk reinsurance’ for more information about self-retention and reinsurance of these risks.

          46 Gross premium income Non-life 2008                                        47 Gross provision Non-life 2008



        13%                                                                          34%

        16%                                                                          21%

        36%                                                                          30%

        27%                                                                           9%

         8%                                                                           6%




              Accident and Health                                                          Accident and Health
              Fire                                                                         Fire
              Transport                                                                    Transport
              Motor                                                                        Motor
              Other                                                                        Other



      The diagrams above illustrate the distribution of gross premium income and gross claims reserves across the various product
      categories. The premium volume and the claims reserves for the Transport category originate almost entirely from co-insurance.
      The diagrams illustrate the long-term non-life obligations of disability insurance policies (AOV): compared to the limited share that
      the Accident and Health category has in the total premium there is a relatively large claims reserve. The reverse applies to the Fire
      segment. Due to the rapid settlement of fire claims, this product category, which generates more than a quarter of the premium
      income, only represents a small part of the total claims reserves.

      The total gross premium income of the non-life insurance activities in 2008 amounted to € 809 million (2007: € 590 million). In 2008,
      € 59 million (2007: € 48 million) in reinsurance premium was paid. This is 7.3% (2007: 8.1%) of the gross premium income. At
      year-end 2008, the gross claims reserve amounted to € 1,333 million (2007: € 1,456 million). For more information on risk retention
      and incoming reinsurance, see paragraph 3.1.3 ‘Insurance risk reinsurance’.




164   SNS REAAL Financial Statements 2008 risk management
Analysis of the technical result in non-life insurance:

In € millions                          Total                Fire            Accident          Motor             Transport            Other
                                                                           and health         vehicle                              segments
                                  2008      2007       2008      2007     2008     2007     2008     2007      2008    2007       2008    2007

Gross earned premium                 809       590        216      169     128        62     289        225      68         51     108        83
Gross claims incurred                408       322        113      85       40       (28)    165        174      54         41      36        50

                                     401       268        103      84       88        90     124        51       14         10      72        33

Balance reinsurance                  (64)      (21)       (13)     (19)     (9)      (16)     (2)       (4)      (1)        2      (39)       16

                                     337       247        90       65       79        74     122        47       13         12      33        49

Operational expenses
 and profit sharing                 (332)      (243)    (100)      (78)    (46)      (24)    (121)      (90)    (25)    (20)       (40)    (31)
Other technical expenses               6        (8)       --       (1)      --        (4)     (1)        2       --         (2)      4        (3)

Operating result                       8        (4)       (10)     (14)     33        46      --        (41)    (12)    (10)        (3)       15

Investment income                     20        26         1        3        8          8      6         8        1         1        4        6

Technical result                      28        22        (9)      (11)     41        54       6        (33)    (11)        (9)      1        21


The claims incurred (claim payments including changes to claims reserves) per segment is compared to the gross premium, while
the development of the ratio between the two, the claim payment ratio, serves as an indicator. If necessary, the rates and/or
reserves may be adjusted.

Insurance risks non-life insurance portfolio
The insurance risk for REAAL Verzekeringen’s non-life insurance portfolio is primarily concentrated on covering the risks resulting
from third party liability (WA), bodily injury, general third party liability, disability and catastrophe. This is mainly because of the
size and the long-term character of these claims.

 Motor vehicle third party injury liability
   Motor vehicle liability is a third-party liability insurance to cover bodily injury, medical care and/or loss of income following a
   road traffic accident. REAAL Verzekeringen provides this product through all of its distribution channels.

 General third party liability (GTPL)
   We offer liability insurance to both private individuals and the business segment; the latter can include professional indemnity
   coverage. REAAL Verzekeringen provides this product through all of its distribution channels.

 Disability
   The disability cover in the insurer’s portfolio includes both individual coverage for self-employed people and (semi-)group
   coverage for employees. The latter group also includes the additional cover to the WIA, which is offered through a co-insurance
   partnership.

 Fire and other damage to property
   Fire insurance offers policyholders financial cover against damage to their property and material consequences of business
   interruptions as a result of the damage sustained.

Fraud risks non-life insurance portfolio
Fraudulent claims are defined as claims submitted by policyholders for non-events or claims in which the extent of the damage is
exaggerated. Fraud prevention and detection are in the hands of Fraud, a separate operational department. In addition, supervision
of internal fraud takes place decentralised by various departments, such as Acceptance, Claims and Claims Handling.

Managing the risks for the non-life insurance portfolio
Risks are managed by means of risk policy (see also 3.1.3 ‘Insurance risk reinsurance’ and 3.2. ‘Market risk’), by understanding the
risk factors and by reviewing them.




                                                                                  SNS REAAL Financial Statements 2008 risk management              165
      The developments in the insurance risks non-life are examined every year and Economic Capital calculations are made. The results
      are used to determine rates and the acceptance conditions of non-life insurance policies. The focus on the retail and SME markets
      has resulted in an insurance portfolio characterised by diversification across various segments and sub-segments, on the one hand,
      and the similarity in the type of insured risks, on the other. As a result, the portfolio has a relatively low variation in the insurance
      result. Furthermore, an active reinsurance policy is pursued. Uncertainties are further avoided by an adequate process control,
      monitoring procedures, and clearly documenting the insurance risks in agreements.

      The effects of changes in parameters, which can be observed in connection with the Economic Capital calculations, provide insight
      into the degree of risk. The table below shows the sensitivity of the results after tax in the event of a 10% increase or a 10% decrease
      in non-life claims. The sensitivity is based on a one-off increase or decrease of the realised claims of non-life insurance policies.

      In € millions                                                                                            Result            Shareholders’
                                                                                                                                    equity
                                                                                                          2008        2007       2008           2007

      Non-life claims + 10%                                                                                   (31)       (22)      (31)           (22)
      Non-life claims – 10%                                                                                    31         22        31             22


      The IBNR provision (provision for incurred but not reported claims and run-offs on reported claims) is determined quarterly, based
      on the latest analysis of run-off figures from our own portfolio. In addition, each half year, a liability adequacy test is carried out on
      the claims reserves (including IBNR provision).

      Realised claims with a run-off of more than one year
      The insurer has assigned specialised departments to the handling and run-off of (bodily injury) claims. The experts in these
      departments handle claims on an item-by-item basis, make estimates on the size of the claim and monitor progress on claims
      handling. Claims with a run-off period of more than one year include disability claims, bodily injury claims and liability claims.

      Characteristics of the Provision for recurrent disability annuity benefits
      For non-life, disability liabilities include in-force payments for claims that stem from the individual and the semi-group insurance
      portfolio. Disability benefits in actual payment relating to life insurances concern supplementary coverages within a life insurance
      contract. The table below provides a summary of the key figures for the regular disability benefits provision at year-end 2008.


      In € thousands                                                                       Life               Non-Life                  Total
                                                                                        insurance            insurance
                                                                                     2008       2007      2008        2007       2008           2007

      Provision for periodic payments                                                61,950     82,438   248,364     239,851    310,314    322,289
      Number of commenced annuities                                                   1,339      1,472     4,396        4,770    5,735          6,242
      Average annual annuity                                                            9.7       10.2       14.4       13.8      13.3           12.9


      Characteristics of claims reserve for other claims with run-off of more than one year
      The other claims with a run-off longer than one year generally comprise bodily injury and liability claims. These risks are more
      diverse than the disability risks; this diversity also applies to the expected duration of the claims payment. Since 2004, the policy of
      the non-life insurer with respect to the settlement of these claims has been tightened with the aim of settlement of claims within
      five years. In addition, a start was made in 2005 with the process of ‘accelerated’ claims settlement for claims originating from
      older claim years. This has resulted in the settlement of a large number of claim files that had been open for some time.

      Claims development history 2008 and 2007
      The table on page 167 provides a summary of the run-off on claims reserves for old claim years. This summary was compiled for the
      financial years 2008 and 2007 respectively and shows the non-life insurance results net of reinsurance. The earn-out scheme, which
      has been agreed for the former NHL portfolio, has not been included in the development of the claims reserve outlined below.
      The run-off on the provisions for the reinsurance captive has also not been included. The size of the gross provision for this captive
      was € 28 million at year-end 2008 (year-end 2007: € 37 million).




166   SNS REAAL Financial Statements 2008 risk management
In € thousands                               Provision     Acquisitions       Interest       Payments        Provision      On balance
                                                as of                          added                           as of         release/
                                             1 January                                                     31 December       run-off

2008
Claim years:
- 2004 and earlier                              588,089           15,343           7,228          71,245         503,495           35,920
- 2005                                            79,123           1,407             596          15,607          65,439               80
- 2006                                          119,855            1,135             706          21,574          74,476           25,646
- 2007                                          304,083               --           1,400         113,926         134,877           56,680

Total through 2007                            1,091,150           17,885           9,930         222,352         778,287         118,326
Total 2008                                                            --             711         237,724         294,632

Total net of reinsurance                                          17,885          10,641         460,076       1,072,919

2007
Claim years:
- 2003 and earlier                              192,871          366,957           4,192          34,599         520,597            8,824
- 2004                                            39,755          43,755             230           8,957          67,492            7,291
- 2005                                            51,324          54,160             239          13,370          79,123           13,230
- 2006                                          129,836           82,024             330          47,310         119,855           45,025

Total through 2006                              413,786          546,896           4,991         104,236         787,067           74,370
Total 2007                                                       126,613             390         180,334         304,083

Total net of reinsurance                                         673,509           5,381         284,570       1,091,150


3.1.3   Insurance risk reinsurance
Reinsurance policy
The reinsurance policy provides cover against technical insurance risks in the various insurance portfolios of both the life insurance
and non-life insurance business. In this case, the losses resulting from catastrophes are limited to levels that correspond with the
risk profile. The reinsurance policy is determined based on risk analysis for the various portfolios, the size of the portfolios, the
nature of the insurance risks, the results, the risk appetite and the financial strength of the company.

After the acquisition of AXA NL (i.e. AXA, Winterthur and DBV) in 2007, it was decided to combine the purchase of the reinsurance
programme as per 2008 for REAAL Verzekeringen (including Proteq and AXA NL), where possible. The main reasons for opting for a
combined programme versus separate programmes were economies of scale and the loss of reinsurance cover from the AXA Group.
Zwitserleven will also be involved in this.

The risk of terrorism is reinsured through the Nederlandse Reinsurancesmaatschappij voor Terrorismeschaden (Netherlands
Terrorism Risk Reinsurance Company (NHT)). In order to align the cover in the policy and the reinsurance cover through the NHT,
the cover for the terrorism risk has been limited to the maximum capacity of the NHT, € 1 billion.

REAAL Reassurantie SA
A number of risks from the non-life portfolio are partially reinsured with the Luxembourg-based reinsurance captive REAAL
Reassurantie SA – in particular, fire, catastrophe and Proteq’s portfolio. The captive offers reinsurance cover for risks of the non-life
insurer and Proteq Schadeverzekeringen.
The reinsurance captive is used, in principle, to cover the difference in risk appetite and financial strength of the different entities
and in relation to the Group. In addition, REAAL Verzekeringen purchases combined cover on the external reinsurance market.

The retentions and reinsured parts as indicated below reflect the consolidated figures of REAAL Reassurantie and REAAL
Verzekeringen.

Reinsurance REAAL Levensverzekeringen
Since 2006, REAAL Verzekeringen has had a fully integrated reinsurance programme for the mortality and disability portfolio.
This situation continued in 2008.

REAAL Verzekeringen purchases reinsurance from a relatively high level upwards (see the table below). In view of the risk profile and
the size of the portfolio, the retention of both the mortality and disability risks is in accordance with the underlying portfolio.




                                                                             SNS REAAL Financial Statements 2008 risk management            167
       For 2008, a combined reinsurance programme was purchased where possible, in which the former AXA and Winterthur portfolios
       have also been reinsured, besides the REAAL portfolio. The former Nieuw Hollandse Lloyd portfolio has also been reinsured within
       the combined reinsurance programme as from 2008. DBV has its own reinsurance programme.

       The negotiations on the renewal of the reinsurance contracts for 2009 has reached its final stages. The catastrophe contract was
       definitively concluded as per 1 January 2009 and is a combined contract for REAAL Verzekeringen. The capacity of this reinsurance
       cover was further increased with a view to the greater reinsured interest. For the other reinsurance contracts for the mortality and
       disability risks, a provisional reinsurance cover was agreed based on the conditions effective for 2008. Once a definitive cover has
       been agreed upon with the reinsurers, the definitive conditions will take effect with retroactive effect as per 1 January 2009.

       REAAL has concluded its reinsurance contracts at reinsurance companies that have at least an A-rating (S&P).

       In € thousands                                                                    2008                                       2009
                                                                  REAAL       AXA      Winter-      DBV       Zwitser-   REAAL      DBV        Zwitser-
                                                                                        thur                   leven                            leven

       Self-retention Life
       Coverage:
       - Mortality (risk capital) per event                         1,000      1,000         --         70         --       n.a.       n.a.         --
       - Mortality (risk capital) per event
         (DBV, concluded before 1-1-2007)                              --         --         --         58         --         --       n.a.         --
       - Mortality (risk capital) per event;
         individual portfolio                                          --         --         --         --        390         --         --        390
       - Mortality (risk capital) per event;
         group insurance portfolio                                     --         --         --         --        700         --         --        700
       - Disability (annual annuity) per event                         --         --         --           3        --         --           3        --
       - Disability (annual annuity x time) per event                 750         --        750         --         --         --         --         --
       - Disability (risk capital) per event                           --         --         --         30         --       n.a.         30         --
       - Disability (risk capital) per event (former AXA)              --      1,500         --         --         --     1,500          --         --
       - Catastrophe per event                                     15,000     15,000    15,000         150      2,000    15,000     15,000       2,000


       Reinsurance REAAL Schadeverzekeringen
      The non-life insurance activities have set the retention of the reinsurance contracts in line with the size of the various portfolios. Effective
      2008, an integrated reinsurance programme is in force, which now also includes the former AXA NL portfolio. The 2008 reinsurance
      programme made no specific distinction between the various sales channels, but large risks were reinsured on an individual basis based
      on their specific risk perspective.


      In addition to the regular protection of individual portfolios, REAAL Schadeverzekeringen has a catastrophe contract for natural perils
      (storm, hail) and accumulation within the fire portfolio.


      Proteq Schadeverzekeringen is included in the combined reinsurance programme of REAAL Schadeverzekeringen. In addition, Proteq
      purchased a number of underlying reinsurance policies from REAAL Reassurantie.


      The effects of the financial crisis were clearly visible during the renewal period for the 2009 contract year. One of these effects included
      the noticeably reduced availability of capacity in the market, which particularly impacted the placing of the catastrophe reinsurance
      contract. In addition, considerable upward pressure of premium rates could be detected. The general approach within the context of
      renewal was to add even more diversification within the reinsurance panels wherever possible in order to prevent REAAL from becoming
      too dependent on a few larger market players. Moreover, the distribution of risks is part of the total risk management.
      The point of departure for the 2009 reinsurance was to take out a (combined) cover for the existing portfolios of all entities of REAAL based
      on the reinsurance structure as in 2008. Compared to 2008, self-retention of a number of branches was increased in 2009. This was mainly
      for reasons of price/risk, partly in relation to the size of the underlying portfolio.


      As indicated in the paragraph ‘Reinsurance REAAL Levensverzekeringen’, the reinsurance contracts for occupational disability are
      currently being renewed for 2009. A provisional cover has been agreed for these reinsurance contracts on the basis of the conditions as
      effective in 2008. Once a definitive cover has been agreed upon with the reinsurers, the definitive conditions will take effect with
      retroactive effect as per 1 January 2009.




168    SNS REAAL Financial Statements 2008 risk management
In € thousands                                                                                                       2008            2009
                                                                                                             REAAL          AXA      REAAL

Self-retention REAAL non lIfe (including Proteq)
Coverage:
Fire                                        per event                                                          2,500        2,500     2,500
Motor third party liability                 per event                                                          2,000        2,000     2,500
Personal/business liability                 per event                                                            500          500      750
Accidents                                   per event                                                            500          500      500
Transport (up to 2006 NHL)                  per event                                                            700          700     1,000
- Disability (annual annuity)               per event                                                             --           --       --
- Disability (annual annuity x time)        per event                                                            750           --       --
- Disability (risk capital)                 per event                                                             --           --      n.a.
- Disability (risk capital)                 per event (former AXA)                                                --        1,500     1,500
- Catastrophe                               per event                                                        40,000         40,000   40,000


The non-life insurer carries out an active policy with regard to placing its reinsurance contracts. A distinction is made in the panel of
reinsurers in the ‘property’ programme (fire and catastrophe) and the ‘casualty’ programme (motor liability, general liability and
accidents). The claims handling in the casualty programme is characterised by its long lead time. Because of this long-term
character, the continuity of the panel is the main consideration in placing these programmes. The minimum rating of this
reinsurance panel is A+. A minimum rating of A- applies for the reinsurance of Fire and Catastrophe. The price aspect plays an
important role in this.

Proteq Schadeverzekeringen: Incoming disability insurance
Proteq Schadeverzekeringen has an incoming reinsurance contract that relates to a portfolio of disability risks. This contract has
not been continued since 2004 and is in a run-off phase. The premium in 2008 was therefore nil (2007: nil). At year-end 2008, the
gross claims reserve amounted to € 102 million (2007: € 127 million); after retrocession, the provision amounts to € 38 million (2007:
€ 50 million).

3.2     Market risk
The market risk of REAAL Verzekeringen reflects the fact that in the event of changes in the financial markets, the changes in the
value of investments (equities, property, fixed-income investments) do not match that of the liabilities. Changes in financial
markets therefore impact the result and total equity of REAAL Verzekeringen.

The market risks are measured and managed by the department Asset & Liability Management (ALM). This department reports
monthly to the ALCO REAAL. The main objective in 2008 was to determine the strategic investment mix of REAAL for 2009. This
analysis was finalised in the 3rd quarter of 2008. The ALCO REAAL and ALCO Group have approved the new strategic investment
mix. In 2008, actions were already taken to adapt the current mix to the proposed strategic investment mix.

To protect the equity position, a hedge was created for Zwitserleven’s portfolio. Swaptions were also purchased to hedge REAAL’s
solvency against any interest rate increase.
In the last quarter of 2008, the solvency’s interest rate sensitivity for decreases in interest rates was hedged using interest rate
swaps. For details on the (equity) hedge, see paragraph 5.3 ‘Hedging REAAL Verzekeringen’.

The table below shows the investment mix at year-end 2008 and 2007. In the fixed-income investment portfolio of REAAL
Verzekeringen, a strategic mix is also determined across the various fixed-income ratings categories. This is also part of the ALM/
investment plan. The increase of the underlying portfolio is related to the integration of the Zwitserleven portfolios into REAAL
Verzekeringen.

In € millions                                                                                      2008       2008          2007     2007
                                                                                                               %                      %

Interest-bearing investments                                                                       25,457        80%        15,133      69%
Equities and options                                                                                2,116         7%         2,494      12%
Investment property                                                                                   287         1%          248        1%
Mortgages                                                                                           3,956        12%         3,912      18%

Total                                                                                              31,816       100%        21,787     100%




                                                                             SNS REAAL Financial Statements 2008 risk management              169
      The starting point for the ALM policy of REAAL Verzekeringen is the ALM/investment plan, which is drawn up annually and which sets
      out the strategic investment policy. The 2010 plan will be adjusted in the spring, including the investments of DBV and Zwitserleven.
      In the ALM plan, a balance is sought between the risk and return within the restrictions implied by Value at Risk (VaR), solvency, the
      score in the Standard & Poor capital adequacy model and the impact on the (IFRS) result.

      For the ‘for own account and risk’ portfolio of REAAL Verzekeringen, the financial market risks are managed through a Value-at-Risk
      (VaR) system. In contrast to the duration of total equity, VaR is a risk indicator that can measure all market risks simultaneously.
      The VaR, expressed as a percentage of the fair value of equity, increased from 29% at year-end 2007 to 54.9% at year-end 2008, thus
      exceeding the current limit of 40%. This limit was exceeded due to an increase in the fair value of the liabilities and, consequently, a
      decrease in the fair value of equity. The VaR will be steered to below the limit by the implementation of a de-risking programme.

      The portfolio on which REAAL Verzekeringen runs a risk can be specified as follows:

      In € millions                                                                                                               2008      2007

      Investment property                                                                                                            287        248
      Interest-bearing investments                                                                                               25,457     15,133
      Equities and options                                                                                                         2,116     2,494
      Invested collateral securities lending                                                                                       2,310            --
      Derivatives                                                                                                                    620        119
      Reinsurance contracts                                                                                                          402        483
      Loans and advances to customers                                                                                              3,960     3,917
      Loans and advances to banks                                                                                                  1,929        539
      Other assets, no lending operations                                                                                          3,566     2,863
      Cash and cash equivalents                                                                                                    1,214     1,006

      Total                                                                                                                      41,861     26,802


      3.2.1   Interest rate risk
      Interest rate risk is a significant component of REAAL Verzekeringen’s market risk profile. It occurs when fixed-income assets and
      liabilities are not fully matched. Interest rate risk is expressed as movements in the result and/or fair value of equity in the event of
      fluctuating market rates. The duration of the liabilities is often longer than the duration of the investments; also, the duration of the
      liabilities is more sensitive to interest rate changes than the duration of the investments. REAAL Verzekeringen manages this risk
      partly by using interest rate derivatives: interest rate swaps for increasing the duration of the fixed-income investment portfolio
      and receiver swaptions for partially hedging the guarantees in traditional life insurance with guarantees and profit sharing. See
      paragraph 5.3 ‘Hedging REAAL Verzekeringen’ for more information.

      For products with only a guarantee, without profit sharing (but possibly with an interest rate rebate), liabilities are matched as far
      as is possible. The table below gives a breakdown of provisions for REAAL Verzekeringen’s own account and risk per type of profit
      sharing.

      In € millions                                                                                                               2008      2007

      Investment policies in cash
      With profit sharing (company profit sharing and share in surplus interest)                                                 10,696      6,303
      With interest rate rebate                                                                                                    4,385     3,068
      Without profit sharing                                                                                                       4,808     2,990
      Balance savings mortgages                                                                                                    3,855     3,686

      Total                                                                                                                      23,744     16,047


      The most significant quantification of interest rate risk is measured through duration analyses, scenario analyses and Value-at-Risk
      analyses.

      The duration of total equity indicates the impact on the fair value of total equity in the event of a parallel shift in the yield curve. In
      its analysis, REAAL Verzekeringen ignores already nearly matched investments and liabilities. This category includes savings
      policies built up with savings mortgages and the part of the balance sheet items on behalf of policyholders.

      The duration of total equity amounted to − 10.0 at year-end 2008 (year-end 2007: − 5.9). This is mainly caused because guarantees in
      insurance liabilities result in more inerest rate sensitivity of these insurance liabilities in a low interest rate environment. This effect
      is not completely countered in the investment portfolio, thus raising the level of interest rate sensitivity of the fair value of equity.



170   SNS REAAL Financial Statements 2008 risk management
For the company profit share portfolios of REAAL Verzekeringen, receiver swaptions have been purchased to reduce the risks
associated with embedded guarantees.

The table below shows the duration of assets and liabilities at year-end 2008 compared to year-end 2007.

                                                                                                                                 2008       2007

Duration of assets                                                                                                                  6.2        5.5
Duration of liabilities                                                                                                            10.1        7.0


Scenario analyses are used periodically to test the impact of changes in market yields on the result and fair value of equity.
The table below shows the impact of parallel shifts in interest rates of 1% as per the balance sheet date (indicative).
In reality, all balance sheet items with an underlying cash flow schedule (both assets and liabilities) change in value when the
interest rate changes. The fair value of total equity decreases in the event of a 1% decrease in interest rates by € 213 million (2007:
€ 120 million) and increases in the event of a 1% increase in interest rates by € 7 million (2007: € 30 million). This corresponds to the
negative duration of the market value of total equity: the duration of the insurance provision is longer than the duration of the
investments. The table below shows the impact net of taxation.

In € millions                                                                                            Interest rate + 1%     Interest rate – 1%
                                                                                                          2008        2007       2008       2007

Interest rate sensitivity fair value shareholder’s equity REAAL Verzekeringen
Investments                                                                                               (1,440)       (690)     1,685        800
Technical provisions insurance operations                                                                  1,364         630     (1,804)      (830)
Other assets and liabilities                                                                                   83         90        (94)       (90)

Shareholders’ equity                                                                                             7        30       (213)      (120)


The IFRS result and total equity change as a result of value changes of interest rate derivatives and the fixed-income portfolio classified
as available for sale. The effect of a 1% increase in interest rates on the result is € 204 million negative (2007: nil) and the effect of a 1%
decrease in interest rates on the result is € 258 million positive (2007: nil). In respect of total equity, this is € 1,142 million negative in the
event of a 1% increase in interest rates (2007: € 350 million negative). A 1% decrease in interest rates has an effect of € 1,226 million
positive (2007: € 350 million positive). The other balance sheet items remain unchanged in the IFRS balance sheet.

Compared to the previous year, the assets’ sensitivity valued on the basis of IFRS principles has clearly increased. The reasons for this
increase include the following:
 On the balance sheet of 2007, a major part of the fixed-income portfolio was classified as ‘held to maturity’, which means that this
   portfolio is not sensitive to changes in (market) interest rates within an IFRS framework. These assets have been reclassified as
   ‘available for sale’, as a result of which they have become sensitive to interest rate fluctuations under IFRS.
 The acquisition of Zwitserleven significantly increased the exposure of fixed-income securities, thus also increasing the investment
   portfolio’s sensitivity to interest rate fluctuations under IFRS.
 In the last quarter of 2008, the interest rate hedge on insurance activities was increased in order to protect solvency levels against a
   decrease in (market) interest rates. This interest rate hedge increases sensitivity to changes in interest rates compared to last year’s
   figures. Contrary to a major part of hedging instruments concluded previously, the interest rate hedge is not included in cash flow
   hedge accounting. Not applying hedge accounting on this hedge increases the impact of interest rate changes on the income
   statement.




                                                                                   SNS REAAL Financial Statements 2008 risk management                171
      The overview below shows the average effective interest percentages of the financial assets, the financial liabilities and the insurance
      provisions of REAAL Verzekeringen.

      In percentages                                                                                                           2008      2007

      Financial assets (not valued at fair value through profit or loss)
      Investments for own account and risk:
      - Held to maturity                                                                                                         4.3%      4.2%
      - Available for sale (excluding equities)                                                                                  4.8%      3.5%
      - Loans and receivables                                                                                                    3.3%      5.3%
      Loans and andvances to customers                                                                                           5.4%      5.0%

      Financial liabilities at amortised cost
      Subordinated debt                                                                                                          7.4%      6.5%
      Debt instruments                                                                                                           5.6%      5.0%


      Technical provisions insurance operations for own account and risk 1                                                       4.2%      4.2%
      Individual insurance policies in cash                                                                                      4.2%      4.3%
       - Savings mortgages                                                                                                       5.6%      5.6%
       - Life annuity                                                                                                            3.4%      3.4%
       - Other                                                                                                                   3.8%      3.9%
      Group insurance policies in cash                                                                                           3.9%      4.0%


      ) Before any interest rate rebate and initial costs
      1




      Life insurance contracts for account of policyholders
      For insurance policies for which policyholders carry the investment risk, the insurer does not, in principle, bear any risk relating to
      interest rates, prices, exchange rates or credit risks. Nevertheless, for some portfolios within this category, REAAL Verzekeringen
      has given policyholders a minimum guarantee on the maturity date of the policy. As a result, REAAL Verzekeringen bears the risks
      for these contracts regarding interest rates, pricing and exchange rate risks. When REAAL Verzekeringen must honour these
      guarantees, the associated expense is recognised in the income statement. The value of the guarantees within the portfolio
      ‘on behalf of policyholders’ is measured periodically. In 2008 no transactions were concluded to hedge the risk associated with the
      guarantees that were provided. The table below shows portions of the technical provisions in the REAAL Verzekeringen portfolio
      where some form of guarantee has been given.

      In € millions                                                                                                            2008      2007

      Insurance policies in investment units
      Without guarantee                                                                                                         6,717     6,051
      With guarantee                                                                                                            4,354     1,402

                                                                                                                               11,071     7,453


      3.2.2   Equity and investment property risk
      The equity and similar investments of REAAL Verzekeringen were valued at € 2,116 million at year-end 2008 (2007: € 2,492 million).
      The IFRS equities classification also includes investment funds that invest in other types of securities. The ALM policy is adjusted for
      this. The equity investments are spread over Europe, North America and the Far East. The increase in the equity exposure is related
      to the integration of the Zwitserleven portfolio. See subsection 5.3 Hedging REAAL Verzekeringen for the hedges of the equity
      portfolio.

      REAAL Verzekeringen periodically calculates the impact of changes in equity markets and property markets on the result and on
      total equity. The table below shows the results of this analysis at the balance sheet date net of taxation (indicative).

      In € millions                                                                                           Result            Total equity
                                                                                                          2008      2007       2008      2007

      Equities and options + 10%                                                                              19        (4)        62       119
      Equities and options – 10%                                                                             (16)          7      (58)     (116)
      Property + 10%                                                                                          21        19         21            19
      Property – 10%                                                                                         (21)      (19)       (21)      (19)




172   SNS REAAL Financial Statements 2008 risk management
3.2.3   Exchange rate risk
REAAL Verzekeringen faces exchange rate risk through a combination of investments and liabilities in foreign currencies that are
not perfectly matched.

In fixed-income investments, REAAL Verzekeringen maintains a policy whereby no exchange rate risk is permitted. The exchange
rate risk on fixed-income assets denominated in a foreign currency is hedged with currency swaps.

Foreign exchange risk also manifests itself in the equity investments of REAAL Verzekeringen. Of this exchange rate risk, after
netting the exchange rate risk in non-fixed income investments and liabilities, between 80% and 90% is structurally hedged using
forward exchange rate contracts. The table below gives an indication of the foreign currency position of REAAL Verzekeringen as at
the balance sheet date.

In € millions                                             Balance debit        Balance credit           Balance          Hedge derivatives
                                                          2008      2007       2008       2007       2008       2007      2008       2007

US dollar                                                    449       779         24         39       425        740       (369)     (659)
Japanese yen                                                  20         71        --         --        20         71        (19)      (66)
Pound Sterling                                               133       153            5       10       128        143       (121)     (147)
Swiss franc                                                   29         10        --         --        29         10        (19)       --
Australian dollar                                             --         29        33         33       (33)        (4)        --        (7)
Other                                                         47       105            1          2      46        103         (7)       --

Total                                                        678     1,147         63         84       615       1,063      (535)     (879)


The impact of changes in foreign exchange rates on the result, on fair value of total equity and solvency are measured periodically using
scenario analyses. The table below shows the indicative results of these analyses net of taxation as at the balance sheet date.

In € millions                                                                                           Result            Shareholders’
                                                                                                                             equity
                                                                                                     2008       2007      2008       2007

Currencies + 10%                                                                                            6      14            6      14
Currencies – 10%                                                                                        (6)       (14)        (6)      (14)


3.3     Credit risk
REAAL Verzekeringen recognises various types of credit risk. The main types are the credit risks in the investment portfolio and in
the loan portfolio to intermediaries. The mortgage loans of REAAL Verzekeringen are well covered and it concerns a relatively aged
portfolio. Consequently, the likelihood of non-payment is low and therefore the risk profile of the mortgage portfolio of REAAL
Verzekeringen is very low.

In the policy documents for the specific credit risk categories, the roles, authorities and responsibilities of employees and
committees are established, following a successively more senior layer of authorisation.

Management of credit risk within the fixed-income investment portfolio of REAAL Verzekeringen
The credit risk within the fixed-income investment portfolios of REAAL Verzekeringen is the risk that an issuer of a bond or a debtor
of a private placement loan can no longer meet its obligations. The strategic scope of the various investment grade categories
within the fixed-income portfolio is determined in an ALM context and laid down in mandates with the investment managers.
Periodically, it is tested and reports are made to ensure that the investment managers adhere to the mandates.

The fixed-income investment portfolios of REAAL Verzekeringen have only European and North American debtors, whereby no one
represents an interest of more than 10% in the fixed-income investment portfolio. The increase of the underlying portfolio is again
related to the integration of the Zwitserleven portfolio into REAAL Verzekeringen.




                                                                              SNS REAAL Financial Statements 2008 risk management            173
      In € millions                     Designated as fair Available for sale     Held to maturity        Loans and                 Total
                                       value through profit                                              receivables
                                             and loss
                                         2008       2007       2008