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KBC Group Life business Embedded value as at 31 Dec. 2004 and analysis of change and sensitivity. Foto gebouw. Disclosure date: 16 June 2005. Cautionary Statements.

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KBC GroupLife businessEmbedded value as at 31 Dec. 2004 and analysis of change and sensitivity

Foto gebouw

Disclosure date: 16 June 2005

cautionary statements
Cautionary Statements

Embedded Value is the result of cash-flow projections with underlyingassumptions and expectations. The values in this presentation are calculated on a deterministic basis.

Many assumptions such as general economic conditions, performance of financial markets, taxes, changes in laws, frequency and severity of insured loss events, mortality and morbidity levels and trends, and others, are beyond KBC’s control. A modification of an assumption can result in a significantly different Embedded Value. Deviations from assumed experience are normal and are to be expected. Even without any change in the parameters, actual results will vary from those projected due to normal random fluctuations.

Embedded Value cannot be considered as an absolute value. This value together with a sensitivity analysis allows the recipient to obtain an idea of the magnitude of the expected value created by their insurance activities.

Under no circumstances should the inclusion of the projections (including the relevant underlying assumptions and expectations) be regarded as a representation, warranty or prediction that the business will achieve or is likely to achieve any particular results.

  • Life insurance activity & scope
  • Terminology
  • ANAV (‘Adjusted Net Asset Value’)
    • Components
    • Roll forward 2003-2004
  • VBI (‘Value of Business In Force’)
    • Components
    • Assumptions
    • Sensitivities
    • Roll forward 2003-2004
  • VNB (‘Value of New Business’)
life business overview
Life business, overview

Growth in Life premium income 1998-2004 (in ’000 EUR)

3 609 717


2 547 557


2 230 521


1 666 842


1 867 037


1 341 980


1 079 465


Minor changes to published figures in order to improve model accuracy

life business overview5
Life business, overview

Growth in Technical Provisions, Life 1998-2004 (in ’000 EUR)

13 494 338309%

10 614 953243%

8 697 296199%

7 589 874174%

6 783 772155%

5 662 602129%

4 373 520100%

Minor changes to published figures in order to improve model accuracy


KBC standard

‘Embedded Value’

Embedded Value

Embedded Value




VBI**(PVFP- CostTied Surplus)

Value In Force







PV TiedSurplus Life




Other Allocated Surplus

Other Allocated Surplus

Other Allocated Surplus







> Equity adjustments> Asset adjustments> Resilience Reserves> Tax assets and liab.

Other Allocated Surplus = Tied Surplus Non Life + Other Tied Surplus

*PVFP = Present Value of Future Profit **VBI = Value of Business In Force

scope of current vbi figures
Scope of current VBI figures
  • Scope of review:

KBC Insurance Belgium + Fidea + Vitis Life: total technical provisions : 12 845 960 (000 euros)


    • 88% of the mathematical reserves
    • 96.8% of the total premium income in 2004
    • 99.8% of the new premium income in 2004
  • Group entities out of scope:

CEE subsidiaries (CSOB CR, CSOB SR, K&H Life, Warta Vita) and Secura: total technical provisions : 648 378 (000 euros)

embedded value overview
Embedded Value: overview

(in ’000 EUR)

* Some methodological changes took place in the calculation of the ‘tied surplus, life’

adjusted net asset value
Adjusted Net Asset Value

‘Adjusted Net Asset Value’ (ANAV) =

[+]Shareholders Equity

[+]Equity Adjustments

  • ‘Minority interests’

[+]/[-]Asset Adjustments

  • Unrealized capital gains on the investments, except for bond investments in the life portfolio (‘buy-and-hold’ philosophy)
  • Goodwill is deducted

[+]Additional Reserves

  • Catastrophe and equalization reserves
  • Additional reserves, life

[-]Tax assets and liabilities on the above

anav as at 31 12 2004
ANAV as at 31/12/2004

(in ’000 EUR)

value of business in force vbi non economic assumptions
Value of Business in Force (VBI): non-economic assumptions
  • Expenses
    • Expenses are allocated to the different products and activities in such a way that the total expenses in the study equals the total expenses in the statutory accounts
    • Expenses increase with expected wage inflation at 2-3% per annum
    • Future expense reduction programmes and synergies are not taken into account
  • Mortality
    • Assumptions based on most recent industry experience were used
  • Lapses
    • Assumptions based on annual experience, investigations of surrenders and paid-ups, with a reasonable safety margin
    • Assumptions are set by product and distribution channel
vbi economic assumptions
VBI, economic assumptions
  • Based on the bond yield in the long run
  • Weighted Average Cost of Capital, taking into account partial funding via subordinated loans
vbi overview
VBI, overview

(’000 EUR, only reserves of modelled business)

vbi sensitivity analysis
VBI, sensitivity analysis

Effect on VBI

* The discount rate is changed consistently with the change in investment return. No profit-sharing was allocated to the 4.75% guarantees in the policies.

value of new business vnb
Value of New Business (VNB)

New business, 2004 at date of sale

(‘000 EUR)

* Annualized Premium Equivalent (APE) is a measure of new business volume equal to 100% of regular premium on new contracts and 10% of single premiums


Lane Clark & Peacock Belgium reviewed the methodology and assumptions used by KBC Insurance in the determination of the Embedded Value at 31/12/2004, the Value of 2004 New Business and the analysis of the change in the value of in-force business for the Life Insurance activities of KBC Insurance.

It is the view of Lane Clark & Peacock Belgium, based on the data made available, that the assumptions used are reasonable and that the methodology used by KBC Insurance is in line with basic principles described in appropriate literature.

Our assignment included a review of the calculations.This review was not a detailed verification of the correctness of all calculations. This review was a limited high-level reasonableness check on the results and included a detailed review on a limited random sample of contracts of the insurance portfolio of KBC Insurance. No material issues have been discovered.

Therefore, based on our work and our validation report on the work carried out by KBC Insurance, we consider the embedded value, the value of new business and the analysis of the change in the value of in-force for the life business to be reasonable and suitable for inclusion as supplementary information to the Group’s consolidated accounts.

contact information
Contact information

Investor Relations Office :Luc CoolNele KindtMarina KanamoriTel. : +32 2 429 49 16 E-mail :

Visit for the latest update.