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Embedded Value and Analysis of Change KBC Insurance business as at 31/12/2002. Agenda. KBC Life Insurance Activity & Scope Terminology ANAV (“Adjusted Net Asset Value”) Components Roll forward 2001-2002 VBI (“Value of Business In Force”) Components Assumptions Sensitivities

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Embedded Value and Analysis of Change KBC Insurance business as at 31/12/2002


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    1. Embedded Value and Analysis of ChangeKBC Insurance businessas at 31/12/2002

    2. Agenda • KBC Life Insurance Activity & Scope • Terminology • ANAV (“Adjusted Net Asset Value”) • Components • Roll forward 2001-2002 • VBI (“Value of Business In Force”) • Components • Assumptions • Sensitivities • Roll forward 2001-2002 • VNB at date of sale (“Value of New Business”)

    3. KBC Life Insurance Activity & Scope

    4. KBC Insurance Group: Life Activity (‘000 EUR)

    5. KBC Insurance Group: Life Activity Growth in Total Life Premium Income 1998-2002 (‘000 EUR) 2 230 521 203% 2500000 1 666 842 152% 1 867 037 170% 2000000 1 341 980 122% 970662 1 079 465 100% 1500000 1458562 1229163 170758 1000000 934502 1259859 500000 926707 437679 407478 408475 0 1998 1999 2000 2001 2002 Non Linked Unit Linked

    6. KBC Insurance Group: Life Activity Growth in Technical Provisions Life 1998-2002 (‘000 EUR) 8 697 296 199% 10000000 7 589 874 174% 9000000 6 783 772 155% 8000000 5 662 602 129% 2813191 7000000 4 373 520 100% 2952108 6000000 2285968 1195446 5000000 210779 4000000 3000000 5884105 4637766 4497804 4467156 4162741 2000000 1000000 0 1998 1999 2000 2001 2002 Non Linked Unit Linked

    7. Main Distribution Channels Life Activity • KBC • Bank branches • Savings and investment products • Credit-linked risk covers • Insurance agents and other • Savings products • Group insurance (Mainly SME, partially based upon referrals from bank branches) • Fidea • Brokerage • Vitis • Life operation services from Luxembourg

    8. Scope • Subsidiaries under review KBC Insurance Belgium + Fidea + Vitis Life total technical provisions: 8 163 364 Modelled: • 87 % of the mathematical reserves • 92.8 % of the total premium income in 2002 • 99.7 % of the new premium income in 2002 • Subsidiaries not under review Central European Subsidiaries (CSOB, Warta Vita, K&H Life,…) total technical provisions : 533 932

    9. Terminology

    10. Terminology KBC standard “Embedded Value” Embedded Value Embedded Value As investment for VBI**(PVFP- CostTied Surplus) PVFP* Value In Force ANAV ANAV TiedSurplusLife TiedSurplusLife PV TiedSurplus Life Shareholders Equity or = Economic Other Surplus Other Surplus Other Surplus Adjustments > Equity adjustments> Asset adjustments> Resilience Reserves> Tax assets and liab. Other Surplus = Tied Surplus Non Life + Other Tied Surplus +Free Surplus *PVFP = Present Value of Future Profits **VBI = Value of Business In Force

    11. Embedded Value: global figures (‘000 EUR)

    12. ANAV

    13. ANAV : Composition “Adjusted Net Asset Value” (ANAV) = [+]Shareholders Equity [+]Equity Adjustments • “Provision for financial risks” [+]/[-]Asset Adjustments • Unrealised capital gains on the investments, except for the bond investments in the life portfolio (“buy-and-hold”-philosophy) • Goodwill is deducted [+]Additional Reserves • Catastrophe and equalisation reserves • Additional reserves life [-]Tax assets and liabilities on the above

    14. ANAV : as at 31/12/2002 ('000 EUR) 1800000 +8458 +259007 1600000 +186752 1400000 -151513 1200000 1000000 -476892 800000 1590931 1416742 600000 400000 200000 0 ANAV equity adjustments asset adjustments shareholders equity tax assets and liab. additional reserves life additional reserves non life

    15. ANAV Change 31/12/2001 – 31/12/2002 3500000 +346868 3000000 2500000 -190080 2000000 1500000 -1185451 -91207 2536612 1000000 1416742 500000 0 Other Paid Dividends ANAV ANAV 31/12/2001 31/12/2002 Adjustments Asset Value Profit in 2002

    16. Value of Business In Force(“VBI”)

    17. KBC RBC requirements for Life business

    18. VBI: Economic Assumptions *Based on the bond yield in the long run

    19. VBI : Non Econonomic Assumptions • Expenses • Expenses are allocated to the different products and activities in such a way that the total expenses in the study equal the total expenses in the statutory accounts • Expenses increase with wage inflation % (2.80% pa) • Future expense reductions programs 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 on by product and distribution channel

    20. VBI Overview (‘000 EUR, only reserves of modelled business) *2001 Based on data of KBC Insurance Belgium

    21. VBI : Sensitivity Analysis Effect on VBI * The discount rate is changed consistently with the change in investment return

    22. Changing the solvency margin VBI : Sensitivity Analysis (‘000 EUR)

    23. VBI Change 31/12/2001 – 31/12/2002 (EUR) 550000000 +75793801 500000000 +37911029 +5664635 -11054525 450000000 -42569640 400000000 -57146590 350000000 -67822360 425142515 300000000 365918865 250000000 200000000 VBI 31/12/2001 VBI 31/12/2002 VNB as of 31/12/2002 Cashflow to ANAV Change in taxation Variances over 2002 Unwinding discounting Change econ.assumptions Change non econ. assumptions

    24. VBI Change 31/12/2001 – 31/12/2002 Effect of changing non economic assumptions: 5 664 635 EUR

    25. VBI Change 31/12/2001 – 31/12/2002 Effect of ‘new business’ sold in 2002 (as at 31/12/2002): 75 793 801 EUR (‘000 EUR)

    26. VBI Change 31/12/2001 – 31/12/2002 Effect of deviations during 2002: -11 054 525 EUR • Investment returns in 2002: - 23 206 453 EUR • Lapse, mortality, extra premium income, miscellaneous + 12 151 928 EUR Effect of changing prospective economic assumptions: - 110 392 000 EUR • - 42 569 640 EUR The impact of the tax reform in 2003 • -67 822 360 EUR • This amount is due to changing the interest expectations and the change in the expected risk premium on equity.

    27. Value of New Business

    28. VNB New business 2002 at date of sale (‘000 EUR) *Based on data of KBC Insurance Belgium APE Non Linked = regular premium + single premium / 10 APE Unit Linked = total premium / 10

    29. Review “B&W Deloitte reviewed the methodology used to calculate the embedded values, the value added by new business and the analysis of change in the value of inforce.” “B&W Deloitte reviewed the assumptions used in the calculation of the embedded value and the value added by new businesss for reasonableness based on the information available” “Based on our work and our validation report on the work carried out by KBC Insurance, we consider the embedded values, 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”

    30. Cautionary Statements “The calculation of embedded values necessarily makes numerous assumptions with respect to economic conditions, operating conditions, taxes, and other matters, many of which are beyond the KBC’s control. Although the assumptions used represent estimates which KBC Insurance and B&W Deloitte believe are reasonable, actual future experience will vary from that assumed in the calculation of the embedded value results, and such variation may be material. Deviations from assumed experience are normal and are to be expected. Even without any change in perceived environments, and in parameters used to reflect them, actual results will vary from those projected due to normal random fluctuations. Consequently, the inclusion of the embedded value herein should not be regarded as a representation by B&W Deloitte that the stream of future after-tax statutory profits discounted to produce these values will be achieved. The embedded value presented in this report is based on common actuarial practice with regard to valuation methodology and assumptions. The values are calculated on a deterministic basis. Therefore they do not necessarily capture the cost of any investment guarantees. Our work has not considered the impact of alternative valuation methodologies such as fair values. “

    31. Embedded Value and Analysis of ChangeKBC Insurance as at 31/12/2002