Taking action to deliver value

• Solvency ratio of 156%, pro forma for announced actions: 165%^[1] (half year 2016: 173%), well placed within target range despite market headwinds
• Value of new business of € 27 million, reflecting stable margins and reduced volumes. Taking action on product design and pricing
• Combined ratio (COR) of 103.1%, in the first 9 months reflecting exceptional weather in June, COR for this quarter was satisfactory at 97.7%, executing on pricing and cost reduction
• Gross written premiums in GI increased to € 1,135 million (9M 2015: € 1,068 million), exiting unprofitable and unattractive business segments
• On track to deliver on operational expenses target of € 610 million in 2016 and reducing target for 2018 to below € 530 million, reflecting progress and ambition on required cost reduction
• Committed to a targeted total cash dividend of € 130 million for 2016, to be determined in February 2017
• NN Group have reconfirmed their intention to make a public offer for Delta Lloyd. We have engaged with NN Group on their proposal and the benefits of a transaction

Hans van der Noordaa, Chairman of the Executive Board:

"We are taking action on our management priorities of capital, performance and customer. We have a clear capital management framework and our capital position is well placed in our target range, despite market headwinds. Our business is strong and we are taking decisive action to improve our performance. We expect to see the first results of these actions in 2017. We need to improve further our cost efficiency and we are lowering our operational expenses target for 2018 by € 30 million to € 530 million.
NN recently reconfirmed its intention to make a public offer for Delta Lloyd. We have engaged with NN on their proposal and the benefits of a transaction a number of times. We are not opposed to transactions that will create value for our shareholders and deliver benefits to other stakeholders."

Overview of first nine months of 2016

We continue to make good progress on our management priorities of capital, performance and customer. During the first nine months of 2016, we have substantially improved the group's capital position. In the first half, we successfully executed the rights issue, the sale of our shareholding in Van Lanschot and ALM actions. During the third quarter, we continued to deliver on management actions, including the announced merger of our Belgian and Dutch life activities, which is to provide a 5pp uplift from 2017. As anticipated, our SF solvency ratio has decreased to 156%, equivalent to 165% pro forma for announced actions, from 173% at end June, reflecting market headwinds. In particular the effect of a lower volatility adjustment and normalising markets after the 'safe haven' credit spread movements, arising following the Brexit referendum, faded. Markets remain volatile and there are ongoing regulatory developments, therefore we need to continue to improve the quality of our capital. In this respect, the implementation of the Partial Internal Model (PIM), which is on track for introduction in 2018, is critical.

Enhancing our business performance is another management priority. Our business is solid, but operational performance needs improvement, including further necessary cost reduction. During the first nine months, our commercial performance was mixed. In Life, value of new business (SII VNB) was € 27 million, and we are taking action to reduce costs and to improve pricing discipline and product design. We were satisfied our market share in defined contribution (DC) pension plans remained stable, despite a lower market volume. The combined ratio for the first nine months was 103.1% after a difficult half-year. Volumes in GI were up, and we are taking action to reduce costs and announce our exiting several unprofitable and unattractive business segments. Further cost reduction is critical to delivering acceptable returns. We are on track for 2016 and we have updated our operational expenses target to € 530 million from € 560 million in 2018. The proposed new pension scheme for Delta Lloyd employees will result in a pension obligation at stable, predictable costs.

We aim to be the preferred insurer for our customers and financial advisors, with a focus on excellent online distribution capabilities. We measure progress in customer preference by Net Promoter Score (NPS) and in preference among financial advisors through performance surveys. We were pleased to see that customer satisfaction (based on NPS score) for both OHRA and Delta Lloyd retail customers continued to show an upward trend during the period. At end September, 30% of the targeted Delta Lloyd customers actively used our online portals. At OHRA, 65% of its targeted customers interacted with OHRA online.

Supporting our ambition to create a positive sustainable impact, S&P Dow Jones Indices and RobecoSAM announced that Delta Lloyd has once again been included in the Dow Jones Sustainability Index (DJSI) World and the DJSI Europe.

Current developments

Delta Lloyd received an unsolicited and conditional proposal from NN Group for a possible cash offer at €5.30 per ordinary share on 2 October 2016. NN Group announced this proposal on 5 October and the Boards of Delta Lloyd rejected this proposal on 7 October 2016. The Boards of Delta Lloyd are of the view that the proposal announced by NN Group on 5 October 2016 substantially undervalues Delta Lloyd, its prospects and its strategic opportunities and fails to reflect an appropriate share of the benefits of Dutch consolidation. After this rejection, Delta Lloyd and NN Group engaged in a number of discussions and meetings including senior management of both companies, to discuss a potential transaction and to share its estimates of the substantial cost and capital benefits that a combination could deliver. Such interactions are ongoing.

Delta Lloyd estimates that a transaction with NN Group could deliver cost synergies of approximately € 200 million per year over and above our existing cost savings plans updated today. Delta Lloyd also estimates there to be substantial capital and other financial benefits from a combination with NN Group, including one off diversification and tax related capital benefits, the accelerated usage of the partial internal Solvency II model, financing, reinsurance and re-risking earnings uplifts. Delta Lloyd will make further announcements if and when required.

Outlook

We remain committed to a targeted total cash dividend of € 130 million for the year 2016 and to delivering on the targeted Solvency II net capital generation of € 200-250 million per year over time. Alongside the interim dividend paid at half-year, the final dividend will be determined in February 2017, taking into account our capital position and performance, market and regulatory developments. We are on track to meet our operational expenses target for 2016 and we have raised our ambition for 2018. We expect to receive a license for the general pension fund (APF) this year, which will contribute to building profitable volume in a sizeable market.

Interim Management Statement audio call on 16 November 2016

On Wednesday 16 November 2016, Delta Lloyd will host a conference call for analysts, which can also be followed via audiocast on our website.
Conference call:              16 November 2016, 10.30 am (CET)
                                               +31 20 716 8427 (English language), PIN code: 72183907#
This press release and the analyst presentation are also available at www.deltalloyd.com.

^[1] This figure includes the benefit of closing an unwanted duration gap at Delta Lloyd Leven (4pp) during October and the announced merger of our Belgian and Dutch Life activities (5pp), expected to close early 2017

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