Obbligazione ASR Netherlands 5% ( XS1115800655 ) in EUR

ASR Netherlands

100 EUR ⇌

Paesi Bassi

XS1115800655 ( in EUR )

5% per anno ( pagato 1 volta l'anno)

perpetue

Prospetto opuscolo dell'obbligazione ASR Nederland XS1115800655 en EUR 5%, scadenza perpetue

30/09/2026 ( In 287 giorni )

ASR Nederland è una società di gestione patrimoniale che offre servizi di investimento e consulenza finanziaria ai clienti privati e istituzionali nei Paesi Bassi.

The Obbligazione issued by ASR Netherlands ( Netherlands ) , in EUR, with the ISIN code XS1115800655, pays a coupon of 5% per year.
The coupons are paid 1 time per year and the Obbligazione maturity is perpetue

Offering Circular dated 30 April 2019

ASR Nederland N.V.
500,000,000 Fixed to Fixed Rate Subordinated Notes due 2049

The 500,000,000 Fixed to Fixed Rate Subordinated Notes due 2049 (the Notes) are issued by ASR Nederland N.V. (the
Issuer).
The obligations of the Issuer under the Notes in respect of principal and interest constitute unsecured and subordinated
obligations of the Issuer, ranking pari passu without any preference amongst themselves and (a) junior to the claims of all
Senior Creditors of the Issuer, (b) pari passu with claims in respect of any Parity Obligations and (c) in priority to claims in
respect of (i) any Equity Securities and (ii) any Junior Obligations.
The Notes will bear interest (i) from (and including) 2 May 2019 (the Issue Date), to (but excluding) 2 May 2029 (the First
Reset Date), at a fixed rate of 3.375 per cent. per annum, payable annually in arrear on 2 May in each year, commencing on
2 May 2020 and (ii) from (and including) 2 May 2029, at a reset rate per annum calculated once every five years on the basis
of the mid swap rates for euro swap transactions with a maturity of five years plus a margin of 4.00 per cent., payable
annually in arrear on 2 May in each year, commencing on 2 May 2030. Payment of interest on the Notes may be deferred at
the option of the Issuer, or shall be deferred under certain circumstances, as set out in Condition 3.8 (Interest - Interest
Deferral) in Terms and Conditions of the Notes. Any interest not paid on an Optional Interest Deferral Date or a Mandatory
Interest Deferral Date and deferred in accordance with Condition 3.8, together with any other interest deferred on any
previous Interest Payment Date, shall, so long as the same remains outstanding, constitute Arrears of Interest and shall be
payable in accordance with Condition 3.8(iii) (Interest - Interest Deferral) in Terms and Conditions of the Notes.
The Issuer will have the right to redeem the Notes in whole, but not in part, on the date falling three (3) months prior to the
First Reset Date and on any date thereafter up to and including the First Reset Date and on any Interest Payment Date
thereafter, as defined in Condition 4.2 (Redemption and Purchase Optional Early Redemption) in Terms and Conditions of
the Notes. The Issuer may also, at its option, redeem the Notes upon the occurrence of a Gross-Up Event, a Tax Deductibility
Event, a Regulatory Event or a Rating Methodology Event, at any time if permitted under the then Applicable Regulations,
and in certain instances exchange the Notes or vary their terms, as further described in Condition 4 (Redemption and
Purchase) in Terms and Conditions of the Notes.
This Offering Circular does not comprise a prospectus for the purposes of Article 5 of Directive 2003/71/EC (as amended or
superseded) (the Prospectus Directive). Application has been made to The Irish Stock Exchange plc trading as Euronext
Dublin (Euronext Dublin) for the approval of this Offering Circular as Listing Particulars. Application has been made to
Euronext Dublin for the Notes to be admitted to the official list (the Official List) and to trading on the Global Exchange
Market of Euronext Dublin (GEM). References in this Offering Circular to the Notes being "listed" (and all related
references) shall mean that the Notes have been admitted to the Official List and have been admitted to trading on GEM.
GEM is the exchange regulated market of Euronext Dublin and is not a regulated market for the purposes of Directive
2014/65/EU.
The Notes are expected to be assigned, on issue, a rating of BBB- by S&P Global Ratings Europe Limited (S&P). S&P is
established in the European Community and registered pursuant to Regulation (EC) No 1060/2009 of the European
Parliament and of the Council of 16 September 2009 on credit rating agencies, as amended by Regulation (EC) No 513/2011
of the European Parliament and of the Council of 11 March 2011. A credit rating is not a recommendation to buy, sell or hold
securities and may be subject to revision, suspension or withdrawal at any time by the relevant rating organisation.
The Notes will be issued in bearer form and shall have denominations of 100,000 and integral multiples of 1,000 in excess
thereof, up to and including 199,000. The Notes will initially be represented by a temporary global note (the Temporary
Global Note), without interest coupons, which will be deposited on or about 2 May 2019 (the Closing Date) with a common
depositary for Euroclear Bank SA/NV (Euroclear) and Clearstream Banking, S.A. (Clearstream, Luxembourg). Interests
in the Temporary Global Note will be exchangeable for interests in a permanent global note (the Permanent Global Note
1

and, together with the Temporary Global Note, the Global Notes), without interest coupons, on or after 11 June 2019 (the
Exchange Date), upon certification as to non-U.S. beneficial ownership. Interests in the Permanent Global Note will be
exchangeable for definitive Notes only in certain limited circumstances. See Summary of Provisions relating to the Notes
while in Global Form.
An investment in the Notes involves certain risks. Prospective investors should have regard to the factors described
under the heading Risk Factors starting on page 4.
Structuring Adviser
HSBC
Joint Lead Managers
ABN AMRO
Deutsche Bank
HSBC
UBS Investment Bank

2

TABLE OF CONTENTS
Table of Contents .................................................................................................................................... 3
Risk Factors ............................................................................................................................................. 4
Important Information ........................................................................................................................... 56
Documents Incorporated by Reference ................................................................................................. 59
Overview of Principal Features of the Notes ........................................................................................ 60
Terms and Conditions of the Notes ....................................................................................................... 66
Summary of Provisions relating to the Notes while in Global Form .................................................... 88
Use of Proceeds ..................................................................................................................................... 91
ASR Nederland N.V. ............................................................................................................................. 92
Taxation ............................................................................................................................................... 111
Subscription and Sale .......................................................................................................................... 115
General Information ............................................................................................................................ 119
3

RISK FACTORS
RISK FACTORS
Before investing in the Notes, prospective investors should carefully consider the risks and
uncertainties described below, together with the other information contained or incorporated by
reference in this Offering Circular. The occurrence of any of the events or circumstances described in
these risk factors, individually or together with other circumstances, could have a material adverse
effect on the ASR Nederland N.V. together with its consolidated subsidiaries (the Group), its business,
revenues, prospects, results and financial condition, which could result in an inability of the Issuer to
pay interest and/or principal and could negatively affect the price of the Notes. In that event, the value
of the Notes could decline and an investor might lose part or all of his investment.
All of these risk factors and events are contingencies which may or may not occur. The Group may
face a number of these risks described below simultaneously and one or more risks described below
may be interdependent. The order in which risks are presented is not necessarily an indication of the
likelihood of the risks actually materialising, of the potential significance of the risks or of the scope of
any potential harm to the business, revenues, prospects, results and financial condition of the Group,
which could result in an inability of the Issuer to pay interest and/or principal and could negatively
affect the price of the Notes.
The risk factors are based on assumptions that could turn out to be incorrect. Furthermore, although
the Group believes that the risks and uncertainties described below are the material risks and
uncertainties concerning the Group's business and the Notes, they are not the only risks and
uncertainties relating to the Group and the Notes. Other risks, events, facts or circumstances not
presently known to the Group, or that the Group currently deems to be immaterial could, individually
or cumulatively, prove to be important and could have a material adverse effect on the Group's
business, revenues, prospects, results and financial condition. The value of the Notes could decline as
a result of the occurrence of any such risks, events, facts or circumstances or as a result of the events,
facts, or circumstances described in these risk factors, and investors could lose part or all of their
investment.
Prospective investors should carefully read and review the entire Offering Circular and should form
their own views before making an investment decision with respect to any Notes. Furthermore, before
making an investment decision with respect to any Notes, prospective investors should consult their
own stockbroker, bank manager, lawyer, auditor or other financial, legal and/or tax advisers and
carefully review the risks associated with an investment in the Notes and consider such an investment
decision in light of their personal circumstances.
Unless the context requires otherwise, capitalised terms which are defined in "Terms and Conditions
of the Notes" have the same meaning when used herein.
RISK FACTORS RELATING TO THE GROUP'S BUSINESS
General Economic and Market Conditions
The Group's growth, business, revenues and results are materially affected by general economic
conditions and other business conditions. The ongoing turbulence and volatility of such conditions
may adversely affect the Group's business, revenues, results and financial condition
Global economic conditions can be volatile, and it is uncertain how the global economy will evolve
over time. The divergence in economic conditions in the United States, the European Union (EU) and
Asia including the effects of quantitative easing in the EU, tightening monetary policy in the United
States, the prolonged economic stagnation in Europe, slowing economic growth in China and the
4

political turmoil in various regions around the world could negatively impact the Group's operations.
Since the onset of the financial crisis in 2008, which in Europe was followed by the onset of the euro
crisis in 2010, weak macroeconomic conditions, including recessions, and the implementation of
austerity measures in many economies, along with financial market turmoil and volatility have at
times negatively affected financial markets. If these trends persist, they may continue to negatively
affect the Dutch economy and therefore the behaviour of the Group's customers, and by extension, the
demand for, and supply of, the Group's products and services. High unemployment levels; reduced
consumer and government spending levels; government monetary and fiscal policies; inflation rates;
interest rates; credit spreads and credit default rates; currency exchange rates; market indices, equity
and other securities prices; real estate prices and changes in customer behaviour have affected and will
continue to affect the Group. All of these factors are impacted by changes in financial markets and
developments in the global and European economies. In addition, despite recent improvements in the
financial position of many European countries, the peripheral European financial system continues to
be weak and could deteriorate further and there remains a risk that financial difficulties may result in
certain European countries exiting the Eurozone. In this respect it is noted that, pursuant to a
referendum held in June 2016, the United Kingdom (UK) has voted to leave the EU and the UK
Government invoked article 50 of the Lisbon Treaty relating to withdrawal on 29 March 2017. Under
article 50, the Treaty on the EU and the Treaty on the Functioning of the EU cease to apply in the
relevant state from the date of entry into force of a withdrawal agreement or, failing that, two years
after the notification of intention to withdraw, although this period has been extended until 31 October
2019.
There are a number of uncertainties in connection with the future of the UK and its relationship with
the EU. Until the terms of the UK's exit from the EU are clearer, it is not possible to determine the
impact that the UK's departure from the EU and/or any related matters may have on the business of
the Group. The Group could be adversely affected in a number of ways including through exposure to
fluctuations in the equity, fixed income and property markets which could result in a material adverse
effect on its returns on invested assets and the value of its investment portfolio or its solvency position.
See also "The Group's exposure to fluctuations in the equity, fixed income and property markets could
result in a material adverse effect on its returns on invested assets, including assets in its investment
portfolio, or its solvency position".
International equity markets have at times continued to experience heightened volatility and turmoil,
with institutions, including the Group, that have exposure to the real estate, mortgage and credit
markets particularly vulnerable. Furthermore, concerns regarding negative interest rates and the low
level of interest rates generally may negatively impact the Group's net interest income, which may
have an adverse impact on the Group's profitability.
Renewed significant downturns in equity markets, significant shifts in currency rate valuations, a
European country exiting, or making a decision to exit, the Eurozone and/or the EU, downgrades of
issuers by rating agencies, in particular of sovereign debt issuers, further downward appraisals of
property values and/or significant movements of interest rates and credit spreads or any of the other
developments described above could have a material adverse effect on the Group's capital and
solvency position and results. Furthermore, economic downturns could also result in increased
incidence of internal and external fraud, including fraudulent claims by customers, theft, corruption
and insider trading. Other events may also adversely affect the financial markets, such as heightened
geopolitical tensions, war, acts of terrorism, natural disasters or other similar events.
As the Dutch, European and global economies have taken steps to recover from the financial crisis,
significant actions by governments, including bail-outs of financial institutions, as well as volatile
markets, interest rates and credit spreads, significant changes in asset valuations (including material
write-offs and write-downs of impaired assets), have all affected the business of financial institutions,
including the Group. Continuing weakness or significant deterioration in the Dutch or, to the extent
they affect the Dutch economy, the European and global economies, a failure to return to growth, and
5

continuing volatility in financial markets could have a material adverse effect on the Group's business,
revenues, results and financial condition.
The Group, due to its concentration in the Dutch market, is particularly exposed to the economic,
market, fiscal and regulatory conditions in the Netherlands and is highly susceptible to changes in
any of these conditions
Virtually all of the Group's operating income is generated and accounted for in the Netherlands. As a
result, the Group is dependent upon the prevailing economic, political and social conditions in the
Netherlands, including unemployment levels in the Netherlands. Austerity measures initiated by the
Dutch government as a consequence of the financial crisis in 2008 and the aforementioned euro crisis
in 2010, combined with weakened economic conditions in Europe and, in particular, the Netherlands
following the global economic and financial crisis, resulted in higher unemployment rates, weak
property markets, below-target inflation and pressure on disposable incomes for many years. The
Dutch economy has more recently recovered and returned to economic growth which can be illustrated
by the stronger property markets and historically low unemployment rates. If weak economic and
market conditions in the Netherlands and western Europe in general will return, this may have a
negative affect on the Group's results of operations. The Group's own investment portfolio, in
particular its equity and real estate portfolios, as well as its mortgage loan portfolio are particularly
exposed to changes in Dutch economic and market conditions. See also "The Group's business,
revenues, results and financial condition are exposed to changes in legislation applicable to the
housing market in the Netherlands and the Group's residential retail and commercial mortgage
portfolio is exposed to the risk of default by borrowers and to declines in real estate prices".
Any deterioration in these conditions or a long-term persistence of deteriorated conditions could result
in a downturn in new business and sales volumes of the Group's products, and a decrease of its
investment return, which, in turn, could have a material adverse effect on the Group's business,
revenues, results and financial condition.
The Dutch corporate income tax rate on the first 200,000 of taxable profit is 19% (as of 2019). The
rate on taxable profit in excess of 200,000 is 25%. Unless legislative changes are made, these tax
rates will be reduced to 16.5% and 22.55% in 2020 and to 15% and 20.5% respectively in 2021.
Besides the positive impact on the result of the Group after tax this has an impact on the Loss
Absorbing Capacity of Deferred Taxes (LACDT) which is a significant item when determining the
Solvency Capital Requirement (SCR). The amount of LACDT included in the calculation of the SCR
as per 31 December 2018 would be reduced if the impact of future tax rate reductions is taken into
account.
Risks related to announced tax initiatives of the Dutch government
On 10 October 2017, the Dutch government released its coalition agreement (Regeerakkoord) 2017-
2021, which includes, among others, certain policy intentions for tax reform. On 23 February 2018,
the Dutch State Secretary of Finance published a letter with an annex containing further details on the
government's policy intentions against tax avoidance and tax evasion. These intentions have been
included in the Tax Plan 2019 (Pakket Belastingplan 2019) and related legislative proposals as
published by the Dutch government on 18 September 2018. Two policy intentions in particular may
become relevant in the context of the Dutch tax treatment of the Group, the Notes, and/or payments
under the Notes.
The first policy intention relates to the introduction of a withholding tax on interest paid to creditors in
low tax jurisdictions, including non-cooperative jurisdictions, as of 2021. The coalition agreement and
the annex to the letter suggest that this interest withholding tax would apply to certain payments made
by a Dutch entity directly or indirectly to a group entity in a low tax or non-cooperative jurisdiction.
This intention is reconfirmed in the letter of the Dutch State Secretary of Finance of 15 October 2018.
6

However, it cannot be ruled out that, contrary to the information publically available to date, it will
have a wider application and, as such, it could potentially be applicable to interest payments under the
Notes.
Another policy intention relates to the introduction of a thin capitalisation rule as of 2020 that would
limit the deduction of interest for tax payers such as banks and insurance companies if highly
leveraged. On 18 March 2019, the Dutch government published a consultation paper regarding this
thin capitalisation rule including draft legislation for consultation purposes. The draft legislation limits
the applicability of the thin-capitalisation rule to qualifying banks and insurance companies, such as
the Group. In short, the rule would apply to insurance companies with an equity of less than 8% of the
balance sheet total (to be determined on the basis of a set of specific provisions which refer, amongst
others, to Solvency II). If the rule is implemented in Dutch law in accordance with this draft
legislation, the thin capitalisation rule may have an adverse impact on the amount of interest that the
Group can deduct for Dutch corporate income tax purposes and thus on its financial position.
The Group has long-term assets and liabilities and is exposed to the risk of a mismatch between the
value of its assets and liabilities resulting from changes in interest rates and credit spreads, which
could have a material adverse effect on the Group's business, revenues, results and financial
condition
As a provider of life insurance and guaranteed pension products, the Group requires a significant
amount of long-term fixed income assets to be matched against its long-term insurance liabilities,
although there will always be sizeable mismatches in duration under certain frameworks. Fixed
income assets are typically valued at fair market value in accordance with current accounting and
solvency regulations and are therefore sensitive to interest rate and credit spread movements.
However, corresponding liability valuations do not fluctuate with interest rate and credit spread
movements when they are valued using a fixed accrual methodology, which may apply depending on
applicable accounting, reporting and regulatory frameworks. Moreover, even if the corresponding
liabilities are valued using a market consistent methodology, they may nevertheless have limited or
different sensitivity to credit spread and interest rate movements because the discount rates applied in
those market valuations (in some cases, including the discount rate prescribed or determined by
regulators) typically do not fully reflect sensitivities to credit spread and interest rate movements and
therefore the value of the Group's liabilities may not match that of its fixed income assets. Although
the impact of a change of credit spreads on fixed income assets is expected to be, in part or in full,
compensated by the Volatility Adjustment (VA), it may have an overall negative impact on the
Group's ratio pursuant to EU Directive 2009/138/EC (Solvency II). As at 31 December 2018, based
on management estimates, if credit spreads had increased by 75 basis points and correspondingly the
VA-premium of 20 basis points, the Group's Solvency II ratio would have increased by 21%
percentage points. The Solvency II ratio is dependent on the application of the ultimate forward rate
(UFR) in the discounting curve of the insurance liabilities.
In all of these cases, there is a mismatch between the valuations of the fixed income assets and
liabilities that, depending on applicable accounting, reporting and regulatory frameworks, could have a
material adverse effect on the Group's available regulatory capital, business, revenues, results and
financial condition.
The sustained low interest rate environment in recent years in Europe has negatively impacted the
Group in various ways and will continue to do so if it persists
In a period of sustained low interest rates, financial and insurance products with long-term options and
guarantees (such as pension, whole-life, funeral and disability products) may be more costly to the
Group. The Group may therefore incur higher costs to hedge the investment risk associated with such
long-term options and guarantees of these products. Moreover, the required capital pursuant to
Solvency II for long-term risks, such as longevity, expense and morbidity risks, is interest rate
7

sensitive. Declining interest rates will result in an increase in the valuation of liabilities and of the
Group's Solvency II required capital.
Projection of the solvency figures in the annual Own Risk and Solvency Assessment (ORSA) and
balance sheet plan show that low interest rates also have a negative impact on the future capital
generation of the Group. The effects mentioned above limit the ability of the Group to offer financial
and insurance products with long-term options and guarantees at attractive prices. As a consequence,
new business levels will be lower and, due to fixed costs, profitability could be reduced. Also, if
interest rates are volatile the present value impact of changes in assumptions affecting future benefits
and expenses will also be volatile, creating more volatility in the Group's results of operations and
available regulatory capital. Furthermore, low interest rates will lead to a low risk free return on the
assets allocated to the own funds.
The risks from interest rate developments are, amongst other things, a result of the UFR, since under
Solvency II life liabilities are discounted with a curve including the UFR. In current market
conditions, the application of the UFR results in an increase of interest rates used for the Solvency II
valuation of the technical provisions for maturities of 20 years or longer. Application of the UFR
makes the valuation of the technical provisions less sensitive to interest movements. The UFR is set by
the European Insurance and Occupational Pensions Authority (EIOPA) which may take into account,
among other factors, interest rates, which are at a historically low level, and inflation. EIOPA
evaluated the level of the UFR for insurance companies and set out a methodology for the use of a
more dynamic UFR which results in a decreasing UFR for the coming years. A lower level of UFR
used in the calculation of the Solvency II regime results in higher valuation of the insurance liabilities
and lower own funds, which may in turn materially and adversely affect the Group's business,
revenue, results and financial condition. For example, based on management estimates as at 31
December 20181, a 1%-point decrease in the UFR would be expected to result in a negative impact of
24%-points on the Group's Solvency II ratio. If the Group is not able to adequately comply with the
Solvency II requirements, this could have a material adverse effect on its business, solvency, results
and financial condition.
In addition, the Group monitors its interest rate risk on a monthly basis. The Group's interest rate
policy is primarily aimed at reducing the sensitivity of the Solvency II ratio, but the interest rate
position might also be assessed from the viewpoint of a moderate UFR or no recognition of the UFR.
In a low interest rate environment this may lead to increased sensitivities of the Solvency II ratio
which may result in a decrease of the Group's Solvency II ratio.
Sustained low interest rate levels have had, and could continue to have, a material adverse effect on
the Group's business, revenues, results and financial condition. Interest rates used under Solvency II to
value technical provisions could be higher than realised investment returns due to the application of
the UFR. EIOPA could lower the UFR to be closer to actual rates with an immediate negative impact
on own funds through the increase of the required Solvency II technical provisions.
Rising interest rates could reduce the value of fixed-income investments held by the Group, increase
policy lapses and withdrawals, and increase collateral requirements under the Group's hedging
arrangements, which could have a material adverse effect on the Group's business, revenues,
results and financial condition
If interest rates rise, the value of the Group's fixed income portfolio may decrease. Additionally, the
Solvency II technical provisions may decrease, but due to the obligatory use of the UFR, the change in
the Solvency II technical provisions may not offset the decrease in the value of fixed-income
investments. Furthermore, rising interest rates could cause third parties to require the Group to post

1 At which time the UFR set by EIOPA was 4.05%.
8

collateral in relation to its interest rate hedging arrangements. In periods of rising interest rates, policy
lapses and withdrawals may increase as policyholders may believe they can obtain a higher rate of
return in the market place. See also "Incorrect assumptions used in pricing products, establishing
provisions and reporting business results could have a material adverse effect on the Group's business,
revenues, results and financial condition". In order to satisfy the resulting obligations to make cash
payments to policyholders, the Group may be forced to sell assets at reduced prices and thus realise
investment losses.
In the case of unit linked policies, an increase in withdrawals would result in a decrease in the Group's
assets under management (AuM), which would result in reduced fee income as the Group's fee
income is typically linked to the value of the AuM. This would in turn reduce profitability and could
adversely affect the Group's ability to implement its business plan or distribute capital.
The occurrence of any of the risks set out above could have a material adverse effect on the Group's
business, revenues, results and financial condition.
Credit and Concentration Risk
The Group's business, revenues, results and financial condition are exposed to changes in
legislation applicable to the housing market in the Netherlands and the Group's residential retail
and commercial mortgage portfolio is exposed to the risk of default by borrowers and to declines in
real estate prices
Various restrictions have been introduced in the Netherlands with respect to mortgage lending and the
tax treatment of the mortgage loans. These restrictions may reduce the size of and income earned from
the Group's total mortgage portfolio significantly.
One of the restrictions concerns mortgage loans with the benefit of a government guarantee (Nationale
Hypotheekgarantie, NHG). The maximum loan amount for mortgage loans, which receive the benefit
of a government guarantee, has been increased to 290,000 as of 1 January 2019. Furthermore, the
maximum loan amount for each newly issued mortgage loan which receives the benefit of a
government guarantee will, on a monthly basis as from origination, be reduced by an amount which is
equal to the amount of the monthly repayments plus interest as if that mortgage loan were to be repaid
on a thirty-year annuity basis. Also the maximum amount of a mortgage loan has been limited. From 1
January 2018, the maximum allowed amount of a mortgage loan in relation to the value of the
property is 100%. Any new restrictions on the government guarantee and/or lowering of the loan-to-
value (LTV) ratio may put pressure on the total outstanding volume of mortgage loans in the
Netherlands which could decrease the size of the mortgage portfolio of the Group or the amount of
government guaranteed mortgages originated by the Group. The Group's mortgage portfolio consists
of, as compared to other lenders, a relatively large proportion of government guaranteed mortgages.
Furthermore, in recent years, restrictions have become applicable to the tax deductibility of mortgage
loan interest payments in the Netherlands. Traditionally, the Dutch tax system allows customers to
deduct, subject to certain limitations, mortgage loan interest payments for owner-occupied residences
from their taxable income (for a maximum of 30 years). As of 1 January 2013, interest deductibility in
respect of mortgage loans originated after 1 January 2013 is only available in respect of mortgage
loans which amortise over 30 years or less and are repaid on at least an annuity basis. As from 1
January 2014, the tax rate against which the mortgage loan interest payments may be deducted will
gradually reduce. As at 1 January 2019, the maximum rate at which deduction takes place is 49%. In
September 2018 the Dutch government published its 2019 budget, which included several changes to
the tax system. From 2021, only two brackets with regard to income tax remain in place, 37.05% and
49.5% as well as an additional lower bracket of 19.15% which will apply to individuals who have
reached the state pension age. The mortgage interest deduction will decrease by 3%-point per year
until a level of 37.05% is reached for each tax payer. This is expected to be achieved in 2023.
9

The increasing restrictions applicable to the mortgage lending and the tax treatment of the mortgage
loans may, among other things, have a material adverse effect on new origination, house prices and the
rate of economic recovery and may result in an increase of defaults or higher prepayment rates. Also,
borrower payment disruptions, e.g. in case of annuity mortgage loans, due to gradually increasing
principal payments, or as a result of increasing interest rates (at future reset dates), may have a
material adverse effect on the rate of economic recovery of the mortgage loans which would have a
negative effect on the Group's large mortgage portfolio.
The Group is exposed to the risk of default by borrowers under these mortgage loans. Borrowers may
default on their obligations due to bankruptcy, lack of liquidity, downturns in the economy generally
or declines in real estate prices, operational failure, fraud or other reasons. The value of the secured
property in respect of these mortgage loans is exposed to decreases in real estate prices, arising for
instance from downturns in the economy generally, oversupply of properties in the market, and
changes in tax regulations related to housing (such as the decrease in the deductibility of interest on
mortgage payments). Furthermore, the value of the secured property in respect of these mortgage loans
is exposed to destruction and damage resulting from floods and other natural and man-made disasters.
Damage or destruction of the secured property also increases the risk of default by the borrower. For
the Group, all of these exposures are concentrated in the Netherlands because the mortgage loans have
been advanced, and are secured by commercial and residential property, in the Netherlands.
For the purposes of available (regulatory) capital of the insurance business, mortgage loans are valued
at fair market value and are therefore exposed to interest rate, prepayment, credit spread and credit
default risk. For instance, the model valuation of mortgage loans includes spreads observed in the
markets for newly issued mortgage loans. If these spreads increase, the modelled value of the
mortgage loans will decrease and will cause decreases in the Group's available (regulatory) capital.
Furthermore, if economic conditions in the Netherlands deteriorate (including due to increases in
unemployment and property price declines), the fair value of the Group's mortgage loan portfolio may
decrease. An increase of defaults, or the likelihood of defaults under, the Group's mortgage loans, or a
decline in property prices in the Netherlands, has had, and could have, a material adverse effect on
Group's business, revenues, results and financial condition.
The Group's savings-linked product portfolio includes both contracts linked to mortgages originated
by the Group, as well as contracts linked to mortgages originated by third parties. For savings-linked
products linked to mortgages originated by third parties (and not transferred to the Group), the
mortgage loan is not reflected on the Group's balance sheet. When the Group sells a savings-linked
product linked to a mortgage originated by a third party, it generally enters into a loan arrangement
with that third party with a nominal value equal to the value of the savings-linked contract and at an
interest rate linked to the interest rate of the underlying mortgage. As of 31 December 2018, the
amortised cost of this loan portfolio amounted to 2,861 million. The Group tries to limit its credit risk
to third parties through various measures. In respect of approximately 44% of the loan portfolio the
counterparties are special purpose vehicles and for approximately 50% the Group has cession-
retrocession agreements with its counterparties.
The Group is exposed to financial risks such as credit risk, default risk and risks concerning the
adequacy of its credit provisions, any of which could have a material adverse effect on its business,
revenues, results and financial condition
Credit risk refers to the potential losses incurred by the Group as a result of debtors not being able to
fulfil their obligations when due, or a perceived increased likelihood thereof. Losses incurred due to
credit risk include actual losses from defaults, market value losses due to credit rating downgrades
and/or spread widening, or impairments and write-downs. The Group is exposed to various types of
general credit risk, including spread risk, default risk and concentration risk. Third parties, including
sovereigns and financial institutions, that owe the Group money, securities or other assets may not pay
or perform under their obligations. These parties may include customers, the issuers whose securities
10