Specific income statement accounting principles

Income and expenditure are allocated to the period to which they relate. Costs are recognised in the cost category to which they relate.

A number of SNS REAAL’s corporate staff departments are shared. The costs of the corporate staff departments are charged to the segments on the basis of the services provided, or, if more appropriate, proportionally allocated to SNS REAAL’s subsidiaries. The costs of the Executive Board, the costs of the strategic reorientation of SNS REAAL and the resulting incidental costs are not allocated.

19.6.1 Income

Income represents the fair value of the services, after elimination of intra-group transactions within SNS REAAL. Income is recognised as described in the following sections.

19.6.1.1 Interest income

The interest income comprises interest on monetary financial assets of the banking activities 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 contractual 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 providing 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 value or fair value is subsequently recognised on the basis of the interest rate used to determine the recoverable value by discounting the future cash flows.

19.6.1.2 Interest expenses

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

19.6.1.3 Premium income

The premium income from insurance contracts, excluding taxes and other charges, is divided into regular life (including pensions), single-premium life and non-life premiums.

Regular life premiums, single-premium contracts and limited-premium life insurance policies from life insurance contracts are recognised as income when payment by the policyholder falls due. Interest rate rebates and rate rebates are included in gross premium income and charged to technical claims and benefits during the amortisation period. Premium income from non-life insurance contracts is recognised as income (earned premium) during the term of the contract in proportion to the elapsed insurance term, taking into account the movement in the provision for unearned premium. In general it concerns insurance contracts with a maximum term of twelve months.

19.6.1.4 Reinsurance premiums

This item represents the premiums on ceded reinsurance contracts. These are recognised as a charge to the income statement in proportion to the term of the contract.

19.6.1.5 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 result.

19.6.1.6 Fee and commission expenses

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.

19.6.1.7 Share in the result of associates

The share of SNS REAAL in the results of the associates is here accounted for. If the book value of the associated company falls to zero, no further losses are accounted for, unless SNS REAAL 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.

19.6.1.8 Investment income

Investment income consists of interest, dividend, rental income and revaluations.

Interest

The item interest comprises the interest income in respect of group activities and from investments of the insurance activities.

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 these securities are quoted ex-dividend.