4 Life business, embedded value and analysis of change Johan Daemen General Manager, Life insurance Foto gebouw

Agenda Life insurance activity & scope Terminology ANAV (“Adjusted Net Asset Value”) Components Roll forward 2002-2003 VBI (“Value of Business In Force”) Assumptions Sensitivities VNB at date of sale (“Value of New Business”)

Life business, overview Growth in Total Life Premium Income 1998-2003 (‘000 EUR) 926 707 407 478 408 475 437 679 1 259 859 1 780 155 170 758 934 502 1 458 562 1 229 163 970 662 767 402 500 000 1 000 000 1 500 000 2 000 000 2 500 000 3 000 000 1998 1999 2000 2001 2002 2003 Non Linked Unit Linked 2 547 557 232% 2 230 521 203% 1 867 037 170% 1 666 842 152% 1 341 980 122% 1 079 465 100% Minor changes to published figures in order to improve model accuracy

Life business, overview Growth in Technical Provisions Life 1998-2003 (‘000 EUR) 10 614 953 243% 4 162 741 4 467 156 4 497 804 4 637 766 5 745 188 7 351 642 1 195 446 2 285 968 2 952 108 3 263 311 210 779 2 000 000 4 000 000 6 000 000 8 000 000 10 000 000 12 000 000 1998 1999 2000 2001 2002 2003 Non Linked Unit Linked 8 697 296 199% 7 589 874 174% 6 783 772 155% 5 662 602 129% 4 373 520 100% Minor changes to published figures in order to improve model accuracy

Scope Subsidiaries under review : KBC Insurance Belgium + Fidea + Vitis Life total technical provisions : 9 987 948 Modelled: 88 % of the mathematical reserves 94.7 % of the total premium income in 2003 99.8 % of the new premium income in 2003 Subsidiaries not under review : Central European Subsidiaries + Secura (CSOB, K&H Life, Warta Vita, Ergo) total technical provisions : 627 0052

Terminology “Embedded Value” or KBC standard Value In Force As investment for VBI** (PVFP- Cost Tied Surplus) PVFP* Value In Force ANAV ANAV Tied Surplus Life PV Tied Surplus Life Tied Surplus Life Shareholders Equity or = Other Allocated Surplus Other Allocated Surplus Other Allocated Surplus Economic Adjustments Free Surplus Free Surplus Free 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

Embedded Value : total figures (‘000 EUR) 31/12/2002 31/12/2003 VBI Life PVFP Cost of tied surplus 365 919 511 060 (145 141) 372 798 564 771 (191 973) Tied Surplus Life* 588 026 839 837 Value In Force 953 945 1 212 635 Other Surplus 828 716 922 769 Embedded Value 1 782 661 2 135 404 * Some methodological changes took place in the calculation of the tied surplus life

Adjusted Net Asset Value (ANAV): composition [+] 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

Adjusted Net Asset Value (ANAV): as at 31/12/2003 ('000 EUR) +103 105 -247 912 +127 832 +227 048 -152 379 1 704 912 1 762 606 500 000 1 000 000 1 500 000 2 000 000 2 500 000 shareholders equity adjustments asset additional reserves Non life reserves life tax assets and liab. ANAV

Adjusted Net Asset Value (ANAV): Change 31/12/2002 – 31/12/2003 + 274 705 - 134 853 + 228 980 - 23 008 1 416 782 1 762 606 200 000 400 000 600 000 800 000 1 000 000 1 200 000 1 400 000 1 600 000 1 800 000 2 000 000 Anav 31/12/2002 Profit in 2003 Dividends Paid Asset Value Adjustments Other 31/12/2003

ANAV: KBC RBC requirements for Life business KBC RBC Requirements (legal requirements) % of the reserves % of sum at risk Unit Linked with legal SM > 0 1.25% (1%) 0.375% (0.3%) Unit Linked with legal SM = 0 0.5% (0%) Non Linked Pension products 75 F.I./ 20 S./ 5 P. mix 10.2% (4%) Non Linked Investment products 87 F.I./11 S./ 2 P.mix 7.97% (4%) The current RBC for Life activities is 215 % of the legal required solvency margin for the Life Activity

Value of Business in Force (VBI): Economic Assumptions 2002 2003 10 year bond yield (Rate from 2006 on) 4.40% pa (5.00% pa) 4.17% pa Risk Prem. on equity 2.50% pa Risk Premium used for discount rate 3.50% pa Discount rate* (= Cost of Capital) 8.50% pa* Wage inflation 2.80% pa (3.00% pa) 2.90% pa * Based on the bond yield in the long run

Value of Business in Force (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 expected wage inflation 2-3% per annum 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

Value of Business in Force (VBI): Overview (‘000 EUR, only reserves of modelled business) PVFP VBI VIF PVFP/ reserves VBI/ res. reserves 2002 511 060 365 919 953 945 7.19% 5.15% 7 104 098 2003 564 771 372 798 1 212 635 6.45% 4.26% 8 756 832

Value of Business in Force (VBI): Sensitivity Analysis Effect on VBI + 10% - 10% Expenses - 4.77% + 4.77% Lapses - 2.18% + 2.35% Mortality - 3.35% + 3.36% + 0.5% - 0.5% Discount rate - 7.59% + 8.09% Investment Return* + 8.49% - 9.34% * The discount rate is changed consistently with the change in investment return. No profit sharing was given to the 4.75% guarantees in the policies.

Value of Business in Force (VBI): Sensitivity Analysis Changing the solvency margin Current RBC KBC Insurance 100% of the legal SM 150% of the legal SM 200% of the legal SM Embedded Value 2 135 404 2 238 180 2 193 649 2 149 118 VIF 1 212 635 866 743 1 017 797 1 168 851 VBI 372 798 475 574 431 043 386 512 (‘000 EUR)

Value of Business in Force (VBI): Change 31/12/2002 – 31/12/2003 (EUR) -36 357 152 +14 416 570 +53 016 901 -61 265 326 +31 570 445 +3 159 540 +2 338 592 365 918 865 372 798 434 200 000 000 250 000 000 300 000 000 350 000 000 400 000 000 450 000 000 VBI 31/12/2002 model Changes Change non econ. assumptions Unwinding discounting Cashflow to ANAV VNB as of 31/12/2003 Variances over 2003 Change econ.assumptions VBI 31/12/2003

Value of Business in Force (VBI): Change 31/12/2002 – 31/12/2003 Effect of ‘new business’ sold in 2003 (as at 31/12/2003): EUR APE (Annualised Premium Equivalent) PVFP of new business at 31/12 VNB of new business at 31/12 PVFP as % of APE VNB as % of APE 2003 210 834 91 087 53 017 43.20% 25.15% (‘000 EUR)

Value of New Business (VNB): New business 2003 at date of sale APE (Annualised Premium Equivalent) PVFP VNB PVFP as % of APE VNB as % of APE Total 210 834 76 804 38 649 36.43% 18.33% (‘000 EUR)

Review Lane Clark & Peacock Belgium reviewed the methodology and assumptions used by KBC Insurance in the determination of the Embedded Value at 31/12/2003, the Value of 2003 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 checks on the results and included a detailed review on a limited part 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.

Cautionary Statements Embedded Value is the result of cash-flow projections with underlying assumptions and expectations. The values in this presentation are calculated on a deterministic basis. Many assumptions like 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 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.