5 Condensed financial statement

The activities of DELA Coöperatie UA (‘DELA cooperative'), with its statutory office in Eindhoven, Oude Stadsgracht 1, CoC number 17012026, and its group companies (‘DELA Group’) involve insurance, investments and funeral services. The insurance products involve funeral insurance, life insurance and savings plans. The insurance activities take place in the Netherlands, Belgium and Germany. The funeral services take place in the Netherlands and Belgium. Investment activities for the DELA Group are managed centrally from the Netherlands.

The consolidation includes the financial data of the DELA cooperative, its group companies and other legal persons over which has decisive control and central management.

On 2 August 2021 DELA Holding NV acquired 100% of the shares in in Yarden Holding BV. The transaction consists of the following components:

• An acquisition price that comprises a purchasing price of €2 for the shares and a commitment of €1.5 million to Yarden Association, to be paid in three annual terms.
• In addition to these commitments, the costs that can be attributed directly to the takeover are added to the acquisition price. These total €0.9 million and mainly involve costs for lawyers and the DNB and ACM trajectories.
• Following commitments made in the purchasing agreement, DELA reserved a sum for Yarden’s in-kind package policies to compensate part of the indexation that Yarden froze when applying an en-bloc clause in 2019. This means that in case of the death of a Yarden in-kind policyholder, all services from the package will be provided without extra costs for the first ten years after the takeover (if DELA is used as funeral company). The actual value of this compensation by DELA for Yarden package policyholders is €80.4 million (after tax, €60.3 million). Of this sum, €57.8 million is intended for the indexation of insured sums and €22.6 million to compensate the bereaved during the first ten years after the takeover. These provisions are subject to the same principles as indicated for the Yarden portfolio.
• As described above, DELA made a provision for the Yarden package policies for the future indexation of the insured sums. It was also agreed that the provisions will be increased or reduced in case of possible windfalls or setbacks after the takeover date. So far, €0.3 million has been withdrawn for legal costs, €9.8 million due to crematoriums having to be sold under market value, and €1.5 million for related costs. This means the provision was reduced by €11.6 million by the end of 2021. An earn-out scheme applies to the sold crematoriums, which may change the returns in the coming years. The impact thereof will be processed in the indexation provision. The actual value of the indexation provision of €57.8 million already includes these calculations.

Goodwill has been included in the intangible fixed assets statement as ‘goodwill acquisitions’. It was determined as follows:

DELA was compelled to sell seven crematoriums in order to obtain approval for the takeover from ACM. These sales provide a solution for the regions which may have experienced competition issues due to concentration. A Share Purchase Agreement for the sale of the seven crematoriums has since been signed and submitted to ACM for approval. Until the sale, the activities of these crematoriums will continue under a Hold Separate Manager. In addition, DELA will not acquire any economic interest or influence in these crematoriums over the next ten years without prior written permission from ACM.

The takeover is processed in accordance with the purchase accounting method. The results of Yarden Holding BV and its subsidiaries will be processed in the financial statement of DELA Group as of the purchasing date (2 August 2021). The purchase accounting method does not adjust the comparative figures (and the figures of the current book year until the takeover date). The identifiable assets and liabilities are instead valued at actual value on the takeover date.

Yarden Uitvaartverzekeringen NV (a subsidiary of Yarden Holding BV) merged with DELA Natura- en levensverzekeringen NV in accordance with the carry over method on 4 August. Both entities were under common management at the time of the merger, which was subject to the same book values as applied in the purchase accounting method on the takeover date.

To apply the principles and rules for drawing up the financial statement, the Board must form an opinion on various matters and make estimates that may be essential to the amounts included in the financial statement. If required in order to provide the insight as intended in Article 2:362 section 1 of the Dutch Civil Code (BW), the nature of these opinions and estimates, including the associated suppositions, is included in the notes related to the relevant items. Although these estimates have been made by the Board to the best of their knowledge, the actual results may eventually be different. The main estimates relate to:

• The valuation of investments: immovable property, real estate funds, infrastructure funds and private equity funds;
• The applied principles for the technical provisions;
• The value of the non-technical provisions.

Although affected by the pandemic, the consequences have not placed the continuity of DELA Group at risk. The Solvency II ratio at the end of 2021 was 266%, while the minimum solvency percentage required was determined at 150%. This indicates that DELA does not have any solvency issues. COVID did have a negative impact on the operational result in 2021 but – as indicated – this effect is not expected to continue in the long term. The liquidity position of the group is also not at risk.

The consolidated financial statement was drawn up in accordance with the statutory demands of Title 9 Book 2 of the Dutch Civil Code (BW) and the Dutch Guidelines for Annual Reporting (RJ). All amounts are provided in thousands unless indicated otherwise. There are no generally applicable criteria for summarised financial statements in the Netherlands. The criteria applied by the Board and the aggregation level of this financial statement are tailored to the desired goal of the summary.

The valuation and determination of the results are based on historical costs unless indicated otherwise. Revenue and costs are assigned to the year to which they relate. Profits are only included insofar as they were realised on the balance sheet date unless indicated otherwise. Obligations and any losses that originated before the end of the reporting year are taken into account insofar as they were known when the financial statement was drawn up.

Investments are valued at current value with the exception of the mortgage loans and the art collection. The mortgage loans are valued at amortised cost. The art collection is part of the other financial investments and valued at cost price. Both unrealised and realised profits and losses due to the sale and value change of investment are accounted for in the income statement. Transaction costs related to the purchase sale of investments are directly accounted for in the income statement.

Profit distribution is calculated actuarially and has a provisional character. The profit distribution for 2021 was determined by the general meeting on the recommendation of the Executive and Supervisory Boards. The processing of the discretionary profit distribution takes place via the technical provisions item. The addition of the amount the DELA Group has appropriated for discretionary profit distribution under the technical provisions is charged to the result.

2.4.1 General

Determining the technical provisions is a process that by its very nature involves uncertainties. The actual payments depend on factors such as social, economic and demographic trends, inflation, investment returns, the behaviour of policyholders, and assumptions about mortality developments. Any application of different assumptions for these factors than the tariff principles currently used in the financial statement could have a material effect on the technical provisions and underwriting costs.

2.4.2 Funeral insurance

For payments based on insurance policies that are expected to be made in the future, an obligation is included as soon as the policy is implemented. The obligations for funeral insurance at own expense and risk consists of the (with tariff interest) discounted value of the expected future payments (including already appropriated profit distribution) to policyholders or other beneficiaries, minus future premiums.

The majority of the technical provisions for funeral insurance at own expense and risk as established in the Netherlands are calculated in accordance with the pure net method at an interest of 2.75% and based on the GBMV 1995-2000 mortality table as published by the Actuarieel Genootschap, using the principles related to mortality and interest. For insurance policies with a temporary premium payment, the actuarial interest for the period after the end date of the premium payment is 2%.

The technical provisions related to the Yarden portfolio are subject to principles that fall under a valuation at actual value at the time of takeover. The actuarial interest is 1.3% on average and the mortality rate is based on the 2020 prognosis table of the Actuarial Society of the Netherlands (Koninklijk Actuarieel Genootschap). Lapses based on empirical data and the actual cost level were also taken into account. These principles won’t change during the term of the portfolio and were therefore also used on 31-12-2021. There are two additional provisions regarding the Yarden portfolio:

• DELA created a provision of €62.4 million to finance the future indexation of the Yarden package policies. These future indexations are estimated and the actual value of this provision will be the cash value of these withdrawals.
• DELA also guaranteed that bereaved will not have to pay inflation deficits for the first ten years after the takeover. These deficits are estimated and discounted resulting in the actual value of the commitment.

The majority of technical provisions for funeral insurance at own expense and risk as established in Belgium are calculated in accordance with the pure net method at the usual interest from the moment of implementation and based on the usual mortality table, using the principles related to mortality and interest. The expected payments are based on the principles of the rate as determined when the policy was signed.

The technical provision for funeral insurance as established in Germany is calculated in accordance with the pure net method at an interest of 2%. The mortality rate is based on mortality tables as produced by the Deutsche Aktuarvereinigung.

2.4.3 Life insurance

For the DELA LeefdoorPlan (life insurance plan), the technical provision is calculated in accordance with the pure net method at an interest of 3% and based on the tables as published by the Koninklijk Actuarieel Genootschap when the rate was introduced.

The technical provision for life insurance as established in Germany is calculated in accordance with the pure net method at an interest rate of 3%. The mortality rate is based on mortality tables as produced by the Deutsche Aktuarvereinigung.

2.4.4 Savings plan

For the DELA CoöperatiespaarPlan (savings plan), the technical provision is calculated in accordance with the built-up policy value based on the paid savings premiums, the already allocated profit shares and the interest rate linked to the rate.

2.4.5 Premiums

The premiums include surcharges for the coverage of the costs. When the premiums are received or become claimable, the surcharges are released and made available for the coverage of the actual costs, which includes ongoing costs and acquisition costs. Different principles are used for some of the smaller technical provisions.

2.4.6 Acquisition costs

The deferred acquisition costs are subtracted from the provision.