Financial statements

The items in the financial statements of the group companies are valued in compliance with the currency of the economic environment in which the group companies carry out the majority of their activities (the functional currency). The euro is the functional and performance currency of DELA Natura.

Transactions in foreign currencies during the reporting period are processed in the financial statements at the exchange rate on the transaction date. Assets and liabilities in foreign currency that are valued at their current value are converted at the exchange rate on the balance sheet date. Exchange rate differences that occur in the settlement of monetary items are processed in the income statements for the period in which they occur.

Assets valued in foreign currency at the historical cost are converted at the exchange rate (or the approximate exchange rate) on the transaction date.

Real estate is valued at the fair value on the balance sheet date. The fair value is based on the valuation by an external appraiser.

Participations in which a significant influence applies are valued in accordance with the net asset value method. A legal presumption of significant influence occurs when 20 percent or more of the votes can be cast.

The net asset value method is calculated in accordance with the principles that apply to these financial statements; for participations for which insufficient data is available to change these principles, the valuation principles of the relevant participation are applied.

A participation that is valued as negative in accordance with the net asset value method is valued at nil. If and insofar as DELA Natura is partially or fully responsible for the debts of the participation, a provision will be made. The initial valuation of participations is based on fair value of the identifiable assets and liabilities at the time of acquisition. From then on, the principles related to these financial statements apply, based on the value at initial valuation.

Participations without significant influence are valued at the historical cost. If a sustainable devaluation applies, valuation is at this lower value. Devaluation is charged to the income statement.

The liabilities from participations included under financial fixed assets are stated at the fair value of the provided amount, which is normally the nominal value, minus any provisions deemed necessary.

Shares are stated at fair value based on official listings in the financial markets. Value changes are accounted for directly in the income statement.

Receivables from mortgage loans are valued at the amortised cost price. The direct costs related to the provision of a mortgage loan are included as acquisition costs. They are part of the amortised cost price and are capitalised on the balance sheet. An assessment will be made on the balance sheet date as to whether there are objective observations for the impairment of the receivables resulting from mortgage loans. The loss is accounted for in the income statements if this proves to be the case.

DELA Natura has forward exchange contracts which are stated at fair value. In addition, DELA Natura has a convertible loan, which consists of a loan and a call option. Upon valuation, the call option is separated from the loan and individually valued at fair value. Profit and loss from the revaluation into fair value on the balance sheet date is immediately processed in the income statement. This involves all non-listed items which are valued based on financial models – the 'mark-to-model' method. Any derived financial instruments with a negative value are categorised on the balance sheet under short-term debts.

Participations in real estate funds, infrastructure funds and agriculture & forestry funds are stated at fair value. This item includes investments without frequent market quotation. Section 4.2 provides further clarification of the valuation method. Value changes are accounted for directly in the income statement. In addition, a revaluation reserve is established for the unrealised value increase.

Other financial investments are stated at fair value. This item includes investments without a frequent market listing. Section 5.2 provides further clarification of the valuation method. Value changes are accounted for directly in the income statement. In addition, a revaluation reserve is established for any unrealised value increase.

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 statements could have a material effect on the technical provisions and underwriting costs (see also 4.81: Liability adequacy test).

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 (based on the mortality rate and including already appropriated profit distribution) to policyholders or other beneficiaries, minus future premiums.

The majority of the technical provisions for own-risk funeral insurance as established in the Netherlands are calculated in accordance with the pure net method at an interest of 2.75 percent 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 percent.

The technical provisions related to the Yarden portfolio acquired in 2021 are subject to principles that fall under a valuation at fair value at the time of acquisition. The actuarial interest is 1.3 percent on average and the mortality rate is based on the 2020 prognosis table of the Actuarial Society of the Netherlands. Lapses due to other causes than death were also taken into account at the moment of acquisition based on empirical data and the actual cost level. In addition, 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. Indexation has now been awarded for a number of years, with a further €33.8 million available for future indexations. These future indexations are estimated at the moment of acquisition and the fair value of this provision will be the present value of these withdrawals.
• DELA also guaranteed that bereaved will not have to pay inflation deficits for the first ten years after the acquisition. These deficits are estimated and discounted resulting in the fair value of the commitment.

The majority of technical provisions for own risk funeral insurance 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 DELA Sorgenfrei Leben is calculated in accordance with the pure net method at an interest of 2 percent. The mortality rate is based on tables produced by the German Actuarial Society.

The technical provisions in the insurance portfolio acquired in Germany in 2022 are subject to principles associated with a valuation at fair value on the acquisition date. The actuarial interest is 2.5 percent on average, and the mortality rate is based on the prognosis for 2022 by the Actuarial Society of the Netherlands.

The technical provision for the DELA LeefdoorPlan (life insurance plan) is calculated in accordance with the pure net method at an interest of 3 percent and based on the tables published by the Actuarial Society of the Netherlands when the rate was introduced.

The DELA Activ Leben technical provision is calculated in accordance with the pure net method at an interest rate of 3 percent plus a provision for unearned premium. The mortality rate is based on mortality tables as produced by the German Actuarial Society.

The technical provision for the DELA CoöperatiespaarPlan (savings plan) 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.

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.

Provisions are made for legal or constructive obligations that exist on the balance sheet date for which it is probable that an outflow of resources will be necessary and the scope of this outflow can be reliably estimated.

The provisions are valued as a best estimate of the amounts required to settle the obligations on the balance sheet date. The provisions are valued at present value of the expenses that are expected to be necessary to settle the obligations, unless stated otherwise.

If it is expected that a third party will pay the obligations and it is likely that the payment will be received once the obligation has been settled, the payment is included in the balance sheet as an asset.

The provision for work anniversaries is included as expected costs during the course of employment. The actuarial method applied to determine the provision is known as the Projected Unit Credit method, which takes into account future salary increases, survival and disability rates, and more. A percentage of 3.1 percent (2022: 3.7 percent) is applied to the long-term investment return and 2.0 percent (2022: 2.0 percent) for the general salary increase. The AG Generation Table 2020 and WIA/IVA data are also applied. The calculated obligation was then discounted by 3.2 percent at the end of 2023 (2022: 3.7 percent).

For any tax amounts to be paid in the future resulting from differences between commercial and fiscal balance sheet valuations, a provision is made equivalent to the sum of these differences multiplied by the applicable tax rate. This provision is then reduced by the still to be settled tax amounts resulting from tax loss carry-forwards insofar as it is likely that the future fiscal profits will be available for settlement. The provision for deferred tax obligations is stated at nominal value.

The calculation of the deferred tax obligation applies the tax rates applicable at the end of the reporting year or the rates that will be applicable in coming years, insofar as these have been legally determined.

If the effect of the time value of money is material, the other provisions will be valued at the present value of the expenses expected to be needed to settle the relevant obligations. Discounting is based on a discount rate for taxes that reflects both the market value and the specific risks related to the obligation. If the effect of the time value of money is not material, the other provisions are stated at nominal value. Unless otherwise stated, the other provisions are stated at present value.

The gross premiums consist of the premiums that are payable by policyholders for insurance contracts. The gross premiums excluding taxes and other fees resulting from insurance contracts are included as income when they are due by the policyholder. For single premium contracts the premium is included as income when it is due, with any cost and risk coverages being postponed and included in the result at a constant ratio to the ongoing insurance.

Acquisition costs are costs directly related to the implementation of insurance policies, which depend on and relate to the acquisition of new insurance contracts or the extension of existing ones. The acquisition costs comprise provisions paid to third parties for insurance products. The acquisition costs are deducted from the technical provision, depreciated over ten years and charged against the result. The annual provisions are offset by the return provisions reclaimed throughout the year. Acquisition costs are deducted from the technical provision insofar as they can be reclaimed from the expected gross result of the underlying new production of that year. The depreciation period is assessed periodically. Where applicable, the depreciation cost is adapted to the shorter depreciation period, which currently stands at ten years.

As part of the liability adequacy test, impairments to the attributed acquisition costs are assessed annually and a determination made as to whether the future contribution from the insurance products is sufficient to cover the attributed costs.

Administrative expenses are those not included under the acquisition costs, personnel costs and depreciations. 

The composition of the capital requirement is shown in the table below. 

It is clear that the underwriting risks and market risks are the largest. The gross positions of both (without taking into account the mitigating effect of profit sharing) have increased, which has been largely compensated for by the mitigating effect of the profit share.

The core capital has decreased in 2023 due to developments related to interest rates, inflation and expected costs. The composition of the core capital is represented in the table below (amounts in € million).

As was the case last year, the core capital is almost entirely Tier 1 capital. All elements of Tier 1 are fully at DELA’s disposal. The Tier 3 capital concerns a net position of an active deferred tax position with the Belgian tax authorities.

The market risk is the risk of possible losses due to unfavourable developments in the financial markets. The value of the investments and obligations depend on developments in these markets, the composition of the investment portfolio and the characteristics of the insurance obligations.

DELA Natura has mitigated the market risk to a significant extent through its profit distribution scheme and premium measure, as well as via derivatives that mitigate part of the currency risk. DELA Natura also applies the ‘prudent person’ principle to its investment policy, and full and/or partial ALM studies are performed periodically to assess whether the investment policy is still suitable.

The table below shows the development of the market risk, quantified based on the presented standard model (amounts in € million).

The financial markets partly recovered in 2023 from the fall in share prices in 2022. Interest rates increased over the course of the year compared to 2022, although the rate at the end of the year was lower. Inflation also fell.

The main developments with an impact on the capital requirement for market risks in 2023 were the growth of the investment portfolio and the improved mitigating function of profit sharing as the coverage ratio was not as far above the 210 percent limit.

The underwriting risk is the risk that the scope and timing of pay-outs are not aligned to the expectations as included in the premium determination. DELA Natura mitigates the underwriting risk in various ways such as its profit sharing and premium measure, but also via reinsurance, (medical) acceptance and a continuous focus on costs.

DELA Natura is exposed to the life insurance risk alone as it only provides life insurance policies. The portfolio largely consists of funeral insurance, with specific rates for the Netherlands, Belgium and Germany. These rates are based on specific characteristics and starting points (actuarial interest, costs, mortality tables) aligned to each country. DELA examines annually whether these starting points remain in line with the development of the relevant portfolios. The portfolio is large in numbers and scope, with a limited chance of fluctuations in the results.

In addition, DELA Natura has a temporary life insurance policy in the Netherlands and Germany. The insured capitals herein are significantly higher than in the funeral insurance. Reinsurance is used to limit any volatility of the results for this portfolio.

Finally, DELA Group has a savings product in the Netherlands. The mortality risk of this portfolio is limited at 10 percent of the built-up value.

The table below shows the structure of the insurance technical risk (amounts in € million)

The underwriting risks have increased. This is mainly a side effect of the lower interest rate and largely made up, as previously mentioned, by the improved mitigating function of profit sharing due to the coverage ratio not being as far above the 210 percent limit.

Credit risk (or: counterparty credit risk) is the risk of losses due to an unexpected default or unexpected worsening of the credit rating of the counterparties and debtors of the insurance company. This mainly involves receivables related to mortgages, reinsurers, derivatives or other debtor receivables. The scope of the credit risk in 2023 did not change significantly.

This is the risk that DELA Natura is unable to fulfil its financial obligations to its policyholders or other creditors at any time because assets cannot be traded fast enough. The liquidity risk is not expressed as a capital requirement (SCR) in Solvency II. DELA Natura must have sufficient cash and cash equivalents to pay claims resulting from the existing insurance agreements and to pay for its annual expenses. DELA Natura uses multiple banks in order to have access to a wide range of credit facilities. In addition, DELA Natura has credit facilities with the custodian of the shares and bonds. DELA Natura has fulfilled its financial obligations to policyholders and other creditors in 2023.

In addition to financial risks, DELA Natura also faces operational risks. These are risks resulting from external influences related to the failing of people, processes or systems. The main operational risk areas are further detailed below.
Operational risks occur at all levels of the organisation. The control measures are therefore embedded in various specific policy documents, protocols and process descriptions.

This risk domain in DELA Group is built up of the following sub-risks:

Integrity risks are paired with the threat of damage to DELA’s reputation or existing or future threats to the capital or results as a result of insufficient compliance with the law. In principle, DELA Natura monitors this issue from its compliance function based on the themes in the systematic integrity risk analysis (SIRA). The remaining risk is therefore considered very limited, and DELA believes that no additional capital has to be reserved.

The SIRA themes are:

• Organisational and employee integrity: organisational integrity includes themes such as governance and outsourcing. Employee integrity involves the integrity of the Management Board, the internal supervising body, and internal and external employees. Related subjects are pre- employment screening, professionalism and conflicts of interest.
• Customer-chain integrity: this involves both the integrity of customers and how the organisation treats customers. It also includes the integrity of the chain in which the company operates. Themes range from duty of care to combatting money laundering and terrorism.
• Market integrity: this relates to the integrity of the (financial) market(s), including issues such as competition and market abuse.
• Integrity related to the processing of personal data: this involves the integrity of the data used within DELA Natura (such as the processing and security of personal data).

In addition to the risks included in the standard model related to determination of the capital requirements, there are various other risks that are of interest to DELA Natura. The sections below describe these risks in further detail.

The head office of DELA Group was sold by DELA Natura to its subsidiary DELA Crematoria Groep BV in 2023.

Subsidiaries DELA Vastgoed BV and DELA Crematoria Groep BV have real estate on the balance sheet. As the valuation of real estate properties includes estimates, a certain degree of uncertainty exists and a bandwidth should always be taken into account. The accuracy of an appraisal of a marketable property is deemed to be within a 10 percent range (+/ -) of the value.

The average balance of these current account relationships is subject to an interest rate of 3.5 percent (short-term) and 7.0 percent (long-term). No new arrangements were made regarding payment and securities. 

Shares and bonds
All shares and bonds are listed on the stock exchange.

The modified duration formula is used to measure interest rate sensitivity. The average modified duration of the bonds and other loans is 5.2.

Other loans
We acquired a security for a loan of €3.5 million, which consisted of a pledge on all outstanding shares in the relevant counterparty and a security deposit of €0.5 million. 

Derivatives
The valuation of the derivatives (forward exchange contracts) is made based on the ‘mark-to-model’ approach. The average remaining term of these contracts is 7 weeks.

Real estate funds
The real estate funds are not listed on the stock exchange. The valuation of the real estate funds involves the fair value using the DCF method. This valuation is taken from the fund managers and is the valuation model also used in the trading of property. The valuation is in accordance with generally accepted methods and set by an external appraiser/valuer. We receive an ISAE3402 Type II report or equivalent for most funds. The audit statement from the external accountant with the valuation or annual statement of the funds is only received in some cases after the DELA Natura financial statements has been drawn up. Analysis has shown that sufficient certainty exists for the reliability of the valuations as accounted for by fund managers, although there is a limited risk of the kind of estimation uncertainty that can naturally occur for investments held by the fund.

Infrastructure funds and agricultural & forestry funds
The infrastructure funds and agricultural & forestry funds are not listed on the stock exchange. Their valuation is based on the fair value provided by fund managers. The valuations are established using the DCF method and local accounting standards, and we have determined that there are only marginal differences between them. The valuation is preferably performed by an external appraiser/valuer. We receive an ISAE3402 Type II report or equivalent for most funds. The audit statement from the external accountant with the valuation or annual statement of the funds is only received in some cases after the DELA Natura financial statements have been drawn up. Analysis has shown that sufficient certainty exists for the reliability of the valuations as accounted for by fund managers, although there is a limited risk of the kind of estimation uncertainty that can naturally occur for investments held by the fund.

Mortgage funds
The mortgage fund is not listed on the stock exchange and comprises investments in non-NHG accredited mortgages. The valuation of these funds involves the fair value, and is taken from the fund managers. The valuations are established via the DCF method. Local accounting standards are applied and these are assessed by DELA for applicability within our valuation principles. The valuation is performed and reviewed internally by the fund’s external accountant and we receive an ISAE3402 Type II report. The audit statement from the external accountant with the annual statement of the fund is only received after the DELA Natura financial statements has been drawn up. Analysis has shown that sufficient certainty exists for the reliability of the valuations as accounted for by fund managers, although there is a limited risk of the kind of estimation uncertainty that can naturally occur for investments held by the fund.

On the balance sheet date, the loan-to-value is 70.1 percent (2022: 66.7 percent).

Other financial investments
The amounts included under this section relate to interests in non-listed private equity firms and a loan fund.

The market value of the private equity firms is based on the DCF method.

The loan fund is not listed and comprises investments in company loans. The valuation of the loan fund involves the fair value provided by fund managers. The fair valuation of the loan fund applies the standards in line with IFRS and US GAAP. DELA has determined that these standards only deviate marginally from DELA’s principles. The valuation is performed by an external assessor, and the fund provides us with an ISAE3402 Type II report. Before the financial statements of DELA Group are determined, DELA receives at least an audit statement from the accountant, providing sufficient certainty regarding the reliability of the accounted valuations; a limited level of estimate uncertainty naturally present in the investments made by the fund remains.

Investments in cash and cash equivalents
Investments in cash and cash equivalents relate to receivables and debts directly linked to the investment portfolios with a mandate issued to the asset manager. It mainly involves cash positions in the various FGRs (joint account investment funds).

Securities lending
DELA Natura lends shares and bonds. To limit the risk for DELA Natura, borrowers must provide collateral for the loans. Cash collaterals are not allowed and the lending parties must comply with strict requirements. To further limit the risk, the following additional restrictions are applied:

• counterparties must have a S&P rating of at least A-;
• collateral may only involve government bonds from OECD countries with a S&P rating of at least AA- in accordance with S&P;
• the market value of the collateral should be at least 102 percent of the market value of the loaned securities;
• shares on our engagement list are not eligible for lending. Engagement is the process by which active rights as shareholder are being used.

The market value of the loaned items on 31-12-2023 was €408.4 million (2022: €518.6 million). The value of the collateral is €421.8 million (2022: €536.2 million).

Due to the scope and distribution of the operations of DELA Natura the credit risk based on the receivable from direct insurance is only condensed to a limited extent. In addition to the usual provision for doubtful debts from intermediaries there is therefore no additional provision for credit risk.

The other receivables have a term of less than one year, except for the deferred tax assets.

The deferred tax positions are subjected to offsetting (where possible). The table below shows a specification of the various deferred positions that are presented jointly on the asset side of the balance sheet, which also include negative amounts due to the offsetting applied.

As a result of a negative tax result, a losses carried forward occurred in 2023. An increase of the fair value of investments in book year 2023 changed the active deferred tax assets on securities to passive deferred tax assets.

The deferred tax assets are largely of a long-term character.

On 31 December 2023 the registered (145,210 shares) and issued capital (29,498 shares) of the company were €14,521,000 and €2,950,000 respectively.

The premium reserve resulted from the share issuance above the nominal value and therefore involves a free reserve.

A statutory reserve has been set at the level of the capitalised expenses of internally developed software systems. At the end of 2023 it amounted to €9.8 million. The rest of the legal reserves come from subsidiaries of DELA Natura.

The liability adequacy test checks that the technical provision is sufficient to provide a high level of certainty regarding the obligations to policyholders. In the test, the balance sheet provision is reduced by the related allocated acquisition costs, and intangible assets are compared to a provision that takes current estimates of all future cashflows and developments into account. These cashflows include profit sharing and premium measures. The current estimates take into account the uncertainty margins prescribed in Guideline 605 of the Dutch Accounting Standards Board.

Should the current estimate be lower than the available technical provision, it can be stated that the available balance sheet provision is able to meet the obligations to policyholders.

The liability adequacy test is performed on the total portfolio of insurance obligations every year. Any shortfalls are charged directly to the income statement, initially by writing them off to future profit margins in acquired portfolios, followed – if necessary – by writing them off to allocated acquisition costs and, finally, by establishing an additional provision if required. Write-offs to allocated acquisition costs or future profit margins in acquired portfolios due to this test are not reversed in later years. No write-offs took place in previous years.

The performed liability adequacy test at fair value shows that the total of the technical provisions has an excess value of €2.3 billion at the end of 2023. This is virtually the same as last year. The results from the test are at the level of DELA Natura (including the Belgian and German offices).

Participation in the Dutch Terrorism Claims Reinsurance Company (NHT) entails a conditional obligation for compensation for acts of terrorism with a value of up to €2.1 million. No terrorist act as meant by this agreement occurred in the book year.

DELA Natura has a credit facility at Northern Trust with a maximum of €100 million or 10 percent of the value of the securities deposited. The collateral comprises the securities in custody with Northern Trust. The interest percentage due is the ESTER interest rate plus 1.25 percent.

DELA Group entered into no new agreements for investments in infrastructure funds in this book year. At the end of 2023 the remaining investment obligations to various counterparties were €11.1 million and $34.5 million (which equals €31.3 million on the balance sheet date)

In 2023 DELA Group did not enter into any new agreements for investments in infrastructure funds. At the end of 2023 the remaining investment obligations were €76 million.

DELA Group came to an agreement with a counterparty in 2023 to invest €100 million in agriculture and forestry funds. At the end of 2023 the remaining investment obligations were €108.1 million and $57.7 million (€52.3 million on the balance sheet date).

DELA Group came to an agreement with a counterparty in 2023 to invest €200 million in a loan fund. At the end of 2023 the remaining investment obligations were €186.6 million.

There was no remaining investment obligation in ASR Hypotheekfonds at the end of 2023.

Fiscal unitys have been established in DELA Natura for corporate tax (VPB) and turnover tax (OB). Every company within the fiscal unity is severally liable for the taxes due.