22.21.1 Identity of related parties
Parties are considered to be related if one party can exert control or significant influence over the other party in deciding financial or operational matters. As a part of its ordinary operations, REAAL maintains various sorts of ordinary business relations with related companies and parties. Related parties with REAAL NV are parent SNS REAAL NV, sister companies, subsidiaries, associated companies, Stichting administratiekantoor beheer financiële instellingen (NLFI), the Dutch State and managers in key positions and close family members of these managers. Transactions with the related parties are in the areas of normal insurance, taxation and other administrative relationships.
Transactions with related parties are conducted 'at arm’s length', except where otherwise mentioned. In the transactions with related parties, Best Practices provisions II.3.2, II.3.3, II.3.4, III.6.1, III.6.3 and III.6.4 of the Dutch Corporate Governance Code were complied with.
REAAL has several joint staff departments with parent SNS REAAL. In 2013 group-level costs are structurally allocated to the insurance activities. For further detail reference is made to section 16.1 Information by segment.
22.21.2 Transactions and positions between REAAL NV, SNS REAAL NV and other related companies
Transactions and positions between REAAL NV, SNS REAAL NV and sister companies
SNS REAAL NV Sister companies
In € millions 2013 2012 2013 2012
Positions
Loans and advances 41 686 3,103 3,373
Subordinated debts 302 357 - -
Other debt 31 123 1,112 1,219
Transactions
Mutation loans and advances (645) 222 (270) 630
Mutation subordinated debts (55) - - -
Mutation other debt (92) (4) (107) 180
Income 18 30 112 101
Impairments 9 - - -
Other paid costs 242 208 29 8
Fiscal unity
REAAL NV is a direct and 100% subsidiary of SNS REAAL NV. Together with other group companies, they constitute a fiscal unity for corporate income tax and VAT purposes. All companies within this fiscal unity are jointly and severally liable for corporate income tax debts and VAT debts stemming from the relevant tax entities.
The corporation tax payable and receivable for the years up to and including 2010 is irrevocably determined. The amount of corporation tax recorded by the various subsidiaries pertaining to these years, has not yet been settled with the head
of the fiscal unity. The same applies to the corporation tax payable or receivable for the years 2011 through 2013. Nationalisation
For more information about the transactions between REAAL, the Dutch State and NLFI please refer to section 15.2 General information.
Funding related intragroup transactions and positions
In the second half of 2013, a number of measures has been taken aimed at strengthening the capital position of the Insurance activities (REAAL NV) and reducing the interdependency between SNS Bank NV and REAAL NV. The measures are in line with the commitment to phase out the financial interdependence between the bank and the insurer and have been agreed upon by the Dutch Central Bank. For more information about the re-allocation please refer to chapter 21 Capital management. The measures with regard to REAAL NV include:
•
The conversion into share premium of a subordinated loan of € 150 million granted by SNS REAAL NV to REAAL NV.•
A loan by SNS Bank NV to REAAL NV of € 250 million to replace the current account balance between these entities. The loan has a maturity of two years and a one year extension option with the obligation for repayment in the event of divestment of (parts of) the insurer. The interest on the loan is floating, with a floor of 2.516% per annum. REAAL NV has provided as collateral the shares in SRLEV NV, REAAL Schadeverzekeringen NV and Proteq Levensverzekeringen NV to SNS Bank NV. REAAL NV needs to repay early when REAAL NV is no longer a subsidiary of SNS REAAL NV or if SRLEV NV, REAAL Schadeverzekeringen NV or Proteq Levensverzekeringen NV ceases to be a subsidiary of REAAL NV. The loan has a risk weight of 500%.•
An additional capital contribution from SNS REAAL NV to REAAL NV of € 250 million.•
A dividend payment from REAAL Schadeverzekeringen NV to REAAL NV of € 250 million (2012: € 50 million).•
SRLEV NV intends to provide a credit facility of € 200 million to REAAL NV. This facility was not legally formalised or used as of 31 December 2013, with the agreement signed in March 2014. This facility, if used, will be deducted in phases from the available capital of SRLEV NV. The phasing did not have an impact on the year-end 2013, and the expectation is that the facility will be used for 50% as of the end of 2014 and for 100% as of the end of 2015. The facility is temporary and will be repaid upon sale of the insurer.SRLEV NV and REAAL Schadeverzekeringen NV conducted intercompany sales transactions in 2013 to better allocate the risk budget between the segments within the insurer. SRLEV NV realised a gain of € 17 million on the sale of bonds in the amount of € 262 million to REAAL Schadeverzekeringen NV. Additionally, SRLEV NV realised a gain of € 20 million on the sale of shares in the amount of € 201 million. REAAL Schadeverzekeringen NV realised a gain of € 15 million on the sale of obligations in the amount of € 472 million to SRLEV NV. The bond transactions were executed through a brokerage firm (SNS Securities NV). The share transactions were privately transferred at market value. Mortgage related intragroup transactions and positions
SRLEV and SNS Bank have sold so called “spaarhypotheken” (savings mortgages) to their customers. A savings mortgage is a financial product which combines an insurance policy issued by SRLEV with a mortgage issued by SNS Bank. The proceeds from the insurance policy will ultimately be used to redeem the mortgages.
The savings parts of these insurance premiums received by SRLEV from the policyholders are in the name and at the risk of SRLEV deposited by SRLEV at SNS Bank against interest rates equal to the interest rates on the mortgages linked to these insurance policies.
SRLEV and SNS Bank entered into a cession/retrocession transaction. In this transaction SRLEV purchased and got transferred and will continue to purchase and to get transferred from SNS Bank a portion of the legal ownership of each savings mortgage equal to the amounts of the savings parts SRLEV deposited at SNS Bank including the interest added to it by SNS Bank. The amounts deposited at SNS Bank including the accrued interest thereon are equal to the purchase
price of the legal ownership of the mortgages and these amounts are used to settle SRLEV’s relating payment obligation. To the extent that these amount increase due to new (monthly) saving parts deposited by SRLEV at SNS Bank and due to the interest added to it, that amount will be paid by SRLEV to SNS Bank and SNS Bank sells additional portions of legal ownership of saving mortgages and transfers ownership thereof to SRLEV. To the extent these amounts decrease, for example in case of the expiration of an insurance policy, SNS Bank repurchases and gets transferred the legal ownership of the mortgage at a predetermined purchase price equal to the amount of the decrease of the savings parts deposited including the interest added to it. The abovementioned cession/retrocession agreement does not apply to mortgages that are securitised. In addition to the aforementioned, SNS Bank is not allowed to enter into (securitisation) transactions with savings mortgages linked to an insurance policy of SRLEV’s without SRLEV’s prior permission. Because the sale price of the legal ownership corresponds to the repurchase price and the cession/retrocession agreement explicitly stipulates that the credit risk on the savings mortgages remains with SNS Bank, no transfer of economic ownerships takes place. Therefore the mortgages remain recognised on SNS Bank’s balance sheet. As of 31 December 2013, the legal ownership of € 1,586 million was transferred to SRLEV.
With respect to amounts deposited by SRLEV at SNS Bank relating to mortgages that are securitised by SNS Bank (31 December 2013: EUR 811 million; 31 December 2012: EUR 407 million), SRLEV received a loan from SNS Bank that was used by SRLEV to acquire sub participations in the securitised mortgages from the special purpose companies involved in the securitisation.
Other key transactions and positions between REAAL and sister companies
•
At the end of 2013 the investments of REAAL in fixed income securities issued by SNS Bank NV amounted to € 27 million (2012: € 34 million).•
At the end of 2013 the investments of SRLEV in bonds issued by various Hermes securitisation entities consolidated by SNS Bank amounted to an amortised cost of € 22 million (2012: € 88 million).•
At the end of 2013 the investments of SRLEV in bonds issued by various Holland Homes securitisation entities consolidated by SNS Bank amounted to an amortised cost of € 54 million (2012: € 94 million).22.21.3 Transactions and positions with managers in key positions of REAAL
Managers in key positions comprise three members of the Executive Board of SNS REAAL NV (2012: 3 members) and the boards of the business units (REAAL and Zwitserleven), acting as such in 2013. In total there were 13 persons in key positions (2012: 11 persons).
The table below provides an overview of the total remuneration of managers in key positions.
Specification remuneration managers in key positions
Statutory board Other managers in key positions Total
In € thousands 2013 2012 2013 2012 2013 2012
Fixed annual income* ** 1,575 1,794 2,224 1,749 3,799 3,543
Pension contribution 241 298 317 263 558 561
Long-term remuneration - 1 - 1 - 2
Termination benefits - - 607 - 607 -
Total 1,816 2,093 3,148 2,013 4,964 4,106
* The benefit of the private use of a business car in the 2012 accounts has not yet been included as a component of remuneration. For that reason the amount of the 2012 fixed annual income component is € 120k higher than in the 2012 financial statements
** In contrast to the 2012 financial statements the valuation of disability and life insurance for both 2013 and 2012 is based on the grossed-up benefit for the employee, and not the premium paid by the employer. For that reason the 2012 fixed annual income component € 87k higher than in the 2012 financial statements.
Fixed annual income (IFRS: 'Short-term employee benefits') means the fixed salary (including holiday allowance, 13th month’s bonus, contribution to health insurance and social security) and the variable remuneration. No variable
remuneration is paid to senior management for 2013. REAAL took out three insurance policies for the members of senior management: WIA insurance, disability insurance and mortality risk insurance. The corresponding premiums are paid for by REAAL. These premiums are also part of the fixed annual income.
In accordance with the Tax Plan 2014 and based on the Budget Agreement 2013 Tax Measures Implementation Act (‘Wet uitwerking fiscale maatregelen Begrotingsakkoord 2013’), REAAL pays a one-off ‘crisis tax levy’ of 16% in 2013 on the salaries of its employees in 2013, but only if the salary (per employee) exceeded € 150,000.
The crisis tax levy is also part of the fixed annual income. In 2013, the salary of 12 persons of senior management (2012: 11 persons) exceeded € 150,000. The total crisis tax levy of senior management in 2013 amounted to € 278,000 (2012: € 276,000).
‘Pension contribution’ (IFRS: ‘Post-employment benefits’), means the pension contribution paid for by the employer, after deduction of the contribution paid by the employee.
‘Long-term remuneration’(IFRS: ‘Other long-term employee benefits’), means the remuneration that has been awarded but has not yet been paid out.
‘Termination benefits’ (IFRS: ‘Severance and redundancy pay’), means the pay under termination of the employment contract, including any compensation to which the employee is entitled in connection with the employment termination without performing work.
Loans
The table below provides an overview of the loans granted to members of the senior management that were outstanding on 31 December 2013. These loans were mortgage loans provided in the course of ordinary business and under conditions that also apply to other members of staff.
Specification loans to managers in key positions
Outstanding as at 31 December Average interest rate* Redemptions
In € thousands 2013 2012 2013 2012 2013 2012
Mortgage loans 3,460 4,785 4.00% 3.73% 279 203
* The average interest rate is the interest paid as a percentage of the average outstanding mortgage loan balances
The change in outstanding positions per 31 December 2013 and 2012 is due to repayments in 2013 and changes in executive management positions.
Transactions with individual members of the Executive Board and the Supervisory Board of SNS REAAL NV are explained in section 16.6 Remuneration report of the Report of the Supervisory Board of the Annual Report of SNS REAAL NV.
22.22 Subsequent events
REAAL NV concluded that no subsequent events have occurred that would require recognition or disclosure in the consolidated financial statements.