Embedded Value and Analysis of Change KBC Insurance business as at 31/12/2002

Agenda KBC Life Insurance Activity & Scope Terminology ANAV (“Adjusted Net Asset Value”) Components Roll forward VBI (“Value of Business In Force”) Components Assumptions Sensitivities Roll forward VNB at date of sale (“Value of New Business”)

KBC Life Insurance Activity & Scope

KBC Insurance Group: Life Activity Technical Provisions KBC Insurance (part Unit Linked) KBC Insurance (Belgium) ( ) ( ) Fidea (Brokerage Belgium) (26 160) (27 074) Vitis Life (Luxembourg) ( ) ( ) Others (CSOB, K&H Life,…) (1 303) (1 709) Total ( ) ( ) (‘000 EUR)

KBC Insurance Group: Life Activity Growth in Total Life Premium Income (‘000 EUR) % % % % % Non LinkedUnit Linked

KBC Insurance Group: Life Activity Growth in Technical Provisions Life (‘000 EUR) % % % % % Non LinkedUnit Linked

Main Distribution Channels Life Activity KBC Bank branches  Savings and investment products  Credit-linked risk covers Insurance agents and other  Savings products  Group insurance (Mainly SME, partially based upon referrals from bank branches) Fidea Brokerage Vitis Life operation services from Luxembourg

Scope Subsidiaries under review KBC Insurance Belgium + Fidea + Vitis Life total technical provisions : Modelled: 87 % of the mathematical reserves 92.8 % of the total premium income in % of the new premium income in 2002 Subsidiaries not under review Central European Subsidiaries (CSOB, Warta Vita, K&H Life,…) total technical provisions :

Terminology

PV Tied Surplus Life Value In Force Terminology “Embedded Value” Shareholders Equity Economic Adjustments ANAV = As investment for Embedded Value > Equity adjustments > Asset adjustments > Resilience Reserves > Tax assets and liab. Tied Surplus Life ANAV Other Surplus PVFP* VBI** (PVFP- Cost Tied Surplus) Tied Surplus Life oror KBC standard Embedded Value Other Surplus Other Surplus = Tied Surplus Non Life + Other Tied Surplus +Free Surplus *PVFP = Present Value of Future Profits **VBI = Value of Business In Force

Embedded Value: global figures (‘000 EUR) 31/12/200131/12/2002 VBI Life PVFP Cost of tied surplus ( ) ( ) Tied Surplus Life Value In Force Other Surplus Embedded Value

ANAV

ANAV : Composition “Adjusted Net Asset Value” (ANAV) = [+]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

ANAV : as at 31/12/2002 ('000 EUR) shareholders equity equity adjustments asset adjustments additional reserves non life additional reserves life tax assets and liab. ANAV

ANAV Change 31/12/2001 – 31/12/ ANAV 31/12/2001 Profit in 2002 Dividends Paid Asset Value Adjustments Other ANAV 31/12/2002

Value of Business In Force (“VBI”)

KBC RBC requirements for Life business KBC RBC Requirements (legal requirements) % of the reserves % of sum at risk Unit Linked with legal SM > % (1%) 0.375% (0.3%) Unit Linked with legal SM = 0 0.5% (0%) 0.0% (0.3%) Non Linked invested in a 75 B./ 20 S./ 5 P. mix 9.2% (4%) 0.375% (0.3%) The current RBC for Life activities is 197.9% of the legal required solvency margin for the Life Activity

VBI: Economic Assumptions year bond yield (Rate from 2005 on) 5.50% pa (5.50%) 4.40% pa (5.00% pa) Risk Prem. on equity3.30% pa2.50% pa Risk Premium used for discount rate 3.30% pa3.50% pa Discount rate* (= Cost of Capital) 8.80% pa*8.50% pa* Wage inflation3.79% pa2.80% pa *Based on the bond yield in the long run

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 wage inflation % (2.80% pa) 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

VBI Overview (‘000 EUR, only reserves of modelled business) PVFPVBI VIFPVFP/ reserves VBI/ res. reserves 2001* %6.74% %5.15% *2001 Based on data of KBC Insurance Belgium

+ 10%- 10% Expenses- 4.24%+ 4.24% Lapses- 2.10%+ 2.28% Mortality- 3.45%+ 3.45% + 0.5%- 0.5% Discount rate- 7.16%+ 7.64% Investment Return*+ 2.76%- 6.94% VBI : Sensitivity Analysis Effect on VBI * The discount rate is changed consistently with the change in investment return

VBI : Sensitivity Analysis Current RBC KBC Insurance 100% of the legal SM 150% of the legal SM 200% of the legal SM Embedded Value VIF VBI Changing the solvency margin (‘000 EUR)

VBI Change 31/12/2001 – 31/12/2002 (EUR) VBI 31/12/2001 Change non econ. assumptions Unwinding discounting Cashflow to ANAV VNB as of 31/12/2002 Variances over 2002 Change in taxation Change econ.assumptions VBI 31/12/2002

VBI Change 31/12/2001 – 31/12/2002 Effect of changing non economic assumptions: EUR (in ‘000 EUR) Total% Mortality % Lapses % Expenses % Other % Total %

VBI Change 31/12/2001 – 31/12/2002 Effect of ‘new business’ sold in 2002 (as at 31/12/2002): 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 %38.82% (‘000 EUR)

VBI Change 31/12/2001 – 31/12/2002 Effect of deviations during 2002: EUR Investment returns in 2002: EUR Lapse, mortality, extra premium income, miscellaneous EUR Effect of changing prospective economic assumptions: EUR EUR The impact of the tax reform in EUR This amount is due to changing the interest expectations and the change in the expected risk premium on equity.

Value of New Business

VNB New business 2002 at date of sale APE (Annualised Premium Equivalent) PVFPVNBPVFP as % of APE VNB as % of APE 2001* %34.96% %33.08% (‘000 EUR) APE Non Linked = regular premium + single premium / 10 APE Unit Linked = total premium / 10 *Based on data of KBC Insurance Belgium

Review “B&W Deloitte reviewed the methodology used to calculate the embedded values, the value added by new business and the analysis of change in the value of inforce.” “B&W Deloitte reviewed the assumptions used in the calculation of the embedded value and the value added by new businesss for reasonableness based on the information available” “Based on our work and our validation report on the work carried out by KBC Insurance, we consider the embedded values, 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 “The calculation of embedded values necessarily makes numerous assumptions with respect to economic conditions, operating conditions, taxes, and other matters, many of which are beyond the KBC’s control. Although the assumptions used represent estimates which KBC Insurance and B&W Deloitte believe are reasonable, actual future experience will vary from that assumed in the calculation of the embedded value results, and such variation may be material. Deviations from assumed experience are normal and are to be expected. Even without any change in perceived environments, and in parameters used to reflect them, actual results will vary from those projected due to normal random fluctuations. Consequently, the inclusion of the embedded value herein should not be regarded as a representation by B&W Deloitte that the stream of future after-tax statutory profits discounted to produce these values will be achieved. The embedded value presented in this report is based on common actuarial practice with regard to valuation methodology and assumptions. The values are calculated on a deterministic basis. Therefore they do not necessarily capture the cost of any investment guarantees. Our work has not considered the impact of alternative valuation methodologies such as fair values. “

Embedded Value and Analysis of Change KBC Insurance as at 31/12/2002