2.2 Discretionary profit distribution
Profit distribution is calculated actuarially and has a provisional character. The processing of the discretionary profit distribution takes place via the technical provisions item. The addition of the amount the Group has appropriated for discretionary profit distribution under the technical provisions is charged to the result.
2.3 Technical provisions
The determination of the technical provisions is a process that naturally involves a lot of uncertainties. The actual payments depend on factors such as social, economic and demographic trends, inflation, investment yields, policy-holders’ behaviour and assumptions on mortality development. The use of other assumptions for these factors than the tariff rates now used in the annual accounts could have a material effect on the technical provisions and underwriting costs (also see ‘adequacy test’).
Funeral insurance at own expense and risk
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 awarded profit shares) to policy holders or other beneficiaries, minus future premiums.
The majority of the technical provisions for funeral and life 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.
The majority of technical provisions for funeral and life 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 HD or MK-FK 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 life insurance as established in Germany is calculated in accordance with the pure net method at an interest of 3% and with a mortality rate based on 46% of the ‘DAV2008T NR/R, 2. Ordnung’ table as produced by the Deutsche Aktuarvereinigung.
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 prognosis tables as published by the Koninklijk Actuarieel Genootschap when the rate was introduced.
For the DELA Spaarplan (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.
The premiums include surcharges for the coverage of the costs. When the premiums are received or have 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.
The deferred acquisition costs are subtracted from the provision.