REPORT OF THE MANAGEMENT BOARD

In 2024 there was political unrest and violent strife in many parts of the world. Nevertheless, the economy developed relatively favorably. In the Netherlands, the Schoof administration took office, which had to find a political answer to the many challenges in our society. As De Hoop we particularly noticed the increased demand as a result of the better economic conditions and the growth in partnerships.

DH Reinsurance has a core organization of 9.0employees (6.6FTE) (2023:9.0;6.6FTE). In addition, about twenty more people provide services for DH Reinsurance, particularly from Onderlinge 's-Gravenhage, through which we jointly give substance to our mission.

We work with specialized medical advisors who take care of the medical assessment and ensure that we can offer customized services. We started the year with three medical advisors, but André Gaasbeek unfortunately could no longer combine the work for DH Reinsurance with his other duties. We are very grateful to him for his years of dedication and commitment and expect to appoint a replacement in 2025.

DH Reinsurance's mission is to provide financial security to individuals with a medically increased mortality risk.

Ever since its founding in 1905, DH Reinsurance has emphasized the social responsibility of insurers and championed this vulnerable target group. DH Reinsurance strives to offer term life insurance to virtually everyone.

DH Reinsurance specializes in difficult-to-insure medical mortality risks and offers insurers the possibility of reinsuring them. This allows each insurer to adopt a socially responsible underwriting policy and also allows people with medical conditions to obtain good life insurance.

From our mission, we have defined three core values: expertise, certainty and customization.

Expertise
We specialize in difficult-to-insure medical mortality risks. We strive to offer mortality risk insurance to pretty-well everyone. We make sure we have the right medical expertise to assess the current situation and expected developments in survival rates of people with (complex) medical conditions.

Certainty
We focus on long-term certainty for our cedents and policyholders. We offer products that fit the application and underwriting process of cedents. We take over the financial risk for this target group. We ensure reliable and financially sound operations.

Customization
Providing customization for our policyholders is at the heart of our business. Our processes and corporate culture are fully geared to providing customized and meticulous coverage for people with medical conditions. We handle every policy application or claim with extreme care.

DH Reinsurance focuses on the individual life insurance market and, in particular, on the medically enhanced term life insurance segment in the Netherlands, Belgium, Germany, United Kingdom and Ireland, and on the islands of Curaçao, Aruba and St. Maarten.

Commercially, as expected, there were significantly more new applications and policies than in 2023. After an in-depth analysis in 2021 on how we could better fulfill our mission, the conclusion was that a different set-up is desirable in the Netherlands and similar offerings are often lacking abroad. Based on this analysis, we launched two strategic projects in 2022, which contributed significantly to our growth in 2024.

De Hoop Maatwerkroute

In the Netherlands, this concerns the launch of De Hoop Maatwerkroute. With this we want to give people with a medically increased mortality risk earlier and better access to the options DH Reinsurance can offer. Insurers can point people with a (complex) medical condition they do not offer to De Hoop Maatwerkroute and thus make a positive contribution to the insurability of this vulnerable target group. Allianz, a.s.r., Centraal Beheer, De Goudse Verzekeringen, FBTO, Interpolis, Nationale Nederlanden and Scildon are affiliated with this initiative.

Foreign activities

The second strategic project involves expanding our foreign activities, first of all in Germany. From the fourth quarter of 2023, we will work together with distributor Check24 and insurer Squarelife. Customers in Germany have responded enthusiastically to this. In 2024, this has led to greatly increased production.

In the United Kingdom, DH Reinsurance has worked for many years with specialist insurance broker Pulse Insurance and, since 2023, with insurer 1Edge Insurance on Guernsey. In 2024, we saw increased production volumes from the United Kingdom.

In the Antilles, Ennia is one of our major cedents. As of 2018, Ennia was in the emergency arrangement of the Central Bank of Curaco. In recent years, we have continued to work with Ennia so that they could continue to offer insurance to clients with increased medical risks. The cooperation agreement has been terminated by Ennia as of December 31, 2024, due to legal restructuring. Ennia and we intend to continue reinsurance in the Antilles with the newly formed entities.

For our activities abroad, we use the trade name DH Reinsurance. Under this name, our website is also available in German and English (www.dhreinsurance.com). 

Cooperation with Onderlinge 's-Gravenhage

For many years DH Reinsurance has been able to use, to its full satisfaction, activities of departments of Onderlinge 's-Gravenhage (OG) whose costs are for common account. This allows DH Reinsurance to suffice with a small organization that focuses on its core tasks. And DH Reinsurance can benefit from the economies of scale and flexibility offered by OG by performing work it does for itself also for DH Reinsurance. Meanwhile, this collaboration is subject to the (ever-increasing) laws and regulations governing outsourcing. This has led to an aggravation of administrative burdens and costs, on both sides. This has regularly raised the question of whether and to what extent OG can continue operations, with only one customer. The introduction of DORA, which significantly increases the obligations for ICT services, has made OG decide it no longer wants to provide ICT services to DH Reinsurance. Given the aforementioned developments, OG and DH Reinsurance have agreed to terminate the agreements for all services. DH Reinsurance will look for other suppliers in 2025. We are grateful for OG's years of service and support in transitioning operations.

The aforementioned developments resulted in a higher number of new policies in2024 (1,011 compared to 742), an increase of 36%. Capital production increased by 46% from 139,623 to 204,108.

DH Reinsurance realised in 2024 a profit after tax of 2,856 (2023: 2,554 profit). The increase was mainly due to higher (direct) investment income. It is proposed to pay a dividend to shareholders of 2,400.

The available equity under Solvency II (EOF) amounts to 64,575 (2023: 64,154). The increase of 421 (net of the proposed dividend) is mainly caused by the increase in the value of shares. Required capital under Solvency II (SCR) also increases, from 24,794 to 26,697. This increase is mainly caused by the increase in market risk by 8%, also due to the increase in the value of shares. The solvency ratio at the end of 2024 is 242% (2023: 259%) and is thus well above the internal standard of 200%.

Premium income before reinsurance deduction increased by 4% (2023: 1%) to 6,470 (2023: 6,218).

The annual premium level increased by 5,6% to 6.768 (2023: 6.408).

The insurance portfolio, measured in insured amount, increased more than in 2023 (10% compared to 5%). New business, measured in insured amount, increased more than in 2023 by 46%. Lapse also increased compared to 2023 by 4% . Over a five-year period, the insurance portfolio grew organically from 756,911 to 1,288,091. That is an increase of  70% in five years.

The investments (excluding deposit, including liquid assets) amounted to 90.148 (2023: 88.510).

The balance sheet value of the equity portfolio increased in 2024 to 48,585 (2023: 46,321) due to positive economic expectations and corporate earnings. DH Reinsurance's investment strategy focuses on value stocks with expected high dividends and high ESG scores. The balance sheet value of the AeAM Dutch Mortgage Fund 2 increased slightly as of 31-12-2024 to 10,723 (2023: 10,256).

In 2021, a commitment of 5,000 was made to the Aegon SME Fund, with 4.689 actually purchased at the end of 2024

The balance sheet value of the liquid assets as of 31 December 2024 was 1,709 (2023: 1,859).

Benefits before deduction of reinsurance amounted to 4,341 up slightly (3.3%) compared with 2023. Death benefits were up 40%mainly due to an increase in the average sum insured. This was offset by an almost equal fall in the volume of surrenders.

The result technical account decreased by 478 compared to 2023. This was mainly caused by the increase in death benefits.

The negative result on expenses decreased slightly. This is mainly caused by an increase in commissions received.

The effective tax rate in 2024 was 25,4% (2023: 26,2%) and thus was lower than the applicable tax rate which is 25.8%. The lower effective tax rate is mainly caused by a negative exchange difference due to currency exchange rate changes.

The result after tax increased by 302 in 2024 compared to2023.

It is proposed to the General Meeting of Shareholders to distribute a dividend of 2,400 from the profit for the fiscal year and to add the remaining positive result to the Other reserve.

To determine the required solvency, DH Reinsurance uses the standard formula from the Solvency II directive.

DH Reinsurance has set a solvency ratio of 200%as an internal standard. This standard is in line with a high creditworthiness as laid down in Article 199 of the Delegated Regulation EU 2015/35. This sets out which solvency ratio matches the creditworthiness of the company. In credit quality category 1, the rated company has a very strong ability to meet its financial obligations. The probability of default at 0.01% is related to a solvency ratio of 196%. DH Reinsurance wishes to aim for the corresponding solvency ratio (rounded to 200%). This internal standard is met at the end of 2024.

Based on the standard formula, the required solvency is  26,697 (2023: 24,794). The solvency ratio at the end of 2024 is 242% (2023: 259%). The solvency ratio decreased slightly compared to the end of 2023 with increasing equity (+ 421) and required capital  (+ 1,903).

The solvency ratio is only final after assessment of the Solvency II reports by the supervisory authority De Nederlandsche Bank.

No use was made of a volatility adjustment on the yield curve when calculating the solvency position. Furthermore, the loss-absorbing capacity of the deferred taxes, the so-called LAC DT, is not taken into account.

Geopolitical uncertainty remains high in 2024, including the war in Ukraine and the battle between Hamas and Israel. In addition to the human dramas taking place there, this is impacting economic conditions. In addition, there is an increase in strategic competition for economic and political influence between China, the U.S. and the EU. Finally, within the EU there are different views in many areas about measures to be taken, which hinders the EU's ability to act. DH Reinsurance only experiences effects of this indirectly, through changing economic conditions in the countries in which we operate.

Higher inflation and interest rates than in the past reinforce economic uncertainty. The stabilization of interest rates and inflation led to higher production volumes in 2024, but (prolonged) economic uncertainty has a negative effect on the demand for our products. In addition, prolonged inflation has an increasing effect on DH Reinsurance's costs, which can hardly be passed on, if at all. Finally, there is uncertainty about future costs, as we have to look for other (commercial) service providers for the work currently done by departments of Onderlinge 's-Gravenhage. 

The Covid-19 virus has greatly diminished in significance. It is still too early to estimate the long-term effects on mortality, especially for DH Reinsurance's target group. We have so far observed hardly any additional mortality in our insurance portfolio. It is to be expected that pandemics of a similar magnitude will occur more frequently. We will have to take this into account in our risk scenarios.

Climate risks are likely to play a larger role in society in the longer term. It is important to closely monitor developments and measures taken by governments to mitigate climate risks. For now, we estimate that the impact on DH Reinsurance will be limited.

DH Reinsurance as a provider of medically enhanced mortality benefits, is a monoliner in a market segment that has been under pressure for several years. In addition, the business model is vulnerable due to the market approach from the facultative reinsurance position that makes the company dependent on the strategic choices of the primary insurer. Withdrawing cedents may jeopardize the continuity of the business. The aforementioned strategic projects reduce our vulnerability to this.

Other factors also play a role. Economically deteriorating conditions may result in lower revenues. Furthermore, diseases or pandemics, for example, may put pressure on underwriting results. DH Reinsurance conducts an annual Own Risk and Solvency Assessment, hereinafter ORSA, in which a number of stress scenarios relating to the aforementioned threats are worked through.This includes a climate scenario, in which the possible effects of climate risk are worked through and assessed.
The ORSA of 2024 has shown that in a number of extreme stress scenarios sufficient measures are possible to overcome deterioration of the solvency ratio. The continuity of the company will not be jeopardized in the process.

Sustainable entrepreneurship, impactful entrepreneurship or Corporate Social Responsibility (CSR) are often used as synonyms in the Netherlands. This is understood as entrepreneurship in such a way that the attention for the people, planet and profit is balanced and aligned with the expectations of the stakeholders of the company.

We give substance to CSR in a number of areas:

• In our mission
• With the De Hoop Leven Fonds
• In our investment policy

Mission

DH Reinsurance's mission is to offer financial security to people with a medically increased mortality risk. We strive to be able to offer as many people as possible a mortality risk insurance. DH Reinsurance specializes in difficult to insure medical mortality risks and offers insurers the possibility of reinsuring these. In this way, every insurer can implement a socially and socially responsible acceptance policy and people with a medical condition can also take out good life insurance.

De Hoop Leven Fonds

DH Reinsurance wants to be able to do more for people who are chronically ill or have been ill in the past. That is why we have set up our own fund: the De Hoop Leven Fund. This fund supports research that makes a positive contribution to the insurability of people with an increased medical risk.

DH Reinsurance endorses the core values laid down in the Insurers Code of Conduct and complies with the provisions and rules of conduct of this code. The Supervisory Board and Management Board have taken the oath or affirmation of the financial sector.

DH Reinsurance's remuneration policy has been approved by the Supervisory Board (SB) and is in line with applicable laws and regulations. In addition to the remuneration policy, a remuneration policy has been drawn up for the directors. The General Meeting of Shareholders determines this remuneration policy.

The remuneration system is in accordance with the applicable laws and regulations and the collective labour agreement for the insurance business. The remuneration policy applies to the entire organization, with the exception of the directors, with a number of specific provisions for colleagues who can influence DH Reinsurance's risk profile. The people who can influence the risk profile are the Management Board and the key functions.

No variable remuneration is awarded to the directors. According to the remuneration policy, other employees receive a limited variable remuneration, namely a surplus and an annual payment in accordance with the collective labour agreement in the month of May. These variable rewards are not dependent on specific performance. In addition, a profit share of 20% of a monthly salary is awarded, at the discretion of the directors. In exceptional cases it is possible to pay a modest variable reward afterwards for a special individual or group performance. Within DH Reinsurance, there are no employees who have received a total annual remuneration of € 1 million or more. A report has been drawn up for the Supervisory Board on the implementation of the remuneration policy. The key function holders for Compliance and Risk Management report on this separately to the Supervisory Board.

In the context of this report, information that can be traced back to a specific person is not reported.

Within the possibilities of DH Reinsurance as a small organisation, we strive for diversity, with a culture in which differences are recognised, valued and utilised.

By diversity we mean all aspects in which people differ from each other. Both visible aspects, such as age, gender and skin colour, and less visible aspects such as cultural and social backgrounds. We believe that these differences make us stronger.

We strive to give everyone equal opportunities in recruitment, work, training and assessment. We want to create an environment in which everyone feels free to be themselves and no one is excluded.

Within the management, there is an equal male/female distribution. The Supervisory Board consists of one woman and three men. DH Reinsurance strives for a situation in which at least one third of the Management and Supervisory Board consists of women and at least one third of men. Given the small size of DH Reinsurance, DH Reinsurance accepts deviations from this.

Taking risks is an essential part of business operations. It is important to identify, analyse, monitor and control risks as well as possible. If risks are not adequately managed, this poses a threat to achieving De Hoop's strategic objectives. Inadequate risk management can also expose De Hoop to the risk of negative financial effects, operational inefficiency, extra supervision, administrative fines and reputational damage. Effective identification, monitoring and management of risks is therefore an important responsibility of the management and the operational organisation. An adequate risk management system reduces the chance of errors, making wrong decisions and the consequences of unforeseen circumstances. Risk and performance are inextricably linked in this.

Every three years, or in the event of significant interim changes to the objectives, or on the proposal of the risk manager (second line), the management determines the risk appetite. The management then asks the Supervisory Board for approval.

When drawing up the risk appetite, the vision of the supervisor DNB is taken into account, including on the topics: inflation, information security, climate and sustainability risks. These topics, as well as compliance with laws and regulations, form an integral part of the risk management framework.

Our risk appetite is laid down in three strategic Risk Appetite Statements:

• Social relevance and growth
• Capital management
• Business operations

Each Risk Appetite Statement qualitatively describes the risk appetite, in such a way that it fits the mission, vision and strategic objectives of the organization. The most important risk categories have been established for each of the three themes.The degree of risk appetite has been defined for each risk category, with a gradation of reduced, neutral and increased. The starting point is that De Hoop has a neutral risk appetite with an increased risk appetite in some areas. Neutral risk appetite is the level of risk that is common in the life insurance market. Key Risk Indicators (KRIs) have been established for each risk category, with the limit values of the KRIs derived from the risk appetite. The KRIs are reported quarterly in a KRI dashboard and discussed by the board of directors and the Supervisory Board. Each risk category has an owner who monitors the risk and reports on this annually.

Social relevance and growth

Based on our mission and core values, we have a strong social objective in addition to a commercial objective. For vulnerable groups, such as the chronically ill, this social objective is of great importance, because it gives them the opportunity to take out a term life insurance policy at a suitable price. That is why DH Reinsurance accepts (almost) every medically increased mortality risk: what can be priced is accepted with a positive mortality result for every medical category. DH Reinsurance accepts the risk that (access to or the quality of) healthcare will decrease during the term of the policy.

We focus on new customers who are rejected for medical reasons in the acceptance process at life insurers. We achieve our objectives if we have the trust of all stakeholders, such as our shareholders, cedants, insured parties, supervisors, interest groups and colleagues. Having the right medical expertise, maintaining a good reputation and complying with (partly foreign) laws and regulations are a prerequisite for this.
As a reinsurer, we depend on the efforts of the cedants with whom we do business for the sale of our products. We accept this dependency and do not seek another role in the chain. Based on our social relevance, we perform more activities to make our products known to potential customers and advisors than a regular reinsurer would do.

DH Reinsurance is deliberately active in several countries with a similar population structure, healthcare and mortality risk. In this way, we spread our risk and at the same time we have taken measures to mitigate local risks. For example, risks related to demographic and specific legislation and regulations are analyzed and a partnership is entered into with a local distributor to mitigate these risks.
In the countries in which we are active, we often have only one active cedant. We therefore run the risk that this entails that the cedant produces less or no more. We therefore invest in the relationship with the cedant, chain efficiency and the awareness of our offer in the market.

Capital management

Based on our mission, the promise to our insured parties and cedants is central. In order to fulfill this promise, we strive for a balanced balance sheet with healthy solvency and appropriate growth in the long term.

We take market risks for which we are sufficiently rewarded and apply a long-term socially responsible investment policy. Given our promise to the client, we ensure a prudent calculation of the provision and we cover our matching and interest rate risk to a large extent. The assets for which no insurance obligations are associated may be invested entirely in investment categories with a higher return-yield ratio. The resulting possible fluctuations in assets and returns are accepted. In order to control the impact, we strive for a high solvency ratio.

We strive to reduce our costs per policy. We accept a limited and sometimes negative value contribution from new production in the short term.

We can accept medically aggravated risks if the medical risk is as statistically and medically scientifically substantiated as possible and the medical advice provides a sufficient basis for determining an appropriate risk premium.

We compensate our shareholders with a return on equity that is reasonably appropriate to the risk and social character in the form of long-term capital growth. We strive to be able to pay out an annual cash dividend.

Business operations

Our mission focuses on customization for policyholders. At the same time, we invest in an efficient operating chain to realize short lead times. In doing so, we emphasize the efficient use of company resources and the focus is on cooperation, accuracy, integrity, transparency and flexibility.

DH Reinsurance is a small core organization with organizational shells around it. In this way, DH Reinsurance can bind expertise to itself that it does not need full-time, and in a number of cases the strategic partners in the organizational shell also take over or reduce the key-person risk. This way of organizing is also cost-efficient. It is important for DH Reinsurance to keep these shells well informed and to bind them to itself for effective business operations, continuity and strategic developments.

Our loyal employees and strategic partners determine the culture and the ability to change of our organization. We therefore invest in colleagues and challenge them to develop themselves.

The 3-lines of defense model is part of the organizational structure of De Hoop and thus guarantees the necessary checks and balances.

In managing operational risks, De Hoop pays attention to, among other things, availability, integrity and confidentiality of data. For the continuity and security of data, DH Reinsurance relies on the measures it takes itself and on the measures taken by suppliers. For example, we rely on the measures of our cloud computing supplier Amazon Web Services (AWS) and on measures taken by our ICT suppliers based on the DNB good practice Information Security and from 2025 also on DORA. The management of other risks related to processes is also risk-based.

Cybersecurity

In the current era, IT risk is increasing, with cyber risk in particular becoming an increasing threat. DH Reinsurance has outsourced IT to Onderlinge 's-Gravenhage, where the security officer also works. DH Reinsurance's infrastructure has been outsourced to cloud services (Amazon Work Spaces), office automation has been outsourced to Microsoft. By working in the cloud, a physical fallback location is no longer necessary, but employees can work elsewhere in the event of calamities. Onderlinge 's-Gravenhage, but also DH Reinsurance, has laid down management measures in its policy with regard to cybercrime, privacy and data security.

Fraud and compliance with laws and regulations
During 2024, nothing has come to the attention of the Board of Directors that indicates suspicions of, or actual, fraud and/or violations of laws and regulations.

Sensitivity analyses
Our solvency is sensitive to both volatility on the financial markets and to major changes in the insurance portfolio that can occur as a result of a major deviation from the assumptions. Scenarios have been drawn up for a quantitative risk assessment, which can have both a positive and negative impact on solvency. Various stress scenarios are calculated in the ORSA, which show that the solvency ratio remains well above the required solvency even under extreme circumstances, such as a strongly increased mortality scenario and a very strong decline in the financial markets.

A qualitative and quantitative explanation is given in the Risk section of the annual accounts. Among other things, an increase/decrease in the interest curve by 100 basis points and an increase/decrease in the value of the shares by 25% are shown. The impact of these scenarios on solvency and the solvency ratio is shown here. In general, DH Reinsurance is sensitive to market risk, due to its relatively high equity position, in particular for the equity risk. The effects of exchange rate changes can influence the existing solvency both positively and negatively. In all cases, the solvency ratio remains above the set internal standard.