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Rating Action:

CORRECTION TO TEXT: April 05, 2011 Release: Moody's downgrades SNS Bank to Baa1 and REAAL Verzekeringen's IFSRs to A3; stable outlook.

Global Credit Research - 11 Apr 2011

Paris, April 11, 2011 -- This press release corrects and replaces the press release issued on 5th April 2011. The sentence regarding the dated subordinated ratings of the bank in the list of ratings section should read "- SNS Bank N.V. -- dated subordinated debt ratings to Baa2 from Baa1" instead of "to Baa1 from A3".

The rest of the press release remains unchanged. The revised press release follows below.

Moody's Investors Service has today downgraded SNS Bank's Bank Financial Strength Rating (BFSR) to D+ mapping to Baa3 on the Long-Term Scale from C- mapping to Baa2 on the Long-term Scale, the bank's Long-Term Deposit and Debt Ratings to Baa1 from A3, the Dated Subordinated Debt to Baa2 from Baa1 and the Preferred Stock Ratings to Ba3 (hyb) from Ba2 (hyb). The Prime-2 Short-Term Ratings were affirmed while the outlook on the BFSR and Long-Term ratings was revised to stable from negative.

In addition, the rating agency downgraded the Insurance Financial Strength Ratings (IFSRs) of REAAL Schadeverzekeringen N.V. and of SRLEV N.V., SNS REAAL's main insurance operating companies (collectively "REAAL Verzekeringen"), to A3 from A2. The senior debt rating of SNS REAAL N.V., the holding company of the Group, was also downgraded to Baa2 from Baa1. All these long-term ratings have been assigned a stable outlook. At the same time, the rating agency affirmed the P-2 short term debt rating of SNS REAAL N.V..

The rating agency also downgraded the rating of one hybrid instrument issued by SNS REAAL N.V. (EUR250 million 6.258% capital securities), in line with the rating action of the senior debt rating of the issuer, and assigned a negative outlook to this rating.

A list of all ratings affected by these rating actions is available at the end of the press release.

RATINGS RATIONALE

SNS BANK RATINGS

The rating action on SNS Bank's BFSR reflects our view of the risks resulting from the wind-down of SNS Property Finance, which the bank placed in run-off in 2009. In particular, while we believe the bulk of associated credit losses are likely to be behind the bank, we believe that there is still material uncertainty around the ultimate losses and we anticipate continued pressure on the bank's earnings in the short-to-medium term.

In the second half of 2010, SNS Bank booked EUR790 million of additional loan loss provisions linked to this activity, which resulted in a net loss for the bank of EUR431 million for FY2010.

While being negative for the bank's profitability at the time, this nonetheless enabled a substantial improvement of the coverage ratio, which rose to 42% of impaired loans at SNS Property Finance at YE 2010 (up from 15% at YE2009).

In its last rating action Moody's had anticipated that the bank would need to increase its level of loan loss reserve in the course of 2010 (see Press Release dated 23 February 2010). At the time, we had therefore revised the outlook to negative to reflect the potential pressure on the bank's financial strength.

Today's rating action reflects Moody's belief that despite being in a run-off mode, SNS Property Finance still holds sizeable legacy exposures to the international and Dutch real estate development sectors, some of which are currently undergoing a major stress, as evidenced by SNS Property Finance's ratio of impaired loans to gross loans of ca. 15% at YE 2010.

While we do not expect the bank's cost of risk to be as high as in the second half of 2010 going forward, Moody's nonetheless believes that key real estate development markets to which SNS Bank is exposed remain highly unpredictable and that SNS Bank may therefore have to further increase the loan loss reserve in the balance sheet in the future.

We therefore anticipate the bank's recurring earnings generation capacity will be hampered in the short-to-medium term and also expect the bank's asset quality to remain weak in the foreseeable future, owing to the level of impairments at SNS Property Finance.

In light of the abovementioned elements, the rating agency believes the bank's financial strength is more consistent with a D+ BFSR, mapping to Baa3 in the Long-Term scale.

On the positive side, we note the relatively good performance of SNS Bank's retail banking operations, including a better-than-anticipated profitability, the improving market shares and the significant improvement of the deposit base to EUR38 billion (although SNS Bank remains materially dependent on wholesale funding).

We also positively note that the bank has been able to maintain stable regulatory capital ratios despite the significant net loss reported in FY2010. This was in part thanks to a capital relief programme, which included the sale of first loss pieces to third parties, but also the transfer of mortgage assets to the insurance sister companies, in respect of which the risk is therefore retained within the SNS REAAL group. SNS Bank targets further capital relief transactions in order to free up capital and ultimately repay state aid. We expect regulatory capital requirements to lighten with the run-off of SNS Property Finance, but caution that the bank has in our view limited additional capacity to achieve further capital relief and that the balance between reducing capital consumption and minimizing losses remains delicate.

Moody's also downgraded the Long-Term Deposit and Debt ratings by one notch, as well as the Dated Subordinated debt to Baa2 from Baa1 i.e. one notch below the Long-Term debt rating, mirroring the rating action on the BFSR. The Short-Term Deposit and Debt ratings were affirmed at Prime-2.

Similarly, Moody's also downgraded SNS Bank's EUR200 million 5.75% and EUR320 million 11.25% Non-Cumulative Capital Securities to Ba3 (hyb) from Ba2 (hyb). The Non Cumulative Capital Securities are rated three notches below SNS Bank's Adjusted Baseline Credit Assessment of Baa3, to reflect their deeply subordinated claim in liquidation and the mandatory non-cumulative coupon skip mechanism tied to the breach of a balance sheet loss trigger.

The rating agency also revised the outlook to stable from negative. This revision reflects Moody's belief that the bank could withstand our anticipated cost of risk without jeopardizing its financial strength.

Any subsequent long-term senior debt, subordinated debt and short-term debt issued by SNS Bank will be rated Baa1, Baa2 and Prime-2, respectively. Any subsequent issuance of capital securities with non-cumulative deferral features tied to the breach of a balance sheet loss trigger will be rated Ba3(hyb).

Commenting on what could change the BFSR down for SNS Bank, Moody's noted that slippage in the wind-down of SNS Property Finance, or a failure to comply with the terms agreed with the European Commission as part of SNS Reaal's Viability Plan, may exert pressure on the bank's BFSR. Additionally, downward pressure on the bank's BFSR could be exerted by a material reduction of the bank's capital adequacy levels, notably as a result of the repayment of the hybrids issued to the Foundation and the Dutch government, without replacing it to a significant degree by high-quality capital (e.g. retained earnings or new equity).

More generally, the BFSR could also be put under pressure should the bank's financial fundamentals deteriorate, as a result of a worsening of the macro-environment beyond our own expectations, or as a result of a deterioration in the performance of SNS Bank's retail banking activities, for example through material margin erosion or a significant deterioration in mortgage or SME asset quality.

The Long-Term and Short-Term Debt and Deposit ratings could be downgraded in the event of a downgrade of the BFSR. Downward pressure could also stem from the perception by Moody's of a lower probability of systemic support that would be extended to SNS Bank, in case of need.

Commenting on what could change the rating up, Moody's noted that a substantial improvement of the real-estate development markets could positively impact the asset quality of SNS Property Finance's loan portfolio and make the bank more resistant to further impairment charges. The Long-Term Deposit and Debt ratings could also be upgraded as a result of an upgrade of the BFSR.

REAAL VERZEKERINGEN RATINGS

Moody's said that the downgrade of the IFSRs of REAAL Schadeverzekeringen N.V. and SRLEV N.V. to A3 from A2 primarily reflects (i) the deterioration of REAAL Verzekeringen underlying earnings during 2010 and (ii) Moody's expectation that REAAL Verzekeringen's operating profitability will remain constrained by the competitive environment prevailing in the Dutch market and continuous pressures on margins exerted by low interest rates, especially in the life segment.

The stable outlook reflects Moody's expectations that the Group will continue to successfully reduce costs and to maintain its underwriting discipline in order to partly mitigate external pressures on its bottom-line, and will continue to use dynamic hedging in order to limit its exposure to low interest rates. The stable outlook also reflects that, although some capital buffer built by the insurance company might be used by the Group in the future to repay part of the State Aid received in 2008, and the solvency ratio of REAAL Verzekeringen might decrease, capitalisation will remain consistent with the revised rating level.

Moody's mentioned that, although the net income of SNS REAAL's insurance operations improved in 2010, the underlying profitability deteriorated. SNS REAAL's net result, excluding the impact of one-off items and the impact of investment portfolio and hedges, decreased from EUR220 million (2009) to EUR87 million (2010), while for Zwitserleven, the result went down from EUR35 million to EUR26 million. Moody's also said that the New Business Value has significantly decreased in the second half of 2010, especially at Zwitserleven, where the value of new business was negative.

Moody's acknowledges the likely benefits on future profitability of the cost saving programme implemented by SNS REAAL and the protection brought by the dynamic hedging of interest rate risk, but the rating agency believes that these positive elements will be offset by a continuous low interest rate environment, notwithstanding slight increases observed recently, and continued competitive pressures. More specifically, according to Moody's, the competition is particularly high in the segment of individual savings products, where banks are likely to continue to gain market shares, and in the pension segment, two areas in which SNS REAAL has significant operations.

Commenting on capital adequacy, Moody's said that, although REAAL Verzekeringen' Solvency I ratio has deteriorated to 195% in 2010 from 230% in 2009, the capitalisation of the insurance operations remains good. Moody's believes that capitalisation is fully consistent with the current long-term rating, especially considering the low asset risk profile and the moderate business risk profile of the insurance operations, and the efforts made by the Group to reduce the duration gap between assets and liabilities.

Nonetheless, the rating agency pointed out that REAAL Verzekeringen's capital position continues to be supported by the hybrids issued to the Foundation and to the Dutch government in 2008. As the Group has stated its intention to repurchase these hybrids, and as uncertainties remain on the extent to which SNS REAAL will be able to rely on generated earnings, on a capital increase or on capital release actions to achieve this goal, SNS REAAL may use some of the capital buffers available at the insurance operations level to repay this money. However, Moody's understands that the Group intends to maintain a strong solvency position, and therefore, even if the solvency ratio of REAAL Verzekeringen might decrease, Moody's expects that the capitalisation of SNS REAAL's insurance operations will remain consistent with the revised rating level.

According to Moody's, key developments that could pose further negative rating implications for REAAL Schadeverzekeringen and SRLEV primarily include a depletion of capital resources, as evidenced for example by a significant upstream of capital to the Group holding company, either to support the capitalisation of the bank or the repayment of the hybrids issued to the Foundation and the Dutch government, without replacing it to a significant degree by high-quality capital (e.g. retained earnings or new equity). Further deterioration in underlying earnings or lower financial flexibility could also place negative pressure on the rating.

Commenting on what could change the rating up of REAAL Schadeverzekeringen and SRLEV, Moody's mentioned a sustainable improvement of the underlying insurance profitability, as evidenced by a return on capital (Moody's calculations) closer to 8% through the cycle, or an enhanced financial flexibility as evidenced by an adjusted financial leverage in the low thirties and earnings coverage above 6x.

HOLDING COMPANY RATINGS

Moody's downgraded the senior debt rating of SNS REAAL N.V. to Baa2 from Baa1, and assigned a stable outlook to these ratings.

The Baa2 senior debt rating continues to reflect the combination of the credit strengths of the banking and insurance operations of SNS REAAL, the specific benefit derived from the diversification afforded by its banking and insurance activities, the systemic support that would be available to the banking units and the resulting benefits attributable to the holding operations, and the structural subordination of the revenues that the Group receives in the form of dividends from operating companies.

The downgrade of the rating reflects the deterioration of the credit strength of the main operating companies. In particular, Moody's views that pressure on the underlying profitability of both the bank and the insurance operations is likely to constrain the Group's financial flexibility. Whilst Moody's notes positively that the Group's financial leverage remains at an adequate level at around 36%, as it continues to be enhanced by the Core Tier 1 securities of EUR1.0 billion, the rating agency believes that fixed charge coverage ratio will remain constrained in the medium-term.

The stable outlook on SNS REAAL N.V.'s ratings reflects the outlooks on both insurance and banking operations.

According to Moody's, a downgrade of the insurance ratings and/or of the bank ratings would likely result in a downgrade of the holding company ratings.

SNS REAAL's CAPITAL SECURITIES

Moody's downgraded to Ba2 (hyb) from Ba1 (hyb) the rating of the EUR250 million 6.258% capital securities issued by SNS REAAL N.V. The downgrade of the rating reflects the downgrade of SNS REAAL long-term debt rating. The notching applied to the ratings of these securities continues to reflect the subordination of the instruments, their mandatory and optional deferral triggers, as well as the cumulative coupon payment (at least during five years for securities issued by SNS REAAL), hence limiting the loss severity of a coupon deferral if this were to materialise.

Moody's notes that the European Commission (EC) has not requested that the Group defers any coupon on these securities when it approved the capital support provided by the Dutch State to the Group in 2008. However, Moody's assigned a negative outlook to these ratings in order to reflect the low to moderate risk of a coupon skip requested by the EC. Moody's believes that this risk will persist as long as the Group has not fully repaid the State Aid.

The following ratings have been downgraded and assigned a stable outlook:

- REAAL Schadeverzekeringen N.V. -- insurance financial strength rating to A3 from A2;

- SRLEV N.V. -- insurance financial strength rating to A3 from A2;

- SNS REAAL N.V. -- senior unsecured debt rating to Baa2 from Baa1;

- SNS REAAL N.V. -- subordinated debt rating to Baa3 from Baa2;

- SNS Bank N.V. -- Bank Financial Strength Rating to D+/Baa3 from C-/Baa2;

- SNS Bank N.V. -- long-term bank deposit and debt ratings to Baa1 from A3;

- SNS Bank N.V. -- dated subordinated debt ratings to Baa2 from Baa1;

- SNS Bank N.V. -- EUR200 million 5.75% (XS0172565482) and EUR320 million 11.25% (XS0468954523)Non-Cumulative Capital Securities to Ba3 (hyb) from Ba2 (hyb).

The following rating has been affirmed:

- SNS REAAL N.V. -- short-term debt rating at Prime-2;

- SNS Bank N.V. -- short-term bank deposit and debt rating at Prime-2.

The following ratings have been downgraded and assigned a negative outlook:

- SNS REAAL N.V. EUR250 million 6.258% capital securities (XS0310904155) -- preferred stock rating to Ba2 (hyb) from Ba1 (hyb).

The principal methodologies used in this rating were Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010, Moody's Global Rating Methodology for Life Insurers published in May 2010, Bank Financial Strength Ratings: Global Methodology published in February 2007, Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007, Moody's Guidelines for Rating Insurance Hybrid Securities and Subordinated Debt published in January 2010, and Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt published in November 2009.

SNS REAAL is a bancassurance group headquartered in Utrecht, the Netherlands. Focusing on the Dutch market, it reported total income of EUR7.1 billion in 2010 and had shareholders' equity of EUR4.8 billion as of 31 December 2010.

SNS Bank, headquartered in Utrecht, the Netherlands, had total assets of EUR78.9 billion and reported shareholders' equity (including minority interest) of EUR1.8 billion as of 31 December 2010.

REAAL Verzekeringen, headquartered in Utrecht, the Netherlands, had total assets of EUR54.0 billion and reported shareholders' equity (including minority interest) of EUR3.7 billion as of 31 December 2010.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

London
Simon Harris
MD - Financial Institutions
Financial Institutions Group
Moody's Investors Service Ltd.
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Benjamin Serra
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Financial Institutions Group
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CORRECTION TO TEXT: April 05, 2011 Release: Moody's downgrades SNS Bank to Baa1 and REAAL Verzekeringen's IFSRs to A3; stable outlook.
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