This English version of the Annual Report contains the report of the Board of Directors, the financial statements and other information. In the event of inconsistencies between the English and Dutch versions, the latter prevails.
Supervisory Board C. van der Pol M. Bax C.H. van den Bos M.A. Scheltema
C. van der Pol Chairman of the Supervisory Board Independent consultant since 2007. From 2005-2006 deputy-chairman of the Board of Management of Eureko/Achmea. Previous positions include chairman from 2002 to 2005 of the Board of Directors of Interpolis.
R.H.A. van Vledder Member of the Board of Directors of ASR Nederland since 1 January 2006.
The following amendments were made to IFRS standards and IFRIC interpretations in the 2008 financial year (all approved by the European Union, except IFRIC 12) and had no material effect on ASR: • IFRIC 11, IFRS 2 – Group and Treasury Share Transactions • IFRIC 12, Concession Arrangements • IFRIC 14, IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.
A number of amendments to IFRS standards and IFRIC interpretations were issued in 2008 with a later application date: On 10 January 2008, IASB (International Accounting Standards Board) issued a revised version of IFRS 3, Business Combinations and accompanying amendments to IAS 27, Consolidated and Separate Financial Statements (not yet approved by the European Union). In the new version of IFRS 3, transaction costs that can be directly attributed to the acquisition are no longer included in the costs of the business combinations. IFRS 3 also allows the party making the acquisition to choose to value a non-controlling interest at its fair value on acquisition date or at the proportional interest in the fair value of the identifiable assets and liabilities of the acquired party, on a transactionby -transaction basis. A partial transfer of an investment in a subsidiary that results in a loss of control necessitates revaluation of the remaining investment according to fair value.
This amendment will apply from the 2010 financial year (earlier application is allowed) and might have an effect on ASR in the event of possible future acquisitions or divestments.
On 31 July 2008, IASB issued amendments to IAS 39, Financial Instruments: Recognition and Measurement (not yet approved by the European Union), providing clarity about two issues concerning the incorporation of hedges: inflation in a financially hedged position, and a one-sided risk in the hedged position. These amendments will take effect from the 2010 financial year (earlier application is allowed) and are not expected to have any material effect on ASR.
c. Financial assets at fair value with impairments in the income statement include: 1. Financial assets held for trading, including derivatives that do not qualify for ‘hedge accounting’, and 2. Financial assets that ASR has irrevocably designated on their first recognition or first-time application of IFRS as being held for trading.
Projects in progress A project in progress refers to a project undertaken on behalf of third parties with the intention of selling it. It is not intended for future use as an investment property. Projects in progress are measured in conformity with projects under development, less invoiced instalments.
The positive difference between the acquired interest in the net fair value of the assets, liabilities and provisional liabilities of the acquired party on the one hand and the acquisition costs on the other are recognised immediately in the income statement.
Current policyholder dividends are allocated to life insurance contracts with discretionary profit-sharing elements. This occurs on the basis of the contractually owed amount according to the net profit, restrictions and instalments in accordance with the articles of association.
Shadow accounting is applied insofar as the aforementioned investments are related to profit-sharing policies. Shadow accounting takes place for non-profit-sharing policies, insofar as the current level of interest is lower than the actuarial notional interest used to calculate the liability. By applying shadow accounting, the realised/unrealised value changes are also recognised in the provision for insurance liabilities. On balance therefore, the realised/unrealised value changes will not form part of equity or the income statement.
2.36 Borrowing costs Borrowing costs are generally presented as an expense in the period they were incurred. Borrowing costs directly allocable to the acquisition or development of an asset are capitalised as part of the costs of an asset while the asset is under development. The capitalisation of borrowing costs must commence when: • expenditure is incurred for the asset and the borrowing, and • work is necessary to ready the asset for its intended use or its sale is in progress.
Deferred taxes are recognised using the balance sheet method for all temporary differences between the balance sheet value of the assets and liabilities in the consolidated financial statements and their fiscal balance sheet value.
Proposed dividend for 2008 The Board of Directors will recommend to the General Meeting of Shareholders not to distribute any dividend over 2008.
The current ASR risk taxonomy is shown in the table below: A detailed explanation of each type of risk is provided in the description of the risk management framework below.
1) Investments regarding unit linked contracts are not included in the outstanding credit risk analysis because of the fact that those risk are for the account of the policyholder.
The following forms of pledges have been received by ASR: homes (under the issue of mortgages), liquidities (under derivative contracts), financial assets and liquidities (under contracts for security lending). Received liquidities (cash collateral) are explained in section 20 of the financial statements.
Cash flows As at 31 December 2008 < 1 year 1-5 years 5-10 years 10-20 years > 20 years
The following instruments and techniques are used to support effective and efficient identification and control of operational risks: • gathering of loss data; • risk evaluations; • major risk indicators; • equity requirements.
6.7.3 Management Control Whereas management of the Operational Event Risk places an emphasis on operational event risks that cause a cash outflow, Management Control focuses primarily on the business risk (including strategic and reputational matters). However, the management of operational risk and management control are closely interrelated: • The risk estimation methods, assessment of degree of control and approach to weaknesses take place in a similar manner: - business risk (including strategic risk and reputational risk): estimations are made via Control Risk Self Assessments (CRSAs) carried out annually by senior management and Process Risk Analyses (PRAs) performed by the responsible operational management; - Operational Event Risk: estimations are made by means of Risk Self Assessments (RSAs) performed by the responsible operational management.
8.1 Defined benefit pension plans and other post-employment benefits ASR provides defined benefit pension plans for its employees. These plans are financed partly by premiums paid by employees. The benefits under these plans are based on the number of years of service and the salary level. The pension obligations are determined using mortality figures, employee turnover, wage drift and economic assumptions as inflation, revenues of the plan assets and the discount rate. The discount rate is determined based on the return (zero coupon rate) of high-quality corporate bonds (AA rating) and the duration of the pension liability. Besides pension benefits, the costs of the defined benefits plans include personnel concessions for financial products (such as mortgages) which are kept in place after retirement.
The following table provides an overview of changes to the total of unrecognised actuarial (gains) losses on assets and liabilities: Pension plans Other postemployment benefits 2008 2007 2008 2007 Unrecognised actuarial gains (losses) at 1 January 87 48 24 19 Actuarial (gains) losses on the defined benefit obligation -26 121 -1 5 Actuarial (gains) losses on qualifying assets 93 -82 0 0 Amortisation of unrecognised actuarial (gains) losses on the defined benefit obligation -2 0 -2 -2 Amortisation of unrecognised actuarial (gains) losses on qualifying plan assets 0 0 0 0 Buying and selling of subsidiaries 0 0 0 0
Former directors received an amount totalling EUR 209,646 in 2007 under existing contractual obligations.
During the normal conduct of business ASR entities may issue business credits, loans or bank guarantees to members of the Board of Directors, members of the Supervisory Board or to immediate family members of those Boards.
Up to and including 3 October 2008, related parties also included the former parent company Fortis Insurance N.V. and Fortis N.V. and former Fortis group companies.
Income from investments related to unit-linked contracts 119 0 0 119 Other realised and unrealised gains and losses 685 83 768 Share in result of associates and joint ventures 38 0 0 38
Historical Revaluation Impairment Fair values amortised cost price 31 December 2007 Investments available for sale Short-term government securities and other discountable securities 49 0 0 49
Impairments as at 1 January -38 -29 -30 Increase in impairments -26 -16 -4 Reversal of impairments 7 7 5 Other 0 0 0 Impairments as at 31 December -57 -38 -29 Net Investment property 1,839 1,673 1,625
At year-end 2008, the fair value of investment property amounted to EUR 3,381 million (year-end 2007: EUR 3,059 million; year-end 2006: EUR 2,927 million).
The table below shows the interests held by ASR in the associates and joint ventures based on a 100% interest at 31 December 2008: Total assets Total liabilities Total income Total expense 17 Property, plant and equipment
Depreciation on buildings is calculated on a straight-line basis. Costs over the estimated useful life are written down to residual value. Land and buildings for ASR’s own use are divided into the components of land, skeleton, outer shell, systems and furnishings (rough finishing and detailed finishing). The maximum useful life of the components can be found in the financial reporting principles in the Property, plant and equipment section (chapter 2.20).
Current and deferred tax receivables are included under Accrued interest and other assets’ (chapter 15.5).
The provision for legal matters is based on the best possible estimates available at year-end. They take account of the recommendations of legal advisers. The time of the outgoing cash flows related to these provisions is uncertain by definition. This is because of the unpredictability of the outcome of and the time required for the settlement of disputes.
More than 3 months but less than 1 year 6 6 2 More than 1 year but less than 5 years 11 9 1
On 12 May 2009, the Board of Directors examined the financial statements and approved them for publication. The financial statements will be submitted to the General Meeting of Shareholders on 19 June 2009 for adoption.
Short-term liabilities Debts owed to group companies 13 1,326 626 1,957 Deposits of group companies 14 589 293 773 Deposits 15 272 Taxes and social security contributions 16 67 0 4
Discounted Cash Flow Method A valuation method whereby the expected future cash flows are discounted at an interest rate that expresses the time value of the money and also a risk premium that reflects the extra revenues that investors require to compensate for the risk of lowerthan -expected cash flows.
Amortised cost price The amount at which the financial asset or the financial liability is stated in the balance sheet at the time of first recognition. This amount is minus repayments on the principal, plus or minus the accumulated depreciation determined via the effective interest method of the difference between that first amount and the repayment amount, and minus any write-downs on account of impairments or uncollectability.
VaR Abbreviation of Value at Risk, a technique based on statistical analysis of historical market developments and fluctuations. The VaR determines the probability that the loss on a portfolio will exceed a certain amount.
Investment property Real estate held to obtain the rent revenues or an increase in the capital value.