Part IV: Report of the Supervisory Board 71 Interview with Margot Scheltema about the Supervisory Board 72 4.1 Members of the Supervisory Board 75 4.2 Report of the Supervisory Board 78
Earning trust begins with giving trust and being trustworthy. ASR Nederland’s values are the moral backbone in this. Together they form a shared language among employees, and a solid promise to new colleagues: this is how employees at ASR Nederland behave towards one another and towards those around them. This helps in making the right choices at work. The core values apply at every moment of the day, in everything that occurs. • ASR Nederland is personal. Trust is created in personal contact. That is why ASR Nederland listens with genuine interest, with the aim of understanding others better and so being able to meet their needs. That is how ASR Nederland builds up long-term relationships with its customers, distribution partners and others, and with its employees.
Cost savings achieved ASR Nederland has successfully attained its goal of achieving € 100 million in structural cost savings. Despite a fall in turnover, the cost-premium ratio was lowered from 13.3% in 2009 to 12.7% in 2010. The rise in operational expenditure in 2010 was principally due to the start-up of ASR Bank.
Continuity and confidence are crucial as ASR Nederland endeavours to offer certainty as an insurer. Customers need to be able to trust that ASR Nederland can and will, meet its financial obligations at all times.
Market and customer requirements are monitored closely in order to capitalize on new developments as they take place. In addition, studies are being performed to test whether communication by ASR Nederland is easy to understand. The Customer Contact Centre, complaints handling, OpEx, the Customer Value programme and Compliance contribute to developing socially responsible business practices that emphasize customer interests.
Engagement is a key aspect of ASR Nederland’s SRI policy. In accordance with the Dutch Corporate Governance Code and ASR Nederland’s CSR policy, a voting policy has been developed based on which ASR Nederland fulfils its role as an institutional investor. The voting record shows how the voting rights are exercised in the shareholders’ meetings of the Dutch associates. Both the voting policy and the voting record have been posted on the corporate website. ASR Nederland also tables CSR in meetings with the mana- gement of businesses and addresses any controversial activities in the process.
In order to emphasize the importance of sustainability in its property developments, ASR Vastgoed Ontwikkeling launched the Land for Land initiative in 2009, which replaces every square metre of property built by ASR Vastgoed Ontwikkeling with a square metre of nature. Parallel to this, talks were initiated in 2010 about the acquisition of a new nature area. ASR Vastgoed Ontwikkeling expects to finalize these talks in 2011.
No predictions can yet be made for 2012 as a result of the influence of the ongoing ICT developments and the forth- coming renovation of the building. After the renovation period energy use will be reduced across the company. These plans are currently being worked out in detail, so a definitive estimate can be made at a later date.
Steps taken: New printing policy The total number of printers has been reduced by over 40%. In addition, double-sided black and white printing is the standard.
In addition, efforts will be undertaken in 2011 to continue to improve interaction with customers and to gradually phase out legacy systems, for example by outsourcing. Initial experiences with outsourcing of administrative work have already been gained in 2010.
Travel and leisure business Europeesche Verzekeringen again faced a difficult market in 2010. Consumer travel and leisure behaviour was still clearly affected by the economic crisis. Loss of spending power led to a lower frequency of vacations. In addition, consumers tended to postpone large expenditures for recreational use. Overall, the leisure sector contracted compared to 2009.
Health insurance business As scheduled, ASR Nederland’s health insurance business put into operation in late 2010 a new application for offering online group health insurance. An IG&H customer survey showed that De Amersfoortse ranks third.
stability and information provision throughout the claims handling process. An option was created for instant contract cancellation by retail customers. The Bewust Verzekerd Package was developed to replace the current Voordeel Package. In addition, messages to customers were rewritten in easy-to-understand language. The IG&H survey ranked ASR Nederland second in the non-life market. The share of the non-life market grew in 2010. Several initiatives were taken to improve earnings, such as premium increases in the car dealership and agricultural segments. In addition, no claims bonus protection was abolished and the acceptance criteria in several product groups were tightened.
Net result for the year -62 -70 net result attributable to non-controlling interests -1 -5
The banking business, which is comprised of ASR Bank and ASR Hypotheken, was fully consolidated into ASR Nederland for the first time in 2010. ASR Bank’s portfolio of savings deposits saw a limited decline in 2010 due to the release of employee savings. Total new mortgage business for 2010 stood at € 1,558 million. Most of these mortgages were funded by Direktbank and BNP Paribas Personal Finance. As part of the streamlining of the investment mix, the banking business opted to self-fund a limited share of the new mortgage business. That is why the WelThuis mortgage was launched at the end of September.
One method of testing financial robustness is the Economic Capital Method, or ECAP. This indicates how much capital is required as a buffer in the two-in-a-thousand cases in which there is insurance risk exposure or the investments perform extremely poorly. ‘To date, this has been managed based on ECAP as a percentage of the market value of investment of ASR Nederland. From now on we will aim towards a required capital level based on both the insurance risks and the investment risks, in accordance with Solvency II principles.’ Another indicator is the stress test for Solvency I capital, which is a measure of the solvency of the business. Julicher explains: ‘After an interest rate shock and a steep drop in the value of shares and corporate bonds, there should still be an adequate margin in terms of the minimum required level of solvency.’
The Audit Committee discussed the budget 2011 and the financial forecast 2012-2013 using the Policy Plan 20112013 as a starting point. The approach was based on ASR Nederland’s ability to continue as a going concern. A number of strategic issues will be finalized and discussed in the Audit Committee in the first half of 2011. This is expected to result in an adjustment to the financial forecast 2012-2013. The Investment Plan, which is driven by the requirements of QIS5/Solvency II, was also addressed extensively.
According to the current remuneration policy, ratified by the shareholder on 28 May 2010, the variable remuneration consists of a short-term portion to be paid out immediately (one third) and a long-term portion to be paid out after three years (two thirds), depending on the development of customer satisfaction. At its meeting of 22 April 2011, the Supervisory Board decided, considering the public outcry regarding variable remuneration, not to disburse the short-term portion of the variable remuneration to the members of the Executive Board for the financial year 2010. The Supervisory Board also set a new condition, namely that the long-term portion of variable remuneration to be paid out after three years should fit the remuneration policy still to be developed.
Notes to the income statement 166 25 Gross insurance premiums 166 26 Reinsurance premiums 167 27 Investment income 167 28 Fee and commission income 169 29 Other income 170 30 Net insurance claims and benefits 170 31 Operating expenses 171 32 Acquisition costs 172 33 Impairment of assets 172 34 Interest expense 173 35 Other expenses 173 36 Income tax expense 173 37 Related party transactions 175 38 Remuneration of the Executive Board 176 and Supervisory Board 40 Contingent liabilities 177
The financial statements for 2010 were approved by the Supervisory Board on 26 April 2011 and will be presented to the Annual General Meeting of Shareholders for adoption. The Executive Board released the financial statements for publication on 29 April 2011.
Measurement – Eligible Hedged Items; • IFRS 1 (revised), First-time Adoption of International Financial
Group Cash-settled Payment Transactions; • IFRS 1 (amended), First-time Adoption of International
2.19 Investments When ASR Nederland becomes party to a financial asset contract, the related assets are classified into one of the following categories: a. financial assets at fair value through profit and loss; b. loans and receivables; c financial assets available for sale.
Trade and other receivables Trade and other receivables are receivable arising from ASR Nederland’s normal business operations.
2.39 Realized gains and losses Realized gains and losses include proceeds from the disposal of investment property, financial assets available for sale, associates and joint ventures.
2.40 Fair value gains and losses Fair value gains and losses include realized and unrealized changes in the value of financial assets at fair value through profit or loss and derivatives. With respect to derivatives, this is based on the fair value exclusive of accrued interest (clean fair value).
Solvency Assessment (ORSA). This assessment helps the product lines and the group identify the risks and quantify the impact of these risk on the forward looking solvency position.
• The main information security initiative this year has been the improvement of logical access control for the main applications in the financial reporting process. The logical access control procedure helps ASR Nederland to prevent fraud by improving segregation of duties and by regular checks of actual access levels within the applications.
3.2 Enterprise Risk Management framework In 2010, ASR Nederland further developed its Enterprise Risk Management (ERM) framework. ERM enables ASR Nederland to understand the inter-relationships between risks and the company’s strategic targets.
2009 Government Financial institution corporates structured instruments exposure percentaGe exposure percentaGe exposure percentaGe exposure percentaGe lower than BBB
ASR Nederland distinguishes the following life risks: • Mortality risk: Mortality risk is the risk of losses due to the possibility that observed mortality is higher than expected mortality.
• Longevity risk: Longevity risk is the risk of a structural increase in the insured’s life expectancy.
The adequacy of insurance liabilities is measured using information gathered from the most recent published mortality tables, such as the mortality table of the Dutch Actuarial Association published in 2010. These recent tables contain the latest available data on mortality improvements for the Dutch population. The entire population is taken into account so as to allow a good understanding of longevity risk, the identified differences between mortality rates of the insured population, and of the pension and annuity portfolios.
Reinsurance ASR Nederland enters into reinsurance contracts to minimize insurance risks. Reinsurance may be in place for a separate contract or for all or part of the portfolio.
Accident & Health: • Disability: The disability coverage in the portfolio includes both individual coverage for self-employed persons and (semi-)group coverage for employees. The latter group also qualifies for occupational disability cover (WIA).
• Health insurance: The health insurance contracts cover medical expenses incurred by physicians and hospitals, and other medical expenses. The basic coverage (‘Basisverzekering’) is mandatory for all residents of the Netherlands and offers limited coverage as stipulated by the Dutch government. Additional coverage (‘Aanvullende verzekering’) is sold for a higher level of medical care.
The above diagrams illustrate the distribution of gross premium income and gross claims reserves across the different lines of business. Disability insurance contracts account for a relatively large claims reserve in total premiums. The rapid settlement of the Property & Casualty portfolio, which generates 48% of premium income, only represents 25% of the total claims reserve.
Information security ASR Nederland gives special attention to the efficiency, effectiveness and integrity of ICT. Risk management helps to achieve this through a heightened focus on information and access security. This year, logical access control for the main applications in the financial reporting process was improved.
Net insurance premiums 2,506 2,626 net insurance claims and benefits -2,762 -2,666 change in liabilities arising from insurance contracts -986 -1,594 fee and commission expense -126 -149 allocated gain (loss) on investments - to technical result 1,764 2,256 allocated gains or losses - to technical result 58 -52 allocated other income and expense – to technical result 43 42
In 2010, loans to associates amounted to € 35 million (2009: € 25 million). These loans are classified as loans and receivables.
A further break down of the Investments at fair value through profit and loss and Investments on behalf of policyholders is included in the fair value hierarchy tables included in chapters 11.5. and 11.6 respectively.
Notional amounts are used for measuring derivatives; they are not recognized as assets or liabilities in the balance sheet. Notional amounts do not reflect the potential gain or loss on a derivative transaction. ASR Nederland’s counterparty risk is limited to the positive net fair value of the OTC contracts.
F o b se r va b le m a r k et
Hybrid Tier 1 instrument variable interest (3-month Euribor + 2.3%) 2,613 586
Movements in liabilities arising from insurance contracts on behalf of policyholders can be broken down as follows: At year-end 2010, the liabilities included a guarantee provision for a carrying amount of € 126 million (2009: € 128 million) and a provision related to unit-linked insurance contracts for a carrying amount of € 626 million (2009: € 569 million). These provisions relate to compensation for the cost of these contracts.
Current service cost, contributions by employee 10 10 - actuarial losses (gains) on liabilities 108 247 -2 -1
Unrecognized actuarial gains (losses) at 31 December -202 -93 16 17
There is no significant difference between the carrying amount of other liabilities and their fair value.
Net insurance claims and benefits, Life -3,591 -4,130 non-life 2010 2009
Claims and disputes ASR Nederland is a respondent in a number of claims, disputes and legal proceedings arising from the normal conduct of business.
Profit carried over from previous financial year - - - 255 -255 - - -
The revaluation reserve relates to investments held by the company. The statutory reserve relates to the revaluation of investments in group companies.
‘Het regentenhuys’ Verzekeringen n.V.1 100.00 100.00 rotterdam non-life administratie- en adviesbureau voor Belegging en Krediet (a.B.K.) B.V.1 100.00 100.00 amersfoort non-life amersfoortse Verzekeringen n.V.1 100.00 100.00 amersfoort non-life asr nederland aanvullende Ziektekostenverzekeringen n.V.1, 2 100.00 100.00 amersfoort non-life asr nederland Basis Ziektekostenverzekeringen n.V.1, 2 100.00 100.00 amersfoort non-life asr schadeverzekering n.V.1, 2 100.00 100.00 utrecht non-life asr nederland Ziektekostenverzekeringen n.V. 1, 2 100.00 100.00 amersfoort non-life
De amersfoortse reinsurance limited 2 100.00 100.00 Dublin, ireland non-life europeesche Verzekering maatschappij n.V. 2 100.00 100.00 amsterdam non-life garant 4 2 n.V. 50.50 50.50 amersfoort non-life n.V. amersfoortse algemene Verzekerings maatschappij 1, 2 100.00 100.00 amersfoort non-life arboned Holding B.V. 41.00 41.00 utrecht other asam n.V.1 100.00 100.00 utrecht other asr Bank n.V. 3 100.00 100.00 utrecht other asr nederland Betalingscentrum B.V.1 100.00 100.00 utrecht other asr nederland Deelnemingen n.V.1 100.00 100.00 rotterdam other asr Hypotheken B.V.1 100.00 100.00 utrecht other asr nederland Beleggingsbeheer n.V. 3 100.00 100.00 utrecht other asr nederland n.V. 100.00 100.00 utrecht other asr nederland pension fund services n.V.1 100.00 100.00 utrecht other asr nederland service maatschappij n.V.1 100.00 100.00 rotterdam other asr Vastgoed ontwikkeling n.V. 100.00 100.00 utrecht other asr Vastgoed Vermogensbeheer B.V.1 100.00 100.00 utrecht other asr Verzekeringen n.V.1 100.00 100.00 utrecht other