Independence The disentanglement from Fortis was completed after one year, and we introduced our new name. Corporate staff departments were formed again for ASR Nederland as an independent company. The whole iT environment is again under ASR’s own management. Our subordinated bond loans were restructured to Tier-1 equity. Looking back, we are very pleased with the rapid and, to the outside world, almost invisible transition.
Market position Parallel to the separation and restructuring, ASR Nederland strengthened its position in various market segments. The first next generation propositions for both life and non-life insurance products were introduced. With the introduction of these propositions, we are breaking with a number of market conventions; transparency, overheads, distribution commission, clarity and contract terms comply with new standards. by implementing a multi-funding strategy, ASR Nederland could introduce a new competitive mortgage product at the end of the year. And ASR bank was again bought from Fortis bank Nederland. This once again gives ASR Nederland access to a bank that can offer investment and saving products, complimenting the range of propositions in the capital accumulation market, and taking the first major and, we believe, essential steps in 2009.
• The decision is taken not to distribute profit sharing and/or award a variable remuneration component. This decision applies to the management and all the members of sta .
• The interim figures for 2009 show positive results. There is a clear improvement in the solvency ratio and the net result amounts to €77 million.
Best underwriting agency business in 2009 According to the 2009 iG&H Performance Survey, ASR Nederland has the best underwriting agency business. The survey includes a market-wide satisfaction survey among professional brokers of the performance of insurers.
We recognize that it may be difficult for clients to make a good assessment of risks. That is why we want to understand what clients really want and need, and clients must be in a position to understand the nature of the products and services they purchase. This implies that, in a close partnership with intermediaries, we must get close to our clients, and maintain close contact about how we can improve our products and services.
We must translate this knowledge into logical products and services. ‘Logical’ here goes further than transparency. Transparency is about openness and honesty. ‘Logic’ is about enabling clients to make the best choices by using simple products and plain language.’
To retain our competitiveness in the future, ASR Nederland strives for a substantial reduction in the cost-premium ratio. in 2010, we will complete our programme to structurally reduce our annual overhead costs. Further initiatives for reducing overheads are underway. They are necessary due to the squeeze on margins in the insurance sector and decreased support for high overheads. For example, the mortgage operations that were previously also run by ASR for Fortis bank, will be returned to the bank due to the split-off.
• A margin on new business in life insurance with an average of at least 1.5%.
• Buffer capital (IFRS basis) increased to 293% (year-end 2008: 233%)
The result of life remained relatively stable, apart from the changes referred to above (including the guarantee provision and compensation for investment insurance). At non- life operations, an increase of claims incurred had a negative effect of €140 million on the result of insurance operations.
insurance companies will have to take jump in where the authorities leave off. And this is only possible if insurance companies can be trusted. insurers will have to earn back this trust and confidence. And as such, they will play an increasingly important role in society.
To show that they can be trusted, insurers will have to be more transparent. Not only with regard to their products and services, but also their costs, solvency and reserves. And with respect to the risks they are exposed to in their investment portfolios. All of this transparency is required to assure clients that their money and the associated risks that they place with insurance companies are safe and properly managed. To make sure that the insurance company will still be around when the saved pension falls due. in a nutshell, the insurance company is solid. Only then will the basis be laid for the trust and confidence.’
No VANb based on the same principles is available for 2008. This is due to the introduction of ASR’s own methods and systems after the disentanglement.
Market position We introduced a number of changes in our range of products. Profit-sharing now applies to all five different forms of insurance, and new product extras have been added. Measures have been taken to prevent cancellations and non client-friendly transfers. The fee system for intermediaries has been overhauled, the earning period for handling fees has been extended from three to five years and there is the option for continuous commission (doorlopende provisie). We also offer the option that accumulated capital from an existing policy can be transferred to a new product range without additional cost.
Market trends Five out of eight Dutch people have taken all the necessary measures with respect to their passing away. Nevertheless, the market for funeral insurance is growing. This is mainly due to the ever-increasing funeral costs and people wishing to make a very personal affair of their funeral or cremation. in line with this growing demand, the number of providers is also on the increase, meaning a squeeze on prices of funeral insurance policies. At the same time, this market is going to see strong growth in the coming years due to demographic developments in the Netherlands.
• Focus on urban redevelopment of ageing locations • Selective real estate portfolio sales policy continued • Considerable number of new and redevelopment projects in the pipeline • Tangible impact of credit crunch on the real estate market
With its labels ASR Vastgoed Vermogensbeheer (ASR Real Estate Asset Management) and ASR Vastgoed Ontwikkeling (ASR Real Estate Development), ASR Nederland is active on the Dutch market. Through ASR Vastgoed Vermogensbeheer, we have been investing part of our equity in land, homes, retail outlets and offices for more than a hundred years now. The land portfolio comprises 31,000 hectares. This makes us the biggest private landowner in the Netherlands. We also believe that land is a solid long-term investment. The bulk of it is used for agricultural purposes under lease or permanent lease. in addition, we own rural, woods and leisure areas. We take a proactive responsibility as a member of the Nature and Countryside Management Foundation (Stichting beheer Natuur en Landelijk gebied - SNbL), the Private Landowner Federation (Federatie Particulier Grondbezit) and the Utrecht Landscape Foundation (Stichting Het Utrechts Landschap).
Permission was asked from investors for the restructuring and for the abolition of the US structure (TOPrS). in addition, investors were offered the option to convert their investments into new hybrid Tier-1 instruments. The vast majority of the investors (91%) agreed with the proposed restructuring. As a result, the US structure was dissolved on 10 August 2009 and four new bonds of ASR Nederland are listed on Euronext.
• Risk Management and the Compliance department together form the second line of defence. They are responsible for coordinating strategy, processes and procedures on the risks to which ASR Nederland is exposed or could be exposed to, and are responsible for ensuring proper compliance with the risk policy, legislation and regulations so that the financial buffers remain at the desired level.
Structure of the risk committees in 2009, ASR Nederland set up a new risk management committee structure as an aid to shape the risk management function in practice. This was directly prompted by the organizational changes in ASR Nederland.
The three main objectives of the HR policy are: • The personal development of staff and managers.
Looking back As an organization, ASR Nederland has gone through constant change in the past period. The Focus on Delivery programme, with the organization being made more efficient and client focused, led to a reduction in the number of staff. Also the decisions taken in the context of the relocation policy caused the necessary anxiety. At the same time, we are seeing a clear shift in the competency profiles of our staff to more specialist knowledge and client focused profiles.
in 2009, we started a dialogue with our staff about next generation working (NGW). Our aim is to perform our tasks with a greater client focus, more efficiently and effectively. At the same time, we definitely do not want to lose sight of the wishes and needs of our staff in terms of flexibility and space. NGW puts staff centre stage by offering room, freedom and resources to determine personally how, when and where they work.
Our role as real estate developer ASR Vastgoed Ontwikkeling is one of the founding members of the Dutch Green building Council (DGbC). This is an organization that devotes its energy to developing a sustainable label for Dutch buildings and areas. With this label, ASR Vastgoed Ontwikkeling gives measurable substance to its aspirations in the field of sustainability and translates this into specific project measures. At the same time, clients can obtain more specific information about our sustainability performance.
We will further embed CSR in our operating processes in 2010. We are working towards positive appreciation both internally and externally, explaining and providing information about our CSR policy to our staff, insurance advisors and our clients. it must be clear to every single consumer in 2010 exactly what the product it is they are buying, what the corresponding terms and conditions are and how long the contract is valid for.
During the first half of 2009, the Audit Committee focused a lot of attention on developing the solvency position, refinancing outstanding hybrid securities and continuing the iT demerger with Fortis.
The Selection, appointment and remuneration committee was installed in 2009 and drafted their rules of practice. The Committee discussed the issues of the succession of the board of Directors and the senior management in the company. The Committee drafted a proposal to the Supervisory board for a new and sustainable remuneration policy. The chairman of the Supervisory board discussed this with the Ministry of Finance. The policy is in line with the Dutch Corporate Governance Code, the ‘gentlemen’s agreement’ and the recommendations of the banking committee. in the context of the new policy, the salaries of the members of the board of Directors were compared to a benchmark. based on the results, the fixed salary component and the performance related components are far more in line with the remuneration levels in the market. The Supervisory board approved the proposal. The proposal will be tabled at the annual General Shareholders’ Meeting.
However, a number of changes were made: • For the member of the Executive Board who joined on 1
Composition of the Supervisory Board: Kick van der Pol (Chairman) Margot Scheltema Cor van den bos
What does ASR consider a learning organization? ‘Staff are learning because they are given more room to do things. We believe in that. Even if the result is not always immediately visible, it still has an effect. Take, for example, our correspondence with clients: we want to communicate in plain language. On their own initiative, a small group of staff regularly give client letters to their partners, parents or friends to read. At the moment, everyone understands the letters. This is how you hand initiative to the staff. This is encouraged by the managers - coaching on the job - with questions asking: can i help you with something or what do you see as a solution?’
Equity attributable to holders of equity instruments 1,904 432 2,262 non-controlling interests 51 97 97
ASR is one of the major insurance companies in the Netherlands and sells insurance products under the labels of ASR Verzekeringen, ASR Pensioenen, Falcon, De Amersfoortse, Ardanta, Europeesche Verzekeringen and Ditzo.
• IAS 1: Presentation of the financial statements (revised), effective from 1 January 2009.
- The item ‘depreciation and amortization of tangible and intangible fixed assets’ (2008: € 79 million) has been included under operating expenses and staff expenses.
2.9 Transaction date and settlement date All the purchases and sales of financial instruments, which have to be settled in accordance with standard market conventions, are recognized on the basis of the transaction date, which is the date on which ASR becomes involved as a party to the contractual stipulations of the instrument. All the other purchases and sales are accounted for as forward transactions until the time of settlement. These transactions are explained in chapter 2.18 ‘Derivatives and hedge accounting’.
2.18 Derivatives and hedge accounting ASR uses derivatives for hedging interest rate and exchange rate risks and for hedging future transactions.
Likely losses in parts of the loan portfolios (ibNR: ‘incurred but not reported’) are also taken into account.
The obligations further include a provision for compensating the costs of these contracts as agreed in 2008 with consumer organizations. This provision equals the present value (based on an actuarial interest rate of 4%) of the agreed amounts of compensation (upon maturity), with the expenses incurred in prior periods fully provided for. in addition, estimates of additional expenses, such as the overheads for administering the compensation scheme, compensation in harrowing cases and compensation surrendered insurance contracts are also taken into account.
ASR Nederland 2009 annual report in accordance with this matching, the acquisition costs are capitalized deferred and then amortized. A detailed explanation of the capitalized deferred acquisition costs is included in chapter 2.14.
2.44 Acquisition costs This mainly concerns commission paid and amortization of capitalized deferred acquisition costs. More information about capitalized deferred acquisition costs can be found in chapter 2.14.
The calculation is based on the prevailing tax rates and the applicable tax legislation. Tax due on the result is accounted for in the period in which the result was achieved. Deferred taxes in respect of the revaluation of assets and liabilities, whose value adjustments were directly added or charged to equity, are taken to equity and, upon realization, included in the income statement together with the value adjustments.
2.48 Off-balance sheet commitments Contingent liabilities are liabilities not shown on the balance sheet. it concerns liabilities • whose cost cannot be reliably estimated and in respect of which it is unlikely that the settlement will lead to an outflow of resources; or
Due from customers government and public sector, total 382 - - - - 382
The table below provides information about the period of arrears since the due date of financial assets that have not yet been subject to any impairment.
Structured instruments 2009 GovernmenT Financial insTiTuTions corporaTe sTrucTured insTrumenTs carryinG amounT
Amersfoortse individueel; both tables have been designed and elaborated on by the Association of insurers (Verbond van Verzekeraars). The chances of death are based on past experience and on expected future development of mortality rates. The tables are regularly updated. The long life provision is determined for each entity, with the group portfolio not taking into account any surpluses from individual portfolios with death risk.
3.4.3.4 Movements in non-life The table below contains a summary of the movement in cumulative benefits in connection with the non-life portfolio for the non-life period from 2001 to the end of 2009.
ASR Nederland 2009 annual report 3.5.1.2 Management Control in the management of Operational Event Risk, the emphasis is on operational event risks that result in losses. The measures that are taken are mainly repressive, aimed at reducing losses. Management Control focuses primarily on the business risk (including strategic and reputational matters). in this field, the measures that are taken are mainly preventative, aimed at preventing losses. 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 takes place in a similar manner: • business risk (including strategic risk and reputational risk): assessments are made via Control Risk Self Assessments (CRSAs) carried out annually by senior management; • Operational Event Risk: assessments are made by means of Risk Self Assessments (RSAs) performed by the responsible operational management.
Available capital according to DNB solvency/ required capital according to DNB solvency
Cumulative amortization as at 31 December - -173 -48 -222 2008 Goodwill VoBA SoftwAre totAl
As a consequence of the revision of iAS 40, the category investment property under development was reclassified from property, plant and equipment to investment property as of 1 January 2009.
Exchange rate contracts interest rate and exchange rate swaps 9 - 156
The expected cash flows in connection with interest rate contracts included under derivatives for cash flow hedging are as follows: in 2009, no cash flow hedges have become ineffective. No amounts were transferred from the cash flow hedging reserve to the income statement.
Exchange rate contracts interest rate and exchange rate swaps 41 - 579
Impairments of investments available for sale The following table shows the impairments of investments available for sale: Short-term government securities and other discountable securities 62 2 49
Hybrid Tier 1 insTrumenT variable inTeresT (3-monTH euribor + 2.3%) (amounTs in € 1,000) 2009 2008 balance sheet as at 1 January - -
The table below shows the acquisition costs: Recognized in deferred acquisition costs 36 90
More than 1 year but less than 5 years 8 11 9
Balance sheet value as at 1 January 269 167 other changes -1 2
investment property Real estate held to obtain the rent revenues or an increase in the capital value.