Total equity (including revaluation of real estate) * 2,975 1,757 65%
* The equity presented is a combination of shareholders’ equity and the revaluation of the real estate. As of 31 December 2009, shareholders’ equity amounted to € 1,955 million, and the revaluation of real estate € 1,019 million. This compares to shareholders’ equity at € 529 million and the revaluation of real estate at € 1,228 million at 31 December 2008.
Client focus 53 Staying on our toes with client experience, that’s what it’s all about
PART II REPORT OF THE ExECuTIvE BOARD 20 2.4 Product lines 34 Property and Casualty 34 Disability and Health 35 individual life 37 Group life 38 banking 39
PART III GOvERNANCE 70 3.1 Members of the Supervisory board 70 3.2 Report of the Supervisory board 71 3.3 Remuneration policy 75 3.4 Corporate Governance 77
PART Iv FINANCIAL STATEMENTS 83 Consolidated balance sheet 84 Notes to the balance sheet 130 Notes to the income statement 160 Other notes 169 Company financial statements 173 Auditor’s report 181
Towards a new balance 2009 will enter the books as the year in which we were confronted by major changes: social as well as economic. in view of this, we had to adapt our existing perceptions to a new reality. in this new reality, our business also experienced a far-reaching change. by the intervention of the Dutch State in our former holding company, Fortis, we continued in 2009 as an independent insurance company bearing the name ASR Nederland. With a history dating back 290 years, 2009 is the first full reporting year of ASR Nederland N.V.
Results Looking back to where we started, we are satisfied with the financial result for 2009. This includes an improvement in the result, a strongly improved balance sheet position and a sharp increase in the solvency ratio.
This is countered by the fact that the demand for insurance products across the market was under pressure, which was to a large extent due to the slowing down of the economy and the lack of consumer confidence. This led to increased competitiveness, in turn leading to a decline in premium income. These market conditions were reflected in our total premium figures. The decrease in life business (-28%) was primarily caused by fewer sales of single-premium policies and the stagnating mortgage and group life markets. in addition, it was only after the implementation of a multi-funding strategy that we were able to offer a good mortgage proposition at the end of 2009. At the same time, the market for individual life insurance became competitive after the introduction of tax driven bank savings (banksparen).
The impact of the recession was also clearly visible in the disability and non-life market, and competitiveness also increased. Nevertheless, our total premiums here increased by 3%.
Organizational restructuring ASR Nederland has replaced its label-driven organization with a market-oriented organization. The product lines were disentangled from the distribution organizations ASR Verzekeringen, De Amersfoortse and Ditzo. The back offices of ASR Verzekeringen and De Amersfoortse were combined, and Falcon Leven will be integrated into this.
Strategy There is a reason for this annual report bearing the title ‘Towards a new balance’: it is a report covering a year that marks a stepping stone on the way towards a new balance between the interests of clients, intermediaries, staff and shareholder. As a result of the financial crisis and the investment insurance affair, our sector has lost the trust and confidence of clients. in order to achieve a fine equilibrium, it is essential that we regain client confidence. Clients must be absolutely clear about the substance of a financial product and be fully confident of the financial solidity of insurance companies. We must be able to account for what we are doing: not only for the substance of our products, but also the price of and the manner in which we offer these products.
• Efficient market player: We are constantly improving our processes, products and services and keep a constant eye on overheads.
• Client focused: Clients dictate how they want to do business with us and we assist intermediaries in offering optimum services. Clients know that we invest in a long-term relationship with them.
Staff Our own people delivered the performance of ASR Nederland in the past year. They therefore deserve a huge word of thanks because the process of taking leave from an international corporation, combined with an uncertain future and the reorganization of our business did not leave our people unaffected. However, they faced the consequences of the crisis and the loss of public trust head on. in addition, the far-reaching decisions made by ASR Nederland itself have a major impact on them. The involvement and commitment of our staff form the unfaltering basis for our belief that we will succeed in our task to restore client confidence and add another chapter to our illustrious 290-year history.
Jos baeten is Chief Executive Officer (CEO) of ASR Nederland N.V. He bears final responsibility in the Executive board, and is responsible for strategy, human resources, external and internal communications, audit and compliance.
With effect from 2005, he was CEO of the then board of Directors of Fortis ASR Verzekeringsgroep N.V. and, prior to that, member of the board of Directors. With effect from June 2003 he was also chairman of the Executive board of De Amersfoortse Verzekeringen.
Members of the ASR Nederland N.V. Executive board ASR Nederland 2009 annual report
As member of the Executive board, Hans van der Knaap is responsible for the product lines P&C, Disability and Health insurance, individual life, Group life and banking. He is additionally responsible for the support services iT and information and project management. Hans van der Knaap is also member of the Supervisory board of Arboned.
Ardanta, Ditzo, bancassurance, ASR Vastgoed Vermogensbeheer, ASR Vastgoed Ontwikkeling and the business Support, Central Purchasing & Contract Management departments. He is chairman of the Life Sector of the Dutch Association of insurers and chairman of the board of the Standaardisatie instituut voor Verzekeringen in de intermediairbranche (Standardization institute for insurance in the intermediary Sector) (SiVi).
Members of the ASR Nederland N.V. Executive boardASR Nederland 2009 annual report
January February March aPrIL May June JuLy auGuST SePTeMber OcTOber nOVeMber DeceMber
• The financial markets face more pressure; Our buffer capital reaches its lowest point since the outbreak of the financial crisis.
• 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 staff.
• ASR Nederland announces its new location policy. All our operations will be concentrated in the Utrecht region. This will be completed in 2015 at the latest. The specialist operations Europeesche Verzekeringen and Ardanta remain based in Amsterdam and Enschede respectively.
• The financial markets face more pressure; Our bu er capital reaches its lowest point since the outbreak of the financial crisis.
• During the sta meeting, the Management Board presents the new direction of Nederland under the motto ‘personally guaranteed’.
• ASR Verzekeringen launches a new campaign: ‘We are ASR Verzekeringen. And who are you?’
• It is decided to merge and integrate the Falcon Leven label with ASR Verzekeringen.
• ASR Nederland introduces the new generation non-life products under the name of the ASR MultiZeker policy.
Best all-round insurer in 2009 ASR Verzekeringen was selected by the intermediary organizations DAK, NbVA and NVA as the best all-round insurer. Grouped together in the Platform Kwaliteitsonderzoek Verzekeraars (insurers’ quality assessment platform), NVA, NbVA and DAK conduct surveys among intermediaries to compare the performance of the different insurers.
SponsorRing 2009 in the ‘social binding’ category, we won the ‘SponsorRing 2009 Maatschappij’ (2009 social sponsoring award) with our ASR Jongeren Run (youth run). The purpose of Stichting SponsorRing is to promote the broad field of sponsoring by awarding annual prizes for the best sponsor cases and to provide a stimulus for professionalism in the sector.
Best Dutch retail developer in 2009 VGM/Locatus selected ASR Vastgoed Ontwikkeling (Property Development) as the best Dutch retail developer for the year 2009.
NCCA Starters Award Ditzo was awarded the National Contact Centre Starters Award. This special award is for a totally new contact centre or a new contact centre of an existing organization that has clearly opted for a new set-up.
Zilveren Spreekbuis 2009 The Spreekbuizen (‘megaphone’) awards are based on the ‘imago blauwdruk HypotheekVerstrekkers 2009’ (the 2009 image blueprint of mortgage providers). This survey is conducted among intermediaries and offers insight into the brand recognition, the image and the position as preferred company of the major mortgage providers. According to the jury report, the new ASR campaign offers intermediaries support with a positive effect on the rating of its current business clients and on the reputation of ASR Verzekeringen
‘behavioural economics conducted a survey into the choices consumers make. We therefore now know that, under certain circumstances, consumers choose something different than what they actually want. This happens for instance when choices are complex, if there is an enticement, if people have few opportunities to learn from mistakes, if there is an option for a tacit choice (silence is agreement) and if there are market parties that benefit from irrationality: we call this ‘third-party marketing’. And these circumstances often involve financial choices. Since it often is not a lack of information that leads to bad choices, more transparency and better information don’t always lead to better choices.
More or better information does actually influence the intention, but not always behaviour. Take, for example, the inevitable slogan ‘borrowing costs money’. Do people not know that? i believe they do. but because of the enticement, and because people overestimate the chance that they will go on the straight and narrow ‘tomorrow’, a warning like this is not effective. As far as financial products are concerned, there is not often the opportunity of a learning curve; if you realize at 70 that your pension is not enough to see you through, it is too late.
What have you learned from the financial crisis? ‘We must find a new balance between the interests of clients, intermediaries, staff and shareholders. Finding this balance starts with winning back consumer confidence. A client must be in no doubt about the content of a financial product and must have full confidence in insurers.
What must ASR Nederland do to win back consumer confidence? ‘We must look after our clients. That sounds so simple but, more than ever before, we will have to check whether we live up to the needs and expectations of our clients. Of course, clients and intermediaries also have an important part in this. Have your needs changed? if your standard of living changes, your risks also change and, with that, your needs. Does the product still meet your needs and requirements? Or are there better solutions?
Can clients trust themselves? ‘ASR Nederland does not wish to make money on the backs of uninformed clients. Lack of understanding that arises from the degree to which we enable clients to assess and understand a product, taking account of their knowledge about and interest in insurance products. Don’t misunderstand me, some clients are very self-sufficient. However, other clients may require extra assistance. The role of intermediaries is very important to assist these clients. They have the knowledge to help clients make the best choices.’
We, all the staff of ASR Nederland, know better than anyone else that the trust and confidence vested in us are more valuable than the premiums that clients pay. From this knowledge and perspective, we have formulated a new strategy based on financial solidity, efficiency and client-centred services inspired by real understanding of our clients.’
ASR Nederland implemented a new strategy in 2009, introducing a balance in the value our company offers clients, intermediaries, staff and shareholders.
The strategy is founded on three pillars: client focus, financial solidity and increased efficiency. Practical examples of our strategy include the introduction of the new product philosophy, the policy pursued to minimize risks and a range of cost-saving and efficiency-improvement measures.
Our mission insurance has been the essence of our existence for almost three hundred years now. We offer assurance in situations that could be uncertain for people and business. We want to help people and business to realize their dreams by assuming their financial risks. This enables them to do things that really matter in their lives. To offer security and solidarity for our clients from the basis of our ability to manage risks - that is our mission and our reason to exist.
Our assignment and strategy two years that will contribute towards reducing direct overheads. The programme has also been launched within the iT department with the aim to comprehensively simplify the current iT environment and to use the available iT facilities more efficiently. At the same time, we are working on developing a next generation back-office system for every product line.
All ASR Nederland activities will be brought together under one roof in the Utrecht region in 2015 at the latest. Only Europeesche Verzekeringen and Ardanta will remain in their current locations as specialist services. in the coming years, activities in 9 locations and 13 branch offices will be housed at one location, in phases, while at the same time, the Nieuwe Generatie Werken (next generation working) programme will be introduced. With the implementation of this programme, we will sharply reduce our accommodation costs and improve collaboration within ASR Nederland as a whole.
General Following the loss of public confidence, the mature Dutch insurance sector will have to reinvent itself. in the coming years we expect that costs and remuneration will become fully transparent in all the submarkets in which we operate. The critical position taken by consumers means that competition will increase, leading to lower margins than what we were used to in the past.
• Net result of € 255 million (year-end 2008 € -640 million) • Equity (including unrealized revaluation of real estate)
• Gross premium income non-life slightly increased (+3%) • Gross premium income life sharply decreased (-28%) • VANB, excluding ‘Initial Expense Overrun’, € 9 million (0.6%
Introduction in 2009, ASR Nederland achieved a net result of €255 million. The solvency ratio increased to 232%. At the same time, the first major steps were taken towards achieving strategic priorities: reducing balance sheet risks in the context of financial solidity and lowering overheads.
With a view to strengthening our financial solidity, the first six months of 2009 were characterized by the accelerated reduction of the interest rate and stock market risk profile by actively increasing the duration of the bond portfolio and by purchasing swaptions. in addition, we reduced the position in shares. As a result, our dividend income has been reduced. During the second half of 2009, the share exposure previously cut back was expanded gradually and with great care.
The regulatory solvency ratio (the available capital expressed as percentage of the minimum capital requirement) for ASR Nederland N.V. increased to 232% compared to 170% at the end of 2008. The same figure for ASR Levensverzekeringen N.V. increased from 233% at year-end 2008 to 277% at the end of 2009.
The buffer capital (the solvency ratio in accordance with iFRS) of ASR Nederland N.V. amounted to 293% at year-end 2009. To calculate buffer capital, several additions were made to shareholders’ equity on top of the revaluation of real estate, such as capital securities and the surplus in technical provisions as set in accordance with the iFRS adequacy test.
At year-end 2009, the group embedded value of ASR Nederland amounted to €3.5 billion, compared to € 2.2 billion at year-end 2008. This increase is mainly due to an improvement in the economic climate resulting in an increase in the market value of investments and a decrease in the market value of liabilities. The group embedded value is determined on the basis of the ECb AAA government curve.
Net result Net profit in 2009 recovered from € -640 million in 2008 to € 255 million in 2009. This improvement was achieved primarily due to the recovery of the financial markets.
The investment proceeds for ASR Nederlands’ own account were considerably higher in 2009 than in 2008. This is mainly due to the fact that fewer impairment losses were recognized: these losses decreased from €933 million in 2008 to € 214 million in 2009.
Running real estate development projects of ASR Vastgoed Ontwikkeling came under pressure because of a further deterioration of the market. Several construction projects were postponed, and the selling and rental of objects hardly came off the ground. As a consequence, the results dropped.
in 2008, the forming of a provision in respect of the agreement with the foundations to compensate for investment insurance and the forming of a guarantee provision for unit-linked products had a considerable negative effect on the result of the life business. The size of this provision in 2008 exceeds that of the provision formed in 2009 to compensate for attributed costs for group life policies.
Against the backdrop of the negative effects of the economic downturn on the sale of insurance policies, gross premium income for 2009 amounted to €4,917 million (16% lower than in 2008). This drop was primarily the result of lower sales in single-premium policies at life. We opted for profitable business here instead of more gross premium income.
The economic decline, in the form of more bankruptcies and a considerable decline in house sales, was also visible in new production in life (-38%) and non-life (-16%). At the end of 2009, we introduced new products: ASR VermogenGarant for life and the MultiZeker policy for non-life, both forming part of the next generation platform, of which production will be seen in 2010. The production of mortgages slowed down significantly due to a stagnating credit market, lower house sales and an uncompetitive proposition due to the separation from Fortis. The market share was halved to 2%.
in spite of a drop in the number of internal staff (-2% on an FTE basis), staff costs were 2% higher as a result of redundancy costs. The drop in FTEs in accordance with the redundancy scheme is delayed in terms of the number of FTEs. The external staff costs dropped by 4%.
As a result of the decline in gross premium income, the cost- premium ratio increased slightly from 14.5% at the end of 2008 to 14.8% at the end of 2009. At life, the cost-premium ratio has increased, whereas non-life actually showed an improvement.
• Strong recovery of the net result to €181 million • Gross premium income under heavy pressure leading a drop of 28% • New Life production (APE) declined by 38% • VANB excluding initial expense overrun at €9 million (0.6%
Compared to 2008, operating expenses increased by 3% to €271 million. The cost savings are not yet fully visible because they were wiped out by the one-off separation costs, investments in next generation products and costs for the implementation of Solvency ii. Combined with decreasing gross premium income particularly in single-premiums, the cost-premium ratio increased to 14.7% (2008: 13.4%).
‘We are seeing that the Netherlands is becoming less and less of a welfare state. in the past, everything was covered through social security premiums. Employees will be expected to shoulder more and more of this burden. i expect that in the future, the government will cover the most basic risks, for example unemployment benefit. The rest will be left to the market. This change is inevitable.
insurance companies will have to make it easy for clients. Clients will have to see to more and more things, but find it difficult to make decisions. insurance companies will have to assist them in this process. Clients must have the confidence that they get good advice from insurers, which places a great burden on insurers because they have to be true to their word. Unfortunately, the credit crunch taught us that insurers have slipped up.
Why is solvency so vital? ‘insurance companies must always be able to fulfil their obligations. Our solidity is the basis for the trust that clients have in us. That is why we need to be transparent about our figures and ensure a sufficient financial buffer. We successfully worked towards this aim in 2009.
And what does solidity mean for the shareholder? ‘it is important to us that we earn a healthy profit. in other words, that both our insurance operations and our investments contribute towards our profitability. in addition, we want to be a solid business with a risk profile that allows our good solvency position to remain intact. We are striving for a long-term return on our equity of between 8% and 12%. Thus in the end we will serve the long-term interest of all our stakeholders.’
Reinsurance and other risk mitigating measures were used in 2009 to reduce volatility. For instance, the insurance risk was reduced in the first half of 2009 by reinsuring 50% of the short life risk. The position was later brought back to 10%.
Apart from a few incidental items, both this year and last year, the overall result on risk remained stable. The number of policy cancellations remained unchanged.
The decrease in new production and a legal ban on bonus commission in 2009 meant that commissions paid to intermediaries were lower.
Gross premium income Gross premium income from the life business was under pressure in 2009 and declined from € 3.5 billion to € 2.5 billion (-28%). This was mainly due to fewer regular and single premiums (-54%). New production in life (APE) dropped by 38% in 2009, caused largely by our choice for profitable new production. The number of mortgage linked life insurance policies also dropped due to mortgage production sharply falling in 2009.
Individual Life The volume of new production in the individual Life market fell sharply in 2009 for both regular (-25%) and single premiums (-27%). This drop can be partly explained by a drop in mortgage production of 35%. in addition, tax driven bank savings increased rapidly in the first eighteen months after its introduction to reach a position of 30% on the fiscal equity market. in the meantime, tax driven bank savings accounts in the Netherlands represent some € 1.8 billion. Other causes for the decline were the economic crisis, the loss of confidence in the sector and the debate about transparency.
The total mortgage portfolio on the balance sheet remained stable at € 2.0 billion, of which 16% is guaranteed by the national mortgage guarantee fund (NHG) or by municipal councils guarantee; 64% of the mortgages are older than five years, and only 1.1% is in arrears. Of these, only 0.2% was in arrears for more than three months.
VaNB 9 N/a margin new production life (= VaNB / PVNBP)
Group life The effect of the economic situation is also reflected in group life. Due to redundancies, paid-up policies and the lack of indexation, production fell behind. in addition, the loss of confidence in Fortis resulted in a number of major corporate clients leaving in 2009. Production is also under pressure because of our policy, in view of the low interest rate level, not to offer 4% actuarial interest rates. The turnover of ASR Pensioenen is above € 1 billion, with premium income only dropping a fraction.
Provisions ASR follows the advice of the Verbond van Verzekeraars (Dutch Association of insurers) with respect to the defined contribution scheme. This advice, brought out in consultation with the Stichting van de Arbeid (Labour Foundation) and the Ombudsman Financial Dienstverlening (Financial Services Ombudsman), concerns the use of a test standard for costs charged in the past. A provision of € 15 million was formed for this in 2009.
in 2009, specific risks contained in the fixed-income portfolio were reduced. On balance, this risk reduction led to realized losses on fixed income securities.
During the course of 2009, the real estate market deteriorated leading to a drop in income from the sale and letting of homes and offices, and to a postponement of production from construction projects. At ASR Vastgoed Ontwikkeling, the expected project results deteriorated on almost all business lines. A provision was therefore recognized for a number of projects, which has an impact on the other non-technical result of € -41 million (2008: € 15 million) including the impairment of goodwill from the acquisition of William Properties (€ -26 million).
• Gross premium income increased by 3% to € 2,346 million • Cost-premium ratio dropped to 14.9% • Combined ratio increased to 102.1% • New production fell by 16%
Technical result The combined ratio increased in 2009 from 94.1% to 102.1% due to a strong increase in claims for disability, fire and motor vehicles. The claims ratio now amounts to 71% (+8.9%p). The net impact of the higher claims ratio amounts to € 140 million. Meanwhile, measures have been introduced in the field of premiums and risk assessment, among other things, to reduce the claims ratio.
Despite the sharp increase in the combined ratio, the technical result (for the result for own account from investment sales) increased by 2% to € 75 million due to a higher return on allocated investments.
in combination with the running OpEx programme to make processes more efficient, the effort resulted in the cost-premium ratio falling to 14.9% (2008: 15.8%).
The disability claims ratio amounted to 67.7% (+13.1%p). This increase can be attributed to the increase in the number of damage claims being reported. in addition, new production led to a significant addition to the provisions. We are also seeing a higher claims ratio in sick leave insurances: the number of people reporting ill increased in 2009. We responded to this by increasing the reserve percentage rate.
Business trends in the disability market, we are seeing that the number of cancellations in 2009 exceeds production. The cause lies in more intense competition with new entrants and the market being eroded by the drop in the number of new self-employed start-ups who opt to insure disability due to the recession. Gross premium income is therefore under pressure. Nevertheless, with respect to disability, we are focusing on prudent premium rates and on offering quality services. We also took measures to put a halt to the extreme increase of claims compared to 2008. in 2009, we focused internally on creating a single disability business within ASR Nederland. in spite of these problems, the disability business fared better than the market: our market leader position improved slightly in 2009.
in 2009, P&C (motor, fire and other) succeeded to maintain our share in a competitive market. All the sectors were under pressure due to hefty price competition. Production at the motor sector exceeded the 2008 level due to a greater contribution from the direct channel Ditzo. in particular the number of people changing from direct sellers stand out. The development of Ditzo is in line with developments in the market, with internet marketing gaining ground on the private market.
Major claims at fire and an increase in general claims at motor had a negative influence on the result in 2009. in response to this, ASR was one of the first in market to increase motor insurance premiums and abolish the no-claims benefit.
Fire saw a drop in production in the private market due to the deteriorating housing market. Gross premium income increased in 2009 as a result of indexations and premium increases in the past year.
Europeesche Verzekeringen also feels the impact of the recession through a drop in the number of holiday reservations. Gross premium income of travel and leisure insurance is 3% below previous year. Volumes were particularly under pressure for leisure products. in 2010, we implemented measures in premium terms and conditions and premiums with the aim of bringing returns up to level again.
• Reassessment of labels, products and distribution • A reorganized structure: from business lines to product lines • An efficient organization • A single culture
Our new strategy produced a redesign of labels, products and distribution in 2009 to enable us to guarantee our market position. We are one of the big three parties on the Dutch market. We offer a wide range of insurance products and services for both private and commercial clients. And we do this on the basis of a diversified label and distribution strategy.
• Ardanta: the specialist in funeral insurance. Distribution takes place through several channels, such as the internet and funeral companies.
• ASR Pensioenen: the specialist in the pension field. Distribution takes place through close collaboration with specialist consultants and intermediaries.
• ASR Verzekeringen: the generalist insurer with a complete range of insurance policies and mortgages. Distribution takes place exclusively through intermediaries.
• Europeesche Verzekeringen: the specialist in travel and leisure insurance. Distribution takes place through numerous channels, such as the internet and travel agencies.
Activities in real estate exploitation and development have been placed with ASR Vastgoed Vermogensbeheer and ASR Vastgoed Ontwikkeling and are carried out in our role as investor and investment manager of premium income.
At the same time, we restructured our organization to be able to respond flexibly and cost-efficiently to the rapidly changing insurance market. Using different distribution channels and as a single business with a clear and human message. To this end, we took a number of important steps in 2009 under the banner ‘Focus on Delivery’: • A different organizational structure: from business lines to product lines.
From business lines to product lines The organization was restructured to an organization with a market focus and is based on a model with product lines in the service of different labels: P&C, disability and health, individual life, group life and banking. Each product line is set up as a separate organization with one flexible back office working for different labels. This has created the most important requirement for simplifying the product range, setting up more efficient processes and, finally, achieving major cost savings. in addition, Falcon Leven will be integrated into ASR Verzekeringen in September 2010.
Apart from these structural changes, new products have been developed on next generation platforms. in 2009, the first of the next generation products were launched by both life and non-life in response to the rapidly changing market demand.
An efficient organization it is vital in the new market conditions to have a competitive organization that works effectively and efficiently. in this context, major corporate departments were centralized. For example, a single payments centre has now been created for ASR Nederland by merging the financial departments of ASR Verzekeringen and De Amersfoortse.
• Changes in distribution • Value of the internet in the private market • Opportunities in banking distribution for ASR Nederland
Private market As for the private market, we are expecting an increased use of the internet, in addition to a continuous role for intermediaries. Moreover, the following social trends also play a role: • Consumers are becoming more assertive and are not so loyal anymore to banks, insurance companies and intermediaries; • The government is responsible for far-reaching legislation and regulations for protecting consumers and for stimulating competitiveness; • The internet encourages transparency and enables new distribution models. For instance, comparative sites offer an overview of the alternative products on the market. The internet has become the main source for consumers for obtaining information about purchasing a product and about prices.
Consequently, consumers are better equipped to make independent choices concerning products, advisors and insurance companies. With respect to simple products with a limited financial impact, with clients requiring little or no advice, we expect more opportunities for distribution models using the internet, such as: • Independent intermediaries that use the internet in their business model; • Online sales of products, by providers themselves or through digital intermediaries using a comparative site; • Retail chains, publishers and suchlike that wish to offer insurance policies (affinity marketing); • Banks that wish to offer insurance via their online banking channels (one-stop shopping).
Direct distribution At the moment, the direct channel of ASR Nederland appears in several forms: • Large companies that take out pension and sick leave contracts without using an intermediary. These employers often rely on the assistance of actuarial advisory firms, that charge their hours directly to their clients.
• Selling simple risk products through Ditzo, our insurance provider over the internet. This label was launched at the end of 2007 and started selling insurance in 2008. in 2009, the production and the portfolio more than doubled. With a spontaneous label recognition rate of 83% and best choice awarded by the Consumer bond, Ditzo is ideally positioned to meet the needs of clients who wish to organize their things personally.
• Europeesche Verzekeringen and Ardanta offer the possibility to take out insurance over the internet.
• Affinity partners are selling over the internet: in addition to direct sales to consumers, we recognize opportunities for affiliation marketing.
We are striving to increase the share of direct distribution of our production from 14% to 25% in 2012, in line with the market trend. With 65% of the share, intermediaries will continue to remain our most important distribution channel.
Market position in 2008 and 2009, the market for P&C grew by on average 0.5%. Premium income from the P&C product line increase by 3% over the same period. P&C gross premium income grew stronger than the market during the year under review. With a market share of around 8% in 2009, ASR Nederland strengthened its position as the third player on the Dutch P&C insurance market.
Market trends in recent years, various new providers entered the market that offered their products at increasingly competitive prices. This trend is particularly prevalent in the market for motor insurance.
From all the major, full-service companies on the non-life market the performance of the ASR Verzekeringen label has been awarded as the best. intermediaries rated our overall service at 7.6 (on a scale from 1 to 10). This gives us the fourth position in a field of fourteen market parties, with ASR Nederland representing the first of the insurance companies behind three smaller parties.
On the one hand, because answers to smaller claims are quicker and, on the other, our people now have more time to focus on more complex claims.
The MultiZeker policy, introduced at the beginning of 2010, is the first product on the new iT platform. We will also transfer the existing portfolio to this platform. The new transparent insurance offered by the MultiZeker policy was developed in partnership with client panels and intermediaries. The policy provides flexible claims adjustment offering the widest cover guarantee, immediate cancellation and immediate cessation of premium payments upon cancellation. The policy and all the related correspondence are written in understandable Dutch, it was comprehensibly tested by external client panels and considered positive. Another major change is that intermediaries can now adjust their own commission in order to have greater commercial freedom in their operations.
Finally in spite of the stagnation in the private market segment and the high claim ratios, the non-life market offers opportunities for growth. With the new iT platform and Cockpit, the front-office system for intermediaries, we are in a good starting position to strengthen our position in the private market. With the growing number of self-employed people, we are also seeing a lot of opportunities in the business market.
To achieve this, it is vital that we expand our share with larger intermediaries and that we reduce our costs. The new applications on the iT platform will make a significant contribution to the latter target. Moreover, with our new products we will respond to the need for transparency, simplicity and service. immediate cancellation of an insurance policy, including the immediate cessation of premium payments, will become one of the standard conditions.
With its labels De Amersfoortse and ASR Verzekeringen, ASR Nederland offers disability and health insurance through the intermediary distribution channel. The disability insurance range includes individual disability, sick leave, accident and group disability (WiA) insurance. The health insurance range includes basic health, additional health insurance packages and different additional modules.
Market position ASR Nederland is market leader in disability insurance with a total market share of 23% in 2009. As a whole, the disability insurance market shrank by around 5% in 2009, while our portfolio in this difficult market remained fairly stable.
Market trends Premium income for many disability insurers declined in 2009. Due to a fall in the number of business starting up, the number of bankruptcies, a decline in the number of managing director shareholders, stagnating wages and increasing unemployment, the disability product line faced a shrinking market. New providers are active in this smaller market, usually with a price-cutting proposition. This means that not only volume was squeezed, but also margins.
The increasing claims incurred combined with pressure on premium income development make it clear to us what challenges we are facing in the vital market for us.
The introduction of basic health insurance in 2006 created a price market for health insurance, with intense battles to win clients. in 2009, only 3.5% of policyholders changed to another insurance company, and the health insurance market now appears to be relatively stable.
However, more changes can be expected from politicians. The implementation of the new DbC system (DbCs On the Way to Transparency (Op weg naar Transparantie)- DOT) is planned for 2011. There are also the political intentions to allow health insurance companies and local governments execute the exceptional medical expenses act (AWbZ) in 2012 and to abolish healthcare offices (zorgkantoren). There will be more clarity about the direction to be taken following the general election in June 2010. it is as yet unclear which component of the AWbZ will be executed by healthcare insurers, but with a total worth of €21 billion it implies a considerable expansion of the market.
Finally Our aim is to maintain our position as market leader in disability insurance in 2010 by further improving our client focus. We will achieve this by introducing new products and services, streamlining the organization to make it more efficient, and by further reducing the cost-premium ratio.
in 2010, we want to further improve the condition of our health insurance portfolio. Furthermore, we want to focus on our client performance in order to continue the growth of 2009 in the course of 2010.
The individual life product line offers ASR Verzekeringen, Falcon Leven and De Amersfoortse life insurance policies for consumers and businesses. in most cases, these products are for accumulating or protecting capital, such as death risk insurance, investment insurance policies, annuities and guarantee insurance. The bulk of our products reaches clients through the intermediary distribution channel.
Market position Production in 2009 fell short by about 30% of our targets. We also lagged behind the market average. Apart from the economic causes and the climate surrounding investment insurances, our mortgage proposition fared badly through the lack of funding and the rapid advance of tax driven bank savings. Today, tax driven bank savings already account for a market share of 30%. Following the acquisition of ASR bank at the end of 2009, we are able to offer a proposition that responds to market demand.
in the latest NVA/NbVA/DAK performance survey among intermediaries, appreciation of our life operations by intermediaries jumped from the twelfth to the fifth position.
New legislation and regulations profoundly changed the market. More providers and more transparency in products and services put a squeeze on margins. Tax driven bank savings have been put under the same tax regime as life insurance, and banks are now entering the market in which, traditionally, only insurers were active.
Forced to greater efficiency, insurers opt for fewer labels and products, and have to adapt their existing products to the demands of our time. We will see a lot of new products in 2010.
• Margins under pressure • Growth in SME portfolio • A lot of focus on integrating labels, processes and systems to reduce costs
At the beginning of 2009, the decision was made to merge the group life organizations of ASR Verzekeringen and De Amersfoortse in a more efficient and flexible organization. The businesses were merged under single management in May 2009.
The newly-created Group Life product line offers ASR Pensioenen, ASR Verzekeringen and De Amersfoortse solutions to retirement issues for our business clients, including individual entrepreneurs, medium and small enterprises (SME) and major business clients. The portfolio includes all the usual retirement propositions, such as average and final salary schemes, defined contribution plans, defined benefit plans, but also top-up insurance for reversionary pension benefits (ANW) and disability (WiA) gaps. For distribution we are work closely together with intermediaries, specialist pension advisors and fee consultants.
A positive development was the growing awareness of pensions among consumers. Prompted by the ongoing debate about the investment climate, cover ratios and increasing the minimum age of the General Seniority Law pension are currently top of mind.
Outlook To achieve a better performance in this challenging market, the group life product line made further investments in the last two quarters of 2009 to a more efficient organization, while work continues in the context of the OpEx programme to further improve processes. in addition, a big step was taken in April in our chain integration programme due to the modernization and integration of iT systems. Using this new application, pension advisors can make up online offers, businesses can report changes and employees can gain immediate insight into their pension build-up (www.mijnpensioen.nl).
• Acquisition of ASR Bank • Introduction of new mortgage product: WoonGerust
The other category of products is designed for clients who wish to accumulate and/or protect capital. The savings and investment products required for this are developed, administered and managed by ASR bank, which operates as an independent bank within ASR Nederland. ASR Nederland acquired ASR bank on 29 December 2009 from Fortis bank Nederland.
Market position The mortgage sales of ASR Nederland were largely determined by the changing relationships in the former Fortis Group in 2009. As a result of the disentanglement, mortgages, which had previously been borne in full by Fortis bank Nederland, had to set up anew. With the introduction of the WoonGerust Hypotheek, the introduction of a second funder, bNP Paribas Personal Finance, to the banking line is also a fact. This mortgage, with national mortgage guarantee (NHG), responds to the needs of consumers for security combined with a sharp price. it also responds to the market need for mortgage products with lower costs, more transparency in the fee structure and plain communication.
ASR bank made all the necessary preparations in 2009 to operate as an independent bank as part of ASR Nederland. For example, ASR bank drafted its own financial and risk management policy and, where necessary, engaged the required additional expertise. Furthermore, for guaranteeing the day-to-day services to clients, agreements have been reached with Fortis bank Nederland concerning the management and use of the required banking administration system in the coming years.
With the acquisition of ASR bank, ASR Nederland can also be active in the market for capital accumulation and protection.
We are also seeing intermediaries where clients can personally compare products. i know of intermediaries where they have terminals so clients can first personally have a go and then ask the advice of the intermediary. This means that the market has to make processes accessible on the website of the intermediaries. We will also have to move into that direction, in other words, look further than your own extranet.
What did ASR Nederland do for efficiency in 2009? ‘We worked hard to improve the efficiency of our processes. We introduced methods to improve continuously. At P&C, we also introduced a new iT platform for our new product lines. With the implementation of this new system, a lot of manual work has been done away with, which means we can work at reduced overheads. And we can also deliver policies to clients much more rapidly, which represents an enormous efficiency improvement.’
Has the need for more efficiency been recognized by the entire ASR Nederland organization? ‘it is going well, although i notice some differences. There are colleagues who argue in favour of leaving things as they were. Of course, this is not a viable option, because the world around us is changing. Clients want different things from us than ten years ago, and we want to respond to this. We want these colleagues to understand that they too have to go along with these changes. but i also see members of staff who face the challenge full on, at the private insurance unit of P&C, where major changes are underway. There are people working there whose position will eventually cease to exist.
Do the clients of ASR already notice some changes? ‘Our new MultiZeker policy can only be applied for electronically by insurance advisors. The policy is immediately processed and forwarded by email. There is no quicker way. And another thing that clients will notice, is that fewer mistakes are made because more processes are now electronic.’
in conversation with Jolanda Hillebrand director of P&C at ASR Nederland
All the activities, except Europeesche Verzekeringen and Ardanta, will be accommodated at one location in the Utrecht region no later than 2015. At the end of 2010, we will announce our choice for this central location. The concentration of activities brings with it lower overheads, better cooperation and the strengthening of the reflection of ASR Nederland as a single company.
The OpEx (operational excellence) programme puts continues learning and improvement of staff and the organization centre stage. Staff are encouraged on a day-to-day basis to share and implement suggestions for improvement. OpEx is making a major contribution towards improved efficiency and quality and lower overheads. All the business units of ASR Nederland follow the OpEx way, so it will become a part of our own culture.
New products were developed on the new flexible iT platform in 2009. This platform allows the introduction of new product at lower costs. Examples of these products include the MultiZeker policy and ASR VermogenGarant.
it is essential for the services of Europeesche Verzekeringen that they are there when clients call on them in need. That is why we set up the European helpline, one number for all types of assistance, often medical. insurances are offered through all the available channels, such as intermediaries, travel agencies, authorized agents, health insurers, banks and the direct channel.
At the same time, we seriously committed ourselves in 2009 to reducing costs and improving service delivery. We successfully implemented improvements in our internal processes and in communication with clients. This has resulted in better products, processes and systems. Clients can see it immediately because Europeesche, for example, abolished the cancellation period. Online changes in Meetingpoint is now also a reality. With respect to fraud prevention, Europeesche Verzekeringen was even top of the class, awarded by the Centre for combating insurance fraud (Centrum voor bestrijding Verzekeringsfraude). All 67 members of staff who participated in a life long learning programme to meet the Financial Supervision Act (PE-WFT) passed.
On top of that, in January 2010, we were appointed the best travel insurer of 2009 by Dutch travel agencies. We take great pride in this. Among non-life insurers, Europeesche is the biggest climber in the 2009 NVA/NbVA/DAK performance survey.
Outlook Despite a fragile economic recovery in 2010, we expect the number of holiday reservations to remain steady or even decline slightly. in view of this forecast, we will continue to focus on client experience and quality improvements in 2010 2.5 Companies
Finally The battle for clients in this market will be won by the company that finds the best way to latch onto the perception of clients. We strive to give our clients the feeling of belonging to the club of Europeesche Verzekeringen, the specialist that offers the best choice tailored to the individual wishes of our clients.
• Growing interest in funeral insurance • Gross premium income increases by 14% • Expansion in Belgium and entry into the German market
bonus commission has been abolished and fees for advice and administration are required to comply with socially accepted standards (inducement). Through the introduction of premiums without commission, intermediaries are free to agree on a fee based on part of the premium, in consultation with clients.
Outlook As part of our strategy to gather and bring together all knowledge, Ardanta will take over the administration of the funeral portfolio from ASR Verzekeringen in 2010. That again offers us additional opportunities to improve efficiency and further reduce the number and complexity of the iT systems. Moreover, we will expand the activities launched earlier in belgium. On top of that, we see favourable opportunities on the German market. A next step will be to enter the German market using an intermediary platform.
Our other label, ASR Vastgoed Ontwikkeling, is a leading developer of homes and retail outlets in the Netherlands. ASR Vastgoed Ontwikkeling has a portfolio worth €3.3 billion, consisting primarily of large retail and home construction projects or combinations of these. Our aim in all our development projects is to find a balance between real estate, nature, landscape, the quality of life and accessibility.
in the retail market, prime locations will remain attractive and thus maintain their value. in the housing market, the rebound will mean that the downward price curve will stabilize while, in the office market, the squeeze on prices for secondary locations – particularly due to competition – will remain high. The rural portfolio will make a stable contribution to the portfolio result. A main priority for ASR Vastgoed Vermogensbeheer is to make the right choices here and to offer investors long-term returns at an acceptable risk profile.
A very promising development is ASR Vastgoed Vermogensbeheer acting as fund, asset and property manager for institutional investors. This means that our expertise is valued, which supports us in maintaining our trendsetting role in this market.
With effect from 3 October 2008, the shares are in the hands of the Dutch State. ASR Nederland did not received any capital injection from the Dutch State, nor were any guarantees or loans extended. The capital policy of ASR Nederland is aimed at an ideal solvency ratio of at least 250% of the minimum set by the regulating authority for both life insurance business and non-life insurance business. We are also aiming for a solvency ratio for ASR Nederland at an ‘A’ rating.
Solvency The available solvency for ASR Nederland at year-end 2009 in accordance with regulatory standards amounted to €3,515 million, or 232% of the minimum required solvency ratio. This is an increase of 62 percentage points compared to year-end 2008, when the solvency ratio stood at 170%.
This increase is primarily due to the recovery of the financial markets in 2009. One of the three mainstays of the strategy pursued by ASR Nederland is to be a financially solid player on the Dutch insurance market. To this end, the solvency development is followed with a keen eye and the associated risks are actively managed.
in accordance with iFRS accounting principles, the buffer capital for ASR Nederland NV is 293%. For calculating this standard, an additional test margin is taken into account with respect to the solvency calculation performed by the supervisor to determine the available capital. As a result, the buffer capital is 61% higher than the solvency ratio, based on the standard set by the Dutch central bank (De Nederlandsche bank).
Capital management safety’s sake’. in practice, this means that the position in shares, which had been started in 2007 already, was further reduced. Later in 2009, the position in shares was increased again under protection of the improved solvency position. The choice for liquid investments in more defensive instruments was made. The structured credit portfolio was managed hands-on, further reducing the interest under fair conditions. This policy will be continued in 2010. Our solvency position allows us to do it in 2010, only if, from a business economical perspective, adequate attractive opportunities should arise. A start was also made in 2009 with shedding some of the real estate portfolio. With the simultaneous availability of real estate property with respect to which commitments had already been made, this was barely noticeable in the figures.
A further consequence of the disentanglement is that access to the mortgage market was restricted due to the reliance on a funder that was no longer part of the same group. in addition to the agreement with Fortis bank Nederland, a second agreement was reached in 2009 involving bNP Paribas Personal Finance.
ISIN code NL 000 92 135 45 NL 000 92 135 52 NL 000 92 135 29 NL 000 92 135 37
Nominal amount € 386 million € 38 million € 85 million € 12 million coupon 10% 7.25% 3 months euribor + 230 bps coupon payment date 26 January 26 April 26 July 26 october 30 September 26 January 26 April 26 July 26 october 31 March 30 June 30 September 31 december call date 26 october 2019 30 September 2019 callable at each coupon payment callable at each coupon payment
With the takeover of ASR bank from Fortis bank Netherlands at the end of 2009, ASR Nederland again obtained an entity with a banking licence. As part of the takeover, the corresponding savings portfolio also transferred to ASR Nederland. ASR bank administers some 250,000 accounts of mainly private accountholders: 60,000 investment accounts and 190,000 savings accounts. A significant portion of the savings accounts are so-called employee savings accounts (100,000 accounts). The remaining savings products mainly concern directly available savings. The acquisition of ASR bank has further strengthened the funding position of ASR Nederland.
Dividend With a view to the solvency position of ASR Nederland and possible future capital requirements arising from Solvency ii, the profit available to shareholders for 2009 will be added to the total shareholders’ equity.
Ratings On 20 May 2009, Standard & Poor’s confirmed the ‘A’ rating of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. with a negative outlook. On 5 June 2009, Fitch Ratings reclassified the rating ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. from ‘A+’ to ‘A’ with a negative outlook. in addition, Fitch Ratings has given a rating to ASR Nederland N.V. of ‘BBB+’ with the same outlook.
aSr Levensverzekering n.V. FSr a 19-08-2009 iFSr a 05-06-2009 aSr Levensverzekering n.V. ccr a 19-08-2009 Long term idr a- 05-06-2009 aSr Schadeverzekering n.V. FSr a 19-08-2009 iFSr a 05-06-2009 aSr Schadeverzekering n.V. ccr a 19-08-2009 Long term idr a- 05-06-2009 aSr nederland n.V. Long term idr
‘Actually, i didn’t want to have anything to do with insurers. in the past i even felt cheated by them, because everything was painted far rosier that it really was. but since i am insured again, i understand that things can be done differently. Warmer, more compassionate.
When i bought a new car, my son alerted me to the Ditzo insurance. He works in the car industry and found their adds on TV very clear and understandable. it also appealed to me. After a while i drove into a traffic bollard, and it had to be settled via the contact centre. Much to my surprise, i got a very friendly gent on the line. “There is nothing to worry about, madam, we’ll sort it out for you.” Well, i couldn’t believe my ears. And when i turned up at the service station, they had already been told. Everything went perfectly well.
This has restored my confidence in the insurance world a bit again. because, to be honest, disappointments are everywhere. Without mentioning any names, but in the past i quite often got steamed up. Funds were booked from my account, and i had no idea what it was for. And then you have to go all over the place to find out the truth.
if we have this direct contact with clients, what is the added value created by intermediaries? ‘ASR Nederland goes for multi-distribution. A label such as Ditzo is a direct channel, ASR Verzekeringen works through intermediaries and Europeesche Verzekeringen uses a mix of these two. There is a blossoming future for intermediaries. To start with, product development must appeal to consumers. Consumers then decide: am i going to do it on my own, or am i going to for auxiliary support. Our channels serve all income and social classes. Our products are not complex, but someone’s financial situation may very well be complex. A mortgage loan as such is not complicated. What does make it tricky is one’s own financial situation. And that is where intermediaries come into play with their advisory role. i believe that the advisory role will remain, and that distribution will eventually pass into the hands of consumers.’
All the organizational divisions of ASR Nederland will gradually fully switch to understandable Dutch. This is plain language that the vast majority of the population will understand effortlessly. Ditzo and Europeesche Verzekeringen are leading the field in this.
We also adapt our products. in anticipation of new legislation, Europeesche Verzekeringen has abolished cancellation terms. Ditzo already did that. Ardanta also launched new products in the course of 2009.
Client opinion is measured or expressed in the Net Promoter Score (NPS). This is an international standard for measuring the extent to which clients serve as ambassadors for your label by actively recommending you. The NPS measurement is done regularly. Management is encouraged take account of client appreciation via NPS.
Risk management ASR Nederland set up risk management systems with the aim to actively manage and control risks, to manage capital, value, return and risk in order to serve the interests of all stakeholders.
Risk management enables ASR Nederland to identify, assess, monitor, manage and report its risks. Evident and adequate capital buffers are held for these risks, appropriate to the chosen risk profile of ASR Nederland. Risk management must thus contribute to achieving the rating target of ASR Nederland, which is a minimum of category ‘A’.
• The internal audit department (Audit ASR Nederland) is the third line of defence, responsible for the independent review of the adequacy and effectiveness of the internal control systems and the governance system.
Final responsibility for the risk profile is borne by the ASR Nederland Executive board. The members of the Executive board all sit on the Risk Committee. The ASR Risk Committee is assisted by two important committees, the Financial Risk Committee and the Non-Financial Risk Committee.
Risks are managed with reference to the risk categories as defined in the financial institutions’ risk analysis method (Financial instellingen Risico analyse Methode (FiRM)) of the Dutch central bank: • The Financial Risk Committee manages the risk profile of
ASR Nederland with respect to the financial risks, including matching and interest rate risk, market risk, credit risk and technical insurance risk.
• The Non-Financial Risk Committee manages the risk profile of ASR Nederland with respect to the non-financial risks, including environment risks (including reputation risk), operational risk, outsourcing risk, iT risk, integrity risk and legal risk.
Risk management in this context, the business units – the first line of defence – bear particular responsibility for identifying, assessing, monitoring, managing and reporting on the risks and the risk profile of the business unit within a given framework. Each business unit has a Risk Committee to implement these tasks.
• The credit crunch once again highlighted the importance of risk analyses. in part due to this, ASR Nederland is paying extra attention to its risk management techniques, scenario analyses and a clear limiting risk management framework.
• IT will continue to become a more important and critical factor in the operations of ASR Nederland. There will be a strong focus on developing and simplifying the system. Furthermore, awareness about information security must be increased, and continuity remains an ongoing focal point because of the ever-increasing dependence on these systems.
• ASR Verzekeringen distributes its insurance products through intermediaries. Precisely because of the belief in the added value of this channel, ASR Nederland will continue to be committed to healthy intermediary distribution with a secure future.
in the second half of 2009, the financial markets recovered strongly. As a result, the solvency position of ASR Nederland improved again. The previously reduced share exposure was then gradually expanded with great caution. As one of the very few major financial institutions in the Netherlands, ASR Nederland did not receive any financial support from the State.
The interest rate, market and credit risks are managed on the basis of the strategic asset mix and various risk reports. The table below illustrates the sensitivity of the available solvency (DNb) to the major financial risks at year-end 2009.
The technical insurance risk concerns all the risk as a result of which future payment obligations cannot be raised from premium and/or investment income due to incorrect and/or incomplete technical assumptions and principles in the development premium fixture of the product, meaning the provisions are insufficient.
All the technical insurance risks are modelled and measured consistently, based on the measurement of the fair value of assets and liabilities and the development of a model for spreading the value across the best possible estimate.
Solvency II Following the break with Fortis, ASR Nederland independently continued preparations for Solvency ii in 2009. Solvency ii is the new regulatory framework for European insurance companies which – as expected – will be implemented in October 2012. Solvency ii offers solvency requirements that are better aligned to the risks faced by insurers and will form an integral part of the operational management of insurers. investments and obligations are valued on the basis of market value under Solvency ii.
Introduction The Human Resources (HR) department of ASR Nederland sees to the substance and implementation of the group-wide HRM policy. ASR Nederland aspires to be an attractive employer for current and potential members of staff whose main focus in their careers are flexibility, client focus and the need for personal development.
• Sustainable remuneration policy. in the public debate about remuneration in the financial world, our position is that the remuneration policy must promote sustainable wealth creation for all the stakeholders. A start was made with this in 2009 by awarding senior management for their performance on client satisfaction and staff engagement, in addition to the financial indicators.
Outlook in the years ahead, ASR Nederland wants to continue to develop as a more client focused and efficient player in the market. This commits us to a greater focus on the development of the capacities of our people. For our staff, this is anchored in the personal development plan that forms part of our career policy, and for managers in the management development programme. At the same time, we use our trainee programme and learning networks on an ongoing basis to bind new, motivated and talented people to our organization. in 2009, we gave an additional impulse to this ambition with a new internet site and with our own staff representing ASR Nederland as ambassadors at schools for higher vocational education (HbO), among others.
Introduction The development, coordination and organization of the corporate social responsibility (CSR) policy at ASR Nederland fall under the responsibility of the CSR department. With our CSR policy, we are striving for a clearer and more transparent balance between social and public interests, the environment and a healthy profit for sustainable operational management. We believe that the only guarantee for profit in the long term is if our business also pays explicit attention to the impact of our operations on people, the public and the environment.
Our role as insurer Our primary duty is to offer security to our clients, both in the short and in the long term. Continuity and confidence are crucial for achieving this; our clients must be confident that we are able to fulfil our financial promises. From that position, winning back client confidence in our sector is the centrepiece of our philosophy.
Our role as institutional investor in our role as institutional investor, our social responsibility is expressed in the application of sustainability criteria. With this in mind, we drafted our current policy on socially responsible investments (SRi) in 2007. This policy places the emphasis on the positive selection of best practices and best products based on ESG criteria (environmental, social, governance). This applies to investments in countries (government bonds) and in businesses (shares and corporate bonds).
With respect to the internal investment portfolio, we apply the ESG definitions of Forum Ethibel, complemented with the exclusion criteria of ASR Nederland. Twice a year an independent research organization (Vigeo) screens our entire portfolio, and we make our performance and programmes in the field of corporate social responsibility public knowledge. This independent certification process took place for the first time at the end of 2008.
ASR Nederland has drafted an active voting policy with respect to the larger security positions, with both our SRi policy and the guidelines set by the corporate governance code being taken into consideration. both the voting policy as the full accounting for votes are published on our website www.asrnederland.nl.
Association of institutional investors in Property in the Netherlands (Vereniging van institutionele beleggers in Vastgoed in Nederland (iVbN)) plays a pioneering role. 2009 saw the establishment of the iVbN sustainability taskforce with the aim to identify the status quo in the field of sustainable investment and to formulate a vision. As a member of iVbN and the task force, ASR Vastgoed Vermogensbeheer contributes to the aims of the task force.
For more than one hundred years now, we have been investing part of our capital in rural property and land. Our estates include exceptional areas of natural beauty, and we manage our woods in a sustainable manner. All our estates are open to the public to pursue outdoor activities or enjoy the peace and quiet, the space and the natural environment. in 2009, we again created new natural and green spots on several of our properties. We also took part in two major national land swaps with the authorities. We will continue to pursue this policy in the coming years with other parties.
in 2009, ASR Vastgoed Ontwikkeling launched the ‘land-forland ’ initiative (Land voor Land-initiatief). For every square metre that is built on, Land voor Land compensates one square metre of nature. Association for nature conservation (Natuurmonumenten) and the Agency for rural area development (Dienst Landelijk Gebied) support this initiative. ASR Vastgoed Ontwikkeling is also represented in the NEPROM sustainability and environmental working group. The members of the group have set a target of 50% less energy consumption in 2015: with effect from 2020, all the developed property must be carbon neutral.
Our role as employer Our guiding principle is to create a positive working environment in which staff feel themselves at home and in which their natural talents blossom. To this end, we offer 3 The 2002 CSR code of conduct of the dutch association of insurers. The purpose of this code is to construct a framework within which we as insurers, individually, and with due respect for the applicable competition rules, elaborate our objective to allow us to operate with due consideration for corporate responsibility.
Our role as organization To minimize our impact on the environment, we have implemented an environmental management system in order to use energy and water efficiently, and we are also consciously busy with waste disposal, mobility and CO2 emissions. This is formulated in the covenant that we signed with the government in 2008 with the intention to reduce energy consumption in 2010 by 30% per FTE compared to 2005, at our head office at Archimedeslaan 10, in Utrecht.
‘Personally, i have been dealing with ASR in a business capacity for more than fourteen years now and, as a business, since 1971. My personal ties with ASR go back to 1996, when i did research there for my graduation thesis.
i expect insurance companies to deliver high-quality products at fair, market related prices. but that is not all; maintaining contacts with the people on the shop floor is vitally important, and we expect them to be professional and to be knowledgeable about the business! We prefer to work with our regular contacts. Our calling card, for instance, is claims settling, and that is the moment that you can show what you what you’re worth. And then you need people you know and with whom you can put your heads together and think.
in recent times, the relationship with insurers has changed. insurers are inclined to go under, to merge, to demerge, whatever. As a result, we are facing ever-changing contacts, and that doesn’t always have a positive impact on business. Digitizing and the use of extranet in the private sector market is the right decision, but using these new opportunities is not always practical for us. We operate mainly in the business market, and standardization is not an option for us. Communication is and remains vital for doing business together.
The relationship between clients and intermediaries is also changing. Clients are more assertive and more knowledgeable. We also see the critical approach from clients to intermediaries. As an intermediary, you must continue to make clear what your added value is and convince clients that they are making the right decision to go into business with you. We see it as an opportunity and expansion of services, which makes work more varied and interesting.
Our partnership with ASR will depend on how they choose to continue working with intermediaries. if ASR continues to deliver good products and services and, in particular, nurtures the relationship with intermediaries, i am positive about the future. Don’t forget, we need each other! ASR must continue to develop and renew. Stagnation means decline!’
‘We need each other, so we can put our heads together to think’
‘What is ASR Verzekeringen’s position regarding client focus? ‘That we as ASR focus on clients is absolutely essential, but it can only be successful if we do that in combination with excellence in our intermediary distribution channel. intermediaries are going through a process of change. Whereas in the past, things like the relationship and commission were taken into account, the modern-day task is to establish who has the best proposition. Clients are judging intermediaries more and more on the recommended product, and that must be right.’
Events that occurred in the past two years meant that consumer confidence has taken a dive. How do you propose regaining that? ‘Make sure that you deliver proof. To talk about it is fun, but the proof of the pudding is in the eating. This means that we deliver products which we are convinced will meet consumer demands. And whatever we put on the market, must also include sound ‘processes’, that is, settlement, transactions and systems.’
in conversation with boudewijn van Uden Marketing and Sales director at ASR verzekeringen
‘if intermediaries do not know us or do not know our products, they can’t recommend them to clients’
Most banks have committed themselves to one particular insurer (usually belonging to the same group). in the business banking segment, clients expect a wider product range than offered by their in-house provider. ASR Nederland focuses on expanding partnerships with banks in order to become one of the major preferred insurers for business insurance products. The first step in this direction has been taken with our partnership with Rabobank.
Dr. C. (Kick) van der Pol (1949) Chairman of the Supervisory Board Member of the Selection, appointments and remuneration committee in the past, Kick van der Pol was vice-chairman of the Executive board of Eureko/Achmea and the chairman of the board of Directors of interpolis. At present, his positions include the chairman of the board of Ortec Finance, commissioner of Raet and Valstar Simonis and the chairman of the Advisory board of Syntrus Achmea.
Drs. C. (Cor) H. van den Bos (1952) Chairman of the Audit Committee
Drs. M. (Margot) A. Scheltema (1954) Member of the Audit Committee
Among other things, she is a supervisory director of Triodos bank NV, supervisory director of Schiphol Group, member of the Supervisory board of the Rijksmuseum in Amsterdam and Energie Centrum Nederland (ECN, Energy centre Netherlands and a member of the AFM financial reporting committee (AFM, authority for financial markets).
Supervisory Board meetings 2009 was the first full year during which the board supervised the operations of ASR Nederland. A range of introductory and ‘getting-to-know-one-another’ sessions were held at the beginning of that year in order to provide the supervisory directors with rapid and proper insight into the operations of ASR Nederland. The supervisory directors also met individually with the members of the board of Director, senior members and members of the works council.
The Supervisory board met twelve times with the board of Directors. Prior to these meetings, the Supervisory board met separately to discuss, among other things, the remuneration policy and corporate governance. The full Supervisory board attended 10 of the 12 meetings in 2009; two of the meetings were attended by three of the four supervisory directors.
Audit Committee The Audit Committee, whose members are Cor van den bos (the chairman) and Margot Scheltema, met seven times. The CFO, the external auditor, the managing directors of the Audit, Risk management and Accounting, Reporting & Control departments and the head of Compliance attended the meetings for the respective agenda items. At four of the meetings, discussion of the financial results was central. The Audit Committee discussed the financial results with reference to the annual report, the financial statements and the actuarial report for 2008. The Audit Committee issued a positive report to the Supervisory board. Other topics were also raised in the Committee, for instance, the Audit Committee looked at the audit plans for 2009 and 2010 of both the internal Audit department and the external auditor, and both plans were approved. The compliance plan for 2010 got the stamp of approval from the Audit Committee. in addition, the external auditor’s reports were discussed, and the audit and compliance reports are on the agenda every quarter. Next to the seven meetings, the Audit Committee met once with only the external auditor present.
in the Committee’s opinion, a solid foundation was laid in 2009 to ensure the successful implementation of the policy plan. To achieve our ambitions objectives, the Committee will closely monitor the progress of building a more efficient organization. The 2009-2010 cost-cutting programme announced in April and the restructuring of the organization are two first important steps in achieving this.
Selection, appointment and remuneration committee. The Selection, appointment and remuneration committee was set up in 2009. The Committee, consisting in 2009 of Marieke bax (chairwoman) and Kick van der Pol, met four times. in the second half of the year, the two other members of the Supervisory board also attended the meetings of the Committee.
The chairwoman of the Selection, appointment and remuneration committee regularly reported verbally to the Supervisory board on the issues discussed and reported in writing to the Supervisory board on their considerations, findings and recommendations. All the members of the Supervisory board received a copy of these reports.
Contacts with the works council (OR) The Supervisory board attended a meeting of the works council three times, in different compositions. An important part of the meetings was devoted to the restructuring of the organization and the requests for advice usually involved in such a process. The Supervisory board found the meetings to be constructive and would like to express its appreciation for the open tone and the involvement of all the members of the works council.
Governance The Supervisory board convened their first meeting on 15 December 2008, while it was still in the process of being set up. in 2009, the board’s governance was agreed upon, in harmony with those expected from an independent organization. The Articles of Association, including the dividend policy, rules of conduct, covenant and the rules of engagement, were drawn up and discussed with the shareholder.
Finances / Solvency / TOPrS At each meeting, the Supervisory board discussed the financial results. Particular attention was paid to the solvency position, the measures to minimize risks and the progress of the cost- cutting programme. The Supervisory board gave approval to the restructuring and refinancing of the hybrid securities.
• The acquisition of ASR Bank from Fortis Bank Nederland. With this acquisition, ASR Nederland strengthens its position in the market for wealth accumulation in that it creates the opportunity to offer tax driven bank savings products and investment products.
• The central accommodation location in the region of Utrecht. The Supervisory board endorses the bringing together of all the activities under one roof, with the exception of Ardanta and Europeesche Verzekeringen. The Supervisory board had been informed in detail about and included in the decision-making process of the Executive board with respect to the new accommodation strategy. The advantages and disadvantages and the consequences of the proposed policy have been looked at and discussed in detail. Different criteria were employed, including social and commercial. The board took a long time to consider the social side of this decision and is very much aware of the fact the closure of offices and locations will affect many members of staff and their families. On the other, however, the advantages are also clear: lower accommodation and other costs, improved cooperation between colleagues and the strengthening of ASR Nederland as one single company. The new head office will be realized either by renovating the current head office in Utrecht or by constructing a new building in the vicinity of Utrecht. The Supervisory board agreed with the board of Directors to postpone this and the corresponding investment decision until the end of 2010.
New management structure at the top At the end of 2009, the Supervisory board explored the ideas for a new efficient top management structure with the chairman of the board of Directors. The board discussed the job descriptions and the positions of the board of Directors. Our diversity policy formed part of the discussions. At the start of 2010, the Supervisory board approved the proposal for a new top management structure. The board of Directors was changed to a Executive board with the tasks and responsibilities that meet the needs of the current position ASR Nederland as an independent company. The Supervisory board is convinced that the team in its current composition has the best papers for the challenges that lie ahead in the coming years.
The centrepiece of the remuneration policy is to further promote and maintain the integrity and solidity of ASR Nederland with an eye on the long-term interests of all our stakeholders. The remuneration policy provides an impulse to our staff to commit themselves to the interests of our clients and other stakeholders, within the parameters of our duty to care.
The shape of the policy is tailored to the framework set by the Dutch Corporate Governance Code and the different and relevant advisory committees. in terms of the specifics of the remuneration policy, the principles for a controlled remuneration policy (Principes voor beheerst beloningsbeleid) by AFM/DNb and the banking code were guiding principles.
The targets are based on an individual component (making up 1/3), a component related to client value and staff engagement (representing 1/3) and a financial component (representing another 1/3) consisting of costs, gross premium income and profit.
Long-term variable remuneration: until now, this wage component was based on the long-term awards scheme used by Fortis Group. in 2009, no long-term variable remuneration was awarded in the form of shares, options or cash. ASR Nederland will draw up its own long-term remuneration policy in consultation with the Ministry of Finance.
Pensions The three longest-serving members of the Executive board are entitled to a final wage scheme at 60 years stemming from the Fortis period, with a target of 65% of the fixed salary. To achieve the agreed pension commitments, the chairman receives a supplement of 33.75%, one of the members a supplement of 5.5% and the other member 4% of the fixed salary that can be put to use in a career-break savings scheme (Levensloopregeling). The newest member of the board is entitled to an indexed average-wage scheme with retirement at 65 years, with a 4% supplement of the fixed salary.
Pending the outcome of discussions with the State, the remuneration policy did not change significantly in 2009 in relation to 2008.
• For the 2009 financial year, the members of the Executive board were also not awarded variable remuneration.
General On 3 October 2008, the Dutch State bought ASR Nederland N.V. from Fortis. Since then, the State has been the sole shareholder. This makes ASR Nederland legally independent from Fortis.
The company has an Executive board, previously known as the board of Directors, and a Supervisory board.
Executive Board The Executive board is in charge of the day-to-day running of the entire ASR organization, draws up plans for the future, determines the strategy and sketches the policy. The Executive board takes major decisions, where necessary with the approval of or in consultation with the Supervisory board.
Supervisory Board The Supervisory board has all the authority that the law ascribes to the Supervisory board of a two-tier company subject to the attenuated regime. The basic tasks and responsibilities of the Supervisory include: supervising the policies of the Executive board and the general state of affairs in the company and its associates, and advising the Executive board.
if the enhanced right applies to the supervisory directory vacancy, as referred to in article 17(7) of the Articles of Association, the Supervisory board will also include this information. Enhanced right implies that for one third of the members of the Supervisory board, the board appoints a person nominated by the works council, unless the Supervisory board objects because it believes that the nominated person will be unsuitable for the position of supervisory director, or that the Supervisory board will not have the proper composition with the appointment of the nominated person. The enhanced right of nomination applied to the appointment of one member of the Supervisory board.
Corporate Governance Code The Dutch corporate governance code (the Code) was drawn up and agreed by the then Tabaksblat Committee. The Frijns Committee amended this Code in 2008. The Frijns Code took effect on 1 January 2009.
The Code does not apply to ASR Nederland, because the shares or the depository receipts for shares of ASR Nederland are not admitted to an official listing on a stock market or similar system. The Code does not apply to the current listing of bonds on Euronext Amsterdam. Although ASR Nederland is under no obligation to do so, it strives to comply with the Code to the best of its abilities. The Code has therefore been taken into consideration in the drafting of the new Articles of Association and rules.
Still, to me ASR Nederland is an excellent firm to work for. You are offered opportunities, and if you grab them, you can grow. i understand that we need fewer people to do the work to cut on overheads. but it is important that we don’t compromise on quality in the process. As a company, you must continue to invest in your own people. in this context, i want to maintain the feeling that i create added value, that i make an important contribution to the quality of ASR Pensioenen. We have seen many positive changes in recent years. For example, the management style is different than in the past. it was then mostly a top-down structure with several layers, while now the organization is ‘flatter’ and personal initiative is emphatically encouraged and appreciated.
in my view, the coming years have to focus on winning back client confidence. Our clients do not receive tangible products from us, but a service documented on a piece of paper. it is our duty to assure them that they can be certain that will get what they expect from us. That has not gone well in investment insurance. i sometimes wonder whether clients will have doubts now because of that, for example about the non-life insurance policies they hold with us. i can see actions being undertaken in different places in our organization to get an even better understanding of our clients motives. You have to really understand why clients choose us.
Something that actually strikes me as exceptionally positive of our Executive board is that it is composed of people who have been with the company a long time. They know the business inside out and are therefore in a good position to make the right decisions.’
‘i want to maintain the feeling that i create added value’
How would you define the culture at ASR Nederland? ‘A number of years back, the culture was that whatever came from up high, everyone had to do. This was then translated to staff down ‘the line’, who were therefore very dependent on their manager. Adherence was the main issue. in those times, too, there were people with good ideas, but they did not always clearly come to the surface of the organization.
‘The changes in our organization have been going on for a little while now, and will continue. Up to now, we have weathered all the changes. The culture programme is an essential element in supporting the changes. Culture coaches and ambassadors from our staff pool have been trained to support this programme.
The next generation working (NGW) programme was launched in 2009. This programme offers staff the responsibility and freedom in their choice of how, where, when, with what and with whom they wish to work. NGW will make an important contribution towards improving customer relations, staff engagement, productivity and the cost ratio, and NGW ensures that our core values and our motto actually becomes tangible.
Notes to the balance sheet 130 6 intangible assets 130 7 Deferred acquisition costs 130 8 Property, plant and equipment 132 9 investment property 134 10 Associates and joint ventures 134 11 Financial assets 136 12 Deferred taxes 144 13 Reinsurance contracts 146 14 Other assets 146 15 Cash and cash equivalents 146 17 Subordinated liabilities 149 18 Liabilities arising from insurance contracts 150 19 Provisions for employee benefits 151 22 Due to customers 158 23 Due to banks 158 24 Other liabilities 159
Other notes 169 37 Transactions with affiliated parties 169 38 Remuneration of the ASR Executive board and
All the amounts quoted in the tables contained in these financial statements are in millions of euros, unless otherwise indicated.
A number of restatements have been made in the consolidated financial statements. The comparative figures have been adjusted accordingly. The figures following the categories in the consolidated balance sheet refer to the relevant chapters in the notes.
A number of restatements have been made in the consolidated financial statements. The comparative figures have been adjusted accordingly. The figures following the categories in the consolidated income statement refer to the relevant chapters in the notes.
Net premiums 4,582 5,517 realized gains and losses 27 22 197
Income tax relating to components of other comprehensive income -156 316
Attributable to: - Holders of other equity instruments 18 - - Tax on result of other equity instruments -5 -
Depreciation and amortization: - Deferred acquisition costs 108 123 - Property, plant and equipment 13 16
Net increase/decrease in amounts due from and to customers 239 -95
Net increase/decrease in amounts due from and to banks -781 516
Net increase/decrease in liabilities arising from insurance contracts on behalf of policy holders 1,560 -2,359
ASR Nederland N.V. and its group companies (hereinafter referred to as ‘ASR’) employs approximately 4,500 members of staff (FTEs) (2008: 4,600 FTEs).
2.2 Changes in the principles for financial reporting The principles for financial reporting applied to the preparation of the financial statements for 2009 are consistent with the principles applied to the financial statements for 2008.
• IFRS 7: Improvement information provided about financial instruments, effective from 1 January 2009.
in accordance with the revised iFRS 3, costs associated with acquisitions to set up a business combination are directly charged to the period in which the costs are incurred. The acquiring party can now also choose between measuring third-party interest at the fair value on the acquisition date or at the proportional interest in the fair value of the identifiable assets and liabilities of the acquired party. in addition, the partial sale of a share in a subsidiary, with control of the subsidiary ending, leads to a revaluation of the remaining interest at fair value. ASR chose for the early application of iFRS 3 and iAS 27 with effect from 1 January 2009. The reason is that not capitalizing acquisitionrelated costs provides a clearer insight into the value of the acquired assets and liabilities.
The following changes in iFRS standards and new iFRiC interpretations adopted for use in the EU apply to financial years following 2009 and are not expected to have a material impact for ASR: • IFRS 1: First time adoption of IFRS, effective from the 2010 financial year; • IFRIC 9: Reassessment of embedded derivatives IAS 39: Financial instruments: recognition and measurement, effective from the 2010 financial year; • IFRIC 17: Distribution of non-cash assets to owners, effective from the 2010 financial year; • IFRIC 18: Transfer of assets from customers, effective from the 2010 financial year.
On 12 November 2009, iFRS 9, phase 1, was published, which replaces some of the existing rules for classification and measurement of financial assets (iAS 39). in this context, the number of categories in which financial assets can be classified are reduced to two: amortized cost or fair value. The standard takes effect in 2013 but, following approval by the EU, may be implemented earlier. Adoption of the standard can have a material effect on the result and financial position of ASR. This will depend on the market conditions at the time of transition and the then applicable rules for the valuation of insurance contracts. Work is currently underway on the revision of iFRS 4: insurance contracts. The new standard is expected to take effect in 2013.
Some figures have been reclassified in accordance with the new way of presentation. The comparative figures have been adjusted. Pursuant to iAS 1.39, the adjusted figures as of 1 January 2008 are also shown for items on the consolidated balance sheet.
The most important changes are: • Balance sheet presentation: - The item ‘other assets and receivables’ (€ 8,677 million in the 2008 financial statements) has been largely reclassified. The derivatives included under this item (2008: € 371 million) are now stated separately. Accounts receivable from banks (2008: € 871 million), accounts receivable from clients (2008: € 4,406 million), and trade and other receivables (2008: € 1,005 million) are included under the item loans and receivables. The capitalizeddeferred acquisition costs (2008: € 646 million) are now stated separately on the balance sheet. This also applies to deferred taxes (2008: € 612 million).
- The order of the presentation of the assets has changed. - Shareholders’ equity has been further extended to separate components.
• Presentation of the income statement: - better insight is given into the effects of reinsurance. The reinsurance premiums (in 2008: € 260 million), which previously used to be included under claims and payments, are now deducted from the gross insurance premiums.
- The result of investments on behalf of policyholders (in 2008: € 2,870 million negative) is included under income; this will also be the case if the investment result is negative. in the 2008 financial statements, the negative investment result was included under expenses related to contracts on behalf of policyholders.
- The item ‘benefits’ has been merged in the income statement with the item ‘expenses related to unit-linked contracts’ and renamed ‘technical insurance expenses and benefits. The expenses related to unit-linked contracts (in 2008: € 2,359 million negative) are included under the expenses. in the 2008 financial statements, the negative expenses in connection with unit linked contracts were included under income in connection with unit linked contracts.
ASR Nederland 2009 annual report - The item ‘costs property projects sold’ (2008: € 91 million), which was previously included under operating expenses and staff costs is now included under other expenses.
• Several summaries in the notes have been changed to provide clearer insight and maintain the reconciliation with the changed presentation of the balance sheet and the income statement.
2.4 Consolidation principles for group companies The consolidated financial statements include the financial statements of all the group companies. Group companies are companies or other entities whose financial and operational policy ASR, directly or indirectly, controls. This is the case if more than half of the voting rights can be exercised or if ASR has decisive say in controlling the entity. Group companies are included in the consolidation from the day on which ASR obtains control until the moment that such control ends. in this context, uniform principles for valuation and result determination are applied.
Third-party interests are stated separately on the consolidated balance sheet and income statement.
Associates and joint ventures Associates and joint ventures are accounted for using the equity method.
Elimination of transactions in consolidation All the intergroup balances and transactions between group companies in the consolidation are eliminated.
2.5 Estimates The preparation of the financial statements requires ASR to use estimates and assumptions that have an effect on the figures reported in the financial statements.
The consolidated financial statements report in Euros, the functional currency used by ASR.
2.7 Segmentation At an organizational level, the operations of ASR are divided into the Life and Non-life business segments. There is a clear difference between the risk and return profiles of these two segments. With respect to transactions or transfers between the business segments, the usual commercial conditions apply that would also apply to non-related parties. Detailed information per segment is included in chapter 5 ‘Segmentation ’.
2.8 Netting of financial assets and liabilities Financial assets and liabilities are netted and the net result stated on the balance sheet, if there is a legally enforceable right to settle the amounts net, with the intention to settle the balance as such net or simultaneously. Netted financial assets are recognized after deduction of any impairment losses.
ASR as lessee ASR primarily enters into operating lease agreements for the rental of property and operating assets. Payments arising from such contracts are recognized in the income statement. When an operating lease is terminated before expiry of the lease term, the payments in the form of penalties to the lessor are stated under expenses in the period in which the agreement is terminated. Any benefits received from the lessor in connection with operating lease transactions are deducted from the lease expenses in the period to which the benefits refer.
if the lease agreement transfers virtually all the risks and benefits associated with the property to ASR, the agreement is accounted for as a financing lease and the relevant asset is included on the balance sheet. At the start of the lease period, the asset is recognized at the fair value of the leased asset or, if lower, the cash value of the minimum lease payments due. The cash value is determined on the basis of the implicit interest rate. The leased asset is depreciated over the expected useful life or over the lease period if it is shorter.
The table below shows the exchange rates of the major foreign currencies for ASR:
The lease obligations are recognized under financing at amortized cost based on the effective interest rate method.
As part of this, the recoverable amount of the cash-generating unit to which the goodwill had been allocated applies. The recoverable amount is the higher of the net realizable value or value in use value. The “value in use” of a cash-generating unit is determined by the present value of the estimated future cash flows. if the net realizable value of the unit is lower than the balance sheet value of the unit, the difference is immediately recognized as an impairment loss in the income statement.
Software The cost of software is capitalized if it concerns identifiable assets that ASR can have at its disposal and with which it is expected to generate future economic benefits. The costs mainly concern licensing fees. The capitalized software is depreciated using the straight-line method over its expected useful life, with a maximum of five years. if there are objective indications thereto, the capitalized software is tested for impairment.
2.14 Deferred capitalized acquisition costs Commission payments directly or indirectly related to the acquisition of new or extended insurance contracts are capitalized to the extent that these acquisition costs (‘deferred acquisition costs’ or ‘DAC’) are hedged by the estimated future surcharges of the underlying contracts.
The value of the capitalized deferred acquisition costs is assessed at each balance sheet date to ascertain whether there are indications of impairment. As part of the process, the results of the mandatory annual adequacy test for the obligations arising from insurance contracts are also taken into account.
buildings are depreciated using the straight-line method based on the expected useful life, taking into account the residual value. The useful life of buildings is assessed for every individual component (component approach) and is assessed each year anew. Property is divided into the following components: land, shell, outside layer, fittings and fixtures (both rough finish and detailed finish).
For the maximum useful life of the components, please refer to the summary in chapter 2.16.
Expenses for repairs and maintenance are charged to the income statement in the period in which they are incurred. Expenses incurred after the acquisition of the asset are capitalized if it is likely that the future economic benefits will fall to ASR and the cost can be determined reliably.
The accounting for borrowing costs for the construction of property, plant and equipment is the same as accounting for borrowing costs for investment property as explained in chapter 2.16.
2.16 Investment property investment property is real estate kept for generating rental income and/or appreciating in value. ASR also utilizes investment property partly for its own use. if the components in own use cannot be sold separately, the properties are treated as investment property as soon as ASR maintains an insignificant part for its own use.
if there is change in the designation of property, it can lead to: • reclassification to investment property: at the end of own use or at the start of an operating lease to a third party; or • reclassification from investment property: at the start of own use or at the start of developments with a view to selling to a third party.
Development projects for future use as investment property are stated under investment property with effect from the 2009 financial year. Valuation is at cost, including all the direct costs and borrowing costs (construction period interest), less any impairment losses. borrowing costs directly attributable to the acquisition or development of an asset are capitalized. borrowing costs are capitalized as soon as: • expenses for the asset and the financing are incurred; and • work required to get the asset ready for its intended use or for its sale is underway.
Derivatives Derivatives are derived financial instruments, such as exchange and interest rate swaps, future contracts, interest rate futures and options. Such instruments have a value that changes due to changes in the underlying market factors, such as interest rates, exchange rates or indices such as a stock index (underlying value). Derivatives require little or no start-up investments in relation to other types of contracts that react similarly to changes in the identified market factors and are settled at some point in the future.
The fair value is based on listed market prices or, if these are not available, on valuation methods, such as cash value methods or option valuation models. Derivatives with a positive fair value are recorded separately under the assets, and derivatives with a negative market value are recorded separately under the liabilities.
Hedge accounting Hedge accounting means that, on the date that a derivative is agreed, ASR can define the contract as: • a hedge of the fair value of a recognized asset or fixed obligation
(fair value hedge); or • a hedge of uncertain future cash flows attributable to a recognized asset or liability, or an expected, highly likely future transaction (cash flow hedging).
The hedging of fixed commitments are fair value hedges, except hedges of foreign currency risks, which are accounted for as cash flow hedges. During the period under review, ASR did not apply fair value hedge accounting.
At the start of the hedging position, ASR documents the hedging objectives and strategy, the relationship between the hedged position and the derivative used as hedging instrument, and the method that will be applied to assess the effectiveness of the hedging transaction. it is also confirmed that the hedge is expected to be effective during the entire hedging period. For the duration of the hedging period, the effectiveness of the hedge is tested in every reporting period.
The amounts accounted for in shareholders’ equity are transferred to the income statement and recognized as income or expenses in the periods when the hedged fixed obligations or expected transaction impacts on the result. if the hedge no longer meets the criteria for hedge accounting or is terminated in any other way, the cumulative hedging result remains in shareholders’ equity until the expected transaction or the fixed obligation is settled. if the expected transaction or the fixed obligation is no longer expected to take place, the cumulative hedging result in shareholders’ equity is taken to the income statement.
The measurement and recognition of the results of financial assets depends on the classification in one of the following categories: a Loans and accounts receivable.
b Financial assets held to maturity. c Financial assets at fair value through profit and loss. d Financial assets available for sale.
ASR determines the classification of the financial assets upon first time recognition on the balance sheet. The measurement and recognition of the results are as follows: a Upon first time inclusion on the balance sheet, loans and accounts receivable are carried at fair value plus transaction costs. Subsequently, they are valued at amortized cost based on the effective interest rate method, less impairment losses where deemed necessary.
ASR Nederland 2009 annual report 1 financial assets held for trading, including derivatives that do not qualify as hedge accounting (see chapter 2.18); and 2 financial assets, which ASR irrevocably, upon first time inclusion or upon first time adoption of iFRS, identified as carried at fair value through profit and loss. This only applies to the extent that: a it eliminates or significantly reduces an inconsistency in valuation that would otherwise exist if financial assets or liabilities were valued using different principles; or b ASR manages a group of financial instruments (assets, liabilities or both) on the basis of fair value; c it concerns financial assets containing embedded derivatives and ASR does not separate the derivative from the basic contract. The financial assets at fair value through profit and loss are stated at fair value. Upon first time recognition, the transaction costs are charged to the result. Realized and unrealized value changes are taken to the income statement.
d financial assets available for sale are financial assets that are not accounted for as (a) loans and accounts receivable, (b) financial assets held to maturity, or (c) financial assets at fair value through profit and loss. Upon first time recognition, financial assets available for sale are carried at fair value (including transaction costs). Subsequently, they are carried at fair value with incorporation of the unrealized fair value changes in shareholders’ equity, taking into account deferred tax liabilities. Financial assets available for sale include shares, preference shares, bonds, other fixed-income securities, unit trusts, variable-income securities and interests in investment pools.
Fair value of financial instruments ASR determines the fair value of a financial instrument as far as possible on the basis of listed prices in an active market. in the absence of an active market for the financial instrument, the fair value is determined with the aid of valuation methods. Valuation methods use as much as possible market information. However, the results are affected by the applied assumptions, such as discount rates and estimates of future cash flows. in the unlikely event that it is not possible to determine the fair value of a financial instrument, it is carried at cost.
investments in shares are considered to have been impaired if the fair value has dropped significantly or permanently below the cost price.
This is the case if the fair value: • has dropped 25% or more below the cost price; or • dropped below the cost price for an interrupted period of twelve months.
The other investments can be tested for impairment if there are objective indications that ASR will not receive all the payments due by the counterparty. Objective indications include: bankruptcy, financial restructuring or payment arrears of more than thirty days. The assessment may also involve circumstances requiring a more detailed estimate, such as: negative shareholders’ equity, recurring payment problems, downgrading of the credit rating and other creditors reverting to legal action.
if at a later stage the fair value of the financial assets available for sale should increase and the increase can objectively be attributed to an event that occurred after the recognition of the impairment loss, the impairment loss is reversed in the income statement. impairment losses on shares are not reversed, and the increase in fair value is taken to shareholders’ equity.
2.20 Investments on behalf of policyholders investments made for the account and risk of policyholders mainly concern unit linked insurance contracts. in addition, it concerns savings banks and group pension contracts with policyholders running the investment risks. These investments are carried at fair value. The realized and unrealized value changes of the investments are accounted for in the income statement as result on investments on behalf of policyholders.
2.21 Loans and accounts receivable Loans and accounts receivable are measured at amortized cost based on the effective interest rate method, less impairment losses where deemed necessary.
The assets arising from reinsurance contracts are recognized under reinsurance contracts, except for the current receivables from reinsurers, which are included under loans and accounts receivable.
unrealized gains and losses This reserve consists of the unrealized result of financial assets available for sale after deduction of taxes and taking account of the adjustments due to the applied shadow accounting (see chapter 2.28).
Reserve for exchange rate differences This reserve comprises the exchange rate differences arising from financial assets available for sale.
Reinsurance obligations Reinsurance obligations, with ASR being the reinsurer and with significant insurance risk being transferred, are accounted for in the same way as the normal directly written insurance contracts and are included under the obligations arising from insurance contracts. Obligations to insurers for which ASR serves as the reinsurer, and with no significant insurance risk being transferred, are recognized as debts related to reinsurance of the debts to clients.
Adequacy test for liabilities in connection with insurance contracts This test is performed annually at balance sheet date to ascertain whether the recognized obligations in connection with insurance contracts are sufficient. in the test, the future contractual and the corresponding cash flows are estimated with reference to, among other things, the development of mortality tables, invalidity, claim handling costs, profit sharing and administration costs. Cash flows from guarantees and options embedded in insurance contracts are also taken into account. These cash flows are discounted using the European Central bank (ECb) AAA curve.
Should the liabilities be inadequate, the liabilities recognized in connection with insurance contracts are increased at the expense of the result to the required level of adequacy calculated in accordance with DNb principles.
Options embedded in insurance contracts Options embedded in insurance contracts are not stated separately but treated in accordance with the main contract. These options are measured in the context of the adequacy test, taking into consideration the intrinsic value and the time value.
Other obligations after retirement ASR offers benefits after retirement, such a mortgage loans at favourable interest rates. To qualify for these benefits, the employee is usually required to remain in service until retirement age and has served the company for a minimum period. The expected costs of these awards are attributed to the term of service. This is done using a method that is similar to that for defined benefit plans. The obligations are calculated using actuarial computations in which the likelihood of remaining in service is one of the considerations.
Employee entitlements A provision is formed for staff leave entitlements not yet used.
2.32 Financing Upon first time recognition, debt instruments and other loans are stated at fair value including direct transaction costs. Subsequent valuation is at amortized cost. When required, the difference between the net return and the redemption cost is recognized in the income statement over the term of the loan using the effective interest rate method.
Non-life insurance premiums Non-life insurance premiums are accounted for in the period in which the premiums were earned. invoiced but not yet earned premiums are included under the obligations arising from insurance contracts as explained in chapter 2.28.
2.37 Returns on investments Returns on investments primarily concern interest income, dividends on shares and rental income from investment property.
Interest income interest income is recognized for all interest-bearing instruments, using the effective interest rate method. Direct transaction costs and share premium/discount are taken into account. if the value of a financial asset has been impaired, the interest income is accounted for using the effective interest rate used for discounting the future cash flows when determining the net realizable value.
Dividends Dividend income is recognized in the income statement when a right to distribution becomes vested.
Rental income The rental income from investment property is attributed to the period to which it relates.
With respect to financial assets available for sale, realized gains or losses consist of sales and divestments of the difference between the income received and the amortized cost of the asset or liability sold, less any impairment losses recognized in the income statement in the preceding period and taking into account any adjustments in connection with hedge accounting. The unrealized gains and losses previously recognized directly in equity (the differences between balance sheet value and amortized cost) are recognized in the income statement.
2.41 Commission income The commission and agency fees received particularly concern the activities in connection with reinsurance, asset management and service provision. The fees and commission on services provided are generally accounted for as income in the period in which the services are provided.
2.43 Operational and staff expenses This concerns the expenses in connection with the operations of ASR that are directly related to the reporting period, such as marketing costs, information technology, advice, accommodation, temporary staff and depreciation and amortization of property, plant and equipment and intangible assets. The staff expenses mainly comprise of salaries, social security expenses and pension costs.
Non-current intangible assets, associates, investments, loans and accounts receivable and other assets may be subject to impairment. impairment losses are recognized in the income statement as soon as they are identified. A further explanation is included in chapter 2 at the relevant items referred to above.
The following paragraphs of the Risk Management chapter will first discuss market and credit risk, then insurance risk and the insurance provisions and, finally, operational risk.
The market risk is managed based on the strategic asset mix and a range of risk reports. The table below indicates the sensitivity of the DNb solvency ratio to the major market risks. increasing shareholders’ equity to the DNb solvency level is explained in chapter 4. The spread risk concerns potential changes in value due to deterioration in the credit rating of fixed-income investments. The spread risk of government bonds is assumed to be zero in this context.
Sensitivity of DNb solvency ratio to market risk: if the sketched scenarios take place at the same time, it has a cumulative negative effect on solvency of 66%. That means that at the end of 2009, the DNb solvency ratio would have been 166%. below we discuss the different market risks in more detail.
Compared to 2008, the long-term interest rate increased by more than 0.5% in terms of more than thirty years, and this impacts the value of the assets and liabilities. The interest rate risk of ASR is managed by aligning the fixed-income assets to the profile of the liabilities using, among other things, receiver swaptions for hedging the specific interest rate risk due to interest rate guarantees and profit sharing in the life insurance products.
The sensitivity of the DNb solvency ratio to changes in interest rates is monitored on a monthly basis. The calculation of the available solvency with respect to fixed-income investments, including swaps and swaptions, is based on the market value. As far as the technical provisions are concerned, the test margin is taken into consideration.
3.3.1.2 Equity risk The equity risk depends on the total exposure to shares. in order to maintain proper insight into the actual equity risk, a number of adjustments were made in comparison to the iFRS classification of shares for own account; for example, bond funds classified in the iFRS balance sheet under shares are not included here.
The sensitivity of the DNb solvency ratio to changes in interest rates is monitored on a monthly basis. The calculation of the impact of options on shares and the tax exemption of Dutch participating interests is taken into account. in relation to 2008, sensitivity increased because of the higher exposure for shares and expiry of the put options. At year-end 2009, the portfolio did not contain any options.
effect on DnB test margin 932 1,386 -1,326 -1,972 effect on DnB solvency -16 579 -135 -1,001
The sensitivity of the DNb solvency ratio to changes in value is monitored on a monthly basis. Compared to 2008, sensitivity declined slightly due to lower exposure to property.
Sensitivity of the DNb solvency ratio to changes in the value of property: The impact of changes in the value of real estate on the result and equity is limited to the impairment of property. With a 10% drop in value, the effect is € 77 million.
SenSitivity of DnB Solvency to change in value of real eState
Due from customers government and public sector, total 332 - - - - 332
ProPerty, Plant and equiPment other Pledges and guarantees excess value oF Pledges relative to imPairments 2 non- guaranteed outstanding amount
3.3.1.5.1 Fixed-income investment portfolio The credit risk in the investment portfolio is managed on the basis of credit ratings as supplied by rating agencies. in so far as external ratings are not available, an internal rating is awarded.
Total receivables due from customers 4,361 - - - tions in the portfolio and create a wide diversification towards counterparties. in addition, management is based on a portfoliowide risk gauge for assessing rating and duration.
At an overall level, the changes in the rating spread in relation to year-end 2008 are limited. The biggest change is a limited increase in the ‘bbb’ and ‘lower than bbb’ categories. This increase can be explained by an increase in the value of bonds with lower ratings in the past year on the one hand and, on the other, by rating agencies, who despite the healthy recovery of the financial markets, considered it necessary to substantially downgrade ratings across the board in 2009. The increase in value was the result of a very substantial drop in the premiums demanded by insurers to compensate for the additional risk of corporate bonds. The increase in the identified rating categories was within a restricted investment environment with a cautious policy with respect to investments in financial institutions, businesses and structured corporate bonds.
ASR Nederland 2009 annual report in 2009, a number of EMU member states faced downgrades. The exposure to the countries in question is limited (ireland: zero, Spain € 267 million, Portugal € 15 million, Greece € 82 million), which means that changes in the rating spread within the public sector are limited. Financial institutions mitigated the effect of the downgrades by active reduction. Also with respect to structured instruments in the corporate sector, there was a downward trend in the rating development. The non-rated category declined in value mainly due to impairments.
Sales and redemptions in the sector for structured instruments mainly occurred in the CDO and CLO subsectors. No new investments were made in this sector in 2009.
3.3.1.5.2 Mortgages ASR mostly issues mortgages for the risk and account of third parties. The company’s own balance sheet contains a limited number of Dutch mortgages. The credit risk on these mortgages is small. The Dutch national mortgage guarantee fund (NHG) applies to some of the mortgages. Despite the stagnation in house prices, the value of the collateral of most mortgages has increased in the past two years since the effective date of the mortgage.
At year-end 2009, 1.3% of the mortgages were in arrears (2008: 1.2%).
3.3.1.5.3 Loans related to savings-linked mortgages Savings-linked mortgages have been sold of which the savings insurance is stated on the balance sheet of ASR and the mortgage on the balance sheet of an external financial institution. A feature of a savings-linked mortgage is the interest on the savings insurance and the interest on the mortgage are linked. At the same time, ASR extends loans to the relevant financial institutions with a nominal value equal to the value of the savings insurance and with an interest rate linked to the interest rate of the mortgage. The value of these loans at year-end 2009 was € 1,630 million.
3.3.1.5.4 Derivatives The credit risk involving the market value of derivatives of ASR with a counterparty is normally hedged with a credit support annex (CSA). in line with market conditions, this agreement stipulates that the counter value of the derivatives in liquid instruments, such as cash and government bonds, are held as surety against credit risk.
in addition, there are current account receivables from intermediaries in connection with normal business operations amounting to € 190 million and a corresponding provision of € 17 million.
The events surrounding an issuing institution and the features of the relevant financial asset are considered to determine the level of concern. All investments are categorized as level of concern 0, 1, 2, or 3, with level of concern 0 implying that there are no serious reasons for concern. in the level of concern category 3, it is assumed that there will be an expected permanent and irreversible change in value, which leads to the recognition of an impairment loss.
3.3.2 Liquidity risk ASR must at all times be in a position to meet its obligations towards policyholders and other creditors. The liquidity risk is limited. Most life insurance products, by the nature of the product (pension, mortgage) and the related (tax) requirements, have a long-term character, with early cancellation being undesired or disadvantageous to the policyholder. As a result, benefits to policyholders can be forecast, and an unexpected demand for benefits without acceptable losses of investments is virtually unheard of. At year-end 2009, the liquidities are € 745 million, and the portfolio containing liquid government bonds is worth € 6,374 million. in the short term, repayment obligations towards loans worth € 720 million have been recognized. in addition, savings amount to € 570 million that are largely on call.
The following table shows the contractual cash flows of the investments and liabilities. For the liabilities arising from insurance contracts, the natural turnover and expected decline in the portfolio are taken into account. Equity and real estate have not been included.
Cash flows 2009 < 1 year 1-5 year 5-10 year 10-20 year > 20 year
ASR controls the insurance risk with a combination of acceptance policy, pricing, provisions and reinsurance contracts. The task of the departments charged with risk management of, or within every insurance division is to assess and minimize the risks. This is done on the basis of policy and guidelines agreed at group level.
3.3.3.2 Provisions policy Every insurance business in ASR recognizes provisions for future claims arising from policies and designates assets for these provisions. The provisions for life and occupational disability risk is basically based on a base of premium calculation taking into account, among other things, market-specific assumptions and assumptions based on social issues. The provisions for the remaining non-life risk are based on historical claims settlements of the ASR portfolio. No provisions are formed for equalization and emergencies as these are not allowed under reporting under iFRS.
This death risk particularly impacts the duration and the moment of paying the insured cash flows and premiums and single premiums received. if the benefit is insured in the event of death, the death risk arises from the risk that the policyholder passes away earlier than previously calculated (short life risk). in the event of a benefit paid during the life of the policyholder, the death risk for the insurer arises from the risk that the policyholder passes away later than previously calculated (long life risk).
• Uncertainty: Greater than expected increase or decrease in the insured life expectancy.
The trends in mortality tables are analysed on an annual basis by the life insurance companies in the context of risk control, using mortality tables from official publications and comparison with the own portfolio. The forming of the long life provision is based on these annual analyses.
3.3.3.4.1 Claim frequency, size of claim and inflation To reduce the claim risk, insurance businesses pursue a selection and acceptance policy linked to the claims history and risk models. This is done for each client segment and for each type of activity. The businesses also use the knowledge or expectations with respect to the future trends in the frequency, size and inflation claims. The risk of unexpected major damage claims is contained by policy limits, concentration risk management and specially created risk transfer contracts (for example, reinsurance).
3.3.3.4.3 benefit and claim handling costs Taking future inflation into account, benefit and claim handling costs are managed on the basis of regular reviews and related actions.
3.3.3.5 Reinsurance When deemed necessary, the insurance businesses of ASR agree on reinsurance contracts for life and non-life portfolios to minimize insurance risks. Reinsurance can be taken out for each separate policy (per risk) or for the whole portfolio (per event). The latter arises when the risk with respect to individual policyholders is actually within the accepted limits, but if there is an unacceptable risk of a possible accumulation of claims (disaster risks) due to human actions or natural disasters. in the Netherlands, extreme weather conditions form the biggest disaster risk, storms particularly.
Selecting reinsurance companies is based on the management of the risk that the counterparty represents (expressed in the rating) on considerations involving the price. To limit risk concentration, the reinsurance contracts are placed with different reinsurance companies. The partnership with the previous internal reinsurer (Fortis Re) was ended before 2009, resulting in a number of internal contracts being placed in the external reinsurance market. As a consequence, the retentions under these contracts were revised and accordingly increased to market level.
HigHest Retention At event 3.4 Technical provisions 3.4.1 Adequacy of provisions The adequacy of the technical insurance provisions is tested at least once a year and evaluated each quarter (and more frequently, if required). Any necessary increases in the provisions are recognized immediately and charged to the income statement. The ASR test policy concerning the provisions and processes comply with the requirements of iFRS and guidelines of DNb. See also chapter 2.28. ‘Liabilities arising from insurance contracts - Adequacy test for obligations’.
3.4.2 Life insurance provisions Life insurance products involve long life and short life (death) risk.
The technical provision is based on the premium calculation basis at the time of acceptance. Life expectancy has increased since then. This is unfavourable for long life risk, leading to inadequate provision.
An additional balance sheet provision was formed to cover long life risk. This provision is calculated with reference to the pension table of ASR Collectief (group insurance) and the annuity table of
The provisions for amounts payable and the provision for premiums at year-end 2009 can be specified as follows: 3.4.3.3 Provision for unexpired risk A provision for unexpired risk is set up to the extent that the future claims and expenses - in respect of current insurance contracts - exceed the future contractual premiums, taking into account the current unearned premium reserve.
ASR Nederland 2009 annual report 3.5 Operational risk The Operational Risk & Management Control (OR&MC) department of ASR is responsible for operational risk management. The insurance products of ASR are supplied by the Reinsurance department.
Operational risks can arise due to external factors or internal factors not managed properly. A distinction is made in operational risk between event risk and business risk. Event risk concerns the risk of losses due to ineffective or failing internal processes, people and/or systems on the one hand and, on the other, the risk of losses due to external events. Legal risks are seen as event risks, while strategic risk and reputation risk fall outside this category. Event risk is managed internally and can be minimized by the correct management processes and controls.
3.5.1 Operational Risk & Management Control The field of Operational Risk & Management Control makes a distinction between four relevant specialities: Operational Event Risk, Management Control, information Security and business Continuity. The implementation of these specialities in ASR always follows the Management Control Framework. This Management Control Framework distinguishes between a top-down approach with standards drafted by ASR in respect of these specialities and a bottom-up approach with the business units reporting on the basis of the ‘comply or explain’ approach.
3.5.1.1 Operational Event Risk The purpose of the Operational Event Risk field is to: • identify, measure and manage operational risk; • manage and implement the Operational Risk Framework for
At end of: Gross claims at 31 December 2009 cumulative gross paid claims
Looking at the table above, one may conclude that, taking into account claim trends, the provisions for payable amounts has generally been calculated prudently.
The CRSAs take place annually within all of ASR’s business units with the most important risks facing the business unit determined by the management. based on this, the Management board performs a CRSA at a higher aggregation level. The Management board thus determines the most important risks or top risks facing ASR each year.
For these top risks and the risks per business unit, actions are formulated to reduce the risks to an acceptable level. The management is committed to the implementation of these actions. From the 2009 CRSA process, ASR has formulated the following top priorities: • Recent events and developments make clear that the importance of reputation management cannot be underestimated. ASR’s top priority is therefore to proactively monitor and strengthen the reputation of ASR and its brands in both word and deed.
• The credit crunch has made the importance of risk analyses even clearer. Partly for this reason, ASR pays special attention to its risk management techniques, scenario analyses and a clear-cut risk management framework with limits.
• Increasing laws and regulations, including the requirements from Solvency ii, iFRS and pension legislation, demand a major effort from ASR to comply with them on time.
The risks and the actions are recorded in a system that has been specifically developed for this. As a result, the Management board, the management of the business units and OR&MC have proper insight into the level of risk management within ASR. OR&MC regularly reports on this to the various risk committees.
1 The standard BS25999-1: Code of practice for Business Continuity Management and BS25999-2: Specifications for Business Continuity Management
in 2009, ASR made preparations for a possible widespread outbreak of swine flu. Since the RiVM (National institute for Public Health and the Environment) has formally declared that there is no longer any question of an epidemic, the preparations have been formally concluded.
3.5.1.4 information Security information is crucially important to a financial service provider like ASR. This is because a financial service provider has a high intensity of knowledge and information and reliable information is vitally important. information must be properly protected all the time against a wide range of threats. ASR does this by ensuring a sufficient degree of information confidentiality, integrity and availability by means of a structured approach to information security.
The ASR information Security Officer works within the OR&MC department, with functional control of the local business information security officers within the ASR business units.
4 Capital management and solvency 4.1 Objective ASR strives for a strong capital position. That means a solvency level well above the regulator’s minimum requirement (Solvency i), considering a stress test for the principal risks. An additional aim is a combination of capital position and risk profile that is at least in line with an ‘A’ rating. Finally, risks should be in balance with the fair value of the shareholders’ equity; Solvency ii requirements must be complied with. With the introduction of Solvency ii, this will also be reflected in the reports to the supervisor.
4. 2 Capital management in 2009 in the first half of 2009, the interest rate risk was mitigated by buying swaptions and extending the duration of fixed-income investments. The equity risk was also mitigated in this period, by selling shares. When the solvency improved substantially in the second half of 2009, the equity exposure was again broadened. The insurance risk in the first half of 2009 was mitigated by means of the reinsurance of 50% of the short-life risk. Due to the improved solvency, with effect from 2010 this was reduced to reinsurance of 10% of the short-life risk. The reinsurance contract provides flexibility to increase the level of reinsurance at the request of ASR.
With the consent of DNb, account is taken of the margin on the technical provisions (test margin) when determining the solvency in accordance with DNb standards. The margin is determined in accordance with the statutory adequacy test (TRT), as described in Article 121 of the Degree on Prudential Rules for Financial Undertakings (Het besluit Prudentiële Regels Wft) and elaborated on in more detail in the Regulations in Relation to the Solvency Margin and Technical Provisions of insurers (Regeling Solvabiliteitsmarge en Technische Voorzieningen Verzekeraars). in conformity with DNb guidelines, the test margin in the determination of the DNb solvency is limited by the commutation value requirement, which requires that the test provision must at least equal the commutation value for each homogenous risk group. in connection with the correction of the shadow accounting provision for determination of solvency, the determination of the test margin is based on a balance sheet provision without shadow accounting.
For the determination of the solvency, the test margin is capped by a prudential filter (by virtue of article 98(3) of the Decree on Prudential Rules for Financial Undertakings). This filter reduces the assumed reinvestment rate in the TRT to a prudent level of 3% (for items closed after 1 August 1999) or 4% (for items closed before 1 August 1999).
4.4 Dividend in order to improve solvency, the Executive board will recommend to the General Meeting of Shareholders not to distribute any dividend over 2009.
The Life segment includes financial products in the field of life insurance, collective and individual pension plans, funeral insurance and mortgages. The activities of ASR Vastgoedontwikkeling are allocated to the Life segment.
The Non-life segment includes financial products in the field of non-life and income insurance, health insurance and travel and recreation insurance.
The ASR segment report shows the complete economic contribution of the various segments. The purpose of these reports is the full allocation of all items in the balance sheet and income statement to the segments that hold complete management responsibility for them.
The segment information is prepared in accordance with the accounting principles used for the preparation of the consolidated financial statements of ASR (these are described in chapter 2).
Transactions between the various segments take place under normal market conditions (at arm’s length). The operating results of the segments are assessed on the basis of the segments’ income statements. in accordance with the ASR business model, the service-providing activities of the insurance companies are not reported separately.
fair value gains and losses -148 -66 - -214 gain (loss) on behalf of policyholders -2,870 - - -2,870 result of associates and joint ventures 27 -1 1 27 insurance claims and benefits recovered from reinsurers 20 106 - 126
Net result for the period -553 48 -128 -633 net result attributable to non-controlling interests -7 - - -7
Net result attributable to holders of equity instruments -560 48 -128 -640 5.4 Technical result The technical result before realized results for the group’s own account includes the insurance premiums, allocated investment income less insurance costs (claims), distribution and operating costs. The investment revenues include rental income, interest income, dividends and revaluations. The revaluations relate to realized value adjustments to investments available for sale and real estate investments, as well as the gains and losses on financial instruments recognized at fair value through profit or loss.
The investment revenues less investments costs are allocated to the life and non-life products on the basis of the investment portfolio that covers the insurance contracts for the product in question.
The non-technical result includes investment income on investments that have been allocated to shareholders’ equity and the general provisions, as well as a number of specific results not allocated to insurance activities.
Gross premiums written 2,527 3,491 change in provision for unearned premiums - -
Net earned premiums 2,461 3,452 insurance claims and benefits -2,569 -2,502 change in liabilities arising from insurance contracts -1,585 1,169 fee and commission expense -181 -188 allocated gain (loss) on investments - to technical result 2,274 -2,598 allocated gains or losses - to technical result -57 -38 allocated other income and expense – to technical result 45 -30
Technical result – before proceeds (loss) from sales of investments 117 -998
Proceeds (loss) from sales of investments -13 54 non-technical result 136 89
The operating costs included in the technical accounts are presented in the consolidated income statement under operating expenses and staff expenses. This is explained in more detail in the table below: NoN-life 2009 2008
Operational and staff expenses not included in operating costs in technical account
Gross written premiums net earned premiums net insurance claims and benefits fee and commission expense operatinG
expenses technical result fire and other property damage 5.6 Non-life ratios
The amortization periods for the intangible assets are specified in chapter 2.13. The amortization charges are included under the operating expenses and staff expenses.
in 2009, goodwill increased by € 11 million as a consequence of the acquisition of ASR bank. The impairment of goodwill of € 22 million recognized in 2009 relates to goodwill of ASR Vastgoedontwikkeling. For the purposes of impairment testing, goodwill is allocated to the cash flow generating units of the applicable business segment.
Amortization schedule for value of Business Acquired (vOBA) VObA mainly relates to the acquisition of Stad Rotterdam. As at year-end 2009, the average remaining amortization period of the VObA was seventeen years.
As at 31 December 2009, the total impairment of deferred acquisition costs amounted to € 26 million (2008: €11 million).
Total property, plant and equipment 151 264 227 8 Property, plant and equipment
Land and buiLdings for own use investment property under construction equipment totaL
The depreciation of property, plant and equipment is included under operating expenses and staff expenses.
As at year-end 2009, the fair value of land and buildings for own use amounted to € 205 million (2008: € 261 million). This value is annually determined on the basis of valuations.
Investments In assocIates and joInt ventures 31 dec. 2009 31 dec. 2008 01 jan. 2008 joint venture – deltafort 151 127 149
Some participating interests with an interest of less than 20% qualify as associates because of ASR’s interest or because ASR can exercise significant influence in another way but does not have overriding control.
The joint venture Deltafort b.V. concerns a 50% interest which participates in the ordinary and preference shares of Ahold N.V., and has its registered office in the Netherlands. in 2009, loans extended to associates amounted to € 54 million (2008: € 43 million). These loans are included under loans and receivables.
2009 ToTal asseTs ToTal liabiliTies ToTal income ToTal gain or los 2008 ToTal asseTs ToTal liabiliTies ToTal income ToTal gain or loss
Loans and receivables (chapter 11.4) 6,098 6,280 6,628 cash and cash equivalents (chapter 15) 685 654 483
Listed derivatives are traded on the basis of standard contracts. As a result of the margin obligations imposed by the various stock exchanges they do not generally carry any significant counterparty risk. Derivative contracts traded over-the-counter are agreed mutually by the contractual parties.
Notional amounts are used for the purposes of determining the value of 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. The risk that ASR runs if a counterparty is unable to fulfil its obligations is limited to the positive net fair value of the OTC contracts.
The increase in translation differences and other adjustments relates mainly to exchange rate differences on investments available for sale.
Total investments at fair value through profit or loss 9,112 7,897 11,709
Impairment of loans and receivables The following table shows the changes in the impairments of loans and receivables: Government and public sector 332 382 436
in contrast with the 2008 financial year, the activity in the market for CDOs returned in 2009. broker rates generally provide a representative indication for transaction prices in the market. The broker rates that ASR uses as fair value are therefore level 1 fair values.
Fa ir v a lu e b a s e d o n a v a il a b le m a r k e t in Fo r m a t
F a v a il a b le m a r k e t in
Fair value hierarchy level level 1 level 2 level 3 total Fair value derivatives investments available for sale short -term government securities 62 - - 62 debt certificates covered by mortgage 276 - - 276 debt certificates covered by other assets 274 - - 274 investments at fair value through profit or loss debt certificates covered by other assets 252 - - 252
a ir v a lu e t h r o u g h p r o Fi t o r l o ss in v e s t m e n t s a v a il a b le
Total as at 1 January 2009 36 45 changes in value in investments, realized/unrealized results recognised in profit or loss -3 11 recognised in oci - -11 reclassification of investments in/out of level three measurement method - -4
Deferred tax assets calculated for unused tax losses as at 31 December 2009 353
in oci other 31 Dec. 2009 financial assets held for trading -38 30 - - -8
Movements in the Insurance claims and benefits recovered from reinsurers in the insurance liabilities are as follows: Balance sheet as at 1 January 523 528
Balance sheet as at 31 December 545 523 14 Other assets
The table below shows the composition of the other assets: deferred investment and interest income 503 504 435
Capitalized interest expenses were taken into account when measuring the property projects. In 2009, € 2 million was capitalised (2008: € 6 million).
The cash and cash equivalents are fully available for the company.
ASR concludes life insurance contracts that, in addition to guaranteed profit sharing, also give the policyholders the right to receive additional benefits (see chapter 2.28). For these insurance contracts with a discretionary participating feature (DPF), the expected claims for supplementary profit- sharing are included in the DPF reserve. This reserve is included as part of the unrealized gains and losses in equity.
ASR Nederland 2009 annual report 16.3 Other equity instruments in June 2009, ASR restructured Trust Capital Securities with a principal amount of € 650 million. This restructuring has resulted in the issue of the following hybrid Tier 1 instruments that are classified as equity instruments.
Hybrid tier 1 instrument variable interest (3-month euribor + 2.3%) 84 - Per quarter with effect from 26 october 2009
Hybrid tier 1 instrument 6.25% fixed interest 12 - Per quarter with effect from 30 september 2009
Hybrid Tier 1 instrument variable interest (3-month Euribor + 2.3%) 26 October 2009
Hybrid Tier 1 insTrumenT 6.25% fixed inTeresT (amounTs in € 1,000) 2009 2008 balance sheet as at 1 January - -
The following were paid out to holders of equity instruments in 2009 (amounts in € 1,000): Hybrid Tier 1 instrument variable interest (3-month euribor + 2.3%) 586
The subordinated liabilities are as follows: Trust capital securities - 599 599
in 2009, the Trust Capital Securities included as subordinated loan were redeemed in conjunction with the restructuring explained in chapter 16. The remaining term on the private loans of € 20 million varies from one to five years. The average interest rate on the subordinated loans is 6.6% (2008: 4.9%).
The fair value of the subordinated loans as at 31 December 2009 was € 22 million (2008: € 446 million).
Balance sheet as at 31 December, provision for unearned premiums 518 532 21 28
The composition of the provision for employee benefits is: Post employment benefits pensions 1,898 1,885 487
LiabiLities arising from insurance contracts on behaLf of poLicyhoLders 2009 2008
ASR Levensverzekering N.V., an insurance company that is part of the group, administers a pension plan. The investments held to cover the pension obligations are held by this company, and therefore do not qualify as ‘plan assets’ (assets held by a longterm employee benefit fund’) in accordance with iAS 19 (7). Prior to 2008, however, these investments did qualify as plan assets. This explains the increase in defined benefit obligations as at 31 December 2008.
The costs relate to all members of an ASR pension plan, including a number of employees of (former) Dutch Fortis entities. in 2009, € 3 million (2008: € 4 million) of the aforementioned costs were charged on and were not for the account of ASR.
The pension costs and other costs of post-employment benefits are stated in the table below: Under iFRS, assets managed by insurance companies that form part of the group do not count as qualifying assets. Therefore, the revenues of these assets have not been included in the above figures. The expected returns on these investments in 2009 amounted to € 66 million (2008: € 74 million; 2007: € 11 million). These revenues have been recognized under the investment revenues.
ASR Nederland 2009 annual report per 31 dec. Other pOst-emplOyment benefits present value of liabilities with qualifying plan assets - - - - present value of liabilities without qualifying plan assets
Liability for defined benefits plans 24 23 20 26 91 fair value qualifying plan assets - - - - balance sheet amounts: Assets managed by insurance companies that form part of the group have not been included in the above figures. At year-end 2008, the fair value of these assets amounted to € 1,500 million (2008: € 1,350 million; 2007: € 183 million).
The table below shows movements in the provisions for defined benefit plans: per 31 dec. pension plans present value of liabilities with qualifying investments - - 1,637 1,700 1,923 present value of liabilities without qualifying investments
There are no longer any qualifying plan assets as a result of the transfer of the pension plan to ASR Life with effect from 1 January 2008.
The following table shows the changes in unrecognized past service costs: The following table provides an overview of changes to the total of unrecognized actuarial (gains) losses on assets and provisions: Pension Plans other Post-emPloyment benefits
Unrecognized past service cost as at 31 December 21 24 - -
Unrecognized actuarial gains (losses) at 31 December -93 154 17 18
as % of liabilities as at 31 December 0.2% -1.8% 3.7% -0.7% -1.5% -2.3% 1.1% -21.5% -17.2% 3.8%
the table below presents the assumptions at year end: Pension Plans other Post-emPloyment benefits expected return on plan assets - - - 0.0%
Pension Plans with DefineD benefits other Post-emPloyment benefits expected contributions for next year 93 2
As a financier of the pension plans, ASR has drawn up general guidelines for asset allocation based on criteria such as geographic allocation and ratings. To ensure that the investment strategy remains in line with the structure of pension provisions, ASR regularly performs Asset Liability Management studies. Asset allocation is determined on these guidelines and the outcomes of the studies.
Total costs 1 1 the table below shows the changes to liabilities concerning other long-term personnel remuneration during the year.
net liability as at 1 January 7 7 total expenses 1 1
The table below shows the movements in provisions: Balance sheet as at 1 January 29 26
The average interest rate payable on other borrowings amounted to 2.9% (2008: 3.6%).
The provisions for premature departure of personnel are based on arrangements agreed in the collective labour agreement and the 2009-2010 social plan, and on decisions made by the management of ASR.
Debts owed to customers were: Deposits of reinsurers - 5 5
23 Due to banks amounts owed to banks were: Debts on account of securities lent 721 1,501 1,207
ASR uses this financing for investment (real estate, foreign subsidiary Limited Partnership, group pension contracts), balance sheet management, and short-term cash flow management.
The security received for the lending of securities consists of the following: A securities lending agreement for € 721 million with Fortis bank Nederland that was taken up in various tranches at year-end 2009. The funds drawn have maturities of less than one year and interest rates ranging from 0.86% to 1.83%.
There is no significant difference between the balance sheet value of other liabilities and the fair value of these liabilities.
The table below shows the composition of the gross insurance premiums presented in the income statement: Life insurance contracts own account 1,466 2,302
Non-life insurance contracts – gross earned premiums 2,389 2,338 26 Reinsurance premiums reinsurance premiums are: Gross premium, life -66 -37
Total realized gains and losses 22 197 and loss. The interest income includes € 34 million (2008: € 48 million) in interest received on impaired fixed-interest securities.
The table below shows a breakdown of fair value of gains and losses per category: Financial assets at fair value through profit or loss 26 -394
Fee and commission income consists of the following components: Asset management for third parties 3 9
Other income includes foreign currency translation gains and revenues from SOS international. The increase in other income was mainly caused by foreign currency translation gains in 2009.
interest rate risk of hedged assets and liabilities and the change to the fair value of hedging instruments. For the portfolio hedging of interest rate risks (macro hedging), the initial difference between the fair value and the balance sheet value of the hedged item is amortized on allocation of the hedge relationship over the remaining term of the hedged item.
ASR Nederland 2009 annual report 30 Net insurance claims and benefits
Insurance claims and benefits -4,198 -1,353 share of reinsurers 44 20
The table below itemizes operational expenses and personnel expenses: Total operational expenses and staff expenses -676 -685
As a result of the cost savings scheme, the number of internal employees decreased by 86 to 4,454. There was also a major reduction in the number of external staff members. in 2009, the average number of staff members employed amounted to 4,497 FTEs (2008: 4,588 FTEs).
not to award variable remuneration, which more than offset the effect of the applied indexations. The change to the short-term staff expenses in 2009 compared to 2008 is mainly caused by the redundancy costs incurred by virtue of the social plan.
The table below shows the impairments: Deferred acquisition costs -15 -
The change in impairments of investments is specified below: in 2008, the impairment of investments was entirely attributable to the volatility of the financial markets. The reversal of the impairment of bonds was caused, among other factors, by the volatility of the market and by the sale of impaired corporate bonds.
The other expenses item consists mainly of the costs of real estate sales and foreign currency translation losses.
The table below shows the interest expenses: Interest owed to banks -24 -68
Previously unrecognized tax losses, tax credits and other temporary differences that increase (reduce) deferred tax expenses
Deferred taxes resulting from depreciation or reversal of a depreciation of a deferred tax liability - -
ASR regularly enters into transactions with affiliated parties during the conduct of its business. The transactions concern mainly loans, deposits, commission and reinsurance contracts and are carried out under the commercial and market conditions applied to non-affiliated parties.
The remuneration and combined share ownership of the members of the Executive board are described in chapter 38, Remuneration of the Executive board and Supervisory board of ASR.
Other assets concern loans that include a provision for impairment of € 11 million. As of 3 October 2008 ASR ceased to be part of the Fortis group. The income and expense items in 2008 recognize transactions with the Fortis group up to and including 3 October 2008.
The table below shows the financial scope of the activities ASR entered into with the following affiliated parties: • associates; • joint ventures; • other affiliated parties.
Up to and including 3 October 2008, affiliated parties also included the former parent company Fortis insurance N.V. and Fortis N.V. and former Fortis group companies.
The remuneration of the directors is determined with reference to the current articles of association of ASR Nederland N.V.
The annual remuneration for members of the ASR Supervisory board is – with effect from 15 December 2008 – determined as follows: An amount of € 224,000 was paid in 2008 to former directors under existing contractual obligations.
Directors short-term employee benefits post employment benefits other long-term employee benefits1 expense AllowAnces terminAtion benefits shAre-bAseD pAyments totAl 38.2 Remuneration of directors and former directors The remunerations paid to directors and former directors were: An amount of € 260,000 was paid in 2009 to former directors under existing contractual obligations. No variable remuneration was awarded for the 2009 financial year.
Directors short-term employee benefits post employment benefits other long-term employee benefits1 expense AllowAnces terminAtion benefits shAre-bAseD pAyments totAl 1 Joined the Supervisory Board on 12 February 2009 and stepped down at her own request on 12 March 2010 in connection with a change in her immediate business situation. 2 This concerns pension expenses and sabatical schemes.
The possibility of gaining advantages in the production and distribution of products together with other business units of ASR plays a major role in ASR bank’s acquisitions. Savings and investment
The balance of the identifiable assets acquired and liabilities assumed is provisionally measured on the basis of the most accurate possible assessment by the management of ASR. information will still become available for the final measurement of identifiable intangible assets after the balance sheet date. Adjustments to the provisional fair value of identifiable assets acquired and liabilities assumed that take place within twelve months of the acquisition date lead to adjustments in the goodwill.
products will be offered to customers in conjunction with life insurance products and mortgages.
For the acquisition of ASR bank N.V., ASR paid an amount in goodwill in addition to the carrying amount of the shareholders’ equity. When determining the acquisition price, expected future benefits and synergies that can be realized with the acquisition were taken into account.
Acquired identifiable assets loans and receivables 8 8 Cash and cash equivalents 718 718
The effect of the acquisition of ASR Bank N.V. on the cash flows of ASR is as follows: Acquisition price 37 Acquired cash and cash equivalents 718
Increase in cash and cash equivalents through acquisition of ASR Bank N.V. 681
Lease obligations The table below shows obligations as at 31 December for non-cancellable operating lease agreements: More than 3 months but less than 1 year 5 6 6
ASR creates provisions for such cases if, in the opinion of the management and after consultation with its legal advisers, ASR is likely to have to make payments and the payable amount can be estimated with sufficient reliability (see chapter 25, ‘Provisions’).
Investment liabilities and guarantees in connection with the development of real estate, there are investment liabilities at Real Estate Asset Management totalling € 300 million (2008: € 451 million). Real Estate Development has issued guarantees to third parties for a total amount of € 3.0 million (2008: € 3.1 million) for projects. The guarantees were issued by principals in connection with the performance of projects in favour of the clients of these projects.
Loans to group companies 458 589 293 debts owed to group companies 735 1,326 626 deferred tax liabilities - - 20
Total intangible assets 11 43 Notes to the company balance sheet and income statement
General The consolidated financial statements of ASR for 2009 were prepared in accordance with iFRS – including the international Accounting Standards (iAS) and interpretations – as accepted within the European Union.
Under Section 2:362(8) of the Netherlands Civil Code, the ASR Executive board decided to use the principles for valuation and determination of the result used for the ASR consolidated financial statements for its company financial statements, commencing in 2005.
Balance sheet value as at 31 December 2,918 2,648 3 Loans to group companies
ASR Nederland 2009 annual report 4 Investments Investments available for sale
S h a r e c a p it a l
S h a r e p r e m iu m r e
Balance sheet as at 1 January 100 962 889 23 464 -176 2,262 - 2,262 net result current financial year - - - 640 - - - -640 - -640 change in reserves required by law - - - - 658 -658 - - result carried over from previous financial year - - -889 - - 889 - - -
Balance sheet as at 1 January 100 962 - 640 - - 10 432 - 432 net result current financial year - - 255 - - - 255 - 255 change in reserves required by law - - - - -658 658 - - result carried over from previous financial year - - 640 - - - 640 - - issue of other equity instruments - - - - - - - 521 521 cost of issue of other equity instruments - - - - - - - -6 -6
Balance sheet as at 31 December 100 962 255 - 45 27 1,389 515 1,904
Other equity instruments in June 2009, ASR restructured a number of Trust Capital Securities with a principal amount of € 650 million. This restructuring has resulted in the issue of four different hybrid Tier 1 instruments that are classified as equity (Chapter 16.3).
The remaining term of the other subordinated loans is 27 months (2008: 11 months). The average interest rate on the subordinated loans is 6.6% (2008: 5.5%).
Refer to chapter 17 for a further explanation of the subordinated loans.
ASR Nederland 2009 annual report 11 Provisions The table below shows movements in provisions: Balance sheet value as at 1 January 27 15
The provision for legal matters is based on the most reliable estimates as available at year-end. Account is taken here of advice received from legal advisors. The timing of the outflow of cash in connection with these provisions is by definition uncertain. This is because of the unpredictability of the outcome of and time required to settle disputes.
The residual term to maturity of the long-term loans is 37 months (2008: 18 months). The average interest rate is 3.5% (2008: 6.7%).
13 Liability Since 3 October 2008, the company and its subsidiaries have been part of the tax entity ASR for corporation tax purposes. Until 2 October 2008, the company and its subsidiaries were part of the Fortis Utrecht N.V. tax entity for corporation tax purposes. For value added tax purposes, ASR formed up to and including 31 december 2008 part of a tax entity with ASR companies and other former group companies of Fortis with their registered offices in the Netherlands. Since 1 January 2009, there has been a new tax entity with ASR companies for value added tax purposes. By law the individual companies in the tax entity are jointly and severally liable for one another’s VAT debts.
ASR Nederland 2009 annual report 43.2 Notes to the income statement
Auditor’s fees The auditor’s fees concern fees paid to auditors at the cost of the company, its group companies and other consolidated companies. The fees paid for the years 2009 and 2008 can be broken down as follows: • fees for audit engagements: this includes fees paid for the audit
of the separate and the consolidated financial statements, quarterly reports and other reports; • other non-audit-related fees: this includes costs for support and advice during acquisitions.
Auditor’s responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. in making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
Opinion with respect to the consolidated financial statements in our opinion, the consolidated financial statements give a true and fair view of the financial position of ASR Nederland N.V. as at 31 December 2009, and of its result and its cash flows for the year then ended in accordance with international Financial Reporting Standards as adopted by the European Union and with Part 9 of book 2 of the Netherlands Civil Code.
Opinion with respect to the company financial statements in our opinion, the company financial statements give a true and fair view of the financial position of ASR Nederland N.V. as at 31 December 2009, and of its result for the year then ended in accordance with Part 9 of book 2 of the Netherlands Civil Code.
B.V. nederlandse Hulpverleningsorganisatie-sos international 100.00 amsterdam non-life * Beleggingsmaatschappij ‘de Hoofdpoort’ n.V. 100.00 rotterdam non-life * Bewaarmaatschappij asr Vastgoed Kantorenfonds B.V. 100.00 Utrecht life
There have been no material events after the balance sheet date that would require adjustment to the consolidated financial statements of ASR as at 31 December 2009.
ASR Nederland 2009 annual report *) This concerns companies for which a 403 statement has been issued.
1 The company is only allowed to distribute the portion of profit earmarked for distribution to the shareholders and other beneficiaries to the extent that the value of the company’s shareholders’ equity exceeds the value of the issued and paid-up portion of the company’s capital, plus the statutory reserves the company is required to keep.
2 Profit distribution is only allowed after the adoption of the financial statements, showing that they are reliable. Profit pursuant to the adopted financial statements is at the disposal of the annual general meeting of shareholders.
5 Calculation of the profit appropriation does not include the shares with respect to which, in accordance with subsection 4, no distribution is made to the company.
6 The request for payments expires after a period of five years from the day on which dividend becomes payable.
The capital interests in associates and joint ventures are explained in Chapter 10 Associates and joint ventures.
The overview in the sense of Sections 379 and 414, book 2 of the Netherlands Civil Code has been filed with the trade register of the Chamber of Commerce in Utrecht.
Cash flow hedge A hedge of the risk of fluctuations in the cash flows of an asset or liability or of an expected future transaction that stem from variable rates prices.
Derivative A financial instrument (traded on or off the stock market) with a price that depends directly (‘derived from’) the value of one or more underlying values, such as equity price indices, securities, commodities prices, other derived instruments or another agreed price index or arrangement.
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 lower-than-expected cash flows.
The right of holders of certain insurance contracts and/or financial instruments to get an additional return (besides a guaranteed benefit). The time and/or level of this return depend on the decision of the issuer.
A component of a hybrid instrument that also includes a non-derivative basic contract. The basic contract may be a bond or share, a lease agreement, an insurance contract or a buy or sell contract.
Fair value The amount for which an asset (liability) can be obtained (entered into) or sold (settled up) in a market-consistent transaction (at arm’s length) between knowledgeable and willing parties.
Fair value hedge The amount for which an asset (liability) can be obtained (entered into) or sold (settled up) in a market-consistent transaction (at arm’s length) between knowledgeable and willing parties.
Gross written premiums Total premiums (earned or otherwise) for insurance contracts entered into or obtained in a certain period of time, without deduction of the reinsured premiums.
iFRS Abbreviation for international Financial Reporting Standards (previously international Accounting Standards, iAS). The standard international accounting rules for preparing financial statements as of 1 January 2005 applicable to all listed companies in the European Union. They make annual results easier to compare and provide a better insight into the financial position and results.
insurance contracts Contracts that transfer to one party (ASR) a substantial insurance risk from another party (the insuring party) by agreeing to reimburse the insuring party for an unforeseen event that harms the insured party.
Provision A liability of an uncertain size or with an uncertain payment period. Provisions are recognized as liabilities if it is likely that an outflow of funds that carry economic benefits will be required in order to deal with the liabilities, always assuming that a reliable estimate can be made.
Securities transactions A loan of a security by one party to another party, who in turn must deliver back the security on the final due date of the transaction. Such a loan is usually guaranteed. Transactions of this kind give the owner of the security a possibility to achieve an additional return.
Subordinated liability (loan) A loan (or security) ranked lower in the order of liabilities that qualify for assets and income.
Transaction date The date at which ASR enters into the contractual terms of an instrument.
The present value of future profits (sometimes defined as ‘Value of business Acquired’, or ‘VObA’) from acquired insurance contracts is presented as an intangible asset and written down over the period of recognition of the premium or gross profit of the acquired policies.
ASR Nederland N.V. Archimedeslaan 10 P.O. box 207 23500 Hb Utrecht www.asrnederland.nl
Paper (Dutch version) This annual report is printed on FSC certified paper