Financial report 5.2 Consolidated financial statements 123 5.3 Accounting policies 130 5.4 Group structure and segment information 150 5.5 Notes to consolidated balance sheet 162 5.6 Notes to the consolidated income statement 191 5.7 Other notes 198 5.8 Risk management 211 5.9 Capital management 248 5.10 Company financial statements 251 6 Other information 259 6.1 Report on the audit of the financial statements 2016 included in the Annual Report 260 6.2 Provisions of the Articles of Association regarding profit appropriation 266
Appendices 269 Appendix A – Glossary 270 Appendix B – List of acronyms 276 Appendix C – Standards, convenants and memberships 277 Appendix D – External recognition 280 Appendix E – Additional insurance information 282 Appendix F – Additional employee information 286 Appendix G – Additional environmental information 291 Appendix H – Additional information 294 Appendix I – GRI Content Index 296 a.s.r.
The online version of the Annual Report contains links between the chapters of this report. You can find more information on a.s.r. on its website asrnl.com.
Scope of disclosures This report is intended for a.s.r.’s stakeholders. The financial information in this Annual Report is consolidated for a.s.r. and all its subsidiaries. The quantitative and qualitative information that is provided pertains to a.s.r. as a whole, except where it is stated that information applies to one specific entity, business line or division. Van Kampen Groep (VKG), Dutch ID (Felisson and Boval), PoliService, SuperGarant and Corins (total assets approximately € 213 million (0.37% of total assets)) are excluded from reporting on social and environmental aspects.
As of 1 January 2016, Solvency II regulations came into force. The Solvency II regime comprises requirements for insurance companies. The new regime is meant to harmonize the European insurance market, increase the protection of policyholders and improve risk awareness in both the governance and management of insurance companies. Solvency II sets sophisticated solvency requirements and forms an integral part of the risk management of insurance companies. The Solvency II figures presented in this report are based on the standard formula. In addition to the information disclosed in this report a.s.r. also publishes a Solvency and Financial Condition Report (SFCR).
The information contained in the management report is based on extensive reports from our business lines and the outcomes of qualitative and quantitative questionnaires and reviews. All disclosures have been reviewed by the business lines and corporate departments. Publication of the Annual Report is subject to the approval of the Executive Board and the Supervisory Board.
Utrecht The Netherlands a.s.r.’s roots go back to 1720 with the foundation of ‘N.V. Maatschappij van Assurantie, Discontering en Beleening der Stad Rotterdam anno 1720’, which – on 21 June 1720 – became the first listed insurance company in the Netherlands. The company in its present form was created in 2000 through the acquisition of ASR Verzekeringsgroep by Fortis. In October 2005, the brands AMEV, Stad Rotterdam and Woudsend Verzekeringen were replaced by Fortis ASR. In the same month, the name of the insurance group was changed to Fortis Verzekeringen Nederland. In 2008, a.s.r. was nationalized after the collapse of Fortis. In March 2009 the new name ASR Nederland was introduced. a.s.r. has been listed on Euronext Amsterdam since 10 June 2016. For more information about the history of a.s.r., please see: asrnl.com.
With its professional expertise, a.s.r. can bundle risks and capital and thus make this accessible and affordable for individuals and companies. a.s.r. takes responsibility for doing this in a sustainable manner.
Intro d uctio n 1.3 Message from the Chairman a.s.r. is in a sound position and we can look back on a successful 2016. This is reflected in our solid financial performance and in the various positive developments in our business. We closed 2016 with a robust Solvency II ratio of 189% based on the standard formula, which makes us one of the most solid insurers in the Netherlands.
Committed people are providing our excellent service. Our employees have shown huge commitment to a.s.r. in the past year. This was also reflected in the increase in our annual engagement score to 65% from 53.5%. Every day, our people make a difference for our customers and intermediaries, and that makes us proud.
We sharpened our focus on our insurance expertise a number of years ago. This includes calculating the right premium for the right risk, underwriting the right risks and handling claims correctly. Last year, this resulted in a combined ratio for the Non-life segment of 95.6%, with all product lines staying below 100%.
The individual life market has been contracting on a structural basis for quite some time. Volumes at a.s.r. are largely in line with developments in the market. The a.s.r. life portfolio is also contracting and, if lapses and early surrenders remain stable, will be about half its current size in a decade’s time. Thanks in part to the acquisitions of AXENT, NIVO and De Eendracht, we nevertheless managed to maintain our volumes in 2016.
The pension market clearly shows more promise. Developments are subject to political choices, but the fact is that there is a need for a more differentiated offering in the pension market. That is why, in 2016, a.s.r. launched Het nederlandse pensioenfonds, a general pension fund, which welcomed its first customers right off the bat. We are also seeing increasing demand for defined contribution products at the expense of defined benefit products.
Our other business lines present opportunities and also show positive developments. a.s.r. Bank is showing growth in the mortgage portfolio. Gross written premiums in the occupational disability business has risen in the past year and a.s.r. is still firmly in a market leadership position. The new BEZAVA law will create new growth opportunities in the medium term.
Where asset management is concerned, a.s.r. has shown that sound returns can be achieved with socially responsible investments. Our expertise in this area is now also being offered as fiduciary asset management under the label a.s.r. de nederlandse vermogensbeheerders. In December, we welcomed the first major client with an initial mandate for an investment portfolio of € 1.7 billion.
The Dutch insurance market is saturated. In addition to organic growth, consolidation is one of the options we have focused on over the past few years. a.s.r. will keep an eye out for such opportunities in the market. When considering possible acquisitions, a.s.r. has made it its priority to only choose partners that help strengthen our strategy, add value and meet the risk criteria we apply to potential acquisitions. We do not acquire companies just for the sake of acquiring them.
We successfully acquired a number of companies in 2016. These include BNG Vermogensbeheer, Corins and SuperGarant. Every one of these companies adds value to our business.
The IPO in June 2016 was a major milestone for a.s.r. With a corporate history that starts in 1720, this marked the fourth time that a.s.r. or one of its legal predecessors was listed on the stock exchange. While the IPO did not change our strategy, it did bring us support for our existing strategy from a broad international shareholder base, in addition to
Intro d uctio n the NLFI. I would like to take this opportunity to thank our shareholders for the trust they have placed in a.s.r. We have made our shareholders a fair dividend proposal of € 187 million, well above the guidance of € 175 million we have given at the time of the IPO.
The aim of a.s.r.’s investor relations programme is to seek active engagement with existing and potential shareholders and debt investors to build enduring relationships based on constructive dialogue. To that end, a.s.r. regularly updates the markets on its financial performance, the progress it makes in the execution of its strategy and any other relevant developments, via press releases, webcasts, conference calls and other means. a.s.r.’s executive management team also hosts one-on-one and small group investor meetings during (international) roadshows or in-house, and also attends broker-organized investor conferences.
a.s.r. aims to provide all relevant information that could help investors to make well-informed investment decisions. a.s.r. will make every effort to ensure that the information it discloses is accurate, complete and provided in a timely fashion. Please refer to the corporate website for a.s.r.’s policy on fair disclosure and bilateral dialogue. If you have any further questions regarding a.s.r.’s investor relations activities or about the company itself, please contact the investor relations team at ir@asr.nl.
On 31 December 2016, NLFI held 63.7% of a.s.r. shares. NLFI, acting on behalf of the Dutch State, intends to sell its entire position in a.s.r. in due course.
Sell down NLFI will make reasonable efforts to conduct sales of a.s.r. shares in an orderly manner, to minimize any possible negative impact on the share price. On 13 January 2017, NLFI disposed of 20.4 million shares (13.6% of the total outstanding shares), reducing its position in a.s.r. to 50.1%. a.s.r. participated in the sale and repurchased 3.0 million shares. The repurchase is in line with a.s.r.’s strategy of using its capital to take advantage of value-creating opportunities and to return capital to its shareholders in an efficient manner.
a.s.r. aims to operate at a Solvency II ratio above a management threshold level. This management threshold level is currently defined as above 160% of the SCR. In general, a.s.r. would not expect to pay a cash dividend if the Group level Solvency II ratio falls below 140%.
Important dates 2017 22 February 2017 Full year 2016 results 31 May 2017 Q1 trading update 31 May 2017 Annual General Meeting 2 June Shares quote ex-dividend 5 June Record date 7 June Dividend payment over 2016 30 August Interim 2017 results 29 November Q3 trading update
Intro d uctio n a.s.r. acquires BNG Vermogensbeheer from BNG Bank 1 April
Province of NoordBrabant awards a.s.r. Asset Management mandate worth € 1.7 billion
The final of the first edition of the a.s.r. scholen challenge a.s.r. successfully launches Het nederlandse pensioenfonds and announces the first customer4 October 2.4 million AXENT funeral policies successfully transferred to Ardanta a.s.r. Real Estate Management acquires offices portfolio of Railway NS Basisfonds
About a.s.r. 20 2.1.2 Vision and ambition 21 2.1.3 Core values 21
Value creation 33 2.4.1 Material aspects 33 2.4.3 Value creation model 36
Assurance report of the independent auditor on the Sustainability information 56
a.s.r. has its registered office in the Netherlands. Its main office is located at Archimedeslaan 10 in Utrecht. a.s.r. also has an office in Enschede and a small number of distribution entities in various locations in the Netherlands.
Structure a.s.r.’s operations have been divided into six operating segments. These segments are the Non-life segment and Life segment for all insurance activities. The non-insurance activities are presented as four separate segments: Banking and Asset Management, Distribution and Services, Holding and Other and Real Estate Development.
See pages 150 and 209 of the 2016 consolidated financial statements for a.s.r.’s structure and a list of principal group companies and associates in the relevant segments.
2.1.1 Mission a.s.r.’s overall mission is to offer transparent insurance solutions as a trusted and reliable partner for its customers while creating sustainable value for its stakeholders. As part of its mission, a.s.r. has identified the following key roles that it intends to play: • An insurer for customers a.s.r. is deeply rooted in Dutch society and is committed to understanding its customers’ needs. It aims to offer its customers peace of mind by offering insurance and wealth accumulation products designed to secure its customers’ financial stability and to protect customers from risks they are unwilling or unable to bear themselves. a.s.r. considers its customers’ trust essential to its business and values the strength of independent advice, which is reflected in the strong position of a.s.r. in the intermediary channel.
• A people-focused employer a.s.r. aims to employ highly skilled employees, and to attract and retain talented individuals. a.s.r. strives to offer its employees a stimulating and inspiring work environment and enable them to develop, broaden and expand their skills. As a people-focused employer, a.s.r. aims to offer a highly adaptable and flexible structure.
• A member of society a.s.r. feels responsible to society at large, and also to vulnerable groups. a.s.r. applies its views on social responsibility in its HR policy (e.g. by employing (partly) disabled young people), its investment policy, its working environment (The New World of Work) and its environmental policy.
Customers feel the help we provide in the risks they have covered. We help them to avoid risks and resolve issues if these risks arise. They can rely on our ability to accumulate sound capital for the future, which we strive to do in a way that will benefit generations to come.
I think ahead We are committed to looking for new solutions and making sure that our customers can carry on, that our employees continue to develop, that our shareholders continue to be satisfied and that a.s.r. continues to play its role in society. For instance, we combine our professional skills with new developments in technology and healthcare, on this front. We dare to think differently and to go against the flow if necessary.
• Diversified and resilient Dutch insurer with leadership in attractive market segments
• Sustainable business enhancement via fiduciary asset management in combination with capital light
• Capital light life products (e.g. Defined Contribution (DC) pension products)
• Developing services to differentiate ourselves (expertise, inspection and damage repair)
• Possibilities in individual and collective asset accumulation markets and in the non-life and occupational disability insurance markets
• Presence only in the Dutch insurance market, which as a whole is contracting and highly competitive
• Fierce competition in Dutch market • Further reduction of the solidarity principle and increased attention to individual solutions, possibly compensated by mandatory solutions for uninsurable groups
• Changed consumer behaviour, with declining and changing need for insurance products as a result of technological developments
• Move from entrepreneurship to de facto implementation of publicly established regulations
The coming years are set to bring developments that may have a major impact on the insurance sector. These include technological, economic and social developments, as well as aspects such as consumer behaviour, politics and supervision will also play a key role.
The Dutch insurance market is saturated. Looking at the volumes of gross written premiums (GWP), we can see a steady long-term trend of contraction in the individual life market. The market for group life/pensions, which has also declined in recent years, seems to be being replaced by non-insurance/asset management solutions. The P&C and occupational disability markets have undergone cyclical contraction, the reason being a fall in the insured interest of P&C, due to factors such as consumers driving smaller cars, linked to a higher deductibles and a decrease in insurance penetration in the individual occupational disability/self employed market as a result of reduced financial strength.
GWP, but do lead to a rise in assets under management. In addition, there is the individual life market, which will inevitably continue to contract by about 7% to 10% per year, and the P&C and occupational disability market, which – after having bottomed out – now has new scope for a limited increase in volumes.
The volumes of a.s.r.’s gross written premiums – exclusive of acquisitions – are roughly in line with market developments. The a.s.r. life portfolio is contracting and, if lapses and early surrenders continue at the current rate, will only be about half its current size in a decade’s time. Although the group pension portfolio has contracted as well, it generates adequate alternatives. Volumes in the P&C and occupational disability businesses have fallen over the past few years. That said, a.s.r.’s market share has remained stable or increased. These markets have recently recorded volume increases.
The share of the different distribution channels in total premium income (excluding of Health) has been relatively stable over recent years, particularly where the P&C business was concerned.
Source: Verzekerd van cijfers 2016, excluding of Health. The information of 2015 is not available yet.
Distribution The share of distribution via third parties/intermediaries at GWP level continues to be high. What is clear is that, traditionally, the ‘stickiness’ of customers via intermediaries is much greater than that of online customers. The types of third parties/advisers are changing, as are their business models: the market is moving away from traditional captive advisers towards underwriting agents, specialists, aggregators, all of whom have a (relatively) strong online presence. The share of online origination in total origination is on the rise.
Various technological innovations, mainly driven by the exponential growth in the development and adaptation of these technologies, have a great impact on the scope and structure of insurance services. Especially if and when these technologies such as artificial intelligence, blockchain and robotics converge. This reinforces but also enables the social developments in cooperation and sharing between individuals and customers. Digital players with strong platforms such as Google, Facebook, Amazon, Booking. com, as well as Apple and Microsoft is on the rise. These players are strongly positioned through their access to customers and data to invest and develop in financial technology (fintech) pie and insur-tec.
Economic developments We are living in times with persistently low interest rates and inflation rates. Low growth in Europe may also trigger further European consolidation. Increased volatility, for instance due to the enormous uncertainty about the balance sheets of – southern European – financial institutions and Brexit, will lead to a number of uncertain years. Power is shifting towards China, which is poised for global expansion.
a.s.r. strives continuously to improve its services to customers and the intermediaries that advise them. Customer and intermediary satisfaction levels are closely monitored through the measurement of closed loop feedback, such as the Net Promoter Score (NPS). The Executive Board is responsible for the performance related to customer and intermediary satisfaction and customer services.
a.s.r. stays in close contact with its customers and monitors any changes in customers’ needs.
The Executive Board uses the product approval and review process to discuss cross-functional proposals for new products and improvements to existing products.
a.s.r. applies these capabilities in all of its insurance products, in both the Non-life segment and the Life segment. Insurance products in the Non-life segment include P&C, occupational disability and health insurance. The Life segment include individual (term) life insurance, pensions and funeral insurance.
a.s.r.’s insurance expertise has resulted in a strong combined ratio in the Non-life segment for many years. To further enhance its competitiveness, a.s.r. continues to invest in hiring senior insurance specialists and expanding its underwriting capabilities and expertise.
Cash-generating business model a.s.r.’s objective is to post robust, high-quality earnings and achieve strong capital generation backed by a solid financial framework. This will enable a.s.r. to deliver on its promises, to provide customers with the financial protection they expect and to secure the payment of attractive dividends in the interest of our shareholders and debt investors. Due consideration of a.s.r.’s risk appetite is a key factor in executive and senior management decisions. a.s.r. intends to maintain its capacity to distribute dividend in the coming years through strong capital generation, while maintaining a robust solvency position and retaining an adequate level of cash.
Execution of strategy: optimizing our portfolio Lo ng te rm g ro w th p ro sp ec ts w it hi n m ar ke t c o nt ex t
Business enhancement opportunitiesStable cash flow and value generating business, with relative growth potential
a.s.r. carefully reviews its business portfolio on an ongoing basis. For each of its activities, it considers both their contribution to profits and their future growth outlook.
a.s.r.’s business portfolio The four strategic principles, as described on page 25, are the value drivers in a.s.r.’s business portfolio. a.s.r. is a diversified insurer with leading positions in attractive market segments. On an ongoing basis, a.s.r. carefully reviews its business portfolios for their contribution to profits, as well as their future growth outlook. a.s.r. is disciplined in deploying capital in areas where its skills and expertise provide good value in products and services for its customers, while achieving attractive returns for shareholders.
Distribution and Services is fee business and also a growth opportunity. a.s.r. acquired four specialist distribution companies over the past two years and our focus is now on unlocking the earnings potential that a.s.r. envisages for each of these companies. In asset management, a.s.r. aims to expand its activities in third-party asset management. To that end, it acquired the asset management activities of BNG, adding skills and approximately five billion euro in Assets under Management, which generates fee income.
Divestitures Managing the business portfolio is not just about acquiring businesses and integrating those businesses in the a.s.r. organization. It is as much about divesting businesses that are either strategically no longer core or that underperform on a structural basis. In 2016, a.s.r. divested SOS international, terminated its real estate development business and divested a large portion of its real estate development projects.
In addition, a.s.r. has invested specifically in distribution activities to get closer to its customers. This proximity to customers not only offers a better understanding of customer requirements and competitors’ actions, but also creates an opportunity to experiment more seriously with new propositions a.s.r. will continue on this path in operational terms. Not only will this allow a.s.r. to respond more quickly to normal changes and developments, it will also enable a.s.r. to scale back more easily in the event of certain developments (further regulation, individualization and technological advances) if it were to ascertain that it no longer qualifies as the best risk bearer/owner for a certain section of the market. No matter what, a.s.r. is committed to professionalism, agility and entrepreneurial spirit.
Looking at developments in society, the environment, technology and healthcare, the company will need to strengthen the organization’s innovative drive. To stay successful in the future, a.s.r. will have to become a more adaptive and innovative organization. For both the short and the long term, this will require a combination of new and existing executive drive (efficiency and incremental innovation driven by the online channel) and a newlydeveloped exploratory drive (transformational innovation). Over the past year, a.s.r. has focused intensely on innovation, which led to the definition of three levels of innovation: Level 1 optimization: continuous learning and improvement of products and processes, whether or not combined with digitization (more mobile access to every step in the chain). This requires continuous focus and leadership.
For 2016, a.s.r. intends to distribute a dividend of € 175 million, which is to be paid in 2017. This dividend is discretionary and not based on the dividend policy a.s.r. will apply from 2017 onwards.
In order to position itself effectively in different customer segments of the Dutch insurance market, a.s.r. uses a hybrid, multi-brand distribution strategy and offers its products to approximately 1.48 million households (directly through the a.s.r., De Amersfoortse and Ditzo labels and through over 5,500 intermediaries). The majority of a.s.r.’s insurance products are distributed via the intermediary channel. Ditzo is a.s.r.’s online brand.
a.s.r. uses a multi-brand model that is designed to target different market segments and comprises three core brands: a.s.r., De Amersfoortse and Ditzo, as well as two niche brands: Europeesche Verzekeringen and Ardanta.
Intro d uctio n a.s.r.’s current brands and distribution strategy includes: a.s.r.
branded products are distributed via the intermediary channel (e.g. P&C, mortgages and
In addition, mandated brokers, aggregators and service providers can sell a.s.r.’s products under their own brand names. The a.s.r. brand targets retail and commercial (primarily
De Amersfoortse Under De Amersfoortse brand, a.s.r. offers occupational disability, health and
DC pension insurance, mainly aimed at the commercial market. De Amersfoortse products and services are sold exclusively through intermediaries.
Ditzo Ditzo is a.s.r.’s online brand, focusing on P&C and health products for retail clients.
Ditzo has established a customer base of over 77,116 P&C and 132,184 health insurance customers in 2016. Ditzo-branded products are sold online via its own websites and aggregator websites.
The tax policy leads to: • Further professionalization of the business practices by embedding tax issues; • An increase in tax awareness within the organization; • Manageability of tax risks and new tax opportunities; • Communication with stakeholders about a.s.r.’s tax risk appetite.
As part of its corporate social responsibility (CSR), a.s.r. takes ownership of the effects of its operations on people and the planet. a.s.r. sees opportunities for new products, services and processes in issues relating to people and the planet; these opportunities will benefit both society and a.s.r. (profit).
Insurance Offering continuity and security to customers. a.s.r. wants to provide sustainable insurance products; it engages in continuous process improvements and simplifies its product offering.
Environment a.s.r. is committed to conserving nature and the environment by reducing its environmental footprint to a minimum. a.s.r. is efficient in its consumption of water, energy and other resources. a.s.r. is committed to waste reduction, lowering carbon emissions and mobility.
What does CSR entail in investing? • Ensuring that all investments meet the SRI policy; • Ensuring that all businesses in which a.s.r. invests meet national and international conventions in the fields of human rights and labour laws, and environmental regulations; • Ensuring that investments in sovereign debt are made only in countries that have an adequate score in the Freedom in the World Annual Report and the Corruption Perceptions Index.
To continue to generate value as an organization and execute our strategy, these material aspects will also have to be reflected in our business practices and management. In 2016, a.s.r. determined its material aspects and priorities in collaboration with Dutch non-profit CSR organization MVO Nederland.
Priorities After coordination with the portfolioholder in the Executive Board (the CEO), the final list of material aspects was sent to the stakeholders in the form of a survey. In the survey, respondents were asked to specify what they felt were the most material aspects for a.s.r. The results were subsequently assessed during the stakeholder dialogue. The material aspects were then submitted to upper management so they could define their impact.
The overall results were visualised in the materiality matrix, which combines the relevance for stakeholders and for a.s.r. was combined. The aspects in the top right-hand corner were defined as material; qualitative notes on these aspects have been included in this report.
Angelique Laskewitz – Dutch Association of Investors for Sustainable Development (VBDO) Stakeholder segment – Public interest groups – NGO
‘a.s.r. occupies a leading position in the area of sustainability by giving active and deliberate follow-up to a sustainable investment policy that ties in with the insurer’s long-term focus.’
‘a.s.r. is an insurance company that is making a concerted effort to advance sustainability and Corporate Social Responsibility, but it is also still finding its footing as far as these themes are concerned. This is only natural given that sustainability is not a fixed goal, but a continuous journey. The great thing is that a.s.r. is not only seeing things from its own perspective, but is also seeking the opinion of its stakeholders, for instance by organising stakeholder dialogues. a.s.r. is aware of its chain responsibility. In the event of a claim, an insurer should be committed to engaging sustainable businesses to make repairs in a sustainable manner. On the fire and water damage front, a.s.r. plays a pioneering role as the initiator and chair of the Sustainable Recovery quality mark. It would be wonderful if this were to become a portfolio-wide exercise in the future, for instance by broadening it to vehicle damage. Stakeholders and a.s.r. have joined hands on the path towards sustainability.’
Stakeholder dialogue In 2016, a.s.r. expanded its stakeholder model to include a central stakeholder dialogue, in which relevant stakeholders met at a.s.r. to engage in a dialogue on material aspects.
2.4.3 Value creation model a.s.r.’s value chain starts with capital generated from shareholders that have invested in a.s.r. and from premiums, savings and fees paid by customers. The majority of its capital is used for activities that are expected to yield returns. To create sound financial cover for risks and positive investment income, a.s.r. encourages innovation and continuous development of the knowledge and expertise of its employees. Products are distributed through partnerships with independent advisers and through online platforms. Thanks to the stakeholder dialogue, a.s.r. is now fully aware of the wishes and requirements of its customers, which translates into a product portfolio that ties in with what people need.
a.s.r. uses the returns its generated and premium income to pay customer claims and offer attractive pay and benefits to its employees. We share the profits with investors in accordance with our dividend policy. We contribute to a better society by encouraging financial self-reliance and awareness by developing activities in collaboration with various public interest groups. And we also have a focus on the planet through the aim to care for the environment.
The table on page 37 gives a more detailed description of the value realized for each CSR focus area.
Mission To offer transparent insurance products to customers while creating sustainable and stable value for stakeholders: • an insurer for customers • a stable financial institution • a people-focused employer • a member of society
Strategy a.s.r.’s strategy is based on four principles: • meeting customers’ need
• Financial cover for risks incurred by customers: Solvency II ratio
• Motivated employees with the knowledge and innovation drive required to develop new and improved products and processes
Intro d uctio n 2.5 Sustainability a.s.r. seeks to be a leader in sustainable business practices in the financial sector and takes into account sustainability wherever possible. For its Corporate Social Responsibility (CSR) policy. a.s.r. defined five focus areas (see page 31). a.s.r. engages in dialogue with its stakeholders on the principles and objectives of the sustainability policy.
Governance Within the Executive Board, the CEO bears ultimate responsibility for a.s.r.’s CSR policy. The Director of Corporate Communications coordinates the performance of the policy together with a CSR steering group, whose members are a secretary, the directors of the departments Human Resources, Group Asset Management and Real Estate Investment Management. Since 2016, the Directors of P&C and Pensions also have a seat on this steering group. The steering group meets multiple times a year to formulate a comprehensive vision and apply this vision to the respective focus areas of each of its members. The steering group also monitors the status of the CSR-related KPIs it has set; monitoring takes place within the specified parameters. The steering group has a CSR project group with representatives of the directors specified above. This project group draws up quarterly reports on the defined CSR-related KPIs to the steering group, which assesses results achieved based on these reports and provides guidance with respect to targets or action where needed. Each focus area has a CSR working group that debates relevant subject matters and fleshes out (sub)activities. A Communications working group supervises the required communication drive to put CSR on the agenda both within and outside the organization.
• a.s.r. is 100% compliant with its own socially responsible investing policy with a specific focus on the integration of commercial asset management services.
• a.s.r. publishes a list of excluded companies (based on controversial activities, not conduct) and countries
(full list with exclusions); these lists are updated twice and once a year respectively.
• The implementation of the SRI policy is assessed by the FIG via specific case studies. In February, the FIG published a study on fur and exotic leather, in which the entire insurance sector was criticized for a lack of policy and policy implementation.
was inducted in the Hall of Fame for the third consecutive year.
Works Council; this package will substantiate a.s.r.’s status as sustainable employer.
• Six branded content publications that are socially relevant. 500,000 hits.
• Ten initiatives that lead to a reduction in paper output in 2017, e.g. by developing online initiatives or simplifying the product offering.
a.s.r. qualifies as sustainable company in terms of the environment and is 100%
• Achieving savings of at least 5% on fossil fuel consumption (carbon emissions)
Key Performance Indicators (KPIs) 2016 In 2016, a.s.r. translated its sustainability strategy into goals and metrics for each of the five priorities. a.s.r. seeks to achieve its sustainability targets by measuring the KPIs periodically and adjusting them where needed based on the measured parameters. This chapter describes the results achieved in terms of these KPIs in 2016 for each of these priorities and their interrelationships with the material aspects, the a.s.r. mission and a.s.r.’s strategy principles.
KPIs Targets Results Material aspects1 Mission Strategic principle Risks 1. NPS at group level
Unhappy customers might terminate their relationship with a.s.r. and generate negative media attention, creating the risk of loss of reputation relevant branded content publications publications 500,000 hits
Products that do not sufficiently meet social standards and values risk falling short of customer needs, leading to unhappy customers 4. Funding via
Risk of loss of reputation if the platform is used by unethical businesses 1. NPS at group level a.s.r. measures its NPS because customer appreciation is a key priority in its strategy. In 2016, all product lines used product line-specific targets, which is designed to result in an NPS of +11 at group level. P&C, Pensions and Ditzo all met their specific targets. Health, Life, Banking and Occupational Disability did not manage to meet their product line-specific targets. As a result, a.s.r. did not meet the NPS of +11 at group level (See Appendix E for more information on the NPS).
Transparent product and product descriptions a.s.r. works continuously to improve its processes to help customers, for instance by making information accessible and easy-to-understand. In this context, a.s.r. uses the results of various internal and external reviews of its intermediary channels and consumers. These reviews have been implemented at all a.s.r. labels and business lines.
• Net Promoter Score (NPS) A tool to measure how customers rate services.
See Appendix E for more information on consumer and intermediary research.
Complaints management The Complaints Management team monitors the implementation of the complaints policy and manages the Complaints department accordingly. Complaints handling is decentralized. The key objectives of complaints management are as follows: • a.s.r. is open to complaints, which is why it is easy for customers to file a complaint; • a.s.r. communicates clearly on its views and regarding the resolution of the complaint; • a.s.r. wants to learn from its mistakes, which is why customers are welcome to file complaints.
Customer Centricity Dashboard – Complaints Management by Insurers module In the report on the survey conducted by the Dutch Insurance Review Agency for the AFM, a.s.r. scored a 4.5 out of 5. This was a 0.3-point improvement on the previous survey. As a result a.s.r. is now the third-ranked Dutch insurer.
Make a contribution to society - Without sustainable employability, a.s.r. might not be able to provide the envisaged services, thereby creating unhappy customers frequency 1 Healthy and inspiring work environment (N)
At employee level, line managers take on the role of case managers in the event of absenteeism; they are in charge. This is how a.s.r. seeks to reduce its absenteeism rate. Employees who are on long-term sick leave or are frequently absent receive support from HR’s own absenteeism officers.
All things considered, the KPI for the sickness frequency was met, but the absenteeism rate was still too high to achieve the KPI.
External candidates 254 227 1 61% of total vacancies were filled by man and 39% by women.
In order to place as many internal candidates as possible, career coaches and recruiters work in close collaboration to match supply and demand. Together with management, the entire a.s.r. population is reviewed in order to map out the capabilities and ambitions of employees and to make the best possible use of any developments. The annual review helps to reveal people’s individual capabilities and ambitions.
Finally, a.s.r. has various career coaches of its own to provide guidance to employees who need help with development issues or sustainable employability.
Employee engagement The engagement scan is an important indicator of how employees perceive a.s.r. as an employer. This is a prerequisite for being an insurer that is trusted by its customers. The results of the scan are used to boost employee engagement.
The engagement score rose by 11.5 percentage point in 2016 for the following reasons: • Employees take more pride in a.s.r. and its reputation; • Employees have more faith in the company; • Employees give a higher rating to their development options within a.s.r.; • Employees are more motivated to contribute to a.s.r.’s success.
a.s.r. Code of Conduct The a.s.r. Code of Conduct (asrnl.com) describes what a.s.r. stands for as a business and what conduct and behaviour it expects from its employees. The purpose is to help protect the company’s reputation through impeccable, professional conduct. The conduct should be in line with its principles.
The code is given to all a.s.r. employees and is a part of their employment contract. In 2016, the code was updated and approved by the Executive Board after consulting with the Works Council.
All employees and anyone who regularly performs work for a.s.r. must take an oath or a solemn affirmation. This demonstrates that the employee accepts the a.s.r. Code of Conduct and complies with the same. The aim is to maintain and promote confidence in the financial sector and its role in society.
Unethical conduct and fraud Fraud, including corruption and unethical conduct, undermines public trust in a.s.r. and in the financial sector as a whole. a.s.r. attaches great value to its integrity and good reputation as a financial services provider, and is committed to preventing fraud and unethical conduct. a.s.r. actively looks to prevent, detect and investigate fraud and/or unethical conduct, and to address it in a uniform and adequate manner. a.s.r.’s fraud prevention policy is based on the sector-wide policy that financial institutions use to fight fraud. This policy promotes compliance with relevant laws, regulations, ethical standards and any related internal procedures. a.s.r. has in place an incident policy and desk for reporting incidents and data leaks. Under the whistleblower procedure, a.s.r. employees can report instances of malpractice (or suspected malpractice) freely and without feeling threatened. Violation of or non-compliance with the code of conduct is considered a serious breach of the trust the employer has in the employee and will lead to disciplinary measures. To limit the risk of a.s.r. hiring persons who may cause physical, financial or reputational harm to a.s.r., its customers or other business relations, everyone working at or for a.s.r., including suppliers and brokers, is expected to undergo integrity screening in advance.
Dutch Participation Act a.s.r.’s policy is designed to hire a specified number of people with an occupational impairment, culminating in at least 70 jobs of 25.5 hours per week (approx. 45 FTEs) by 2026. To achieve this, a.s.r. has set up a Participation Desk. The mission of which is to place low-skilled people with an occupational impairment in specific jobs. In 2016, a.s.r. had 12 employees with an occupational impairment (9 young people through the Participation Desk and three other people elsewhere at a.s.r.).
In the event of equal suitability, highly skilled people with an occupational impairment are preferred. In 2017, 24 jobs must be available to employees governed by the Dutch Participation Act.
In 2016, 295 employees received sustainable employability counselling and 112 availed themselves of mobility services (redundancies). The Other Plan will be kicked off in 2017 and, as part of Mobility Concrete, a.s.r. wants at least 10% of all employees to make use of counselling and/or take one or more sustainable employability workshops every year.
Health and vitality a.s.r. is committed to the health and vitality of its employees, for instance via its occupational health & safety policy and its focus on the importance of mental and physical health, the provision of sports facilities and online and other courses on time management and the prevention of work-related stress.
In May 2016, ArboNed, a.s.r.’s occupational health & safety service, performed a Risk Inventory & Evaluation (RI&E) in the areas of safety, health and welfare. a.s.r. amended the Occupational Health & Safety Policy 2016-2020 on the basis of the outcome of the RI&E. The recent amendments to the Dutch Occupational Health & Safety Act were also added in this process. The Occupational Health & Safety Policy 2016-2020 was discussed with the Works Council and will be submitted for approval. After this approval has been granted, a.s.r. will implement the policy.
Training and development In addition to an extensive range of job-related development courses, a.s.r. has developed various initiatives that support employees in their further development.
Duration of course - Male 31,88 hours - Female 31,12 hours
On the Move This project offers support to colleagues who want to take charge of their own future in terms of talent development or sustainable employability, or because they are made redundant. By helping our employees to develop, we increase their agility and their chances on the labour market, which also helps to prevent them from becoming redundant (in the longer term). In 2016, the following number of the employees applied to qualify for On the Move: • 948 employees took a sustainable employability workshop; • 286 employees took part in an individual counselling project; • 112 employees received guidance after having been declared redundant.
Review During the annual employee review, a.s.r. draws up an inventory of its employee base by discussing the performance and potential of all managers and employees, and entering them in a matrix. The results serve as input for strategic staffing, development programmes, succession planning, mobility and recruitment.
Recruitment and selection To attract the right people in the market, a.s.r. is making use of aptitude and ability tests in its recruitment process.
Sustainable investments The a.s.r. SRI policy describes the ethical and sustainability criteria that apply to a.s.r. investments for internal and external client portfolios, covering internally managed as well as externally managed assets. The full a.s.r. SRI policy is available on asrnl.com.
KPIs Targets Results Material aspects Mission Strategic principle Risks with own CSR
Unhappy customers might terminate their relationship with a.s.r. and generate negative media attention, creating the risk of loss of reputation property portfolio asbestos-safe by 2020
Products that do not sufficiently meet social standards and values create a risk of falling short of customer needs, leading to unhappy customers 8. 100% compliance with own CSR policy, including (after integration) commercial asset management We safeguarded full compliance of our SRI policy a three-step process in 2016: internal teams (Investment departments), compliance process (Risk) and an independent audit by an external party (Forum Ethibel). On the asset management portfolios front, 2016 was a year of transition towards harmonization. We introduced the a.s.r. sustainability policy, while the old sustainability policy for asset management (based on Sustainalytics scores) was also applied. The exclusion criteria for countries and companies have been set up through pre-trade and posttrade compliance. Sustainalytics performs ex-post audits of asset management funds; the outcomes are published on asset management’s corporate website.
1 The definition of the calculation of the tenants satisfaction of offices in 2016 is equal to the tenants satisfaction definition of stores.
Intro d uctio n 9. Active engagement dialogues: at least seven engagement projects per calendar year a.s.r. uses three forms of engagement: • Monitoring; • Influencing; • Public engagement.
Engagement For a.s.r., there are three types of engagement: • Engagement for the purposes of influencing: This type of engagement is used with companies who have been identified as acting in conflict with the UN Global Compact Principles governing human rights, labour rights or the environment. Since 2016 a.s.r. has published the list of companies, the reasons for engaging with them and the current status on its corporate website. This information is updated twice a year parallel to the a.s.r. SRI screening cycle; • Engagement for the purposes of monitoring: During 2016, a.s.r. frequently raised the issue of sustainability with various companies in its investment portfolio, for instance to discuss executive remuneration, but also with suppliers to review and enhance their ESG criteria, and with clients or consultants to improve a.s.r.’s SRI policy and implementation. a.s.r. was also invited as a stakeholder to elaborate on its views and requirements in the area of sustainability reporting for an external party; • Public engagement: In 2016, a.s.r. actively participated in a broad dialogue to create an International Corporate Social Responsibility (ISCR) sector covenant, together with peers, the public sector and various social institutions. a.s.r. became a signatory and took part in a work stream of the Dutch Sustainable Developments Goals (SDG) Call for Action, which aims to accelerate the implementation of SDGs in the Dutch financial sector. a.s.r. hosted the 20th anniversary of the Dutch Association of Investors for Sustainable Development (VBDO) which focused on the theme of Impact Investing. a.s.r. gave its commitment as a sponsor for the SAA Masterclass series on climate risks. In addition, a.s.r. provided input for academic research, questionnaires and publications regarding various sustainability issues, such as natural capital or impact investing.
Impact investing In the investment process, a.s.r. pays special attention to impact investing. Through these investments, a.s.r. makes
Intro d uctio n a sustainable contribution to society, for instance through waste recycling, renewable energy (solar and wind), social enterprises or contributing to health improvements. In 2016, a.s.r. committed € 5 million to Social Impact Ventures (socialimpactventures.nl) and provided € 30 million in funding for the Dutch SME market via private loans/bonds. By the end of 2016, our exposure to non-listed impact investments stood at slightly more than € 57 million. a.s.r. also invested in listed vehicles, such as green bonds, that address specific environmental or societal needs.
Human rights Human rights are basic rights and freedoms that all people are entitled to. a.s.r. respects and subscribes to fundamental human rights as internationally agreed in the Universal Declaration of Human Rights, and a.s.r. expects the same from its employees, customers and other business associates.
a.s.r. excludes investments in companies if they are complicit in systematic and/or gross violations of human rights. These human rights standards can be found in the International Bill of Human Rights (IBHR). IBHR consists of the Universal Declaration of Human Rights, the International Covenant on Economic, Social and Cultural Rights and the International Covenant on Civil and Political Rights and its two Optional Protocols. There are nine core international human rights treaties. Each of these treaties has established a committee of experts to monitor the implementation of the treaty provisions by its contracting parties. Some of the treaties have been supplemented with optional protocols covering specific concerns. These includes: • International Convention on the Eliminations of All Forms of Racial Discrimination (1965); • International Covenant on Civil and Political Rights (1966); • International Covenant on Economic, Social and Cultural Rights (1966); • Convention on the Elimination of All Forms of Discrimination against Women (1979); • Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (1984); • Convention on the Rights of the Child (1989). International Convention on the Protection of the Rights of; • All Migrant Workers and Members of Their Families (1990).
Sustainable forestry Part of a.s.r. REIM’s assets under management qualify as rural real estate, some of which (15%) are country estates with wooded areas and natural habitats. a.s.r. REIM’s forest management meets the sustainability principles of the codes of conduct for nature management and forest management. Through these investments, a.s.r. REIM makes a structural contribution to the management and upkeep of the Dutch (agricultural) landscape.
Sustainable investing By participating annually in the GRESB, a.s.r. REIM improves the transparency and awareness of sustainability.
Star with two stars; • ASR Dutch Prime Retail Fund – Green Star with three stars; • ASR Property Fund (ASR PF) – Green Talker.
Society a.s.r. REIM participates in two institutions for general public advancements (foundations), whose mission is to monitor natural and scenic values and cultural and social heritage, as well the management of same for future generations to enjoy: • Stichting Ambachtsheerlijkheid Cromstrijen; • Stichting Kasteel Bleijenbeek.
Intro d uctio n 2.5.4 Environment a.s.r. wants to be a good steward of nature and the environment by preventing waste and limiting negative impacts. To achieve this, a.s.r. works with an environmental management system.
On the environmental front, a.s.r. puts special focus on its carbon footprint, which comes in two varieties: • Direct footprint, due to its own activities; • Indirect footprint, as a result of investment activities (see chapter 2.5.3).
KPIs Targets Results Material aspects Mission Risks 13. Reduce carbon footprint of a.s.r.
Make a contribution to society 15. Sustainability annex to procurement contracts and compliance with this annex
Employer with a human dimension a.s.r. working with suppliers that do not meet social sustainability standards may cause negative media attention, creating the risk of loss of reputation 13. Reducing the carbon footprint of the a.s.r. head office by 2% against 2015 a.s.r.’s direct footprint consists of waste, fuel, heat, electricity, cooling, commuter travel and business travel. In 2016, a.s.r. sought to reduce its direct footprint by 2%. The relocation of Europeesche Verzekeringen (see Housing) resulted in an increase in headcount of 528 FTEs in Utrecht, and as a result the absolute carbon footprint of the a.s.r. head office increased by 6% in 2016. The remaining emissions reduction will be achieved via ‘Trees for all’ credits in 2017.
Sustainable Mobility Pledge; • Membership of Dutch Climate Coalition: working together to create a climate-neutral society; • MYA 3: achieved more than 50% in savings in 2016.
In 2016, fossil fuel consumption made up 96.1% of a.s.r.’s total carbon footprint, representing an 8% increase compared to 2015.
Mobility a.s.r. has taken the following measures to make its commuter travel and business travel more sustainable: • Less travel due to The New World of Work; • Lease policy restrictions; • Facilitation of alternative vehicles; • A ‘drivers’ battle’ and e-learning courses for lease car operators; • An appropriate parking policy.
In 2016, mobility at a.s.r. can be broken down as follows: • 21% bicycle use; • 48% car use; • 30% public transport use; • 1% carpool use.
Commitments a.s.r. signed the Dutch Business Sustainable Mobility Pledge in 2016. As part of this pledge, a.s.r. is now affiliated with the Anders Reizen (Travel Differently) working group, in which large Dutch employers are working to reduce mobility-related emissions and share best practices.
Business travel 36.6 32.98 a.s.r.’s carbon footprint is determined annually by an external agency using Carbon Manager based on Green deal carbon emission factors.
The office of Europeesche Verzekeringen at Hoogoorddreef 56A (Amsterdam) was closed in April 2016. Its employees have been relocated to the a.s.r. head office.
The consortium consists of a.s.r., Utrecht University, Stichting Kantorenpark Rijnsweerd (Rijnsweerd business park foundation), energy firm Engie, the University of Applied Sciences Utrecht, University Medical Center Utrecht and TNO.
Waste One of a.s.r.’s priorities is to maximize the reduction and recycling of waste volumes. a.s.r.’s waste is processed by Sita, a waste-processing company. Sita has calculated that a.s.r. recycles 33% of its waste. Total volume of waste in 2016: 352,000 kg. For a breakdown of waste flows, see Appendix G.
Procurement 15. Sustainability annex to procurement contracts and compliance with this annex in 60% of contracts This target was not achieved. The annex was completed and approved in December. After that, there was no time to implement it in 60% of the contracts managed by Procurement.
Outsourcing policy Procurement reviews whether suppliers meet the criteria set in the relevant policy (as formalized in the Financial Supervision Act - Wft), defined by Compliance. a.s.r. uses a standard contract, including the a.s.r. governance annex, if a procurement process qualifies as outsourcing. This streamlines the supervision within and outside a.s.r. Reports of relevant meetings are included in the contract file of the supplier in question, which guarantees stakeholder alignment with Legal, Compliance and Audit.
a.s.r. believes that climate change risks will mainly affect the P&C business. In its operations, a.s.r. currently manages the impact of climate change and weather-related events at different levels. a.s.r. analyzes climate change as a whole and calamities in particular on a regular basis (e.g. the hailstorm that took place in June 2016). If deemed necessary, a.s.r. adjusts premiums so they still reflect the underlying risks. a.s.r. is in a position to change its premiums relatively quickly thanks to the fact that the vast majority of contracts are up for annual renewal.
Assets As a signatory of the Paris Pledge for Action, a.s.r. pursues efforts to limit global warming to 1.5°C. a.s.r. has analyzed and identified risks for the investment portfolio, such as stranded assets and changing business models in the mining and energy sectors. As a result, a.s.r. expanded its exclusion policy in July 2016 to include environmental controversies. It now excludes companies that commit severe environmental breaches or derive 30% or more of their revenues from coal.
Court rulings, opinions issued by regulators and dispute committees can generate a lot of media attention sector-wide and perhaps cause disgruntlement among policyholders, creating an enhanced risk of loss of reputation or financial losses for a.s.r.
If the financial performance falls short of the mark, the buffers may be inadequate to meet all financial obligations 19 Solvency II
17. Volunteering in the ‘Financial Self-Reliance’ domain • At least 170 instances of volunteering; • At least 1,700 hours.
a.s.r. tries to encourage employees to volunteer by calling them to action, posting interviews with volunteers on the intranet, using social media and organizing information sessions. In 2016, these efforts led to 2,034 hours spent volunteering in the Financial Self-Reliance domain by 181 employees. The KPI was amply achieved as a result.
Intro d uctio n a.s.r. has a two-track focus in its volunteer projects within the Financial Self-Reliance domain are concerned: 1. Promoting financial education of children and youths; 2. Supporting households in financial difficulties or at risk of same.
Incentive plans, STA & sports The a.s.r. Foundation’s activities can be broken down into three main groups. • Incentive plans
Foundations and funds a.s.r. is committed to conserving cultural and social heritage, which is why the company is involved in a number of nation-wide and local foundations. The local ties mostly stem from the past presence of an a.s.r. division in a city or town. For more information on a.s.r. foundations and funds, see: asrnl.com.
Intro d uctio n 2.6 Assurance report of the independent auditor
Our conclusion We have reviewed the Sustainability Information in the 2016 Annual Report of ASR Nederland N.V. (hereafter referred to as a.s.r.), based in Utrecht, The Netherlands. The scope of our review engagement is described in the section ‘Our Scope’. A review engagement is aimed at obtaining limited assurance.
Our independence We are independent of a.s.r. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO) (Dutch Code of Ethics for Professional Auditors, a Dutch regulation with regard to independence) and other relevant independence regulations in the Netherlands. This includes the stipulation that we do not perform any activities that could result in a conflict of interest with our independent assurance engagement. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics for Auditors)’.
The Sustainability Information includes forwardlooking information such as ambitions, strategy, plans, expectations and projections. Inherent to this information is that the actual results may differ in the future and are therefore uncertain. We do not provide any assurance on the achievability and feasibility of forward-looking information in the Sustainability Information.
The Executive Board is also responsible for such internal control as it deems necessary to enable the preparation of the Sustainability Information that is free from material misstatement, whether due to fraud or error.
Misstatements can arise from fraud or error and are considered material if, individually or in aggregate form,
Intro d uctio n they could reasonably be expected to influence the economic decisions of users taken on the basis of the Sustainability Information. The materiality affects the nature, timing and extent of our review procedures and the evaluation of the impact of any identified misstatements on our conclusion.
The aim of a review is to obtain a limited level of assurance. Procedures performed to obtain a limited level of assurance are aimed at determining the plausibility of information and are less extensive than a reasonable assurance engagement. The procedures performed consisted primarily of making inquiries of staff within the entity and applying analytical procedures on the Sustainability Information.
Business environment 64 3.2.1 Macro developments in the Netherlands 64 3.2.2 Insurance industry in the Netherlands 64 3.2.3 Non-life insurance market 65 3.2.4 Life insurance market 66 3.2.5 Dutch investment management industry 67 3.2.6 Dutch banking industry 68
Business segments 69 3.3.1 Non-life 69 3.3.3 Banking and Asset Management 77 3.3.4 Distribution and Services 80 3.3.5 Holding and Other 81 3.3.6 Real Estate Development 81
Group and segment financial performance 82 3.4.1 ASR Nederland N.V. 82 3.4.2 Non-life 86 3.4.4 Banking and Asset Management 89 3.4.5 Distribution and Services 90 3.4.6 Holding and Other 91 3.4.7 Real Estate Development 92
Council; • CSR and sustainability; • Market, strategy and business; • Financial performance, solvency and developments in premium income/cost ratio; • Reports external accountant; • Compliance, Risk, Actuarial function and Internal Audit reports; • Multi-year budget, investment plan and capital plan; • Governance, contact with shareholders and regulators; • ICT projects.
Additionally, specific themes addressed in 2016 include acquisitions and divestments, market developments, solvency and low interest rates, IPO, unit-linked policies and the renovation and re-opening of the head office.
The Executive Board sets great store by robustness, because it clearly tells our customers that a.s.r. will be able to fulfil its obligations at any time, even in the more distant future. For a.s.r., this is reflected in a robust Solvency II ratio. Solvency II is governed by a standard formula which should enhance transparency and consistent interpretation.
Until 31 December 2015, an external ‘certifying’ actuary issued an actuarial report on the adequacy of technical provisions under the Dutch Financial Supervision Act (Wft). With effect from 1 January 2016, similar tasks on Solvency II technical provisions have been performed by an internal actuarial function. Further tasks include giving an opinion on underwriting and reinsurance arrangements. In 2016 two function holders were formally appointed for the Group and its insurance entities. The report of the actuarial function on the 2015 financial year was discussed by the Executive Board as well as the Audit & Risk Committee.
Finally, the Executive Board extensively discussed the positioning of a.s.r., its core values and the leadership associated with these values. a.s.r. sees four leadership themes, namely dialogue, dilemmas, clear frameworks and action. This was extensively discussed with the senior management of a.s.r. in early February 2017 and it will be further rolled out in the organization during the rest of this year.
Works Council The Executive Board attaches great value to providing information to the Works Council and hearing its opinion. The working relationship that has developed with the
Supervision a.s.r. also attaches great value to its excellent relationships with Dutch regulators. The company is in frequent contact with both the Dutch Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB). Outside of our routine contacts, in 2016 a.s.r. spoke with the DNB about the preparations for the potential privatization and the consequences of the IPO. Finally, the Executive Board believes that there should be a keen sense of awareness throughout the organization of compliance with rules and regulations, as well as any codes governing a.s.r. That is why it decided in 2015 that all a.s.r. employees should take the professional oath, so that everyone has a thorough understanding of the importance of the related principles. By the deadline on 1 April 2016, all employees had taken the oath.
Closing remark from the Executive Board The Executive Board is grateful to all employees for their unrelenting commitment to helping customers every single day and to making a.s.r. the valued and socially relevant insurance company that it aspires to be, and in particular for the results that we achieved in 2016. The Executive Board also wants to express its appreciation to the Supervisory Board and its shareholder for their constructive input. The sessions and discussions about such issues as a.s.r.’s privatization were intensive and of great added value to our business. But most of all we owe a debt of gratitude to our customers who have chosen our products and services. It is only by their grace that we exist.
Demography At the end of 2016, the Netherlands had almost 17.1 million inhabitants. While the population has been growing at a 1.1% compounded annual growth rate (CAGR) over the past twenty-five years, the population is also aging (18% 65+ in 2016, compared with 13% in 1990). Consistent with other Western European countries, the population is expected to stabilize by around 2035, while the aging phenomenon will continue. Demographic developments vary by region, with a number of regions expecting population shrinkage within the next twenty years.
In 2015, the Dutch insurance market was the fifth largest in Europe, following the United Kingdom, France, Germany and Italy. The Netherlands ranked as the second highest in the EU in 2015 in terms of insurance density and had the highest GWP per capita in the EU (€ 4,500). The Dutch insurance market is a mature market, with a GWP as a percentage of GDP of 11.0%. In 2015, Dutch insurance companies paid out € 71 billion in claims to their customers, and received € 72,4 billion in premiums.
The Dutch insurance industry can be divided into two categories of insurance products: (a) life insurance, which comprises group life, individual life and funeral insurance, and (b) non-life insurance which comprises P&C, disability insurance and health insurance. a.s.r. was the third largest composite life and non-life (excluding monoline health insurers) insurance provider in the Netherlands measured by GWP in 2015.
Distribution channels in the Dutch market are in a state of transition. The number of small intermediaries (fewer than 20 employees) has been decreasing (around -3.6% annually since 2011) while the number of intermediaries with over 20 employees has remained stable. Drivers and trends currently shaping the market are: • The decrease in the number of intermediaries, primarily driven by the ban on commissions for complex products introduced in 2013 and the increasing requirements related to expertise for advising on financial products; • In addition, these developments have led to an increase in specialization of the remaining (larger) intermediaries; and
• Both insurance companies and intermediaries have been building up their online distribution capabilities. But even today, few intermediaries have an online presence.
The Dutch non-life insurance market (excluding health insurance) measured by GWP amounted to € 14.7 billion in 2015, representing 20% of the total Dutch insurance industry. With a 12% market share in 2015, a.s.r. was the second largest insurer in the non-life insurance market (excluding health insurance). The Dutch health insurance market amounted to € 43 billion. The Dutch non-life insurance market is a mature and highly competitive market.
(goods in transit) and (d) other (liability, miscellaneous financial loss and legal expenses).
Disability insurance consists of three products: (i) disability self-employed, which is mostly for self-employed professionals, (ii) sickness leave, which covers the cost of the first two years of disability for employees, and (iii) Group disability, which covers the privatised part of formerly public insurance coverage.
Market The overall disability market measured by GWP is € 3.5 billion of total insurance market. The combined ratio of the disability insurance market was 105.6% in 2014 and 94.3% in 2015. The market has been declining in recent years due to the economic downturn and the 2013 commission ban.
The Dutch health insurance market is a concentrated market, with nine insurance groups active in the market in 2015. The top four health insurance companies held a combined market share of approximately 90% measured by GWP in 2015.
The Dutch health insurance market is dominated by monoline insurers with origins in the Dutch public healthcare segment. The number of customers who switch per calendar year has been stable over the past three years at approximately 6.5%.
The Dutch life insurance market can be split into three product categories: (i) Group life, (ii) Individual life and (iii) Funeral.
Group life insurance products are policies pursuant to which employers offer pension products and certain other insurance benefits to their employees. The Dutch group life market can be split in (a) traditional and (b) unit-linked.
The combined market share measured by GWP of the top six providers of group life insurance was approximately 98% in 2015. With respect to pensions, the large insurers differ from each other in their product focus, specialising in DB, DC, IORP and/or APF.
The individual life market consists of term life and annuities with no other products actively offered. The market is dominated by large market participants with small market participants active but in declining numbers. Many insurers have decided to close new business for most or all individual life products, focusing on customer services and retaining AuM.
Market Individual life accounts for € 7.9 billion GWP. The CAGR of the individual life market was -11% for the period 2011-2015. New production has decreased from € 822 million APE in 2010 to € 300 million APE in 2015. While natural and unnatural lapses are larger than new production, GWP has decreased over time.
Funeral insurance is a type of individual life insurance which is paid out upon death, either in cash or in kind, to cover related funeral expenses, such as a cemetery plot and headstone, casket, funeral procession and other miscellaneous costs.
The Dutch funeral market is a mature market, with over 90% of the open book market controlled by five market participants. Only two large generalist Dutch insurance companies are currently offering funeral insurance, though more used to do so. The funeral insurance market comprises insurers who offer funeral insurance with in-kind benefits, supporting their funeral services business. New entrants are not expected in the short-term and further consolidation is expected, as market participants seek economies of scale. Intermediaries are selling portfolio rights (advice will be the responsibility of insurers going forward), and the number of smaller specialist market participants is expected to decrease.
Distribution Historically, nearly all funeral policies were sold through intermediaries. In recent years, there has been a strong increase in direct sales. In addition to obtaining new customers, insurers also generate new business through fulfilling their ‘duty of care’ to their in-force underinsured customer base (e.g. increase insured sum).
Measured by the share of total assets of the five largest banks, the Netherlands has the fifth highest banking sector concentration in the Eurozone. The sector is dominated by ABN AMRO, ING and Rabobank which hold a joint market share of over 75%.
Bank saving products with tax advantages, also referred to as bank annuities (banksparen), were introduced in the Netherlands in 2008. Bank annuities are primarily used for mortgage- and pension-related savings. Until 2008, tax benefit saving was only possible through an insurance policy. Since the adoption of new legislation in 2008, bank annuities have the same fiscal benefits as insured savings products but do not have a life insurance component. Each year there are approximately € 20 billion of ‘free’ assets available and € 2-4 billion of this will be used to purchase annuity/bank savings products. The net growth of bank savings is estimated at around € 1 billion annually.
The Home ownership Guarantee Fund (Stichting Waarborgfonds Eigen Woning, ‘WEW’) acts as a guarantor for mortgages under certain conditions through the provision of an NHG guarantee. Around half of new mortgage loans were government guaranteed in 2015.
At an organizational level, a.s.r.’s operations are divided into six operating segments. The main segments are the Non-life segment and Life segment, which represent all insurance activities. The non-insurance activities are presented as four separate segments, namely: Banking and Asset Management, Distribution and Services, Holding and Other and Real Estate Development (partly discontinued operations).
Strategy In the Non-life segment, a.s.r. aims to leverage its claims management skills and maintain operational efficiency and total expense discipline to continue to deliver a combined ratio in line with its targets. a.s.r. seeks to develop products based on customer data, underwriting experience and claims management excellence. The entire process is managed on a business line basis, in which end-to-end empowered business directors are in charge of executing strategy for each product group.
General The Non-life segment comprises the following three product lines: • P&C insurance, including motor vehicle, fire, transport, liability and other insurance policies, as well as travel and leisure insurance products; • Disability insurance, including disability self-employed, sickness leave and group disability, as well as occupational disability insurance products related to the Dutch Work and Care Act; and
Distribution a.s.r. utilizes multiple labels and distribution channels for its P&C insurance products and the choice of a particular channel depends primarily on customer preference.
Leverage on existing strength and distinctive profitability a.s.r. aims to continue developing its expertise in pricing, underwriting and claim handling, which a.s.r. believes are the key drivers for sustainable value creation.
Profitable and selective growth in market share a.s.r. intends to grow selectively in the intermediary channel through more active intermediaries, acquiring a greater percentage of the business of the market’s largest 650 advisors and by pursuing a retention strategy based on good customer service. Furthermore, a.s.r. aims to increase its market share in the SME liability and transport markets. We intend to bring proven innovative products and services to the market.
General a.s.r. has been a market leader in the disability insurance market since 2007, and in 2015 its market share in the Netherlands stood at 21.4% measured by GWP. The total Dutch disability insurance market measured by GWP amounted to € 3.5 billion in 2015.
a.s.r. was one of the first insurers to respond to the demand for disability insurance solutions under the De Amersfoortse brand, and today offers a broad range of disability products for SMEs, self-employed persons and individual customers. The latest change in social legislation was the Sickness Absence and Occupational Disability among Sickness Benefit Claimants (Restrictions) Act (wet beperking ziekteverzuim en arbeidsongeschiktheid bij vangnetters, or ‘BeZaVa’) for the part of WGA liability for temporary employees which came into force on 1 January 2017. This is a new additional market segment for group disability, which creates a market potential of ± € 530 million premium in competition with public insurance (UWV, a government body) (source: nota gedifferentieerde premies WGA en ZW 2016, UWV).
Distribution a.s.r. has customers in the disability business line ranging from multinational corporations to individual customers. a.s.r.’s main distribution channel for disability insurance products is the intermediary channel, including via authorized agents for group disability products. Due to tightening regulatory requirements in the Dutch insurance market, there is a general trend toward consolidation in the intermediary market, which is particularly visible in group disability. Smaller agents remain an important distribution channel for self-employed disability products, where smaller local intermediaries traditionally have strong positions.
Strategy a.s.r. is the number one insurer in terms of GWP in the Dutch disability insurance market and, with its strong De Amersfoortse brand, a.s.r. believes that it is well positioned to capture profitable growth opportunities in this market. In addition, a.s.r. has a leading position in the advisory distribution channel. Disability insurance is expected to grow in line with general macroeconomic trends. In addition to maintaining its focus on market leadership and achieving attractive combined ratios, a.s.r. intends to pursue growth opportunities, especially within the SME and self-employed customer segments, leveraging its strength in the intermediary channel.
To improve competitiveness, the disability business line plans to finish the implementation of a system for Group disability, an IT platform resulting in better service (e-based underwriting), better underwriting and lower costs (self-fill data systems).
Product development for new business opportunities a.s.r. intends to continue providing its customers with optimal services and high-quality products. The company expects to achieve this by reducing the complexity of products and by keeping product offerings up to date through the introduction and development of new propositions to seize market opportunities. Recently planned or introduced product developments include: • The development and introduction of a new product to cover the 12-year risk of disability including reintegration services complementary to social legislation (BeZaVa); • Improving access for and insurability of the selfemployed; • The introduction of ‘Doorgaanverzekering‘ under the De Amersfoortse brand. This is an integrated disability and health insurance proposition whose benefits for the customer include lower premiums and additional services.
Hybrid distribution to improve and secure distribution channels a.s.r. intends to assist the intermediary channel with e-based underwriting systems and online channels to provide online product offerings. In addition, a.s.r. aims to help authorized agents to explore the local SME market, including the introduction of new propositions. Furthermore, with the acquisition of Boval and SuperGarant, a.s.r. believes it has further strengthened its position in the authorized agents segment. a.s.r. believes that this approach should help it to maintain its strong market position in disability insurance.
New products In 2016 a.s.r. continued to develop the ‘Doorgaanverzekering’ proposition, which combines the products offered by the Disability segment with the health insurance products described above. The company launced additional modules aimed at preventing disability and improving reintegration. The goal of the ‘Doorgaanverzekering’ is to help customers to continue or resume their daily (working) life as far as possible. Combining the two products into one customer offering supports the De Amersfoortse brand as the insurer for both SMEs and self-employed people in the Netherlands. Doorgaan insurance is offered to both self-employed and SME customers.
As a health insurer, ASR Basis Ziektekostenverzekeringen N.V. is aware of its role in society. The company is developing various initiatives on this front; it was once again decided, for instance, not to spend any resources on a large-scale marketing campaign in the 2017 healthcare season, but instead to give back to customers by reducing their premiums.
Strategy a.s.r.’s strategy for Health is to continue to be an agile niche player with profitable underwriting, benefiting from alliances (e.g. collaboration with other insurance companies for the purchase of medical care and Delphi R&D for back-office IT processes), with a focus on continuously improving customer experience, products and services, as well as cross-selling and customer retention. Health strives to contain healthcare cost development through the focus on competitive purchasing of medical care. Health has a strong record with a combined ratio of around 99% since 2013.
Self-funding a.s.r. intends to fund the growth of its health business exclusively through organically generated Solvency II
Support Ditzo and De Amersfoortse brands to facilitate cross-selling a.s.r. is focused on the opportunity for Health to create cross-selling opportunities to its P&C and disability businesses, particularly as the cost of acquisition for new health business is lower than the independent cost of acquiring new P&C customers. The sale of health insurance products via De Amersfoortse and Ditzo will result in increased brand recognition and improved retention rates for Ditzo P&C and Disability.
In 2015, a.s.r.’s Life GWP was € 1.8 billion, which made it the sixth largest participant in the Dutch market.
The life insurance products a.s.r. offers range from relatively simple insurance products such as term life to more complex and personalized insurance products such as pension products. Life insurance products can be characterized as either traditional policies or unit-linked policies. Traditional policies are those products that offer benefits primarily based on a guaranteed interest rates, sometimes combined with profit sharing to the extent that certain thresholds are met, plus term life policies. Under traditional policies, therefore, a.s.r. bears the investment risk. Under unit-linked policies, the policy holder bears the investment risk. In addition, a.s.r. provides hybrid forms of unit-linked policies with a guarantee of a minimum investment return or minimum accumulation at maturity. The Life segment is active in the retail mortgage market. Mortgages are originated on behalf of a.s.r. Leven and are serviced by mortgage provider ASR Hypotheken B.V. (ASRH), which is part of the Banking and Asset Management segment. The Life segment offers mortgages to customers to diversify and optimize the asset mix of the segment and a.s.r. as a whole.
The Dutch pension system consists of four pillars: a mandatory state pension scheme (Pillar 1), employerbased pension schemes (Pillar 2), voluntary pension facilities with fiscal benefits (Pillar 3) and voluntary pension facilities without fiscal benefits (Pillar 4).
In 2015 regulations changed in the Netherlands with respect to the forming of a general pension fund. This rule change opened up the possibility of a DB solution without a heavy capital charge (no guarantees) but with full upside potential of the investment returns for the participants.
a.s.r. has a 50/50 joint venture IORP with Brand New Day Premiepensioeninstelling N.V., which acts as a challenger in the established market. An IORP is a pension vehicle in the form of a separate legal entity that can operate a defined contribution pension scheme on a separate account basis during the pension accrual phase. As part of the IORP joint venture with Brand New Day, a.s.r. is the sole insurer connected to Brand New Day involved in delivering the additional risk cover included in Brand New Day’s proposition to the customers. a.s.r. also provides various supplementary insurance options as part of its insurance products, including bereavement benefits and disability protection.
Strategy a.s.r.’s strategy for its existing DB book is focused on preserving value, reducing capital requirements, enhancing cost coverage and lowering risks, including through reinsurance. a.s.r. aims to invest, within its financial targets, in larger blocks or buy-outs of DB business that meet one of two strategic objectives: cost coverage or potential DC transfer. a.s.r. is also adapting to the changing pension market by developing the capacity to distribute new ‘capital-light’ pension products.
General In 2015 a.s.r. was the fourth largest provider of individual life insurance products measured by GWP in the Netherlands. a.s.r. offers individual life products under the a.s.r. brand.
a.s.r.’s active individual life insurance offering consists of the following products: • Term life insurance a.s.r.’s most important category of individual life products is term life. The term life insurance range consists of traditional life insurance policies that pay death benefits without a savings or investment features. a.s.r.’s term life insurance products are mainly sold in combination with mortgage loans or investment accounts, and generally require recurring premium payments; and
• Immediate annuities a.s.r.’s immediate annuities are traditional life insurance products with guaranteed returns for the customer. Under an immediate annuity, the annuitant pays a single premium, in return for which a.s.r. agrees to make lifelong annual payments to the annuitant immediately. a.s.r.’s immediate annuities are sold primarily to customers whose traditional life savings products are maturing.
• Unit-linked/universal life These policies provide savings from recurring or single premium payments. The value of capital is based on the value of the investments at the chosen end date, with the possibility of guaranteeing a minimum return under certain conditions. a.s.r. currently offers unit-linked policies solely to existing customers wishing to switch to a topical product.
a.s.r. mobilizes customers by prioritizing the most vulnerable groups. The interim results on customer mobilization of all insurers, including a.s.r., were made public by the AFM on 28 October 2015 in a report (Rapportage nazorg beleggingsverzekeringen) (available at afm.nl/nl-nl/consumenten/nieuws/2015/okt/rapportnazorgbeleggingsverzekeringen ). This report includes the mobilization targets, for which a.s.r. is on track. By the end of 2016 a.s.r. had mobilized 100% of the most vulnerable group of policy holders (non-accruing policies) and 100% of the policy holders with an individual unit-linked life insurance policy combined with a mortgage and a pension. All policy holders with an individual unit-linked life insurance policy must be mobilized by the end of 2017.
In 2016, the remaining unit-linked portfolio accounted for 40% of individual life’s GWP. As at 31 December 2016, the Individual life unit-linked policies accounted for 37% of the technical reserves of the Individual life service book.
Products a.s.r.’s funeral policies are traditional life insurance products with guaranteed insured amounts to cover the cost of the insured funeral. The amounts insured are usually relatively low and there is lifelong coverage. Within these policies, a.s.r. distinguishes between capital (monetary payment) and in-kind (provision of funeral services) products. For in-kind insurances, a.s.r. does not provide funeral services itself but has contracts with funeral service providers who provide these services. In 2016, 98% of funeral GWP was attributable to recurring premium policies and 2% to single premium policies. As at 31 December 2016, a.s.r.’s funeral product line consisted of approximately 6.5 million policies.
Strategy a.s.r. has a leading position in this niche market. a.s.r. is the largest composite funeral insurer with a hybrid servicing model, the number two in terms of GWP in the funeral market and number one in terms of the number of policies. The strategy of a.s.r.’s funeral insurance is to focus on optimizing the value of the existing book and the acquisition of blocks of business. The funeral portfolio is a book with 100% mortality risk which naturally hedges the longevity risk of pensions to a significant extent. That hedge is also expected to increase over time due to interest accrual within the funeral book. To maximize the value of the funeral book, a.s.r. has three primary focus areas.
Maintain its strong distribution network and focus on customer satisfaction a.s.r. offers funeral insurance through the direct and intermediary channels. These channels are supported by a dedicated sales force that services all distribution channels through visits, telephone calls and via the internet. a.s.r. has launched an innovative online platform to help customers under the Ardanta brand. Due to the large scale of the existing book, retention of existing customers is very important. a.s.r. believes that improving service levels increases customer satisfaction and the duration of cash flows.
General ASR Bank N.V. (hereinafter a.s.r. Bank) offers savings products and services investment products for retail customers. It does not have branches and primarily focuses its sales activities on the sale of tax-driven savings products (bank savings).
Distribution For sales of bank products, a.s.r. distributes new business via the intermediary and direct channels. a.s.r. Bank strives to address the increasing demand for online service via its own online channel and direct customer services.
Strategy The Bank supports a.s.r.’s overall strategy. a.s.r.’s goal is to record modest and controlled growth in the Bank business. a.s.r. strives to align its banking operations with the individual life and asset management business lines, enabling a.s.r. to offer a full range of financial products to customers (in a market that is shifting away from individual wealth accumulation and annuities), focusing on customers with expiring life policies and offering them savings and investment products.
The products offered are bank annuities (long-term fiscal saving and investment products), deferred annuities (fiscal savings products), savings accounts (e.g. variable interest, term deposits) and retail investments.
a.s.r. GAM a.s.r. GAM provides a full range of asset management services for a.s.r. In addition, a.s.r. GAM is responsible for managing investment funds for the account of a.s.r.’s policyholders, as well as for a number of separate accounts for a.s.r.’s pension customers. a.s.r. GAM offers a number of investment management services in the the following categories: • Fiduciary asset management services
These include strategic and tactical advice, portfolio construction, manager selection and monitoring, risk management and reporting to a.s.r. entities. In 2015, a.s.r. GAM started to offer these products to Dutch institutional investors including APFs; • Balanced mandates These products are managed for the likes of reinsured pension contracts, offering a diversified portfolio and taking into account the relevant investment restrictions; • Institutional mandates in specific asset classes This includes tailor-made solutions for specific investors (e.g. local governments, agencies and wealth funds) through the acquisition of BNG Vermogensbeheer (completed in May 2016, now a.s.r. Vermogensbeheer) as well as institutional mandates for a select number of asset classes, such as Dutch and European equities, euro fixed income (government and credit) and overlay strategies; and
As at 31 December 2016, a.s.r. REIM held € 4.6 billion in AuM in commercial (both offices and retail), residential properties, land positions and real estate equities under management. As at 31 December 2016, a.s.r. REIM managed € 3.3 billion of AuM held for a.s.r.’s own account.
The recently agreed acquisition of the niche asset manager BNG Vermogensbeheer will help a.s.r. to achieve that goal. a.s.r. also aims to expand its fiduciary asset management by leveraging its existing investment skills and platforms. From 1 January 2017 a.s.r. GAM is responsible for the operational asset management of ‘Het nederlandse pensioenfonds’, the general pension fund initiated by a.s.r.
a.s.r.’s asset management platform has recorded a strong performance in a number of asset classes that it currently manages in-house, including euro fixed income, Dutch and euro equities and Dutch real estate, although it does selectively use third-party asset managers for other asset classes (for example emerging market debt, emerging market equities and US equities). a.s.r. strives to ensure that all investments products and services, whether managed internally or externally, continue to comply with a.s.r.’s strict sustainable and socially responsible investment policy.
Our in-house Research and Strategy team develops strategic visions on the investment markets in which a.s.r. operates by using market decision tools. These tools rank the likes of real estate sub-markets at a low geographical scale. Our aim is to continuously improve our market analysis tools by combining new scientific insights, additional datasets, associated market risks and the market expertise of our asset management organization.
Finally, a.s.r. REIM obtained International Standard of Assurance and Engagements (ISAE) 3402 type II certification for the a.s.r. REIM processes and ISAE 3000 type II certification for its managed real estate investment funds.
Boval Boval is an advisor, service provider and mandated broker to a.s.r.’s P&C and disability insurance businesses, as well as to other insurance companies operating in the Dutch non-life insurance market.
As at 31 December 2016, Boval acted as an advisor to 14 insurance companies and provided mandated broker services for some of their products and business lines. Based on these associations, Boval provides administration services as a service provider to advisors in respect of their commercial and back-office operations. Furthermore, Boval offers consulting and other services such as claims management, risk management, prevention, reintegration and leasing. Boval focuses primarily on the agricultural, transport, overhaul and civil construction sectors. Boval has ties with business associations of the agricultural (LTO) and transport (EVO) sectors.
PoliService Poliservice B.V. (‘PoliService’) is an intermediary for a.s.r. and its business includes selling different types of insurance, giving mortgage and pension advice directly to its customers and managing the portfolios of intermediaries that have ceased to operate. PoliService is a pioneer in the field of digital advice through video chat and website solutions for a more efficient customer experience. It acts as a tied agent and is also an intermediary for insurance products for a.s.r.’s own employees. It services more than 120,000 unique relations and is strategically aligned with a.s.r.
Het AssuradeurenHuys B.V. is a back-office service provider for agents and intermediaries, which was integrated into VKG in the second half of 2016.
Strategy a.s.r. believes that VKG, Boval, Corins and SuperGarant will benefit from their inclusion in a.s.r. as this will allow them to develop their business with the a.s.r.’s support (e.g. for product offerings and/or innovation possibilities).
Profile The segment Holding and Other consists primarily of the holding activities of the Company (including the Grouprelated activities), other holding and intermediate holding companies and the activities of ASR Deelnemingen N.V. This segment includes the pension contract of the Group with a.s.r. Leven on behalf of a.s.r. for a.s.r.’s employees.
Profile A part of the Real Estate Development (a.s.r. RED) company was legally split on 30 December 2015 retroactively as per 1 January 2015 into ASR Vastgoed Projecten B.V., which consists primarily of a.s.r.’s Leidsche Rijn Centre project (including commitments and guarantees in respect thereof), aftercare projects and joint ventures in real estate projects. Meijer Realty Partners B.V. acquired ASR Vastgoed Ontwikkeling N.V. on 29 April 2016.
Real Estate Development Historically, the real estate development business of a.s.r. was expanded when it was part of Fortis and consisted of large and complex real estate (re-)development projects in urban areas in the Netherlands.
The continuing operations of this segment consist primarily of the Leidsche Rijn, and aftercare projects. Leidsche Rijn is a development project assumed in 2007 with a joint venture partner. a.s.r. has the obligation to develop a retail and residential district in Utrecht. a.s.r. has a 78% share in the joint venture. a.s.r. has provided the municipality of Utrecht with two guarantees for the project, the total amount of which is reduced as the development progresses and payments are made. a.s.r. is actively seeking to further minimize its exposure in respect of this project. In 2016 the contract with the investor in the Leidsche Rijn Centre was dissolved. The aftercare projects are finalized projects with outstanding commitments and guarantees.
Discontinued Operations Discontinued real estate operations consist of joint ventures in real estate projects. The shares of a.s.r. Vastgoed Projecten in the joint ventures Thiendenland II Schoonhoven and BPD-ASR Vastgoed Ontwikkeling v.o.f. were acquired by BPD in 2016.
Intro d uctio n 3.4 Group and segment financial performance 3.4.1 Financial and business performance in 2016 a.s.r. key figures
Income tax expense -197 -157 25.5% Profit/(loss) for the year from continuing operations 641 649 -1.2% Profit/(loss) for the year from discontinued operations 17 -26 165.4% Non-controlling interest 1 -3 133.3%
Earnings per share Operating result per share (€) 2.77 2.46 12.6%
Basic earnings per share on IFRS basis (€) 4.17 3.91 6.6%
1 The figures for 2015 have been restated due to retroactive adjustments to the provisions related to the acquisitions (one year window) and immaterial adjustments related to the accounting for a.s.r.’s employee benefits.
Solvency II ratio (standard formula post (proposed) dividend) 1 189% 180% 2 9.0%-p
Gross written premiums increased by € 236 million (5.8%) to a level of € 4,328 million. In the Non-life segment, premiums were slightly higher (3.5%) due to underlying growth in the P&C (motor) portfolio and to a lesser extent to the Occupational Disability business. Growth in the Life segment (10.1%) was driven by the contributions from acquisitions (AXENT, De Eendragt) and the transfer of the NIVO funeral insurance portfolio in early 2016.
1 The Solvency II (standard formula) ratios reported at day-one 2016 and 2016 are post-dividend (resp. € 170 million and a proposed € 187 million). The ratios are presented excluding a.s.r. Bank.
Profit for the year was up 6.3%, rising to € 659 million (2015: € 620 million) due to a higher operating result (pre-tax: € 62 million) and other incidentals, including an IAS19 release of a.s.r.’s own pension scheme (pre-tax: € 100 million) in the first half of 2016. Profit for the year at a.s.r. Vastgoed Ontwikkeling increased by € 121 million mainly as a result of additional loss provisions for the development portfolio in 2015. The sale of a.s.r.’s equity exposure in 2015 led to a high level of realized capital gains on equity compared to 2015 (pre-tax: € 242 million negative).
The Solvency II ratio increased by 9 percentage points to 189% (day-one 2016: 180%). The Solvency II ratio increased from day-one 2016, largely due to accretion driven by organic growth, cost savings and LACDT guidance.
• Net capital release: increase in EOF of € 98 million due to release of risk margin (impact solvency ratio: +3%). Apart from that the SCR requirement decreased (€ -52 million) due to runoff of the closed book life portfolio (impact solvency ratio: +3%).
• Market & operational developments: impact on the solvency ratio is 5%, due to realized return on investments above organic growth, acquisitions, Business developments, and other effects.
The proposed dividend per share amounts to € 1.27 per share payable in cash, up 12.4% from 2015 (pro-forma € 1.13). Following the approval of the Annual General Meeting on 31 May 2017, the dividend will become payable with effect from 7 June 2017. The a.s.r. stock will trade ex-dividend on 2 June 2017.
Dividend policy for 2017 In 2016, a.s.r. announced a dividend policy for 2017. Going forward, the annual dividend will be based on a pay-out ratio of 45% to 55% of net operating result attributable to shareholders (i.e. net of hybrid costs). a.s.r. applies a boundary condition based on its Solvency II position. a.s.r. does not plan to pay a cash dividend if the Solvency II ratio were to fall below 140%.
• The operating result stood at € 136 million. Better conditions in the occupational disability business were more than offset by the drop in result from Health due to a lower contribution from the equalization system and higher claims; • At 95.6%, the combined ratio remained at a good level (2015: 95.0%) despite a rising ratio at Health. This demonstrates a.s.r.’s excellence in underwriting capabilities; • Gross written premiums rose to € 2,433 million (3.5%), mainly due to growth in the P&C business and Occupational Disability; • Operating expenses, including the provision for restructuring expenses, were down 5% as a result of continuing operational efficiency improvements combined with lower restructuring expenses.
The operating result in the Non-life segment was once again strong in 2016. The underwriting results of the Occupational Disability business increased and were driven by growing business volumes, reflecting the recovery of the Dutch economy in combination with expertise in claims handling, prevention and reintegration. In the Health insurance business, the operating result declined by € 25 million due to lower benefits in 2016 from the Dutch National Health Care Institute (‘Zorginstituut Nederland’) via the equalization system and higher dentist claims for supplementary health insurance. Higher claims from exceptional hail and water damage in June 2016 led to a specific claims burden of € 25 million in the P&C business after reinsurance. In addition, we noted an increase in the number of large claims (€ 7 million), which was partly covered by reinsurance.
Intro d uctio n water damage claims in June 2016, the combined ratio would have been 94.5% (-1.1 percentage points) for the Non-life segment and 96.1% (-2.4 percentage points) for the P&C business (a.s.r. Schade, Ditzo and Europeesche Verzekeringen).
The decline in profit for the year was largely due to developments in operating result. A lower contribution from incidental investment income, including realized capital gains on equity, was offset by an incidental release of premium reserves (€ 27 million).
Intro d uctio n efficiencies of scale. This is also reflected, for example, in an improvement of the cost-premium ratio by 0.6% percentage points to 11.7% from 12.3% absorbing the additional costs of acquired businesses and integration costs.
Gross written premiums increased by 10.1% to € 2,013 million. Recurring premiums increased by € 23 million to € 1,279 million (1.8%). The decline in the individual life portfolio was more than offset by growth in the funeral business (AXENT and NIVO) and pension business (De Eendragt). The DC pension product Werknemers Pensioen also contributed to the growth as did customers switching as a result of the commercial integration of De Eendragt. Single premiums in the Life segment increased by € 162 million to € 734 million (28.3%). The increase was largely due to the transfer of the NIVO funeral portfolio (€ 323 million) and a pension contract for AstraZeneca (€ 195 million). In 2015, the Chevron pension contract added € 370 million in single premiums. As lapses are structurally higher than new production in the individual life market, gross written premiums have declined over time. The level of lapses of unit-linked policies in the individual life business is shrinking and dropped slightly to 1.5% in 2016, from 1.7% in 2015.
New business, measured in APE, increased to € 152 million in 2016 from € 92 million in the previous year (+€ 60 million). Excluding the inflow of new business from the single and regular premiums related to the NIVO funeral insurance portfolio (impact: € 52 million), the underlying growth of the Life segment was € 8 million (Pension business: € 11 million; Individual life: € -2 million; Funeral: more or less stable). In the Pension business, the shift from capital-intensive defined benefit (DB) products to capital-light DC products was reflected in a doubling of new business from the Werknemers Pensioen product proposition.
In the funeral business, the share of the online distribution channel continued to grow. Last year, 48% of total new business was written via the online distribution channel (2015: 45%).
Operating expenses, including the additional cost base of acquisitions (€ 8 million), were down by € 2 million at € 203 million (-1.0%). a.s.r. achieved efficiences in scale due to the successful migration of acquired portfolios to a.s.r.’s IT platform. As a result, the cost premium ratio improved by 0.6% percentage point to 11.7%. In 2016, a.s.r. took further steps towards achieving its cost-savings ambitions. This includes the migration of several product and system combinations to a new single platform and the use of business process outsourcing to make costs more flexible.
Profit for the year declined by € 68 million to € 492 million from € 560 million. This decline was largely due to a fall in equity investments in 2015, which resulted in a relatively high level of capital gains that year.
The operating result of the Banking and Asset Management segment came in at € 2 million in 2016 (2015: € 12 million). A higher net interest margin and fee income was offset by higher operating expenses. In 2016, operating expenses also included costs related to the acquisition of BNG Vermogensbeheer.
a.s.r. Hypotheken services the mortgage portfolio. New business volumes of WelThuis mortgages amounted to € 1,286 million compared to € 1,356 million in 2015 (-5.2%). The total mortgage portfolio on a.s.r.’s balance sheet, primarily within the Life segment, rose by 11%, climbing to € 7.2 billion at 31 December 2016 from € 6.5 billion at year- end 2015.
BNG Vermogensbeheer was renamed a.s.r. de nederlandse vermogensbeheerders. This acquisition was incorporated in the Bank and Asset Management segment on 20 May 2016. a.s.r. de nederlandse vermogensbeheerders is a leading asset manager in the (semi) public and pensions sector, and manages customized portfolios and customer-tailored investment funds. At year-end 2016, its assets under management stood at € 5.2 billion.
The vacancy rate of the real estate portfolio in the reporting period, measured in gross rental income, stood at 9.2% (year-end 2015: 6.3%). This increase was largely due to the retail portfolio, which includes a number of former V&D stores and former owner-occupied offices. As new leases have been signed with effect from mid-2017, this increase is temporary.
Profit/(loss) for the year attributable to holders of equity instruments 9 3 200.0%
The operating result increased to € 12 million from € 3 million and was largely due to the acquisition of Dutch ID at the end of 2015. Total income, mainly comprising service fees and operating expenses, increased as a result of the acquisition.
(in € million) 2016 2015 restated Delta - of which associated with ordinary activities -48 -56 -14.3%
1 The Holding and Other segment consists primarily of the holding activities of ASR Nederland N.V. (including the group-related activities) and the activities of ASR Deelnemingen N.V. Certain holding-related expenses are recognized in this segment (including audit, group finance, group risk management, group balance sheet management, corporate communication and marketing). This segment is a cost centre.
Profit/(loss) for the year attributable to holders of equity instruments 8 -113 107.1%
Profit for the year increased to a profit of € 8 million from a loss of € 113 million. As a result of a remeasurement of the net realizable value of the related assets and liabilities, a.s.r. recognized impairments to these assets in 2015.
a.s.r. sold parts of real estate development business in 2016. The total assets declined by a further € 18 million to € 154 million from € 172 million.
Intro d uctio n 3.5 Risk management and Compliance 3.5.1 Risk management
Risk management is an integral part of our daily business operations. a.s.r. applies an integrated approach to managing risks, ensuring that its strategic objectives are achieved. This ensures that value is created by striking the right balance between risk and return, while ensuring that obligations to our stakeholders are met. Risk management helps a.s.r. to identify, measure and manage risks, and to monitor whether adequate and immediate actions are taken in the event of changes to our risk profile.
a.s.r. is exposed to the following types of risks: market risk, counterparty default risk, liquidity risk, insurance risk (life and non-life), strategic risk and operational risk. The risk appetite is formulated at both group and entity level, and establishes a framework that supports the effective selection of risks.
As part of the regular ORSA process, a.s.r. assesses the appropriateness of the Solvency II standard formula annually, taking into account the identified risks and those risks that are not part of the standard formula (for example inflation risk, strategic and reputational risk, model risk, contagion risk and liquidity risk).
a.s.r. also updated its recovery plan in 2016. The purpose of the recovery plan is to ensure that a.s.r. has effective measures in place to deal with potentially severe financial stress resulting from a wide range of causes and circumstances. The recovery plan enables a.s.r. to improve its chances of successful intervention in such extreme scenarios and ensures that a.s.r. is better prepared for financial crisis situations.
a.s.r.’s effected an important shift in its internal control structure to an even more risk-based focus, which was also incorporated in the revised Operational Risk Management Policy. This allows for closer alignment between the risk appetite and the focus on risk, which in turn contributes to the extent to which a.s.r.’s risks remain within the parameters of the predetermined risk appetite. In line with this, a.s.r. revised and improved its reporting systems and these changes will come into effect in 2017.
The use of and dependence on IT is significant, for both customers and a.s.r. As a result, cybercrime could have a major impact on a.s.r.’s security and continuity. The attempts at cybercrime we experienced in 2016, including phishing, malware and ransomware attacks, are now a familiar phenomenon.
We made continuous investments in building our defence against cybercrime and the expertise of our teams throughout 2016. Our cybercrime experts monitor and evaluate developments in cybercrime closely, and we take suitable measures when necessary. We have been able to limit incidents to a minimum. Partnerships with other financial institutions and public parties, such as the Dutch National Cyber Security Centre (NCSC), are crucial to mounting an effective defence against cybercrime. a.s.r is actively involved in these partnerships.
Intro d uctio n a.s.r. took a number of major steps in 2016, and will continue to take steps in 2017, to support the reasonable assurance given by the actuarial function on the reliability of the financial statements.
In 2015, DNB examined to what extent insurance companies comply with the Dutch Sanctions Act 1977. During its examination of a.s.r. Schade, DNB concluded in 2016 that a.s.r. Schade did not fully comply with this legislation. This non-compliance was primarly related to procedures for cross-checking clients and third parties against sanctions lists. a.s.r. Schade has since taken adequate measures to follow-up on the shortcomings ascertained by DNB and is now in compliance with the Dutch Sanctions Act.
Management of financial risks in 2016 a.s.r. strives to find an optimal trade-off between risk and return, also known as value steering. Value steering is applied in decision-making throughout the entire product cycle: from PARP (Product Approval Review Process) to the payment of benefits and claims. At a more strategic level, decision-making takes place through balance sheet management. A robust solvency position takes precedence over profit, premium income and direct investment income. Risk tolerance levels and limits are disclosed in the financial risk appetite statements (financial RAS) and monitored by the FRC. The FRC evaluates financial risk positions against the RAS on a monthly basis. Where appropriate, a.s.r. takes additional mitigating measures. The a.s.r. Risk Committee takes decisions that may have a significant impact.
A dominant theme in 2016 was the ongoing low and volatile interest rate environment, as well as ongoing volatility in the financial markets. Solvency ratios, excluding
Management of non-financial risks in 2016 Non-financial risk appetite statements are in place to manage the risk profile within the limits as determined by the Executive Board and approved by the Supervisory Board. The NFRC monitors whether non-financial risks are adequately managed on a quarterly basis. If the risk profile exceeds the appetite, the NFRC agrees on actions to be taken. The a.s.r. Risk Committee takes decisions that may have a significant impact. The risk profile and internal control performance of each business line are discussed on a quarterly basis with senior management in the business risk committees and the NFRC.
a.s.r. recognizes the importance of sound data quality and information management systems. In 2016, a.s.r. took a number of actions to enhance the measurement and reporting on data quality for the purposes of financial reporting. Comprehensive assessments were performed by the central risk function at all entities within the organization to measure the effectiveness of the IT controls to guarantee controlled and secure information management systems.
a.s.r. focuses on value over volume to secure long-term value creation. Products and distribution channels are continually adjusted to keep meeting customer needs. In this process, a.s.r. makes use of customer journeys to identify these customer needs. Where possible, a.s.r. also places focus on cost reductions in order to stay competitive.
The juridification of society In the matter of unit-linked policies, a.s.r. has made firm policyholder compensation agreements with the relevant customer associations. Meanwhile, there is still a risk of new claims. This risk is intensified by the increased juridification of our society and by uncertainty regarding the handling of legal proceedings at other insurance companies. Court rulings and decisions by arbitration boards may have an industry-wide impact and trigger widespread media attention, evoking negative sentiment among policyholders, which in turn could increase reputational and claim risk for a.s.r.
Impact of supervision, laws and regulations The Dutch market is experiencing stricter regulation and new legislation is being introduced and implemented on a continuous basis. As a result of this increasing political and regulatory pressure, there is a risk that: • a.s.r.’s reputation will come under pressure, if new requirements are not complied with in time; • Available resources will mostly be used for implementation of new legislation, meaning there are fewer resources to spend on a.s.r.’s core business processes; • Processes will become less efficient and pressure on the workforce will increase; • a.s.r. may receive administrative fines or sanctions for being unable to comply with the requirements (in a timely fashion).
Information security risk Information security risk has increased, due to new technological developments – such as cloud computing, bring-your-own device, social networks and online transactions with customers. In order to prevent cyberattacks and information security breaches, a.s.r. needs to be sufficiently aware of the potential threats posed to it as an organization. a.s.r. runs the risk that new technological developments require different and increased expertise and alternative mitigation measures. The chance that confidential information becomes available to third parties, either intentionally or unintentionally, is a risk for a.s.r. and its customers, which could ultimately lead to significant reputational harm. All our employees are therefore expected to be fully aware of the risks to the handling of confidential information about our customers, employees, financial information and strategy, and are asked do their utmost to protect our assets.
Risk appetite The risk appetite is formulated to provide steering and direction to the management of the strategic risks. The risk appetite contains a number of qualitative and quantitative risk statements. The statements point out the risk preferences and tolerances of the organization and are viewed as key elements for the realization of our strategy. The performance against these statements is monitored in the risk committees. The statements and limits are evaluated regularly to maintain alignment with the strategy.
15 ASR Nederland N.V. has a maximum combined ratio of 99%.
The governance of the supervised entities is similar to the governance of a.s.r.
Annual Compliance plan Developments in rules, the management of high compliance risks and action plans provide the basis for the annual compliance plan and the compliance function’s monitoring activities. The annual compliance plan is discussed with management and submitted to the Executive Board and the Audit & Risk Committee for approval.
Intro d uctio n 3.6 Executive Board In Control Statement a.s.r.’s consolidated and company financial statements for 2016, as well as chapter 1, 2 and 3 of the Annual Report, have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and with Part 9, Book 2 of the Dutch Civil Code. Based on the evaluation carried out, the Executive Board is of the opinion that the internal risk management and control systems over financial reporting within ASR Nederland N.V. provide reasonable assurance that the financial reporting over 2016 does not contain any errors of material importance and the internal risk management and control systems over financial reporting functioned properly throughout 2016.
As required by section 5:25c paragraph 2(c) of the Dutch Financial Supervision Act, the Executive Board declares that, to the best of his knowledge; 1. The financial statements give a true and fair view of the assets, liabilities, financial positions and earnings of a.s.r. and the enterprises included in the consolidation taken as a whole; 2. The Management Report gives a fair view of the position at the balance sheet date and developments during the year under review and the enterprises included in the consolidation taken as a whole together with a description of the principal risks a.s.r. is confronted with.
IPO In the autumn of 2008, the Dutch State acquired the Dutch entities of the Fortis Group and spun off Fortis Verzekeringen Nederland N.V., which now operates as a.s.r. Although a.s.r. was acquired by the Dutch State as a result of the nationalization of the Fortis Group, a.s.r. never received state aid.
On 13 May 2016, NLFI, acting on behalf of the Dutch State and a.s.r., confirmed its intention to proceed with the next step towards an IPO and the listing of the ordinary shares of the Group on Euronext Amsterdam. NLFI also announced that the offering could be launched during Q2 2016.
On 30 May 2016 NLFI announced that the indicative price range for the offering was set at € 18 to € 22 per offer share and that the offering consisted of the sale by NLFI of up to 54.5 million offer shares, or 36.3% of the total number of shares. Eventually, the price was set at € 19.50 per offered share. a.s.r. became a listed company on Friday 10 June 2016. (For more information please see chapter 1.4).
Contact with shareholders As a general principle, the Group endorses the importance of fair disclosure and transparency towards analysts, investors, shareholders, the press and other parties. At the time of the IPO, in order to facilitate bilateral communications with shareholders, the Executive Board adopted, with the approval of the Supervisory Board, the Policy on fair disclosure and bilateral contact with shareholders. This policy sets out the conditions under which a.s.r. may disclose information and documents to individual analysts, investors, shareholders, or other parties, provided that a non-disclosure agreement has been signed. The policy does not apply to the contacts between a.s.r. and NLFI as that relationship is governed by the Relationship Agreement. The Policy on fair disclosure of information and bilateral dialogue with shareholders is published on asrnl.com.
The Supervisory Board supervises the policy pursued by the Executive Board and the general course of affairs at a.s.r. and its group entities, and advises the Executive Board. Specific powers are vested in the Supervisory Board, including the approval of certain decisions taken by the Executive Board.
The composition of the Supervisory Board is such that each supervisory director has the skills to assess the main aspects of the overall policy and that the Supervisory Board as a whole meets the profile thanks to a combination of the experience, expertise and independence of the individual supervisory directors. The Supervisory Board is diverse in terms of gender and professional background of its members. The diversity of its members ensures the complementary profile of the Supervisory Board.
The composition of the Supervisory Board of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. is the same as that of ASR Nederland N.V. Europeesche Verzekering Maatschappij N.V. and N.V. Amersfoortse Algemene Verzekering Maatschappij were merged into ASR Schadeverzekering N.V. in 2016. De Eendragt Pensioenen N.V. and AXENT NabestaandenZorg N.V. were merged into ASR Levensverzekering N.V. in 2016.
Two continuing education (CE) sessions were organized for the members of the Supervisory Board in 2016. The first session for the Supervisory Board and Executive Board was about the risks and challenges of global warming for the Insurance Industry. During the other session, the Supervisory Board, Executive Board and senior managers were educated and updated with respect to the impact of exponential technology on the business management and strategy of a.s.r.
CV’s of the Supervisory Board a.s.r.’s registered address, Archimedeslaan 10, 3584 BA Utrecht, the Netherlands, serves as the business address for all the members of the Supervisory Board.
A.P. (Annet) Aris Chair of the Selection & Appointment Committee and the Remuneration Committee Member of the Audit & Risk Committee
Annet Aris (1958) is a Dutch national and had a 17-year career at McKinsey as a management consultant, including nine years as a partner in the firm. She holds supervisory directorships at several Dutch and foreign enterprises and institutions, including ASML N.V. in the Netherlands, ProSiebenSat1 AG and Jungheinrich AG in Germany and Thomas Cook PLC in London. Annet Aris is adjunct professor of digital strategy at INSEAD international business school (Fontainebleau, France). Annet Aris is a Supervisory Board member appointed by the Works Council.
Herman Hintzen (1955) is a Dutch national. Until January 2016, he was Chairman Insurance EMEA at UBS Investment Bank. He currently serves as Chairman of the Board of Amlin International SE and as a member of the Investment Committee of Concertgebouw Fonds. In the past, Herman Hintzen also acted as an adviser to the Executive Board at APG Asset Management and served as Managing Director in the Financial Institutions investment banking groups of Morgan Stanley, Credit Suisse and JP Morgan.
The Executive Board is responsible for the day-to-day conduct of business a.s.r. as a whole and for strategy, structure and performance. In performing its duties, the Executive Board is guided by a.s.r.’s interests, which include the interests of the businesses connected with a.s.r., which, in turn, includes the interests of customers, insurers, shareholders, employees and society in general. The Executive Board is accountable for the performance of its duties to the Supervisory Board and to the General Meeting.
Composition The Executive Board consists of a minimum of two members, including at least a CEO and CFO. The Supervisory Board appoints the Executive Board members and may suspend or dismiss any member of the Executive Board at any time. The Supervisory Board notifies the General Meeting of a proposed appointment. In accordance with the Relationship Agreement, the Supervisory Board shall give NLFI an opportunity to advise on the decision to appoint or reappoint any member of the Executive Board, as long as NLFI directly or indirectly holds 10% or more of a.s.r.’s issued share capital. Only candidates found to meet the fit and proper test under the Dutch Financial Supervision Act are eligible for appointment. There were no changes in the composition of the Executive Board in 2016.
The Executive Board evaluated its own performance regularly in 2016 by holding what are known as Executive Board team conduct evaluation sessions. Furthermore, a two-day off-site event was held in August under the guidance of an external agency which served to discuss different roles and forces for the purpose of harnessing the diversity in the team and making the most of the collaboration between the members.
In addition to the self-evaluation, the performance of the members of the Executive Board was also assessed by the Supervisory Board within the scope of the annual assessment round.
CV’s of the Executive Board a.s.r.’s registered address, Archimedeslaan 10, 3584 BA Utrecht, the Netherlands, serves as the business address for all the members of the Executive Board.
Additional positions Chris Figee does not hold any additional positions at this time.
Michel Verwoest was appointed to the Executive Board of a.s.r. on 1 December 2012. Current term of office: 2016 – 2020
Additional positions Michel Verwoest does not hold any additional positions at this time.
Professional oath On 1 January 2013, the Dutch financial sector introduced a mandatory oath for Executive and Supervisory Board members of financial institutions licensed in the Netherlands. The Executive Board and Supervisory Board members of all financial undertakings that are licensed in the Netherlands must take this mandatory oath. In this oath, board members declare that they will: (a) perform their duties with integrity and care, (b) carefully consider all the interests involved in the financial institution, i.e. those of the customers, the shareholders, the employees and the society in which it operates, (c) in doing so, give paramount importance to customers’ interests and inform customers’ to the best of their ability, (d) comply with the laws, regulations and codes of conduct applicable to them, (e) observe confidentiality in respect of matters entrusted to them, (f) not abuse their knowledge, (g) act in an open and assessable manner and be aware of their responsibility towards society, and (h) endeavour to maintain and promote confidence in the financial sector. If the oath is broken, the supervisory authority (DNB/AFM) can decide to reassess their suitability.
For based banks in the Netherlands, such as ASR Bank N.V., all persons working under the responsibility of the bank need to take a similar bankers’ oath with effect from 2015. In addition, persons having taken the bankers’ oath are thereby subject to disciplinary rules.
Regardless of the above, a.s.r. has decided that employees and other persons performing activities under its responsibility must take the oath. All employees had taken the oath before 1 April 2016. New employees take the oath within three months of joining the company.
Meetings The Supervisory Board met with the Executive Board at six scheduled routine meetings and one offsite meeting. Several ad-hoc meetings were also held to discuss specific issues related to the privatization and M&A transactions. The Supervisory Board also held periodic operational meetings.
Besides routine consultative meetings, the Works Council’s executive committee maintains regular contact with Annet Aris, the member of the Supervisory Board appointed on the nomination of the Works Council. In addition, one tripartite session between the Supervisory Board, the Executive Board, the HR Director and the Works Council was held in 2016 to discuss current affairs.
Financial performance The Supervisory Board met once a quarter to discuss the financial performance, covering standing issues such as developments in earnings, premium income, returns and solvency. The members of the Supervisory Board were satisfied with a.s.r.’s financial performance in 2016. The increase in underlying earnings was due to an improvement in underwriting profit and growth, thanks to strategic acquisitions that contributed to a sustainable increase in profits.
The status of cost savings and improvements in claims management were discussed extensively. The combined ratios of the different non-life operations were below 100%. The solvency ratio is more than adequate. The commercial drive was boosted by previous acquisitions and by the acquisitions of Corins and SuperGarant in 2016. In addition, the Supervisory Board considers one of a.s.r.’s key priorities is to increase premium income where possible, despite the fact that the market can be challenging, for instance due to saturated submarkets and the low level of interest rates. In this process, a.s.r. prefers value over volume.
Rules and Executive Board Rules were discussed and approved. The Prospectus was also shared and discussed several times before the final version was approved. Furthermore, the Supervisory Board was frequently informed about the negotiations on the Relationship Agreement and the establishment of ASR Nederland Continuity Foundation, as a defence measure against future hostile situations. The IPO process was evaluated in August 2016. The Supervisory Board greatly appreciated how the Executive Board and the IPO-team performed in this project, with both energy and dedication. The Supervisory Board has always had confidence in a good result.
The Supervisory Board is satisfied with the execution of the risk policy. Solvency levels remain acceptable and adequate thanks to the organization’s prompt and adequate response to external developments based on the chosen risk appetite and the associated risk-mitigating measures. The risk appetite is an important criterion for the Supervisory Board in making tactical and strategic decisions.
Solvency II was addressed regularly in the meetings of the Audit & Risk Committee, as well as in the meetings of the Supervisory Board. This crucial change in the statutory regime demanded much of the organization’s attention. The Supervisory Board appreciates the prudent approach taken to comply with these regulations and regularly engages in dialogue with the Executive Board about its view of the targets and intervention level related to Solvency II ratios. The charters of the four key functions, namely Compliance, Actuarial, Risk and Audit, were updated and discussed, also with the external regulator, in this light.
Market developments Specific business developments were regularly discussed in the form of a deep dive with presentations from senior managers. In August for example, new developments in group disability were discussed. The Group provides employers with two categories of products: (i) sick leave disability products, which cover the first two years of employers’ mandatory salary payments in the case of disability of employees (in the SME market), and (ii) longterm group disability products which offer coverage until retirement age depending on the cover (in the SME and corporate markets). As a result of the Sickness Absence and Occupational Disability among Sickness Benefit Claimants (Restrictions) Act (Wet beperking ziekteverzuim en arbeidsongeschiktheid bij vangnetters, or ‘BeZaVa’) a new additional market segment for Group disability products will be created for the part of WGA liability for temporary employees. The context of this new segment and the underwriting skills and pricing involved were discussed.
The Committee was informed of the outlines of the reinsurance programme. The internal control structure (Management in Control 2.0) was also a regular item of discussion by the Committee. This structure allows the management of a.s.r. to verifiably manage the principal risks that pose a threat to achieving the company’s strategic targets. The multi-year budget 2017-2019, the investment plan and the risk priorities for 2017 were discussed at length at the end of the reporting year, after which the multi-year budget was adopted by the Supervisory Board.
Both committees solicit support and advice from departments such as Group Risk Management, Compliance, Audit and Human Resources. Where needed, it calls on the expertise of independent legal and pay and benefit experts.
The Committee met on five occasions in 2016. The first three meetings were still held in the former constellation. In accordance with policy, the Committee advised the Supervisory Board on target setting, performance appraisals and the ex-post assessments of the variable pay awarded to identified staff. The remuneration policy was updated in line with new rules and regulations. And the results of the audit plan on the application of our remuneration policy were discussed.
The Committee was informed about the outline of the new social plan in relation to the sustainable mobility of employees, and the results of the preference scan conducted among employees on labour and employment conditions were explained and discussed.
Two meetings were held in the new constellation. The Selection & Appointment Committee discussed the annual assessments of senior management. The nine-box grid was used to evaluate senior managers and to discuss their individual development and potential successors. The Selection & Appointment Committee was also informed about the use of the Denison scan, a new tool to measure the success of the organization.
Improving and maintaining the integrity and robustness of a.s.r. is key to the remuneration policy, and the focus is squarely on the long-term interests of all our stakeholders. The aim of the remuneration policy is to motivate employees to work for the interests of customers and other stakeholders within the parameters of the duty of care. The remuneration policy is based on the following principles.
5. Compliance: a. The remuneration policy complies with prevailing national and international legislation and regulations (see also Section 1.4). It is evaluated periodically and modified, if necessary, to ensure compliance with new legislation and regulations or market standards; b. The compliance of the remuneration policy and the related procedures with the relevant rules and regulations is checked at least once a year by a centralized and independent internal body.
Governance • The Annual General Meeting (AGM) has decisionmaking powers relating to the remuneration policy of the Executive Board and the individual remuneration of the supervisory directors. In addition, the Supervisory Board informs the AGM of the individual remuneration of the executive directors; • The Supervisory Board has decision-making powers relating to setting the individual remuneration of the members of the Executive Board. In addition, the Supervisory Board has responsibilities regarding, the remuneration policy for all groups of employees and monitors same. The Supervisory Board also approves the remuneration policy and its underlying principles before they are adopted and the selection of identified staff; • The Supervisory Board has an Audit & Risk Committee (ARC Committee) and as of the moment of the IPO the Selection, Appointment & Remuneration Committee was split in the Selection & Appointment Committee and the Remuneration Committee. These committees are composed of members of the Supervisory Board. The full Supervisory Board remains responsible for any decisions taken, even if they have been prepared by a committee. The duties, composition, expertise, independence and organization of the committees of the Supervisory Board are described in further detail
Undertakings (Remuneration) Act (Wbfo); • Executive directors and supervisory directors; • Senior and higher management.
Executive Board The pay awarded to the members of the Executive Board comprises a fixed amount per month, including holiday allowance. The pay is indexed in accordance with the CBA for the insurance industry.
In addition, the Supervisory Board has the right to adjust the level of the conditional variable pay if leaving the payment unchanged would go against the principles of reasonableness and fairness.
Retention bonuses Prior written permission from DNB for retention bonuses exceeding the bonus cap of 20% may only be requested by a.s.r.’s HR department after it has obtained the prior consent of the Remuneration Committee.
Guaranteed variable remuneration, welcome bonuses and buy-outs a.s.r. does not award guaranteed variable remuneration except within the legal bounds and only if prior permission has been obtained from the HR Director.
Additionally, the following conditions apply with respect to severance pay for policymakers. • The maximum severance pay is 100% of the fixed annual remuneration; • No severance pay is awarded in the event of the company’s failure; • No severance pay that can be classified as variable is awarded to policymakers of a.s.r. or banks and insurers that are part of the Group; • No fixed severance pay may be awarded to this group of employees unless this severance pay was agreed before 7 February 2015 (or before 20 June 2012 in the case of members of the a.s.r. Executive Board) or is agreed when the employee in question commenced his or her activities as a policy-maker after 7 February 2015.
As a result of the change to the pension plan agreed with the Works Council, an additional pre-pension allowance was introduced with effect from 1 January 2015 for employees who had a pension accrual rate of 2.25% at year-end 2013. The supplementary pre-pension allowance has been set at 2.25%.
The allowance is paid until the end date of the (regular) pre-pension allowance, subject to a maximum of five years.
In 2016, the Works Council worked on shaping its mission: unifying a.s.r.!
At the start of its current term of office early in 2015, the Works Council translated this mission into three core values: • We are accessible and approachable; • We are proactive; • We form a useful counterweight.
We are accessible and approachable a.s.r.’s employees are the grassroots of the organization. They are very important to the Works Council. The Works Council can only do its job properly if it knows what is happening on the work floor. To determine how to improve the relationship between the Works Council and the staff base, the Works Council had an employee survey conducted in 2016. A number of key conclusions of the survey were that the Works Council should be more visible, be clearer in its communications and communicate on a continuous basis; it should also increase its accessibility and position itself as a visible, reliable source that employees want to share information with. Based on the outcome of the survey, the Works Council put together a plan of action with a view to creating an even better position for the Works Council terms of how its represents staff base in its dialogue with the executive.
We are pro-active a.s.r.’s future is increasingly being determined by technological developments, as well as by social and climatological changes. The pace of these developments affects the Dutch economy, and a.s.r. is also feeling the impact of these changes. These developments bring both opportunities and threats. The insurance market will have to reinvent itself to some extent. This was an important theme for the Works Council in 2016. To address this theme with the executive, the Works Council drafted a number of memos on the topics of innovation and strategy. These memos met with a positive response from the executive and they were covered in constructive meetings.
The Works Council was actively involved in the process leading up to the IPO. When preparing for the IPO, the executive spent a great deal of time and energy communicating the a.s.r. narrative to analysts and potential new shareholders. The Works Council’s primary focus in this process was the balance that was struck in that narrative between the interests of employees, the business and related stakeholders.
Group structure and segment information 150 5.4.1 Group structure 150 5.4.2 Segmented balance sheet 152 5.4.3 Segmented income statement and operating result 154 5.4.4 Non-life ratios 157 5.4.6 Discontinued operations and assets held for sale and related liabilities 160
Notes to consolidated balance sheet 162 5.5.1 Intangible assets 162 5.5.2 Property, plant and equipment 163 5.5.3 Investment property 164 5.5.4 Associates and joint ventures 165 5.5.5 Financial assets and derivatives 167 5.5.6 Deferred taxes 173 5.5.7 Other assets 175 5.5.9 Subordinated liabilities 178 5.5.10 Insurance liabilities 179 5.5.11 Employee benefits 182 5.5.14 Due to customers 189 5.5.15 Due to banks 189 5.5.16 Other liabilities 190
Other notes 198 5.7.1 Fair value of assets and liabilities 198 5.7.2 Related party transactions 204 5.7.3 Remuneration of Supervisory Board and
Executive Board 206 5.7.4 Contingent liabilities and assets 207 5.7.5 Events after the balance sheet date 208 5.7.6 List of principal group companies and associates 209 5.7.7 Profit appropriation 210
Company financial statements 251 5.10.1 Company balance sheet 251 5.10.2 Company income statement 252 5.10.3 Notes to the company financial statements 252
Intro d uctio n 5.2 Consolidated financial statements 5.2.1 Consolidated balance sheet
Liabilities arising from insurance contracts on behalf of policyholders 5.5.10 9,928 9,997
Discontinued operations Profit (loss) from discontinued operations net of tax 5.4.6 17 -26
Attributable to: - Attributable to non-controlling interests -1 3 - Shareholders of the parent 625 586 - Holders of other equity instruments 45 45 - Tax on interest of other equity instruments -11 -11
Unrealized change in value of property for own use 5.5.2 10 5
Total items that will not be reclassified to profit or loss -281 171
Income tax on items that may be reclassified subsequently to profit and loss -16 21
Attributable to: - Non-controlling interests -1 3 - Shareholders of the parent 377 702 - Holders of other equity instruments 45 45 - Tax on interest of other equity instruments -11 -11
Shadow accounting allows a recognized but unrealized gain or loss on an asset to be transferred to liabilities arising from insurance contracts (see accounting policy I, chapter 5.3.5).
N on -c on tr ol lin g in te re st
Profit for the year (restated) - - - - 620 620 - 3 623
Capital investment non-controlling interest - - - - - - - 5 5
Tax relating to interest on other equity instruments - - - - 11 11 - - 11
Changes in operating assets and liabilities: Net (increase) / decrease in investment property -262 310
Net (increase) / decrease in investments on behalf of policyholders 179 107
Net (increase) / decrease in amounts due from and to customers -533 -1,198
Net (increase) / decrease in amounts due from and to credit institutions 689 -1,497
Net (increase) / decrease in trade and other receivables 45 124
Net (increase) / decrease in other operating assets and liabilities -318 85
Net (increase) / decrease in assets and liabilities relating to held for sale - 3
Total cash and cash equivalents as at 31 December 3,581 2,632
As the insurance liabilities continue to be adequate, this change in estimate has no impact on net profit or total equity of a.s.r.
In addition to the amendments as disclosed above and the finalization of the acquisitions (chapter 5.4.5), the current presentation differs from last year’s presentation in some aspects. Where applicable, in accordance with IFRS, comparative figures have been included in the new presentation format to ensure comparability.
These changes have no material effect on the total equity attributable to shareholders or profit or loss for the reporting period of a.s.r.
Classification and measurement The classification and measurement of financial assets under IFRS 9 will depend on a.s.r.’s business model and the instrument’s contractual cash flow characteristics. These may result in financial assets being recognized at amortized cost, at fair value through other comprehensive income (equity) or at fair value through profit or loss. In many instances, the classification and measurement under IFRS 9 will be similar to IAS 39, although certain differences will arise. The classification of financial liabilities remains unchanged.
Impairment The recognition and measurement of impairment under IFRS 9 is intended to be more forward-looking than under IAS 39. The new impairment requirements will apply to all financial assets measured at amortized cost and at fair value through other comprehensive income (equity). Initially, a provision is required for expected credit losses resulting from default events that are expected within the next twelve months. In the event of a significant increase in credit risk, a provision is required for expected credit losses resulting from all possible default events over the expected life of the financial asset.
Hedge accounting The hedge accounting requirements of IFRS 9 aim to simplify hedge accounting.
IFRS 16 Leases IFRS 16 is effective for annual periods beginning on or after 1 January 2019, subject to endorsement by the EU. IFRS 16 contains a new accounting model for lessees. The implementation of IFRS 16, if and when endorsed by the EU, is not expected to have a significant impact on the consolidated financial statements of a.s.r.
B. Fair value of assets and liabilities The fair value is the price that a.s.r. would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants on the transaction date or reporting date in the principal market for the asset or liability, or in the most advantageous market for the asset or liability and assuming the highest and best use for non-financial assets. Where possible, a.s.r. determines the fair value of assets and liabilities on the basis of quoted prices in an active market. In the absence of an active market for a financial instrument, the fair value is determined using valuation techniques. Although valuation techniques are based on observable market data where possible, results are affected by the assumptions used, such as discount rates and estimates of future cash flows. In the unlikely event that the fair value of a financial instrument cannot be measured, it is carried at cost.
Financial instruments in this category primarily consist of bonds and equities listed in active markets. Cash and cash equivalents are also included as level 1.
This category primarily includes: I. financial instruments: unlisted fixed-interest preference shares and interest rate contracts; II. financial instruments: loans and receivables (excluding mortgage loans) 1; III. other non-financial assets and liabilities 1.
This category primarily includes: I. financial instruments: private equity investments (or private equity partners); II. financial instruments: loans and receivables – mortgage loans; III. investment property and buildings for own use (include mortgages).
I. Financial instruments: private equity investments The main non-observable market input for private equity investments is the net asset value of the investment as published by the private equity company (or partner).
II. Financial instruments: loans and receivables – mortgage loans The fair value of the mortgage loan portfolio is based on the discounted cash flow method. It is obtained by calculating the present value based on expected future cash flows and assuming an interest rate curve used in the market that includes an additional spread based on the risk profile of the counterparty. The valuation method used to determine the fair value of the mortgage loan portfolio bases the spread on the interest rate curve for discounting the mortgage portfolio cash flows on consumer rates and includes assumptions for originating cost, proposal risk, and the options related to early redemption and moving.
III. Investment property and buildings for own use The following categories of investment properties and buildings for own use is recognized and methods of calculating fair value are distinguished: • Residential – based on reference transaction and DCF method; • Retail – based on reference transaction and income capitalization method; • Rural – based on reference transaction and DCF method; 1 Not measured at fair value on the balance sheet for which the fair value is disclosed.
The following valuation methods are available for the calculation of fair value by the external professional appraisers for investment property and buildings for own use: Reference transactions Independent professional appraisers use transactions in comparable properties as a reference for determining the fair value of the property. The reference transactions of comparable objects are generally based on observable data consisting of the land register ‘Kadaster’ and the rural land price monitor as published by the Dutch government ‘grondprijsmonitor’ in an active property market and in some instances accompanied by own use information. The external professional appraisers, valuate the property using the reference transaction in combination with the following valuation methods to ensure the appropriate valuation of the property: • DCF method; • Income capitalization method.
The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related re-letting, redevelopment, or refurbishment. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of investment property. Periodic cash flow is typically estimated as gross rental income less vacancy (apart from the rural category), non-recoverable expenses, collection losses, lease incentives, maintenance costs, agent and commission costs and other operating and management expenses. The series of periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.
The accounting policies for the treatment of investment property and buildings for own use are described in accounting policy D and T respectively. The fair value of investment property and buildings for own use is disclosed in chapter 5.5.2, 5.5.3, 5.7.1.
C. Intangible assets Intangible assets are carried at cost, less any accumulated amortization and impairment losses. The residual value and the estimated useful life of intangible assets are assessed on each balance sheet date and adjusted where applicable.
If the recoverable amount is lower than its carrying amount, the difference is directly charged to the income statement as an impairment loss.
In the event of impairment, a.s.r. first reduces the carrying amount of the goodwill allocated to the cash-generating unit. After that, the carrying amount of the other assets included in the unit is reduced pro rata to the carrying amount of all the assets in the unit.
Value of Business Acquired The Value of Business Acquired (VOBA) represents the difference between the fair value and the carrying amount of insurance portfolios that have been acquired, either directly from another insurer or through the acquisition of a
Intro d uctio n subsidiary. VOBA is recognized as an intangible asset with a finite useful life and amortized over the term of the current insurance contracts at acquisition date, in conjunction with the corresponding obligations. With regard to VOBA, allowance is made for the outcome of the annual compulsory Liability Adequacy Test (LAT) for insurance contracts (see accounting policy I). Amortization charges related to VOBA are included in net claims and benefits.
If there is a change in the designation of property, it can lead to: • Reclassification from property, plant and equipment to investment property: at the end of the period of owneroccupation or at inception of an operating lease with a third party; or • Reclassification from investment property to property, plant and equipment: at the commencement of owneroccupation or at the start of developments initiated with a view to selling the property to a third party.
The following categories of investment property are recognized by a.s.r. based primarily on the techniques used in determining the fair value of the investment property: • Retail; • Residential; • Rural; • Offices; • Other (consisting primarily of parking); • Investment property under development.
Borrowing costs are no longer capitalized when the asset is ready for use or sale. If the development of assets is interrupted for a longer period, capitalization of borrowing costs is suspended. If the construction is completed in stages and each part of an asset can be used separately, the borrowing costs for each part that reaches completion are no longer capitalized.
If, at a later stage, the fair value of the financial assets available for sale should increase and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit and loss, the impairment loss is reversed through the income statement. Impairment losses on equities available for sale are not reversed, and any increases in fair value are recorded in equity.
F. Investments on behalf of policyholders Investments made for the account and risk of policyholders mainly concern unit-linked insurance contracts. In addition, they concern group contracts with unguaranteed segregated pools (discretionary self-insurance). These investments are carried at fair value. Any realized and unrealized value changes of the investments are recognized in the income statement as gains or losses on investments on behalf of policyholders.
G. Loans and receivables Loans and receivables are measured at amortized cost based on the effective interest rate method, less impairments where deemed necessary.
Impairment of loans and receivables At each balance sheet date, a.s.r. assesses whether objective evidence of impairment exists of the financial assets classified as loans and receivables. An individually assessed asset is considered as impaired if objective evidence exists that a.s.r. is unable to collect all the amounts due by the counterparty in accordance with the contractual terms and conditions. The amount of the impairment loss is equal to the difference between the asset’s carrying amount and its recoverable amount. The recoverable amount equals the present value of estimated future cash flows, including amounts realized from guarantees and securities provided, discounted at the financial asset’s original effective interest rate.
At the inception of the hedge, a.s.r. documents the risk management objective and strategy for undertaking the hedge, as well as the relationship between the hedging instrument, the hedged item and the method for assessing the effectiveness of the hedging transaction. It is also confirmed that the hedge is expected to be highly effective throughout the hedging period.
The effectiveness of the hedge is assessed on an on-going basis throughout the financial reporting periods for which the hedge was designated. A hedge is considered highly effective if the change in the fair value or the cash flows of the hedged item is offset by changes in the fair value or the cash flows of the hedging instrument.
I. Liabilities arising from insurance contracts General This includes liabilities arising from insurance contracts issued by a.s.r. that transfer significant insurance risks from the policyholder to a.s.r. These contracts may also transfer financial risk.
Liabilities arising from non-life insurance contracts These liabilities comprise a provision for claims payments, a provision for current risks, and a provision for unearned premiums. The provision for claims payments is based on estimates of claims payable. Claims payable relate to unpaid claims and claims handling costs, as well as claims incurred but not reported. The estimates are based on individual assessments of the reported claims, on past experiences and estimates of trends (expert judgement) in claims behaviour, (national) social factors and economic factors and relevant court decisions. In the process of determining the liabilities, allowance is made for amounts recoverable from third parties and expected subrogation reimbursements.
Additional provisions are generally recognized for realized gains or losses on financial assets allocated to insurance contracts if and to the extent that the current interest rate is lower than the interest rate that was used in the pricing principles at inception of the insurance contract.
Additional provisions are generally recognized for realized gains or losses on financial assets allocated to: • Insurance contracts with participation features; • Non-participating insurance contracts if and to the extent that the current interest rate is lower than the interest rate that was used in the pricing principles at inception of the insurance contract.
These financial assets include fixed-income financial assets available for sale, specific financial assets designated at fair value through profit and loss, and specific derivatives (i.e. swaptions, interest rate swaps and inflation rate swaps). The realized gains or losses are amortized based on the remaining maturity period of the disposed financial assets. The realized gains or losses and the amortization thereof are included in net insurance claims and benefits.
Participating contracts include additional obligations relating to contractual dividends or profit-sharing. These obligations are stated net of capitalized interest rate rebates. These interest rate rebates are amortized in accordance with actuarial principles to the extent that the expected surplus interest is achieved.
Shadow accounting The Group’s insurance accounting policies include the application of shadow accounting which is a specialized accounting treatment commonly utilized in insurance accounting and is permitted under IFRS. The purpose of shadow accounting is to help reduce potential accounting mismatches which can occur when related assets and liabilities: • Are measured on a different basis; or • Have changes in their measurements recorded in different IFRS performance statements (Income Statement or OCI). Under shadow accounting, adjustments are made to the insurance liability to reflect the unrealized gains or losses from the financial instruments backing these insurance liabilities.
Shadow accounting is applied to unrealized value changes in fixed-income financial assets available for sale, specific financial assets designated at fair value through profit and loss, and specific derivatives (i.e. swaptions and interest rate and inflation rate swaps) that are backing the liabilities arising from insurance contracts.
Where the Property & Casualty (motor, fire and liability) and Health liabilities business is concerned, the LAT is performed using statistical analyses. Any identified losses are used as a basis for estimating future claims arising from an insurance contract from the portfolio on the balance sheet date. This is the best estimate. An appropriate risk margin is added. The risk margin is determined for each homogeneous risk group using the Cost of Capital (CoC) method that is also used for Life. With effect from 2016 the Non-life CoC rate of 6% is used for all Non-life business. In 2015 the Life CoC rate of 5% was used for disability - Similar to Life Techniques (SLT). The CoC for the other Non-life business is unchanged and remained at 6%. The total of best estimate and risk margin is compared to the technical provision recorded in the balance sheet.
IFRS Liability Adequacy Test Life The LAT is performed at each reporting date to assess the adequacy of insurance liabilities and as of 2016 insurance liabilities for the LAT are calculated in accordance with Solvency II (see chapter 5.3.1). Liabilities are adequate if the technical provision recognized in a.s.r.’s balance sheet for Life segment as a whole at least equals the best estimate of the life insurance liabilities including an appropriate risk margin. If there is a deficiency in the life insurance liabilities, those liabilities are increased to adequate levels through a charge to the income statement.
Also unrecognized gains and losses from relevant assets that are not carried at fair value in the balance sheet are taken into account to the extent these assets are allocated to cover the insurance liabilities. The various elements of the Liability Adequacy Test are further discussed below.
Best estimate The best estimate of an insurance contract is the net present value of the projected cash flows of benefits and expenses, less the net present value of premiums. These cash flows are estimated using realistic (‘best estimate’) assumptions in relation to mortality, longevity, lapse rate, expense and inflation. The best estimate assumptions regarding mortality and longevity include recent trend assumptions for life expectancy in the Netherlands, as provided by the Dutch Actuarial Association. The best estimate includes the intrinsic value and the time value of options and guarantees (TVOG: Time Value of Financial Options and Guarantees) and is calculated using stochastic techniques.
The fair value of the financial liabilities is obtained by multiplying the number of units attributed to each contract holder at the end of the reporting period by the unit value on the same date. Allowance is also made for liabilities arising from technical insurance risks (death, occupational disability).
a.s.r. also has a defined contribution plan for a limited number of employees in the recent acquisitions. For defined contribution plans, a.s.r. pays contributions to privately administered pension insurance plans on a contractual basis.
Intro d uctio n a.s.r. has no further payment obligations once the contributions have been paid. The contributions are recognized as operating expenses in the profit and loss account during the period the services are rendered. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.
Where applicable in the notes to the financial statements the reclassification to assets held for sale and liabilities related to assets held for sale are recognized in the changes in the composition of the group.
M. Acquisitions (Business combinations) Acquisitions are accounted for according to the acquisition method, with the cost of the acquisitions being allocated to the fair value of the acquired identifiable assets, liabilities and contingent liabilities. Goodwill, being the difference between the cost of the acquisition and a.s.r.’s interest in the fair value of the acquired identifiable assets, liabilities and contingent liabilities on the acquisition date, is capitalized as an intangible asset. Any gain on bargain purchase (negative goodwill) is recognized directly in the statement of profit or loss. Any change, in the fair value of acquired assets and liabilities at the acquisition date, determined within one year after acquisition, is recognized as an adjustment charged to goodwill in case of a preliminary valuation. Adjustments that occur after a period of one year are recognized in the statement of profit or loss. Adjustments to the purchase price that are contingent on future events, and to the extent that these are not already included in the purchase price, are included in the purchase price of the acquisition at the time the adjustment is likely and can be measured reliably.
Life insurance contracts on behalf of policyholders Claims from these life insurance contracts are directly linked to the underlying investments. The investment risk and return are borne fully for policyholders (see accounting policy J). Life insurance contracts for the account and risk of policyholders generally consist of contracts where premiums, after deduction of costs and risk premium, are invested in unit-linked funds. For some individual contracts, a.s.r. guarantees returns on unit-linked investment funds. In addition, group life insurance contracts with unguaranteed segregated pools (discretionary self-insurance) are classified as life insurance contracts on behalf of policyholders.
P. Segment information At organizational level, a.s.r.’s operations have been divided into six operating segments. The main segments are the Non-life segment and Life segment where in all insurance activities are presented. The non-insurance activities are presented as four separate segments being the Banking and Asset Management, Distribution and Services, Holding and Other and Real Estate Development (Discontinued operations) segment. There is a clear difference between the risk and return profiles of these six segments.
Q. Transaction date and settlement date All purchases and sales of financial instruments, which have to be settled in accordance with standard market conventions, are recognized at the transaction date, which is the date on which a.s.r. becomes party to the contractual stipulations of the instrument. Any purchases and sales other than those requiring delivery within the time frame established by regulations or market conventions are accounted for as forward transactions until the time of settlement. For details on these transactions, see accounting policy H ‘Derivatives and hedge accounting’.
R. Securities lending a.s.r. participates in securities lending transactions, whereby collateral is received in the form of securities or cash. Cash received as collateral is recognized on the balance sheet and a corresponding liability is recognized as liabilities arising from securities lending in ‘Due to banks’. Securities lent remain on the balance sheet. Securities received as collateral are not recognized in the balance sheet.
Cash flows from operating activities are reported using the indirect method. Cash flows from operating activities include operating profit before taxation, adjustments for gains and losses that did not result in income and payments in the same financial year, adjustments for movements in provisions, and accrued and deferred items. The statement of cash flows recognizes interest received and paid, and dividends received within cash flows from operating activities. Cash flows from purchasing and selling investments and investment property are included in cash flows from operating activities on a net basis. Dividends paid are recognized within cash flows from financing activities.
Equipment Equipment is recognized at cost, less accumulated depreciation and/or any accumulated impairment losses. Cost corresponds with the cash paid or the fair value of the consideration given to acquire the asset. The accounting policy for equipment is unchanged.
Accounting for borrowing costs attributable to the construction of property, plant and equipment is the same as accounting for borrowing costs attributable to investment property. For details, see accounting policy D.
Joint operations a.s.r has a limited number of non-material joint operations. These are recognized in relation to a.s.r’s interest in the joint operation’s individual balance sheet and income statement items.
Property developments consist of property under development commissioned by third parties. Measurement is at cost including any directly attributable costs and construction period interest, less invoiced instalments and impairments.
Reserve for unrealized gains and losses This reserve consists of: • Unrealized gains and losses from financial assets available for sale net of tax and taking account of adjustments due to shadow accounting (see accounting policy I); • The share of unrealized gains and losses of associates and joint ventures held by a.s.r. (see accounting policy U); • Unrealized gains and losses on the effective portion of cash flow hedges net of tax (see accounting policy H); • Unrealized change in value of property for own use (see accounting policy T); • Reserve for discretionary participation features (see accounting policy I); • Reserve for exchange rate differences arising from financial assets available for sale.
Z. Financing On initial recognition, debt instruments and other loans are stated at fair value, net of transaction costs incurred. Subsequent valuation is at amortized cost. Any difference between the proceeds and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.
AA. Insurance premiums Non-life insurance premiums Non-life insurance premiums are accounted for in the period in which they are earned. As indicated in accounting policy I, invoiced but not yet earned premiums are included under liabilities arising from insurance contracts.
Dividends Dividend income is recognized in the income statement when a right to receive payment is established.
DD. Fair value gains and losses Fair value gains and losses include realized and unrealized changes in the value of financial assets at fair value through profit and loss, derivatives and investment property held at fair value. With respect to derivatives, this is based on the fair value excluding accrued interest (clean fair value).
EE. Result on investments on behalf of policyholders Investments on behalf of policyholders are measured at fair value through profit and loss. Any changes in value are recognized in result on investments on behalf of policyholders. This also includes interest income and dividends received on investments on behalf of policyholders.
JJ. Impairments An asset is impaired when its carrying amount exceeds its recoverable amount. Impairment losses are recognized in the income statement as soon as they are identified. For details, see the relevant items of chapter 5.3 as mentioned earlier.
Legal structure of the most significant a.s.r. group entities as per 31 December 2016
The eliminations applied in the reconciliation of the segment information to the consolidated balance sheet and the consolidated income statement are separately presented in chapter 5.4.2 and 5.4.3.
The a.s.r. segment reporting shows the financial performance of each segment. The purpose of the segment reporting is to allocate all items in the balance sheet and income statement to the segments, for which respective segment management has full responsibility.
Segment information has been prepared in accordance with the accounting principles used for the preparation of a.s.r.’s consolidated financial statements (as described in chapter 5.3). Goodwill and other intangibles are presented in the related CGU’s segment. Intersegment transactions are conducted at arm’s length conditions. In general, cost related to centralized services are allocated to the segments based on the utilization of these services.
With effect from 2016, the segments are assessed on their operating result, which is based on the profit before tax adjusted for: • Investment related income: income for own account of an incidental nature (for example realized capital gains and losses, impairment losses or reversals and (un)realized changes of investments held at fair value); and • Incidentals: incidental items not relating to ordinary activities as a result of accounting changes, consulting fees for acquisitions, restructuring expenses, start-up costs, privatization expenses and shareholder-related expenses.
For comparative purposes the 2015 operating result has also been adjusted accordingly.
Financial Statements 2016 | 5.4 Group structure and segment information 154
The incidentals 2015 mainly include an additional loss provisions for projects of Real Estate Development.
The combined ratio is 95.6% (2015: 95.0%) mainly due to an increasing ratio at Health.
Financial Statements 2016 | 5.4 Group structure and segment information 158
In 2016 a.s.r. concluded three acquisitions, which are in line with a.s.r.’s strategic focus in strengthening its position in the Distribution and Services market and the Asset management market.
BNG Vermogensbeheer In May 2016, ASR Nederland N.V. acquired 100% of the shares of BNG Vermogensbeheer B.V. (BNG). Following the acquisition the entity was renamed to ASR Vermogensbeheer B.V. (AVB). AVB is an asset manager previously mainly focused on the public sector and currently changing its focus to the private sector (in particular, charitable foundations), with assets under management valued at nearly € 5 billion. a.s.r. expects that the acquisition will strengthen its position on the Dutch market for external asset management. The entire AVB team of 9 FTEs forms part of the Banking and Asset Management segment.
SuperGarant In September 2016, ASR Deelnemingen N.V. acquired 100% of the shares of Certitudo Investments B.V. and its subsidiaries SuperGarant Verzekeringen and SuperGarant Zorg. With this acquisition, a.s.r. strengthens its position as market leader in the disability insurance market. SuperGarant operates as an intermediary and underwriting agent. SuperGarant has developed into an insurance specialist with a focus on P&C and disability insurance for the retail market and a provider of related absenteeism and occupational health and safety services. SuperGarant Verzekeringen and SuperGarant Zorg have been consolidated as from the third quarter of 2016, and is presented in the segment Distribution and Services.
The fair value of the contingent consideration amounts to € 9 million with a maximum amount of € 15 million.
Financial Statements 2016 | 5.4 Group structure and segment information 159
The deferred and contingent consideration related to acquisitions amounts to € 10 million.
In determining this amount, management has assumed that the fair value adjustments, determined provisionally, that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2016.
Axent Nabestaanden Zorg N.V. In 2016 the final acquisition balance of Axent Nabestaanden Zorg N.V. was established. No differences with the provisional balance sheet were identified, as a result of which no retrospective adjustments were made. In 2016 Axent Nabestaanden Zorg N.V. was merged with ASR Levensverzekering N.V. and ceased to exist. In 2017 € 9 million deferred consideration will be paid.
Financial Statements 2016 | 5.4 Group structure and segment information 161
There is no significant difference between the carrying amount and the fair value of these financial assets and liabilities included above.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 162
Changes in the composition of the group 31 - 9 40 176
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 163
Segments Banking and Asset management and Distribution and Services The outcome of the goodwill test on step 1 showed that the difference between the recoverable amount and the carrying value may not be sufficient to support the amount of goodwill allocated to the CGU. Therefore the step 2 additional analysis was performed in order to determine a recoverable amount in a manner that better addresses the specific characteristics of the CGU. Assumptions used in the step 2 internal model are: • A steady state growth rate used to extrapolate cash flow projections beyond the budget periods (1.0%) which reflects the market segment in which the CGU’s operate; • Future cashflows are based on expected market developments and past experience and on the long term characteristics of the markets in which the CGU’s operate; • The (pre-tax) discount rate used in the estimate of value in use is 14.8%.
The second step as described above in the CGU’s of segments Banking and Asset management and Distribution and Services indicate that there is an excess of recoverable amount over the bookvalue of all CGU’s to which goodwill has been allocated (buffer).
Other intangible assets The other intangibles assets mainly relate to the acquisition of Dutch ID in 2015. After this acquisition the other intangible assets of Dutch ID were valued. These assets relate to trade name, distribution relationships and customer relationships. The fair value of these intangibles assets is € 23 million and will be amortized over the remaining usefull life.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 164
Land and buildings for own use Equipment Total 2016 Total 2015
Changes in the composition of the group - - - 5
Gross carrying amount as at 31 December 225 204 429 450
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 165
For more detailed information about the fair value valuation of the financial assets and derivatives, please refer to chapter 5.7.1. The significant inputs are the net initial yield and market rental value. These inputs are verified with the following market observable data: • Market rent per sq.m. for renewals and their respective re-letting rates; • Reviewed rent per sq.m.; • Investment transaction of comparable objects.
Investment property is leased to third parties and is diversified over the rural, residential, offices and retail sectors in the Netherlands. In 2016, a.s.r. acquired the office portfolio of Basisfonds Stationslocaties C.V. (€ 261 million), mostly transferred to the new ASR Dutch Mobility Office Fund (DMOF). In 2016, the fifth and sixth tranches in ASR Dutch Core Residential Fund (DCRF) were transferred by a.s.r. to institutional investors thereby further reducing a.s.r.’s exposure to DCRF from 80% to 77%. Investment property amounting to € 1,500 million (2015: € 1,240 million) is held by the DCRF, DMOF and the ASR Dutch Prime Retail Fund, which are governed under fund agreements.
Real estate development joint ventures ranging between 11% and 50% 2 1
The real estate development joint ventures consist of numerous contractual agreement with other developers and property owners, whereby the parties agree to develop real estate projects. Various guarantees for the real estate development projects have been issued by a.s.r. (see chapter 5.7.4).
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 167
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 168
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 169
Investments at fair value through profit and loss 31 December 2016 Investments
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 170
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 171
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 172
Intro d uctio n 5.5.5.4 Derivatives Derivatives consist primarily of derivatives used to hedge interest rate and inflation rate movements. In 2016, the limited cash flow hedge accounting ended and therefore at year end 2016, a.s.r. does not apply hedge accounting. Changes in the fair value of derivatives at fair value through profit and loss are recorded in investment income (under ‘fair value gains and losses’, see chapter 5.6.2).
Notional amounts are not recognized as assets or liabilities in the balance sheet, however notional amounts are used in determining the fair value of the derivatives. Notional amounts do not reflect the potential gain or loss on a derivative transaction.
a.s.r.’s counterparty risk is limited to the positive net fair value of the OTC contracts.
In addition to the use of swaps and options a.s.r. has further mitigated interest rate risk by entering into forward starting swaps in 2016.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 173
Debt related to cash collateral received on derivative instruments is included in the amount due to banks (chapter 5.5.15).
The deferred tax asset is mainly caused by additions which have been made to the liabilities arising from insurance contracts and have already been recognized in the income tax expense.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 174
Financial assets held for trading -708 303 - - - -405
Liabilities arising from insurance contracts 1,927 -55 -200 - 113 1,785
Preference shares: - Authorized capital; par value of € 0.16 350,000,000 56 - Of which unsubscribed 350,000,000 56
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 176
Hybrid Tier 1 instrument 7.25% fixed interest 17 17 Annually with effect from 30 September 2010
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 177
The Tier 1 and Tier 2 instruments bear discretionary interest and have no maturity date, but can be redeemed at the option of a.s.r. on any coupon due date with effect from: Other equity instruments
As a.s.r. had no potential shares, basic and diluted earnings per share are equal. Net profit in the table is after tax and non-controlling interests.
For disclosure related to net profit we refer to the income statement (chapter 5.2.2).
March 2016. At year end 2015, the number of issued shares was 200,000. For more information please refer to chapter 5.5.8.1.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 179
Provision for unearned premiums as at 31 December 345 403 3 4
Provision for claims (including IBNR) as at 31 December 4,266 4,110 439 406
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 180
Changes in the composition of the group - 2 - -
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 181
At year-end 2016, the liabilities included a guarantee provision for a carrying amount of € 28 million (2015: € 29 million) and a provision related to unit-linked insurance contracts and pension contracts for a carrying amount of € 139 million (2015: € 163 million). These provisions relate to compensation for the cost of these contracts. Other changes primarily include the effect of the conversion of some insurance contracts amounting to € 10 million (2015: € 128 million) which were previously included in the liabilities arising from insurance contracts.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 183
5.5.11.1 Post-employment benefits pensions a.s.r. has a number of defined benefit and defined contribution post-employment benefit plans for its employees and former employees. The pension plans of other group companies are disclosed separately in this paragraph.
ASR Levensverzekering N.V., an insurance company and a group entity, is the insurer of the majority of the postemployment benefit plans. As this company holds the separated investments that are meant to cover the employee benefit obligation, they do not qualify as plan assets in accordance with IAS 19 and are therefore included in financial assets.
The post-employment benefit plans for staff that is employed by ASR Nederland N.V. have been insured by ASR Levensverzekering N.V. since 2008.
Developments in 2016 Following recent development after April 2016, negative past service cost has been recognized in other income amounting to € 100 million, resulting from the amendment to the a.s.r. post-employment benefit plan for future inflation indexation for former employees. Hereby all future inflation indexation has become conditional upon there being sufficient funds available in the separate account that was set up in the past to fund future inflation indexation.
Employees account for 26% (2015: 24%) of the DBO, 41% (2015: 38%) of the DBO relates to former employees currently receiving pension benefits, 28% (2015: 33%) of the DBO relates to deferred pensioners and 5% (2015: 5%) of the DBO relates to other members.
The discount rate has decreased by 0.8% point to 1.7% at 31 December 2016 (2015: 2.5%), resulting in a € 397 million increase in the DBO (2015: € 301 million decrease). As per 31 December 2016 the duration of the defined benefit obligation was 19 years (2015: 18 years).
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 185
The change in other assumptions amounts to € -27 million (2015: € 88 million) due to a change in indexation percentage of former employees.
As a % of liabilities as at 31 December 0.9% 0.6%
In the calculation of the defined benefit obligation the: • Discount rate is determined based on the return (zero coupon rate) of high-quality corporate bonds (AA rating) and the duration of the pension obligation. The discount rate methodology is based on the IBoxx € Corporates AA 10+ curve; • Most recent mortality table ‘AG Prognosetafel 2016’ is used, in combination with the latest the ‘CVS Sterftestatistiek Pensioenen 2006-2015’ for experience factors; • The period of indexation is based on the expected duration of the separate account to fund the future inflation indexation.
The non-qualifying assets, which are managed by a group company, are not presented as part of the net defined benefit obligation. At year-end 2016, the fair value of these assets amounted to € 2,498 million (2015: € 2,419 million), which includes the separate account to fund future inflation indexation amounting to € 327 million (31 December 2015: € 306 million). As mentioned above, the swaps and swaptions have not been allocated directly to the post-employment benefit obligations; neither are they included as part of the fair value of the non-qualifying assets managed by the group company.
Under IFRS, assets managed by insurance companies that form part of the group do not qualify as qualifying assets. Investment income from these assets has therefore not been included in the above figures. Actual investment returns for 2016 amounted to € 71 million (2015: € 113 million), which includes the investment income on the separate account to fund future inflation indexation amounting to € 3 million (2015: € 5 million). These returns have been recognized in investment income (chapter 5.6.2).
As an employer, a.s.r. is expected to pay contributions for pension plans and other post-employment benefits in the coming financial year amounting to € 105 million (excluding the positive effect of the investment income) and € 0.1 million respectively.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 187
Remeasurement of liabilities included in OCI Discount rate change - -1
As a % of liabilities as at 31 December -6.6% 1.7%
All methods used for determining the DBO and assumptions are consistent with those applied in 2015. The sensitivity of the above actuarial assumptions to feasible possible changes at the reporting date to one of the relevant actuarial assumptions whilst other assumption remain constant, would have affected the defined benefit obligation by the amounts of € -1 million increase or € 1 million decrease as a result of a movement of the discount rate by 1%.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 188
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 189
See accounting policy Z. As at year-end 2016, borrowings comprised loans having the following terms to maturity: Borrowings comprised loans
The amounts due to banks increased from € 1,804 million to € 2,835 million primarily as a result of cash collateral received under ISDAs concluded with counterparties (see chapter 5.5.5.5 Cash and cash equivalents). There is no significant difference between the carrying amount and the fair value of these liabilities (see chapter 5.7.1.2).
Cash collateral paid for reverse repurchase agreements is recognized under cash and cash equivalents (see chapter 5.5.5.5). Cash collateral received for repurchase agreements is recognized under due to banks.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 190
Financial Statements 2016 | 5.6 Notes to the consolidated income statement 192
Financial Statements 2016 | 5.6 Notes to the consolidated income statement 193
Total dividend and other investment income 239 235 5.6.3 Realized gains and losses
Gains and losses on investment property and property for own use 130 138
Financial assets at fair value through profit and loss 2 40
Additions to Insurance liabilities due to shadow accounting (chapter 5.5.10) -804 1,179
Financial Statements 2016 | 5.6 Notes to the consolidated income statement 194
Financial Statements 2016 | 5.6 Notes to the consolidated income statement 195
In the presentation of the a.s.r.’s workforce per segment employees related to administrative expenses and overheads are allocated to segment Holding and Other.
Financial Statements 2016 | 5.6 Notes to the consolidated income statement 196
Financial Statements 2016 | 5.6 Notes to the consolidated income statement 197
The profit is almost entirely earned and taxable in the Netherlands. The effective income tax rate is 23.5% (2015: 19.5%).
Intro d uctio n 5.7 Other notes 5.7.1 Fair value of assets and liabilities
Reclassification between categories during 2016 2016 To level 1 To level 2 To level 3 Total
Changes in value of investments, realized/unrealized gains and losses: - Fair value gains and losses (see chapter 5.6.4) -3 -2
Transfer between investments on behalf of policyholders and investment property -2 -27
The movements in investment property measured at fair value (recurring basis) that are categorized within level 3 are presented in chapter 5.5.3 Investment property, 5.5.2 Property, plant and equipment and 5.7.1.1 Recurring fair value measurement of financial assets and liabilities.
Positions and transactions between a.s.r., associates, joint ventures and other related parties. The table below shows the financial scope of a.s.r.’s related party transactions: • Associates; • Joint ventures (and real estate development joint ventures); • Other related parties.
a.s.r. is listed on Euronext Amsterdam since 10 June 2016. NLFI currently holds approximately 50,1% of the shares. As major shareholder of the issued exchangeable depository receipts, the Dutch State holds an equal indirect interest in a.s.r. NLFI is responsible for managing the shares and exercising all rights associated with these shares under Dutch law, including voting rights. However, material or principal decisions require the prior approval of the Dutch Minister of Finance, who will also be able to provide binding voting instructions with respect to such decisions. NLFI’s objectives exclude disposing of or encumbering the shares, except pursuant to an authorization from and on behalf of the Dutch Minister of Finance.
In view of NLFI’s position as the owner of a majority or a substantial part of the shares for some period of time after the listing, its special position under the NLFI Act and its intention to divest its shares over time, NLFI and a.s.r. have agreed on certain arrangements which are set forth in a Relationship Agreement.
Long-term variable remuneration Total 5.7.4 Contingent liabilities and assets 5.7.4.1 Claims and disputes The group is a respondent in a number of claims, disputes and legal proceedings arising from the normal conduct of business.
Provisions are formed for such occurrences if, in management’s opinion and after consultation with its legal advisers, a.s.r. is likely to have to make payments and the payable amount can be estimated with sufficient reliability. The costs of the compensation scheme for unit-linked insurance contracts have been fully recognized in the financial statements based on management’s best knowledge of current facts, actions, claims, complaints and events. Provisions are recognized in the liabilities arising from insurance contracts and legal provisions (see chapter 5.5.10).
H.C. Figee have been restated as a result of a recalculation of the individual service cost allocation to 2015.The pension costs include pensions and VPL.
Intro d uctio n 5.7.4.2 Investment obligations and guarantees Investment obligations for an amount of € 245 million (2015: € 133 million) and guarantees to third parties for a total amount of nil (2015: € 330 million) have been assumed / issued for investment property. The guarantees to third parties as of December 2015 expired on 30 June 2016.
Investment obligations and guarantees to third parties for a total amount of € 334 million (2015: € 422 million) have been issued, for real estate development projects and the acquisition of property. Those guarantees were issued by principals for the execution of projects for the benefit of clients.
Furthermore, ASR Nederland N.V. issued a guarantee to Stichting Het nederlandse pensioenfonds. On 31 December 2016, this guarantee amounts to € 4 million (2015: nil).
Other commitments have been entered into primarily for facility and ICT contract related to an amount of € 53 million (2015: € 78 million).
Expected minimum future rental income on non-cancellable investment property lease as at 31 December
Other than the disclosure related to the share disposal by NLFI in January 2017, as described in chapter 5.5.8.1, there have been no material events after the balance sheet date that would require adjustment to the consolidated financial statements of a.s.r. as at 31 December 2016.
Intro d uctio n 5.7.6 List of principal group companies and associates
ASR Nederland Vastgoed Maatschappij N.V. 1 100.00 100.00 Utrecht Life / Non-life
ASR Hypotheken B.V. 1 100.00 100.00 Utrecht Banking and Asset Management
Van Kampen Groep Holding B.V. 3 100.00 100.00 Purmerend Distribution and Services
ASR Pension Fund Services N.V. 1 100.00 100.00 Utrecht Holding and Other
ASR Vastgoed Projecten B.V. 4 100.00 100.00 Utrecht Real Estate Development
The Executive Board will propose to the Annual General Meeting of Shareholders to distribute € 187 million in dividend on ordinary shares for 2016.
a.s.r. is exposed to the following types of risks: market risk, counterparty default risk, insurance risk, strategic risk and operational risk. The risk appetite is formulated at both Group and legal entity level and establishes a framework that supports an effective selection of risks.
5.8.1.1 Enterprise Risk Management Framework The framework below is the risk management framework as applied within a.s.r.
Risk strategy (incl. risk appetite) a.s.r.’s risk strategy aims to ensure that decisions are made within the boundaries of the risk appetite, as stipulated annually by the Executive Board and the Supervisory Board. The risk appetite is the level of risk that a.s.r. is prepared to take (see ‘Risk strategy and risk appetite’).
Risk governance a.s.r. employs a risk governance framework that entails the tasks and responsibilities of the risk management organization and the structure of the Risk committee.
The risk appetite is based on a.s.r.’s mission, vision and strategy, determined by the Executive Board. The overall mission is to offer transparent insurance solutions as a trusted partner to customers, while creating sustainable and stable value for a.s.r’s stakeholders. This mission is translated into the prioritization of simple and transparent products, clear communication and fair treatment of customers. The strategy is derived from the mission and is based on four pillars: fulfilling customer needs, pricing discipline and underwriting excellence, cost effectiveness and maintaining a cash generating business model. The Group strives to execute these four strategic pillars within all of the Group’s segments.
Meeting customers’ needs The Group aims to offer customers simple, transparent products that fulfil their needs.
Excellence in pricing, underwriting and claims handling The Group intends to maintain a disciplined pricing strategy focusing on further deepening its knowledge of customer behavior and continuing to enhance and further develop its experience and skills in respect of pricing, underwriting and claims handling.
Cash-generating business model The Group’s objective is to maintain its operation on a cash-generating business model backed by a sound investment policy and investment mix to deliver robust, high-quality earnings underpinned by strong capital generation.
Ensuring customer satisfaction, and offering safety and reliability in the long run while maintaining a good reputation.
R is k a p p et it e p il la rs
Risk governance a.s.r.’s risk governance could be described by: • Risk ownership; • The implemented three lines of defense model and associated (clear delimitation of) tasks and responsibilities; and • The risk committee structure to ensure adequate strategic decision making.
Risk ownership The Executive Board has the final responsibility for risk exposures and management within the organization. Part of the responsibilities have been delegated to persons that manage the divisions where the actual risk-taking takes place. Risk owners are accountable for one or more risk exposures that are inextricably linked to the department or product line they are responsible for. Through the risk committee structure, risk owners provide accountability on ‘their’ risk exposures.
Three lines of defense The risk governance structure is based on the ‘three lines of defense’ model. The ‘three lines of defense’ model consists of three defense lines with different responsibilities with respect to the ownership of controlling risks. The model below provides insight in the organisation of the three lines of defense within a.s.r.
First line of defense Second line of defense Third line of defense
• Challenges the 1st line and supports the 1st line to acheive their business objectives in accordance with the risk appetite
Group Risk Management Group Risk Management is responsible for the execution of the risk management function and the actuarial function. The department is led by the CRO. Group Risk Management consists of the following sub-departments: • Enterprise Risk Management; • Financial Risk Management.