Cover Photo of a stained glass window which shows the image of the tree planter from the former office building of the Life Insurance Company Utrecht in Brussels. The young man with the spade is planting a tree. On the other side of the tree he’s an old man and watches his children and grandchildren reap the fruits of his effort. This artwork was created by J. Vosch.
in the Annual Report a.s.r.’s history goes back to 1720. It’s a history we are proud of and of which we like to be reminded. Not only in the form of documents and historical objects, but also in the form of the art collection built up over the years which demonstrates our social involvement.
The basic idea behind the creation of the art collection is to make the working environment as inspiring as possible for employees and visitors. Art is often seen as an interpretation of reality and therefore, in our opinion, creates a fitting link with the concrete contents of this Annual Report.
‘This photograph intrigues me. What exactly is going on in this room? The furniture looks as though it’s being blown backwards by an enormous gust of wind. How on earth has it been photographed? And what is it saying? I like it when a work of art raises questions when you go on thinking about it. I often come across art in this building that surprises me. Which is an added bonus in what’s already a great working environment.’
ASR Nederland N.V., hereinafter ‘a.s.r.’, is the Dutch insurance company for all types of insurance. a.s.r. offers a broad range of insurance products in the areas of non-life and life insurance. a.s.r. offers investment products and mortgages and is also active as an investor and in offering asset management services to institutional clients. Furthermore, a.s.r. is a full-service provider for intermediaries. a.s.r. operates exclusively in the Dutch market.
Ambition for Climate Agreement 20 September a.s.r. becomes supporter of the Task
Nederland 19 November a.s.r. announces changes in management structure 19 March a.s.r. included in AEX
Capital Markets Day a.s.r. presents strategy update and new mediumterm targets 4 December
‘For me, this silver model of the Hoofdpoort, which doubles as a salt and pepper cruet, symbolises the transition we’ve made at a.s.r. The Hoofdpoort was the first headquarters of the Maatschappij van Assurantie, Discontering en Beleening der Stad Rotterdam Anno 1720, and next year it will be 300 years since it was founded. De Oude Hoofdpoort has long since disappeared, having been demolished in 1856 to make way for a railway station. When we still had boardrooms at a.s.r., this silver model stood in the chairman’s office - my office - until 2009. The decision to do away with separate boardrooms and offices, and the light and transparent layout of our building following its complete redesign in 2016, testify to the enormous changes we’ve gone through as a company.’
‘The key figures show that a.s.r. performed well in 2018. At € 742 million, our operating result was higher than it was in 2017, which at € 728 million was our best result to date. The gross written premiums (GWP) for Non-life and Life went up in 2018 and the combined ratio in Non-life came to 96.5%, ahead of our target of <97%. The operational return on equity was 14.2%, well above the target of ‘up to 12%’. While the net result for 2018 was below that in 2017, this can be explained by incidental windfalls in 2017. At 197%, our Solvency II ratio is robust. Not only the absolute level but also the quality of our solvency is high, with Tier 1 capital accounting for 85% of the capital present. Our capital base gives us considerable financial flexibility.
Part of a.s.r.’s strategy is to grow, both organically and through targeted acquisitions. In 2017, we announced the acquisition of Generali Nederland. The transaction was closed in February 2018. As well as being able to welcome the Generali Nederland customers, the integration of Generali Nederland into the various lines of business is also proceeding successfully. Already in the first year, Generali Nederland contributed to the operating result. We expect to complete the full integration of Generali Nederland by 2020. At the end of 2018, we were also able to announce that we are acquiring Loyalis from pension provider Algemene Pensioen Groep N.V. (APG). The company,
The growth of our operating result and management’s confidence in the year ahead means we will be proposing a higher dividend payout for our shareholders consisting of a cash dividend of € 1.74 per share: a 6.7% increase compared with the year before. In line with our dividend policy, we will strive to offer our shareholders a stable, modestly increasing ordinary dividend per share in the long term. The ongoing strong operational performance of the various segments, disciplined execution of our strategy and robust capital position make us confident that we can continue to realise the strong operating result of previous years in 2019.
Additionally, the value creation model shows which Sustainable Development Goals (SDGs) are most relevant for a.s.r.
Ke y s tra teg ic pri nciple: Value over volum e
Financial capital • Shareholders equity • Eligable own funds • Total debt • Total assets
Human and intellectual capital • Employees • Average years of service • Training employees • Development of employees
• Human rights 4.5 Role in society • Employee contribution to local society • Financial self-reliance • Foundations 4.6 Sustainable investor • SRI funds and mandates • Impact investing • Carbon footprint: Measure investment portfolio
• Life • Life related fee business (Asset Management and Pension DC)
1.5 Reporting segments a.s.r.’s operations are divided into six operating segments. This chapter presents a short summary of these segments. More detailed information per segment can be found in chapter 5.1 Group and segment performance.
Consists of • Property and Casualty (P&C) • Disability • Health
Disability • Disability self-employed individuals • Sickness Leave • Group Disability
Bank • Bank annuities • Deferred annuities • Savings accounts • Retail investments
Customers • Retail customers • Small- and medium-sized enterprises (SMEs) • Large corporate clients and their employees • Pensionfunds • Self-employed individuals • Het nederlandse pensioenfonds
Financial performance (€m) Gross written premiums € 3,014 Operating expenses € -222 Operating result € 145 Profit/(loss) for the year attributable to holders of equity instruments € 132
Combined ratio Non-life segment 96.5% P&C 98.4% Disability 90.8% Health 99.2%
Consists of • Van Kampen Groep Holding B.V. • Dutch ID B.V. • Corins B.V. • SuperGarant Verzekeringen B.V. • Anac B.V. • Stoutenburgh Adviesgroep B.V. • PoliService B.V.
a.s.r. operates in a changing and highly regulated environment. It has to stay on top of trends that impact its business models. Therefore, a.s.r. aims to be adaptive to benefit from opportunities as well as to mitigate risks to its business models that originate from those trends.
Various technological developments will have an impact on the scope and position of insurers in society.
Technological developments in the area of artificial intelligence (AI), blockchain, quant computing, machine learning and robotics have a significant impact and have the potential to disrupt or to help re-invent the insurance industry. These technologies could change the nature, magnitude and types of risks that customers want to mitigate and which insurers may want to provide cover for. Insurers’ role could be to cover residual risks and their role could therefore shift to helping customers prevent risks. Robotics could also strongly improve the efficiency as well as the quality of processes.
a.s.r.’s answers Technological developments change the lives of consumers. a.s.r. constantly scans the market for technological trends, emerging customer needs and new ways of interacting. a.s.r. has a specialised team I&D in place to support optimisation, transformation and disruption. I&D reports directly to the Executive Board. Disruptive initiatives are managed and organised separately from the a.s.r. organisation.
When needed, a.s.r. assists its customers in a 1:1 conversation. Increasingly however, technology allows a.s.r. to replace these conversations with 1:many dialogues. For customers this means that they can reach a.s.r. at any time with any question. For a.s.r., this means it can be relevant in an efficient and scalable manner.
The a.s.r. website is an example where a.s.r. has shown that it can serve its customers, personally and fluently.
Transformation The Netherlands is a country with one of the highest adoption rates of voice interfaces and a.s.r. is developing technologies to incorporate voice in its operations. Voice is very different from the conversational interface that a.s.r. currently uses on its website, e.g. ‘buttons’ that are intuitive in a visual conversational interface are not as intuitive in ‘voice’. Not only does a.s.r. learn about this ‘new’ technology, a.s.r. also applies these lessons in its current interface.
Robotic Process Automation (RPA) within a.s.r. In 2018, RPA pilots were carried out at the Life, Non-life, Health and Group departments to determine whether RPA provides added value for a.s.r. The conclusion is that the use of RPA indeed offers opportunities. With RPA, a.s.r. creates virtual employees who carry out certain tasks. These activities are often repetitive and are perceived by ‘employees’ as unpleasant. As a result, the use of RPA contributes to the quality of the execution as well as employee satisfaction. At the end of 2018, a.s.r. decided on RPA tooling across business units to optimise the deployment of RPA. a.s.r. sees this optimisation in knowledge sharing, deployment of virtual staff capacity and a re-use of solutions between the business units. The use of RPA now mainly focuses on processes with structured information. In 2019, its deployment will be expanded further, whereby a.s.r. will consider whether the use of AI can also process unstructured information via RPA.
The insurance industry has been operating in a low interest rate environment for many years. Investment returns are an important source of income for insurers and its customers. The low interest rate environment has put significant challenges on insurers to achieve adequate returns.
With the relatively strong economic performance of the US and the Fed in tightening mode, US bond yields rose and US equities performed relatively well, especially during the first half of 2018. However, bond yields in the eurozone remained at historically low levels and European equities as well as emerging market equities registered negative returns, albeit to different degrees. As a consequence, conditions for insurers and other institutional investors remained challenging, with low interest rates and low risk premiums resulting in reduced investment returns, while margins on traditional, capital intensive spread-based products remained thin. Taking into account the background of a still positive, but decreasing economic growth, subdued inflationary pressures, and heightened political risk, a.s.r. recognises the possibility that the current environment of low investment returns and volatile financial markets may continue.
In addition, a.s.r. has identified a trend of value chain integration in economic sectors. Through controlling stakes and partnerships, insurance companies increasingly integrate the value chain. This can be seen in distribution channels, claims prevention and added services as well as claims handling. It enables insurers to become a full-service provider to customers.
Opportunities and threats • Further development of fee business from the Distribution and Services segment; • Sustainable fee income and business enhancement via asset management solutions for all asset classes for external clients; • Prolonged low interest rate environment and/or financial markets volatility due to uncertainty, and reduced rewards for financial risks which may reduce future investment related profits and the attractiveness of spread-based businesses such as defined benefit plans; • Further development of capital-light life products without guarantees that are funded through investment returns (e.g. defined contribution plan and asset management products).
a.s.r.’s answers a.s.r. actively manages its interest rate hedging to be prepared for sudden fluctuations. While higher interest rates in general are positive for insurers, a sudden steep rise in interest rates usually is not. The increased volatility of financial markets poses an additional risk to future investment returns. In the course of 2018, a.s.r. reduced its market risk by stopping the re-risking process and refocused from equities to real estate.
a.s.r. has assessed the possible consequences of a ‘no-deal’ Brexit and found that these are relatively limited. The continuity of business operations and continuous service provision is guaranteed. The risk of non-compliance with data protection and privacy legislation has been classified as low. A number of additional (contractual) measures are in progress to further mitigate residual risks. Where possible, a.s.r. wants to limit the consequences of a reduced coverage area for its customers. Fewer than 400 customers have an address in the United Kingdom. With this group, a.s.r. will communicate in a personalised manner, even if there are no consequences (expected) for them. At a.s.r. asset management (AVB), Brexit will mainly impact flexibility with regard to the current portfolios in derivatives positions and new derivative transactions to be concluded in the future. Within AVB, a working group has been set up that is in contact with all relevant counterparties and contract adjustments are implemented.
a.s.r. has further strengthened its third party asset management proposition by offering several funds and mandates to institutional investors. a.s.r. offers specific niche product solutions e.g. the ASR Mortgage Fund, the ASR ESG IndexPlus fund range, tailored LDI Solutions, balanced mandates and several real estate funds (ASR Dutch Prime Retail Fund (DPRF), ASR Dutch Core Residential Fund (DCRF), ASR Dutch Mobility Office Fund (DMOF)).
Developments in society encourages the development of new products and services and/or altering the work procedures of insurance companies. Different factors play a part in this context.
Life expectancy continues to increase (although the speed with which it increases has slightly decreased). This makes the existing social welfare system in the Netherlands less affordable. Pensions are increasingly tailored to the individual. This affects the product portfolios offered by insurers and pension funds. Another consequence of the steady increase in life expectancy, combined with expensive technological innovations, is that health care is becoming more expensive year after year. This puts pressure on the existing medical insurance system.
Health and Disability will potentially be lower. This is in line with a.s.r.’s objective to contribute to society. • A further reduction of the principle of collective solidarity and growing attention for individual solutions, possibly offset by mandatory solutions for uninsurable groups; • An increasing number of self-employed individuals is seeking insurance and (retirement) savings solutions; • Highly educated and experienced employees, who understand underwriting and risk-pricing are therefore important for insurers’ future profitability; • Customers need to prepare for a longer working life in order to sustain their lifestyle; • A focus on sustainability enables a.s.r. to distinguish itself as an insurer and attract stakeholders such as investors, customers and new employees; • Climate change will continue to impact risk analyses and pricing decisions and, if performed inadequately or incorrectly, this poses a risk to a.s.r.’s revenue model; • Unforeseen elevations in life expectancy may have an impact on future profitability.
a.s.r.’s answers Pensions responds by focusing on capital-light pension products that can support customers to build up capital/ savings for retirement, also when life expectancy continues to increase. a.s.r. closely monitors changes in legislation, such as the expected expansion of individual choices, which can already be discerned in current legislation. Pensions anticipates this change by facilitating communication and digitisation with a personal touch. Within Disability, a.s.r. provides (self-employed) customers with services pertaining to mental and physical fitness.
a.s.r. aims to be best-in-class in sustainable business practices in the financial sector and takes account of sustainability whenever possible. a.s.r. continues to work on making its insurance products and services more sustainable (see chapter 4.1 Customers).
a.s.r. is fully aware of the importance and the responsibility that is expected from its role as an investor; both as an asset manager at its own risk and as an asset manager for third parties. Therefore, sustainability is an essential part of a.s.r.’s investment beliefs. a.s.r. believes that the integration of ESG factors into the management of its investments contributes to a reduction of risks (both financial and reputational) and positively impacts its long-term performance and value creation.
The developments in and the impact of climate change is discussed and assessed periodically in the multi-disciplined climate committee of a.s.r. recommendations of this committee led to initiatives in 2018 such as: • Climate maps to improve knowledge about what kind of climate risks are most likely to occur in which geographical areas; • Supporting new prospects to prevent damage as a result of climate change through individual risk assessments: focus on preventing climate risks for new applications; • Supporting policy holders to reduce the effects of climate change through individual claims assessments: focus on preventing climate claims to recur; • Through social media, a.s.r. shares advice on how to prevent specific climate risks and in blogs, a.s.r. sends information on what to do in the event of weather warnings.
P&C is currently looking into possibilities to expand its product range with new climate covers in exchange for an appropriate premium increase. In addition, climate risk is incorporated in P&C’s re-insurance arrangements. At the annual renewals, the latest developments, insights and knowledge on climate developments are taken into account. P&C also monitors the financial performance of its product portfolio continuously. As part of this monitoring, it assesses the impact of climate change on claims ratios, which may lead to an adjustment of premiums. For 2019, P&C will continue to take measures to adapt to climate change.
In the financial sector, the ongoing trend is towards more regulation to better safeguard the interests of customers and making the financial sector more resilient to prevent future state intervention. Consumer protection (for example, regulations to increase the protection of personal information – the General Data Protection Regulation (GDPR)) has high priority and risk mitigation is broadly supported by politicians and regulatory bodies alike. Continuous effort is needed to comply with regulation, as illustrated by the emergence of Solvency II and the upcoming change in accounting standards (i.e. IFRS 17).
The Solvency II framework requires insurers to hold sufficient capital to ensure that policyholders’ interests are safeguarded at all times. Products with guaranteed minimum returns have become increasingly expensive. This causes insurers to move from capital-intensive to capital-light products, such as DC pensions and asset management propositions.
The business is primarily responsible for controlled and ethical business operations. This is supervised by both the
Legal and Compliance departments while they invest in awareness and knowledge. A legislative and regulatory committee was set up to respond efficiently to changing legislation and regulations. The committee helps the various business units to identify and apply legislative changes in a timely manner. Products are also rationalised and the ICT system landscape of e.g. P&C, Individual life and Pensions is simplified. This will mitigate the impact of legislation and regulations.
Investors Shareholders rely on the execution of a.s.r.’s strategy to create value and are guided by the financial and non-financial targets. They expect management to seize the opportunities that arise and to monitor risks continuously. Dividends and share price developments should offer an attractive total return on their investment. Shareholders are also increasingly interested in the social relevance of the companies they invest in. It is in their interest that a.s.r. represents the interests of all stakeholders in order to achieve long-term value creation and return on capital.
Society a.s.r.’s stakeholders also include business partners (intermediaries, regulators, politicians, tax authorities, trade unions, the media and civil society organisations among others). They expect a.s.r. to create sustainable and responsible societal value.
Dialogue with stakeholders a.s.r. is committed to maintaining a good relationship and clear communication with all its stakeholders. It therefore maintains an ongoing dialogue with a wide range of stakeholders at international, national and local level. In 2018, a.s.r.’s communication and engagement with stakeholders on the selection of material topics was reflected in an internal survey which was sent to all employees and in 18 in-depth interviews with internal and external stakeholders. These dialogues sought to gather information on the expectations of value creation by a.s.r. A more detailed description of this process and the outcomes of the stakeholder dialogue can be found in Annex E.
The outcomes of the materiality analysis (described more fully in Annex E), including the stakeholder dialogue, were plotted in the materiality matrix on page 30. The topics are grouped into two categories: • The first category (A) covers highly material topics.
Most of these are required to run the business and to keep a.s.r.’s house in order on a daily basis. Each of the topics is measured for its importance in short and longterm value creation for both a.s.r. and its stakeholders. a.s.r.’s main objectives remain unchanged.
• The second category (B) comprises material topics that are important for employees and societal actors but are of a less strategic nature.
The materiality matrix has been validated by various internal stakeholders, including the CSR workforce and the Executive Board.
Sustainable insurer Customers need to be able to rely on a.s.r. meeting its fi nancial obligations because a.s.r. enters into long-term liabilities such as pension contracts. That is why sustainable fi nancial robustness is essential and one of a.s.r.’s top priorities. a.s.r.’s sustainable commitment is refl ected in the development of its products and services. a.s.r. offers solutions that address social issues and align with the needs of today’s customers. For example, an affordable disability insurance was designed, the Langer mee AOV, for entrepreneurs with a (physically) demanding profession. Another example is the Starters Mortgage – which runs for 40 years instead of 30 – enabling starters to purchase a house with lower monthly payments. Furthermore, a.s.r. helps clients and insurance brokers by actively sharing relevant content and practical tips about damage prevention.
Sustainable investor As an institutional investor, one way in which a.s.r. takes ownership of social responsibility is through the use of ethical and sustainability criteria in its investment policy. All investments are screened on the basis of the Socially Responsible Investment (SRI) policy, focusing on aspects such as social and environmental criteria. Countries and businesses that do not meet the criteria are excluded. These include producers of controversial or offensive weapons, nuclear energy, coal, tar sand and shale oil and tobacco and the gambling industry. a.s.r. also require that businesses comply with international conventions on environment, human rights and labour rights.
Sustainable employer Having a talented, qualifi ed and healthy workforce is key for a.s.r. in achieving its business targets. That is why a.s.r. is committed to attracting, retaining and inspiring the best people, offering them extensive scope for training and development, and facilitating a sound work/life balance.
Society a.s.r. foundation initiates projects on awareness and fi nancial self-reliance. By teaching and supporting people in reading and arithmetic, being able to handle money and organising their fi nancial administration. a.s.r. also adheres to and executes the ethics manifesto ‘From Debts to Opportunities’: customers who are behind on payments are approached in a timely and pro-active manner to resolve their payment problems. a.s.r.’s sponsorship and donation policy fi ts in with this and is always focused on those starting points. The purely fi nancial support does not or hardly ever occur. It is often a combination of material and substantive support. a.s.r. is committed to preserving cultural and social heritage, which is why the company is involved in a number of nation-wide and local foundations.
A financially reliable and stable institution which is strong enough to meet its financial targets and objectives.
Risk management is an integral part of a.s.r.’s daily business operations. a.s.r. adopts an integral approach to managing risks, thereby ensuring that strategic objectives are met.
To develop sustainable products and services and encourage customers to positively and actively opt for them. The focus is on initiatives in the areas of safety (around the home, in traffic, at work, etc.), prevention (of care and disability) and sustainable asset-building.
Offering the knowledge and skills of its employees to help people avoid getting into debt or to get them out of debt.
A balanced workforce composition based on age, gender, cultural or social origin, skills, views and working styles.
Helping by doing a.s.r.’s purpose is to help people to ensure their financial stability. We help them by mitigating the financial risks they are unable or unwilling to bear themselves. And we help them to accumulate wealth for financial needs later on in life.
We proactively offer innovative solutions for prevention and address our customers’ risk-related issues. We are committed to handle claims competently and efficiently, which allows us to offer our customers attractively priced solutions. We also focus on developing asset management solutions to enable our customers to build up capital.
We are highly cost-conscious in our business operations. We make use of well-founded risk assessments and are financially sound, realising sustainable, attractive returns for our shareholders. We strive for organic growth, as well as for growth through the acquisition of small and medium-sized insurers and/or asset management or distribution companies.
We seek to be a leader in sustainable business practices in the financial sector. We feel responsible for our environment and believe that consumers prefer to do business with sustainable companies.
3.1.1 Strategic principles a.s.r.’s overarching strategic principle is ‘value over volume’. Value over volume continues to be a key principle when selling products and services. a.s.r. pursues volume growth, but will only do so if this is value accretive. Value over volume overarches the four principles which drive the value of the a.s.r. organisation.
• a.s.r. serves its customers’ needs. As outlined in chapter 2.1 Trends and developments, there are many trends and developments affecting insurers, their business models and customer behaviour. a.s.r. must stay on top of these trends and developments, be flexible and continue to meet its customers’ changing needs.
• To remain competitive in the Dutch market, a.s.r. must continue to build on its expertise, which a.s.r. refers to as ‘craftsmanship’. a.s.r. reflects excellence in its disciplined pricing, underwriting and claims management. a.s.r. aims to be the Netherlands’ leading insurance expert.
• a.s.r. is committed to a ‘no waste’ cost principle. Cost effectiveness is not something you do once every couple of years by announcing large one-off reduction processes, but something a.s.r. believes should be everpresent. Cost effectiveness lays the foundations for sustainable profitable business models.
• a.s.r. generates capital, a pursuit that derives from being a resilient and highly diversified insurer with solid solvency and value-generating businesses. The sound capital base allows a.s.r. to absorb shocks while also taking advantage of opportunities to grow through acquisitions as well as organically.
In 2018 a.s.r. strengthened its position in several of the above categories by acquiring Generali Nederland (P&C, Disability, Individual life, Pensions, Funeral), ZZP Nederland (Distribution and Services) and PC Hooft (Funeral). At the end of 2018 a.s.r. announced the acquisition of Loyalis (Disability, Individual life, Pensions), which is expected to be finalised in 2019.
Within P&C a.s.r. can continue to grow organically by gaining market share at the targeted COR and, where available, by adding books of business without increasing operational expenses, consequently benefiting from economies of scale. The marginal costs of new business are low. The distribution partners in the portfolio can facilitate this growth.
a.s.r. is well equipped to benefit from the macro trends in Disability that are driving demands for services surrounding sustainable employability. a.s.r. owns an evolving disability platform which comprises: • Distributors; • Added services to assist employees and a growing cohort of self-employed individuals; • Claims prevention services; • Disability treatment and reintegration services; • Access to the APG portfolio via Loyalis.
The Disability growth opportunity is that a.s.r. serves customers throughout the value chain. a.s.r. is consequently able to use these data to improve customer services and grow profitably in every single part of this value chain and in its underwriting performance. The recent acquisition of Loyalis fits perfectly into this strategic position.
a.s.r.’s profitability in this segment finds its origin in effective and simplified processes based on low and variable costs, an excellent migration and conversion of books of business and an optimisation of Solvency II capital and investment returns.
The growth opportunities within the life insurance services books include: • a.s.r. has been and continues to be a consolidator of funeral books; • a.s.r. has started to pursue individual life consolidation as seen in the acquisition of Loyalis.
Asset management related growth businesses The growth of asset management and defined contribution pension business has been part of a.s.r.’s strategy. a.s.r. has been able to expand external assets under management efficiently and profitably.
a.s.r. sees clear opportunities to continue to expand this segment. a.s.r. pursues a ‘buy and build’ strategy to add scale and skills to a.s.r.’s asset management business for external investors. a.s.r. aims to capture assets in the changing pensions landscape in the Netherlands. a.s.r. continues to leverage on its expertise in mortgages, LDI solutions and ESG asset management services. And a.s.r. aims to continue to expand its real estate fund platform.
Maintaining a strong balance sheet with ample financial flexibility remains an important element going forward. A robust solvency and capital position is key to existing customers. They need to be able to rely on a.s.r. Robustness is also key to enable the pursuit of profitable growth, both organically and through acquisitions.
As part of its IPO and listing on Euronext Amsterdam in 2016, a.s.r. communicated its targets for the medium-term
During the 2016-2018 period, a.s.r. maintained a single A Standard & Poor’s (S&P) Insurer Financial Strength (IFS) rating and met the target of at least a Single A S&P IFS rating.
The COR amounted to 96.5% and was better than the target of ‘< 97%’ for 2018. For each of the years during the planned period, the COR was better than the target of < 97%.
Operating expenses were reduced by € 55 million during the 2016-2018 period. The operating expenses were corrected for the absorbed cost bases of several acquisitions during the 2016-2018 period. The operating expenses increased due to investments in the growth segments of Banking and Asset Management and Distribution and Services, for which no correction was made. The outcome is in line with the realisation of the medium target owing to a strict cost discipline, which remained strong.
Dividend pay-out ratio Management proposes a total dividend of € 245 million for the full year of 2018. This is a 6.7% increase compared to the cash dividend of 2017. The proposed annual dividend is in line with the dividend policy and based on a pay-out ratio of 48% of the net operating result distributable to shareholders (net of hybrid costs).
The proposed total dividend per share for 2018 amounts to € 1.74 per share, an increase of 6.7% compared to last year (2017: € 1.63). Taking into account the interim dividend of € 0.65 per share (paid in cash on 7 September 2018), the proposed final dividend amounts to € 1.09 per share.
At its first Capital Markets Day (CMD) on 10 October 2018, a.s.r. introduced targets for the 2019-2021 period. The targets can be divided into group financial targets, business financial targets and non-financial targets, the latter reflecting the position a.s.r. wants to take in society.
Group financial targets a.s.r. has determined a set of ambitious group targets. Positioning itself for profitable growth. a.s.r. will continue to run the company with a strong capital position and a Solvency II ratio safely above 160% (standard formula). This enables a.s.r. to deploy capital for entrepreneurial purposes. The maximum level of financial leverage has been set at 35% to bring this ratio more in line with Dutch and international peers on an underlying basis. This adjustment also better reflects the IFRS methodology of shadow accounting that is applied by a.s.r. and is consistent with a.s.r.’s unchanged S&P A rating target. Given the strong performance in recent years and the confidence a.s.r. has in its business for the medium term, a.s.r. has raised the target for operating ROE to the range of 12%-14%.
a.s.r. keeps its dividend policy unchanged as well as its target of a stable to slightly growing dividend per share.
Business financial targets In P&C and Disability together, a.s.r. aims to achieve a COR of 94%-96%. This range reflects a.s.r.’s leadership to manage these businesses profitably while remaining competitive. The range also allows a.s.r. to absorb the normal level of calamities, such as major fires and heavy storms. a.s.r. expects that in a year with a normal level of storms and large claims, it can deliver a COR of 96%. a.s.r. decided to exclude Health from the target as the pricing and profitability of this product line is more prone to political scrutiny. At 99%, the target for Health stand-alone remains stable.
a.s.r. aims to keep its operating result in Life stable compared to 2017 levels. Although a.s.r. expects to experience a decline in the reserves, particularly in Individual life, it remains confident that, in terms of earnings, it will be able to maintain its operating result at the level of 2017 for the next three years. In addition, a.s.r. aims to decrease the Life operation costs from 57 basis points (bps) on its reserves in 2017 to within the range of 45-55 bps on the insurance provision excluding shadow accounting and capital gain reserve.
Targets for the 2019-2021 period1 1 Targets are based on the assumption of normal market, environmental and economic conditions and no material regulatory changes and on a stand-alone basis.
In the first place, a.s.r. measures how its customers experience its services via the NPS. In 2018, its customers gave a.s.r. a NPS of 42 points, which is a strong performance. The ambition is to grow from this level to achieve at least a NPS score of 44 points by 2021.
‘The great thing about these old adding machines is that whenever I look at them I’m reminded how little has changed over the centuries. Whether it’s 2019 or the year zero, people have always been busy trying to make their future more manageable, calculating how much money they’ve got (or are owed) and communicating with their loved ones and business partners. Seeing this old calculating machine also makes me realise that our activities don’t essentially change over the centuries; only our methods and machinery become more efficient. Our tools go on improving, but we stay the same.’
Ditzo Pechvogelhulp and Pechvogelhulp Plus Pechvogelhulp and Pechvogelhulp Plus are insurance products for medical expenses following a sudden, unforeseen event. Pechvogelhulp provides cover for extra medical expenses following an accident in the Netherlands that are not covered by the basic insurance. Pechvogelhulp is a standard package that is part of the Ditzo Basisverzekering and provides cover for medical expenses up to € 10,000, such as dental care or physiotherapy. No extra costs are charged for Pechvogelhulp. For a small extra amount Ditzo offers the more extensive Pechvogelhulp Plus. With this package, customers are insured up to € 12,500 for extra medical expenses following an accident. It also provides worldwide cover and includes a € 12,500 pay-out if the insured dies following an accident.
a.s.r. continuously measures the NPS¹ for a.s.r. and its business lines (the overall NPS score is based on the unweighted average of the business lines). The NPS is a management tool that can be used to gauge the customer satisfaction of an organisation’s customers. In the questions put to the customer, emphasis is placed on the employee of a.s.r.: How likely is it that you will recommend a.s.r. to your family, friends and colleagues based on your experience with me? a.s.r. uses the NPS as the most important KPI to monitor its services. Customers indicate on an ongoing basis how they experience a.s.r.’s service. a.s.r. wants its customers to experience that it is continually improving its services and strives for an increase of its NPS.
In 2018, the NPS customer contact moment for customers increased by two points during the year, from 40 (2017) to 42 (2018). a.s.r. measures the NPS in all business lines. Many business lines themselves have also formulated specific 1 The NPS is calculated after customers had been in contact with one of the agents. Calculation of the NPS: With a score of 9 or 10, the customer is seen as a promoter (recommendation). With a score of 7 or 8, the customer gets the predicate passive. He or she will neither recommend nor discourage the brand. With a score of 0 to 6, the customer will discourage the brand. The NPS term for this is detractor
(criticaster). The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. The NPS scores presented reflect the year end scores.
Risk premiums mortgages During the term of a mortgage, mortgage providers may apply one fixed interest rate or separate interest rates per risk category. AFM assesses whether mortgage providers communicate in a transparent way about how they determine and apply the risk premium during the term of the mortgage. The assessment showed that many mortgage providers insufficiently acted in their customers’ interest. The risk premium for each mortgage must be in line with the specific risk of the customer and in case of an equal risk profile, customers should pay the same risk premium. a.s.r. had a higher-than-average score (3.5, on average 1.9) in this research module.
Claims handling In the investigation into claims handling at Non-life, a.s.r. scored 4.2 with an average score of 3.8. This score shows that orientation on the customer is recognised at a.s.r. The themes that were object of the investigation were: provision of information, claims handling and complaints and feedback management.
Consumer trust a.s.r. has been measuring its media expenditure’s effect on brand, media and creation on an ongoing basis, using the Reality Analytics model of DVJ Insights. In this model, all relevant brand and communication KPIs and media expenditure are brought together in an online, interactive platform. With the help of this platform, media investments can be better deployed over time.
One of the KPIs that is a constant factor in the Reality Analytics model is the consumer trust in a.s.r.
In particular among the general public and intermediaries, 2018 showed a strong improvement of the score compared to previous measurements. The score among the general public rose to 66.4 (+5 compared to 2016¹) and among advisors to 74.9 (+5.1 compared to 2016). An increase is also seen among SMEs (+1.7 compared to 2016) and arrives at a score of 67.7. Thus a.s.r.’s reputation moves between ‘Average’ and ‘Strong’.
In October 2016, a.s.r. joined a group of companies committed to helping customers with late payments in proactively finding a solution. These companies have united in a coalition which has laid down ten rules of conduct in an ethical manifesto. Through this coalition, a.s.r. remains in sync with market developments and the public debate surrounding the subject.
a.s.r. makes every effort to ensure that customers are financially self-sufficient. This ties in with ‘the story of a.s.r.’ and with its core values. Signing and complying with the ten rules of the ethical manifesto also fits in very well with this. In this way, a.s.r. wants to reduce the number of customer cancellations due to payment arrears and problems. It also wants to reduce situations in which customers are confronted with cost-increasing measures. In all cases, a.s.r. strives to avoid non-payment.
a.s.r.’s businesses have put ten rules of the ethical manifesto into effect in their own way. A number of activities in 2018: 1. a.s.r. actively engaged a job coach to help unemployed mortgage customers find a job. The job coach helps customers during a six-month period with drafting an application letter and CV. In addition, customers are coached in job application skills. In the past years, 24 customers found a new job in this way (a success rate of more than 85%). a.s.r. also engaged a budget planner. 19 customers were introduced to this budget planner, 15 of whom eventually followed a budget planning trajectory.
The above-mentioned positive development is also due to: - Growth of the total portfolio; - Adjustment of the reference date; - Favourable economic conditions allowing for a speedier recovery; - Successful handling of arrears, based on getting in touch with customers promptly, tracing the cause and offering suitable solutions.
2. In 2018, 150 insured were signed off at the CAK (the Central Administration Office) by Health for reasons of leniency because only their excess was still outstanding. All their premium arrears had been paid. Although, by law, all debts must have been settled before being eligible for signing off, for reasons of leniency Health has chosen to sign off these insured persons (with permission from the Ministry of Health, Welfare and Sport) so that they have more repayment capacity to recover the excess.
In 2018, the PARP Committee approved 4 new propositions, 18 product adjustments and 11 reviews of existing products. Examples of the PARP Committee’s approval include: Langer mee AOV, Direct Ingaand Pensioen, VVP Recreatiewoningverzekering and Pechvogelhulp Plus.
The Complaints Management team monitors the implementation of a.s.r.’s complaints policy and manages the complaints scheme. The complaints handling itself is decentralised within the organisation. Key principles and objectives of complaints management are: • a.s.r. is open to complaints, making it easy for customers to lodge a complaint; • a.s.r. communicates its views and the solution to the complaint in an understandable manner; • a.s.r. wants to learn from its mistakes.
Introduction of a new training plan Building on the further professionalisation of complaints management, a.s.r. upgraded the training plan for complaints officers. Complaints officers were involved in this project in order to gain insight into their training needs. This resulted in the introduction of a new and varied training plan in September 2018.
4.2 Investors a.s.r. attaches great value to a strong relationship with the investment community in the broadest sense and sets high standards with respect to transparent communication and fair disclosure. The aim of a.s.r.’s investor relations is to provide all relevant information which may help investors make well-informed investment decisions. a.s.r. does its utmost to ensure that the information it discloses is accurate, complete and timely.
a.s.r. provides relevant insight into its activities through selected financial and non-financial disclosures. To that end, it regularly updates the markets on its financial performance, the progress a.s.r. is making in the execution of its strategy and any other relevant developments by means of press releases, webcasts, conference calls and other forms of communication.
a.s.r. seeks active engagement with existing and potential shareholders, bondholders, research analysts and rating agencies in order to build enduring relationships based on a constructive dialogue. a.s.r.’s executive management team hosts one-on-one and group investor meetings during (international) roadshows or in-house, and attends broker-organised investor conferences. See www.asrnl.com for a.s.r.’s policy on fair disclosure and bilateral dialogue.
In February, a.s.r. organised a sell-side analysts’ dinner, which was attended by 21 analysts. In June of the same year, a.s.r. held a conference call to give an update on the Generali Nederland integration. And in October 2018, it hosted a CMD at its office to update the market on its strategy and its financial and non-financial targets for 2019–2021.
The total shareholder return¹ amounted to 7.08% in 2018 (including dividend reinvestment in a.s.r. shares). The total return since IPO amounted to 96.9%. The Euronext AEX index and the Stoxx Insurance 600 Insurance Index were both outperformed by 11.2% and 10.8%, respectively.
Average daily volume shares 474,054 602,768 223,479 a.s.r. is included in the following indexes: • AEX since 19 March 2018; • FTSE4Good Index Series, confirmed on 10 July 2018; • Ethibel Sustainability Index (ESI) Excellence Europe since 21 September 2018; • a.s.r. is also included in several indexes of the MSCI.
Ratings and bonds a.s.r. has five listed bonds outstanding. On 31 December 2018, the total nominal amount was € 1,509 million. a.s.r. has ratings from S&P. In 2018, a.s.r. had several conference calls with the rating agency and a meeting at the a.s.r. offices to discuss both developments at a.s.r. and the Dutch insurance market. This resulted in a comprehensive S&P analysis report on a.s.r. on 20 August 2018, which confirmed the ratings and outlook. The single A rating of the insurance entities has applied since 29 September 2008, and the stable outlook since 23 August 2012.
ASR Schadeverzekering N.V. IFSR A Stable 23 August 2012 10% Tier 1 hybrid bond BBB+ 17 July 2009 7.25% Tier 1 hybrid bond BBB+ 17 July 2009 5% Tier 2 hybrid bond BBB- 16 September 2014 5.125% Tier 2 hybrid bond BBB- 16 September 2014 4.625% Tier 1 hybrid bond BB 5 October 2017
Please find more detailed information about investors in Annex A Facts and figures.
a.s.r. needs competent, agile and vital employees with an entrepreneurial and versatile attitude in order to realise ‘the story of a.s.r.’. Employees who can and dare to take control of their day-to-day work, including their own careers, but also employees who can handle change, within a.s.r. as well as in the market in which it operates. Because a.s.r.’s environment is rapidly changing. Consider for example, developments such as robotisation, digitisation and artificial intelligence. But also the entry of new players onto the market and the fact that employees must work for longer due to the increase in the state pension age. This also changes the requirements made of employees. This is why a.s.r.’s HR policy focuses on personal leadership and personal agility, on supporting employees in their professional development and on boosting their continued employability and labour market appeal.
The a.s.r. culture The story of a.s.r. was updated in early 2017. a.s.r.’s strategy, mission, vision and core values were also reformulated at this time (see also chapter 3.1.1 Strategic principles).
Everyone at a.s.r. abides by the organisation’s core values, which set out the basic approach and are used as a behavioural compass. These core values are: I. ‘I’m helpful’. Employees are approachable, listen attentively, then help with solutions using their expertise, experience and commitment; II. ‘I think ahead’. Employees empathise and think ahead to proactively help customers, intermediaries and colleagues; III. ‘I act decisively’. Employees are alert and sharp to content and process, and come up with solutions. They coordinate, are persistent and stand by their commitments.
The story of a.s.r. is reflected in all HR instruments and tools and in the HR strategy.
Organisational success and employee engagement In April 2018, a.s.r. conducted the yearly Denison organisational success survey, which measures the success of an organisation in several dimensions, e.g. engagement. The results are compared to a global benchmark of large organisations that use the Denison organisational success survey. This was the second time this survey was conducted.
Each Management Team discussed the results for their business line and devised a follow-up.
Employees took part in one of the development programmes 719 819 661
Employees were given guidance in the context of redundancy 154 182 112
The a.s.r. head office building was voted Best Office Building in the Netherlands 2014 by Intermediair Magazine. The jury report said: ‘The building is of a high quality due to its acoustics, distribution of daylight, indoor climate, workplace variation and connection with outdoor spaces. The philosophy of a.s.r. and the office also go together very well: transparency, sustainability and sobriety are reflected very strongly in the transformed office.’
Flexi-work in terms of location and hours, including part-time jobs at all levels, is one of the ways a.s.r. helps employees to manage work-related stress and work-life balance. It also has programmes to reduce stress in the workplace, an important issue for office-based companies. a.s.r. also allows paid time off for voluntary work (see chapter 4.5 Role in society) because it believes its employees should continue to feel a strong connection with the local community. It also provides in-house fitness facilities and advice on healthy nutrition.
Absenteeism a.s.r. is committed to maintaining healthy employees and tries to reduce absenteeism wherever possible. This involves a role for the manager in the event of employee sickness. a.s.r.’s reintegration manual for managers describes the role and responsibilities of a manager during and after the absenteeism process and in preventing absenteeism. The manual was updated in 2018. The aim is to prevent and reduce absenteeism within a.s.r. The absenteeism rate for 2018 was 3.83% (2017: 3.95%). Although absenteeism has decreased, the target in this area is not achieved. a.s.r. will maintain its efforts on behalf of the health and vitality of its employees in 2019. In 2018, 56% of all employees were not absent due to illness.
Due to the strengthening labour market, a.s.r. is investing in distinctive employer branding. Employer positioning has been tightened up to align more closely with corporate positioning. The recruitment site ‘working at a.s.r.’ has been updated and new recruitment methods, such as online advertising, search and talent pools, have been used. Use of social media has been intensified and higher name recognition is being pursued through online campaigns. Employees are also deployed as ambassadors through videos and interviews.
In order to attract young talent, a.s.r. has entered into partnerships with various students’ associations and universities. In 2018, it was represented at various events at colleges and universities.
Trainee programme a.s.r. has its own trainee programme in which young talented people carry out four different assignments in a single business line over an 18-month period. Trainees also follow a customised development programme which includes training courses, a buddy programme and various projects.
Diversity and inclusivity a.s.r. is committed to achieving an inclusive culture in which difference is recognised, valued and used to the full. a.s.r. believes in the positive effect of a diverse workforce on its success and innovation – be it through differences in gender, ethnicity, age, religious beliefs, education, sexual orientation, disability or nationality.
Objectives of the diversity policy At least 30% of the Supervisory Board, Executive Board and senior management to be male or female. In 2018, the Executive Board had three male members and one female member (25%), the Supervisory Board had three male and two female members (40%). On 31 December 2018, senior management consisted of 21 members, 6 of whom (29%) were women. In order to achieve the 30% target, application of the diversity policy has been explicitly included in the recruitment of Supervisory and Executive Board members. Diversity policy is part of the recruitment process and the employee review, in which succession planning, among other things, is discussed.
Male/female Other employees 60/40 60/40 60/40 1 Nil absenteeism is the number of employees or percentage of employees who have not reported sick during the reporting period.
a.s.r. is committed to employing at least 70 people through the Participation Desk by 2026. These are individuals with an occupational impairment who are covered by the
Number of employees through the Participation Desk 70 29 31 12
In summer 2018, a.s.r. began negotiations with the trade unions De Unie, CNV and FNV concerning the extension of ‘De Andere Cao’, a.s.r.’s own CLA, which took effect on 1 January 2018. At the same time, the parties started negotiations on the extension of ‘Het Andere Plan’, a.s.r.’s social plan. The third topic on the negotiating table was the a.s.r. pension scheme. This scheme expired at the end of 2017 but was ‘frozen’ with the introduction of ‘De Andere Cao’.
‘De Andere Cao’ In September and October 2018, employees gave their opinion on ‘De Andere Cao’ in writing and through participation in round table discussions. These evaluations were included in the discussions concerning the extension of ‘De Andere Cao’.
bonus and a buy-out, which occur only occasionally and are awarded in line with legislation and regulations. The same applies to severance pay.
The differences in hourly wages between men and women shown in the table below are caused by the on average higher number of years of service of men. Because men have served for an average of 3.5 years more than women, they have reached on average a relatively higher position on the salary scale for a given job.
a.s.r. has taken a number of control measures to prevent, recognise and defy unethical behaviour, including combating corruption. Examples of control measures include pre-employment screening and the screening of intermediaries and suppliers. An integrity screening is carried out by Investigations prior to hiring new employees. This also applies to everyone who regularly works for a.s.r., including suppliers and brokers. Anyone who carries out work at or for a.s.r. must take the professional oath or make a solemn affirmation within three months of taking up their duties. In this way, a.s.r. seeks to prevent the risk of physical, financial or reputational damage to the company, its customers and/or other business relations.
companies in the Netherlands being involved in bribery and/or conflicts of interest which impair the integrity of, and trust in, that company or in the financial markets’.
In 2018, 85 cases of alleged lack of integrity were investigated. In 35 of these, there was a proven lack of integrity in the conduct of an employee, intermediary or supplier. With respect to the conduct of employees, in 2018 14 employees violated the a.s.r. code of conduct.
After investigation a lack of integrity, e.g. fraud and inappropriate conduct or behaviour, was proven. These employees were disciplined for disobeying the principles. This resulted in addressing behaviour, written warning or dismissal. Investigations reports quarterly on the number of incidents and measures taken. This report is discussed with the Board of Directors and the Supervisory Board.
The measures taken in 2018 and 2017 are as follows: Violations measures taken
4.4 Sustainable management a.s.r. organises its business operations in a sustainable manner. This chapter describes the own CO2 footprint and the social responsible procurement policy of a.s.r. Furthermore the way in which a.s.r. deals responsibly with its tax obligations and how a.s.r. takes into account human rights are explained.
Carbon footprint of a.s.r. head office a.s.r. intends to be a good steward of nature and the environment by preventing waste and limiting negative impacts. a.s.r. places special focus on its carbon footprint, which comes in two varieties: • Indirect footprint, as a result of investment activities
a.s.r. seeks to minimise its impact by striving for an efficient use of energy. In addition, a.s.r. is actively getting to grips with carbon emissions, mobility and waste management.
The CO2 footprint of a.s.r. is based on the principles of the Greenhouse Gas Protocol, which divides emissions into three scopes, as can be seen in the table below.
a.s.r.’s absolute CO2 emissions are presented in the table below. It should be noted that the 2018 figures include around 150 additional employees compared to 2017 due to the acquisition of Generali Nederland.
Business travel as a result of lease car fleet 27.0 2,172 29.1 2,248 31.1 2,302
2 In addition, the figures are based on a.s.r.’s head office (91,912 m² of gross floor area). The establishments in Enschede (1,830 m² of gross floor area) and Rotterdam (approx. 1,000 m² of gross floor area for office space and 3,900 m² of gross floor area for archives) are not included (due to small sizes).
(2017: 85 tonnes); • Cooling emissions increased slightly to 56 tonnes
In 2019, all central-heating boilers will be replaced by heat pumps, as a result of which no natural gas will be used for heating anymore.
Scope 2: Emissions resulting from electricity As in previous years, part of the electricity used was self-generated by solar cells. The remaining part consisted of zero emission Swedish wind energy, resulting in zero Scope 2 emissions.
The numbers of charging points will be extended for E-bikes by 120 and for E-cars by 12 in 2019.
a.s.r. operates CO2 neutrally a.s.r. compensates for all CO2 emissions caused by its business activities. By using solar panels and CO2-free electricity, in combination with an active policy of reducing energy consumption, a.s.r.’s Scope 2 emissions are unchanged compared to previous years, i.e. zero. The compensation of the Scope 1 and Scope 3 emissions in 2018 was 8,044 tonnes of CO2 (2017: 7,725 tonnes).
Energy efficiency The energy consumption (Scopes 1 and 2) of a.s.r.’s head office decreased by nearly 270,000 kWh in 2018 compared to 2017. The largest positive impact was realised by replacing existing computer servers by fewer and more energy efficient servers.
In 2018, the head office energy usage was reduced by 4%, to 65.3 kWh per m² (2017: 68.2 per m²). a.s.r. aims to meet the Paris ambitions for its head office. This requires a.s.r. to further reduce its emissions to 50 kWh per m² by the year 2050 at the latest.
Socially Responsible Procurement policy a.s.r. imposes additional requirements on its suppliers ² in the areas of the environment, human rights and working conditions, when relevant within the scope of the sourcing matter. The requirements are part of all procurement contracts concluded between a.s.r. and its suppliers since 2017. As a result, awarding an assignment depends partly on the Socially Responsible Procurement document scoring. The main objective of the Socially Responsible Procurement policy is to be in dialogue with suppliers on these socially relevant themes. This subject is therefore a recurrent agenda item in the (board) meetings between a.s.r. and its most strategic suppliers.
1 Gold Standard Project Bolivia: Compensation via Gold Standard certificates stands for the amount of CO2 that the forest holds. Trees are planted if necessary, but compensation also takes place by the conservation of the forest through education, alternative income support for local president etc.
In Control process. The Tax department is the ‘single point of contact’ for the Dutch tax authorities and it holds periodical and ad-hoc consultations with the Dutch tax authorities.
The effective tax burden differs from the (nominal) statutory tax rate. This is caused, for example (in 2017 in particular) by applying the holding exemption. In addition, there was an effect of the reduction in the corporate income tax rate in 2018, with a tax rate of 22.55% in 2020 and 2021 a tax rate of 20.5%. For a reconciliation of the nominal tax burden to the effective tax rate, reference is made to chapter 7.6.12 of the financial statements.
Tax payments The Netherlands Corporate income tax and withholding taxes 47 226
Domestic and foreign taxes levied at source, offset against Dutch corporate income tax 7 5
Turnover tax - Turnover tax not offset 34 37 - Turnover tax paid 3 1
Investments via external funds When making investments via external funds, tax considerations are not leading. Investments are assessed on a business case, which includes the investment fund’s strategy and the asset manager’s quality. The tax assessment from an a.s.r. perspective serves only to ensure the proper tax qualification of the investment.
In line with its status as a signatory to the United Nations Global Compact (UNGC), a.s.r. works to ensure that human rights are respected. Moreover, a.s.r. endorses the UN Guiding Principles on Business and Human Rights (UNGPs), setting out the global standards for companies to respect human rights via a ‘protect, respect and remedy’ framework, as well as other more detailed standards, such as the OECD Guidelines for Multinational Enterprises or the Equator Principles for the financial sector. As such, a.s.r. strives to integrate human rights risk management and due diligence into existing business processes across all operations.
The largest potential link with challenging human rights situations is considered to be found in asset management activities. In addition, causing or contributing to human rights violations may occur in a.s.r.’s own operations, through partners or intermediaries and in the supply chain.
• Supply chain a.s.r. does not do business with partners involved in crime or other socially undesirable acts, including money laundering, fraud or the financing of terrorism. a.s.r. has a CDD policy that requires screening before a contract is signed. The contract management policy also stipulates that screenings are to be carried out on a periodical basis. If, in the opinion of a.s.r., there is reason to doubt the integrity of a supplier, appropriate measures are taken. a.s.r. imposes additional requirements on its suppliers in the areas of the environment, human rights and working conditions. The requirements are part of the procurement contracts concluded between a.s.r. and its suppliers.
Ethical dilemmas a.s.r. fulfils different roles, which sometimes makes it challenging to serve all stakeholder interests when making decisions. Giving proper weights to these challenges is a process wrought with uncertainty and ethical dilemmas. Therefore, a.s.r. is looking for new ways to stimulate open dialogue throughout the company, centred around dilemmas a.s.r. faces in its business. Practicing ethical reflection and discussion about dilemmas helps to involve a wider range of perspectives and interests from all relevant stakeholders.
Through these initiatives, a.s.r. attempts to develop company-specific guidelines to help reflect on how a.s.r. deals with dilemmas in the different contexts of its various business activities, enabling a.s.r. to gauge its ethical culture and consider to what degree daily decisions express its core values and contribute to society in valuable ways. By creating opportunities for dialogue about dilemmas, a.s.r. hopes to be better equipped to deal with changing societal norms and circumstances as an organisation and stimulate the growth of ethical awareness in all of its employees.
Please find more detailed information about sustainable management in Annex A Facts and figures.
a.s.r. foundation a.s.r. foundation encourages employees to contribute to society, in a team or as an individual. On an annual basis, a.s.r. provides hours and financial resources in this context. a.s.r. foundation initiates projects with the help of the voluntary efforts of colleagues with regard to two themes: • Financial self-reliance: providing help to prevent people from getting into debt or to get people out of debt again with the help of voluntary commitments of employees; • Helping by doing: inspiring, motivating and mobilising a.s.r. employees to voluntarily engage in community activities in a broad sense.
Financial self-reliance In the Netherlands, one in five households has high-risk or problematic debts. The debt burden of these high-risk households is on average € 40,000, spread across 14 different creditors 1. The chance of someone ending up with a debt burden that is hard to resolve depends on a combination of factors. However, it does appear that a disorderly administration, a lack of proper financial upbringing and a low literacy level increase the risk of falling into debt. a.s.r. foundation provides support: • In promoting the financial education of children and young people (reading and teaching); • To households with (a risk of) problematic debts.
Helping by doing a.s.r. considers it important to play a broad social role in the community. This fits in well with the desire of many employees to be actively involved in the community in a meaningful way. Annually, a.s.r. makes time and funding available for this purpose. • In a team context – Social Team Activity (STA)
More and more departments within a.s.r. extend their help as a team in a social organisation. This creates a fine combination of team building and ‘helping by doing’, divided into two categories: ‘Rolling up your sleeves’ (active day-jobs or a day out) and Frisse Blikken (fresh looks). A Frisse Blikken team of a.s.r. employees helps an organisation with solving a strategic problem. In 2018, a team of a.s.r. employees developed a new promotion plan for the Prinses Maxima Manege. This riding school strives to enable people with disabilities to ride horses.
Foundation for Art & Historical Artefacts The purpose of the Foundation for Art & Historical Property is twofold; in the first place, they want to retain a.s.r.’s rich company history. In the second place, the Foundation tries to make art accessible to employees and thus contribute to an inspiring work environment. Read more about the foundation on www.asrnl.com.
As an institutional investor, one way in which a.s.r. takes ownership of social responsibility is through the use of ethical and sustainability criteria in its investment policy. All investments managed by AVB are screened on the basis of the SRI policy, focusing on aspects such as social and environmental criteria. Countries and businesses that do not meet the criteria are excluded. These include producers of controversial or offensive weapons, tobacco, coal, tar sand and shale oil, nuclear energy and the gambling industry. a.s.r. also assesses businesses on their compliance with international conventions such as the OECD guidelines and the UN Guiding Principles.
Ethibel). In 2018 a.s.r. took the necessary actions to align the recently acquired investment portfolio from Generali Nederland and make it fully compliant to the a.s.r. SRI policy.
ESG integration for best-in-class investments Best-in-class investing is part of the a.s.r. selection process for companies based on ESG best practices and products. a.s.r. favors companies that deliver an above-average performance in the area of ESG policy and implementation. Based on Vigeo Eiris research, which is certified by Arista standards, they are classified as pioneering, best-in-class and sustainable companies using a relative, sector-based ranking for six domains of analysis: Human Resources, Environment, Market Ethics, Good Governance, Social Impact and Human Rights. A detailed description of these criteria is published on www.asrnl.com.
For sovereign bonds, a.s.r. applies a best-in-class selection of countries based on their SDG performance, according to the SDG country ranking published by the SDG Index: the weighted average score of a.s.r. sovereign portfolio is positioned within the first quartile (Best in class) of the SDG Index.
- Methane in the oil and gas industry via the CIO dialogue platform: Methane is a greenhouse gas with an even higher effect on global warming than CO2. Being the main component of natural gas, oil and gas companies are among the largest emitters of methane. A group of 11 Dutch institutional investors joined forces to engage the largest 7 oil and gas companies to request methane emission reduction targets and the integration of these targets into their incentive policies. a.s.r. took the lead in engaging Total and the first call took place in December 2018.
III. Public engagement: In 2018, a.s.r. continued to participate actively in the dialogue to create an International Corporate Social Responsibility (ICSR) sector covenant, together with peers, the public sector and various NGOs. The covenant was signed in June 2018, with a.s.r. being active in 3 working groups. At the Platform Carbon Accounting Financials (PCAF), a.s.r. participated actively in 2 new working groups to develop a carbon accounting methodology for real estate, mortgages and indirect investments. Additionally, a.s.r. was committed to the Access to Medicine Index, promoting access to medicine to everyone (SDG3). In 2018, a.s.r. became a member of the Institutional Investors Group on Climate Change (IIGCC), a forum for investors to collaborate and engage on climate change risks (SDG 13). Also, a.s.r. participated in a number of UN PRI initiatives: the signing the UN PRI Tobacco Pledge (SDG 3), the UN PRI Investor letter to the Roundtable on Sustainable Palm Oil (SDG 12), and the UNPRI Investor statement for alignment of sustainability requirements in the textile sector (SDG 8). a.s.r. was a speaker on various ESG events, such as the Erasmus RSM Global Sustainability Forum, ESG roundtable from Financial Investigator or the BlackRock Mid-Year Outlook conference.
Voting policy A shareholders’ right to vote is essential for a proper functioning of a corporate governance system. a.s.r. exercises this right whenever relevant. a.s.r.’s voting policy (www.asrnl.com) has been developed in accordance with the Dutch Corporate Governance Code and a.s.r.’s SRI policy. This policy is applicable to all internally managed listed equities. In 2018, a.s.r. voted at nearly 98% of the shareholder meetings held by equity investments. Of the 817 shareholder’s meetings, there were 287 that had at least one vote Against, Withhold or Abstain. Of these 287 meetings, there were 12 meetings with one or more votes against remuneration with regard to the Board of Directors or Supervisory Board and 114 meetings with one or more votes against appointments. The voting accountability report provides a quarterly review of how a.s.r. exercised its voting rights at shareholder meetings. The full report for 2018 is available on a.s.r.’s website www.asrnl.com.
Externally managed assets The external providers’ SRI policy is a key decision criterion in the selection of external managers. To the extent possible, a.s.r. seeks managers with a SRI policy that is as comparable as possible to that of a.s.r. and, as a minimum norm, a.s.r. requires exclusion of controversial weapons as per the Sustainable Investing Code of the Dutch Insurance Association and the best possible effort to be a signatory to the UN PRI and the UN Global Compact principles. In addition, a.s.r. engages with its external managers to enhance their SRI policy, implementation and transparency. In September 2018, a.s.r. engaged actively with new and existing managers such as BlackRock, with whom a.s.r. co-developed and seeded the first ESG EMD index tracker fund. a.s.r. receives frequent sustainability reporting from its external managers and, where possible, a.s.r. requests impact metrics in addition to the SDG reporting.
Current analyses focus mostly on bottom-up climaterelated risk analyses and reporting and do not consider top-down integration via macro-economic (quantitative and qualitative) modelling. Considering a top-down analyses is important, however, because empirical research has shown that portfolio returns are determined to a large extent by investment decisions made at the strategic level.
As a real estate investment manager focusing on long-term value creation, the objective of making real estate more sustainable is important. a.s.r. real estate believes in long-term relationships with its stakeholders. Together with them, a.s.r. real estate wants to reduce its carbon footprint. But CSR goes further than just a sustainable management of real estate. a.s.r. real estate wants to contribute to both the environment and society by investing in neighbourhoods, among other things. The funds and business lines continuously strive to make the properties in their portfolios more sustainable. Their focus is on both sustainable acquisitions and making standing investments more sustainable with a keen eye on energy efficiency of the buildings, using sustainable materials & methods and greenery. a.s.r. real estate is continuously investigates and implements new developments and applications, such as solar parks, transforming vacant spaces and/or buildings, energy-neutral dwellings, charging points for electric cars and green rooftops.
In November 2018, the ‘Nationale Bodemhack’ took place. During the ‘hackathon’, data scientists, programmers, farmers and lots of other interested people worked on challenges whose outcomes will be beneficiary for sustainable soil management.
In the long run, a.s.r. real estate expects to have a positive impact on the soil fertility of Dutch agricultural land. a.s.r. rural real estate promotes sustainable soil management by intensifying the working relationship with partners in the ‘sustainable soil management’ charter coalition.
Green Building Certificate In addition to the portfolio’s energy label certification, the Funds aim to improve the sustainability of their portfolios even further by focusing on achieving Green Building
About 70% of the ASR DMOF portfolio, including future projects in the pipeline, currently have a Green Building Certificate. In line with the objective for 2018, a BREEAM Quick Scan for Eempolis in Utrecht was completed.
Tenant satisfaction Real estate is not only an investment, a.s.r. real estate also aims for aware, involved and satisfied tenants. In this context, a.s.r. real estate conducts periodical tenant satisfaction surveys amongst tenants of residential, retail, office and rural real estate. The feedback shows how they rate the services, properties and their living and working environments. The outcomes are processed by Asset Management and, where applicable, discussed with internal or external property managers. a.s.r. real estate aims to achieve an average tenant satisfaction rating of at least 7 (out of 10).
Sustainable investing – GRESB benchmark By participating annually in GRESB, an independent benchmark that assesses the sustainability of real estate investment funds around the world, a.s.r. real estate improves its transparency and awareness of sustainability. In 2018, all three funds which were participating in GRESB 2017 improved their scores. As a result, all of the funds now score above the average for their peer groups.
• a.s.r. offers insurance to cover (the costs of) health care, available at one price (per label) for anyone who is eligible for this type of insurance under Dutch law.
• a.s.r. plays an active social role in helping people recognise health risks, advising on possible interventions and increasing awareness of the importance of health.
a.s.r. strives for an inclusive culture in which differences between employees are recognised, valued and exploited. With regard to gender: 25% of the Executive Board was female, while the Supervisory
Long term value creation | 4.7 Overview Sustainable Development Goals 74
One of the four principles of a.s.r.’s policy on diversity is ‘Participation of people with limited labour market potential’. In 2018, a.s.r. had 29 employees with an occupational impairment.
a.s.r. invests with a strict ESG policy aimed at stimulating sustainable economic growth. In 2018, a.s.r.
CO2-neutral. a.s.r. real estate funds aim to further improve the sustainability of their portfolios by achieving Green Building Certificates (GBC) (including BREEAM, DGBC Woonmerk and Well). Green building certificates: 11.6% of ASR DCRF’s portfolio is certified, shopping centre Terwijde Utrecht obtained BREEAM In Use certification in 2018 and about 70% of the ASR DMOF portfolio has a Green
The Climate Committee of P&C focuses on the impact and risks of climate change on customers, intermediaries and a.s.r. This is done by developing climate maps, improved risk and claims assessments and supporting intermediaries and customers with information to prevent climate risks.
a.s.r. real estate aims to improve the soil for healthy agriculture. Research is conducted for the development of a label with which degree of soil fertility can be measured.
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‘I love the colours in this painting. I tend to like art that’s colourful. If you look at this work from a distance, you’d almost think it was a photograph. It’s partly due to the play of light, which looks very natural. But if you move closer, you’ll see it’s built up from many layers. It’s very cleverly done.’
Provision for restructuring expenses -25 -10 - - Banking and Asset Management 16 6 186.3%
1 Generali Nederland figures are indicative in connection with the ongoing integration and conversion of portfolios.
Earnings per share Operating result per share (€) 3.63 3.53 2.8%
Number of internal FTEs (as at 31 December)¹ 3,683 3,493 190
Operating result increased € 14 million to € 742 million in 2018, this includes the impact from a heavy storm in January (€ -30 million). The acquired businesses from Generali Nederland contributed approximately € 40 million to the operating result, mostly in the Life segment of which approximately € 30 million is sustainable.
The result in Non-life segment decreased € 27 million to € 145 million, driven by the lower result from P&C business reflecting the effect of large claims from the storm in 2018 and the absence of calamities in the prior year. Outside these larger effects the business showed healthy underlying development. In Disability and Health the operating results remained fairly stable.
The Life segment increased € 31 million to € 664 million, mainly due to higher investment margin from the acquired Life business of Generali Nederland. Technical result remained stable, due to continuing cost awareness as well as additional cost coverage and synergies from the Generali Nederland portfolio.
The operating result of the Bank and Asset Management segment rose € 11 million to € 16 million. The increase of AuM resulted in higher fee income, especially as result of strong inflow in the ASR Hypotheekfonds (mortgage fund). Distribution and Services operating result increased € 8 million to € 25 million in 2018. Operating result of Holding and Other decreased € 9 million to € 108 million, driven by non-recurring items.
GWP increased € 538 million to € 4,459 million, including the contribution of Generali Nederland (€ 409 million). GWP in the Non-life segment increased (€ 435 million), which was mainly attributable to Generali Nederland Non-life (€ 314 million) and solid organic growth in each business line. Growth in P&C was driven by sales of ‘Vernieuwd Voordeel Pakket’ (up 25% from 2017). The increase in GWP in the Life segment (€ 113 million) was mostly due to the inclusion of Generali Nederland Life (€ 95 million). Sales in the Pension DC-product (‘WerknemersPensioen’) more than offset the decline in Individual life. Funeral remained stable, excluding one-time single premiums.
Profit before tax was € 904 million (2017: € 1,126 million). Profit before tax in 2017 included an exceptional investment result from the sale of preference shares Unilever. In 2018, declines in financial markets resulted in an increase of impairments. The contribution of other incidental items decreased due to expenses related to the integration of Generali Nederland as well as higher regulatory costs for, amongst others, the implementation of IFRS17/9 legislation.
Operating return on equity amounted to 14.2% and was well above the target of up to 12% (2017: 16.0%). The decline reflects the effect of the increase in the average shareholders’ equity (+13%) surpassing the increase of operating result (+2%). IFRS return on equity stood at 13.7% (2017: 21.2%).
The COR of the Non-life segment was 96.5% and better than the target of 97%. The increase of 1.4%-point compared to the prior year is driven by the impact from the January storm (1.0%-point). The COR of P&C business rose by 2.9%-point to 98.4% (including 2.6%-point impact from the storm). Besides the impact from larger claims, the underlying regular performance of the portfolio improved slightly. Disability COR remained stable at 90.8%. The Health COR was stable at 99.2%, despite higher claims in the supplementary health insurances.
Operating expenses for Non-life increased € 21 million to € 222 million. This increase was largely related to the addition of Generali Nederland Non-life (€ 17 million). The remaining part was caused by higher staffing costs and one-off transition costs for the migration of the Europeesche portfolio into the a.s.r. and Ditzo platforms. The migration will have a favourable impact on the future development of the cost ratio. In 2018 the cost ratio improved 0.3%-point to 7.3%.
Profit for the year for Non-life amounted € 159 million (2017: € 241 million). Last year was positively influenced by a higher level of realised capital gains (€ 33 million) and this year there were more impairments on equities (€ 31 million) due to a less favourable financial markets climate.
Products a.s.r.’s broad P&C insurance product range offering can be divided into the following categories: • Motor: a.s.r.’s motor policies for retail and commercial customers provide third-party liability coverage for motor vehicles and commercial fleets, including property damage and bodily injury, as well as coverage for theft, fire and collision damage; • Fire: a.s.r.’s fire policies for retail and commercial customers provide coverage for a variety of property risks, including fire, storm and burglary. Private coverage is provided on both a single-risk and a multirisk basis, with multi-risk policies providing coverage both for loss or damage to dwellings and damage to personal goods; • Travel and Leisure: a.s.r. offers travel insurance policies for retail customers and is a market leader in the travel and leisure market in the Netherlands; • Other: a.s.r. also offers other non-life insurance products such as transport goods in transit only, liability, agricultural and construction motorised vehicles, construction all risk and assistance.
Digitisation and innovation Another important part of the a.s.r. strategy is to further simplify and modernise its infrastructure. The new non-life platform will lead to the improvement and digitisation of services to customers and intermediaries. It will also reduce costs, thereby further strengthening a.s.r.’s competitive position. The first retail portfolio has now been successfully converted to this new platform. In 2019, P&C will convert the remaining retail portfolios to the new platform. P&C has also begun to implement its SME products on the new platform.
In 2017, P&C began using Robotic Process Automation (RPA) to perform routine tasks and commercial portfolio migrations more efficiently. It is using RPA in the migration of the Avéro Achmea portfolio and the retail provincial Generali Nederland portfolio.
1 Source: DNB - The market share figures for 2018 will be published in August 2019.
Target Result 2018 1 Organise knowledge sessions for consultants on: - Vehicle crime; - Cyber; - Fire, climate & sustainability 2 Placing prevention content on social media regarding: - Road safety; - Online security; - Worry-free travel; - Safety and sustainability in and around the home and office; - Personal protection
Growing number of followers on social media to > 100,000 by year-end 2020
Key themes in Ditzo’s strategy are: • A focus on customer satisfaction through Ditzo’s customer service; • Continuous optimisation of customer acquisition costs through online channels; • Increasing the share of bundled proposition for existing customers with regard to both health and non-life insurance policies; • To diversify the portfolio through more non care-related sales.
In 2018, Ditzo also migrated to a single platform. This will result in cost savings at P&C level, simplification and a shorter time-to-market. In early 2019, the Generali Nederland Direct non-life portfolio will be migrated to the Ditzo system using robotics. In 2019, De Europeesche will be migrated to the Ditzo platform and the Ditzo and Europeesche organisations will be merged to form a single organisation.
a.s.r. has been a traditional leader in this market, with a market share of 23.9%¹ in 2017² (2016: 24.0%), measured by GWP. The total Dutch disability insurance market measured by GWP totalled € 3.65 billion in 2017.
Under the De Amersfoortse brand, a.s.r. offers a broad range of disability insurance products as well as the services of in-house experts and external parties in the context of prevention and reintegration for SMEs (employers and employees) and self-employed persons.
• Sickness leave: - Products for employers to cover the costs associated with the employers’ obligation to continue to pay wages in the event of employee sickness.
Market The disability market is subdivided into: • Disability self-employed: the entrepreneur has no social security concerning loss of income caused by sickness or occupational disability and is able to insure disability risk up to retirement age.
- Disability (long-term, up to retirement age): After two years of sickness, the employee may appeal to the WIA. WIA is a public act covering all employees in the Netherlands and is administered by UWV (the Employee Insurance Agency). The employee can use this to cover a possible significant loss of income.
Product development a.s.r. continues to provide high quality products and services to its customers by reducing the complexity of those products and by keeping product offerings up to
3 a.s.r. also offers products relating to sickness leave and group disability via authorised agents and mandated brokers.
date. Recently planned/introduced products and services include: • ‘Langer mee AOV’: an affordable product devised for blue collar workers up to retirement age; • Linking the disability payroll system and insurance administration means that personnel transactions are processed directly in the administration; • Linking the disability health services administration and insurance administration means that sickness leave transactions are processed directly in the administration.
At the end of 2018, 11,000 customers signed a 'doorgaangarantie' (continuation guarantee) almost 14,000 5,053
With a market share of 2.0% (2017: 2.1%), a.s.r. was the eighth largest provider of health insurance products on the Dutch market in 2018, as measured by customer numbers. a.s.r. offers health insurance products under the Ditzo and De Amersfoortse brands.
Market The health insurance market is a highly regulated market. The Dutch health care system distinguishes two types of insurance product: basic health insurance coverage and supplementary coverage. All Dutch residents are obliged to have basic health insurance coverage. Basic coverage is the same across all insurers, since it is a statutory requirement. The number of customers who switch care providers per calendar year has been relatively stable over the past four years just under 7%. In 2018 the number of customers that switched amounted to 6.7%.
Making an impact on the personal health of customers a.s.r. aims to help customers improve their health whenever possible. It therefore provides information, services 1 Source: NZA Monitor Zorgverzekeringen 2018
Given that it considers the health of its customers as one of its core focus areas, a.s.r. ended the outsourcing of health care procurement in 2017 and in 2018 brought the contracting of health care providers in-house. In this way, a.s.r. health aims to strengthen its relationship with health care providers for the benefit of its customers, while at the same time facilitating declaration processes in order to benefit customers and healthcare providers alike.
Customer satisfaction As well as introducing products and services to help make customers more healthy, a.s.r. health strives to increase customer satisfaction by organising an efficient and client-focused customer service process. a.s.r. health puts considerable effort into streamlining and digitising the process of paying declarations, customer onboarding and other services, thereby leading to faster and more accurate payments to customers, customer satisfaction, lower operating costs and efficient processes. a.s.r. health also constantly updated the practical information it provided to its employees so that they can in turn improve the quality, accuracy and speed of information they give customers.
Offer of expertise to see if and how a.s.r. health can help health care institutions improve their sustainability
The Green Deals set four goals for the health sector: reduce CO2 emissions, circular production and labour, clean water, and a healthy environment for employees and patients.
a.s.r. health encourages sustainability and CO2 reduction initiatives from its health care suppliers. a.s.r.
At the end of 2018, a.s.r. health set a target to host a ‘sustainability congress’ in mid-2019 for its top 150 health care suppliers. a.s.r. health wants to open up discussions on how it can help and inspire these suppliers to take the next steps. It is now setting up a partnership with advisor CFP green building and investigating possibilities for financing via AVB/Triodos bank.
A sustainability conference is being planned for mid-2019. There are approximately 150 registrations of interest from the real estate managers of health care suppliers.
Phase 3 of the pilot has been successfully completed. Lessons are being implemented in further projects and used to develop a health-based customer organisation.
Provision of support to three health care institutions through approximately 150 colleagues from a.s.r. health
Successfully assisted three institutions for mentally and/or physically ill or challenged people.
Successfully assisted several institutions for mentally and/or physically ill or challenged people.
The operations are conducted by life legal entity ASR Levensverzekering N.V. With a 12% share of the market in 2017¹ (2016: 14.8%), a.s.r. occupies fifth place in the Dutch life market, based on GWP.
The funeral portfolio of Generali Nederland has already been converted to the a.s.r. platform, The individual life and pension portfolios are scheduled for 2019 and 2020 respectively.
GWP amounted to € 1,566 million (2017: € 1,453 million). Excluding the Generali Nederland’s contribution of € 95 million the Life segment increased by € 18 million. The decrease in individual life premiums (€ 70 million) was more than compensated by new business in Pensions (€ 68 million) and Funeral (€ 19 million). The growth of Pensions is driven by the ‘WerknemersPensioen ’, which increased by € 85 million to € 216 million (+65%). There are circa 55,000 active participants (2017: approximately 36,000) with a DC pension product. In addition to new customers, this growth is also due to transfers from the existing DB/DC-portfolio. The share of capital light DC pension products in new pension business remained fairly stable at 73% (2017: 77%). The level of surrenders of nominal policies at Individual life was stable at 0.8% but is still above long-term average. This mainly concerns savings mortgages that are surrendered or transferred because of the persistently low interest rates.
results. The decline in the stock market in 2018 resulted in higher level of equity impairments.
Products • DC: a.s.r. provides pension products based on defined contributions with recurring premiums where benefits are based on investment returns on specified funds, in some cases with guarantees. The Employee Pension proposition also offers the accumulation and benefits phase as a single product.
• DB: a.s.r.’s DB pension products are traditional insurance products based on lifelong guaranteed pension payments with recurring premiums with or without profit-sharing. These products also provide an option for additional single premiums for indexation and back services.
• Immediate annuities: in addition to the fixed annuities product, a.s.r. planned to offer a new product for postretirement annuities (De variabele pensioenuitkering) in 2019. This product is based on single premiums and has the option of postponing benefits in response to the low interest rate environment.
Market There is a clear shift in the pensions market towards capital-light products, and this is expected to continue. a.s.r. believes it is well positioned to increase market share with its DC and IORP proposition, through high-level service, cost-effectiveness and capacity for execution, while still meeting its pricing policy. a.s.r.’s modern DC proposition (‘WerknemersPensioen’) has been further developed to strengthen its competitive position and accelerate growth in the DC market. Through this proposition, a.s.r. believes it is well positioned for further individualisation in the future which may result from the current pension debate in the Netherlands.
a.s.r. is also active in the pension market through Het nederlandse pensioenfonds (Hnpf), for which it delivers pension administration and asset management. Hnpf was established by a.s.r. in 2016 to offer new and existing customers an alternative DB product. The first customers were welcomed in 2017 and in 2018 Stichting Pensioenfonds Arcadis Nederland (Arcadis Netherlands Pension Fund) transferred its pension scheme to Hnpf. Hnpf is one of the four major general pension funds in the Netherlands and currently has € 1.3 billion in committed assets. a.s.r. is the pension administrator for the 14,000 Hnpf customers.
Optimise customer satisfaction a.s.r. focuses on clear, simple, cost-conscious pension products. a.s.r.’s DC proposition (WerknemersPensioen) aims to be competitively priced (top 3), rewarded for its fund selection (SRI funds) by independent intermediaries and digital in its communications to participants. In 2018, a.s.r. strengthened the position of the WerknemersPensioen in the market by improving customer portals and optimising sales & customer service. The results of these efforts are reflected in the progress a.s.r. has made in the IG&H pension survey (climbing from the lowest place in 2016 to 4th place in 2018). The goal is to rank in the top 3.
a.s.r. continued to reduce complexity in the existing portfolio by offering more standardised products. The renewal of DB contracts is considered if customers are intending to shift to DC in the near future and meet strict financial criteria consistent with the year before. a.s.r.’s strategy for its existing DB book is to maintain its value, reduce capital requirements, enhance cost coverage and minimise risks. The DB book will gradually become a service book as more employers opt for other pension solutions.
Outlook for 2019 The main outlook for 2019 is further growth in the DC proposition and Hnpf, enhancing online and personal customer services and developing client portals. Attention will also continue to be focused on cost variabilisation through planned migrations and by simplifying and automating operational processes.
Products Term life insurance, the sole selling proposition, consists of traditional life insurance policies that pay out death benefits without a savings or investment feature. 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. The number of unit linked policies is declining year on year.
Strategy and achievements The strategy of Individual life is to maximise and maintain the current value of the individual life book. To achieve this, a.s.r. focuses on optimising customer satisfaction and on reducing and variabilising costs.
Optimise customer satisfaction To increase the value of the individual life book, a.s.r.’s strategy is to optimise customer satisfaction. It believes that maintaining customer satisfaction is crucial for efficiently managing the way in which customers behave and in order to limit unnatural lapses. While focusing on customer satisfaction, a.s.r. is also striving to further digitise and robotise its services and to make these services easier for customers to use.
Sustainability During 2018, Individual life concentrated on digitising its communication. Individual life planted a forest in the Netherlands and Bolivia to mark the fact that many of its customers decided to communicate with us digitally as a way of offsetting CO2 emissions.
Outlook for 2019 The main perspective for maintaining the value of the robust and predictable life book is to complete the planned migrations from the Generali Nederland platform and the remaining a.s.r. legacy platform to the SaaS platform. The focus will also be on further improving and digitising the surrender processes, data management and operational excellence.
As at 31 December 2018, the funeral portfolio consisted of 6.6 million policies and 3.9 million customers. Based on the volume of premiums, Ardanta is the second biggest funeral insurer in the Netherlands.
Products Ardanta’s primary objective is to insure funeral expenses, for which it offers capital and in-kind insurance products. Ardanta also offers practical guidance to survivors and dependants on overcoming their personal loss and advises policyholders and their relatives on practical matters relating to bereavement. This is done through initiatives such as the ‘www.doodgaanendoorgaan.nl’ portal and the services of a ‘funeral coach’, who assists relatives in the days immediately following a death.
Strategy and achievements Ardanta’s strategy is on growth through acquisitions, developing customer-focused initiatives and simultaneously maintaining its low-cost operating platform. In 2018, the portfolios of Generali Nederland and PC Uitvaart were integrated into Ardanta. A total of 360,000 Generali Nederland policies and PC Uitvaart customers were thus transferred to the Ardanta platform.
Outlook for 2019 With regard to new consolidation opportunities, Ardanta will continue to be alert to new developments that could arise. But always with a clear eye on the risk versus reward trade-off. Developments are also under way to facilitate an increase of approximately 25% of claims to be handled digitally in 2019. Finally, Ardanta launched a new initiative in 2018 to actively try to contact relatives of deceased policyholders who had not yet filed a claim: it will continue to make endeavours with this project. In 2018, Ardanta approached approximately 5,500 individuals in this context.
The Banking and Asset Management segment involves all banking activities and activities related to asset management, including investment property management. The related entities include ASR Bank N.V.
(held for sale and discontinued operations), ASR Hypotheken B.V., ASR Vastgoed Vermogensbeheer B.V., ASR Vermogensbeheer N.V. and ASR Financieringen B.V.
Assets under management for third parties (€ bn) 16.0 14.3 9.1%
In October 2018, the Executive Board of a.s.r. decided to look for a strategic buyer for ASR Bank N.V. (hereinafter a.s.r. bank) and enter into a programme to sell a.s.r. bank because it was no longer a core activity. a.s.r. bank has consequently been classified as ‘held for sale’ and a.s.r. subsequently presented the assets of a.s.r. bank on the balance sheet under the item ‘assets held for sale’, and its liabilities under the item ‘Liabilities relating to assets held for sale’. These assets and liabilities have not been offset. a.s.r. has not retrospectively adjusted the prior period figures. a.s.r. bank is measured at the lower end of its carrying amount and fair value less costs to sell. Any excess in the (total) carrying amount of a.s.r. bank over the fair value, less (total) costs to sell is classified as an impairment. a.s.r. presented the profit or loss from discontinued operations (including the impairment) in relation to a.s.r. bank as a single amount (after tax). The profit or loss from a.s.r. bank in relation to the 2017 income statement has been re-presented. The financial result from this business is no longer included in a.s.r.’s operating result.
by Life were subsequently acquired by a.s.r. bank and ASR’s Mortgage Fund. Mortgages are distributed via the intermediary channel only. a.s.r.’s residential mortgage portfolio includes annuity mortgages, linear mortgages, interest-only mortgages and bank annuity mortgages.
Market The Dutch housing market continued its strong recovery from the 22% fall in prices between 2008 and 2013. In 2018, house prices increased by an average of 8.4% compared with 2016 and now average 33% above the 2013 trough. In fact, the market is now showing signs of overheating in terms of affordability and supply, especially in the four largest cities and their suburbs.
Lending by institutional investors and insurers to consumers and businesses continues to increase. Since 2010, these lenders have increased their investments in mortgages and are now funding 25-30% of new mortgage production. This rise in the market share of pension funds and insurers has been mainly at the expense of the four major banks in the Netherlands.
Strategy a.s.r.’s strategy with regard to mortgage loan services is to have lean and reliable processes and to achieve economies of scale by servicing growing mortgage loan portfolios. The growth of loan assets under administration was partly due to the organic growth of the mortgage loan portfolio in Life and a.s.r. bank, but chiefly to the introduction of the ASR Mortgage Fund. a.s.r. considers mortgage loans to be an attractive asset class in which to invest insurance premiums, and offers institutional clients the opportunity to invest in a.s.r. mortgages through the ASR Mortgage Fund. a.s.r. aspires to be a front-runner in supporting mortgage customers in the energy transition of their homes.
Outlook for 2019 Further growth of the mortgage business is expected in 2019. The mortgage market appears to be consolidating to some extent, but demand for mortgages to finance investments continues to increase within a.s.r. Further growth will result in ever higher cost efficiency. a.s.r. Hypotheken also wants to continue to play a prominent role in the financing of the energy transition.
ASR Vermogensbeheer N.V. (AVB) has been conducting all of a.s.r.’s asset management activities, with the exception of direct real estate, and is active in the market as a.s.r. the Dutch asset manager.
Products a.s.r. offers asset management services for pension funds, insurance companies, guarantee and donor-advised funds, charities, local and regional authorities, health care and education institutions and other parties in the social sphere. The product array consists of euro corporate bonds, interest rate overlay, euro government bonds, euro equities, balanced mandates, tailor-made bond portfolios, interloans, fixed-income index investments, real estate and a mortgage fund proposition. a.s.r. offers tailor-made solutions with a sound return on investment. In addition, a.s.r. also offers institutional investment funds and integrated/comprehensive management with modular elements such as ALM advice or reports for regulators.
Market As well as complying with growing and more complex legislation and regulations and achieving economies of scale, the asset management market is also progressively consolidating. The number of independent Dutch asset managers is decreasing while at the same time there is a need for specific knowledge of the Dutch market. This provides opportunities for AVB as a practical, no-frills Dutch asset manager.
AVB invests in fixed-income securities such as government bonds (rates) and corporate bonds (credits), including overlay/LDI, European and US equities, real estate and mortgages. These products are offered both as individual building blocks and as part of an integrated solution. AVB believes that selective, risk-controlled deviations from the index can generate higher returns. This approach to investment is referred to as Index Plus investing. Selective deviations from the index can be based on quality criteria and sustainability aspects, for example.
Product development In 2018, the asset base grew, both for internal and third-party clients. AVB has been highly successful with the ASR Mortgage Fund, which was launched in 2017. Total commitments for this fund grew to € 2.3 billion in 2018. Moreover, the recently developed ESG Index Plus funds (rates, credits, European and US equities) received substantial inflows during the year and the LDI proposition was further developed.
Digitisation and innovation AVB is continuously looking for possibilities to further streamline its processes. This is done, for example, by automating repetitive tasks. In 2018, a pilot project was launched to robotise part of the back office activities. Another example of innovation is the integration of ESG factors into the entire investment process, which has given AVB a leading position in ESG investing.
At the beginning of 2019, AVB introduced a marketing campaign stressing the importance of long-term investments (‘LANG’). The aim of this campaign is to increase brand awareness of AVB and underline the ESG profile.
The total inflow of new capital amounted to € 0.3 billion. The total value of acquisitions in several non-listed real estate funds came to € 0.25 billion. During the year under review, several rural real estates were acquired for over € 0.1 billion.
Strategy and achievements The strategy in the Netherlands and on international markets is to create long-term value for investors. To this end, agreements are made to generate returns at acceptable risk levels. In the longer term, it is important for real estate to make a substantial contribution to the (economic) objectives of tenants and leaseholders. a.s.r. real estate also has a strong focus on quality, believing that quality retains its value. It therefore invests continuously in maintenance, good-quality materials, sustainability of buildings and sustainable land use. Sustainability is an integral part of a.s.r. real estate’s investment and management practice.
The strategy of a.s.r. real estate in the agricultural sector is to enable farmers to achieve their entrepreneurial goals within the framework of a.s.r. real estate’s financial and sustainable investment objectives. The objective of a.s.r. real estate is to manage a rural real estate portfolio with long-term value.
Outlook for 2019 The macroeconomic prospects for the years ahead are good. GDP growth amounted to 2.5% in 2018 (Statistics Netherlands, 2019). The economy is expected to grow further by 1.9% during the forthcoming year, so the pace will slow down slightly (Consensus Forecast, 2018). Unemployment has fallen below 4% this year and is expected to reach 3.6% in 2019 (CPB, 2018). The positive economic climate is favourable for both the occupier and investor real estate markets. a.s.r. real estate is predicting positive market dynamics, increasing rents and decreasing vacancy levels on average. The availability of supply will determine the final level of investment volumes. Geographical differences will nonetheless remain substantial. a.s.r. real estate will therefore continue to focus on key regions, towns and locations. However, acquiring high quality products will continue to be a challenge in view of current investor demand and the low supply levels on good locations.
The Distribution and Services segment includes the activities related to the distribution of insurance contracts and includes the financial intermediary businesses of PoliService B.V., Van Kampen Groep Holding B.V., Dutch ID B.V., SuperGarant Verzekeringen B.V. (amongst which ZZP
These extra distribution and services activities, combined with the growth in the distribution businesses acquired in previous years, strengthened a.s.r.’s footprint in the distribution landscape. The portfolio of activities of financial service provider Dutch ID, SuperGarant and Corins in particular showed steady growth compared with the corresponding period the year before.
Corins Corins has been a successful and reputed high-quality underwriting agency in the Dutch co-insurance market since 2003. The addition of the co-insurance activities of Generali Nederland more than doubled those of Corins. The company services over 60 brokers and will continue to represent the multiple insurers it currently does business with. Inclusion of Corins into a.s.r. contributes to a.s.r.’s expansion in the Dutch commercial P&C insurance market. For example, a.s.r. participates in the co-insurance pool of Corins, which enables a.s.r. to grow in the Dutch co-insurance market within the terms of its own risk appetite.
Following the acquisition of ZZP Nederland, SuperGarant also acts as one of the biggest independent service organisations for freelancers, and also represents their interest in the Netherlands.
Stoutenburgh Stoutenburgh is a small independent intermediary which sells, advises on and manages different types of insurance for retail and SME clients. Stoutenburgh’s focus is on P&C retail products and on pension and disability products for SME clients.
Poliservice Poliservice is an intermediary for a.s.r. and its business which sells, advises on and manages different types of insurance, giving direct mortgage and pension advice to its customers and managing the portfolios of intermediaries that have ceased to operate. It acts as a tied agent and is also an insurance intermediary for a.s.r.’s own employees.
Outlook for 2019 For the coming year, it is also important to note that the market anticipates decreasing commission levels for distribution companies. a.s.r.’s aim remains to continue to grow organically with its Distribution and Services segment, as well as to unlock the earnings potential of last year’s acquisitions. In terms of the development of the result for this segment, the growth plans that are being pursued may compensate for the downward pressure on commission levels.
The segment Holding and Other consists primarily of the holding activities of a.s.r. (including the Group-related 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 ASR Levensverzekering N.V. on behalf of a.s.r. for a.s.r.’s employees.
Profit/(loss) for the year attributable to holders of equity instruments -68 -44 -53.5%
The operating result decreased with € 9 million to € -108 million (2017: € -99 million). The decrease is mainly due to the alignment of employee benefit schemes and other one-time items. This was partly compensated by lower Current Net Service Costs for a.s.r.’s own pension scheme (€ 2 million) due to increased discount rates ultimo 2017.
Incidental items amounted to € -19 million compared to € 15 million in the previous year. The decrease is mainly due to prior year’s provision releases and higher incidental costs this year. These relate amongst others to restructuring costs, implementation regulatory costs for project IFRS 17/9 and Generali Nederland integration costs.
These items also impact the development of the profit before tax, which decreased from € -84 million to € -127 million.
Risk appetite statement ASR Nederland N.V. 2018 1 ASR Nederland N.V. places long-term value creation at the forefront of its (strategic) operations.
2 ASR Nederland N.V. ensures that operational risks are controlled efficiently and effectively: a. ASR Nederland N.V. has efficient and effective business processes; b. ASR Nederland N.V. has reliable financial reports; c. ASR Nederland N.V. has controlled internal and external outsourcing; d. ASR Nederland N.V. has IT that processes information reliably.
ASR Nederland N.V. meets the (reasonable) expectations of stakeholders and offers solid and reliable products which are cost-efficient, useful, safe and comprehensible to customers, intermediaries and a.s.r.’s internal organisation. Conducting honest business ensures that a.s.r.’s reputation is protected.
Double leverage ratio = Total value of associates/(equity attributable to shareholders + hybrids and subordinated liabilities).
10 ASR Nederland N.V. is capable of releasing liquidities worth up to € 1 billion over a one-month period following stress and remains capable of meeting its collateral requirements in the event of a 3% interest increase.
The performance against the statements (risk profile) is monitored by the risk committees. The risk profiles of the departments are periodically discussed in Business Risk Committees (BRC). After being discussed in a BRC, the non-financial risk profiles are reported to the Non-Financial Risk Committee (NFRC) and the financial risk profiles are reported to the Financial Risk Committee (FRC). The integrated risk profile is reported to the a.s.r. Risk Committee. In the event of infringements, the committees are authorised to decide on corrective actions. The risk governance structure ensures that the risk profile is monitored effectively and that action is taken at the correct and appropriate time.
As part of the regular ORSA process, a.s.r. assesses the accuracy of the Solvency II standard formula on an annual basis, taking into account the identified risks and the risks that are not part of the standard formula (such as inflation risk, strategic and reputational risk, model risk, contagion risk and liquidity risk).
Based on the output of the ORSA, a.s.r. draws conclusions regarding its capital adequacy. Risk-mitigating measures are also identified as part of the ORSA process and are integrated into the relevant risk management cycles. Risk management cycles are embedded in day-to-day business in order to structurally measure, analyse, monitor and evaluate the identified risks that are at odds with the risk appetite.
In 2018, a.s.r. took various steps to support the assurance given by the Actuarial Function (AF) and the RMF regarding the reliability of the Solvency II calculations and reports. In this context, a.s.r. continued to pay attention to improving data quality to information management systems. To gain a reasonable assurance regarding the accuracy of model outcomes in accordance with the Solvency II regulation, a.s.r. applies model validation and other mitigating measures. The primary scope of model validation consists of determining best-estimate liabilities and solvency capital requirement models.
The risk priorities are as follows: 1. Pressure on the cash-generating business model; 2. Juridification of society; 3. Pressure on investment returns; 4. Impact of supervision, laws and regulations; 5. Information (cyber) security risks.
In addition to the risk priorities, a.s.r. also identified emerging risks. Emerging risks are defined by a.s.r. as new or existing risks with a potentially major impact, the level of which is hard to define.
Gross risk: the risk that exists if there are no control measures in place.
Pressure on result and renewal of cashgenerating business model The insurance market is changing and the (current) cash-generating business model is being squeezed due to the scale and speed of (technological) developments in the insurance market. These developments change customer demand, bring new entrants onto the insurance market and intensify competition, cybercrime and technological developments.
Risk description Political, regulatory and public attention has focused on unit-linked life insurance policies for some time now. Elements of a.s.r.’s unit-linked life insurance policies are challenged on multiple legal grounds in current legal proceedings, and may continue to be challenged in the future. There is a risk that one or more of the current and/or future claims and/or allegations will be upheld. To date, a number of rulings relating to unit-linked life insurance products have been issued by the Financial Services Complaints Board (FSCB) and (appeal) courts in the Netherlands against a.s.r. and other insurers in specific cases. In these proceedings, different (legal) approaches have been taken to arrive at a ruling. The outcomes of these rulings are diverse. As the record of (a.s.r.’s) policies dates back many years, it contains a wide variety of products with different features and conditions and, since rulings are so diverse, no reliable estimate can be made of the timings and outcomes of these current and future legal proceedings.
Although the financial consequences of these developments could be substantial, a.s.r.’s exposure cannot be reliably estimated or quantified at this point. If one or more of these legal proceedings succeed, there is a risk that a ruling, though only legally binding for the parties involved in the proceedings, could be applied to, or be relevant for, other unit-linked life insurance policies sold by a.s.r. Consequently, the financial consequences of any current and/or future legal proceedings brought upon a.s.r. could be substantial for a.s.r.’s life insurance business and may have a material adverse effect on a.s.r.’s financial position, business, reputation, revenues, operating results, solvency, financial condition and/or prospects.
Compensation scheme for unit-linked products In 2008, Life concluded an outline agreement with two leading consumer protection organisations to offer compensation to unit-linked policyholders if the cost and/ or risk premium exceeded a specified maximum. A full agreement on the implementation of the compensation scheme was reached in 2012. The total recognised cumulative financial costs relating to the compensation scheme for Individual life in a.s.r.’s income statement up to 2018 was € 1,030 million. This includes, amongst other things, compensation paid, amortisation of surrender penalties and costs relating to improved product offerings. The remaining provision in the balance sheet as at 31 December 2018 amounted to € 44 million and is available only to cover potential additional compensation (for distressing cases and costs relating to the compensation scheme). Individual cases have a limited impact on the risk profile.
Pressure on investment returns It is becoming more and more challenging to generate sufficient returns on investments and to be able to reinvest on attractive terms. The pressure to generate investment returns (search for yield) creates a considerable tension between risk and return.
Unforeseen political developments and/or macroeconomic trends could weaken a.s.r.’s solvency position. a.s.r. will remain permanently alert to the risk of a scenario developing in Europe with a major impact on capital and solvability. It therefore continuously monitors its interest rate position and reports the findings to the FRC. The Interest Rate Risk Committee then holds preparatory discussions to decide whether or not to adjust the interest rate hedge. The consequences of possibly low investment returns or interest rate fluctuations are also examined more fully in the Strategic Asset Allocation (SAA), an annual ALM study which a.s.r. conducts at its own expense, and, to some extent, also in the ORSA.
u sin e ss p e rfo rm a n ce
In 2018, a.s.r. set up an internal centralised project group to implement the IDD (Insurance Distribution Directive, effective from 01 October 2018). The project group managed and supported processes, policy guidelines and the interpretation of the Directive throughout a.s.r. In addition, knowledge sessions were organised again in 2018 for the decentralised project organisations, a fit-gap analysis was conducted and policy guidelines were formulated. The same approach was used for the implementation of legislation on data protection, the GDPR, in order to be compliant by 25 May 2018.
a.s.r. made ongoing investments throughout 2018 to further strengthen its defences against cybercrime and to enhance the expertise of its teams. a.s.r.’s cybercrime experts closely monitor and evaluate developments in cybercrime and take appropriate measures where necessary. a.s.r. regularly tests the organisation’s ability to detect and respond to cyber incidents (‘red team test’). An awareness programme to improve the ability of employees and management to recognise phishing and other cyber threats was offered and followed throughout 2018 and, due to the importance of the different outsourcing initiatives, a.s.r. also screened the cyber controls of its own suppliers. As a result, a.s.r. succeeded in keeping obstacles to a minimum. Partnerships with other financial institutions and public agents, such as the Dutch National Cyber Security Centre (NCSC) and i-CERT (a cybersecurity partnership between insurance companies), are crucial to mounting an effective defence against cybercrime. a.s.r. is actively involved in these partnerships.
The mission of the Compliance Function is to enhance and ensure a controlled and sound business operation in which impeccable, professional conduct is self-evident.
Responsibilities and duties The Compliance Function, as part of the second line of defence, is responsible for: • Encouraging compliance with relevant rules and regulations, ethical standards and the internal standards derived from them (‘rules’) by providing advice and formulating policies; • Monitoring compliance with rules; • Monitoring the management of compliance risks by developing adequate compliance risk management, including monitoring and, where necessary, making arrangements relating to proposed management actions; • Creating awareness of the need to comply with rules and of social and ethical issues, in which context ethical behaviour within a.s.r. is self-evident; • Coordinating contacts with regulators in order to maintain effective and transparent relationships with them.
Annual compliance plan Developments in rules and the management of high compliance risks and action plans provide the basis for the annual compliance plans and the compliance monitoring activities. a.s.r. continuously monitors changing legislation and regulations and assesses the impact and corresponding actions to be taken. In 2018, a.s.r. paid specific attention to: • General Data Protection Regulation (GDPR): The Privacy Officer falls under Compliance and was a member of the GDPR central project group. Compliance advises on privacy issues and monitors compliance with relevant legislation and regulations as a second line of defence; • Insurance Distribution Directive (IDD): Compliance was part of both centralised and decentralised projects to implement IDD as from 1 October 2018.
Based on the annual plan, Compliance monitors every year the compliancy of rules. In 2018, Compliance conducted a.s.r.-wide monitoring surveys on compliance with the sanction regulations and CDD policy, privacy and the quality of customer contacts and underlying procedures. The findings have been reported to and discussed with responsible management, the a.s.r. Risk Committee and the Audit & Risk Committee. Actions have been taken with regard to unify processes and training of employees.
Reporting The Compliance Function reports on compliance matters and progress made on the relevant actions at Group level, supervised entity level and division level on a quarterly basis. The quarterly report at division level is discussed with the responsible management and scheduled for discussion by the Business Risk Committee.
5.4 Statements Executive Board a.s.r.’s consolidated and company financial statements for 2018, as well as chapters 1 - 5 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.
We have reviewed the sustainability information in the accompanying annual report for the year 2018 of ASR Nederland N.V. (hereafter referred to as a.s.r.) based in Utrecht. A review is aimed at obtaining a limited level of assurance.
The reporting criteria used for the preparation of the sustainability information are the Sustainability Reporting Standards (option core) of the Global Reporting Initiative (GRI) and the applied supplemental reporting criteria as disclosed in Annex B. ‘About this report’ of the annual report.
Business performance | 5.5 Assurance report of the independent auditor 108
of the sustainability information and the reporting policy are summarised in Annex B ‘About this Report’ of the annual report.
• Evaluating the consistency of the sustainability information with the information in the annual report which is not included in the scope of our review; • Evaluating the overall presentation, structure and content of the sustainability information; • Considering whether the sustainability information as a whole, including the disclosures, reflects the purpose of the reporting criteria used.
Object Adding machine Made by Felt & Tarrant Mfg. Co, Chicago USA
6.1 Corporate governance 6.1.1 General a.s.r. is a public limited company which is listed on Euronext Amsterdam and governed by Dutch corporate law. It has a two-tier board governance structure consisting of an Executive Board and a Supervisory Board. The Executive Board is responsible for the realisation of corporate objectives, the strategy with its associated risks and the delivery of the results. The Supervisory Board is responsible for advising the Executive Board, supervising its policies and the general state of affairs relating to a.s.r. and its group entities. On 19 November 2018, a.s.r. announced that its management structure would change as of 1 February 2019. From then on, the Executive Board would consist of the CEO, CFO and a new member to be appointed, plus the establishment of a Business Executive Committee (BEC) alongside the Executive Board. The BEC will work in unison with the Executive Board and will share responsibility for the implementation of the business strategy. Information on the BEC can be found in chapter 6.1.2 Executive Board.
ASR Levensverzekering N.V., ASR Schadeverzekering N.V., ASR Basis Ziektekostenverzekeringen N.V., ASR Aanvullende Ziektekostenverzekeringen N.V. and ASR Bank N.V. On 5 February 2018, ASR Nederland N.V. completed the acquisition of Generali Nederland N.V. by acquiring all issued and outstanding shares. Generali Nederland N.V. was legally merged into ASR Nederland N.V. on 7 May 2018. The operating companies Generali levensverzekering maatschappij N.V. and Generali schadeverzekering maatschappij N.V. legally merged with ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. on 29 June 2018.
General Meeting of Shareholders and consultation with Shareholders At least one general meeting of shareholders is held per annum (the AGM), no later than 30 June. The main purpose of the AGM is to decide on matters as specified in a.s.r.’s articles of association and under Dutch law, such as the adoption of the financial statements. The articles of association also outline the procedures for convening and holding general meetings and the decision-making process. The draft minutes of the AGM must be published on the corporate website (www.asrnl.com) no later than three months following the AGM. Shareholders are given three months to respond to the draft minutes. The minutes of the AGM are subsequently adopted and signed by the Chairman and Company Secretary.
The AGM in 2018 was held on Thursday 31 May. A total of 70,78% of the total issued share capital with voting rights was present in person or represented by proxy or voting instructions. The agenda of the AGM included the adoption of the annual financial statements, the approval of the proposed dividend payments for the financial year 2017, the discharge of the Executive and Supervisory Board members holding office in the 2017 financial year, the
reappointment of Chris Figee (CFO) as a member of the Executive Board, the appointment of Sonja Barendregt as a new member of the Supervisory Board, and the approval of the proposed extended authority of the Executive Board and the cancellation of shares held by a.s.r. All agenda items were approved by the AGM. The next AGM will be held on Wednesday 22 May 2019.
Anti-takeover measures Stichting Continuïteit ASR Nederland (the ‘Foundation’) was established on 26 May 2016 under Dutch law in connection with a.s.r.’s listing on Euronext Amsterdam. The Foundation has an independent board consisting of three members. The role of the Foundation is to promote and protect the interests of a.s.r., its business and stakeholders, and to work against possible influences that could threaten the continuity, independence, strategy and/or identity of a.s.r. or its associated business to the extent that they could conflict with the aforementioned interests. If the interests of a.s.r., its business, stakeholders or continuity were to be undermined, the Foundation would be entitled – provided certain conditions under the call option agreement were to be met – to exercise a call option right on preference shares such that the number of preference shares acquired under the call option would never exceed the total number of shares forming the issued capital of a.s.r. at the time the call option was exercised, minus the number of preference shares already held by the Foundation (if any) at the time and minus one. For more information, see chapter 9 Report of Stichting Continuïteit ASR Nederland.
Sustainability governance a.s.r. seeks to be a leader in sustainable business practices in the financial sector and takes account of sustainability wherever possible. It does so in line with five CSR-related themes: ‘Sustainable insurer’, Sustainable investor, ‘Sustainable employer’, ‘Sustainable management’ and the ‘Role in society’.
a.s.r. engages in dialogue with all stakeholders on the principles and objectives of its sustainability policy. To this end, it maintains close contact with internal stakeholders and a broad group of external stakeholders, including customers, regulators, politicians and government ministers, as well as trade bodies. In order to continue to drive and monitor sustainability in all its aspects within a.s.r., sustainability has been earmarked as a separate topic. Within the Executive Board, the CEO is ultimately responsible for a.s.r.’s CSR themes. Each year, the Supervisory Board discusses and approves the CSR objectives and the progress made in these specific areas. The Director of Corporate Communications coordinates the implementation together with the CSR Task Force. The Task Force consists of a secretary, the directors of the Services, Human Resources, Asset Management, Real Estate, Integrity, Group Risk Management, Non-life, Pensions and Bank & Mortgages departments, and the Company Secretary. The Task Force meets regularly to formulate an integrated CSR vision and to set objectives. All Task Force members subsequently promote this vision and objectives within their own focus areas. The Task Force also sets CSR Key Performance Indicators (KPIs).
A CSR Work Force operates under the Task Force, with delegates from the directors mentioned above. It reports quarterly on the set CSR KPIs to the Task Force, which evaluates the results achieved or takes action where necessary. Each focus has a CSR Work Force for substantive discussions and to work out (subsidiary) activities. Five sessions on specific CSR themes were organised for the Task Force throughout the year.
The Executive Board is collectively responsible for the day-to-day conduct of business at a.s.r. and for its strategy, structure and performance. In carrying out its duties, the Executive Board is guided by a.s.r.’s interests, which include the interests of the businesses connected with it, which in turn include the interests of customers, shareholders, employees and society at large. The Executive Board is accountable to the Supervisory Board and the AGM with regard to the performance of its duties.
In 2018, specific sessions were also organised jointly with the Supervisory Board for the benefit of further education. The first session was a follow-up on the explanation of IFRS 17, the new accounting standard for insurance contracts, led by Group Accounting, Reporting & Control. The new regulations will impact the external reporting on insurance contracts in future. The implementation of IFRS 17 within a.s.r. is a major project. The second session focused on increasing digitisation in the insurance industry. A knowledge session was also led by an external expert on governance and board leadership took place at the beginning of the year. During this session, the Supervisory and Executive Boards were given an update on long-term value creation based on the Dutch Corporate Governance Code and discussed this in relation to a.s.r.
Individual Executive Board members attended knowledge sessions on various topics in their capacity as board members and supervisory directorships in other organisations.
Remuneration Information on the remuneration policy for Executive Board members and their individual remunerations can be found in the Remuneration report, see chapter 6.3.
Committee (BEC) will also be established. The BEC consists of the members of the Executive Board, the Chief Risk Officer (CRO) and senior managers representing certain business areas. The following business areas are represented in the BEC: Service Books (Individual life & Funeral), Disability, Health, P&C, Mortgages, Pensions, Asset Management and Innovation & Digital. Through the creation of the BEC, a.s.r. wishes to increase direct involvement of the senior managers of the product lines in further strengthening a.s.r.’s innovative power. It will also enable a.s.r. to act decisively with respect to potential inorganic opportunities.
The BEC will work as a unison with the Executive Board, and is co-responsible for the implementation of the business strategy. Only the members of the Executive Board have voting rights in the meeting of the BEC. The new BEC will ensure the direct involvement, knowledge and skills of a.s.r.’s senior management responsible for specific business areas in the decisionmaking process at board level. With part of industry in motion, it is vital that a.s.r. can respond quickly to opportunities that arise and efficiently anticipate constantly changing customer needs.
On 1 February 2019, he became responsible for Human Resources, Corporate Communications, Legal Affairs & Integrity, Group Risk Management, Audit and Innovation & Digital.
Additional positions Jos Baeten is currently a member of the Executive Board of the Dutch Association of Insurers (Verbond van Verzekeraars). During 2018 Jos Baeten was the Chairman of the Supervisory Board of Stichting Theater Rotterdam until March 2019. He is member of the Supervisory Board of De Efteling B.V. And he is also a member of the General Administrative Board of VNO-NCW and a Board Member of Stichting Grote Ogen and Stichting Fietshelm is Hoofdzaak.
Chris Figee has a degree in Financial Economics from the University of Groningen and is an EFFAS Certifi ed Investment Analyst. He also studied Risk Management at Stanford University. Chris Figee began his career at Aegon N.V., where he held various positions, including that of Senior Portfolio Manager Fixed Income Aegon Life Insurance. Chris Figee’s last position at Achmea Holding B.V. was Director of Group Finance.
Additional positions Chris Figee is a member of the Board of Stichting DSI and a member of the Supervisory Board of Stichting Nederland Comité UNICEF. As of 31 January 2019, he is also a member of the Supervisory Board of Human Total Care.
Kick van der Pol 15 December 2008 15 June 2014 15 June 2018 2019
Annet Aris 7 December 2010 7 December 2014 7 December 2018 2023
Cor van den Bos 15 December 2008 15 June 2015 15 June 2019 2020
The Supervisory Board is looking for a suitable successor for Kick van der Pol. Someone with the right expertise and experience, who fits well with the culture of the company and who embraces the strategy of a.s.r. The right candidate has not yet been found.
Annet Aris will step down from the Supervisory Board at the forthcoming AGM in 2019.
Independence and conflicts of interest All the Supervisory Board members passed the ‘fit and proper test’ required under the Dutch Financial Supervision Act. In 2018, there were no reports of potential conflicts of interest relating to members of the Supervisory Board. The Supervisory Board was also able to carry out its tasks independently pursuant to principles 2.1.7 to 2.1.9 of the Dutch Corporate Governance Code.
2. Based on the possibility of an appointment for a maximum of twelve years (2 x four years and 2 x two years in accordance with principle 2.2.2.
F in an ci al m ar ke ts /d is cl o su re co m m u n ic at io n
Cor van den Bos 12-2008 9 1952 M • • • • • •
Chairman of the Supervisory Board and member of the Selection & Appointment Committee and the Remuneration Committee
Kick van der Pol serves as Chairman of the Board of Directors of Ortec Finance. He is also a member of the Supervisory Board of the Holding Nationale Goede Doelen Loterijen N.V. In the past, he served as Chairman of the Board of the Federation of Dutch Pension Funds, as Vice-Chairman of the Executive Board of Eureko/Achmea and as Chairman of the Executive Board of Interpolis.
Chair of the Selection & Appointment Committee and the Remuneration Committee
Cor van den Bos served on the Executive Board of SNS REAAL N.V. until August 2008, where he was responsible for all insurance operations. He is Vice-Chairman and a non-executive member of the Board at the investment fi rm Kardan N.V.
Herman Hintzen was Chairman Insurance EMEA at UBS Investment Bank, until January 2016. 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. Until 31 December 2018, he served as Chairman of the Board of Amlin International SE. Herman Hintzen is currently a non-executive Board member of VCM Holdings Ltd. and a non-executive Board member of TSC Power Ltd.
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. With regard to insurance companies, in addition to the Executive and Supervisory Board members, individuals holding a management position immediately below the Executive Board who are responsible for staff who may have a significant influence on the risk profile of the insurance company, are also required to take the oath, as are certain other employees. This includes individuals who may (independently) significantly influence the risk profile of the undertaking as well as those persons who are or may be involved in the provision of financial services.
For banks based in the Netherlands, such as ASR Bank N.V., all persons working under the responsibility of the bank are required to take a similar bankers’ oath with effect from 2015. Individuals who have taken the bankers’ oath are subject to disciplinary rules.
Regardless of the above, a.s.r. has decided that all employees and other individuals carrying out activities under its responsibility must take the oath. New employees must take the oath within three months of joining the company.
6.2 Report of the Supervisory Board 6.2.1 Report of the Supervisory Board
Meetings of the Supervisory Board The Supervisory Board convened 7 routine meetings, 5 extra meetings and 1 off-site meeting with the Executive Board. The availability of Supervisory Board Members for consultation in-between scheduled meetings was good. Several ad-hoc meetings were held to discuss issues relating to specific topics such as remuneration, the change in the management structure and M&A. Periodic operational meetings were also held in the absence of the Executive Board. During these meetings, issues such as the (self) evaluation of the Supervisory Board and the evaluation of the Executive Board members were discussed.
Kick van der Pol Annet Aris¹ Cor van den Bos Herman Hintzen Sonja Barendregt¹
The Supervisory Board has a good working relationship with the Executive Board. The Chairman of the Supervisory Board has regular contact with the CEO, and one or more Supervisory Board members are regularly approached outside meetings for advice on various files. The Supervisory Board as a whole also receives periodic updates, outside meetings, from the Executive Board on various developments within the company, including product development, (potential) M&A transactions and personnel matters.
Strategy based on long-term value creation Each year, the Executive Board presents various matters to the Supervisory Board for approval, such as the (quarterly) figures, multi-year budget, the investment plan and the risk appetite. These matters were all discussed and approved by the Supervisory Board in 2018. Throughout the year, the Executive Board discussed a.s.r.’s strategy in detail with the Supervisory Board and obtained the support of the Supervisory Board for its value creation model. For a.s.r. as a multiline insurer, this involves the portfolio strategy (as described in chapter 3.1.2 Portfolio and execution of strategy) and the strategy for small and medium-sized acquisitions. Acquisition opportunities and possible divestments were discussed in the context of the execution of the strategy. The Supervisory Board supported the management with add-on acquisitions. Following a comprehensive process, it was decided to define a.s.r. bank as a non-core activity while its strategic fit was considered insufficient.
In 2018, considerable attention was also paid to the publication of the strategic priorities and the revised medium term targets which were announced at the Capital Markets Day on 10 October 2018. Organic growth was achieved in line with the strategy. Costs were also generally further reduced (excluding acquisitions), customer service was improved and brand awareness of a.s.r. grew. a.s.r. is also increasingly appreciated for the role it plays in society.
IT and innovation In 2018 almost all the business lines opted for an IT system that was well suited to the future in terms of both customer expectations and cost flexibility. The Supervisory Board was periodically informed of developments in the field of innovation. Innovation at a.s.r. is organised along three lines: optimisation, transformation and disruption. Various initiatives and projects have been started, with a clear distance being taken from the existing organisation in order to be able to test and grow. In 2018, the Executive Board explored a possible future cooperation to enhance innovation in the vitality domain. The Supervisory Board supports the progress that has been made in this area in 2018. Finally, attention was paid to the various developments in the area of cyber risk, on which the Supervisory Board is regularly informed via the Audit & Risk Committee.
3. Timely performance of back-testing of estimation processes with regard to the financial reporting of separate account pension contracts. The financial processes surrounding separate accounts are complex and time-consuming. From a strategic perspective, a.s.r. has decided to pursue the closing of all separate account contracts. a.s.r. recognises that until now, all separate accounts have been closed and extra attention must be given to the relevant financial processes.
Moreover, EY asked attention going forward for an increased capacity pressure on parts of the organisation due to in- and external developments resulting in concurrence of various projects. In addition to these topics, EY has also provided suggestions with a more medium to low priority. a.s.r. welcomes all suggestions and is committed to implementing these suggestions promptly.
At year-end, the Supervisory Board approved the 2019-2021 multi-year budget following the recommendation of the Audit & Risk Committee.
Risk management and solvency At the end of the year, the Supervisory Board approved the risk appetite for both a.s.r. and its supervised entities. a.s.r.’s risk appetite is based on the Solvency II regime and a prudent approach to risk management translated into standards for solvency, liquidity, efficient processes and achievable returns. The Supervisory Board was satisfied with the execution of the risk management framework. The level of solvency remains acceptable and adequate thanks to the organisation’s prompt and adequate response to external developments based on the chosen risk appetite and associated risk-mitigating measures. The risk appetite is an important criterion for the Supervisory Board in making tactical and strategic decisions. The Supervisory Board appreciates the prudent approach taken to comply with Solvency II and other regulations and regularly engages in dialogue with the Executive Board concerning its views of the targets and intervention level relating to Solvency II ratios.
Culture and customer interest Every six months, the Supervisory Board considers the theme of customer interest based on reports, including the Net Promoter Score report and the complaints report. These reports provide insight into levels of customer satisfaction. In 2018, the NPS was further improved compared to the previous year. The Supervisory Board was satisfied that a.s.r. goes to great lengths to deliver a good NPS performance.
The Supervisory Board has great appreciation for the approach taken by the Works Council to developments impacting a.s.r., such as the integration of Generali Nederland, the acquisition of Loyalis and the new management structure and evaluation of the remuneration policy for the Executive Board of a.s.r. Taking into account the interests of both a.s.r. as a whole and its employees, the Works Council makes thorough preparations when addressing the wide range of issues it is presented with, discusses them in a constructive dialogue with the Executive Board, and issues balanced, well-considered opinions and recommendations.
The Committee held six regular meetings in 2018. In accordance with the Audit & Risk Committee Rules, committee meetings are also attended by the CFO, the Director of Group Risk Management, the Director of Group Accounting, Reporting & Control, the Director of Finance & Risk, the Director of Compliance, the Director of Audit and the independent external auditor.
During the year, outside the regular meetings, the Committee met on two occasions with the Audit, Compliance, Risk Management and Actuarial Functions in their roles as countervailing powers. The Committee Chairman also had two one-to-one meetings with each of the directors of Audit, Compliance and Group Risk Management, and two meetings with the external auditor EY.
Function. The Committee issued positive opinions on the Annual Report and on the financial statements to the Supervisory Board.
The Committee discussed and adopted the external auditor’s letter of engagement and the audit plan for 2018. The external auditors’ independence and additional fees were also reviewed each quarter. The management letter of the external auditor highlighting key internal control observations was discussed (see chapter 6.2.1). Also, the exernal auditors audit results report was discussed. Special attention was given to the reported key audit matters: fair value measurement of non-listed investments, valuation and adequacy of insurance contract liabilities including shadow accounting, unit-linked exposure, Solvency II, the Generali Nederland acquisition, classification of a.s.r. bank as held for sale and discontinued operation, and reliability and continuity of electronic data processing. In addition, the Committee discussed with the external auditor their assessment report regarding the Solvency II and IFRS LAT key non-economic assumptions. Following the creation of the BEC in early 2019, the Audit & Risk Committee approved the updated charters of the Actuarial and Risk Management Function and the Compliance Function. It advised the Supervisory Board to approve the updated charter of the internal Audit Function; this advice was followed. The 2019 annual plans for the countervailing powers were also discussed and approved. Following positive advice from the Committee, the Supervisory Board approved the 2019 annual plan of the Audit department.
Following the completion of the acquisition in early 2018, the progress of the integration of Generali Nederland, its contribution to the financial results and its (limited) impact on a.s.r.’s risk profile was discussed. The effect of the acquisition on the audit plan was also discussed and the audit plan was amended accordingly.
New business in the Dutch life insurance market is very limited. Cost control and the future development of costs are therefore key for future profitability. The Committee discussed cost developments, not just at its regular quarterly meetings, but also in the context of a.s.r.’s
The a.s.r. risk appetite is based on a prudent approach to risk management and translates the risk appetite into qualitative business guidelines for non-financial risk matters and into requirements for solvency, liquidity and returns for the financial risks matters; solvency takes priority over profit and profit takes priority over premium income. Moreover, a.s.r.’s updated capital and dividend policy was discussed, after which the Supervisory Board approved the updated policy.
In line with policy, the Committee advised the Supervisory Board on target-setting, performance appraisals and the ex-post assessments of variable payments awarded to identified staff. At the beginning of 2018, the remuneration policy was updated in line with new regulations and the Remuneration Committee discussed the implementation of the remuneration policy for a.s.r.’s subsidiaries and participations. The results of the internal audit report on the application of a.s.r.’s remuneration policy were discussed.
In 2018, the Remuneration Committee devoted considerable time and attention to the evaluation of the remuneration policy for the Executive Board. The Committee was assisted by an internal committee and a pay & benefits expert. In its evaluation of the remuneration policy, the Committee carefully took into account the opinions of all stakeholders, since there was a risk of in order not damaging trust in a.s.r. and to put its market position as a socially responsible insurer at risk. This produced an integrated approach for the evaluation, based on four perspectives: 1. Organisational perspective; 2. Internal perspective: consistency with and fairness with regard to the internal wage; 3. External perspective: competitiveness with the external market; 4. Stakeholder perspective: taking into account the views of various stakeholder groups with regard to remuneration (level and structure): customers, employees, society and shareholders.
The remuneration policy aims to strike a fair balance between the views and interests of these various stakeholder groups.
Selection & Appointment Committee In 2018, the composition of the Selection & Appointment Committee was as follows: • Annet Aris (Chair) • Kick van der Pol
The Selection & Appointment Committee advises the Supervisory Board on selection and appointment procedures and the composition of the Boards; it also prepares the (re)appointment of members. The Selection & Appointment Committee met six times in 2018. Its meetings are also attended by the CEO and the Human Resources Director, who also acts as Secretary.
At the 2018 AGM, Sonja Barendregt was appointed to the Supervisory Board. A selection process for the appointment of a new chairperson was begun in 2018 with the help of an external agency. The Works Council also began their search for a candidate under the terms of Article 2:268 of the Dutch Civil Code. An announcement will be made as soon as there is clarity about the outcome.
The Committee was heavily involved in the discussion and preparation of the new management structure. As described earlier, as a result of these discussions the Supervisory Board decided on the recommandation of the Selection & Appointment Commitee to change the composition and size of the Executive Board from four to three members and to appoint a BEC. The COO positions superfluous and Karin Bergstein and Michel Verwoest agreed to step down as Executive Board members as from 1 February 2019. A search was begun for a new Executive Board member and an announcement will be made once this search has produced a candidate and the DNB procedure is finished. Lastly, the Committee discussed the annual appraisals of senior management. A nine-box grid was used to evaluate senior managers and to discuss their individual development and possible successors. The Committee was also informed of the results of the Denison scan, a tool used to measure the success of the organisation.
Financial statements and dividend The Executive Board prepared the 2018 Annual Report and discussed it with the Supervisory Board in the presence of the external auditor. The 2018 financial statements will be submitted for adoption by the AGM on 22 May 2019. a.s.r. will propose a dividend of € 1.74 per ordinary share, or € 245 million in total, including the interim dividend paid.
The Executive Board has additionally committed itself to taking a percentage of its remuneration in the form of a.s.r. shares. Each member has signed an individual agreement committing themselves to purchase these shares. The cumulative investment in a.s.r. shares will reach a minimum of 50% of the annual gross salary for the CEO and a minimum of 25% of the annual gross salary for the CFO.
Principles and governance of remuneration policy The a.s.r. Group remuneration policy applies to all a.s.r. employees, including the Executive Board. a.s.r.’s remuneration policy is controlled and sustainable and aims to improve and maintain the integrity and robustness of a.s.r. It supports the strategy, objectives, values, culture and long-term interests of a.s.r. and all its stakeholders. It enables a.s.r. to retain employees and attract the right people. An organisation-wide variable remuneration is not a part of the remuneration policy. The full remuneration policy can be consulted at www.asrnl.com.
Remuneration in 2018 In line with a.s.r.’s remuneration policy, the remuneration of the Executive Board structurally consists of a fixed remuneration and does not include a variable component. This comprises a fixed monthly amount, including holiday allowance. Pay is indexed in accordance with the a.s.r. CLA.
The remuneration policy is based on the principle that the average level of total remuneration is just below the median of the benchmark group that is relevant to the company. In accordance with the policy, a comparison with a peer group is periodically made and was last conducted in 2017 to gauge the competitiveness of the total remuneration. The relevant peer group for the Executive Board is a mix of Dutch financial institutions and medium-sized listed Dutch businesses outside the financial sector. The Remuneration Committee periodically checks whether that the choice of peer group is still adequate or if it should be revised. Every three years, an independent consultant makes a market comparison (remuneration benchmark).
(among others, a CO2 neutral a.s.r. and distinctive capacity for socially responsible investment) and further development of a distinctive ESG position in asset management; • Craftsmanship: further development of a.s.r. as a listed company and to manage the interests of all stakeholders in a balanced manner.
2. The pay ratio at a.s.r. is among the lowest compared with the pay ratio of all AEX companies.
The calculation of annual pension expenditure is based on the total pension rights granted during the term of service at a.s.r. Further changes in the cost of pension benefits are mainly due to the impact of age, terms of service, gender and age differentiated disability, mortality and other actuarial assumptions. The pension costs include pensions based on maximum pensionable salary cap, compensation for the maximum pensionable salary cap (to be used for pensions at the employees’ discretion) amounting to € 259,000 (2017: € 206,000) in total, and VPL. The pension benefits, excluding compensation for the maximum pensionable salary cap, represent post-employment benefits.
Supervisory Board The remuneration policy for Supervisory Board members, including fees, expense allowances and other benefits, was adopted by the AGM of Shareholders. The remuneration paid to the members of the Supervisory Board does not depend on the financial performance of a.s.r. and none of the Supervisory Board members own a.s.r. shares.
The members of the Supervisory Board are entitled to: • A base fee for membership of the Supervisory Board; • A committee fee for members on each of the
Supervisory Board’s Committees. The annual fee paid to each member of the Supervisory Board is € 30,000; that paid to the Chairman of the Supervisory Board is € 45,000. In addition, the annual fee paid to each member of the Audit & Risk Committee is € 10,000; that paid to each member of the Selection & Appointment Committee is € 2,500; and that paid to each member of the Remuneration Committee is also € 2,500. Supervisory Board members who also serve on the Supervisory Board of ASR Bank N.V. receive € 4,000 per annum and those on the Supervisory Board of ASR Basis/Aanvullende Ziektekostenverzekeringen N.V. also receive € 4,000 per annum. Annual fees are not paid to members of the Executive Board who are also members of the Supervisory Board of one of the Group entities, such as ASR Bank N.V.
Remuneration of the Supervisory Board The annual remuneration for members of the Supervisory Board has been calculated as follows: Annual remuneration for members of the Supervisory Board
As a committee member Total 1 The amount received as a committee member of the Selection & Appointment Committee and the Remuneration Committee and as a member of the Supervisory Board of ASR Basis/Aanvullende Ziektekostenverzekeringen N.V.
3 The amount received as a committee member of the Audit & Risk Committee and as a member of the Supervisory Board of ASR Bank N.V.
4 The amount received as a member of the Audit & Risk Committee since May 2018.
There was much interest among the employees of a.s.r. for the elections, which is reflected in the high turnout; more than 60% of the electorate voted. The current Works Council consists of three women and four men, varying in age from 29 to 63 years. This diversity ensures excellent dynamics and energy within the Group.
Consultations with the Executive Board and the Supervisory Board are held in an open atmosphere. The topics covered by the Works Council are highly diverse. Examples include: • The introduction of the newly appointed Supervisory
The Works Council dealt with seven requests for advice. The number of applications for consent was three. More requests for advice were handled this year. In accordance with the new employee participation structure, these have been dealt with by the various Business Unit Committees.
Object Poster Made by Kon. Ned. Drukkerij J. Vürtheim & Zoon
a.s.r. is a public limited company under Dutch law having its registered office located at Archimedeslaan 10, 3584 BA in Utrecht, the Netherlands. a.s.r. has chosen the Netherlands as ‘country of origin’ (land van herkomst) for the issued share capital and corporate bonds which are listed on Euronext Amsterdam and the Irish Stock Exchange. (Ticker: ASRNL).
The consolidated financial statements are presented in euros (€), being the functional currency of a.s.r. and all its group entities. All amounts quoted in these financial statements are in euros and rounded to the nearest million, unless otherwise indicated. Calculations are made using unrounded figures. As a result rounding differences can occur.
The financial statements for 2018 were approved by the Supervisory Board on 26 March 2019 and will be presented to the Annual General Meeting of Shareholders for adoption on 22 May 2019. The Executive Board released the financial statements for publication on 27 March 2019.
(in € millions) (Before profit appropriation) Note 31 December 2018 31 December 2017
Financial statements 2018 | 7.2 Consolidated financial statements 143 7.2.2 Consolidated income statement
Profit / (loss) from discontinued operations, after tax 7.4.6 -36 3
Diluted earnings per share 4.03 5.92 1 Comparative figures for 2017 have been restated, related to the discontinued classification of a.s.r. bank (see chapter 7.3.1).
Financial statements 2018 | 7.2 Consolidated financial statements 145 7.2.3 Consolidated statement of comprehensive income
Unrealised change in value of property for own use 7.5.2 8 3
Income tax on items that may be reclassified subsequently to profit or loss 61 -18
Total items that may be reclassified subsequently to profit or loss -290 141
Total other comprehensive income for the year, after tax -244 224
Attributable to: - Attributable to non-controlling interests 2 2 - Shareholders of the parent 367 1,096 - Holders of other equity instruments 59 45 - Tax on interest of other equity instruments -15 -11
Total comprehensive income attributable to holders of equity instruments 411 1,130
Financial statements 2018 | 7.2 Consolidated financial statements 146 7.2.4 Consolidated statement of changes in equity
U n re al is e d g ai n s an d lo ss e s
The actuarial gains and losses related to the pension obligation increased in 2018 by € 39 million after tax and € 53 million before tax (2017: increased by € 81 million after tax and € 108 million before tax). The increase is mainly due to a decrease in the indexation rates (see chapter 7.5.15).
In the Annual General Meeting of Shareholders held on 31 May 2018 the resolution was adopted to cancel these 6,000,000 own shares offered by NLFI. The repurchased shares were canceled in August 2018 leading to a decrease of € 1 million in share capital, a decrease of € 42 million in share premium reserve and a decrease of € 145 million in retained earnings.
Adjustments on non-cash items included in profit: Revaluation through profit or loss -159 -184
Retained share of profit of associates and joint ventures 9 -14
Net (increase) / decrease in amounts due from and to credit institutions 542 -619
Net increase / (decrease) in liabilities arising from insurance contracts -528 -984
Net (increase) / decrease in assets and liabilities relating to held for sale 186 -
Cash flows from investing activities -89 -26 1 Profit before tax includes results from continuing operations of € 953 million (2017: € 1,128 million). For 2018, results from discontinued operations amounted to € -49 million (after tax € -36 million).
Cash flows from financing activities: Proceeds from issues of borrowings 2 30
Further details on cash flows from operating activities: Interest received 1,247 1,180
Cash and cash equivalents classified as assets held for sale 236 -
The changes in the comparative figures concern the representation of continued operations to discontinued operations, impact of € -3 million on profit before tax, in the consolidated income statement. Please see chapter 7.4.6.
IFRS 15 Revenue from Contracts with Customers IFRS 15 became effective as of 1 January 2018 and is EU endorsed. IFRS 15 provides more specific guidance on recognising revenue other than insurance contracts and financial instruments. The implementation of IFRS 15 had no impact on the consolidated financial statements of a.s.r.
Amendments to IFRS 4 Insurance Contracts This amendment became effective as of 1 January 2018. The IFRS 4 amendments permit insurers to apply a temporary exemption from applying IFRS 9 for predominant insurance entities or to use overlay approach, until the implementation of IFRS 17 (new accounting standard for insurance contracts) or at the latest 1 January 2021.
Based on the amended IFRS 4 a.s.r. meets the criteria of a predominant insurer as of 31 December 2015 as the percentage of the total carrying amount of its liabilities connected with insurance related activities to the total carrying amount of all its liabilities exceeded 90% at that date. The liabilities connected with insurance, that are not liabilities directly arising from contracts within the scope of IFRS 4, have a carrying amount of € 3.3 billion and primarily relate to the derivative liabilities and due to banks as included in the Non-life and Life segments and the subordinated liabilities. As a result a.s.r. decided to apply the temporary exemption from applying IFRS 9 by deferral until IFRS 17 (new accounting standard for insurance contracts) is implemented. The implementation of amended IFRS 4 had no significant impact on the consolidated financial statements of a.s.r.; but it does introduce additional disclosure requirements.
7.3.3 New standards, interpretations of existing standards or amendments to standards, not yet effective in 2018
The following new standards, amendments to existing standards and interpretations, relevant to a.s.r. and published prior to 1 January 2019 and effective for accounting periods beginning on or after 1 January 2019, were not early adopted by a.s.r.: • IFRS 16: Leases (2019); • IFRS 9: Financial instruments (2022); • IFRS 17: Insurance Contracts (2022).
IFRS 16 Leases IFRS 16 is effective for annual periods beginning on or after 1 January 2019. IFRS 16 replaces IAS 17, the existing standard on leases. Under the new lease standards the current operating lease accounting (where a.s.r. is the lessee) will change, introducing a right-of-use asset and lease liability. The main items a.s.r. leases, under operating lease agreements, are cars and buildings. a.s.r. will implement IFRS 16 by applying the modified retrospective method, meaning that the 2018 comparative figures in the 2019 financial statements will not be restated to show the impact of IFRS 16. The standard will result in an increase in balance total of € 19 million per 1 January 2019 and does not have an impact on equity of the consolidated financial statements of a.s.r. per that date.
This standard represents the most significant change to European insurance accounting requirements in decennia, and will have a significant impact on the information presented in the financial statements (the primary statements as well as the disclosures). The standard introduces three models for the measurement of the insurance contracts. The general
IFRS 17 must be implemented retrospectively with amendment of comparative figures. However, simplifications may be used on transition when the full retrospective approach is impracticable.
Programme In 2017, a.s.r. started a combined IFRS 17 and IFRS 9 programme to implement IFRS 17 and IFRS 9 Financial Instruments and has performed a high-level impact assessment. In 2018, the programme has focused on the following activities: • Updating Technical Implementation Documents taking into account available information and interpretation (i.e. IASB
IFRS 17 in the operations for the period till the effective date of IFRS 17; • Gained a better understanding of the impact through performing an impact assessment based on various scenarios using 2017 data; • Evaluating and analysing the potential use of the disaggregation accounting policy choice for the insurance finance income or expense or OCI-option in combination with hedge accounting; • Developing and implementation of a CSM engine; • Preparation of the IT architecture including implementation of the general ledger, accounting hub and reporting infrastructure; • Defining the level of aggregation of contracts and decisions regarding the use of different accounting models; • Preparation of transition plan for IFRS 17; • Preparation of transition plan for IFRS 9 including if and how to implement hedge accounting due to the strong interaction between the insurance liabilities and the underlying assets; • Provided feedback and input for the EU endorsement process where possible; • Further training of staff participating in the programme.
IFRS 9 Financial Instruments IFRS 9 is effective from 1 January 2018 and EU endorsed. a.s.r. applied the temporary exemption from applying IFRS 9 for predominant insurance entities as permitted by the amendments to IFRS 4. The IFRS 4 amendments postpone the implementation of IFRS 9 until the effective date of the new insurance contracts standard IFRS 17, which is expected to be 1 January 2022. Due to this exemption there is no impact of IFRS 9 on the consolidated financial statements 2018 of a.s.r. but may have a significant impact on Shareholders’ equity, Net result and/or Other comprehensive income and on the consolidated financial statements of a.s.r. in 2022. The required disclosures as a result of the temporary exemption from applying IFRS 9 a.s.r. have been provided in chapter 7.7.3 Fair value of financial assets based on SPPI test results.
Financial statements 2018 | 7.3 Accounting policies 153 classification of financial liabilities remains unchanged. The final outcome of the classification and measurement will be highly dependent on the interaction between IFRS 17 insurance contract accounting and IFRS 9 accounting for financial assets and liabilities taking into account decisions and guidance prepared in the IFRS 17 and IFRS 9 implementation project. Identifying potential accounting mismatches and addressing volatility / predictability in the income statement will be a.s.r.’s major priority.
Programme IFRS 9 a.s.r. is currently assessing the impact of the new requirements including: • Investigation into the classification and measurement of the financial instruments. • Implementing the new expected loss impairment requirements and models. • Performing business model evaluation and solely payment of principle and interest (SPPI) testing related to the financial assets and liabilities held by the insurance activities, as part of the overall IFRS 17 and IFRS 9 programme.
The implementation of IFRS 9, in combination with IFRS 17, for the insurance activities may have a significant impact on Shareholders’ equity, Net result and/or Other comprehensive income and on the consolidated financial statements of a.s.r.
Financial statements 2018 | 7.3 Accounting policies 155 own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are generally based on the available observable data (adjusted for factors that contribute towards the value of the asset) and own source information.
This category primarily includes: I. Financial instruments: private equity investments (or private equity partners) and real estate equity funds third parties; II. Financial instruments: loans and receivables – mortgage loans, and mortgage equity funds; III. Investment property, real estate equity funds associates and buildings for own use.
II. Financial instruments: loans and receivables – mortgage loans, and mortgage equity funds 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.
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: • Discounted cash flow method; • Income capitalisation 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 behavior, which depends on the class of investment property. Periodic cash flow is typically estimated
For the categories residential, offices and other in applying the discounted cash flow method, the significant inputs are the discount rate and market rental value. These inputs are verified with the following market observable data (that are adjusted to reflect the state and condition, location, development potential etc. of the specific property): • Market rent per square meter for renewals and their respective re-letting rates; • Reviewed rent per square meter; • Investment transactions of comparable objects; • 10 Year Dutch Government Bond Yield (%) as published by the Dutch Central Bank.
The significant inputs for retail valuations are the reversionary yield and the market or reviewed rental value. These inputs are generally verified with the following observable data (that are adjusted to reflect the state and condition, location, development potential etc. of the specific property): • Market rent per square meter for renewals; • Reviewed rent per square meter (based on the rent reviews performed in accordance with Section 303, Book 7 of the
The fair value of investment properties and buildings for own use, are appraised annually. Valuations are conducted by independent professional appraisers who hold recognised and relevant professional qualifications and have recent experience in the location and category of the property being valued. Market value property valuations were prepared in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation Standards, 7th Edition (the ‘Red Book’). a.s.r. provides adequate information to the professional appraisers, in order to conduct a comprehensive valuation. The professional appraisers are changed or rotated at least once every three years.
If there is a change in the designation of property, it can lead to: • Reclassification from property and equipment to investment property: at the end of the period of owner-occupation or at inception of an operating lease with a third party; or • Reclassification from investment property to property and equipment: at the commencement of owner-occupation or at the start of developments initiated with a view to selling the property to a third party.
Property under development for future use as investment property is recognised as investment property. The valuation of investment property takes (expected) vacancies into account.
E. Investments When a.s.r. becomes party to a financial asset contract, the related assets are classified into one of the following categories: • Financial assets at fair value through profit or loss; • Loans and receivables (see accounting policy G); • Financial assets available for sale.
Financial statements 2018 | 7.3 Accounting policies 159 include equities (ordinary and preference shares), bonds, other fixed-income securities, unit trusts, variable-income securities and interests in investment pools.
Fixed-income financial assets available for sale are tested for impairment if objective evidence exists that the counterparty will default. Objective evidence includes: bankruptcy, financial reorganisation or delinquency in payments for more than 30 days. The assessment may also involve circumstances requiring a more detailed estimate, such as in the event of an equity deficit, recurring financial difficulties, downgrading of the credit rating or other creditors reverting to legal action. This assessment is made at each reporting date by the Level of Concern Committee, where the portfolio managers and analysts assign a level of concern from 'Nil' to 'Three' to each of the fixed-income assets. A level of concern 'Nil' means that there is no reason for concern, while a level of concern 'Three' indicates that the situation is critical and that an impairment is highly recommended. The final decision to recognise an impairment loss on a financial asset or to reverse a prior impairment loss is taken in the quarterly Impairment Committee, chaired by the Group Asset Management director.
F. Investments on behalf of policyholders Investments made for the account and risk of policyholders mainly concern unit-linked insurance contracts and group contracts with segregated pools. These investments are carried at fair value. Any realised and unrealised value changes of the investments are recognised in the income statement as gains or losses on investments on behalf of policyholders.
Receivables from credit institutions Receivables from credit institutions concern business loans, deposits and the savings portion of savings mortgages concluded by a.s.r.
Changes in the fair value of the effective portion of derivatives that have been designated and qualify as cash flow hedges are recognised as unrealised gains or losses in a separate component of equity. Fair value changes in the ineffective portion are recognised in the income statement. The amounts recorded in equity are reclassified to profit or loss in the same period or periods during which the hedged firm commitment or highly probable forecast transaction affects results.
I. Liabilities arising from insurance contracts General This includes liabilities arising from insurance contracts issued by a.s.r. that transfer significant insurance risks, and in some cases also financial risk, from the policyholder to a.s.r.
Loss obligations in respect of occupational disability are discounted. The recognised provisions are sufficient to cover the cost of claims and claims handling fees. a.s.r. discounts obligations for losses only for claims with determinable and fixed payment terms.
Reinsurance liabilities Reinsurance liabilities, with a.s.r. qualifying as the reinsurer and with significant insurance risk being transferred to a.s.r., are accounted for in the same way as regular directly written insurance contracts. They are included under liabilities arising from insurance contracts.
The shadow accounting policy is applied to certain types of insurance liabilities: • Insurance contracts with participation features; • Non-participating insurance contracts if and to the extent that the IFRS LAT would be triggered. This would be the case when current interest rates are lower than the interest rates that were used in the pricing principles at inception of the insurance contract.
Shadow accounting allows a recognised but unrealised gain or loss on an asset to affect the measurement of its insurance liabilities in the same way that a realised gain or loss does.
IFRS Liability Adequacy Test Non-life The Liability Adequacy Test (LAT) is performed at each reporting date to assess the adequacy of insurance liabilities for Non-life. The insurance liabilities for the LAT are calculated in accordance with Solvency II, using the UFR rate prevailing at the reporting date.
IFRS Liability Adequacy Test Life The LAT is performed at each reporting date to assess the adequacy of insurance liabilities. The insurance liabilities for the LAT are calculated in accordance with Solvency II, using the UFR rate prevailing at the reporting date.
Liabilities arising from insurance contracts on behalf of policyholders also include obligations in connection with savings pools and group pension contracts, with policyholders bearing the investment risk. These liabilities also include a provision for compensation of possible high cost of the unit linked insurance contracts, as agreed in 2008 with the consumer organisations. The additional compensation related to the unit linked insurance contracts for the past has been included in the insurance liability and is therefore included in the investment portfolio. In addition, there is still a provision for compensation for claimants and compassionate and supportive policy ‘flankerend beleid’.
The liability in respect of defined benefit plans is the present value of the defined benefit obligation at the balance sheet date, less the fair value of the plan assets where the pension plans are insured by third parties.
Pension obligations are calculated using the projected unit credit method. Inherent to this method is the application of actuarial assumptions for discount rates, future salary increases and bonuses, mortality rates and consumer price indices. The assumptions are updated and checked at each reporting date, based on available market data. The assumptions and reports were reviewed by Risk Management.
When employee benefit plans are modified and when no further obligations exist, a gain or loss, resulting from the changes are recognised directly in the income statement.
Where applicable in the notes to the financial statements the reclassification to assets held for sale and liabilities relating to assets held for sale are recognised 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 capitalised as an intangible asset. Any gain on bargain purchase (negative goodwill) is recognised 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 recognised as an adjustment charged to goodwill in case of a preliminary valuation. Adjustments that occur after a period of one year are recognised in the income statement. 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.
Where applicable in the notes to the financial statements the acquisitions are recognised in the changes in the composition of the group.
P. Segment information At organisational level, a.s.r.’s operations have been divided into six operating segments. The main segments are the Non-life segment and Life segment that include all insurance activities. 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 segment. There is a clear difference between the risk and return profiles of these six segments.
Intersegment transactions or transfers are conducted at arm’s length conditions. For detailed information per segment, please see chapter 7.4, ‘Group structure and segment information’.
U. Associates and joint ventures Associates Associates are entities over which a.s.r. has significant influence on operating and financial contracts, without having control. Generally, associates are accounted for using the equity method from the date at which a.s.r. acquires significant influence until the date at which such influence ceases. This means that associates are initially recognised at cost, including any goodwill paid. This value is subsequently adjusted to take account of a.s.r.’s share of the associate’s comprehensive income. Comprehensive income is adjusted in accordance with the accounting principles used by a.s.r.
Joint operations a.s.r. has a limited number of non-material joint operations. These are recognised in relation to a.s.r.’s interest in the joint operation’s individual balance sheet and income statement items.
V. Reinsurance contracts Contracts that transfer a significant insurance risk from a.s.r. to third parties are accounted for as reinsurance contracts, and are classified as outgoing reinsurance.
Y. Equity Share capital and share premium reserve The share capital disclosed in the balance sheet consists of issued and fully paid-up ordinary shares. The share premium reserve comprises additional paid-in capital in excess of the par value of the shares.
Treasury shares Treasury shares are a.s.r.’s own ordinary shares that has been issued and subsequently required by a.s.r. Treasury shares are deducted from equity, regardless of the objective of the transaction. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the instruments. If sold, the difference between the carrying amount and the proceeds is reflected in retained earnings. The consideration paid or received is recognised directly in shareholders’ equity. All treasury shares are eliminated in the calculation of earnings per share and dividend per common share.
Non-controlling interest The non-controlling interest relates to the equity in a consolidated subsidiary not attributable, directly or indirectly, to a.s.r. (see accounting policy N).
Z. Financing On initial recognition, debt instruments and other loans are stated at fair value, net of transaction costs incurred. Subsequent valuation is at amortised cost. Any difference between the proceeds and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Life insurance premiums Life insurance premiums relating to life insurance contracts are recognised as income when received from policyholders. Liabilities arising from insurance contracts are recognised based on estimated future benefits and expenses, and charged to the income statement. These expenses are recorded within ‘insurance claims and benefits’. Therefore, in accordance with the matching principle, the profits are realised over the estimated term of the contracts.
CC. Realised gains and losses Realised gains and losses include proceeds from the disposal of financial assets available for sale, associates and joint ventures and loans and receivables.
DD. Fair value gains and losses Fair value gains and losses include realised and unrealised changes in the value of financial assets at fair value through profit or 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 or loss. Any changes in value are recognised 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 recognised in the income statement as soon as they are identified. For details, see the relevant items of chapter 7.3.4 as mentioned earlier.
Legal structure of the most significant a.s.r. group entities as per 31 December 2018
Insurance activities Insurance entities are entities that accept the transfer of insurance risks from policyholders. The Non-life segment consists of non-life insurance entities and their subsidiaries. These non-life insurance entities offer non-life insurance contracts. The Life segment comprises the life insurance entity and their subsidiaries. These life insurance entities offer financial products such as life insurance contracts and life insurance contracts on behalf of policyholders. The Non-life and Life segments have different levels of profitability and growth opportunities, as well as a different outlook and risk profile. See chapter 7.7.8 for a list of principal group companies and associates in the relevant segments.
Other activities The other activities consist of: • The Banking and Asset Management segment involves all banking activities and the activities related to asset management including investment property management. These activities include amongst others ASR Bank N.V., ASR Hypotheken B.V., ASR Vastgoed Vermogensbeheer B.V., ASR Vermogensbeheer N.V. and ASR Financieringen B.V. As of October 2018, all activities of ASR Bank N.V. are classified as discontinued. For further disclosure, see chapter 7.4.6; • The Distribution and Services segment includes the activities related to distribution of insurance contracts and includes the financial intermediary business of PoliService B.V., Van Kampen Groep Holding B.V. (and Van Kampen Geld B.V.), Dutch ID B.V., SuperGarant Verzekeringen B.V. (and as of July 2018 ZZP Nederland Verzekeringen B.V.), Corins B.V., Anac, All-Finance Nederland Advies-Combinatie B.V. and Stoutenburgh Adviesgroep B.V; • The Holding and Other segment consists primarily of the holding activities of ASR Nederland N.V. (including the group related activities), other holding and intermediate holding companies and the activities of ASR Deelnemingen N.V.; and
Segment information has been prepared in accordance with the accounting principles used for the preparation of a.s.r.’s consolidated financial statements (see chapter 7.3). 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 centralised services are allocated to the segments based on the utilisation of these services.
• Other incidentals: personnel related items (for example provision for restructuring expenses and a.s.r.’s own pension scheme excluding the current net service cost), costs related to M&A activities and items not related to the corebusiness or on-going business.
Financial statements 2018 | 7.4 Group structure and segment information 174 7.4.2 Segmented balance sheet
Financial statements 2018 | 7.4 Group structure and segment information 175
Attributable to: Profit attributable to non- - Holders of other equity - Tax on interest of other equity
Financial statements 2018 | 7.4 Group structure and segment information 178
Financial statements 2018 | 7.4 Group structure and segment information 179 2017 (restated) Non-life Life
The incidentals in 2017 are mainly related to the a.s.r. post-employment benefit plans in segment Holding and Other (see chapter 7.6.8) and to the run-off activities in segment Real Estate Development. Furthermore, various relatively small administrative differences of prior years have been resolved which led to a release of provisions in the Life insurance business of in total € 27 million. This amount is classified as an incidental as it does not reflect the underlying performance of the insurance portfolio.
Financial statements 2018 | 7.4 Group structure and segment information 180 7.4.4 Non-life ratios
Generali Nederland was the group company of a number of entities, the main being Generali levensverzekering maatschappij N.V. (Generali life) and Generali schadeverzekering maatschappij N.V. (Generali non-life).
The acquisition of Generali Nederland further strengthens a.s.r.’s position on the Dutch insurance market and ties in with a.s.r.’s strategy of combining organic growth and growth through targeted acquisitions. Business synergies, diversification benefits and elimination of capital tiering restrictions generate significant synergy potential.
The closing for the transaction of Generali Nederland took place on 5 February 2018. As a result, a.s.r. fully included the results and the balance sheet positions in the a.s.r. consolidated financial statements from that date. The full integration of Generali Nederland’s activities into a.s.r. will take place in phases and is to be completed by 2020 at the latest.
Financial statements 2018 | 7.4 Group structure and segment information 182
Loyalis N.V. In December 2018, a.s.r. announced the intended acquisition of Loyalis N.V. for a total consideration of € 450 million. This transaction will be financed with short-term debt. The acquisition of Loyalis N.V. is expected to be completed in the first half of 2019 and has not been recognised in the 2018 financial statements.
VSP Risk In April 2018, SuperGarant Verzekeringen B.V. established the final acquisition balance sheet of VSP Risk B.V. No differences with the provisional balance sheet were identified, therefore no retrospective adjustments were made.
Financial statements 2018 | 7.4 Group structure and segment information 183 7.4.6 Discontinued operations and assets held for sale and related liabilities
Since a.s.r. bank is measured at the lower of its carrying amount and fair value less costs to sell, a provision of € 48 million million has been made upon initial recognition of a.s.r. bank as discontinued operations.
Financial statements 2018 | 7.4 Group structure and segment information 184
Breakdown of financial assets and liabilities not measured at fair value of discontinued operations
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 185 7.5 Notes to the consolidated balance sheet 7.5.1 Intangible assets
The results of the annual goodwill impairment test are as follows: Segment Non-life The activities of Generali Non-life (€ 13 million goodwill) are being integrated in a.s.r. schade. As such, the goodwill impairment test was conducted at the segment Non-life level as CGU. The result of the goodwill impairment test, using the multiples methodology, shows an excess recoverable value over the book value. As a result, a second step was not necessary and there is no significant exposure of goodwill impairment for sensitivities in the underlying assumptions. No goodwill impairment was recognised.
Segment Distribution and Services The goodwill impairment test was conducted at the segment Distribution and Services as CGU. 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 (1,6%) 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 ranges between 7.7% and 7.9%, depending on the
Value of Business Acquired (VOBA) VOBA mainly relates to the acquisition of Amersfoortse Stad Rotterdam. At year-end 2018, the remaining amortisation period of VOBA is 12 years and the average amortisation for the next 5 years will be € 8 million per year.
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 187
Land and buildings for own use Equipment Total 2018 Total 2017
Changes in the composition of the group 8 - 8 -
Gross carrying amount as at 31 December 242 44 287 408
Net carrying value as at at 31 December 151 21 172 171
Depreciation of property and equipment is recorded in the operating expenses (see chapter 7.6.8).
Transferred between investments on behalf of policyholders and investment property -4 9
Investment property is leased to third parties and is diversified over the rural, residential, offices and retail sectors in the Netherlands. For more detailed information about the investment property, please see chapter 7.7.1. The significant inputs are the net initial yield and market rental value. These inputs are verified with the following market observable data: O p e ra tin g e n viro n m e n t
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 188
• Market rent per square meter for renewals and their respective re-letting rates; • Reviewed rent per square meter; • Investment transaction of comparable objects; • 10 Year Dutch Government Bond Yield (%) as published by the Dutch Central Bank.
Real estate equity funds ranging between 30% and 70% 1,677 1,563
The information disclosed in the tables below is based on the most recent financial information available from the associates and joint ventures. This is primarily based on the investee’s financial statements and their accounting policies
The total assets of the real estate equity funds consist primarily of investment property (€ 3,207 million).
At fair value through profit or loss (chapter 7.5.5.2) 2,332 1,706