2.1 Our strategy 12 2.2 Value creation model 17 2.3 Key trends 22 2.4 Our stakeholders and material issues 29 2.5 Our people 33 3 Business performance 3.1 Group performance 38 3.2 Segment performance 49 3.3 Risk management and Compliance 78 3.4 Statements Executive Board 86 3.5 Assurance report of the independent auditor 87 4.1 Corporate governance 90 4.2 Our investors 98 4.3 Supervisory Board report 102 4.4 Remuneration report 110 4.5 Employee participation 114 2017 Annual Report
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 financial products in the areas of non-life, life and income protection insurance. a.s.r. also offers investment and (bank) savings products. a.s.r. is also active as an investor and offers 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, except for a small Belgian funeral insurance portfolio, which is recognised as a business line of ASR Levensverzekering N.V.
a.s.r. is the third largest insurance company in the Netherlands measured by GWP (excluding health insurance).
of the assets under management by Group Asset Management are compliant with a.s.r. SRI policy.
‘Pride in looking back over a good year, but our focus remains on the future’
The Executive Board is pleased with the results obtained by a.s.r. Discipline in executing our strategy led us to exceed all our medium-term financial targets in 2017. Our operating result rose by 17.2% to € 729 million, with all business segments contributing to the increase. At 15.6%, operating return on equity was well above our target of ‘up to 12%’. In non-life insurance, our expertise was reflected in an increase in Gross Written Premiums (GWP) of nearly 6%, while at the same time we managed to reduce our cost base by € 3 million. The Combined Ratio was 95.1%, which was well below the target of ‘less than 97%’. Our Solvency II ratio, based on the standard formula and taking into account the dividend proposal, was robust at 196% and exceeded our target of ‘safely above 160%’.
a.s.r. is ambitious to grow, both organically and through acquisitions. In 2017, we finalised the integration of the insurance portfolio of funeral services company NIVO, the integration and migration of De Eendracht Pensioenen, announced the acquisition of Generali Nederland and completed the acquisition of First Investments. We have already taken initial steps to integrate the various businesses in anticipation of closing Generali Nederland into a.s.r., and on 1 June 2018 our new colleagues are planned to relocate to Utrecht.
In September 2017, NLFI sold the remaining interest in a.s.r. on behalf of the Dutch State. In the fifteen months since the initial public offering (IPO) in June 2016, a.s.r. has made a full return to the stock market. Looking back on the process from nationalisation to full privatisation, we are proud of the way this was achieved. The total proceeds from the sale was € 3.80 billion against an initial investment of € 3.65 billion. During the period of State ownership, a dividend of € 636 million was paid out. This is an achievement that would certainly not have been realised without the effort and dedication of our employees. We are grateful to them for their significant contribution to this process. We are also of course indebted to NLFI and the Dutch Ministry of Finance for their constructive cooperation over the past years, of which I and my fellow Board Members have very positive recollections.
We will continue to focus on long-term value creation for our customers, shareholders, employees and other stakeholders in the year ahead. The phrase ‘past performance is no guarantee of future results’ is one of which we are acutely conscious. So, while it is good to celebrate our strong results, we will be swiftly shifting our focus back to tomorrow and beyond.
Helping by doing a.s.r.’s raison d’être is to help people. We help customers share risks and build up capital for the future. We are committed to understand what they need and to deliver it clearly and transparently. Using our expertise, we fulfil their needs in a service-driven way. We pay a great deal of attention to sustainability because we feel responsible for our environment and are convinced that in the near future consumers will only want to do business with sustainable companies.
This can only be achieved with enthusiastic and committed employees. Our work is guided by our core values: I’m helpful, I think ahead and I act decisively. These values drive our behaviour.
We are highly cost-conscious in our business operations, compile well-founded risk assessments and are financially sound, realising sustainable, attractive returns for our shareholders. In addition to organic growth, we strive for growth through the acquisition of small and medium-sized insurers and/or asset management companies.
We are only satisfied if our customers are getting value for premium paid and their financial advisors believe that a.s.r. is providing the right level of service and offering the right products and services, if our employees are continuously developing their skills and our shareholders are being given attractive returns. Our customers need to be convinced on a daily basis that we are doing our job with dedication and expertise. Our aim is to be a future-proof insurer who performs above expectations.
a.s.r.’s employees are dedicated to helping customers whenever possible, in accordance with its core values. Its staff helps to identify key solutions for customers needs and to implement them effectively. a.s.r. focuses on retail customers, the self-employed and small and medium-sized enterprises (SMEs). It also provides pension, disability and asset management products to pension funds and large institutional investors.
a.s.r. fosters close contact with its customers, both directly through customer panels and surveys, and through feedback from intermediaries. It monitors changes in customers’ needs and uses customer feedback to improve existing products and to develop new products and services. Customer and intermediary satisfaction is monitored closely through the measurement of closed-loop feedback such as the NPS.
Excellence in pricing, underwriting and claims handling a.s.r. maintains a disciplined pricing strategy based on an in-depth understanding of customer behaviour. a.s.r. continues to build on its experience and skills in pricing, underwriting and claims handling, since these are key drivers in the creation of sustainable value.
a.s.r.’s risk appetite is a key factor in executive and senior management decisions. a.s.r. has a moderate risk profile and sets minimum solvency levels in order to remain entrepreneurial, to absorb potential losses, and to remain financially robust and resilient. With these levels, the requirements of the regulator are also respected.
The four strategic principles described in Chapter 2.1.1 (Strategic pillars) are the value drivers in a.s.r.’s business portfolio. On an ongoing basis, a.s.r. reviews its business portfolio for its contribution to profits, as well as its future growth outlook.
Given the profit contribution and growth outlook of the businesses, a.s.r. divides its portfolio info four categories: I Activities that provide stable cash flows and generate value with relatively strong growth potential; II Businesses that represent robust and predictable back books and contribute to current profits; III Activities that offer business enhancement opportunities, typically capital-light, and; IV Non-core activities which will eventually be divested.
Stable cash flow and value-generating business with relatively strong growth potential In P&C and Disability, a.s.r. focuses on maintaining profitable underwriting and pricing discipline combined with excellent claims handling for customers. a.s.r. strives for selective organic and inorganic growth in this segment. Maintaining its leadership position in the intermediary distribution channel is key to this ambition. Non-life insurance offers a.s.r. organic growth potential, which is reflected in the organic GWP growth of these business lines in 2017. The customers of Generali Nederland will be migrated in 2019, strengthening our market position.
a.s.r.’s cost-efficient platform in the funeral insurance business gives it a strong competitive position. Moreover, the funeral insurance business carries mortality risks that strongly diversify the longevity risk in a.s.r.’s pensions businesses. With its strong market position, a.s.r. is well positioned to buy ‘blocks of business’ in funeral and to offer a high level of service and generating long-term value for its customers and shareholders.
Lo ng t er m g ro w th p ro sp ec ts
Business enhancement opportunities a.s.r. sees growth opportunities in the capital-light business. These include capital-light pension propositions such as defined contribution (DC) plans. With new legislation on ‘doorbeleggen’, a.s.r. has enhanced the defined contribution solution with an individual pay-out product.
Divestments Managing the business portfolio is not just about acquiring businesses and integrating them into the a.s.r. organisation. It is equally about divesting businesses that are either strategically no longer core or that structurally underperform. a.s.r. has for example terminated its real estate development business and divested a large portion of its real estate development projects. The remaining property development activities (Leidse Rijn Centrum) are in run-off and divestment opportunities are explored continuously.
Providing the right services and products leads to loyal customers that provide long term value that leads to an attractive return for shareholders. A long-term employable workforce contributes to this and a.s.r. thus also creates (long-term) value for its employees. a.s.r. also wants to contribute to sustainable economic development by investing resources responsibly. a.s.r. therefore follows a strict investment policy based on Environment, Social, Governance (ESG) good practices. Organisations with above-average performance in the field of ESG are preferred.
E xcellence in p ricing , und erw riting and claim s hand ling
Financial capital • Shareholders equity • (Hybrid) Debt • Premiums • Investment returns
• Knowledge and advice in the context of prevention and risk issues
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. The Director of Corporate Communications coordinates the implementation together with a CSR Task Force. The Task Force consists of a secretary, the directors of the departments Services, Human Resources, Asset Management, Real Estate Investment Management, Integrity, Group Risk Management, Non-life, Pensions and Bank & Mortgages and the secretary of the Executive Board. The Task Force meets regularly to form an integral CSR vision and set objectives. All members of the Task Force subsequently promote this vision and objectives within their own focus areas. The Task Force also establishes CSR Key Performance Indicators (KPIs).
Under the Task Force, an CSR Work Force operates with delegates from the directors above. It reports quarterly on the established CSR KPIs to the Task Force, which evaluates the results achieved or take actions where necessary. Each focus area has a CSR Work Force for substantive discussions and working out (sub)activities.
a.s.r. contributes to the SDGs in its value creation process. a.s.r. examined where the largest contribution is made. Although the seventeen SDGs are related and a.s.r. has an impact on different fronts, a.s.r. contributes to SDG 8 (Decent work and economic growth) objectives in all four roles. As an insurer, a.s.r. contributes to income and work by focusing on prevention (and reducing the risks) of unemployment due to sickness or disability. As an investor, a.s.r. invests with a strict ESG policy aimed at stimulating sustainable economic growth. As an employer, a.s.r. contributes to economic productivity through a strong focus on vitality and development. And, to conclude, a.s.r. contributes to people’s financial self-reliance and is committed to keeping products available for customers with payment problems (access to financial services).
Sustainable investor In the investment process, a.s.r. pays special attention to impact investing, seeking to make a sustainable contribution to society, for instance through investing in renewable energy (solar and wind, SDG 7) and social enterprises (SDG 8). On the other hand, a.s.r. does not invest in arms trading (SDG 16) or the tobacco industry (SDG 3). As a real estate investment manager, a.s.r. contributes to sustainable and liveable cities (SDG 11) by investing in, among other things, energy-efficient buildings, renewable energy applications, greenery and liveability. As a sustainable investor, a.s.r. touches on a wide range of SDGs. Read more about sustainable investing and sustainable real estate investing on pages 66 and 70.
a.s.r. is convinced that it is important to pay attention to its own direct footprint and sets a good example as a responsible company by limiting its negative impact on the environment. a.s.r. therefore sets the ambition to become 100% carbon-neutral by 2020 (SDG 7). Read more about the targets and results regarding a.s.r.’s carbon footprint on page 46.
Technological innovation Various technological innovations will have a significant impact on the scope and position of insurers in the value chain. Big data is generating a vast amount of information that can be used for a range of purposes such as customised solutions to meet customer requirements, risk pricing, improvement of retention rates, prevention, lead generation and fraud detection. The Internet of Things, where devices are constantly online and sending or receiving relevant information, could improve prevention of damage, resulting in a reduction of claims. Smartphones and tablets are increasingly being used in customer interfaces that require simple and straightforward digital services. Health-related technology can contribute to a longer, healthier life. Predictability and determination of factors influencing people’s health is improving thanks to wearables, which give customers (and insurance companies, where possible and desired) more information that could help them move from cure to prevention.
Technological developments in the area of artificial intelligence, blockchain, quant computing and robotics have the potential to disrupt or to re-invent the insurance industry. Artificial intelligence and big data, for example, could prompt a shift from risk mitigation (via insurance solutions) towards risk prevention (e.g. self-driving cars, increased focus on preventing illness). These technologies could change the nature, magnitude and type of risks that customers want to mitigate. Insurers could help to cover the residual risk and their role could therefore shift to helping customers prevent risks. Robotics could also dramatically improve process efficiencies and, in the long term, could also improve the quality of processes.
Risks • New technology is creating new forms of risk for which customers seek cover. (e.g. cyber risk and security, for more information see Chapter 3.3.1 (Risk Management); • Technological developments could disrupt traditional insurance models; • Customers are becoming more comfortable with exploring opportunities with nontraditional ‘start-up’ companies in the financial sector. They could be willing to consider products that offer something different than traditional savings and pension models; • Talent with digital skills is crucial for success and is becoming increasingly difficult to find. The in-house development of this talent is key; • Through technology, customers or alternative platforms are able to offer services themselves without or with less help from traditional parties. More and more alternative collectives and several platforms are emerging in this way.
Exploiting these new opportunities requires an innovative approach. In this context, a.s.r. distinguishes three horizons: 1. Optimisation of current processes, focusing on efficiency and cost savings (e.g. in distribution and communication); 2. Transforming the existing business model with the aim of making the end-to-end service provision more relevant, mainly through digitisation; 3. Developing disruptive initiatives focusing on new business, service and revenue models (separate from the existing business).
In 2017, a special team (Innovation & Digital) was set up to support the transformation and disruption. For disruptive initiatives with the potential to quickly capture market share or penetrate new markets, a new innovation space was also set up, the Mission Control lab. This team organises customer panels to test new concepts. A growing number of online tools are also being used and web and data analyses are being further developed.
The Innovation & Digital team reports directly to the Executive Board. Disruptive initiatives are managed separately and are organised separate from the a.s.r. organisation.
Robotic Process Automation (RPA) is piloted in several departments (Finance, P&C and Individual life). If a process is not straight through, RPA can create further efficiency. In 2017, the Life segment began using a RPA to perform simple tasks. This primarily helps to reduce costs. It also frees up employees to focus more on tasks with added value for customers. Finally, the initiative gives a.s.r. the experience and knowledge to deploy robots elsewhere in its business processes.
a.s.r. is offering a wide range of capital-light pension products (defined contribution), het Nederlandse pensioen- fonds (Dutch pension fund; Hnpf) and IORP (Institution of Occupational Retirement Provision) products via a joint venture. a.s.r. has successfully increased its market share in the defined contribution product segment. During 2017, a.s.r. migrated a large part of the existing defined contribution products to a single platform.
In the past years, a.s.r. strengthened its position in the Distribution and Services segment through the acquisition of Van Kampen Groep (VKG), Dutch ID, SuperGarant and Corins.
In 2017, a.s.r. asset management significantly expanded its third-party asset management business, successfully introducing two flagship mutual funds for institutional investors in the mortgages and Euro ESG investment grade credits asset classes. The a.s.r. mortgage fund gives investors access to Dutch residential mortgages originated by a.s.r. A unique element of this fund is that it offers two subsidiary funds: investing in mortgages with or without national mortgage guarantee. The assets under management amount to € 0.5 billion at the end of 2017. The fund also received € 0.3 billion in commitments. The a.s.r. ESG Euro credit fund fully includes the a.s.r. Socially Responsible Investment (SRI) policy in its investment process and offers an attractive risk-return profile against the benchmark. The assets under management in this fund grew to approximately € 0.5 billion. At the end of 2017, a.s.r. further strengthened its asset management capabilities through the acquisition of First Investments, an asset manager specialising in liability-driven solutions for pension funds.
Opportunities • Capital-light life products (e.g. defined contribution plan products); • Further development of the Distribution and Services segment; • Sustainable business enhancement via asset management solutions across all assets classes for external clients.
a.s.r. encourages employees to continue to develop themselves and boost their long-term employability. This approach is also anchored in ‘De Andere Cao’, which has been in force since 1 January 2018. The ‘In Motion’ programme and the programmes linked to the annual employee review are also geared to personal development and sustainable employability. This is covered in more detail in Chapter 2.5 (Our people). Not only does a.s.r. encourages its employees to take preventive measures and remain healthy, it encourages its customers too, where possible.
Risks • Changes in consumer behaviour, resulting in declining and evolving demand for insurance products. For more information see Chapter 3.3.1 (Risk Management); • Unforeseen rises in life expectancy may have a major impact on future profitability, though mitigated by a.s.r.’s funeral and term life business; • The move from retail to wholesale purchase of insurance products (for instance, when consumers move from car ownership to car-sharing, cover will be purchased by the organisation that owns the vehicle), which will squeeze margins; • Further reduction of the principle of solidarity and growing attention for individual solutions, possibly compensated by mandatory solutions for uninsurable groups.
Politics and regulatory supervision In the financial sector, the trend is towards more regulation and State intervention. Consumer protection (for example, regulations to increase the protection of personal information – the General Data Protection Regulation) takes precedence and risk mitigation is broadly supported by politicians and regulatory bodies alike. There is an increased effort needed to comply with regulation, as illustrated by the emergence of Solvency II and the upcoming change in accounting standards (e.g. IFRS 17).
Risks • New and increased levels of regulation, for instance, in the field of Pensions, Disability and Health, may impact existing business models. For more information see Chapter 3.3.1 (Risk Management); • Juridification of society with specific political, regulatory and public attention to unit-linked life insurance policies. Current and/or future legal proceedings (e.g. of unit-linked life insurance products) brought upon a.s.r., could be applied to or be relevant for other insurance products. For more information see Chapter 3.3.1 (Risk Management); • Increasing levels of regulation, forcing a move from entrepreneurship to ‘de facto’ implementation of publicly established regulations.
As an insurer, there are various ways in which a.s.r. can be impacted by climate change risks. a.s.r. believes that climate change risks are mainly likely to affect the P&C business. For example, more frequent weather-related events such as wind or hailstorms could lead to a higher claims ratio, affecting the profitability in P&C. In October 2017, P&C set up the a.s.r. climate committee to examine what measures must be taken to manage risks and support customers as effectively as possible from the impact of climate change. a.s.r. currently manages the impact of climate change and weather-related events at different levels in its operations. It analyses climate change as a whole and calamities in particular on a regular basis.
As a signatory to the Paris Pledge for Action, a.s.r. is involved in initiatives to limit global warming to 1.5°C. It has also analysed and identified risks for the investment portfolio, such as stranded assets and changing business models in the mining and energy sectors. As a result, for its investment portfolio a.s.r. expanded its exclusion policy in July 2017 with controversial environmental activities, for example excluding companies that derive 33% or more of their revenues from tar-sands and shale oil. It also excludes countries that achieve a low score (below 50) on the environmental performance index. On the other hand, a.s.r. invests in renewable energy and ‘cleantech’ and endorses high-scoring countries and companies in its ESG integration policy. Its strict ESG policy (see page 67), which incorporates extensive requirements with regard to climate change, also makes a.s.r. more attractive for a growing number of (responsible) investors.
Declining insurance market The Dutch insurance market is saturated. Looking at the volumes of GWP which includes higher lapses at this point in time, a.s.r. envisages a steady long-term run-off pattern in the individual life market. The volumes of a.s.r.’s GWP – excluding acquisitions – are roughly in line with market developments. If lapses and early surrenders continue at the present rate, a.s.r.’s life portfolio will be less than half its current size in a decade’s time. In pensions, where the market has also declined in recent years, traditional defined benefits contracts are slowly shifting towards defined contribution or asset management solutions.
Customers Customers entrust their assets (premiums) to a.s.r., giving it a ‘license to operate’. They need to be confident that these funds are being skilfully managed and that a.s.r. will continue to fulfil its long-term commitments. They also want this done in an impeccable, socially responsible, relevant and ethical way. Product requirements, perceptions and social standards are constantly evolving, and a.s.r. is committed to anticipating and responding to this changing context.
Shareholders a.s.r.’s shareholders rely on the implementation of its strategy. They expect management to seize the opportunities that arise and permanently monitor risks. They want a dividend that offers attractive 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. adequately represents the interests of all stakeholders in order to achieve long-term value creation and return on capital.
During the 2017 dialogue, members of the Executive Board discussed with a broad group of stakeholders the question ‘What does it mean to be a sustainable and socially valuable and desirable insurer?’. Discussions centred on three subsidiary themes: ‘Sustainable insurer’, ‘Sustainable investor’ and the ‘Social role of a.s.r.’. Participants were drawn from key internal and external stakeholder groups representing the broadest possible cross-section of a.s.r.’s stakeholders.
One of the key discussion points during the dialogue with stakeholders was the coherence and consistency (and hence integration) between a.s.r.’s corporate strategy, investment policy and general policy. The organisation undertakes several roles: investor, supplier of insurance products and services, lessee and lessor of real estate and buyer of products and services. In some situations, these roles can conflict with one another and give rise to dilemmas. a.s.r. has therefore devised an assessment framework for addressing social and ethical dilemmas, the aim being to help each other, learn from each other and work together on a solution. The CSR Taskforce (Chapter 2.2 CSR Governance) acts as a platform within a.s.r. to discuss social and ethical dilemmas. Decisionmaking can also take place in the Taskforce if this is not possible in the business line. a.s.r. believes that external transparency on this issue is vital. Stakeholders also specifically mentioned this as a point requiring attention. As a sustainable insurer, a.s.r. wants to engage in dialogue and exert influence in order to set parties in motion rather than exclude them. This is in line with a.s.r.’s commitment to be a sustainable insurer.
For a.s.r.’s insurance activities the Customer Due Diligence (CDD) policy has been put in place to avoid that business relations are established with customers (and suppliers) involved in crime or other socially undesired actions, thus jeopardising a.s.r.’s reputation and integrity. Examples include money laundering, tax fraud, insurance fraud, financing terrorism, corruption, environmental offences, conflicts of interest and insider trading.
These different angles of CDD, SRI and CSR may however conflict with one another and create social and ethical dilemmas. For instance, is it an acceptable exception to offer employees of an excluded company a pension insurance solution? If so, under which conditions is such an exception justified to all stakeholders? Another example of a dilemma is when a company acting in violation of a.s.r.’s exclusions policy has formed a pension foundation for its staff in the past and now wants to transfer the existing entitlements of its (former) employees to a.s.r. (buy-out). This, too, poses the dilemma for a.s.r. as to whether the SRI policy should be guiding in such decisions, or whether the rights of individual participants should be prioritised.
A third key discussion point mentioned by stakeholders was cooperation. a.s.r. has considerable knowledge and operates a large network within and beyond the insurance industry. It can further strengthen its social role by working more closely with national and regional parties and players within the sector. In CSR and innovation in particular, a.s.r. is seeking opportunities to invest with other parties, exchange knowledge and help in the further development of social initiatives. In 2017, for example, it set up a financing structure with Triodos in order to exert a sustainable influence on the business community through investments. Other examples are the involvement in the ‘Beter Bereikbaar Utrecht-Oost’ (towards a more accessible Eastern Utrecht) platform, through which a.s.r. is contributing to the region’s accessibility in conjunction with the University Medical Center (UMC), Utrecht University (UU) and Utrecht University of Applied Sciences (HU). This takes the form of combined promotion of bicycle use and efforts to improve and encourage use of public transport, reduce traffic problems and cut the CO2 footprint. a.s.r. is also one of six partners in the GOUD project (Geothermie Oost Utrecht Duurzaam, or Sustainable East Utrecht Geothermics), which investigates whether ultra-deep geothermics is feasible in the eastern Utrecht region. In the area of sustainable deployment, a.s.r.’s career coaches seek, in collaboration with Stichting Tussenvoorziening in Utrecht, to help formerly homeless people to re-enter the job market by, for example, offering workshops (on how to apply for a job, for example). Also, a number of formerly homeless people received individual guidance from talented participants of the development programme. Furthermore, a.s.r. is seeking collaboration with fintech and insurtech start-ups and accelerators to develop new customer solutions and applications and explore new business models to create shared value for a.s.r. and its stakeholders.
One of the points of attention for reporting which emerged was that a.s.r. could communicate more about its contribution to the Sustainable Development Goals (SDGs). In 2017, a.s.r. investigated where its impact on the goals was greatest and where it could make concrete contributions. Chapter 2.2 (Value creation model) discuss this in more detail.
More information about the a.s.r.’s stakeholder approach can be found in Annex D (GRI 102-43).
B Offering socially responsible products and services 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.
D Financial performance A financially reliable and stable institution strong enough to achieve its financial targets and objectives.
F Solvency The solvency position reflects the way a.s.r. can fulfil its short-term and long-term obligations and commitments to all its stakeholders. This is expressed by the ratio of available capital and solvency capital requirement (SCR ratio). a.s.r. has set limits and internal targets for the statutory framework at different levels. The key objective in this context is to guarantee the required level of solvency and to uphold S&P ‘single A’ rating at group level.
G Socially responsible investment Investing with due regard for ethical standards, policies and procedures, in line with the interests of a.s.r. stakeholders, whereby the integration of ESG criteria is key. This includes respect for fundamental human rights, labour rights, the environment and adequate corporate governance.
R el ev an ce t o s ta ke ho ld er s
I Innovation A corporate culture focused on continuously adapting and translating new customer expectations into new solutions and applications that deliver relevance and sustainable value for customers and society. This is achieved by adopting other ways of working (together) both internally and externally, as well as anticipating and applying new technologies.
a.s.r. needs competent and vital employees who are enterprising and versatile 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. That is why a.s.r.’s personnel policy focuses on employability, on supporting employees in their professional development and on boosting their continued employability and labour market attractiveness. This is also reflected in the starting points of ’De Andere Cao’, a.s.r.’s new, home-grown corporate Collective Labour Agreement (CLA) which took effect on 1 January 2018.
The story of a.s.r. was shared by the Executive Board with senior management and their management teams and subsequently within the business lines. It was transposed to make it applicable for each business line. The employees then set to work within their teams to discuss what the core values meant for their roles and where they could develop themselves further. The story of a.s.r. is regularly highlighted and made visible through various communication channels, like the gamification platform. The story of a.s.r. was also given a prominent role in the new in-house CLA which a.s.r. compiled with the trade unions in 2017.
Development and vitality a.s.r. considers the promotion of ongoing employability and agility in its employees to be crucial. It therefore invests in development, vitality and facilities that encourage time- and location-independent work. In order to enhance professional knowledge and skills, employees are offered a wide range of job-related education and training courses. All employees can moreover call on career coaching and choose from a wide range of workshops on sustainable employability. In 2017, groups of employees were also offered tailor-made (development) programmes. These included the Professional development programme and the Talent development programme for employees identified as (emerging) professional talent or top talent in the annual employee review. a.s.r. also runs a Management Development Programme for employees who are in or may be assuming a leadership role. Finally, a special programme was launched in 2017 for employees who, based on the employee review, are in the designated ‘right person in the right place’ group.
In motion a.s.r.’s ‘In Motion’ initiative encourages employees to continue to develop themselves in order to improve their employability (inside or outside a.s.r.) and avoid (future) redundancies. ‘In Motion’ is intended for all employees, with specific attention for those affected by a reorganisation. The resources used in this context are career guidance, development programmes, workshops and IM cafes, a live meeting place where career development and ongoing employability are the central focus. 12 IM cafes were organised in 2017 with 658 employees taking part.
Annual employee review During the annual employee review, the performance and potential of all a.s.r. employees is discussed. The employee review is carried out by line manager, the HR advisor and at least one other manager within the same business line, based on the ‘4 eyes’ principle. The results of the employee review are discussed individually with each employee and are used for strategic personnel planning, succession planning, mobility and recruitment, as well as the targeted implementation of the development programmes.
a.s.r.’s policy on sickness absence was updated in 2017, with more emphasis given to employees’ responsibility in preventing absenteeism and their own role in the absenteeism process. The aim is to reduce absenteeism within a.s.r. The absenteeism rate for 2017 was 3.95% (2016: 3.68%).
Employees took part in one of the development programmes 819 661
a.s.r. also wants to attract young talent and introduce them to the company. It therefore entered into partnerships with various students’ associations and universities. In 2017, a.s.r. was represented at various events at colleges and universities, including National Econometrist Day, Utrecht University’s Career Day and the Erasmus Recruitment Days. a.s.r. invites college and university students to familiarise themselves with the company. In 2017, for example, a group of second-year Business Economics students from Utrecht University of Applied Sciences visited the company and a.s.r. also organised the Finance Expedition, which involved 24 top students studying Finance.
Trainee programme a.s.r. has its own trainee programme in which young talented people carry out roughly four different assignments in one business line over an 18-month period. In addition to the assignments, trainees follow a customised development programme which includes training courses, a buddy programme and projects. After their traineeship, most of the trainees successfully leave the organisation. They particularly appreciate the help and scope they are given to explore what they are good at and what they want to specialise in or further develop themselves in. Eleven trainees started at the company in 2017.
a.s.r. is committed to employing at least 70 people through the Participation Desk by 2026. These are individuals with an employment restriction who are covered by the Labour Participation Act. In 2017 a.s.r. had 31 employees with an occupational impairment. In order to achieve the target, the Participation Desk was further professionalised in 2017. Attention was also drawn to this theme within the Management Teams (MTs), the aim being to increase awareness of the Participation Desk and hence the scope to employ people with limited labour market prospects.
The underlying aim of ‘De Andere Cao’ is self-management, a mature employment relationship and boosting the labour market value of employees. Freedom of choice is possible though not compulsory, and the relationship between manager and employee is based on trust rather than control. The customer is central and ‘De Andere Cao’ contributes to a better work-life balance. The hallmark of ‘De Andere Cao’ is ‘Het Andere Gesprek’. This is held on an ongoing basis and conversation partners and topics can change. ’Het Andere Gesprek’ is used to discuss personal development, conclude agreements on, and evaluate, goals, behaviour and performance, give or ask for coaching and to coordinate efforts, attendance and absence. The ‘De Andere Cao’ consists of four clusters: Culture, Development, Time and Mobility and applies to all employees. The key implications of ‘De Andere Cao’ are: 1. The standard assessment cycle has been abolished; performance, behaviour and development are reviewed on an ongoing basis; 2. Intensive and substantial investment in development, expertise, sustainable employability and vitality and making use of each other’s talents; 3. Working with a standard number of annual hours with no fixed schedules. Attendance and absence at the office and working hours are agreed between manager and employee; 4. The timeframes within which work is done have been extended; 5. A system with plus and minus hours gives employees and managers more scope to absorb peaks and troughs in workloads within the annual standard hours; 6. The allowance for travel expenses will take place via a mobility budget based on, among other things, a kilometrage allowance.
Peer groups Once every three years, an independent consultancy is hired to perform a market comparison (remuneration benchmark). The ASR Remuneration Policy starts from the principle that the average level of total remuneration should actually be below the median of the peer group. The relevant peer group for a.s.r. employees (excluding the Executive Board of ASR Nederland N.V. and Asset Management) consists of the general market.
In compliance with the remuneration policy, the remuneration of our employees consists solely of fixed remuneration, with the exception of a number of specific small groups. In addition, a.s.r. knows a few other special
A clawback mechanism, fairness clause and penalty scheme are applicable, meaning that the Supervisory Board can claw back any variable pay already awarded if it was based on incorrect information. The Supervisory Board is also entitled to adjust the level of the conditional variable pay if leaving the payment unchanged would go against the principles of reasonableness and fairness.
’Het Andere Plan’ In order to provide the best possible support and guidance for employees during a reorganisation, a.s.r. applies ’Het Andere Plan’. This is a social plan centring on guidance from work to work which places emphasis on the development and sustainable employability of employees. ’Het Andere Plan’ 2017-2018 divides a possible reorganisation into three phases: 1. My plan phase 1: in anticipation of (potential) redundancy; 2. My plan phase 2: following notice of redundancy; 3. My plan phase 3: from the moment of redundancy.
Anyone who carries out work (on a regular basis) at or for a.s.r. must take the oath or make a solemn affirmation. New employees (both internal and external) must take this oath or make this affirmation within 3 months of taking up their duties.
In 2017, a.s.r. introduced ‘Gamification’ to keep knowledge of the code of conduct up to date. By daily answering related questions, employees can refresh their knowledge of the code of conduct. Since its launch, 46% of employees played the game 2 to 3 times a week. This has led to an 18% increase from 67% to 85% in knowledge of the code of conduct.
Ethical behaviour a.s.r. attaches great importance to maintaining its integrity and good reputation as a financial institution, and actively takes measures to prevent unethical behaviour such as fraud and corruption. a.s.r.’s policy to prevent unethical behaviour is based on the sector-wide policy that financial institutions use to combat fraud. This policy promotes compliance with relevant laws, regulations, internal procedures and ethical standards. a.s.r. has an incident policy and allows employees to report incidents and data leaks (anonymously).
Business performance | 3.1 Group performance 38 3.1 Group performance 3.1.1 Financial review
Profit / (loss) for the year attributable to holders of equity instruments
a.s.r. seeks to generate an ROE of up to 12% per year in the medium term. For the longterm, a.s.r. aims to achieve an operating ROE of above 10% on average.
Cost savings a.s.r.’s aim is to reduce operating expenses by an aggregate € 50 million in the medium term.
Solvency II position. a.s.r. does not plan to pay a cash dividend if the Solvency II ratio were to fall below 140%.
In 2018, a.s.r. announced the intention to introduce an interim dividend as of 2018.
In the Non-life segment, a.s.r. strives to achieve an overall combined ratio (‘COR’) of below 98%, and below 97% for 2017.
Combined ratio amounted to 95.1%, which is an improvement of 0.5%-point (2016: 95.6%). Operating result in the Non-life segment rose 26.5% to € 172 million mainly due to the exceptionally low level of claims in H1 2017.
1 After proposed dividend and excluding a.s.r. bank. Solvency II ratio 203% pre-dividend.
Proposed dividend over 2017 per share amounts to € 1.63 per share payable in cash, up 28.3% from 2016 (2016: € 1.27). Proposed dividend per share of € 1.63 is based on 141 million shares. Dividend over 2016 of € 1.27 was based on 147 million shares.
Generali Nederland On 5 February 2018, ASR Nederland N.V. completed its acquisition of Generali Nederland N.V. (hereafter GNL) by acquiring all issued and outstanding shares in cash.
The acquisition price amounts to € 145 million which is paid at closing of the transaction on 5 February 2018. a.s.r. expects the total net capital commitment (including acquisition price) to amount to approximately € 200 million. The a.s.r. Solvency II SCR is expected to decrease by 9%-points as per 5 February 2018. To meet the a.s.r. solvency criteria, a.s.r. is planning to make capital injections to Generali levensverzekering maatschappij N.V. and Generali schadeverzekering maatschappij N.V. via ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. respectively. GNL is expected to have a limited impact on the IFRS profit after tax and the operating result in 2018.
In 2017, the NPS customer contact moment for customers increased by 4 points during the year, from 36 to 40¹. Intermediaries² were more positive: the NPS rose from 50 to 57. The business lines each monitor their own NPS scores. Many business lines themselves have also formulated targets on the NPS. The NPS per business line is presented in Chapter 3.2 (Business performance).
(Aftercare) Investment Insurance 3.7 3.2 Information Provision by Insurers 3.8 3.6
No, not fully but the follow-up is clear to me 19%
No, not fully and the follow-up is unclear to me 7%
Product Approval & Review Process The Product Approval & Review Process (PARP) is one of the internal tools for assessing the relevance of products and services. The focus is on customers and customer interests. The PARP process is implemented in various situations: when developing new products and services; in the event of changes due to, for example, changing legislation and regulations and in the event of complaints from customers. Products that are actively offered and inactive products and services are also regularly reviewed. The PARP tests Cost Efficiency, Usefulness, Safety and Comprehensibility (Dutch abbreviation: KNVB), among other things. This KNVB test includes AFM questions and own a.s.r. policy. For example, the usefulness of a product and/or service for the customer is assessed: to what extent is the product a response to a well-founded need of the target group and does it actually have added value? The comprehensibility test examines whether the target group can properly assess the functioning of a product on the basis of the information the customer receives from a.s.r. This includes tests for comparability, completeness of the information provided and whether the characteristics of the product are clearly defined. In 2017, the PARP Committee approved two new propositions and two propositions that had already been initiated, 12 product adjustments and 25 reviews of existing products.
In order to guarantee sound and controlled business operations, a.s.r. has taken a number of control measures. This involves preventing, recognising and combating conduct that does not respect integrity, including the risk of corruption. a.s.r. uses the Dutch Central Bank’s definition: ‘Corruption risk is the risk that financial companies in the Netherlands are involved in forms of bribery and/or conflict of interest that impair the integrity of and trust in the financial company or the financial markets.’ Within a.s.r. this has been further elaborated in various policy documents, including an anti-corruption policy and an incentive policy. In 2017, 771 incentives were reported to Compliance and in 22 cases the advice was not to accept them. Within the a.s.r. businesses, high-risk processes are identified, as well as the risks and control of these risks.
Business performance | 3.1 Group performance 44 a.s.r. investigates signals of unethical behaviour of employees, intermediaries and suppliers. In the event of a lack of integrity, including corruption and fraud, a.s.r. imposes appropriate measures. This is done with due observance of the applicable laws and regulations and protocols within the sector. In 2017, 49 incidents were recorded at the Security Affairs department where there was a proven lack of integrity that led to the imposition of a measure. A lack of integrity involved in 17 cases the conduct of an employee, in 31 cases the conduct of an intermediary and in one case the conduct of a supplier.
Screening a.s.r. does not do business with partners involved in crime or other socially undesirable acts such as money laundering, fraud or the financing of terrorism. This may endanger its reputation and integrity. a.s.r. has a Customer Due self-reliance Diligence (CDD) policy that requires screening before a contract is signed. The contract management policy also stipulates that a screening is carried out periodically. If, in the opinion of a.s.r., there is reason to doubt the integrity of a supplier, appropriate measures are taken.
SRP annex is part of the procurement contract with the ten most strategic suppliers.
The experiences a.s.r. employees gain in this way also contribute substantially to the customer contacts desired by a.s.r. The starting point is a helpful and service-oriented approach. The customer values a.s.r. for its excellent service and expertise, but also for its positive attitude and social commitment. The customer realises that what a.s.r. does is socially responsible and sustainable.
Financial self-reliance In the Netherlands, one in five households has high-risk or problematic debts. The debt burden is on average € 40,000 spread across fourteen different creditors 1. The chance of someone ending up with a hard to resolve debt burden is a combination of factors. However, it does appear that having a disorganised administration, a lack of proper financial upbringing and low literacy increase the risk of 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.
In 2017, a.s.r. foundation worked together with the following (social) organisations in the context of projects within Financial self-reliance: De Tussenvoorziening, Diversion, FC Utrecht Maatschappelijk, Feyenoord Maatschappelijk, Giovanni van Bronckhorst Foundation, Humanitas, Kinderzwerfboek, Nederlandse Vereniging van Banken (Netherlands Bankers’ Association), Nibud (Dutch National Institute for Family Finance Information), Stichting Leven en Financiën (LEF), Taal doet meer, U-Centraal, Verbond van Verzekeraars (Dutch Association of Insurers).
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 finances available for this purpose. • In a team context – Social Team Activity (Dutch abbreviation: MTA)
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’. Teams work together with organisations that really need a helping hand. For example, a.s.r. teams took elderly people on a walk in the forest or picked fruit with mentally challenged people.
• At home – Encouragement Plan An individual Encouragement Plan has been put in place to encourage volunteering in colleagues’ private environment. The financial contribution of up to € 500 plan by a.s.r. foundation is an extra backing. If an idea is only about receiving a financial contribution, the proposal will be rejected. Colleagues can apply for an Encouragement Plan once per calendar year.
Voluntary contribution to Helping by doing/roll up your sleeves – MTA (number of hours)
Voluntary contribution to Helping by doing/roll up your sleeves – MTA Encouragement Plans (number of times)
Contributing to prevent payment problems at customers In October 2016, a.s.r. signed the ethical manifesto From Debts to Opportunities. In this way, a.s.r. joined a group of companies committed to proactively helping customers who are behind on payments. These companies have united in the Creditors’ Coalition. Through this coalition, a.s.r. remains connected to developments in the market and the public debate surrounding the subject.
Carbon footprint 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. puts special focus on its carbon footprint, which comes in two varieties: • Indirect footprint, as a result of investment activities (see Chapter 3.2.3 Banking and Asset Management); • Direct footprint, due to its own activities.
The scope 1 emissions decreased by 194 tonnes of CO2-equivalent, mainly due to the use of fewer and more economical lease cars and the reduced use of natural gas. However, the scope 3 emissions increased by 210 tonnes of CO2-equivalent. This is due to an increase in commuter traffic in kilometres, with car use increasing proportionally (compared to, for example, public transport use).
Fossil fuel consumption (carbon emissions) with respect to mobility3 5% reduction on 2016 - 6.8%
Energy consumption a.s.r. has undertaken the following measures to reduce its carbon emissions: • MYA3: achieved 4.1% energy1 savings in 2017, compared to 2016. A 30% energy efficiency improvement under the MYA3 covenant 2005-2020 was achieved back in 2014; • a.s.r. achieved further savings, 4.9% kWh in 2017, by reducing the energy consumption of the in-house data centre. In 2018, energy consumption will be further reduced by replacing equipment of the Data Centre with more energy-efficient units; • The building’s energy efficiency label is A++ and the building was awarded a BREEAM Excellent rating; • In 2017, electricity use was offset by the use of Swedish wind energy, using emission factor zero.
Mobility Mobility (business travel and commuter travel) accounts for a major proportion of a.s.r.’s carbon footprint. In 2017, fossil fuel consumption made up 96% of a.s.r.’s total carbon footprint.
Operating result Gross written premiums 1 The total workforce consists of the number of internal and external FTEs.
The Non-life segment consists of P&C, Disability and Health. They offer non-life insurance contracts, including policies insuring risks related to motor vehicles, fire, travel and leisure, liability, legal assistance, disability and medical expenses. The most significant legal entities of the Non-life segment are ASR Schadeverzekering N.V., ASR Basis Ziektekostenverzekeringen N.V. and ASR Aanvullende Ziektekostenverzekeringen N.V. With an 10.9% market share in 2016¹ (2015: 8,5%), a.s.r. occupies a third place in the non-life market in the Netherlands.
Intro d uctio n 1 Source: DNB - At the moment of writing, the market share figures for 2017 are unknown.
P&C With a market share of 10.9% in 2016 (9.8% in 2015), a.s.r. was the third largest general provider of P&C insurance products in the Netherlands in 2016¹, as measured by GWP. a.s.r. offers a broad range of P&C insurance products under the a.s.r. brands, Ditzo and Europeesche Verzekeringen.
Products a.s.r.’s broad P&C insurance product range offering can be divided into the following product 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 multi-risk 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.
Market The non-life market consists of many insurers with similar products, especially in the private non-life insurance market. This has led to fierce price competition. The non-life market in general has been loss-making in recent years. The losses in the market resulted in premium increases. Consolidation of other insurers have also affected a.s.r.’s position in the Dutch market. Insurers distribute their insurance policies through intermediaries (80% of the market volume) and directly (20% of the market volume). In the private market, online distribution has become more important. This mainly involves simple products, such as car insurance. Consumers increasingly use the internet to orientate themselves, compare and purchase products. Customers who opt for online buying of insurance are usually customers for a shorter period of time and more frequently switch to another insurer. With the introduction of social media and WhatsApp, customers’ service needs are changing. In the SME market, advisors continue to maintain their dominant position, in particular due to the more complex products involved.
Strategy and achievements On the P&C insurance front, a.s.r. endeavours to leverage its existing strengths and to achieve a combined ratio of less than 98%. The P&C business is expected to grow in line with GDP development. While leveraging existing strengths and distinctive profitability, a.s.r. aims to further develop its expertise in pricing, underwriting and claims handling and good service, which a.s.r. believes are its key drivers for sustainable value creation.
Another important part of the strategy is to further simplify the product portfolio and infrastructure. The new non-life platform will lead to the improvement and digitisation of services to customers and intermediaries. It will also reduce costs, which further strengthens a.s.r.’s competitive position. Various policy terms & conditions are also being rationalised. For customers and distribution partners, this makes the product range simple and clear. Meanwhile, the first portfolio has been successfully converted to this new platform.
The acquisition of Generali Schade and agreement on the right to convert Avéro Achmea intermediary portfolio to a.s.r. further strengthens the position of a.s.r. In co-insurance in particular, the market position doubled following the acquisition of Generali.
Central themes in the strategy of Ditzo include: • Continuous optimisation of customer acquisition costs through online channels; • Focus on customer satisfaction through Ditzo’s customer service (especially WhatsApp); • Increasing product ownership of existing customers for both health and non-life insurance policies; • Increasing diversity in non-life products through increased non-motor related sales.
In 2017, Ditzo began the transition to a new administration platform with a revised product portfolio. Migration to the new platform will be completed in the first half of 2018. The P&C companies including a.s.r., Ditzo and Europeesche Verzekeringen are migrating to a single platform. This will result in cost savings at P&C level, simplification and a shorter time-to-market.
Europeesche Verzekeringen The travel and leisure activities of Europeesche Verzekering Maatschappij N.V. has been (legally) merged with ASR Schadeverzekering N.V. since 2016. Until that time, it was an independent business and risk carrier within ASR Nederland N.V. Europeesche Verzekeringen positions itself as the travel and leisure insurer for travel enthusiasts. This was further emphasised in 2017 in online and personalised services. Access to the market was enhanced by selling travel and leisure insurance directly online. In addition, the revenue model was strengthened for the long-term by selling off loss-making relations and implementing policy measures and regulations. In conclusion, further progress was made on the integration with P&C, which started in April 2017. The integration should lead to improved customer and distribution partner services and cost savings.
The Climate Committee focuses on the impact and risks of climate change on customers, advisors and a.s.r. The objectives and scope of the Climate Committee were determined in 2017. In 2018, a number of actions will be taken to improve a.s.r.’s understanding of climate risks, changing precipitation patterns and the risk factors involved.
a.s.r. believes it is important that customers and advisors become more aware of the consequences of climate change. And that they recognise that they themselves can also contribute to mitigate the effects of climate change. For example, by ensuring that excess water on and around the house is easily discharged. Furthermore, a.s.r. wants to give (new) customers practical prevention advice, organise prevention sessions and disseminate prevention advice from local authorities. a.s.r. also participates in initiatives of the Dutch Association of Insurers that provide insight into the consequences of climate change and keep them insurable.
1 Source: DNB - At the moment of writing, the market share figures for 2017 are unknown.
Through its disability product line, a.s.r. aims to achieve the targeted combined ratio in the range of 93-95%. With regard to disability insurance, a.s.r. plans to capitalise on its unique integrated approach of utilising a dedicated multi-disciplinary team of professionals and by maintaining focus on the enhancement and further development of pricing and underwriting, which a.s.r. believes are key drivers for sustainable value creation. To improve competitiveness, the disability business plans to introduce new products, develop a tender application using a device that offers optimal accessibility and functionality, and improve the performance of its new IT platform at Group Disability in terms of flawlessness, speed and accuracy.
Product developments a.s.r. intends to continue providing high quality services and high-quality products to its customers. It expects to do so by reducing the complexity of its products and by keeping product offerings up-to-date through the introduction and development of new propositions in order to seize market opportunities. Recently planned or introduced product developments include: • The development and introduction of a new product to cover the 12-year risk of disability including occupational reintegration services complementary to the new social legislation ‘BeZaVa’ (Dutch Sickness Absence and Occupational Disability among Sickness Benefit Claimants (Restrictions) Act); • Improving access for and insurability of the self-employed by developing an disability insurance for the heavier work category up to retirement age; • The introduction of ‘Doorgaan’ insurance under the De Amersfoortse brand. This is an integrated disability and health insurance proposition whose benefits for the customer include lower premiums and additional services; • Within De Amersfoortse, Disability and Health began a collaboration with service providers in informal care, home help and childcare, as well as counselling and aftercare in the event of cancer, care after an accident and support with financial and social psychological problems. This protects and utilises the working capacity of entrepreneurs and their employees in favour of income security and business continuity.
Digital communication by De Amersfoortse In October 2017, Disability began implementing the latest developments in the field of digital transformation for De Amersfoortse together with e-Health. The aim is to enhance visibility and potential relevance, especially for young customers. The ‘Always On’ project focuses primarily on digital communication via a mobile device instead of a laptop or PC.
The website of De Amersfoortse has also been adapted, making it easier to find information by classifying it by customer group, so that visitors can immediately find the information that is relevant to them after they have chosen one of the four target groups.
Products Health sells two types of products: basic insurance and supplementary insurance. Basic insurance provides cover in accordance with the guidelines of the law. Supplementary insurance covers specific risks that are not covered by basic insurance. For example, costs for dentist, physiotherapy, orthodontics, medical support abroad.
Market The Dutch health insurance market is a concentrated market. The top four insurance companies held a combined market share of 90% measured by GWP in 2017. In 2016, nine insurance companies were active in the market. In 2017, a new health insurer entered the market.
Health business insurance is a highly regulated market. The Dutch healthcare system distinguishes between two types of insurance products: basic health insurance coverage and supplementary coverage. All Dutch residents are obligated to have basic health insurance coverage. Basic coverage is free for minors. Basic coverage is the same across all insurers as coverage is mandated by the government. There are limited possibilities for insurers to differentiate from their competitors. One is through price, another is whether or not insured persons can freely choose their own healthcare providers.
In 2017, 17 million adults in the Netherlands paid for basic coverage². The number of adults paying for additional coverage declined from 84.5% in 2014 to 84.1% in 2017. The volume of the market in terms of GWP increased by 16.7% between 2013-2017.
Health strives to be an agile niche player benefiting from smart alliances (e.g. for the procurement of medical care and Delphi R&D for its back-office processes), providing excellent customer service and supporting Ditzo, P&C and De Amersfoortse Disability with brand appreciation and cross-selling.
Customer satisfaction Health focuses continuously on increasing customer satisfaction. For example, data-driven Workforce Management and Real Time Management have worked on the accessibility of customer service. As a result, predictions can be made on an hourly basis in the number of customers that will contact us and capacity can be adjusted where necessary. Health also worked on constantly updating practical information and making content available to employees so that they can continuously improve the quality and speed of information provision.
Profit / (loss) for the year attributable to holders of equity instruments 731 492
Pensions a.s.r. is a major provider of pension insurance products in the Netherlands. a.s.r. offers pension insurance products under the brand a.s.r. It has an IORP in a joint venture with Brand New Day. The current customer base of the pensions business comprises circa 20,000 companies and 475,000 participants.
Market In the pension market, there is a shift towards capital-light products. Customers want to reduce their interest rate exposure. a.s.r. believes that it is well positioned to gain market share in this segment with DC and IORP propositions, through high-level service, cost effectiveness and execution power, while meeting its pricing policy. The modern DC proposition of a.s.r. has been further developed in order to strengthen its competitive position in the DC market. Through this proposition a.s.r. believes it is well-positioned for anticipated further individualisation in the future, which may be the result of the current pension debate in the Netherlands.
Furthermore, a.s.r. is also active in the pension market through Het nederlandse pensioenfonds (Hnpf). a.s.r. delivers pension administration for Hnpf. Hnpf was founded in 2016 by a.s.r. in order to offer new and existing customers an alternative DB product. As of 2017, the first customers were welcomed, including De Efteling and DAS. In 2018, Stichting Pensioenfonds Arcadis Nederland (Arcadis Netherlands Pension Fund) will transfer its pension scheme to Hnpf. Hnpf is one of the six general pension funds in the Netherlands. Hnpf has now reached a top 3 position in terms of committed assets.
In 2017 the integration and migration of De Eendracht Pensioenen was completed. a.s.r. is further reducing complexity in the existing portfolio by offering more basic products and closing the more complex products (phasing out of SA contracts). The renewal of DB contracts is only considered if customers have the intention to shift to DC in the near future and has to meet strict financial criteria. a.s.r.’s strategy for its existing DB book focuses on preserving its value, reducing capital requirements, enhancing cost coverage and lowering risks. Generali customers will be migrated to a.s.r. platforms, while offering the same services to these new customers and while enhancing the market position.
Digitisation and innovation a.s.r. pensions has improved digital customer service by investing in more user-friendly portals, a more integrated online environment and apps for PC, mobile and tablet. The legally required documents, such as starting letters and UPO, were also further digitised in 2017. As a result, a substantial print reduction was achieved, which contributed to CSR policy, cost reduction and customer convenience.
Steps were also taken in 2017 to enable robotisation of work, at the same time improves customer service. Customers are served earlier and better, appropriate to their situation. The efforts will continue in 2018.
Sustainability ‘Sustainable’ is one of the promises to customers in the strategy of Pensions. For Pensions, the emphasis is on insurance and investment. ‘Insurance’ because Pensions is providing security to customers. Customers must be confident that a.s.r. always meets its financial obligations, especially in the case of long-term obligations such as pensions. Sustainable financial soundness is therefore essential. As far as investing is concerned, it is about implementing a responsible investment policy (for more information see page 67).
Individual life a.s.r. is the third largest provider of individual life insurance products measured by GWP. a.s.r. offers individual life products under the a.s.r. brand.
• Immediate annuities a.s.r.’s immediate annuities are traditional life insurance products with guaranteed returns for the customer. Under an immediate annuity, the annuitant pays a single premium, in return for which a.s.r. agrees to make life-long annual payments to the annuitant immediately. a.s.r.’s immediate annuities are mainly sold to customers whose traditional life savings products are maturing. The sale of these products was terminated after 31 December 2017.
Market The premium volume has fallen in recent years. The reasons are low interest rates and tax changes. This contraction is expected to continue in the years to come. The market for these products cannot be expected to pick up in the short term. From 1 January 2018, therefore, a.s.r. has only offered life insurance products as from 1 January 2018, other products will no longer be sold within Individual life.
Strategy and achievements The strategy of Individual life aims to maximise and sustain of the current value of the individual life book. In order to achieve this a.s.r. focusses on optimising customer satisfaction and making cost lower and more variable.
Products Ardanta’s primary aims is to insure funeral expenses. Ardanta offers capital and insurance products for this purpose. Ardanta to offer practical guidance to descendents in terms of personal losses. Ardanta helps insured persons and relatives with arranging and advising on practical matters concerning the theme of death. This is done by deploying various initiatives, such as the portal ‘doodgaanendoorgaan.nl’ and the services of a funeral coach, who assists survivors from the moment of death and the days after the funeral.
Market The market is characterised by consolidation. As a result of the low interest environment, premium levels of funeral insurance have been raised. The distinctive selling point of Ardanta is the ‘free choice’ with respect to the delivery of funeral services, and as a consequence Ardanta has an unique market position which is cherished.
Strategy and achievements The strategy is aimed at growth through acquisitions. In 2017, NIVO’s portfolio was integrated into Ardanta. This meant that the 280,000 NIVO policies of 135,000 customers were transferred to the Ardanta administration.
Approximately 360,000 Generali funeral policies will migrate to Ardanta following the acquisition of Generali Leven. The focus continues to be placed on new opportunities that arise. In addition, the strategy focuses on ‘value creation among existing customers’.
Digitisation and innovation Ardanta is fully committed to increase digital process support. Thanks to improved customer portals and service & contact pages, customers and intermediaries experience digital convenience. In addition, new customers find Ardanta more easily online. Production from online increased by 48% in 2017 compared to 2016. Furthermore, the accessibility of the website will be improved for users with an audio-visual disability and work will continue on digital ease of use.
By communicating the research results, Ardanta wants to make people aware of the importance of recording things that have life-determining consequences for their children, for example. It is important to think now about what should be arranged after death, so that there is no ambiguity at the time of death. If you have children, it should also be a logical topic for discussion.
Asset Management: • ASR Vastgoed Vermogensbeheer B.V. • ASR Vermogensbeheer N.V.
ASR Bank N.V. (a.s.r. bank) offers savings and investment products that complement a.s.r.’s individual life products and other insurance products for retail customers in the Netherlands. a.s.r. bank uses the savings entrusted to it mainly to finance residential mortgages, that were (self) originiated by ASR Hypotheken. a.s.r. bank is a whollyowned subsidiary of a.s.r. and is regulated by the Dutch Central Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM).
ASR Hypotheken B.V. (a.s.r. mortgages) provides mortgage loan related services with respect to the administration of mortgages recognised on the balance sheet of a.s.r. group entities. The market share of a.s.r. mortgages in 2017 was 2.4% (2016: 2.0%).
Mortgages of a.s.r. ‘Welthuis Hypotheek’ a.s.r. is active in the residential mortgage market. Mortgage loans are issued by a.s.r. life, which is a part of the Life segment. A portion of the mortgages originating from a.s.r. life is subsequently acquired by a.s.r. bank and a.s.r.’s mortgage fund, which was launched by a.s.r. asset management in 2017. Mortgages are exclusively distributed via the intermediary channel. a.s.r.’s residential mortgage portfolio includes annuity mortgages, linear mortgages, interest-only mortgages and bank annuity mortgages. All other operations with respect to the mortgage portfolio are executed conducted by Stater N.V. (a mortgage service provider and wholly-owned subsidiary of ABN AMRO Group N.V.).
a.s.r. bank Products include bank annuities (long-term fiscal saving and investment products), deferred annuities (fiscal savings product), savings accounts (e.g. variable interest, term deposits) and retail investments. For sales of bank products, a.s.r. distributes new business mainly via the intermediary and direct channels. a.s.r. bank strives to address the increasing demand for online services via its own online channel and direct customer services.
Strategy and achievements a.s.r.’s strategy with regard to mortgage loan services is to have lean and reliable processes and to achieve economies of scale from servicing growing mortgage loan portfolios. The increase in volume of loans assets under administration was partly a consequence of the organic growth of the mortgage loan portfolio in a.s.r. life and a.s.r. bank but related primarily to the introduction of the a.s.r. mortgage fund. a.s.r. considers mortgage loans an anchor product to private customers and aims to stay active in this market to further improve its brand recognition and potentially capitalise on cross-selling opportunities.
Given the low interest rate environment, a.s.r. bank’s strategy focuses on a modest growth of its balance sheet to improve its service provision to customers and to increase its operational efficiency. a.s.r. bank will continue to do so in 2018.
Our customers Customers wish to have an ever better understanding of their financial position and make their own decisions on the accrual and management of their net worth. In order to meet these wishes, a.s.r. bank continued to invest in its internet portal (www.asr.nl/sparen) in 2017 with the aim to make it easier to do business with a.s.r. bank. In addition, a.s.r. bank introduced a value chain management model in order to align all activities directed at customers. During the second half of 2017, a.s.r. bank integrated its savings and investments operations and the customer contact centre to have one single point of contact for customers. This new department is the beating heart of a.s.r. bank and works relentlessly to provide a better and faster service.
In addition to a.s.r.’s residential mortgage lending proposition, a.s.r. bank has issued bank guarantees as from the fourth quarter of 2017. The introduction of this product allows a.s.r. to be a one-stop shop for an individual’s mortgage application without any additional effort by either the customer or the financial intermediary. The focus on meeting customers’ needs was rewarded in 2017 when MoneyView awarded a.s.r. bank five stars for the terms and conditions of its tax-driven bank savings products and five stars for the price of its investment product, Extra Pensioen Beleggen.
Since 1 December 2017, 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.
ASR Vermogensbeheer B.V. (AVB) invests in fixed-income securities such as government bonds (rates) and corporate bonds (credits), including overlay/LDI, European equities, real estate and mortgages. These products are offered both as individual building blocks and as integral solutions. Integral management is the management of an investment portfolio, including interest rate hedging, and of return portfolios, with an Index Plus style. Modular elements such as ALM advice or reports for regulators can be added. Examples of building blocks are tailor-made mandates, the a.s.r. mortgage fund and the a.s.r. ESG INDEX plus corporate bond fund and the ESG index plus European equity fund. AVB is cost-efficient as confirmed in a benchmark study. a.s.r. is convinced that active management and selective deviation from the index can add additional returns. This investment style is referred to as Index Plus investing. A selective deviation from the index is based on a rigorous proces, using quality criteria and sustainability aspects, among other things.
At the beginning of 2018, a.s.r. announced its intention to lend € 600 million to sustainable businesses together with Triodos Bank over the next four years. The financing is intended for companies, institutions and projects in the field of green energy, sustainability of real estate and the healthcare sector. The initiative for the joint financing structure stems from a.s.r.’s need, through its investments, to have a sustainable impact on the business community and, where possible, to further increase it.
Customers The common denominator of the client groups is working with specific investment guidelines. AVB has incorporated its knowledge of these investment guidelines, such as Solvency-II, New Financial Assessment Framework (FTK), Financing Local Governments (FiDO) and the scheme for Public Service Organisations (ANBI) into the investment, risk and reporting processes. With this knowledge and these possibilities of application, insurers, (medium-sized) pension funds, local governments, education and healthcare institutions, donor-advised and guarantee funds and charities can be served tailored to suit their needs.
Socially responsible investment a.s.r. is fully aware of the importance and the responsibility expected from its role as an investor; both as asset owner and asset manager. Therefore, sustainability is an essential part of a.s.r.’s investment beliefs. For a.s.r., the integration of Environmental, Social and Governance (ESG) factors into the management of its investments contributes directly to the reduction of risks (both financial and reputational risks) and positively impacts its longterm performance and value creation.
Exclusion criteria for countries and companies a.s.r. pursues a strict exclusion policy based on controversial activities, which a.s.r. applies to internally managed portfolios, in respect of both countries and companies. In 2017, the policy was expanded in order to strengthen the environmental criteria for companies (exclusion of companies deriving more than 33% of their revenues from tar-sands and shale oil) and for countries (exclusion of countries scoring less than 50 on the Environmental Performance Index). By the end of 2017, 247 of the screened companies had been excluded due to: involvement in human rights violations (3), labour rights violations (3), environmental violations (6), armaments (107), tobacco (17), gambling (39), coal (63), tar-sands and shale oil (10) and nuclear energy-related activities (5). With regard to investments in sovereign debt, a.s.r. has excluded 85 countries that are poor performers in the Annual Report of Freedom in the World, have a low ranking on the Corruption Perceptions Index or in the Environmental Performance Index. In 2017, a.s.r. expanded its exclusion criteria for both companies and countries and published the updated policy and its consequences in the form of exclusions lists on the corporate website.
Engagement a.s.r. recognises three types of engagement: • Engagement for the purpose of influencing: This type of engagement is used with companies who have been identified as acting in violation of the UN Global Compact Principles governing human rights, labour rights or the environment. In 2017, a.s.r. participated in 11 engagement projects (listed on a.s.r. website); • Engagement for the purpose of monitoring: During 2017, a.s.r. discussed the importance of sustainability with various companies in its investment portfolio, mostly with our largest holdings such as TKH and Corbion. Additionally, a.s.r. was in dialogue with other players in the investment landscape, like fund or index providers, to encourage actively further ESG integration for their role in the investment chain. In 2017, these players included BNP Paribas AM, AXA IM, Black Rock, State Street, Northern Trust and VigeoEiris; Human rights
Human rights are the basic rights and freedoms that all human beings are entitled to, without discrimination. a.s.r. respects and subscribes to the fundamental human rights as internationally agreed upon in the Universal Declaration of Human Rights and its legally binding documents. a.s.r. signed the United Nations Principles for Responsible Investments (UNPRI) and the United Nations Global Compact (UN GC) in 2011. Moreover, it endorses the UN Guiding Principles for Business and Human Rights that were published in 2011, 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.
These sets of principles have formed the basis for a.s.r.’s SRI policy formalised in 2007. Human and labour rights are essential criteria for a.s.r. in the assessments of countries and companies, both to avoid controversial practices and risks and to identify best practices and opportunities. As a consequence, a.s.r. favours companies performing well in their policies on and implementation of Human Rights, for example, performing on-going human rights due diligence studies, setting targets to promote diversity, respecting the right to privacy or promoting collective bargaining. At the same time, a.s.r. either engages in or excludes investments in companies if they are complicit in systematic and/or gross violations of human or labour rights, including child labour, forced labour or severe controversies regarding decent wages in the supply chain. More details on the criteria and the way in which a.s.r. pursues human and labour rights policies can be found on the a.s.r. website.
Protection of the environment and efforts to limit the impacts of climate change are of the utmost importance to preserve our planet for future generations. For a.s.r., climate change is a direct risk to our business, both to our liabilities the claims we pay out and to our assets the value of our investments. But, as complex as climate risks may be, climate change also presents unprecedented opportunities for action.
In 2015, a.s.r. became a signatory to the Paris Pledge for Action, committing to make efforts to limit global warming to 1.5°C. Since 2016, a.s.r. has integrated Climate change and Energy transition as an explicit theme/driver into its strategic asset allocation and has taken measures to implement its commitment across the investment portfolio. a.s.r. has analysed and identified risks for the investment portfolio, such as stranded assets and changing business models in the mining and energy sectors in the long-term. As a result, a.s.r. is gradually expanding its SRI policy, recognising the different implementation instruments per asset class with the objective of addressing both the ‘mitigation’ and the ‘adaptation’ aspects of climate change. Moreover, a.s.r. has contributed as much as possible to advancement of the SDG’s targeted environmental benefits, such as SDG 7 and SDG 13.
a.s.r. will continue conducting periodical measurements and evaluating the results of these efforts, the final goals being to support the energy transition and to contribute to limiting the rise in temperature to 1.5 degrees Celsius. Furthermore, a.s.r. will explore opportunities and improvements to further reduce the carbon footprint of its investment portfolio. This is intended to result in a zero emission investment portfolio in the long-term.
More details on our criteria and on the way in which we pursue our climate and energy transition policies can be found on the a.s.r. website, including an insight into the carbon footprint of the a.s.r. investment portfolio.
• Public engagement: In 2017, a.s.r. actively participated in a broad dialogue to create an International Corporate Social Responsibility (ICSR) sector covenant, together with peers, the public sector and various NGOs. From the DNB Platform for Sustainable Financing, a.s.r. actively took part in 2 working groups i.e. (1) SDG impact metrics, where a.s.r. was part of the writing group and (2) Platform Carbon Accounting Financials, where a.s.r. was part of the Sounding Board. Additionally, a.s.r. co-signed a petition to the Dutch Upper House for a new Dutch law to prevent child labour (SDG 8) and participated in a number of UNPRI initiatives: signing the UNPRI Investor Statement for the World No Tobacco Day (SDG 3), the UNPRI Investor engagement to eliminate child labour in the cocoa industry (SDG 8) and the UN PRI Investor expectations on deforestation in the cattle supply chains (SDG 15), which are expected to be followed by subsequent engagements on soy and timber/pulp and paper. a.s.r. spoke at various ESG events, such as the Impact Summit (April) and a round table with Al Gore (December).
Voting policy A shareholders’ right to vote is essential for a proper functioning of any corporate governance system. a.s.r. exercises this right whenever this is relevant. a.s.r.’s voting policy (asrnl.com) has been developed in accordance with the Dutch Corporate Governance Code and a.s.r.’s SRI policy. The policy applies to all internally managed listed equities. In the 4th quarter of the year under review, two new funds were introduced that have also been subject to the voting policy as from the first quarter of 2018. In 2017, a.s.r. voted at nearly 95% of the shareholder meetings held by equity investors. From the 193 shareholders’ meetings, there were 69 (36%) with at least 1 vote Against, Withhold or Abstain. Of this 69 meetings, there were 18 meetings with one or more votes against remuneration with regard to the Board of Directors or Supervisory Board and 22 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 2017 is available on the a.s.r. website.
Impact investing In the investment process, a.s.r. pays special attention to impact investing in order to make a sustainable contribution to society, for instance through waste recycling, renewable energy (solar and wind), social enterprises or contributing to health improvements. In 2017, a.s.r. invested in the first European sustainable real estate fund to achieve zero emission, contributing to SDG 11 (environmental and spatial quality) and SDG 13 (from zero emission to zero energy). a.s.r. decided to invest an additional € 25 million in four new initiatives with the intention of making a positive contribution to: (1) SDG 7, via an energy efficiency fund , (2) SDGs 1, 7, 8, 9, 12 and 13, via a clean energy fund, (3) SDGs 2, 6, 14 and 15, via a healthy eco-systems fund and (4) SDGs 2, 3, 6, 9, 11, 12, 13 and 14, via an energy transition fund to migrate from fossil fuels to biochemical-based sources. By the end of 2017, a.s.r. exposure to listed and non-listed impact investments addressing specific environmental or societal needs stood at nearly € 300 million.
Sustainability Benchmarks and Indices a.s.r. is recognised and acknowledged in the market as a leading player in the area of applied sustainability. This was also demonstrated in various studies that were conducted in 2017: • a.s.r. rose from third (2015) to second place in the benchmark ‘Sustainable investments by insurers in the Netherlands’ of the Dutch Association of Investors for Sustainable Development (VBDO).
The aim is to generate profit by on the one hand optimising management fees, and cost control on the other hand. Management activities focus on fund management and separate mandates for international real estate. In cooperation with ASR Vermogensbeheer B.V., the asset management activities for a.s.r. customers and third parties will be further expanded.
a.s.r. reim introduced a SaaS-solution that ensures that efficiency and professionality are improved. It can digitally sign documents via email, website or app, for example, and helps to reduce print and paper consumption and thus enhance sustainability. The tool also enables a.s.r. reim to work even more independently of time and location. This fits in with the desire to make processes simpler and faster, resulting in greater customer satisfaction.
The residential team has put together a CSR welcome package for new tenants to make them aware that not only energy factors determine the sustainability of a house, but also living behaviour.
Rural real estate portfolio asbestos-safe by 2020 a.s.r. reim seeks to minimise the presence of asbestos in its existing Dutch real estate investments. To achieve this, the entire portfolio of retail, office and residential properties has been made asbestos-safe. Some buildings in the rural real estate portfolio may still contain asbestos. In order to make its rural real estate portfolio fully asbestossafe by 2020, the goal for 2017 was to conduct an asbestos screening and perform asbestos abatement procedures at no less than 20% of at-risk holdings.
Sustainable real estate As a real estate investment manager focussing on long-term value creation, the objective of making real estate more sustainable is important. a.s.r. reim believes in long-term relationships with its stakeholders. Together with them, a.s.r. reim wants to reduce its carbon footprint, increase its share of renewable energy, and focus on reusable materials. But CSR goes further than just a sustainable management of real estate. a.s.r. reim wants to contribute to both the environment and society by investing in neighbourhoods and offering internships, among other things.
When possible, a Green Building Certificate (such as BREEAM) will be deployed. a.s.r. reim is continuously investigating and implementing 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.
Based on the idea of investing in sustainably attractive real estate and thus remaining attractive in the future, the sustainability of 389 homes was enhanced to energy label A(+) in 2017, two shopping centres were BREEAM certified and it was decided that, for the renovation of a large Utrecht office, a strong focus will be placed on sustainability in accordance with the guidelines of the BREEAM Excellent certificate.
The ASR Dutch Mobility Office Fund, which was set up in December 2016, will take part in GRESB for the first time in 2018.
Society - Investing in local neighbourhoods a.s.r. reim considers it important that areas in which it manages property, continue to thrive. That is why a.s.r. reim is actively involved in these districts and communities. a.s.r. reim contributes to associations for city centre management and organises activities in the various shopping centres. The company also sponsors neighbourhood and city centre initiatives so that these areas remain attractive places to work, shop, recreate and/ or live. a.s.r. reim sets aside a budget to invest in neighbourhood facilities and greenery, such as playgrounds, hiking trails, green roofs, Tiny Forests or other enhancements. In addition, a.s.r. reim has revitalised and opened up many country estates and nature conservation areas to the public to strengthen the relationship between citizens and nature.
The overall trend is that the larger distribution businesses gain market share, due to organic as well as in-organic growth; the top-50 companies in the distribution field are increasing their power within the total distribution landscape. Next, hybrid distribution models of insurance products remains in place and the independent advisory channel did gain market share in a few submarkets last year. a.s.r. is with its own distribution businesses well positioned for these developments, as well as to support the independent advisory channel.
Corins Corins has been successful as an reputable for high quality underwriting agency in the Dutch co-insurance market since 2003. 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.
SuperGarant SuperGarant operates as an intermediary and underwriting agent. As an ISO9001 and Arbo-certified service provider, it constitutes a unique advisory center offering integrated disability propositions consisting of prevention, re-integration and disability insurance products aimed at retail sector. SuperGarant also sells P&C products to its clients. SuperGarant works in close collaboration with SME sector associations and has a direct line of contact with franchise and purchasing organisations.
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.
Operating expenses decreased from € -63 million to € -56 million, mainly related to a reduction of non-ordinary costs with € 8 million in 2017 due to preparation costs for the IPO of a.s.r. in the first half of 2016.
A part of the Real Estate Development company was legally split on 30 December 2015 retroactively as per 1 January 2015 into ASR Vastgoed Projecten B.V., which consists primarily of a.s.r.’s Leidsche Rijn Centrum project (including commitments and guarantees in respect thereof), aftercare projects and joint ventures in real estate projects. The Real Estate Development activities of a.s.r. are effectively in run off. a.s.r. will opportunistically explore divestment opportunties for the remaining projects in its portfolio.
Profit / (loss) for the year from discontinued operations - 4
Until 2016, the activities of ASR Vastgoed Projecten B.V., which consist of the run-off real estate development activities, were considered partly as continuing and partly as discontinued operations. In 2016, some of the discontinued operations were sold. The small remaining part of the business is not expected to be sold in the near future. These operations therefore no longer meet the IFRS requirements to be classified as ‘held for sale and discontinued operations’ and have been reclassified as continuing operations as of 1 January 2017.
Profit for the year increased from € 8 million to € 12 million, reflecting an increase in residential and retail volumes sold, especially in the project Leidsche Rijn Centrum (LRC).
In order to position itself effectively in different customer segments of the Dutch insurance market, a.s.r. uses a hybrid, multi-brand distribution strategy and offers its products to approximately 1.46 million households (through the a.s.r., De Amersfoortse and Ditzo labels). The majority of a.s.r.’s insurance products are distributed through the intermediary channel. Ditzo is a.s.r.’s online brand. Ardanta is active in the funeral insurance and has approximately 3.8 million customers.
Brand Type Products Distribution Coverage Platform a.s.r. Generalist Individual life, Pensions,
Ardanta Specialist Funeral Multi-channel Nationwide ardanta.nl a.s.r.’s current brand and distribution channels includes: a.s.r. Under the a.s.r. brand, a.s.r. offers products for P&C (all customer segments), pensions (DB and DC products for the SME and commercial market), individual life (term life and annuity) and banking products (mortgages, savings and investments) for retail clients. a.s.r.-branded products are mainly distributed through the intermediary channel (e.g. P&C, mortgages and DB pension products), and by exemption online (e.g. term life, savings and individual annuity). In addition, mandated brokers, aggregators and service providers can sell a.s.r.’s products under their own brand names. The a.s.r. brand targets retail and commercial (primarily SME) customers.
Europeesche Verzekeringen a.s.r. sells travel and leisure insurance under the Europeesche Verzekeringen brand. Europeesche Verzekeringen insurance policies are sold through the intermediary channel, including through specialist partners, such as tour operators, sports federations and online channels. The Europeesche Verzekeringen brand primarily targets retail customers.
a.s.r. is exposed to a number of risks, such as strategic risks, market risks, counterparty default risks, liquidity risks, underwriting risks (life and non-life) and operational risks. Its risk appetite is formulated at both group and legal entity level and provides a consistent framework of risk appetite statements that supports effective risk selection and monitoring.
In 2017 the Risk Appetite statements and limits were evaluated to ensure alignment with the strategy, and were updated by the Executive Board and approved by the Supervisory Board.
The statements highlight the risk preferences and limits of the organisation and are viewed as key elements for the realisation of our strategy. In 2017 the performance against these statements was monitored by the risk committees.
Risk appetite Statement ASR Nederland N.V. 2017 1 ASR Nederland N.V. places long-term value creation at the forefront of its (strategic) operations.
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 ASR’s internal organisation. Conducting honest business ensures that ASR’s reputation, business model and financial solidity are protected.
6 ASR Nederland N.V. retains, in accordance with the S&P Capital model, a minimum rating of single A. FR
11 ASR Nederland N.V. generates a robust and high-quality operational ROE, i.e. pursues an overall ROE > 10%
The risk profile is periodically discussed in the risk committees. After being discussed in the Business Risk Committees (BRC), the non-financial risk profile is reported to the Non-Financial Risk Committee (NFRC) and the financial risk profile is reported to the Financial Risk Committee (FRC). The integrated risk profile is reported to the a.s.r. Risk Committee. In the event of breaches, the committees are authorised to decide on corrective actions. The risk governance structure thus ensures that the risk profile is monitored effectively and that action is taken at the correct and applicable time.
As it does every year, a.s.r. updated its recovery plan in 2017. The purpose of the recovery plan is to increase the chances of a successful early intervention in the event of a financial crisis situation and to further guarantee that the interests of policyholders and other stakeholders are protected. The recovery plan ensures that a.s.r. has effective measures in place to deal with potentially severe financial scenarios. The recovery plan enables a.s.r. to improve its chances of successful intervention in such extreme scenarios and ensures that it is better prepared for financial crisis situations.
In 2017 as in 2016, a.s.r. took various steps to support the reasonable assurance given by the actuarial function and the risk management function on the reliability of the Solvency II calculations and reports. In relation to this, a.s.r. maintained attention for data quality to improve sound data quality and information management systems. To gain 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 best-estimate liabilities determination and solvency capital requirement models.
Management of financial risks in 2017 a.s.r. strives for an optimal trade-off between capital, risk and return. Steering on capital, risk and return is applied in decision-making throughout the entire product cycle: from PARP (Product Approval Review Process) to the payment of benefits and claims. At a more strategic level, decision-making takes place through balance sheet management. A robust solvency position takes precedence over profit, premium income and direct investment income. Risk tolerance levels and limits are disclosed in the financial risk appetite statements (financial RAS) and are monitored by the FRC. The FRC evaluates financial risk positions against the RAS on a monthly basis. Where appropriate, a.s.r. takes additional mitigating measures.
Management of non-financial risks in 2017 Non-financial risk appetite statements are in place to manage the risk profile within the limits determined by the Executive Board and approved by the Supervisory Board. The Non-Financial Risk Committee (NFRC) monitors and discusses on a quarterly basis whether non-financial risks are adequately managed. Should the risk profile exceed the risk appetite, the NFRC will decide on actions to be taken. The financial and non-financial risk profiles are integrated on behalf of the a.s.r. Risk Committee. In the event of breaches, the a.s.r. Risk Committee is authorised to decide on corrective actions. The risk profile and internal control performance of each business is discussed on a quarterly basis with senior management in the business risk committees and the NFRC.
In 2017, a.s.r. took steps to further improve the effectiveness of its operational risk control framework by adopting a more risk-based approach. In 2017, a risk analysis project was carried out. The management of the businesses (re) evaluated their key risks and controls and redesigned and implemented their risk-control frameworks accordingly.
In order to enhance the uniformity, efficiency and effectiveness of the risk- and control cycle, a.s.r. additionally purchased and began the roll-out of the Governance and Risk Compliance (GRC) tool (‘Cerrix’). In 2018, it will continue the roll-out of the tool throughout the organisation to include all the businesses. a.s.r. will naturally continue to look for opportunities to improve the management of its operational risks in 2018.
In 2017, a.s.r. took various actions to enhance the measurement and reporting of data quality for financial reporting purposes. A data quality project has now been completed, including the mitigation of associated risks through quality controls. In 2018 a.s.r. will take further steps in this area. A further initiative addressing end-user computing risks and basic data, among other things, is currently under way.
To determine the degree of risk, a.s.r. uses a risk scale based on probability and impact (Level of Concern). For the risk priorities, the degree of risk is determined by the a.s.r. Risk Committee quarterly. The following table shows the degree of risk per 2017Q4.
Gross risk: the risk that exists if there are no control measures in place to mitigate it. Net risk: risk when taking into account a.s.r.’s mitigating measures.
a.s.r. takes measures to mitigate the risks which are outside the risk appetite boundaries. For each risk priority the measures are described in the text below.
Pressure on result and renewal of cash-generating business model The insurance market is changing and the (cash-generating) business model of many insurers is under pressure due to shrinking customer demand, changes in customer behaviour, changes in distribution channels, the current economic climate (low interest rates), regulatory changes and technological developments. Competition in the current market is fierce and cost-consciousness is growing, which could lead to an increase in non-life policy cancellations, loss of retention in the life business, a decline in new insurance contract sales and limited scalability of departments.
a.s.r. continually monitors and assesses its product portfolio and distribution channels for relevant alterations in order to meet the changing needs of customers and to achieve planned cost reductions as premiums fall. It is, for example, actively monitoring the market to study potential acquisitions and mergers, and has increased its market share through the acquisition of Generali Nederland. In the case of this acquisition a non-regular ORSA has been performed and Group Risk Management reviewed this ORSA. Other mitigating measures include the roll-out of capital-light initiatives (such as third party asset management and focus on pension DC) and the creation of an Innovation & Digital team through which it focuses on innovation.
Risk description Political, regulatory and public attention has been focused on unit-linked life insurance policies for some time now. Elements of a.s.r.’s unit-linked life insurance policies are being challenged on multiple legal grounds in current legal proceedings, and may continue to be 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. Because 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 concerning the timing and outcome 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
Unit-linked products (beleggingsverzekeringen) One of the aspects of the juridification of society are the current legal actions (partly class actions) with respect to unit-linked products sold.
Since the end of 2006, individual unit-linked life insurance products (beleggingsverzekeringen) have been receiving negative attention in the Dutch media, from the Dutch Parliament, the AFM, consumers and consumer protection organisations. Elements of unit-linked policies are being challenged or may be challenged on multiple legal grounds. The criticism and scrutiny of unit-linked life insurance products has led to the introduction of compensation schemes by Dutch insurance companies that have offered unit-linked products. In 2008, a.s.r. 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 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 until 2017 was € 1,031 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 2017 amounted to € 45.3 million and is available only to cover potential additional compensation (for distressing cases and costs relating to the compensation scheme). Under this agreement, a.s.r. offered consumers additional measures such as alternative products and less costly investment funds. In addition to the compensation scheme, a.s.r. implemented additional measures (supporting policy), including the ten best in class principles as formulated by the Dutch Minister of Finance. On 17 July 2015, the Dutch Ministry of Finance published an Order in Council (algemene maatregel van bestuur) under which insurance companies can be sanctioned if they fail to meet the compulsory targets set for approaching policyholders of unit-linked life insurance policies and prompting them to review their existing policies.
The agreement with the two consumer protection organisations and additional measures are not binding on policyholders. Consequently, neither the implementation of the compensation schemes nor the additional measures offered by a.s.r. prevent individual policyholders from initiating legal proceedings against a.s.r. and submitting claims for damages.
a.s.r. is currently the subject of two class actions. In June 2016, Woekerpolis.nl initiated a class action asking the Midden-Nederland District Court to declare that a.s.r. sold products that were defective in various respects (e.g. lack of transparency regarding cost charges and other product characteristics, and including risks which the insurer failed to warn against, such as substantial stock depreciations, inability to realise the projected final policy value, unrealistic capital projections due to differences in geometric versus arithmetic returns and general terms and conditions governing costs which Woekerpolis.nl considered to be unfair). In March 2017, the Consumentenbond also brought a class action against a.s.r. This class action was on grounds similar to that brought by Woekerpolis.nl. The class action brought by the Consumentenbond is currently pending before the Midden-Nederland District Court. a.s.r. has rejected all the claims in both cases. The timing and outcome of both class actions is as yet unclear.
In 2011, three individual test cases were initiated by ConsumentenClaim B.V. on behalf of three policyholders against a.s.r. regarding certain unit-linked life insurance products. ConsumentenClaim argued, among other things, that a.s.r. (a) failed to provide the policyholders with sufficient information about certain aspects of the products, such as costs, risk premiums and the leverage capital consumption risk, (b) had a duty of care towards
Intro d uctio n the policyholders which a.s.r. had breached, and (c) had applied general terms and conditions governing costs that were unfair. In two of the cases, the ‘s-Hertogenbosch Court of Appeal (having the same composition) issued rulings on 2 May 2017 and 31 October 2017 respectively. In the first of the two judgments (2 May 2017), some specific general terms governing costs were considered to be unfair in the light of Directive 93/13/EEC concerning unfair terms in consumer contracts. In the second judgment (31 October 2017), some specific general terms governing costs were considered to be unlawful in light of general contract law which was applicable at the time when the product was sold. In both cases, the ‘s-Hertogenbosch Court of Appeal ruled that a.s.r. was required to repay certain costs it had charged in the product to the customer concerned. The third case is still pending before the The Hague Court of Appeal. The timing and outcome of these proceedings are as yet uncertain.
Risk profile and contingent liability unit-linked life insurance products The political, regulatory and public attention which is focused on unit-linked life insurance policies continues. Elements of a.s.r.’s unit-linked life insurance policies are being challenged on multiple legal grounds in current legal proceedings, and may continue to be so in future. There is a risk that one or more of the current and/or future claims and/or allegations will succeed. To date, a number of rulings regarding unit-linked life insurance products have been issued by the FSCB and courts (of appeal) in the Netherlands against [a.s.r.] and other insurers in specific cases. In these proceedings, a variety of (legal) approaches have been taken to arrive at a ruling. The outcomes of these rulings are diverse. Because a.s.r.’s book of policies dates back many years, it contains a variety of products with different features and conditions, and since the rulings are diverse, no reliable estimate can be made regarding the timing and outcome of current and future legal proceedings brought against a.s.r. and other insurance companies.
Impact of supervision, laws and regulations As a result of increasing political and regulatory pressure, there is the risk that: Due to growing political and regulatory pressure, there is the risk that: • a.s.r.’s reputation will come under pressure if new requirements are not met in time; • Available resources will largely be utilised to align the organisation with new legislation, meaning there are fewer resources to spend on core customer processes; • Processes will become less efficient and pressure on the workforce will increase; • a.s.r. will have administrative fines or sanctions imposed on it for failure to comply with requirements (on time).
a.s.r. constantly monitors changing laws and regulations and assess their impact and the corresponding actions required (in cooperation with Compliance and Legal). Also the availability of capacity is monitored continuously to have sufficient resources to process all regulations in a timely manner. As mentioned under ‘key trends’,
In May 2017, the International Accounting Standards Board (IASB) published IFRS 17, the new IFRS standard for insurance contracts. IFRS 17 will take effect on 1 January 2021, at which time it will replace the existing IFRS 4 standard. IFRS 17 is designed to facilitate comparability between insurers and increase transparency in relation to risks, contingencies, losses and embedded options in insurance contracts. IFRS 9 Financial instruments was published in July 2014 and has had a major impact on the processing of the financial instruments (investments). IFRS 9 will, like IFRS 17, be applied by a.s.r. group from 1 January 2021 in order to maintain cohesion between these two standards and guard against IFRS 9 being implemented twice. This postponement is not available to ASR Bank N.V., which therefore began applying IFRS 9 from 1 January 2018. In 2017, a.s.r. launched an internal programme to prepare for the implementation of IFRS 17 and IFRS 9 throughout the group. This programme will have a major impact on the group’s primary financial processing and reporting and could have a significant effect on its capital, financial statements and related KPIs. Finance, risk, audit and the business have all been given responsibility in the programme due to the need to develop an integrated vision. For more information, see Chapter 5.3.3 (New standards), interpretations of existing standards or amendments to standards not yet effective in 2017.
The use of, and dependence on, IT is significant for both a.s.r. and its customers. Cybercrime could therefore have a major impact on a.s.r.’s security and continuity. The attempted cybercrime attacks a.s.r. experienced in 2017, which included phishing, malware and ransomware attacks, have become a well-known phenomenon.
Reporting The compliance function reports quarterly on compliance matters and progress made on the relevant actions at Group level, supervised entity level and division level. The quarterly report at division level is discussed with the responsible management and scheduled for discussion by the Business Risk Committee. The quarterly report at Group level and supervised entity level is presented to and discussed with the a.s.r. Risk Committee, and submitted to the Audit & Risk Committee. The report is shared and discussed with the DNB, the AFM and the external auditor.
Business performance | 3.4 Statements Executive Board 86 3.4 Statements Executive Board a.s.r.’s consolidated and company financial statements for 2017, as well as Chapters 1, 2 and 3 of the annual report, have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and with Part 9, Book 2 of the Dutch Civil Code.
In accordance with best practice 1.4.3 of the Dutch Corporate Governance Code of December 2016 and based on the evaluation carried out, the Executive Board declares that, to the best of its knowledge: i. The report provides sufficient insight into any failings in the effectiveness of the internal risk management and control systems (see Chapter 3.3 Risk management and Compliance); ii. The aforementioned systems provide reasonable assurance that the financial reporting does not contain any material inaccuracies (see Chapter 3.3 Risk management and Compliance and 5.8 Risk management); iii. Based on the current state of affairs, the preparation of the financial reports on a going concern basis is justified
Business performance | 3.5 Assurance report of the independent auditor 87
Our conclusion We have reviewed the sustainability information in the Annual Report for the year 2017 of ASR Nederland N.V. at Utrecht, the Netherlands (hereafter referred to as a.s.r.). A review engagement is aimed at obtaining limited assurance.
Based on our procedures performed nothing has come to our attention that causes us to believe that the sustainability information does not present, in all material respects, a reliable and adequate view of: • The policy and business operations with regard to sustainability; • The thereto related events and achievements for the year 2017. in accordance with the Sustainability Reporting Standards (option: core) of the Global Reporting Initiative (GRI) and the applied supplemental reporting criteria as disclosed in Annex B of the Annual Report.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of the sustainability information. The materiality affects the nature, timing and extent of our review procedures and the evaluation of the effect of identified misstatements on our conclusion.
We have exercised professional judgement and have maintained professional skepticism throughout the review engagement performed by a multi-disciplinary team, in accordance with the Dutch Standard 3810N, ethical requirements and independence requirements.
Business performance | 3.5 Assurance report of the independent auditor 89
Recent history In the autumn of 2008, the Dutch State acquired the Dutch entities of Fortis Group and spun off Fortis Verzekeringen Nederland N.V., which now operates as a.s.r. Although a.s.r. was acquired by the Dutch State as a result of the nationalisation of Fortis Group, a.s.r. never received state aid.
In September 2011, the Dutch State transferred all of its shares to NLFI in exchange for depositary receipts for the shares. NLFI was responsible for managing the shares and exercising all rights associated with these shares under Dutch Law, including voting rights. In November 2015, NLFI and the Dutch Minister of Finance agreed that all conditions for a privatisation of the Group had been met. In January 2016, the Dutch Parliament agreed to the exit strategy proposed by the Dutch Minister of Finance based on the NLFI advice, after which the Dutch Minister of Finance formally asked NLFI and a.s.r. to start the sale process through an IPO.
On 13 May 2016, NLFI confirmed its intention to proceed with the next step towards an IPO and the listing of the ordinary shares of the Group on Euronext Amsterdam. a.s.r. became a listed company on Friday 10 June 2016 and the price was set at € 19.50 per offered share.
Structure ASR Nederland N.V. is the Group’s holding company. The supervised entities (OTSOs) within the Group are ASR Levensverzekering N.V., ASR Schadeverzekering N.V., ASR Basis Ziektekostenverzekeringen N.V., ASR Aanvullende Ziektekostenverzekeringen N.V., ASR Bank N.V. and, since the acquisition of Generali Nederland on 5 February 2018, also Generali levensverzekering maatschappij N.V. and Generali schadeverzekering maatschappij N.V. The last two companies are intended to merge legally with ASR Levensverzekering N.V. and ASR Schadeverzekering N.V., respectively, in 2018. ASR Utrecht N.V. (before Generali Nederland N.V.) is the holding company of the Generali entities. The Executive Board and Supervisory Board members are the same as of those of ASR Nederland N.V.
The Executive Board members and Supervisory Board members of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. are the same as those of ASR Nederland N.V. The Executive Board of Generali levensverzekering maatschappij N.V. and Generali schadeverzekering maatschappij N.V. is also the same as that of ASR Nederland N.V. These companies have dispensation for having a Supervisory Board ASR Basis Ziektekostenverzekeringen N.V., ASR Aanvullende Ziektekostenverzekeringen N.V. and ASR Bank N.V. have their own Executive Board. The Supervisory Board of these entities consists of a combination of members of the Executive Board and members of the Supervisory Board of ASR Nederland N.V.
General Meeting of Shareholders At least one General Meeting is held annually, no later than by 30 June. During this General Meeting, the financial statements are adopted. The articles of association set out, among other things, the procedure for convening a General Meeting. The Articles of Association also set out special resolutions that the General Meeting can adopt at the proposal of the Executive Board with the approval of the Supervisory Board. No later than three months after the General Meeting, the draft report is available to the shareholders via the corporate website. They have three months to respond. The report of the General Meeting is then adopted and signed by the Chairman and the secretary.
After the IPO, a.s.r. held its first General Meeting on 31 May 2017. 301 shareholders were present or represented, who represented 81% of the issued capital. The financial statements for the 2016 financial year were adopted and all other proposals were adopted at this General Meeting. The next General Meeting will be held on 31 May 2018.
Anti-takeover measures a.s.r. and ASR Nederland Continuity Foundation (Stichting Continuïteit ASR Nederland) (the ‘Foundation’) have concluded an agreement under which the Foundation can acquire preference shares. This call option on preference shares is currently a measure that could be considered a potential protection of a.s.r. against acts that are, in the opinion of the Foundation, actually contrary to the interests of a.s.r., its business or its stakeholders. The Foundation is entitled to exercise the option on preference shares in such a way that the number of preference shares acquired under the call option will never exceed the total number of shares that form the issued capital of a.s.r. at the time of exercising the call option, less the number of preference shares already held by the Foundation at that time (if any) and minus one. In the event of the Foundation exercising the option on preference shares, the Executive Board and the Supervisory Board will be given the opportunity to determine their position with respect to, for example, the announcement of a public offer for shares in the capital of a.s.r. or the legitimate expectation that such a public offer will be announced without having reached an agreement with a.s.r. on the offer or the offer being supported by a.s.r., or an activist a.s.r. shareholder (or group of activist a.s.r. shareholders acting in concert) directly or indirectly representing at least 25% of the ordinary shares forming part of the issued share capital of a.s.r. (in each case to the extent this is actually contrary to the aforementioned interests of a.s.r., its business and its stakeholders). The Boards will then be able to examine and implement alternatives. The Foundation has an independent board. For more information please see Chapter 7 (Report of Stichting Continuïteit ASR Nederland).
In addition to the self-evaluation, the performance of the members of the Executive Board was also assessed by the Supervisory Board as part of the scope of the annual assessment process. In that context, interviews are held twice a year with the individual members of the Executive Board (by two members of the Supervisory Board each time).
Dutch Corporate Governance Code As of the listing on Euronext Amsterdam, a.s.r. has been required to adhere to the Dutch Corporate Governance Code. a.s.r. has complied with all principles and best practices of the Dutch Corporate Governance Code, apart from those that do not apply to a.s.r. Additionally, in the Corporate Governance section of its website, a.s.r. publishes a detailed ‘comply or explain’ list, which also specifies which principles and best practices do not apply to a.s.r.
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 respect to insurance companies, apart from the Executive and Supervisory Board members, persons with a management position directly below the Executive Board who are responsible for persons that 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 persons that may (independently) significantly influence the risk profile of the undertaking as well as those persons that are or may be involved in the provision of financial services.
H.C. (Chris) Figee (CFO) Chris Figee (Dutch, 1972) serves as CFO. His areas of responsibility are Group Accounting, Reporting & Control, Business Finance & Risk, Group Asset Management, Real Estate Investment Management, Real Estate Projects (as of 1 March 2017), Group Balance Sheet Management and Group Risk Management.
K.T.V. (Karin) Bergstein Karin Bergstein (Dutch, 1967) has been responsible (as of 1 March 2017) for Innovation and Digitalisation, Information Technology and Change, and the product lines Pensions, Individual life, Banking and Mortgages and Funeral.
Additional positions Karin Bergstein is a member of the Supervisory Board of Stichting Sanquin Bloedvoorziening and a member of the Supervisory Board of Utrecht University.
First appointed on: 7 December 2010 Current term of office: 2014 – 2018
Vice-Chairman of the Supervisory Board Chairman of the Audit & Risk Committee
Cor van den Bos (Dutch, 1952) served on the Executive Board of SNS REAAL N.V. until August 2008, where he was responsible for all insurance operations. Cor van den Bos is Vice-Chairman and a Non-Executive Member of the Board at the investment firm Kardan N.V.
Herman Hintzen (Dutch, 1955) was Chairman Insurance EMEA at UBS Investment Bank until January 2016. He currently serves as Chairman of the Board of Amlin International SE. 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.
In order to support the process of privatisation, a.s.r. participated in three selldowns and bought back nine million shares for a total consideration of € 255 million. The repurchases are in line with a.s.r.’s strategy of using its capital to take advantage of value-creating opportunities and to return capital to its shareholders. The shares purchased by a.s.r. on 13 January 2017 were cancelled during the Annual General Meeting (AGM) of 31 May 2017. It is a.s.r.’s intention to cancel the other repurchased shares at the next AGM in May 2018.
In 2008, a.s.r. was nationalised for an amount of € 3.65 billion. The total proceeds from the sale of a.s.r. amount to € 3.8 billion. During the period that a.s.r. was state-owned, the Dutch State received a total sum of € 636 million in dividends.
Ratings and bonds a.s.r. also issues debt instruments to fund its businesses. On 31 December 2017, a.s.r. had five bonds outstanding with a listing of a total nominal amount of € 1,499 million. In 2017, a.s.r. issued a € 300 million RT1 contingent convertible bond with a coupon of 4.625% (listed on the Irish Stock Exchange). For more information about the bonds, please refer to the corporate website / Chapter 5.5.12.5 (Other equity instruments) of the financial report.
The Supervisory Board performs its duties on the basis of three roles; the supervisory role, the advisory role and the employer’s role. The Supervisory Board supervises the policy pursued by the Executive Board and the general course of affairs at a.s.r. and its group entities. Specific powers are vested in the Supervisory Board, including the approval of certain decisions taken by the Executive Board.
Composition According to a.s.r.’s articles of association, the Supervisory Board should consist of at least three members. The Supervisory Board currently has four members. In 2017, there were no changes to the composition of the Supervisory Board. As mentioned in Chapter 4.1 (Corporate governance) the composition of the Supervisory Board of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. is the same as that of ASR Nederland N.V. The Supervisory Board has drawn up a profile for its size and composition, taking into account the nature of a.s.r.’s business, its activities and the desired expertise and background of its members. The full profile of the Supervisory Board is available on asrnl.com. In 2017, the Supervisory Board adopted a formal diversity policy. One of the objectives of the policy is a Supervisory Board consisting of at least 30% women and at least 30% men. The current composition of the Supervisory Board does not meet the gender balance of having at least 30% women amongst the members of the Supervisory Board. The composition of the Supervisory Board is such that each member of the Supervisory Board has the skills to assess the main aspects of the overall policy and that the Supervisory Board as a whole meets the profile thanks to a combination of experience, expertise and independence of the individual members. The diversity of its members ensures the complementary profile of the Supervisory Board. a.s.r. will continue to strive for an adequate and balanced composition of the Executive Board in future appointments, by taking into account the diversity policy and all relevant selection criteria such as executive experience, experience in finance and experience in the political and social environment.
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Independence and conflicts of interest In 2017, there were no reports of potential conflicts of interest relating to members of the Supervisory Board. Also, the Supervisory Board could conduct its tasks independently. In the 2016 Annual Report, the Supervisory Board included an exception in this respect because Herman Hintzen had previously performed activities for a.s.r. through UBS. The Supervisory Board is of the opinion, now that a year has passed, that Herman Hintzen also qualifies as an independent member of the Supervisory Board as from 1 January 2017 (based on the Dutch Corporate Governance Code).
The outcome of the assessment was discussed by the members of the Supervisory Board and the external assessor. The overall impression that emerged from this self-assessment was positive. The Supervisory Board is seen as an effective / impactful team in terms of content, with a balanced and high-quality composition. This was also considered closely in the context of the end of current terms of appointment. The atmosphere is open and the relationship with the Executive Board is good. One recommendation made was to improve an open dialogue on relevant strategic issues at an early stage. In this context, the actions taken were to tighten the content-related meeting schedule for Supervisory Board meetings and create room for this dialogue. It was also discussed to devote more attention to succession management. To conclude, the reports received by the Supervisory Board were improved last year.
In 2017, two continuing education (CE) sessions were organised for the members of the Supervisory Board together with the members of the Executive Board. The first session was a defence manual training, led by an investment bank and a law firm. The second session concerned an explanation of IFRS 17, the new accounting standard for insurance contracts. The new regulations will impact the external reporting on insurance contracts in the future. The implementation of IFRS 17 within a.s.r. is a major project.
Meetings The Supervisory Board met with the Executive Board at six scheduled routine meetings and one off-site meeting. Several ad-hoc meetings were also held to discuss issues related to specific (M&A) transactions. The Supervisory Board also held periodic operational meetings (without the Executive Board’s presence).
The Supervisory Board has an excellent relationship with the Executive Board. The quality of the reports and information provided was further improved in 2017 following suggestions from the Supervisory Board. From his position, the Chairman of the Supervisory Board has regular contact with the CEO. In addition, one or more Supervisory Board members are regularly approached outside meetings for advice on various matters. 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.
The year 2017 began with a first sell down on 13 January in which a.s.r., with the approval of the Supervisory Board, repurchased its own shares. To everyone’s satisfaction, the last NLFI shares were sold on 14 September 2017. The Supervisory Board expresses its appreciation for the way in which the Executive Board and all the employees involved have shown great commitment and energy in effectuating this. Of course, the energetic sell down has also been a consequence of a.s.r.’s good results and investors have confidence in the story of a.s.r.
a.s.r.’s strategy was discussed at every meeting between the Supervisory Board and the Executive Board. For a.s.r. as a multiline insurer, this involves the portfolio strategy (as described in Chapter 2.1 Our Strategy) and the strategy for small and medium-sized acquisitions. The conclusion, which is also supported by the Supervisory Board, is that, with its size, a.s.r. is a player with impact, and can also be a player with impact in the future. a.s.r. is also flexible enough to anticipate future developments that are not yet clear at every level. a.s.r. manages to attract and keep the right people on board. Almost every segment has its own market dynamics, and factors such as political and regulatory developments play a role. Developments within a number of selected businesses are discussed in more depth with the Supervisory Board each year. In 2017, developments within the following businesses were discussed in more detail; a.s.r. reim, Health, Disability, Pensions and Non-life.
An important acquisition decision in 2017 concerned the acquisition of Generali Nederland, which was of course discussed extensively with the Supervisory Board. The Supervisory Board has been involved in the entire acquisition process and will also monitor the integration.
It is apparent that the GWP of P&C has grown in recent years. The growth has been absorbed by the same organisation. Health also absorbed steady growth without expanding the organisation. Life is faced with a shrinking portfolio and is in the process of IT migration. This migration is expected to be completed by the end of 2018. Despite a shrinking portfolio, the Supervisory Board notes that pressure from external regulators will not diminish. This also means that the pressure of staff on the business remains tangible.
To conclude, the Supervisory Board has agreed with the issuance of a restricted Tier 1 loan for an amount of € 300 million. The intended issue was announced on Thursday 5 October 2017, after which a roadshow was held to inform investors. The interest turned out to be substantial and the pricing of a 4.625% pre-tax coupon was announced on 12 October 2017.
Each quarter, the Supervisory Board considers the theme of Treating Customers Fairly on the basis of various reports, including the a.s.r. TCF Dashboard. The TCF Dashboard sets out developments and results with regard to TCF and of the related best practices shared and lessons learned across the organisation. The Supervisory Board believes that a.s.r. goes to great lengths to deliver a good TCF performance.
Contacts with the Works Council All Supervisory Board members attended a routine consultative meeting of the Works Council. Besides routine consultative meetings, the Works Council’s executive committee maintains regular contact with Annet Aris, the member of the Supervisory Board appointed on the nomination of the Works Council. The Supervisory Board
Audit & Risk Committee The composition of the Audit & Risk Committee is such that specific business expertise, financial accounting expertise and related financial management expertise (risk and control) in the activities of a.s.r. is present. The Audit & Risk Committee has three members; Cor van den Bos, a financial expert with a deep experience in finance matters in insurance, is the Chairman and the other two members are Annet Aris and Herman Hintzen.
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 Chairman of the Committee had two one-on-one meetings with each of the directors of Audit, Compliance and Group Risk Management and had two meetings with the External Auditor EY.
Remuneration Committee The Remuneration Committee advises the Supervisory Board on, among other things, the remuneration policy regarding the Executive Board, the terms and conditions of employment of members of the Executive Board, and it reviews the remunerations of members of senior management.
The Remuneration Committee was in session on five occasions in 2017 and the members of the Remuneration Committee are Annet Aris (chair) and Kick van der Pol. Its meetings are also attended by the CEO (except when issues relating to the Executive Board are discussed) and the Human Resources Director, who doubles as secretary. The Committee solicits support and advice from departments such as Group Risk Management, Compliance, Audit and Human Resources. Where needed, it calls in the expertise of independent legal and pay & benefit experts.
In accordance with the policy, the Committee advised the Supervisory Board on target setting, performance appraisals and the ex-post assessments of variable payments awarded to identified staff. The remuneration policy was updated in line with new rules and regulations and the Remuneration Committee discussed the implementation of the remuneration policy for our subsidiaries and participations. The results of the audit plan on the application of a.s.r.’s remuneration policy were discussed.
The committee decided and advised on topics such as the procedure of (re)appointing members of the Executive Board and Supervisory Board, the Succession plan and the Diversity Policy. At the beginning of 2017, the Supervisory Board discussed the composition of the Board The term of appointment of the current Chairman will end at the 2019 General Meeting and the Vice-Chairman, also Chairman of ARC, at the 2020 General Meeting. The committee prepared the search for future members of the Supervisory Board and chose an independent executive search firm to conduct the search. As part of the selection process, several candidates met with both members of the Supervisory Board and members of the Executive Board. The interviews resulted in two strong (female) candidates who enjoy the trust of all Board members in a nomination. During the 2018 General Meeting of Shareholders, the Supervisory Board will nominate the two candidates for appointment for a four-year period.
A possible reappointment of the CFO was also discussed and prepared. The proposed reappointment of Chris Figee as CFO for a four-year period will be placed on the 2018 AGM agenda for discussion.
Intro d uctio n 2017 Financial statements and dividend The Executive Board prepared the 2017 Annual Report and discussed it with the Supervisory Board in the presence of the external auditor. The 2017 financial statements will be submitted for adoption by the General Meeting on 31 May 2018. a.s.r. will propose to pay a dividend of € 1.63 per ordinary share, or € 229.7 million in total, based on the number of outstanding shares, excluding the shares held by a.s.r. in its own capital in treasury.
Kick van der Pol (Chairman) Annet Aris Cor van den Bos Herman Hintzen
Principles and governance remuneration policy The ASR Group remuneration policy applies to all employees of a.s.r., including the members of 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. The policy 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 found at www.asrnl.com.
These goals are supplemented with specific strategic priorities per board member.
Severance pay, either fixed or variable, may not be awarded in the following cases: • In the event that an employment relationship is terminated early at the employee’s own initiative, except where this is due to serious culpable conduct or neglect on the part of the company; • In the event of serious culpable conduct or neglect on the part of the employee in the performance of his or her role.
Remuneration of current and former members of the Executive Board The remuneration can be broken down as follows: Annual remuneration for members of the a.s.r. Executive Board
Long-term variable remuneration Total 1 The fixed salary of the three ordinary board members is similar and amounts to € 413 thousand in 2017. Variations arise as a result of the fiscal treatment of lease cars depending on the price and private use of the car and personnel interest rate discount related to mortgages. The fixed salary for the CEO amounts to € 534 thousand in 2017.
3 The commitment on pensions has not changed in 2017. The increase in annual pension expenses is caused by a decrease of the interest rates.
VPL. The Pension benefits, excluding compensation for maximum pensionable salary cap, represent post-employment benefits.
The salaries of the members of the Executive Board will be increased in several phases, starting from 1 January 2018 and ending on 1 January 2020 at the latest. The remuneration of Jos Baeten, CEO, will increase from € 543,000 (2017) to € 740,000; the remuneration of Chris Figee, CFO, will increase from € 428,000 to € 670,000 and the remuneration of Karin Bergstein and Michel Verwoest, both COOs, will increase from average € 428,000 to € 650,000. Whereas these increases in remuneration will narrow the gap with the benchmark, the total direct compensation of the members of the Executive Board will still remain clearly below the median of the benchmark. The timing and magnitude of the increases reflect the balance which the Supervisory Board has struck between the need to reduce the gap with the benchmark, on the one hand, and the viewpoint of Dutch society on this topic, on the other. The remuneration of the Executive Board in 2020 still remains below a pay ratio of 20 (annual total compensation for the highest-paid individual/the median annual total compensation for all employees).
The Supervisory Board has made arrangements with the members of the Executive Board to acquire a.s.r. shares. Each member of the Executive Board has made a personal and individual commitment to purchase a.s.r. shares. In doing so, the members of the Executive Board demonstrate their commitment to a.s.r. and establish further alignment with the interests of its shareholders. The desired situation is that, in due course, the CEO will own shares in a.s.r. representing at least 50% of his or her gross fixed annual salary. For the CFO and the COOs, this is intended to be at least 25% of their gross fixed annual salary. Acquired shares must be kept for at least 5 years.
The Supervisory Board has very carefully weighed all the elements influencing its decision to adjust the Executive Board’s remuneration. The Supervisory Board believes that the assessment made in this context is also appropriate in view of a.s.r.’s position in society. The interests of various stakeholders have been considered, as have those of customers, employees, directors and shareholders. The labour market position and the continuity of the company and its management also were important considerations. The fact that the views of the various stakeholders differ is clear and at the same time illustrate the dilemma with regard to executive remuneration in general.
Pensions The calculation of annual pension expenses is based on the total pension rights granted during a term of service at a.s.r. pension costs include • Pensions based on a maximum pensionable salary cap (€ 103,317 - 2017, fiscal maximum); • Compensation for the maximum pensionable salary cap (to be used for pensions at employee’s discretion); • Pension benefits related to historically awarded pension rights; • VPL (early retirement and life cycle; ‘VUT, Prepensioen en Levensloop’). All components of the Executive Board’s remuneration are included in the base used for calculating the pension benefits.
As a committee member Total 1 The amount as committee member includes remuneration for services as member of the Selection and Appointment Committee and the
Remuneration Committee amounting in total € 5,000 per annum per member.
3 The amount as a committee member also includes remuneration for services as Supervisory Board member of ASR Bank N.V. amounting to € 4,000 per annum per Supervisory Board member.
Works Council meetings with a member of the Executive board and members of the
Strategy of a.s.r. The Works Council also discussed strategic issues with each other and with the Chairman of the Executive Board on several occasions. The future of a.s.r. was one of the issues discussed. Is blockchain a threat to our business model and is a.s.r. sufficiently capable of anticipating it? Does the company have sufficient innovative power to provide a rebuttal to start-ups that storm the market without legacy? Questions that cannot always be answered immediately, but about which dialogue has been started to think about the continuity of the company and not to be surprised by external developments.
5 Financial statements 2017 5.1 Introduction 5.1.1 General information 121 5.1.2 Statement of compliance 122 5.2 Consolidated financial statements 5.2.1 Consolidated balance sheet 123 5.2.2 Consolidated income statement 124 5.2.3 Consolidated statement of comprehensive income 126 5.2.4 Consolidated statement of changes in equity 127 5.2.5 Consolidated statement of cash flows 128 5.3 Accounting policies 5.3.1 Changes in comparative figures 130 5.3.2 Changes in EU endorsed published IFRS Standards and interpretations effective in 2017 5.3.3 New standards, interpretations of existing standards or amendments to standards, not yet effective in 2017 5.3.4 Key accounting policies 134 5.3.5 Other accounting policies 146 5.4 Group structure and segment information 5.4.1 Group structure 153 5.4.2 Segmented balance sheet 155 5.4.3 Segmented income statement and operating result 157 5.4.4 Non-life ratios 160 5.4.6 Discontinued operations and assets held for sale and related liabilities 162
Intro d uctio n 5.5 Notes to consolidated balance sheet 5.5.1 Intangible assets 164 5.5.2 Property and equipment 165 5.5.3 Investment property 166 5.5.4 Associates and joint ventures 167 5.5.6 Investments on behalf of policyholders 170 5.5.7 Loans and receivables 171 5.5.9 Deferred taxes 173 5.5.10 Other assets 174 5.5.11 Cash and cash equivalents 174 5.5.13 Subordinated liabilities 178 5.5.14 Insurance liabilities 179 5.5.15 Employee benefits 182 5.5.18 Due to customers 189 5.5.19 Due to banks 189 5.5.20 Other liabilities 190 5.6 Notes to consolidated income statement 5.6.1 Gross insurance premiums 191 5.6.2 Investment income 192 5.6.3 Realised gains and losses 193 5.6.4 Fair value gains and losses 193 5.6.5 Fee and commission income 194 5.6.6 Other income 194 5.6.7 Net insurance claims and benefits 194 5.6.8 Operating expenses 195 5.6.10 Interest expense 196 5.6.11 Other expenses 196 5.6.12 Income tax expense 197 5.7 Other notes 5.7.1 Fair value of assets and liabilities 198 5.7.2 Offsetting of financial assets and liabilities 207 5.7.3 Related party transactions 207 5.7.4 Remuneration of Supervisory Board and Executive Board 208 5.7.5 Contingent liabilities and assets 211 5.7.6 Events after the balance sheet date 213 5.7.7 List of principal group companies and associates 215 5.7.8 Profit appropriation 215
5.8 Risk management 5.8.1 Risk management system including the Own Risk and Solvency Assessment Risk Management System 5.8.2 Insurance risk 228 5.8.3 Market risk 236 5.8.4 Counterparty default risk 244 5.8.5 Liquidity risk 246 5.8.6 Operational risk 247 5.8.7 Strategic risk management 247 5.9 Capital management 5.9.1 Capital management objectives 251 5.9.2 Solvency Capital Requirement 252 5.9.3 Dividend and capital actions 253 5.10 Company financial statements 5.10.1 Company balance sheet 254 5.10.2 Company income statement 255 5.10.3 Notes to the company financial statements 255
ASR Nederland N.V. (a.s.r.) is a leading insurance company in the Netherlands. a.s.r. sells insurance products under the following labels: a.s.r., De Amersfoortse, Ardanta, Europeesche Verzekeringen and Ditzo. a.s.r. has a total of 3,493 internal FTE’s (31 December 2016: 3,461).
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. As of 10 June 2016 a.s.r. is listed on Euronext Amsterdam (Ticker: ASR NL).
The financial statements for 2017 were approved by the Supervisory Board on 27 March 2018 and will be presented to the Annual General Meeting of Shareholders for adoption on 31 May 2018. The Executive Board released the financial statements for publication on 28 March 2018.
Pursuant to the options offered by Section 362, Book 2 of the Dutch Civil Code, a.s.r. has prepared its company financial statements in accordance with the same principles as those used for the consolidated financial statements.
Liabilities arising from insurance contracts on behalf of policyholders 5.5.14 9,804 9,928
Financial statements 2017 | 5.2 Consolidated financial statements 124 5.2.2 Consolidated income statement
Share of profit / (loss) of associates and joint ventures 14 7
Discontinued operations Profit / (loss) from discontinued operations, after tax 5.4.6 - 4
The numbers following the line items refer to the relevant chapters in the notes. The comparative figures for 2016 have been restated (see Chapter 5.3.1).
Diluted earnings per share Diluted earnings per share from continuing operations 5.5.12 5.92 4.14
Financial statements 2017 | 5.2 Consolidated financial statements 126 5.2.3 Consolidated statement of comprehensive income
Attributable to: - Non-controlling interests 2 -1 - Shareholders of the parent 1,096 377 - Holders of other equity instruments 45 45 - Tax on interest of other equity instruments -11 -11
Total comprehensive income attributable to holders of equity instruments 1,130 411
Intro d uctio n 5.2.4 Consolidated statement of changes in equity
Capital investment non-controlling interest - - - - - - - - 8 8
Issue of other equity instruments - - - - - - - 300 - 300
Cost of issue of other equity instruments - - - - -2 - -2 - - -2
Unrealised gains and losses include shadow accounting adjustments (see accounting policy I, Chapter 5.3.4). For more detailed information on the unrealised gains and losses, see Chapter 5.5.12.2.
In January 2017, NLFI sold 20,400,000 shares in a.s.r. at a price of € 22.15 per share and a.s.r. repurchased 3,000,000 shares in the offering, which is the maximum to which a.s.r. was authorised to acquire shares in its own capital. In April 2017 NLFI sold 20,000,000 shares in a.s.r. at a price of € 25,75. In June 2017, NLFI sold another 25,000,000 shares at a price of € 29.00 per share. a.s.r. again repurchased 3,000,000 shares in its own capital in June 2017. In September 2017, NLFI sold the remaining 30,150,115 shares at a price of € 33.75 per share. In this final offering of a.s.r. shares by NLFI, a.s.r. again repurchased 3,000,000 of its shares and the remaining shareholding of NLFI as from this date is nil.
a.s.r. did not receive any proceeds from the sales. In the Annual General Meeting of Shareholders on 31 May 2017 the resolution was adopted to cancel the 3,000,000 shares that have been repurchased in January 2017. This was effected in the beginning of August 2017.
The table below represents the cash flows from continuing and discontinued operations. Cash flows related to discontinued operations are included in Chapter 5.4.6.
Net (increase) / decrease in investments on behalf of policyholders 61 179
Net (increase) / decrease in trade and other receivables -126 45
Net increase / (decrease) in liabilities arising from insurance contracts -984 1,572
Net increase / (decrease) in liabilities arising from insurance contracts on behalf of policyholders -124 -69
Cash flows from investing activities Investments in associates and joint ventures -5 -
Cash flows from investing activities -26 -39 1 Profit before tax includes results from continuing operations of € 1,128 million (2016: € 855 million). For 2016, results from discontinued operations amounted to € 4 million (after tax € 4 million).
Further details on cash flows from operating activities Interest received 1,180 1,341
Total cash and cash equivalents Cash and cash equivalents from continuing operations 3,749 3,581
The changes in the comparative figures mainly concern the representation of discontinued operations to continued operations, impact of € 17 million on profit before tax, in the consolidated income statement. In line with IFRS accounting requirements the comparative figures in the consolidated balance sheet have not been restated.
The impact of the mentioned changes for the period ended 31 December 2016 is as follows: Changes in comparative figures
The following changes in the EU-endorsed IFRS standards and IFRIC interpretations are effective from 1 January 2017: • Amendments to IAS 7: Disclosure Initiative; • Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses; • Annual improvements to IFRSs 2014-2016 cycle: IFRS 12 – Disclosure of Interests in Other Entities.
Amendments to IFRS 4 Insurance Contracts This amendment becomes 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.
IFRS 17 Insurance Contracts IFRS 17 Insurance Contracts was issued by the IASB in May 2017 and will replace IFRS 4 Insurance Contracts. The standard will be effective from 1 January 2021, subject to endorsement by the EU. IFRS 17 is expected to increase comparability by requiring all insurance contracts to be accounted for in a consistent manner. Insurance obligations will be accounted for using current values – instead of using tariff rates (‘tariefgrondslagen’) as is currently the a.s.r. accounting policy (see accounting policy I).
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 model (commonly known as the building block approach), the variable fee approach for contracts with a direct participating feature and the premium allocation approach which is a simplified version of the general model and can be used mainly for short-duration contracts.
The building block approach measures insurance liabilities by taking the present value of future cash flows adding a risk adjustment (RA) as well as a contractual service margin (CSM). The CSM represents the unearned profits of insurance contracts and will change the recognition of revenue in each reporting period for insurance companies.
Under current a.s.r.’s accounting policy, revenue for insurance contracts is recognised when premiums are earned or received. Under IFRS 17, the Insurance contract revenue depicts the insurance coverage and other services provided arising from the group of insurance contracts at an amount that reflects the consideration to which a.s.r. expects to be entitled in exchange for those services. Revenue includes the release of the CSM and RA in profit or loss over the coverage period. Insurance service result is a new income statement line item which is effectively a net result on non-financial risks of all Insurance contracts.
IFRS 17 including the combination with IFRS9; • Various workstreams have started their projects to address the implementation in the operations and these have prepared implementation plans for the period till the effective date of IFRS 17.
IFRS 9 Financial Instruments IFRS 9 is effective from 1 January 2018 and EU endorsed. a.s.r. will apply 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 1 January 2021.
IFRS 15 Revenue from Contracts with Customers IFRS 15 becomes 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 is not expected to have a significant impact on the consolidated financial statements of a.s.r.
IFRS 16 Leases IFRS 16 is effective for annual periods beginning on or after 1 January 2019, subject to endorsement by the EU. IFRS 16 contains a new accounting model for lessees. Under the new lease standards the current operational 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. is leasing are cars, rented buildings and IT equipment.
The implementation of IFRS 16, if and when endorsed by the EU, is not expected to have a significant impact on the consolidated financial statements of a.s.r.
III. Other financial assets and liabilities For other financial assets and liabilities where the fair value is disclosed these fair values are based on observable market inputs, primarily being the price paid to acquire the asset or received to assume the liability on initial recognition, assuming that the transactions have taken place on an arm’s length basis. Valuation techniques using present value calculations are applied using current interest rates where the payment terms are longer than one year.
1 Not measured at fair value on the balance sheet for which the fair value is disclosed.
This category primarily includes: I. Financial instruments: private equity investments (or private equity partners); II. Financial instruments: loans and receivables – mortgage loans; III. Investment property, buildings for own use (include mortgages) and real estate equity funds.
III. Investment property and buildings for own use The following categories of investment properties and buildings for own use is recognised and methods of calculating fair value are distinguished: • Residential – based on reference transaction and discounted cash flow method; • Retail – based on reference transaction and income capitalisation method; • Rural – based on reference transaction and discounted cash flow method; • Offices – based on reference transaction and discounted cash flow method (including buildings for own use); • Other – based on reference transaction and discounted cash flow method; • Under construction – based on both discounted cash flow and income capitalisation method.
The following valuation methods are available for the calculation of fair value by the external professional appraisers for investment property and buildings for own use: Reference transactions Independent professional appraisers use transactions in comparable properties as a reference for determining the fair value of the property. The reference transactions of comparable objects are generally based on observable data consisting of the land register ‘Kadaster’ and the rural land price monitor as published by the Dutch government ‘grondprijsmonitor’ in an active property market and in some instances accompanied by own use information. The external professional appraisers, valuate the property using the reference transaction in combination with the following valuation methods to ensure the appropriate valuation of the property: • 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 as gross rental income less vacancy (apart from the rural category), non-recoverable expenses,
Intro d uctio n collection losses, lease incentives, maintenance costs, agent and commission costs and other operating and management expenses. The series of periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.
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 sq.m. for renewals and their respective re-letting rates; • Reviewed rent per sq.m.; • Investment transactions of comparable objects; • 10 Year Dutch Government Bond Yield (%) as published by the Dutch Central Bank.
When applying the discounted cash flow method for rural valuations, the significant inputs are the discount rate and market lease values. 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 value per acre per region in accordance with the ‘rural land price monitor’; • 10 Year Dutch Government Bond Yield (%) as published by the Dutch Central Bank.
Goodwill Acquisitions by a.s.r. are accounted for using the acquisition method. Goodwill represents the excess of the cost of an acquisition over the fair value of a.s.r.’s share of the net identifiable assets and liabilities and contingent liabilities of the acquired company at acquisition date. If there is no excess (negative goodwill), the carrying amount is directly recognised through the income statement. At the acquisition date, goodwill is allocated to the cash-generating units (CGU’s) that are expected to benefit from the business combination.
The additional analysis is based on an internal model, wherein managements assumptions in relation to cash flow projections for budget periods up to and including five years are used and, if deemed justified, expanded to a longer period given the nature of the insurance activities.
Value of Business Acquired The Value of Business Acquired (VOBA) represents the difference between the fair value and the carrying amount of insurance portfolios that have been acquired, either directly from another insurer or through the acquisition of a subsidiary. VOBA is recognised as an intangible asset with a finite useful life and amortised over the term of the current insurance contracts at acquisition date, in conjunction with the corresponding obligations. With regard to VOBA, allowance is made for the outcome of the annual compulsory Liability Adequacy Test (LAT) for insurance contracts (see accounting policy I). Amortisation charges related to VOBA are included in net claims and benefits. Negative VOBA, or an additional provision, is recognised and presented under the Liabilities arising from insurance contracts. The negative VOBA is amortised based on the expected run-off of the portfolio.
The classification of the financial assets is determined at initial recognition. The classification depends on the purpose for which the investments were acquired. For detailed information on the fair value of the financial assets see accounting policy B.
Financial assets at fair value through profit or loss are stated at fair value. At initial recognition, transaction costs are recognised in the income statement. Realised and unrealised gains and losses in the fair value are also recognised in the income statement.
G. Loans and receivables Loans and receivables are measured at fair value plus transaction costs on initial recognition. They are subsequently measured at amortised cost based on the effective interest rate method, less impairment losses where deemed necessary.
Impairment of loans and receivables At each balance sheet date, a.s.r. assesses whether objective evidence of impairment exists of the loans and receivables.
If a hedge no longer meets the criteria for hedge accounting or is otherwise discontinued, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction or the firm commitment is settled. If the forecast transaction or the firm commitment is no longer expected to take place, any related cumulative gain or loss on the hedging instrument that was reported in equity is recognised in the income statement.
Shadow accounting The Group’s insurance accounting policies include the application of shadow accounting which is a specialised accounting treatment commonly utilised in insurance accounting and is permitted under IFRS. The purpose of shadow accounting is to help reduce potential accounting mismatches which can occur when related assets and liabilities: • Are measured on a different basis; or • Have changes in their measurements recorded in different IFRS performance statements (Income Statement or
Liabilities are adequate if the technical provision recognised in a.s.r.’s balance sheet for the Life segment as a whole at least equals the best estimate of the life insurance liabilities including an appropriate risk margin. If there is a deficiency in the life insurance liabilities, those liabilities are increased to adequate levels through a charge to the income statement.
Risk margin The risk margin is determined for each homogeneous risk group using the CoC method. For life a CoC rate of 6% (2016: 6%) is used. a.s.r. uses the latest standard Solvency II model, to quantify the risks. The risks that are incorporated in the risk margin are: mortality, longevity, disability, lapse, catastrophe, expense and operational risk. A projection of expected future risks is made and all these risks are projected into the future. The total risk for every future year is determined based on correlations between the risks described in the Solvency II standard model. The projected total risk for every year is multiplied by a cost of capital charge and discounted at the balance sheet date.
a.s.r. also has a defined contribution plan for a limited number of employees in the recent acquisitions. For defined contribution plans, a.s.r. pays contributions to privately administered pension insurance plans on a contractual basis. a.s.r. has no further payment obligations once the contributions have been paid. The contributions are recognised as operating expenses in the profit or loss account during the period the services are rendered. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Other post-retirements obligations a.s.r. offers post-employment benefit plans, such as arrangement for mortgage loans at favourable interest rates. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology that is similar to that for defined benefit plans.
N. Basis for consolidation - subsidiaries The consolidated financial statements include the financial statements of ASR Nederland N.V. and its subsidiaries. Subsidiaries are those entities over which a.s.r. has control. Control exists when a.s.r. is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. This is the case if more than half of the voting rights may be exercised or if a.s.r. has control in any other manner. Subsidiaries are fully consolidated from the date on which control is acquired by a.s.r. and are deconsolidated when control ceases to exist.
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 (Discontinued operations) segment. There is a clear difference between the risk and return profiles of these six segments.
Increase in the fair value exceeding the cost price is added to the revaluation reserve in shareholders’ equity, less deferred taxes. Decreases in the fair value that offset previous increases of the same asset, are charged against the revaluation reserve. The revaluation reserve cannot be negative. All other decreases in fair value are accounted for in the income statement. Increases that reverse a revaluation decrease on the same asset previously recognised in net result are recognised in the income statement.
Accounting for borrowing costs attributable to the construction of property and equipment is the same as accounting for borrowing costs attributable to investment property. For details, see accounting policy D.
Property developments consist of property under development commissioned by third parties. Measurement is at cost including any directly attributable costs and construction period interest, less invoiced instalments and impairments. If the contract revenue can be reliably estimated, it is accounted for by reference to the stage of completion, using the percentage of completion method. If the contract revenue cannot be reliably estimated the contract revenue is then accounted for upon completion of the development (completed contract method).
Reserve for unrealised gains and losses This reserve consists of: • Unrealised gains and losses from assets available for sale net of tax and taking account of adjustments due to shadow accounting (see accounting policy I); • The share of unrealised gains and losses of associates and joint ventures held by a.s.r. (see accounting policy U); • Unrealised gains and losses on the effective portion of cash flow hedges net of tax (see accounting policy H); • Unrealised change in value of property for own use (see accounting policy T); • Reserve for discretionary participation features (see accounting policy I); and • Reserve for exchange rate differences arising from assets available for sale.
Dividends on ordinary share capital Dividends on ordinary shares are recognised as a liability and recognised in equity when they are approved by a.s.r.’s shareholders. Interim dividends are recognised in equity when they are paid.
BB. Investment income Investment income primarily comprises interest income, dividends on equities and rentals from investment property.
With respect to financial assets available for sale, realised gains or losses comprise: • The proceeds from the sale or disposal of an asset or liability less the amortised cost of the asset or liability sold; • Impairments previously recognised (except for equity instruments); and • Hedge accounting adjustments.
FF. Fee and commission income Fee and commission income relates mainly to reinsurance, asset management and distribution and services. These items are generally recognised as income in the period in which the services are performed.
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 5.3.4 as mentioned earlier.
Intro d uctio n 5.4 Group structure and segment information 5.4.1 Group structure
3 Other Wft registered companies (included in the segments Banking and Asset Management and Distribution and Services).
Financial statements 2017 | 5.4 Group structure and segment information 154
• The Real Estate Development consists of the activities where property development occurs and includes ASR Vastgoed Projecten B.V. As of 1 January 2017, all activities in the Real Estate Development segment are classified as continuing. For further disclosure, reference is made to Chapter 5.4.6.
The a.s.r. segment reporting shows the financial performance of each segment. The purpose is to allocate all items in the balance sheet and income statement to the segments that hold full management responsibility for them.
Financial statements 2017 | 5.4 Group structure and segment information 156
Fair value gains and losses 15 -4 1 -1 - - 3 14
Financial statements 2017 | 5.4 Group structure and segment information 160
The combined ratio is 95.1% (2016: 95.6%) mainly due to a decreasing ratio at Property & Casualty.
Small differences are possible in the tables due to rounding. The claims, commission and expense ratio can be calculated based on the following information: Claims, commission and expenses
The total assets and total income for the year ending 31 December 2016 of VSP Risk as published in its financial statements amounted to € 2 million and € nil respectively. VSP Risk is consolidated within the Distribution and Services segment as of 6 April 2017 and an amount of € 3.6 million is recognised as goodwill.
The total assets and total result for the year ending 31 December 2017 of First Investments amounted to € 0.9 million and € -0.3 million respectively. First Investments is consolidated within the Banking and Asset Management segment as of December 2017. The total consideration for the First Investments acquisition amounted to € 3.2 million.
Cash and cash equivalents related to acquisitions VSP Risk and First Investments
Goodwill is recognised as the difference between the consideration paid and the fair value of the net assets and liabilities upon acquisition date (see Chapter 5.5.1). In accordance with the applicable reporting standards, the final acquisition balance sheet will be drawn up within 12 months of the acquisition. No significant differences compared with the provisional balance sheet are expected for the acquisitions of 2017.
Deferred and contingent consideration The deferred and contingent consideration related to acquisitions amounts to € 11 million (2016: € 22 million) with a maximum amount of contingent consideration of € 15 million (2016: € 15 million). During 2017 an amount of € 12 million deferred consideration was paid in relation to Dutch ID B.V. and Axent Nabestaanden Zorg N.V.
5.4.6 Discontinued operations and assets held for sale and related liabilities
Until 2016, the activities of ASR Vastgoed Projecten B.V., which consist of real estate development activities, were partially considered as continuing and partially as discontinued operations. The Executive Board has decided to look for a strategic buyer for the discontinued part and therefore classified a part of its real estate development business as ‘held for sale’. With this in mind, the discontinued operations were recognised as held for sale in the balance sheet.
As a consequence, the financial results were disclosed in condensed form in the income statement. In 2016 part of the discontinued operations were sold. For the remaining discontinued operations it is not expected that they will be sold in the near future. Therefore these operations no longer meet the IFRS requirements to be classified as held for sale and are reclassified to continuing per 1 January 2017.
The assets and liabilities related to assets held for sale can be summarised as follows: Assets held for sale and related liabilities
Changes in the composition of the group 7 - - 7 40
Goodwill For the purpose of impairment testing, goodwill is allocated to the cash-generating units (CGU) of the relevant operating segment. As a result of acquisitions during 2017, disclosed as changes in the composition of the group (please see Chapter 5.4.5) the amount of goodwill increased by € 7 million (2016: € 31 million).
The results of the annual goodwill impairment test are as follows: Segment Life The goodwill impairment test was conducted at the segment 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.
The second step as described above in the CGU’s of segments Banking and Asset Management and Distribution and Services indicate that there is an excess of recoverable amount over the bookvalue of all CGU’s to which goodwill has been allocated (buffer).
Management believes that any reasonable possible change in the key assumptions on which the other CGU’s recoverable amounts are based would not cause the carrying amounts to exceed their recoverable amounts.
Other intangible assets The other intangible assets mainly relate to Dutch ID, SuperGarant and the acquisition of a customer client list in 2017. The other intangible assets relate to trade name, distribution relationships and customer relationships.
Depreciation of property and equipment is recorded in the operating expenses (see Chapter 5.6.8).
Changes in value of investments, realised / unrealised gains and losses: - Fair value gains and losses 65 129
Transferred between investments on behalf of policyholders and investment property 9 2
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 refer to Chapter 5.7.1. The significant inputs are the net initial yield and market rental value. These inputs are verified with the following market observable data: • Market rent per sq.m. for renewals and their respective re-letting rates; • Reviewed rent per sq.m.; • Investment transaction of comparable objects; • 10 Year Dutch Government Bond Yield (%) as published by the Dutch Central Bank.
Rental income is recognised as investment income. For details, see Chapter 5.6.2. In 2017, rentals amounted to € 54 million (2016: € 115 million). The decrease is the result of the transfer of real estate equity funds to investments. Direct operating expenses arising from investment property amounted to € 12 million (2016: € 29 million). Given the overall low vacancy rate, virtually all direct operating expenses relate to investment properties generating rental income. Direct operating expenses of investment property are classified as operating expenses.
At fair value through profit or loss Real estate equity funds ranging between 30% and 70% 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.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 168
Associates and joint ventures at equity method Real estate equity funds Total
The total assets of the real estate equity funds consist primarily of investment property (€ 2,914 million).
In 2017, loans to associates and joint ventures amounted to € 3 million (2016: € 4 million). These loans are classified as related party transactions (see Chapter 5.7.3).
In 2017, due to the ongoing sales of tranches in real estate equity funds to institutional investors and transactions in fund participations as a result of the legal merger between a.s.r. leven and ANVM the classification of the real estate equity funds was reassessed. For the real estate equity funds for which a.s.r. leven has significant influence, being ASR DMOF, ASR DPRF and ASR DCRF, the exemption of IAS 28 was used, thereby measuring the investments at fair value through profit or loss and presenting them as a separate category within the investments at fair value through profit or loss. For a breakdown of the real estate equity funds ASR DMOF, ASR DPRF and ASR DCRF, please refer to Chapter 5.5.4.
The reversal of impairments through profit or loss are mainly related to the disposal of collateral debt obligations which were impaired in 2008. There is a high degree of uncertainty about the repayment of the remaining collateral debt obligations.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 170 5.5.5.2 Investments at fair value through profit or loss
Transfer between investments on behalf of policyholders and investments 32 2
Transfer between investments on behalf of policyholders and investments -32 -2
The claim related to cash collateral paid on derivative instruments, included in total due from credit institutions, amounts to € 33 million (2016: 32 million).
In addition to the above variation margin obligations, there is also an initial margin obligation for central cleared derivates which further reduces the risk of a.s.r. and its counterparties that they cannot fulfil their obligations.
The derivatives do not include the derivatives on behalf of policyholders (2017: € 4 million, 2016: € 8 million).
In addition to the use of swaps and options a.s.r. has further mitigated interest rate risk by entering into forward starting swaps, included in interest rate contracts swaps, in 2016.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 173
The fair value of the interest-rate contracts using the above valuation method form the basis for the amount of collateral that is exchanged between a.s.r. and its counterparties in accordance with the underlying contracts. For more information, see Chapter 5.8 on risk management.
Financial assets held for trading -405 -183 - - - -588
A total of 54.5 million ordinary shares of ASR Nederland N.V., representing 36.3% of the outstanding and issued ordinary shares (150 million) were listed on Euronext Amsterdam at the IPO on 10 June 2016, with the remaining shares held by Stichting Administratiekantoor Beheer Financiële Instellingen (NLFI).
Total unrealised gains and losses recorded in equity 856 13 869
Total unrealised gains and losses recorded in equity 715 11 726 5.5.12.3 Actuarial gains and losses The actuarial gains and losses related to the pension obligation increased in 2017 by € 81 million after tax and € 108 million before tax (2016: decreased by € 288 million after tax and € 382 million before tax) due to an increase (2016 decrease) primarily in the discount rate and inflation (see Chapter 5.5.15).
5.5.12.5 Other equity instruments In 2017, a.s.r. launched and priced a € 300 million perpetual non-call 10 year restricted Tier 1 contingent convertible capital instrument. In 2016, a.s.r. neither issued nor redeemed any other equity instruments.
a.s.r. launched and priced a € 300 million perpetual non-call 10 year restricted Tier 1 contingent convertible capital instrument on 12 October 2017. Priced with a fixed-rate coupon of 4.625% (resettable after 10 years), the transaction is a.s.r.’s inaugural restricted Tier 1 and is the first issue of a restricted Tier 1 instrument denominated in Euro in the European insurance sector. With this transaction a.s.r. added a new instrument to the capital management toolbox.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 178
Adjusted net profit (loss) attributable to holders of ordinary shares for calculating the diluted earnings per ordinary share 872 625
Weighted average number of shares used to calculate the diluted earnings per ordinary
Diluted earnings per ordinary share from discontinued operations (in €) - 0.03
Premiums received in 2016 include the premiums related to the acquired insurance portfolio, NIVO Uitvaartverzekeringen amounting to € 323 million, and a single premium of a pension portfolio amounting to € 195 million.
Increasing intrest rates led to a decreased in the Liabilities arising from life insurance contracts. This effect is reflected in the line item ‘changes in shadow accounting’. For the realised gains and losses of the investments in fixed interest securities and the realised gains and losses on derivatives, we refer to Chapter 5.6.3 and 5.6.4.
Intro d uctio n 5.5.14.2 Claims development table, non-life The table below is a ten-year summary of movements in gross cumulative claims in connection with the Non-life portfolio for the period from 2008 to 2017.
5.5.15.1 Post-employment benefits pensions a.s.r. has a number of defined benefit and defined contribution post-employment benefit plans for its employees and former employees. The majority of employees are formally employed by ASR Nederland N.V. A limited amount of employees are employed by other group companies. The pension plans of other group companies are disclosed in a separate section in this paragraph.
The post-employment benefit plans for ASR Nederland N.V. employees is primarily based on the following conditions: • The accrual rate for old age pensions 1.89% (2016: 1.875%); • Retirement age 68 years (2016: 67 years); • Maximum pensionable salary capped at € 103,317 (2016: € 101,519); • Future inflation indexation is conditional; • Minimum franchise has changed.
Other group companies employees The other group companies which have been acquired have defined contribution and defined benefit plans. The defined benefit plans consist primarily of indexed average salary pension plans taking into account a franchise. The liability as per 31 December is € 1 million (2016: € 3 million).
Remeasurement of liabilities included in OCI Discount rate change -94 397
As per 31 December 2017 the duration of the defined benefit obligation was 18 years (2016: 19 years).
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 185
As % of qualifying investments as at 31 December 1.0% 23.3%
In the calculation of the defined benefit obligation the: • Discount rate is based on the Triple A – Risk Finance Spot Curve (AAASC); • Most recent mortality table ‘AG Prognosetafel 2016’ is used, in combination with the latest the ‘CVS
Sterftestatistiek Pensioenen 2007-2016’ for experience factors; • The period of indexation is based on the expected duration of the separate account to fund the future inflation indexation.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 186
Under IFRS, assets managed by insurance companies that form part of the group do not qualify as qualifying assets. Investment income from these assets has therefore not been included in the above figures but is recognised as investment income separately. Actual investment returns for 2017 amounted to € 61 million (2016: € 71 million), which includes the investment income on the separate account to fund future inflation indexation amounting to € 6 million (2016: € 3 million). These returns have been recognised in investment income (Chapter 5.6.2).
The separate account to fund future inflation indexation is expected to be utilised in ten years to fund the future inflation indexation for the employees and former employees included in the ASR Nederland N.V. postemployment benefit plans. As such this has been included in the assumption used in calculating the defined benefit obligation.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 187
As a % of liabilities as at 31 December -2.5% -6.6%
In the calculation of the defined benefit obligation the: • Discount rate is based on the Triple A – Risk Finance Spot Curve (AAASC); • Most recent mortality table ‘AG Prognosetafel 2016’ is used, in combination with the latest ‘CVS Sterftestatistiek
In 2017, the discount rate methodology has changed and is based on the Triple A – Risk Finance Spot Curve (AAASC). All other methods used for determining the DBO and assumptions are consistent with those applied in 2016.
The average interest rate for the cash collateral received in 2017 is -0,35% (EONIA) (2016: -0.32%). There are no specific terms and conditions, because these depend on the development of the value of the underlying instrument.
a.s.r. has bonds that have been transferred as a result of reverse repurchase agreements, but do not qualify for derecognition amounting to € 64 million (2016: € 103 million). The asset recognised for cash collateral paid on reverse repurchase agreements is presented under loans and receivables. The liability recognised for cash collateral received on repurchase agreements is presented under due to banks.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 190 5.5.20 Other liabilities
The other liabilities of € 336 million (2016: € 432 million) consist amongst others of payables, accruals related to investments and construction depots for rural housing mortgages.
Financial statements 2017 | 5.6 Notes to the consolidated income statement 191
Intro d uctio n 5.6 Notes to the consolidated income statement 5.6.1 Gross insurance premiums
The table below provides an overview of total gross earned non-life insurance premiums.
The non-recurring premiums written Individual decreased to € 88 million in 2017, mainly resulting from a single premium of € 323 million in the funeral portfolio in 2016.
The effective interest method has been applied to an amount of € 836 million of the interest income from financial assets not classified at fair value through profit or loss (2016: € 901 million). Interest income includes € 9 million (2016: € 16 million) in interest received on impaired fixed-income securities.
Reversal of impairments on fixed-interest securities as a result of disposal amounts to € 3 million (2016: € 3 million).
Additions to insurance liabilities due to shadow accounting (Chapter 5.5.14) 445 -804
Financial statements 2017 | 5.6 Notes to the consolidated income statement 194 5.6.5 Fee and commission income
The increase of the proceeds from property developments is mainly due to the sale of parts of the ‘Leidsche Rijn Centrumplan’. In 2016, the item other income includes a past service cost related to the amendment to the a.s.r. post-employment benefit plans amounting to € 100 million.
Changes in liabilities arising from insurance contracts on behalf of policyholders 119 56
Financial statements 2017 | 5.6 Notes to the consolidated income statement 195
The total workforce decreased to 4,117 FTE (2016: 4,160 FTE). The total workforce consists of the number of internal and external FTEs. The number of internal FTE increased to 3,493 FTE (2016: 3,461 FTE) as a result of filling vacancies. The number of external FTE decreased to 624 FTE (2016: 699) as a result of filling internal vacancies and continuing cost-cutting programmes.
Financial statements 2017 | 5.6 Notes to the consolidated income statement 196 5.6.9 Impairments
The table below shows a reconciliation of the expected income tax expense with the actual income tax expense. The expected income tax expense is determined by applying the tax rate in the Netherlands to the profit before tax. In 2017, this rate was 25.0% (2016: 25.0%). The enacted tax rate for 2018 will be 25.0%.
Investments at fair value through profit or loss Equities 67 2 62 131
Investments on behalf of policyholders Government bonds 1,249 - - 1,249
The adjustment of the unlisted real estate funds to level 3 is mainly the result of a decision to base the level classification on the valuation technique of the underlying investment since that primarily drives the value of the fund.
Debt funds are adjusted from level 3 to level 2 based on a reassessment of the impact of the observable and non-observable market assumptions used in determining the fair values of the underlying instruments.
The movements of € 395 million from level 1 to level 2 is mainly due to a change in methodology whereby the fair value is based on observable market data. The movement from level 2 to level 1 of € 102 million, relates to unlisted funds only consisting of listed investments.
Changes in financial assets classified as available for sale categorised within level 3
Changes in value of investments, realised/unrealised gains and losses: - Realised gains and losses (see Chapter 5.6.3) 8 3 - Recognised in Other comprehensive income (unrealised gains and losses) -2 8
Transfer between investments on behalf of policyholders and investment property -9 -2
Transfer of real estate equity funds from investment property 1,432 -
Total revaluations of investments, held at year-end, recognised in the income statement 125 -3
Financial statements 2017 | 5.7 Other notes 202 5.7.1.2 Financial assets and liabilities not measured at fair value The breakdown of the fair values of financial assets and liabilities not measured at fair value, and for which the fair value is disclosed in accordance with the level of fair value hierarchy, as explained in accounting policy B, is as follows: Breakdown of financial assets and liabilities not measured at fair value
The mortgage loan portfolio is classified as level 3 ‘not measured on the basis of market observable market data’. Non-observable market inputs are used in the valuation methods, in addition to the observable market inputs. The valuation method used to determine the fair value of the mortgage loan portfolio is based on 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 mortgage loan portfolio consists of high quality mortgages with a relatively fixed return, limited impairments and arrears (see Chapter 5.5.7). The mortgage loan portfolio consists only of Dutch mortgages with a limited counterparty default risk in line with the strategic investment plan (see Chapter 5.8.4).
Intro d uctio n 5.7.1.3 Property (including land and buildings for own use) The breakdown of the investment property, real estate equity funds and land and buildings for own use in accordance with the fair value hierarchy, as explained in accounting policy B, is as follows: Breakdown of the fair value of the investment property and land and buildings for own use
Investments at fair value through profit or loss: Real estate equity funds (Chapter 5.5.5.2) - - 1,585 1,585
Land and buildings for own use (Chapter 5.5.2) - - 147 147
Investments on behalf of policyholders: Investment property (Chapter 5.5.6) - - 193 193