About the object On 14 May 1940, German bombers bombarded the inner city of Rotterdam. The 15-minute bombardment destroyed almost the entire inner city, partly as a result of the fires that flared up. Some 650 to 900 people lost their lives and around 80,000 people became homeless. The office buildings of the Bicker Caarten & Obreen insurance firms and that of M. van Marle – to which Stad Rotterdam belonged at that time – on the Wijnstraat were bombed. Little remains of them apart from the commemorative brick showing the Oude Hoofdpoort; a reference to the place where it all once began.
Contents 1.1 At a glance 9 1.2 Message from the CEO 12 1.3 Value creation model 14 2 Operating environment 17 2.1 The story of a.s.r. 18 2.2 SWOT analysis 23 2.3 Stakeholders and material topics 24 2.4 Strategic targets and results 27 2.5 Sustainable Development Goals 30 3 Sustainable value creation 33 3.2 Our role as a sustainable insurer 35 3.3 Our role as a sustainable employer 39 3.4 Our role as a sustainable investor 44 3.5 Our role as a trusted company 49 3.6 Our role in society 60 4 Business performance 63 4.1 Group and segment information 64 4.2 Risk management 84 4.4 a.s.r.’s approach to addressing climate change 90 4.5 Statements of the Executive Board 96 4.6 Assurance report of the independent auditor 97 5.1 Corporate Governance 102 5.2 Supervisory Board report 112 5.3 Remuneration report 118 5.4 Employee participation 127 6 Financial statements 129 6.2 Consolidated financial statements 134 6.3 Accounting policies 141 6.4 Group structure and segment information 163 6.5 Notes to the consolidated balance sheet 178 6.6 Notes to the consolidated income statement 207 6.7 Other notes 216 6.8 Risk management 234 6.9 Capital management 268 6.10 Operating result 273 6.11 Company financial statements 275 7 Other information 285 7.1 Report on the audit of the financial statements 2019 included in the annual report 286 7.2 Provisions of the Articles of Association regarding profit appropriation 296 8 Report of Stichting Continuïteit ASR Nederland 299
ASR Nederland N.V., hereinafter ‘a.s.r.’, is the Dutch insurance company for all types of insurance. a.s.r. offers a broad range of insurance products in the areas of non-life and life insurance for consumers, self-employed people and companies. a.s.r. offers investment products and mortgages and is active as an investor and in offering asset management services to institutional clients. Furthermore, a.s.r. is a full service provider for intermediaries and operates almost exclusively in the Dutch market.
• Mortgages • Asset Management • Real Estate • Bank (discontinued)
About a.s.r. | 1.2 Message from the CEO 12 1.2 Message from the CEO ‘We hereby present you a.s.r.’s 2019 Annual Report. 2019 was an excellent year for us. Before I go into that in a little more detail, I would first like to reflect on what is currently happening in the world in relation to the coronavirus. The developments regarding the coronavirus succeed one another fast and are far-reaching. People are worried and our day-to-day activities are greatly affected, with schools, shops and factories closing and employees working in teams and sometimes entirely from home. The financial markets and share prices are under severe pressure. It reminds me of the crisis of 2008. As a company, we have learned a lot from that crisis. Since then, we have worked unabatedly to create a solid basis in order to be able to cope with such a crisis in the future. a.s.r. is healthy, and our buffers are good.
‘a.s.r. doet het’ We believe that companies that are relevant for society have a rationale for the longer term. This ties in closely with the overarching theme of our strategy: long-term sustainable value creation. It applies not only to our commercial decisions but also to the deployment of our shareholder capital, the service we provide and the way in which we seek to contribute to society. In 2019 we made this expressly visible in our marketing campaigns and elsewhere through the slogan ‘a.s.r. doet het’. This indicates our commitment to work towards solutions for the social issues in our focus areas. The success we are having is reflected in, among others, customer surveys which show that a.s.r. is increasingly seen as a sustainable insurer. The high ratings we are given by customers and intermediaries (measured through the Net Promoter Score (NPS)), plus the various awards accorded to a.s.r. by insurance intermediaries for the quality of its service all show that our added value is being acknowledged externally.
M&A The sale of Vivat by its Chinese parent Anbang attracted considerable attention in the insurance sector in 2019. a.s.r. carefully considered the possibility of acquiring Vivat, on the basis that all acquisitions made by us must meet strict financial and risk parameters and add value to our organisation. As is known, a.s.r. made an offer but another party was ultimately preferred. We have always taken the view that an acquisition of such a size could be attractive but is by no means an imperative for us. In addition to organic growth, a.s.r.’s growth strategy is based on small and medium-sized acquisitions. This is a strategy in which the company has been highly successful. This success continued throughout 2019 with the start of integration of Loyalis and the acquisitions of Veherex and VvAA.
We will assess the possibility of an additional distribution on an annual basis, depending partly on developments in the market, such as opportunities for larger acquisitions. At the same time, we remain interested in growth through small and medium-sized acquisitions. Our strong capital position provides sufficient scope for this. The new policy will be implemented with immediate effect and we announced when presenting our annual results that we will be buying back € 75 million of our own shares.
a.s.r. 300th anniversary These gratifying results for 2019 are entirely due to the confidence placed in us by our customers and intermediaries, the hard work and commitment of our employees and the support of our shareholders. We are optimistic about the outlook for a.s.r.
We are moving into the future with a new Executive Board (EB) following the appointment of Ingrid de Swart and Annemiek van Melick and the resignation of our CFO Chris Figee. I am grateful for Chris’ significant contribution to a.s.r. over the past five years. With his financial leadership and expertise Chris has been key in the successful IPO, a number of successful acquisitions and a.s.r.’s firm position in the capital markets. His relentless drive, ambition and enthusiasm has been inspiring to many within the company. All of us at a.s.r. regretted seeing Chris leave and wish him all the best for the future. I am very pleased with Annemiek as our new CFO and Ingrid as new Executive Board member and I am delighted to welcome them both. They are new, exceptional and experienced colleagues with whom I look forward to directing a.s.r. in the years ahead. Beginning in 2020, a.s.r.’s 300th anniversary year. Our company’s history encompasses many high points, during which it has laid the foundations for a strong and healthy future. We are pleased to commemorate this milestone; after all, a company that fails to honour its past has no future.
C lim at e c h an g e a n d e n e rg y tr an si tio n
• Technological • Environmental and demographic • Economic and financial markets • Political and regulatory
Products and services around the themes: • Sustainable living • Sustainable employability • Future income • Self-employment and fl exible labor markets
Financial capital • € 4,666 million gross written premiums • € 7,828 million Eligible Own
Social and relationship capital • > 1.5 million customers • 5,000 intermediaries • Other business partners • Society at large
I th in k ah e adI’m h e lp fu l
Enhance positive impact Reduce negative impact a.s.r. helps customers to mitigate risks and build capital for the future. The main goal of a.s.r. is to offer customers fair value for the premium paid. a.s.r. is satisfied only if the customer feels he has been positively helped and if the financial advisor feels that a.s.r. offers the right service and high quality products and services.
• Customer satisfaction: NPS 44 • Claims and benefits paid: • Sustainable products and services • Precautions to prevent damage • Provide risk management opportunities for customers • > 86,000 new customers in Health • Introduction of a.s.r. Vitality resulting in 11,000 participants in the first two months
Having a diverse, talented, qualified and healthy workforce is key for a.s.r. in achieving its business objectives. That is why a.s.r. is committed to attracting, retaining and inspiring the best people, offering them extensive scope for training and development, and facilitating a sound work/life balance. Improve the attractiveness of a.s.r. as an employer on the external labor market.
• Paid salaries and wages: € 257 million • Number of ompleted job related trainings: 1,912 • Diverse employee population: 59% male / 41% female • Healthy and vital workforce: absenteeism 3.97%; nil absenteeism 54%; vitality activities
• Sustainable investment opportunities • Assets under management for third parties increased to € 20.7 billion
• Exclude countries and businesses that do not meet a.s.r.’s SRI criteria.
a.s.r. works responsibly to realise its objectives. The negative impact on the environment (e.g. CO2 emission) is minimised as much as possible. The purchase of goods and services takes place in a responsible manner in accordance with applicable standards and policies. a.s.r. has a transparent tax policy with the aim of delivering its share to society.
• Tax paid: € 683 million • No fines for data leaks • Carbon neutral operations
Dividends and share price developments should offer an attractive total return on shareholders investment. Shareholders are increasingly interested in the social relevance of the companies they invest in. It is in their interest that a.s.r. represents the interests of all stakeholders in order to achieve long-term value creation and attractive return on capital.
• Dividend per share: € 1.90 • Total shareholder return: 1.8% • Organic capital creation: € 370 million
• Offer increasingly sustainable investments a.s.r. foundation initiates projects on financial awareness and self-reliance. By teaching and supporting people in reading and arithmetic, being able to handle money and organising their financial administration. a.s.r.’s sponsorship and donation policy fits in with this and is focused on those starting points. Purely financial support does not or hardly ever occur. It is often a combination of material and substantive support.
The history of a.s.r. goes back 300 years. The company is deeply rooted in Dutch society and goes to great lengths to understand the needs and wishes of its customers. It is committed to delivering services clearly, sustainably and transparently, understanding and fulfilling customers’ needs, and continuing to innovate and develop new services. The organisation meets clients’ needs in a service-oriented way based on its expertise. Gaining and maintaining the trust of its customers is essential to a.s.r. The company values the provision of independent third party advice to customers, as reflected in its strong position in the intermediary channel.
a.s.r.’s purpose is to help people ensure their financial stability by sharing risks and building capital with sustainability and the long term in mind. It helps them do so by mitigating the financial risks (FR) they are unable or unwilling to bear themselves, and allowing them to accumulate capital for their financial needs later on in life. Through its expertise, a.s.r. contributes to the solution of societal issues related to financial self-reliance and inclusiveness, vitality and (sustainable) employability and climate change and energy transition with a view to sustainability and the long term. Focusing on sustainability as an integral part of its strategy, a.s.r.’s goal is to increase its positive contribution and reduce its potential negative impact on society and the environment.
Core values a.s.r. believes it’s goals can only be achieved with motivated and engaged employees. Having a talented, qualified and healthy workforce is key in enabling to achieve its business targets. The employees are guided by its core values: • ‘I’m helpful’. Employees are approachable, listen attentively, then help with solutions using their expertise, experience and commitment; • ‘I think ahead’. Employees empathise and think ahead to proactively help customers, intermediaries and colleagues; • ‘I act decisively’. Employees keep a close eye on content and process, and come up with solutions. They coordinate, are persistent and stand by their commitments.
a.s.r. is satisfied if : • Customers receive value for the premiums they pay; • Employees continuously develop their skills; • Shareholders obtain attractive returns; • Sustainability is included in the day-to-day activities to create long-term value.
To remain competitive a.s.r. continues to build on its expertise, which it refers to as ‘craftsmanship’. a.s.r. excels in disciplined pricing, underwriting and claims management.
Sustainable value creation a.s.r. seeks to be a leader in sustainable business practices in the financial sector, based on a sustainable future business model. It strives to meet the needs of existing and potential customers while simultaneously adding value for other stakeholders. a.s.r. feels a responsibility to adopt a long-term approach as the starting point for its decisions and activities. And it believes it can make a positive and sustainable contribution to addressing social challenges. There are three areas in which the organisation believes it has the most to contribute – and where it can potentially create the most value for its stakeholders: • Financial self-reliance and inclusiveness As a financial service provider, a.s.r. feels it is important for people to have financial continuity in their lives, to be able to take risks responsibly and make well-informed financial decisions. It therefore helps clients to gain insight into their financial situation and is involved in projects aimed at helping people to make conscious financial decisions. a.s.r. is an insurer for all Dutch citizens, including specific (vulnerable) target groups.
Based on these three areas, a.s.r. develops and promotes products and services with which to create sustainable value for its businesses, stakeholders and society at large. The company recognises its duty to minimise the negative impact of its business activities, including its investment policy. a.s.r. therefore offers the assurance that investments are made in a socially responsible way while aiming to achieve financially attractive returns on the capital invested by its shareholders.
The areas of growth are related to the overall trends and developments which will be discussed in chapter 2.2 SWOT analysis and chapter 3 Sustainable value creation.
• Future income This area of expertise focuses on helping people gain insight and prepare for their future (financial) demands (e.g. a planned sabbatical or anticipated birth of a child), but can also be for the longer term (e.g. to finance (early) retirement or additional pension savings, unexpected health care costs or additional health services). A trend impacting demand in this area is the retreat of national government and the reduction in availability of fiscally attractive facilities. The low interest environment is having a negative impact on the benefits that can be expected from the pensions that have been built up collectively in the past. a.s.r. can provide customers with the necessary insights in their financial situation. Individual savings and investment solutions can be provided on top of collective pension systems and financial planning and awareness tools. This area of expertise is closely related to the expertise a.s.r. already has in its pension business.
• Sustainable living This area is closely linked to a.s.r.’s P&C and mortgage business. It focuses on how a.s.r. can help customers to live in a suitable, affordable and sustainable manner.
a.s.r. supports self-employed people through the ZZP Nederland services platform and through its disability and health insurance business. In this area of growth, a.s.r. is creating cohesive offering containing for example various (non-life) insurance covers, mortgages and mortgage advice, support in relation to contracts with employers, educational support, accounting, fiscal and pension support.
Portfolio Given the profit contribution and growth outlook of the businesses, a.s.r. divides its portfolio into four categories: I Activities that provide stable cash flows and generate value with relatively strong growth potential; II Activities that offer business enhancement opportunities, typically capital-light; III Businesses that represent robust and predictable service books and contribute to profitability; IV Non-core activities which will or are eventually be divested.
Business domains in Non-life with growth potential Within the non-life domain, a.s.r. focuses on continued growth of P&C and disability insurance, both organically and inorganically. Selected distribution and service companies have been acquired in recent years to facilitate this growth and to enable a.s.r. to become an even more services-oriented company.
The basis for creating value and growing profitability in P&C is underpinned by the following capabilities of a.s.r.: • Insurance craftsmanship, which means its underwriting skills – risk selection and pricing, claims management and cost-effective operations; • Leading position in the intermediary channel and its in-house distributors and service providers; • Know-how in underwriting and claimshandling resulting in a strong combined ratio (COR), while growing organically; • Know-how in integrating and optimising the portfolios and businesses it has acquired. a.s.r.’s IT systems and platforms can onboard more business.
a.s.r. is well-equipped to benefit from the trends in disability insurance that are driving demand for services surrounding sustainable employability. a.s.r. has a considerable stake in an evolving ecosystem in sustainable employability, which includes: • Insurance intermediaries and access to customer groups serviced by Loyalis; • Added services to assist employees and a growing cohort of self-employed individuals; • Partnership with Discovery’s Vitality; • Claims prevention services; • Disability treatment and reintegration services.
Asset management related growth businesses The growth of asset management and the DC pension business continue to be part of a.s.r.’s strategy. a.s.r. has been able to expand external assets under management (AuM) efficiently and profitably. It pursues a ‘buy and build’ strategy to add scale and skills to its asset management business for external investors.
• Liability-driven investment (LDI) management solutions based on managing its own insurance liabilities and related assets.
Robust and predictable service books Life premiums account for less than 40% of total premiums. But the existing life books’ contribution to the operating result and capital generation is expected to remain substantial in the medium- to long-term. The robustly capitalised books that a.s.r. manages as service books are traditional Defined Benefit (DB) pensions, individual life and funeral books. These books are not formally closed for new business. However, production has reduced over time due to, among other things, the low interest rate environment and a.s.r.’s value over volume key strategic principle.
a.s.r. strengthened its position in Life by acquiring Loyalis N.V. (Individual life), VvAA Levensverzekeringen N.V. (Individual life) together with a partnership with VvAA Group B.V. The acquisition of VvAA was finalised on January 1st 2020.
Non-core businesses a.s.r. completed the sale of almost all of its banking activities to Dutch insurance company Achmea in December 2019. The remainder of the banking activities is sold to Van Lanschot Bankiers, a Dutch Bank, and is expected to close in the first half of 2020.
• Consolidation potential in the ‘closed’ books for individual life and funeral insurance
• Emerging risks due to climate change or cyberattacks require insurance solutions
In creating sustainable (long-term) value, it is essential to have an ongoing dialogue with stakeholders concerning trends, developments and the strategy and activities of a.s.r. The a.s.r. organisation has a diverse set of stakeholders with varying interests and expectations. a.s.r. identifies customers, investors, employees and intermediaries as its most important stakeholder groups. These stakeholder groups significantly influence the performance of a.s.r. and are conversely affected by the organisation’s activities, products and services. Other stakeholders of a.s.r. include business partners, regulators, tax authorities, suppliers, trade unions, the media and civil society organisations.
Investors Investors rely on a proper execution of a.s.r.’s strategy to create value and are guided by its financial and non-financial targets. They expect management to seize the opportunities that arise and to continuously monitor risks. Dividends and share price developments as well as coupons should offer an attractive total return on investment for shareholders and bondholders. Investors are also increasingly interested in the social relevance of the companies they invest in. It is important for them that a.s.r. represents the interests of all stakeholders in order to create long-term value and return on capital.
Employees Employees want a professional working environment which offers them control over their own career choices and development opportunities to boost their mobility on the labor market. Furthermore, stimulating a good work-life balance and attention for inclusiveness and diversity are highly valued. They want to be proud of the company they work for. Personal development, pride and sustainable employability (within and/or eventually after a.s.r.) translates into employee engagement. These factors contribute positively to the interests of a.s.r. and its stakeholders.
Intermediaries As an intermediary insurer, a.s.r. distributes the majority of its products and services through independent advisors and intermediaries. They have broad knowledge of the insurance marketplace, including products, prices and providers, and an acute sense of the needs of insurance purchasers. Their specific knowledge and experience with local markets and customers is valuable for a.s.r. and its customers. New products and solutions are developed in close cooperation to ensure that these products are competitive and meet the changing needs of a.s.r.’s customers.
Society Beyond its most prominent stakeholders, a.s.r. has a variety of stakeholders to take into account when doing business including business partners, regulators, tax authorities, trade unions, suppliers and civil society organisations. Depending on the topic and the type of relationship, expectations and interests may vary from responsible investments, complying with regulations and supporting people with financial self-reliance to constructive cooperation with business partners in different contexts. Overall, these diverse stakeholders expect a.s.r. to create sustainable and responsible societal value, now and in the future.
Material topics A materiality analysis was carried out in 2018 to identify the most material topics that drive a.s.r.’s long-term value creation including megatrends and issues perceived as being of highest importance to a.s.r. and its stakeholders. The outcomes were further analysed by senior management and the EB in 2019, to develop an integrated business strategy focused on creating sustainable long-term value for a.s.r. and its stakeholders. Also in 2019 a review was carried out on the material topics which have been validated by various internal stakeholders, including the EB. This annual report is based on the material topics which are presented on the next pages.
A full description of the materiality analysis can be found in Annex E Materiality analysis and stakeholder dialogue, including the stakeholder dialogues carried out in 2018 and the materiality review during 2019.
Robust financial performance A financially reliable and stable institution which is strong enough to meet its financial targets and objectives and can fulfil its short- and long-term obligations and commitments to all its stakeholders.
Compliance, integrity and privacy Complying with applicable laws and regulations, ethical standards and internal a.s.r. codes and standards. Protecting customer privacy is a key priority. In addition to complying with legislation and regulations, additional measures are being taken to minimise privacy risks.
Socially responsible investments Investing with due regard for ethical standards, policies and procedures, in line with the interests of a.s.r.’s stakeholders, where the integration of ESG criteria is key. This includes respect for fundamental human rights, employment rights, the environment and adequate corporate governance. a.s.r. aims to have a positive impact with a special focus on the transition towards a low carbon and inclusive society.
• € 1.2 billion impact investments (for own account) by 2021
Supporting vitality Helping employees to improve and maintain a healthy lifestyle and providing (self-employed) customers with services to support mental and physical fitness.
Fostering diversity & inclusion A balanced workforce composition based on age, gender, cultural or social origin, skills, views and working styles.
Contributing to financial self-reliance Offering the knowledge and skills to help people avoid getting into debt or getting them out of debt and to help people make conscious financial choices.
• +5% employee contribution to local society per annum (base year 2018)
Mitigating and adapting to the consequences of climate change Taking into account the impacts of climate-related risks and opportunities, taking measures to mitigate the effects of climate change and accelerate the transition to a low carbon economy.
• Carbon footprint: 95% of investment and mortgages portfolio (for own account) measured in 2021
• Science Based Targets (SBT) expected to be published in 2020 89% Investors, customers, employees, intermediaries, society
• Energy usage head office is 50 kWh or less per m2 in 2030 61 kWh
At the Capital Markets Day (CMD) on 10 October 2018, a.s.r. introduced its targets for the 2019-2021 period. These targets are divided into group and business targets.
a.s.r. aimed for OCC to rise to at least € 430 million by 2021. Under the new OCC definition2 this target is raised to € 500 million.
a.s.r. measures how its customers experience its services via the NPS. In 2019 the NPS was 44 points. This is an increase of two points compared to 2018 (42). It is a.s.r.’s ambition to maintain an NPS score of at least 44 points by 2021.
In the investment process, a.s.r. pays special attention to impact investing to make a sustainable contribution to society, for instance, through waste recycling, renewable
In conclusion, a.s.r. encourages its employees to help local society and communities by devoting part of their time to helping individuals and/or groups with financial issues. a.s.r. provides financial courses for children, helps families to improve their financial planning and assists communities in more general terms. a.s.r. aims for an annual growth of 5% compared to the base year 2018 by participating in the activities of the a.s.r. foundation. The total growth of a.s.r.’s contribution to local society compared to the base year 2018 was 42% and amounted to 12,413 hours.
Business targets 2019 – 20211 In P&C and Disability together, a.s.r. aims to achieve a COR in the range of 94-96%. This range reflects a.s.r.’s leadership to manage these businesses profitably while remaining competitive. The range also allows a.s.r. to absorb calamities, such as major fires and heavy storms. a.s.r. expects that in a year with a normal level of storms and large claims, it can deliver a COR of < 96%. a.s.r. decided to exclude Health from the target as the pricing and profitability of this product line is more prone to political scrutiny. At 99%, the target for Health stand-alone remains stable. The COR for P&C and Disability amounted to 93.5% at FY 2019 and outperformed the target range of 94 - 96% for 2019.
Importantly, the COR target is connected with a.s.r.’s Non-life GWP growth target. a.s.r. aims to grow organically by 3-5% per annum while remaining within the stated COR range. In pursuit of profitable growth, a.s.r. will not forfeit its core discipline of value over volume. The GWP growth for Non-life (P&C and Disability), including the negative impact from sanitising the former Generali Nederland amounted to 4.0% over 2019.
a.s.r. aims to keep its operating result in Life stable compared to 2017 levels. a.s.r. expects that it will be able to maintain its operating result at least at the level of 2017 for the next three years. In addition, a.s.r. aims to decrease the Life operating expenses from 57 basis points (bps) on its basic life provision in 2017 to within the range of 45-55 bps. The operating result for the Life segment amounted to € 696 million in 2019 and the expenses in relation to the basic life provision amounted to 53 bps in 2019.
1 Targets are based on the assumption of normal market, environmental and economic conditions and no material regulatory changes and on a stand-alone basis.
Operating environment | 2.5 Sustainable Development Goals 30 2.5 Sustainable Development Goals
Vitality and (sustainable) employment a.s.r. aims to be a valuable partner in the fi eld of sustainable employment, focusing on health care and vitality for entrepeneurs, employers and (own) employees.
Financial self-reliance and inclusiveness a.s.r. uses its fi nancial knowledge and skills to help prevent and solve payment problems in society.
• a.s.r. plays an active social role in helping people to recognise health risks, advising on possible interventions and increasing awareness of the importance of health.
Contribution • a.s.r. is committed to fostering an inclusive culture in which difference is recognised, valued and used to the fullest. The principles of a.s.r.’s policy on diversity include ‘Participation of people with limited labor market potential’ and ‘Equal development opportunities for all employees’.
Targets • At least 30% of the SB, EB and senior management to be male or female. • Number of employees employable via the Participation Desk: 70 in 2026
Promote inclusive and sustainable economic growth, employment and decent work for all.
Climate change and energy transition a.s.r. takes the risks associated with climate change into account for its business and its stakeholders. Furthermore, a.s.r. would like to play a role as driver of the necessary energy transition.
(for own account) by 2021. • Direct footprint of a.s.r. head office is climate-neutral.
Contribution • a.s.r. has integrated climate change and energy transition as an explicit theme/driver within its strategy. • a.s.r. has the ambition to reduce its own direct emissions annually by 10% and to remain ‘climate neutral’ in terms of the direct footprint of its head office.
• € 1.2 billion impact investments (for own account) by 2021.
Contribution • a.s.r. extends the insurance for buildings and their inventory to include flood cover. As a result, customers are better insured for damage caused by flooding from 2020.
Sustainable value creation | 3.1 a.s.r.’s roles 34 3.1 a.s.r.’s roles Based on its mission, as described in chapter 2.1 The story of a.s.r., a.s.r. defines five roles in which it strives to create sustainable value for its stakeholders.
As an institutional investor, one way in which a.s.r. takes ownership of social responsibility is through the use of ethical decision and sustainability criteria in its investment policy. All investments are screened on the basis of the SRI policy, focusing on aspects such as social and environmental criteria. See chapter 3.4 Our role as a sustainable investor.
Based on its core values, craftsmanship, positive attitude and social commitment, a.s.r. strives to ensure that customers experience good service. To achieve this goal, a.s.r. invests in improving and further digitising the services it provides. a.s.r. strives to work as sustainably and efficiently as possible.
a.s.r. is satisfied only if the customer feels he has been positively helped and if the financial advisor feels that a.s.r. offers the right and high quality service.
The repair companies within the network are constantly being tested. Consider for example the use of environmentally friendly means, less energy consumption, the correct processing of waste, the reuse of materials, care for sustainable employability of employees, recycling and products that are not harmful to the employee or to you.
a.s.r. Vitality Vitality is a behavioural science based health programme that encourages customers to exercise and live healthier lives in a positive way. The programme has been developed by the South African insurer Discovery and is now successfully implemented in 22 countries with almost 10 million members.
Since 4 November 2019, a.s.r. also offers this programme in the Netherlands to customers with a disability or health insurance. As an insurer, a.s.r. not only wants to help its customers if they have an illness or disability, but also to help prevent this from happening. By encouraging people to make healthy choices and become more active. a.s.r. Vitality is positively received with an inflow of 11,000 participants in the first two months.
Customers can opt to take out a membership with a.s.r. Vitality and to start exercising. With the a.s.r. Vitality app, which can be linked to an activity tracker such as Fitbit or Apple Watch, customers will first of all obtain insight into their own health. Based on this, exercise targets are set and then they can get moving. If they achieve these targets weekly, monthly and annually, they got awarded. The annual reward consist of a reimbursement on their insurance premium paid.
When you participate in a.s.r. Vitality a.s.r. processes healthcare data, e.g.how much you exercise or your food habits, in the app. With the introduction of a.s.r. Vitality various parties have expressed their concerns about the privacy protection of their data. To guarantee that these healthcare data are only processed within a.s.r. Vitality and not shared with a.s.r. insurance departments, a.s.r. set up a separate legal entity: a.s.r. Vitality B.V.
Sustainable value creation | 3.2 Our role as a sustainable insurer 36
‘Langer mee AOV’ a.s.r. offers a solution for the social challenge of the rising age of retirement. Working with a.s.r. on lifelong employability enables customers to remain at work in good health for longer.
In v e st m e n ts a.s.r. ESG funds All investments managed by a.s.r. asset management are screened on their social and environmental aspects and governance criteria, based on a.s.r.’s SRI policy.
a.s.r. won the Golden Lotus Award for best home insurer in digital accessibility, fast and professional claims handling, good product terms and conditions and good price-quality ratio. The Golden Lotus Awards Mortgage Market is an initiative of the trade journal InFinance and the Mortgage Business Club.
a.s.r. received the Lipper Group Awards for its high performance in the categories Overall Small, Bonds and Mixed Assets. The Lipper Awards for investment funds are awarded annually by the independent American research
Sustainable value creation | 3.2 Our role as a sustainable insurer 37 institute Refinitiv. Investment funds and fund houses that consistently outperform comparable funds in the Lipper and fund house fund data are eligible for an award.
The PARP assesses the usefulness of a product and/or service for the customer: to what extent is the product a response to an actual need of the target group and does it have sufficient added value? The comprehensibility test examines whether the target group can properly assess the usefulness of a product based on the information the customer receives from a.s.r. This includes tests for comparability, completeness of the information provided and whether product characteristics are clearly defined. In 2019, the PARP Committee approved 5 new propositions, 21 product adjustments and 28 reviews of existing products. Examples of the PARP Committee’s approval include: Direct Ingaand Pensioen, a.s.r. Vitaliy and Verduurzamingshypotheek.
Net Promoter Score a.s.r. continuously measures the NPS1 for a.s.r. and its business lines (the overall NPS score is based on the unweighted average of the business lines). The NPS reflects the customer satisfaction of an organisation’s clients. In the questions put to the customer, emphasis is placed on the interaction with the a.s.r. employee. ‘How likely are you to recommend a.s.r. to your family, friends and colleagues based on your experience with the a.s.r. employee?’ a.s.r. uses the NPS as the most important key performance indicator (KPI) to monitor the level of its service. Customers indicate on an ongoing basis how they 1 The NPS is calculated after customers had been in contact with one of the agents. Calculation of the NPS: With a score of 9 or 10, the customer is seen as a promoter (recommendation). With a score of 7 or 8, the customer gets the predicate passive. He or she will neither recommend nor discourage the brand. With a score of 0 to 6, the customer will discourage the brand. The NPS term for this is detractor (criticaster). The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. The NPS scores presented reflect the year-end scores.
The Complaints Management Team monitors the implementation of a.s.r.’s complaints policy and manages the complaints scheme. The complaints handling itself is decentralised within the organisation. Key principles and objectives of complaints management are: • a.s.r. is open to complaints, making it easy for customers to lodge a complaint; • a.s.r. communicates its views and the solution to the complaint in an understandable manner; • a.s.r. wants to learn from its complaints.
Sustainable value creation | 3.2 Our role as a sustainable insurer 38
3.2.4 Contributing to prevent payment problems for customers a.s.r. makes a significant effort to ensure that customers are financially self-reliant. This ties in with its core values.
In October 2016, a.s.r. joined a group of companies committed to assist customers with late payments to proactively find a solution. These companies have united in a coalition which has laid down ten rules of conduct in an Ethical Manifesto which a.s.r. has signed. Through this coalition, a.s.r. remains in sync with market developments and the public debate surrounding the subject.
a.s.r.’s businesses have put the ten rules of the Ethical Manifesto into effect. An a.s.r.-wide working group shares relevant market information and exchanges business successes. This allows customer processes to be more effectively coordinated and allows a.s.r. to be of greater service to its customer.
Sale of a property will only be used as a last resort. During the year 2019 in total 6 properties have been sold by proxy, and 1 property has been sold in an auction. a.s.r. is proud to report that in 9 cases, the sale of properties have been prevented as a direct result of effective intervention from the arrears team.
Please find more detailed information about customers in Annex A Facts and figures.
Organisational success and employee engagement a.s.r. conducted the yearly Denison Organisational Success Survey, which measures the success of an organisation on several dimensions, e.g. engagement. The results are compared to a global benchmark of large organisations that use the Denison Survey.
As part of the Denison survey employee involvement is measured on three themes: empowerment, team orientation and knowledge development. In 2019 a.s.r. was able to maintain the positive score of 84%. This figure is a relative score compared to the global benchmark of participants in the Denison survey.
(Personal) Leadership In order to realise its targets, a.s.r. needs employees who take responsibility for their work and careers and who show initiative. This is stimulated via agreements laid down in the Collective Labor Agreement (CLA) with regard to the working relationship, employment conditions (time- and place- independent work, no annual appraisal cycle) and development range.
Development programmes, employee review and succession planning In order to ensure the continuity of the business operations and to prevent talent from leaving, a.s.r. invests in development programmes for employees who have been identified as (future) top talent or professional talent. In order to identify these talents, an annual employee review is carried out for the total employee population, in which performance, agility and potential are determined for each employee. The employee review is the basis for succession planning and strategic personnel planning.
Trainee programme a.s.r. has its own trainee programme in which young talented people carry out three to four different assignments over an 18-month period. Trainees also follow a customised development programme which includes training courses and various projects. In 2019, 11 new trainees joined a.s.r. The trainee programme is intended to attract young talent who can be prepared for higher positions within a.s.r. As of 2014, 57 trainees joined a.s.r. 43 of them are still employed. The majority of this group moved on to a higher position, 14 trainees have left a.s.r.
Employer branding As the labor market is picking up: it is becoming increasingly important to distinguish yourself as an employer. That is why a.s.r. invests in employer branding, for example, via the website www.werkenbijasr.nl and the use of social media channels. For this purpose, specific content is created that meets the needs of the most important recruitment target groups. a.s.r. likes to make use of the network of employees for employer branding and recruitment and sees them as ambassadors. Employees who ‘bring in’ a colleague may be eligible for a referral bonus of € 750. Through partnerships with student associations, colleges and universities, a.s.r. is working on its image among students.
Sustainable value creation | 3.3 Our role as a sustainable employer 41 work and a five weeks maternity/paternity leave for partners. In 2019, a.s.r. continued to cooperate with the trade unions in working groups to develop a possible life-stage policy. Integration of the hybrid professional into the a.s.r. organisation will also be considered. A hybrid professional is someone who works as an employee for a.s.r. and also works as a self-employed person or has his own company or someone who is employed by a.s.r. combined with employment with another employer.
HR’s vitality specialists support the management of the business units in developing the vitality and absenteeism policy and provide guidance on absenteeism case dossiers.
a.s.r. promotes diversity and inclusion by empowering employees and allowing people to develop based on individual performance and demonstrated potential.
The fundamental principles of a.s.r.’s diversity policy are: • A balanced workforce composition based on age, gender, cultural or ethnic origin, physical and mental capacity, beliefs and working styles; • Promotion of a balanced composition of management through a policy of gender and cultural diversity; • Equal development opportunities for all employees; • Participation of people with limited labor market potential.
At least 30% of the SB, EB and senior management are to be male or female. In 2019, the SB had four male (67%) and two female members (33%), the EB had two male members (67%) and one female member (33%). On 31 December 2019, senior management consisted of 20 members, five of whom were women (25%) and 15 men (75%). In order to achieve the 30% target, application of the diversity policy has been explicitly included in the recruitment of SB and EB members. Diversity policy is part of the recruitment process and the employee review, in which succession planning, among other things, is discussed.
To reduce the step to the labor market for candidates with a work disability, a.s.r. has founded ‘The Participation Desk’. This desk uses people with a Work and Employment Support for Disabled Young Persons benefit (Wajong) for various assignments. They are given a maximum of 2 years to gain work experience and develop employee skills. They receive intensive guidance and a tailor-made development programme. The aim is to prepare them for a permanent position, preferably within a.s.r.
a.s.r. is committed to employing at least 70 people through the Participation Desk by 2026. At the end of 2019, 35 employees with a work disability were working via the Participation Desk. Currently 14 employees with a work disability fulfil a permanent position.
At the end of 2019, a multidisciplinary working group was started, charged with the task of tightening, renewing and expanding a.s.r.’s diversity policy. This group will also look at how diversity can be given more attention and how barriers can be removed in order to make further progress on this subject.
In February 2019, a.s.r. and the trade unions reached an agreement on the continuation of ‘De Andere Cao’ which includes a structural salary rise of 3% at 1 March 2019 and 1 March 2020 and a continuing dialogue about a future-proof employment conditions package for the employees of a.s.r.
In 2019, 157 employees made use of the facilities of ‘Het Andere Plan’ (2018: 154) and 97 employees left a.s.r. with this social plan (2018: 83).
Sustainable value creation | 3.3 Our role as a sustainable employer 43
The differences in hourly wages between men and women shown in the table below are caused by the on average higher number of years of service of men. Because men have served for an average of 3.7 years more than women, they have reached on average a relatively higher position on the salary scale for a given job.
Note: The numbers of the EB are including CEO’s compensation. Excluding CEO’s compensation, male average hourly wage of the EB would be € 261.
The table below shows the difference in years of service between men and women. This difference has remained virtually constant over the past 3 years and varies between 3 and 3.7 years.
Employee share purchase plan In 2019 a.s.r. issued an employee share purchase plan (ESPP). Employees of a.s.r. are thereby given the opportunity to acquire a.s.r. shares at a discount. a.s.r. can suspend or withdraw the plan at any time. There is no option under the plan for either a.s.r. or the employee to settle in cash or other assets. Therefore the plan is an equity-settled share-based payments plan.
The members of the EB are required to participate in the plan by investing a predetermined part of their remuneration in a.s.r. shares. Other employees participate voluntarily.
Under the terms of the plan the granting and vesting is predefined. The grant date of the plan is the moment the employee registers to participate in the plan. The shares vest immediately on the transaction date when cash is received of the employee, unconditionally, subject only to a post-vesting transfer restriction of five years. Otherwise, there are no specific restrictions to the share (i.e. voting power, dividend restrictions).
The employees purchase the shares at a discount of 18.5%. The fair value of the a.s.r. share with a lock-up of five years at the grant date equals the purchased price by the employee.
As an institutional investor, one way in which a.s.r. takes ownership of social responsibility is through the use of ethical and sustainability criteria in its investment policy.
Already since 2007 a.s.r. has a formally approved investment policy which is being applied to all its investments, both for own account as well as for third party clients. With the years a.s.r. expanded the efforts from the original exclusionary criteria to focus on achieving a positive contribution to a more sustainable world. A regular update can be found on our quarterly ESG reports, see www.asrnl.com.
(see www.asrnl.com) by Vigeo Eiris, focusing on aspects such as governance, social and environmental criteria. Countries and businesses that do not meet the criteria are excluded.
Sustainable and responsible investing a.s.r. understands the importance of, and the responsibility expected from, its role as an investor, both as asset owner and as asset manager. Sustainability is therefore an essential part of a.s.r.’s investment beliefs. The integration of ESG factors in the management of investments contributes directly to the reduction of risks (both financial and reputational risks) and has a positive effect on its long-term performance. The SRI policy has been integrated into internal investment practice through: • ESG integration for best-in-class investments Best-in-class investing is part of a.s.r.’s selection process for companies based on ESG best practices and products. a.s.r. favours companies that achieve an above-average performance in ESG policy and implementation. Based on Vigeo Eiris research, which is ISO 9001-certified, companies are classified as pioneering, best-in-class and sustainable companies using a relative, sector-based ranking for six domains of analysis: human resources, environment, market ethics, good governance, social impact and human rights. A detailed description of these criteria is published on www.asrnl.com. In 2019, a.s.r. expanded its ESG research capabilities by entering into partnership with MSCI ESG.
With regard to investments in sovereign debt, a.s.r. has excluded 82 countries that are poor performers in the annual Freedom in the World report or which score a low ranking on the Corruption Perceptions Index or on the Environmental SDGs.
Sustainable value creation | 3.4 Our role as a sustainable investor 45
Engagement In 2019, a.s.r. increased its engagement efforts to actively promote higher sustainability practices. The list of engaged companies is published on the a.s.r. website www.asrnl.com, including the reason and status of the engagement.
Active engagement dialogues: at least seven engagement projects per calendar year a.s.r. actively engaged with a total of 22 companies. a.s.r. engages with companies that either have shown controversial behavior (i.e. Global Compact violations) or are controversial in another way, for example as a result of societal discussions.
II. Engagement for the purpose of monitoring: sustainability is a standard topic on a.s.r.’s agenda at meetings with companies from its investment portfolio. a.s.r. has also been in dialogue with other players in the investment landscape, such as fund and index providers, to actively encourage a further ESG integration for their role in the investment chain.
III. Public engagement: In 2019, a.s.r. continued to actively participate in the implementation of the International Corporate Social Responsibility (ICSR) sector covenant, together with peers, the public sector and various non-governmental organisations (NGOs). a.s.r. played an active role in three working groups (general assembly, development of specific guidelines for a climate policy and the extra yearly ‘Do-Good’ working group for the sector). The first ICSR assessment was published in November 2019 with a positive evaluation. At the PCAF, a.s.r. made an active contribution to four working groups for general PCAF management and for developing a carbon accounting methodology for real estate, mortgages and indirect investments, and also road tested different methodologies for setting Science Based Targets (SBT’s).
In August 2019, a.s.r. committed itself to a collaborative engagement with the Access to Medicine Index to promote access to medicines (SDG3) among the 19 companies from the Index. In 2019, a.s.r. was involved in the start of a new Biodiversity Working Group under the Sustainable Finance Platform of the Dutch Central Bank (SDG 14+15). It also joined the FAIRR initiative, which addresses ESG issues in animal protein supply chains (SDG 12). a.s.r. took part in a number of UN PRI initiatives: the signing of the United Nations Principles for Responsible Investmen (UN PRI) coordinated response to the Vale Dam failure, the UN PRI Investor statement on deforestation and forest fires in Brazil (SDG 15) and the UN PRI Investor statement to Support the UN Women’s Empowerment Principles (SDG 5).
Sustainable value creation | 3.4 Our role as a sustainable investor 46 of the shareholder meetings held. Of the 1,052 shareholder’s meetings, 408 had at least one vote Against, Withheld or Abstained. 60 of these 408 meetings had one or more votes against remuneration with regard to the EB or SB and 174 meetings had 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 2019 is available on a.s.r.’s website www.asrnl.com.
a.s.r. is involved in the development of a robust methodology for financial institutions to set greenhouse gas (GHG) reduction targets and manage the scope 3 downstream emissions of their investments (the so-called Category 15 under the GHG Protocol). This is being led by the SBTi (Science Based Targets initiative) – in collaboration with over 40 global financial institutions and various knowledge partners such as PCAF, Navigant and the 2° Investing Initiative – and is meant to align investment (and lending) portfolios with decarbonisation pathways that fit with the ambition of the Paris Agreement. a.s.r. expects a globally coordinated and agreed methodology to become available early 2020 which will allow a.s.r. to deliver on its commitments under the ‘Klimaatakkoord’ as articulated in this report.
External recognition In 2019, a.s.r.’s ESG investing policy was recognised by a number of external parties. • a.s.r. was awarded the number 1 position in the Dutch
The ASR Dutch Prime Retail Fund’s (DPRF) objective is to obtain BREEAM-NL In-Use certification for all wholly-owned shopping centres. The objective for 2019 was to certify at least one wholly-owned district shopping centre. In 2019, five shopping centres, Castellum in Houten, FIoriande in Hoofddorp, Vathorst in Amersfoort and Vleuterweide in Utrecht obtained a BREEAM-NL In-Use Good certification. Shopping centre Terwijde in Utrecht obtained a BREEAM-NL In-Use Very Good certification.
Tenant satisfaction Real estate is not only an investment, a.s.r. also aims for aware, involved and satisfied tenants. In this context, a.s.r. conducts periodical tenant satisfaction surveys amongst tenants of residential, retail, office and rural real estate. The feedback shows how they rate the services, properties and their living and working environments. The outcomes are processed by Asset Management and, where applicable, discussed with internal or external property managers. a.s.r. aims to achieve an average tenant satisfaction rating of at least 7 (out of 10).
Open Soil Index In addition to buildings, a.s.r. also invests in agricultural land. With reference to the investment framework ‘climate smart agriculture’ a.s.r.’s aim is that it’s farmers earn a sustainable income and produce in a sustainable way. a.s.r. is convinced that farmers can make a significant contribution to the various ecological services such as water quality, water retention, biodiversity etc. Sustainable soil management is key in this process, and acknowledged by every farmer. However due to financial constraints sustainable soil management is not implemented in full by every farmer. a.s.r. therefore developed in close cooperation with its charter coalition partners Rabobank and Vitens the Open (source) Soil Index (OSI). With OSI a single language is created regarding the ‘soil wellness’. The OSI assesses the soil on three aspects: structure, biology and chemistry. It gives the farmer insight into his current soil condition and provides him with an inspiration list of measures to improve his soil. This unique tool will enable stakeholders to not only monitor the farmer’s sustainable achievements but also reward him for his efforts. a.s.r. is convinced that the cumulation of rewards will motivate farmers to further improve their sustainable soil management job.
ASR Dutch Core Residential Fund ASR Dutch Prime Retail Fund ASR Dutch Mobility Office Fund
It is of great importance for a.s.r. to gain and maintain the confidence of its stakeholders. a.s.r. informs them about how the organisation defines and achieves its goals by reporting openly and transparently on issues such as tax, human rights, dilemmas, integrity, political engagement, privacy and environmental impact.
The tax strategy was approved and endorsed by the EB on 21 January 2014. The Audit and Risk Committee (A&RC) supervises the tax policies pursued in line with the Dutch Corporate Governance Code. The tax policy and the tax risks are discussed annually in the A&RC.
Tax control Group Tax is part of the Finance, Risk & Performance Management (FRPM) department.
a.s.r. is actively implementing technological solutions to control tax risks, for example by means of data analysis. a.s.r. has also completed the implementation of a new financial system in 2019, in which financial consolidation and reporting, tax accounting and the corporate income tax return have been integrated.
a.s.r. strives for an open and honest culture and considers it important for employees and third parties to be able to report in a careful and safe way, in accordance with the House for Whistleblowers Act, any (suspicions of) abuses within a.s.r., see www.asrnl.com. a.s.r.’s whistleblowers’ scheme also applies to abuses in the field of tax.
Sustainable value creation | 3.5 Our role as a trusted company 50
Relationship with the Dutch Tax Authority In January 2013, a.s.r.’s EB and the Dutch tax authorities signed the Horizontal Monitoring covenant. This covenant sets out how a.s.r. and the tax authorities engage with one another: with mutual trust and in an open, transparent manner. By signing this covenant, a.s.r. undertakes to develop and maintain a system of internal management, together with internal and external controls with regard to tax (Tax Control Framework). The Horizontal Monitoring will be further developed by the tax authorities into an Individual Monitoring Plan (IMP) and the IMP will replace the covenant in 2020.
There is also an effect of the change in corporate income tax rate in 2021. The tax rate then becomes 21.7%. For a reconciliation of the nominal tax burden to the effective tax rate, reference is made to chapter 6.6.12 Income tax of the financial statements.
Tax burden and tax payments In countries in which a.s.r. is active, a.s.r. pays taxes on profits realised by the economic activities in those countries, in accordance with the OECD guidelines for multinational enterprises.
a.s.r. operates almost exclusively in the Netherlands, which means that nearly all tax payments are made to the Dutch tax authorities, with the exception of: • Payments relating to insurance tax for, in particular, nonlife insurance in respect of which the tax jurisdiction is in other countries; • Withholding taxes deducted from foreign investment income.
The Netherlands Corporate income tax and withholding taxes 42 47 226
Number of employees Number of employees in FTEs, all of them employed in the Netherlands 3,906 3,683 3,493
Sustainable value creation | 3.5 Our role as a trusted company 51 a.s.r. as an investor
Investments via external funds Investments via external funds are never prompted by tax considerations. A business case is assessed on the basis of the strategy of the investment fund and the quality of the asset manager. The tax assessment from an a.s.r. perspective only serves to avoid any double and/or unnecessary tax.
a.s.r. has a preference for regulated funds in the European Union (EU) because of the relevant expertise for institutional investors combined with a responsible and transparent tax policy. In addition, a.s.r. can invest in funds offered from other OECD countries, provided the legislation and regulations are comparable to those in the EU, and the fair-share principle is met. a.s.r. avoids investments in countries that have a reputational risk as far as tax is concerned, a relative weak legal system and insufficient regulation and/or transparency.
a.s.r. is an active member of PLWF. Together with other institutional investors, a.s.r. engages companies in the garment, retail and agri-food sector to address the (non-) payment of living wages in their supply chain. Members of the platform use a joint methodology to measure the investee companies’ performance on living wages and their progress. More details on the criteria and the way in which a.s.r. pursues human and labor rights policies can be found on www.asrnl.com.
Sustainable value creation | 3.5 Our role as a trusted company 52 management policy also stipulates that screenings are to be carried out on a periodical basis. If, in the opinion of a.s.r., there is reason to doubt the integrity of a supplier, appropriate measures are taken. a.s.r. imposes additional requirements for its strategic suppliers in the areas of the environment, human rights and working conditions. The requirements are part of the procurement contracts concluded between a.s.r. and its strategic suppliers.
3.5.3 Ethical dilemmas a.s.r. fulfills different roles, which sometimes make it challenging to serve all relevant stakeholder interests in the decision-making process. To give weight to these challenges, a.s.r. is facilitating open dialogue throughout the company since 2018, centered around ethical dilemmas and challenges in its business. Practicing ethical reflection and dialogue concerning dilemmas helps to involve a wider range of perspectives and interests from all relevant stakeholders. This open dialogue is practiced by organising Ethics workshops and Dilemma sessions.
Two examples of actual dilemmas a.s.r. is facing are described below.
Ethical guidance for big data and artificial intelligence Technological developments in the area of big data and AI are moving ever faster. This could significantly impact current products and services and presents new challenges for existing business models. Big data could for instance better position insurers to deliver new customer-centric products and services through a clearer understanding of customer needs and preferences, or assist them in better prevention of their risks through analysis of current and future behaviour patterns. But, big data also emphasises the need for financial companies to adequately comply with the GDPR and keep their clients’ privacy and broader societal interests front and center. An example of a dilemma a.s.r. might increasingly face in the future is the effect of big data and AI on the solidarity in the insurance market, where some risks may become too expensive for traditional insurance companies to cover. To that end, a.s.r. is helping the Dutch Association of Insurers (Verbond van Verzekeraars) to create an ethical framework to guide responsible use of big data and AI for the entire insurance market in the Netherlands. This in an effort to safeguard several key ethical parameters such as customer autonomy, transparency and explainability, availability of necessary financial services, moral solidarity and privacy.
Sustainable repair For the years to come, the non-life department aims to be a trusted, reliable and sustainable service provider for its customers, companies, business partners and employees. These ambitions require an efficient supply chain, involving a wide range of stakeholders that work closely together to visibly improve customer experience and reduce costs across all business processes. They will enable a.s.r. and its independent advisors to better inform customers about the relevance of taking preventive measures and help them to choose sustainable repair options wherever possible within the repair network.
For the long term, a.s.r. aims to further develop its broader domestic network of sustainable repair partners to help to realise its vision of achieving the most desirable sustainable non-life supply chain. However, realising this ambition through active stimulation of choices for newer, more sustainable, repair partners could conflict with the autonomy of customers and their intermediaries. It is not always easy to find the appropriate balance between the freedom of choice for customers and an easy, familiar process, on the one hand, and a.s.r.’s long-term broader sustainability goals in these situations, on the other.
Customers or employers applying for an insurance or other financial service will be asked to provide personal data. These data are provided by them to a.s.r. via an adviser or directly, for example, via the a.s.r. website, email or telephone.
Healthcare data are only collected when necessary. Employees of a.s.r. have a duty of confidentiality in respect of the processed data. The processing of healthcare data is only performed by qualified employees and generally takes place under the responsibility of a medical adviser. a.s.r. complies with the rules of the professional code for medical advisers involved in private insurance cases and/or personal injury cases. If someone participates within a.s.r. Vitality a.s.r. processes their healthcare data in the app, for example, how much a participant exercises. To ensure healthcare data are processed only within a.s.r. Vitality and to ensure data are not shared with a.s.r. insurance departments, a.s.r. has set up a separate legal entity: a.s.r. Vitality B.V.
Sustainable value creation | 3.5 Our role as a trusted company 54 measures to improve processes and awareness of dealing with data to avoid data leaks in the future. Data are kept no longer than necessary. Some retention periods for data are prescribed by law. a.s.r. has drawn up a retention period policy to ensure data is no longer kept than needed.
Anyone has the right to ask a.s.r. what personal data is being processed and to have incorrect data be adjusted or deleted. In certain cases and under certain conditions, individuals have the right to let a.s.r.’s personal commented data on them be removed. If someone is of the opinion that a.s.r. processes their personal data unlawfully or that the data processed are incorrect, they may under certain conditions and in certain cases request the processing to be restricted. This means that the data may no longer be processed by a.s.r. for a certain period of time. Individuals may at any time object against the processing of their personal data that takes place on the basis of a.s.r.’s justified interest or the justified interest of a third party. In that case, a.s.r. will no longer process their data unless there are urgent and justified grounds for the processing that bear more weight, or unless the processing takes place in relation to instituting, exercising or substantiating a claim.
In newsletters or digital (email) personal offers, a.s.r. always points out the right to unsubscribe from the newsletters or personal offers.
The use of social media is everyone’s own responsibility. a.s.r.’s privacy statement does not apply to the way in which social media platforms deal with the personal data provided by individuals.
a.s.r. has taken a number of control measures to prevent, recognise and defy unethical behaviour, including combating corruption. Examples of control measures include an integrity screening carried out by the Investigations department prior to hiring new employees. All employees have taken an oath or made a solemn affirmation, either swearing or promising that they will comply with legislation and regulations and codes of conduct and that they will observe ethics in their actions. This also applies to everyone who regularly works for a.s.r., including suppliers and brokers. Anyone who carries out work at or for a.s.r. must take the professional oath or make a solemn affirmation within three months of taking up their duties. In this way, a.s.r. seeks to prevent the risk of physical, financial or reputational damage to the company, its customers and/or other business relations.
Address behaviour Written warning Dismissal 3.5.6 Investors a.s.r. attaches great value to a strong relationship with the investment community in the broadest sense and sets high standards with respect to transparent communication and fair disclosure. The aim of a.s.r.’s investor relations is to provide all relevant information which may help investors make well-informed investment decisions. a.s.r. does its utmost to ensure that the information it discloses is accurate, complete and timely.
Sustainable value creation | 3.5 Our role as a trusted company 56
Dividend a.s.r.’s dividend policy is based on a pay-out ratio of 45-55% of net operating result distributable to shareholders (i.e. net of tax and hybrid costs), while taking into account the aim to offer a progressive regular dividend per share.
Shareholders a.s.r.’s shares are held by an international and diversified shareholder base. As at year-end 2019 and based on public filings and company information, investors in the US and UK represent the majority of a.s.r.’s shareholders, owning approximately 52% of the outstanding shares. The remainder is primarily held by investors in the Netherlands, Germany, Norway and the rest of Europe. Approximately 1 Source: Bloomberg.
Major shareholders Dutch law requires shareholders to report their holdings in Dutch listed companies to the AFM if they exceed 3% of total outstanding share capital (and at certain higher thresholds). As per the AFM register, the following shareholders held a position in a.s.r. of between 3% and 5% as at 31 December 2019: Old Mutual Residual Asset Management, Aberdeen Standard Investments, Norges Bank Investment Management, Fidelity Management & Research, Dimensional Holdings. BlackRock Inc. held a position of more than 5%.
The share ended 2019 at € 33.36 (2018: € 34.58). The total shareholder return1 amounted to 1.8% in 2019 (including dividend reinvestment in a.s.r. shares). Total shareholder return since the IPO came to 95.3%. The Euronext AEX index and the Stoxx Insurance 600 Insurance Index appreciated by respectively 23.9% and 24.4% in 2019.
Market cap as at 31 December (million) € 4,695 € 4,876 € 5,043
Ratings and bonds In 2019, a.s.r. has been active on the bond market. In April a € 500 million Tier 2 bond was issued to finance the acquisition of Loyalis. In September a.s.r. tapped € 200 million from the 2017 Restricted Tier 1 bond to make this bond an issue of in total € 500 million. In addition, the two grandfathered Tier 1 bonds with an amount of € 17 million and € 192 million were redeemed on schedule, following the earlier tender in 2014. At the end of 2019 there are four listed bonds outstanding with a total nominal amount of € 2 billion.
More information on a.s.r.’s bonds and ratings can be found on the website: www.asrnl.com.
The total of annual monetary contributions made and expenditures incurred with regard to trade associations in 2019 was € 2,320,000 (2018: € 2,111,000). The largest contribution in 2019 was paid to the Dutch Association of Insurers € 2,281,000 (2018: € 2,063,000).
1 The figures are based on a.s.r.’s head office (91,912 m² gross floor area). The offices in Enschede (1,830 m² gross floor area), Rotterdam (approx. 1,000 m² gross floor area of office space and 3,900 m² gross floor area of archives) and Heerlen (2,768 m² gross floor area) are not included.
It is a.s.r.’s goal to reduce its direct CO2-emissions by 50% in the period 2019 - 2025 compared to the base year 2018. To achieve this, it is constantly striving to reduce emissions while remaining emissions are offset by the Verified Carbon Standard (VCS) and the Climate, Community and Biodiversity Standard (CCB) certificates. a.s.r.’s absolute direct footprint fell by around 2% compared to the base year 2018.
Business travel excluding lease car fleet 4.2 329 4.0 322 4.1 317
Scope 1: Emissions resulting from fuel consumption a.s.r. assigns the emissions from the following sources to scope 1: • Fuel and heat used; • Cooling; • Business travel as a result of lease car fleet.
Results 2019 a.s.r. achieved savings of 151 tonnes of CO2-equivalent in 2019 compared to 2018. The savings took place in the areas of ‘fuel and heat’ and ‘business traffic’.
Since mid-2019, renewable energy from the Aquifer Thermal Energy Storage (ATES) has been used instead of natural gas for heating and cooling the head office. The supply of natural gas to the head office has been cut off.
Sustainable value creation | 3.5 Our role as a trusted company 59 fuel efficiency of new cars that do not yet drive electrically contribute positively to the lower emissions of the total fleet.
Outlook Plans are being made to install PV panels above a.s.r.’s parking deck in 2020 or 2021. The yield of these panels is estimated at 800,000 kWh of electricity per year. This additional capacity will be used to charge the heat pumps and for charging the growing number of electric cars.
Scope 3: Emissions resulting from mobility and waste a.s.r. assigns emissions from business traffic, other than to a.s.r.’s lease cars, commuting and waste to scope 3.
1 Within the framework of an agreement with a.s.r., the Trees for All foundation is responsible for an investment in CO2-sequestration in certified sustainable forest projects in such a way that the CO2-absorption remains fixed in the long term. The CO2-compensation for a.s.r. took place in 2019 through the Kibale Forest project in Uganda. The planting of forest enlarged the animal habitat and contributed to the protection of primeval forest. This form of offset also made a positive contribution to the climate.
A start was made on renewing a.s.r.’s mobility policy. The bicycle plan was again brought to the attention of the employees. a.s.r. offers all employees the opportunity to use a public transport Business Card, including the use of public transport bicycles. Amber electric shared cars were made available for all business trips with the aim of making a growing part of the business kilometres CO2 -neutral.
Trees for all a.s.r.’s emissions as a result of the above activities (scope 1, 2 and 3) expressed in tonnes of CO2-equivalent are fully offset by the planting of trees. a.s.r. has instructed the foundation ‘Trees for All’1 to implement this planting. In 2019, a.s.r. had approachably 39,800 trees planted in the Kibale Forest project in Uganda.
Please find more detailed information about our role as a trusted company in Annex A Facts and figures.
Sustainable value creation | 3.6 Our role in society 60 3.6 Our role in society 1 Households in financial debts (Panteia 2015), Chances on financial problems (National Institute for Family Finance Information 2015 and 2018).
• a.s.r. supports households with a risk of problematic financial debts in getting rid of their debts and building a healthy financial future.
a.s.r. entered into a partnership with the ‘Stichting Lezen en Schrijven’ whose mission is to banish illiteracy. The www.ikdenkvooruit.nl platform is further developed and employees have participated in various activities.
Sponsor and donation policy a.s.r.’s sponsorship and donation policy fits in with its strategy to stimulate financial self-reliance and inclusiveness in society. The purely financial support does not or hardly ever occur. It is often a combination of material and substantive support.
Please find more detailed information about our role in society in Annex A Facts and figures.
Operating result The operating result improved by € 109 million to € 858 million (2018: € 749 million), a record operating performance. A strong Non-life performance, the contribution of acquisitions and growth of fee based businesses were the main drivers of the increase in the operating result. The total contribution of Loyalis to the operating result, which mainly relates to Disability in the Non-life segment, is circa € 28 million1.
Gross written premiums GWP increased with 4.6% to € 4,666 million (2018: € 4,459 million).
Operating expenses Operating expenses increased by 9.1%, to € 656 million (2018: € 601 million). The operating expenses associated with ordinary activities (which excludes incidental expenses) increased by 5.6% to € 597 million (2018: € 565 million), due to the additional cost base of acquisitions (€ 37 million). Excluding these acquisitions, regular operating expenses declined by € 5 million. These lower costs are mainly IT-related due to the reduction of applications following the integration of Generali and lower project costs from system rationalisation at Individual life, as well as lower FTE’s. The impact of acquisitions mainly relates to Loyalis (€ 32 million as of 1 May 2019) as well as the acquisitions of Melching Groep, ArGon Groep and ZZP Nederland (total impact € 5 million).
The closing of the Loyalis transaction took place on 1 May 2019. As a result, a.s.r. fully included the results and the balance sheet positions in the a.s.r. consolidated financial statements as from that date. Loyalis’ total contribution to the operating result is circa € 28 million. In December 2019, a.s.r. established the final acquisition balance sheet of Loyalis, in accordance with IFRS 3 business combinations, within twelve months of the closing date. The gain as a result of the purchase amounted to € 118 million, which is recognised as an incidental item and therefore not part of the operating result.
Solvency II ratio and Organic capital creation The Solvency II-ratio per 2019 amounted to 194% (2018: 197%) after the proposed dividend. During 2019, the Solvency II ratio increased 32%-points from OCC (+10%-points), hybrid capital transactions (+13%-points) and market and business developments (+9%-points). The increase was more than offset by the impact of the acquisition of Loyalis (-7%-points), the reduction of the Ultimate Forward Rate (UFR) (-3%-points), tightening of the VA (-18%-points) and the 2019 dividend (- 7%-points).
As from 2020, the OCC definition will be more aligned with market practice. Based on the new definition, OCC for 2019 amounted to € 501 million. The main adjustment relates to the long term investment margins. The excess returns for fixed income have been changed to market observable spreads, while the post-tax total return assumptions for equities have been set at 5% and for real estate to 4.1%. Furthermore, refinements have been made to the new business strain in Non-life, the run-off of market risk from the life book and the addition of the time value of options and guarantees (TVOG). OCC, under the new definition, will remain sensitive to changes in the interest rates and will became more sensitive to credit spreads.
Business performance | 4.1 Group and segment performance 66 4.1.2 Non-life
Gross written premiums GWP amounted to € 3,192 million, an increase of 5.9% (2018: € 3,014 million). All product lines contributed to the € 111 million organic growth and an increase of € 67 million was due to the acquisition of Loyalis Disability. The organic growth of Disability (€ 66 million) was mainly related to the sickness leave portfolio, especially in the mandated brokers distribution channel driven by increased tariffs. The growth in Health (€ 19 million) reflects higher premiums including tariff adjustments for supplementary health insurances. The increase of the P&C business (€ 26 million) mainly relates to the corporate and mandated broker channel. The ‘Vernieuwd Voordeel Pakket’ (a product that combines several insurance coverages) remained successful.
Operating expenses The operating expenses increased by € 19 million to € 240 million (2018: € 222 million). Excluding the increase in cost base, due to the acquisition of Loyalis Disability (€ 19 million), operating expenses remained stable. The cost ratio of P&C and Disability (including Loyalis) remained stable at 8.4% (2018: 8.3%). Cost synergies were realised thanks to the integration of Generali Nederland and the migration of Europeesche Verzekeringen portfolio into the a.s.r. and Ditzo platforms last year.
Profit before tax The profit before tax for Non-life increased by € 133 million to € 292 million (2018: € 159 million). Besides the improved operating result (€ 83 million), a higher level of indirect investment income (€ 86 million), primarily consisting of realised capital gains, contributed to the increase. The contribution of insurance related and other incidental items decreased (€ -37 million) and included, amongst others, the alignment of the P&C technical provision under IFRS with Solvency II this year (€ -13 million).
With a market share of 15% in 20181, P&C business strengthened its position in the non-life market. a.s.r. was the third largest general provider of P&C insurance products in the Netherlands in 2019, as measured by GWP. a.s.r. offers a broad range of P&C insurance products under the brands a.s.r., Ditzo and Europeesche Verzekeringen. The P&C COR improved 1.5%-point to 96.9% (2018: 98.4%) due to favourable underwriting results.
Motor policies for retail and commercial customers provide third-party liability coverage for motor vehicles and commercial fleets property damage and bodily injury as well as coverage against theft, fire and collision damage; • Fire Fire policies for retail and commercial customers provide coverage against various property risks, including fire, storm and burglary. Private coverage is provided on both a single-risk and a multi-risk basis, with multi-risk policies providing coverage both against loss of or damage to dwellings and damage to personal goods; • Other Non-life insurance products such as travel, leisure, transport goods in transit only, liability, agricultural and construction motorised vehicles, construction all risk and assistance.
Motor Other 1 Source: DNB (based on SII) - At the moment of writing, the market share figures for 2019 are unknown.
Insurers distribute their insurance policies either through intermediaries or directly. A shift in distribution is taking place from provincial to authorised agents. The authorised agents market has grown strongly in the last decade and currently amounts to approximately € 3.1 billion in GWP for non-life products (2018). The share of the authorised agents portfolio in the total GWP is also increasing. Online distribution in the P&C market has increased. Consumers use the internet to inform themselves, compare and purchase products. In the small and medium-sized enterprises (SME) market, advisors continue to maintain their dominant position, particularly due to the fact that products involved have become more complex.
With an NPS score of 51 in 2019 (47 in 2018), the P&C business (concerning a.s.r. excluding Ditzo and Europeesche Verzekeringen) improved its customer satisfaction. In addition, the P&C business won first prize in the Adfiz Performance Survey in 3 categories of ‘Best Partner’ – Efficiency, SME insurability and retail insurability.
In reaction on the climate change process, a.s.r. has expand the insurance for buildings with flood cover. As of 1 January 2020, all private and corporate customers
To further improve efficiency, service levels and customer satisfaction, P&C has rationalised its product portfolio. Another important part of its business strategy is to further simplify its infrastructure. The new non-life platform will lead to improved and digitised services to customers and intermediaries. It will also reduce costs, which further strengthens a.s.r.’s competitive position. The retail portfolios of a.s.r., Generali and Europeesche Verzekeringen have been successfully converted into the new P&C platform. The organisations of both the Europeesche Verzekeringen and Generali have been integrated into the a.s.r. P&C and Ditzo organisation.
In the field of sustainability, P&C has taken several initiatives. The three pillars of the initiatives are: prevention, safety and sustainability. The ambitions of P&C are the following: • To be recognised by customers, advisors and employees for its contribution to prevention, safety and sustainability; • To advise and communicate on how to prevent damage; • To make the customer’s environment safer; • In the event of damage: to promote sustainable recovery.
To achieve these ambitions, P&C took the following actions in 2019: • Knowledge sessions were organised for advisors on developments in the P&C market, such as climate change, emerging causes of damage and sustainable repairs; • a.s.r. helps build and maintain relationships with business premises staff by assisting them with repairs in the event of defects in electrical installations of solar panels; • Safety on the road thanks to a.s.r. Driver’s Day 2019. This day was dedicated to prevention and was held for professional drivers in freight transport; • Online magazines are published with preventive and sustainable repair content.
As of the beginning of 2019, Ditzo and Europeesche Verzekeringen have operated as one integrated organisation with independent labels in the market and different distribution models. Ditzo aims to empower consumers to make their own decisions when insuring their properties and lives. Europeesche Verzekeringen aims to insure travellers sensibly as they explore the globe.
Key themes in their business strategies are as follows: • A focus on customer satisfaction by enhancing customer service; • A continuous optimisation of customer acquisition costs through online and touroperator channels; • An increase in the share of bundled propositions for existing customers with regard to both health and nonlife insurance policies.
In 2019, the Generali Nederland Direct non-life portfolio was migrated to the Ditzo platform with the help of process robotics.
Market research has shown that almost one third of Dutch travellers travel without taking out a travel insurance. This is predominantly a result of the fact that consumers perceive limited risks when travelling, find insurance policies too expensive and assume that their health insurance policies also cover medical expenses incurred abroad. Europeesche Verzekeringen has presented this research in a white paper to its business partners. Europeesche Verzekeringen supports travellers by its implementation of a tool that provides them with information on sensible travelling.
• Sickness leave: Products for employers to cover the costs associated with the employers’ obligation to continue to pay wages in the event of employee sickness; • Group disability: - Products for employers to cover their own Return to work (Partially Disabled Regulations (WGA)) risk carrier status; - Products for the benefit of employees (taken out by employers) to cover loss of income due to the inability to (fully) perform work as a result of disability as defined by the WIA.
1 Including Europeesche Verzekeringen accidents, Generali and Loyalis. 2 Source: DNB (based on SII) - At the moment of writing, the market share figures for 2019 are unknown. 3 a.s.r. also offers products relating to sickness leave and group disability via authorised agents and mandated brokers. Due to the importance of this distribution channel, a.s.r. presents these sales as part of a separate product category (‘Other’). 4 Source: Marketreport 2018, CVS statistics Financial annual income results.
The disability market is mainly distributed by intermediaries, where a.s.r. is well positioned with its brand De Amersfoortse at SMEs and self-employed. Loyalis has a strong position in direct distribution at large businesses. The authorised agents disability market in the Netherlands has grown strongly in the last decade up to € 579 million4; 15% of total GWP. 24% of a.s.r.’s disability GWP comes from authorised agents.
With a market share of 1.9% (2018: 2.0%), a.s.r. was the seventh largest provider of health insurance products on the Dutch market in 2019, as measured by number of customers. a.s.r. offers health insurance products under the Ditzo and De Amersfoortse brands. The COR of Health improved by 0.2%-points to 99.0% (2018: 99.2%) mainly due to an improved pricing of the supplementary insurance portfolio.
Products The health insurance market in the Netherlands comprises of two product types: basic insurance and supplementary insurance. Basic insurance provides a broad coverage of healthcare costs of which contents are prescribed by the government on an annual basis. Supplementary insurance covers specific risks that are not covered by basic insurance, such as the costs of dentistry, physiotherapy, orthodontics and medical support abroad.
The GWP for basic coverage has been increasing across the board due to rising health care costs. In the period from 2017 to 2019, the GWP of the market as a whole rose by more than 9%1.
Strategy and achievements In line with a.s.r.’s mission statement, the strategy of Health is to help its customers to improve their health. It therefore provides information, services and products to customers that could help them improving their condition and general health. The introduction of a.s.r. Vitality, available for all health insurance customers, is an example of the execution of its mission.
Health aims to increase customer satisfaction by organising an efficient and client-focused customer service process. Health puts considerable effort into streamlining and digitising the process of paying declarations, customer onboarding and other services, thereby leading to faster and more accurate payments to customers, lower operating costs and efficient processes. Furthermore, Health prides itself in continuously improving client interaction, and serving customers at the time and manner chosen by them. Health continuously updates the practical information it provides to its employees so that they can in turn improve the quality, accuracy and speed of the information they give to customers. With an NPS score of 43 in 2019 (39 in 2018), the health business improved its customer satisfaction.
Target: 45 a.s.r. puts significant time and effort in evaluating and developing its high-quality products and services. In 2019, both Ditzo and De Amersfoortse launched a new type of basic health insurance policy; an in-kind policy which is the most common kind of policy in the Dutch market; 75% of the insured population have an in-kind policy1. An in-kind policy is also called contracted care. If an insured person visits a contracted care provider, the healthcare costs will be reimbursed. If they visit a non-contracted care provider, they will have to pay part of the healthcare costs, usually 1 Source: NZA Monitor Zorgverzekeringen 2019.
around 20-30%. This introduction enables Health to service a larger part of the market and supports the introduction of a.s.r. Vitality, which is available for clients of Health.
Outlook for 2020 a.s.r. aims to set up cross-sell programmes focusing on the Doorgaan proposition under De Amersfoortse brand, the benefit-package for Ditzo customers and health improvement through a.s.r. Vitality. Vitality focuses on health related themes such as exercise, nutrition and mental wellbeing. The programmes will be offered to customers in order to help them better understand health risks and motivate them to actively change their lifestyle. Customers will be able to subscribe to a programme and receive regular newsletters with tips and motivational challenges. The programmes can be used to provide customers with a better understanding of the benefits of a.s.r. Vitality and drive cross-sell. The main goal is to inspire and motivate customers to start and maintain a healthier lifestyle. a.s.r. believes that this goal can be impacted positively if more health customers become (more) active through the a.s.r. Vitality programme.
Business performance | 4.1 Group and segment performance 72 4.1.3 Life 1 Source: DNB (based on SII) - At the moment of writing, the market share figures for 2019 are unknown.
The Life segment comprises the life insurance entities Pensions, Individual life and Funeral. The segment offers insurance policies that involve asset building, immediate (pension) annuities, asset protection, term life insurance and funeral expenses insurance for consumers and business owners. The market share of Life in 2018 was 14.3% (2017:13.0%)1.
Operating expenses The acquisition of Loyalis resulted in an increase in operating expenses by € 6 million to € 192 million (2018: € 185 million). Underlying operating expenses decreased (€ 6 million) due to the integration of Generali Life and system rationalisation at Individual life. This year a.s.r. completed the large-scale migration to a.s.r.’s Software as a Service (SaaS) platform. In total, more than 800,000 policies from all nine different Individual life systems, including several ‘closed-book’ systems, have been converted.
Operating result The operating result increased by € 25 million to € 696 million (an increase of 3.7%). The increase was primarily driven by a higher investment margin (€ +46 million).The increase in the investment margin is due to less required interest at Individual life and higher investment income as a result of the re-risking of investments and the integration of the Loyalis investments. The technical result decreased by € 11 million to € 98 million largely due to the decline of a substantial part of the book.
Profit before tax The profit before tax increased by € 107 million to € 913 million (2018: € 805 million). This increase mainly relates to higher incidental items (€ 83 million), including higher indirect investment income (€ 100 million) as a result of re-risking the asset mix. The contribution from insurance related and other incidental items decreased (€ 17 million) and relates to several items including restructuring costs.
Pensions a.s.r. is a major provider of pension insurance products in the Netherlands. The DB product forms the largest component of its portfolio followed by the growing DC proposition. The current customer base of these portfolios comprises approximately 25,000 companies and 728,000 participants. Under the brand of a.s.r. pensions has a joint venture with Brand New Day for an Institution for Occupational Retirement Provision (IORP).
Products a.s.r. provides pension products based on DC with recurring premiums where benefits rebased on investment returns on specified funds, in some cases with guarantees. It has been five years since a.s.r. successfully launched its DC proposition, WnP. In 2019, WnP had more than 80,000 participants and € 1.3 billion in AuM in SRI funds.
a.s.r.’s DB pension products are traditional insurance products based on lifelong guaranteed pension payments with recurring premiums, either with or without profit sharing, including an option for additional single premiums for indexation and back services. a.s.r. is also active in the DB pension market through Het nederlandse pensioenfonds (Hnpf), for which it provides pension administration and asset management.
Strategy and achievements The business strategy in Pensions is to focus on clear, simple, cost-conscious pension products. a.s.r.’s DC proposition (WnP) is competitively priced and has been rewarded for its fund selection (SRI funds) by independent intermediaries.
In 2019, Pensions improved its digital customer service by taking further steps to introduce robotics into its day-to-day operations and by investing in more user-friendly client portals and a more fully integrated online environment for its portfolio. All communications to participants are digital. With an NPS score of 52 in 2019 (47 in 2018), Pensions improved its customer satisfaction.
The same services will be offered to customers and the market position will improve.
Outlook for 2020 Pensions’ focal areas include a further growth in WnP, Hnpf and immediate annuities, further improving customer satisfaction through enhancing online and personal customer services, and further developing client portals. In addition, attention will continue to be placed on cost variability by simplifying and computerising operational processes and by migrating the Loyalis and Generali Nederland pension portfolios. The Individual life and Pension departments of a.s.r. will be integrated in 2020.
Products Term life insurance, the sole selling proposition, consists of traditional life insurance policies that pay out death benefits without a savings or investment feature. a.s.r.’s term life insurance products are mainly sold in combination with mortgage loans or investment accounts and generally require recurring premium payments. a.s.r. only offers term life insurance products. All other products are managed as a closed service book.
Strategy and achievements Individual life aims to maximise and maintain the current value of the individual life book. To realise this aim, the strategy is to optimise customer satisfaction as it is crucial to efficiently manage the way in which customers behave and, in addition, it limits unnatural lapses. Life aims to further digitise and robotise its services to improve their quality and user friendliness. With an NPS score of 42 in 2019 (37 in 2018), the individual life business improved its customer satisfaction.
In order to preserve the value of the individual life book, Life has simplified its organisation, shifting its cost base from fixed costs to more variable costs. Life is in the process of simplifying processes and rationalising and migrating its service book to a (SaaS) platform. With the migration of more than 800,000 policies from 9 different Life systems to the Keylane platform (SaaS), including the book of Generali Nederland, the Service Books programme was finalised after five years. This successful project shows a.s.r.’s strength to carry out large-scale migrations. Migrating the recently acquired Loyalis and VvAA life books is planned for 2020.
As at 31 December 2019, the funeral portfolio consisted of 6.4 million policies and 4.7 million customers. Based on the volume of premiums, Ardanta, a.s.r.’s funeral brand, is the second largest funeral insurer in the Netherlands.
Market The market is characterised by rapid consolidations. Due to the low interest rate environment, funeral insurance premium levels increased in recent years. The distinguished proposition of Ardanta was recognised in the market: business targets were well exceeded in 2019. The ‘multichannel’ distribution strategy of Ardanta proved to be successful as 65% of new business was derived from direct channels (internet, direct mail and own advisors) whereas the remaining 35% came from the traditional independent intermediaries. For comparison: in 2014, 60% of new business was derived from indirect (broker) channels.
Business performance | 4.1 Group and segment performance 75 portal www.doodgaanendoorgaan.nl and the services of a ‘funeral coach’, who assists relatives in the days immediately after a loved ones has passed away. In a recently developed online initiative, Ardanta provides answers to frequently asked questions in short video clips. In 2019, the active product range was reviewed. In 2020, new products will be launched that focus on the theme of ‘enhanced flexibility for customers’.
Outlook for 2020 With regard to new consolidation opportunities, Ardanta will keep an eye on new developments. Ardanta will continue to focus on providing good and innovative services to existing customers and achieving organic growth through smart customer activation and care duty campaigns that create value for customers.
Assets under management for third parties The AuM for third parties of a.s.r. asset management and a.s.r. real estate increased by € 3.2 billion to € 20.7 billion (2018: € 17.5 billion). The increase of a.s.r. asset management by € 2.9 billion to € 18.8 billion was primarily driven by inflow into ASR Hypotheekfonds (€ 2.1 billion), positive revaluations of the funds (€ 2.1 billion) and inflow into the ESG-Funds (€ 0.6 billion).
The payment arrears and credit losses remain well below the limits due to arrears prevention, favourable economic conditions and strict monitoring. Payment arrears of more than 90 days on the mortgage portfolio amount to 0.05% (2018: 0.10%) and have been decreasing for years reaching the lowest level ever. Credit losses were reduced substantially and amounted to 0.28 bps (2018: 0.80 bps).
Operating expenses The operating expenses increased by € 9 million to € 87 million reflecting a higher mortgage production and higher personnel costs due to growth and expansion of the various (third party) funds.
Products Asset Management offers services to pension funds, insurance companies, guarantee and donor-advised funds, charities, local and regional authorities, health care and educational institutions and other parties in the social sphere. The product range consists of euro corporate bonds, interest rate overlay, euro government bonds, euro equities, balanced mandates, tailor-made bond portfolios, loans, fixed-income index investments, real estate and the mortgage fund proposition. Asset Management offers tailor-made solutions with a sound return on investment. These asset categories are offered, among other things, via institutional investment funds and segregated mandates.
Market The asset management market is consolidating progressively, while complying with increasing and more complex legislation and regulations and achieving economies of scale. The number of independent Dutch asset managers is decreasing whereas there is a need for specific knowledge of the Dutch market. This provides opportunities for Asset Management, a practical, ‘no-frills’, Dutch asset manager.
At the beginning of 2019, Asset Management introduced a marketing campaign that stressed the importance of long-term investments. The campaign aimed to increase brand awareness of Asset Management and underline the ESG profile and the long term investment horizon.
In 2019, the asset base grew, both for internal and third-party clients. Asset Management has been highly successful with the ASR Hypotheekfonds, which was launched in 2017. The ASR Hypotheekfonds increased by € 2.1 billion and the € 5.0 billion milestone, including commitments, has been achieved. In addition, the ESG Index Plus fund range (rates, credits, European and US equities) received substantial inflows during the year and the LDI proposition was further developed
Asset Management also offers asset management solutions for the successful DC pension proposition, based on the same Index Plus approach to investment.
For more than 125 years, Real Estate has been investing in property on behalf of institutional investors.
At year-end, the real estate portfolio totaled € 6.3 billion (2018: € 5.0 billion), divided in € 4.4 billion on behalf of a.s.r. and € 1.9 billion on behalf of institutional investors. The total inflow of new capital amounted to € 0.2 billion. The total value of acquisitions in several non-listed real estate funds came to € 0.3 billion.
Products Real Estate offers 4 different investment funds. Each fund has its own specific characteristics. The funds areas follows:
All other operations with respect to the mortgage portfolio are conducted by Stater N.V., a mortgage service provider, based on a contract that was concluded between Stater N.V. and Life.
In 2019, Mortgages made significant progress in measuring the carbon footprint of its mortgages portfolio. By the end of 2019, the carbon footprint of 82% of the portfolio was calculated.
Business performance | 4.1 Group and segment performance 80 4.1.5 Distribution and Services
SuperGarant Verzekeringen B.V. (and as of July 2018 ZZP Nederland Verzekeringen B.V.), Corins B.V., ANAC, All-Finance Nederland Advies-Combinatie B.V. and Loyalis Kennis & Consult B.V.
Operating result The operating result of the Distribution and Services segment decreased as expected by 12.5% to € 23 million (2018: € 26 million) as fee-income was under pressure. Several tariffs for mandated broker services were lowered resulting in a decrease in fee-income of Dutch ID. Additional growth of mandated broker services, transfers, premium increases and the growth in outsourcing back-office activities to Dutch ID partially offset the decrease in fee income. The operating result of Poliservice was lower due to increased depreciation charges on acquired portfolios. The operating results of the other distribution companies (SuperGarant, Corins, VKG and ANAC) remained stable. The recently acquired companies (ArGon Groep and Melching Groep) will contribute to the operating result as of 2020.
Market In the above distribution business, developments in 2019 have shown that the distribution landscape remains fluid. The ongoing consolidation and growth of larger distribution businesses remain the most important developments in this market.
Dutch ID acts as an intermediary for insurance products and provides mandated brokerage services for some of the products and business lines offered by insurance companies. Based on these associations, Dutch ID provides administration services as a service provider to other intermediaries in the fields of their commercial and back-office operations. It also offers these services to insurers, as it does consulting and other services, such as claims management, risk management, prevention, reintegration and leasing. Dutch ID focuses primarily on the agricultural, transport, overhaul and civil construction sectors. It has ties with business associations, with the Agriculture and Horticulture Organisation Netherlands (LTO) and, for example in the transport sector, the Entrepreneurs organisation for the Logistics and Transport sector (EVO).
Following the acquisition of ZZP Nederland, SuperGarant also acts as one of the biggest independent service organisations for freelancers.
ANAC ANAC operates as an underwriting agent and intermediary. With two entities, Anac BackOffice and Anac Verzekeringen, it provides dedicated solutions for intermediaries (as a full service provider) and insurance companies (for run-off claims handling) as well as for companies in the automotive sector.
With its highly flexible way of working and software solutions, ANAC works with the Corporate Brandings of its customers, used on their request at their websites, policies, bank accounts and (email) communication. ANAC has ‘white label propositions’ of car importers, large car dealer companies and dedicated intermediaries. ANAC
Poliservice Poliservice is an intermediary for a.s.r. and its business. It sells, advises on and manages different types of insurance, gives direct mortgage and pension advice to its customers and manages the portfolios of intermediaries that have ceased to operate. It acts as a tied agent and is also an insurance intermediary for a.s.r.’s own employees. In 2019, a.s.r. integrated into Poliservice a part of its independent intermediary Stoutenburgh, which then ceased to exist.
The Holding and Other segment consists primarily of the holding activities of ASR Nederland N.V. (including the group related activities), other holding and intermediate holding companies, the real estate development business (ASR Vastgoed Projecten B.V.) and the activities of ASR Deelnemingen N.V.
Operating expenses Operating expenses increased by € -12 million to € -76 million (2018: € -65 million) primarily as a result of incidental costs. The incidental cost items in 2019, classified as other incidentals, amounted to € -51 million (2018: € -34 million). Incidental items this year mainly relate to preparation costs for the a.s.r. Vitality-programme, regulatory costs for the preparation of the implementation of IFRS 17/9, Loyalis and Generali Nederland integration costs and advisory costs related to M&A activities.
The incidental items, which amount to € 73 million this year, mainly relate to a purchase gain as a result of the Loyalis acquisition (€ 118 million, including a reassessment in the second half of the year) and the incidental costs of € - 51 million.
Profit before tax The higher contribution from incidental items is also reflected in the development of the profit before tax, which increased to € -39 million (2018: € -101 million).
Risk appetite a.s.r. is exposed to a number of risks, including strategic risks, market risks, counterparty default risks, liquidity risks, underwriting risks (Life and Non-life) and operational risks.
Risk appetite is defined as the level and type of risk a.s.r. is willing to bear in order to meet its objectives while maintaining the right balance between risk, return and capital. Risk appetite is formulated to give direction to the management of (strategic) risks. Risk appetite contains a number of qualitative and quantitative risk appetite statements (RAS) and is defined for both financial risks (FR) and non-financial risks (NFR). The statements highlight the organisation’s risk preferences and limits and are viewed as key elements for the realisation of a.s.r.’s strategy.
In 2019, to ensure alignment with a.s.r.’s strategy, the RAS and limits were evaluated and updated by the EB and approved by the SB. The RAS of ASR Nederland N.V. can be found in chapter 6.8 Risk management.
In 2019, the Actuarial Function (AF) performed its regulatory tasks by assessing the adequacy of the Solvency II technical provisions, giving an opinion on reinsurance and underwriting, and contributing to the Risk Management Framework (RMF). The AF report on these topics was discussed by the EB, Risk Committee and A&RC. See the Financial Statements (chapter 6.8 Risk management) for further information on a.s.r.’s management of FR.
• Outsourcing risk (internal and external) remains relevant for a.s.r., especially in view of the increasing focus from regulators, i.e. European Insurance and Occupational Pensions Authority (EIOPA). a.s.r. is fully aware of the potential risks and regulatory developments. An outsourcing policy is in place defining responsibilities, processes, risk assessment and mandatory controls. Outsourcing risk is managed and reported as part of the overall operational risk. An update for the outsourcing policy is scheduled for the forthcoming year.
• Information security risk is highly relevant for a.s.r. See risk priority 3. Information (cyber) security risks for further information.
• Data quality and end-user computing are also relevant for a.s.r. When user-defined models (e.g. spreadsheets) are used to support the Risk Management Framework (RMF), the ‘a.s.r. Standard for end-user computing’ – as well as the general security policy – defines and describes best practices in order to guard the reliability and confidentiality of these tools and models. a.s.r. recognises the importance of sound data quality and information management systems.
In order to enhance controlled (efficient and effective) projects, a.s.r. rolled out the ‘project risk management’ policy. This policy was implemented during 2019. In 2019, the most important projects at a.s.r., including IFRS 9/17, Service Books and a.s.r. Vitality, fell within the risk appetite.
Risk priorities a.s.r.’s risk priorities and emerging risks are defined annually by the EB, based on strategic (top-down and bottom-up) risk analyses. Risk priorities are regarded as the most important strategic risks which could materially affect the strategic and financial objectives of a.s.r. To determine the degrees of risk, a.s.r. uses a risk scale based on likelihood and impact (Level of Concern). For each risk priority, the degree of risk is determined for the gross risk and net risk. Gross risk is the degree of risk when no (control) measures are in place. Net risk is the degree of risk taking into account mitigating (control) measures. Each of a.s.r.’s risk priorities has a very high degree of gross risk (Level of Concern 4, outside risk appetite boundaries) and a high degree of net risk (Level of Concern 3, outside risk appetite boundaries).
a.s.r.’s risk priorities for 2019 were: • Pressure on result and renewal of the cash-generating business model; • Low interest rate environment and pressure on investment returns, exacerbated by geopolitical tensions; • Information (cyber) security risks; • Juridification of society; • Impact of supervision, laws and regulations.
The coronavirus will be a priority for 2020, given the rapid development in the coronavirus in the first quarter of 2020.
The insurance market continues to change, e.g. with new entrants on the insurance market, evolving customer demand and technological developments. Customers buy (insurance) products more frequently through direct, digital distribution channels. It is important to meet customers’ needs, taking into account changing customer demand.
Unforeseen political developments and/or macroeconomic trends could weaken a.s.r.’s solvency position. a.s.r. will remain permanently alert to the risk of a scenario developing in Europe with a major impact on capital and solvability. It therefore continuously monitors its interest rate position and reports the findings to the FRC. The consequences of potentially low investment returns and interest rate fluctuations are examined more fully in the annual SAA study and in the annual Own Risk and Solvency Assessment (ORSA).
Information (cyber) security risk Information (cyber) security risks are continuously evolving and imminent. Nation state actors are (covertly) probing and intruding, pushing the development of more sophisticated attacks and implicitly the progression of new detection measures to improve ‘older’ detection techniques. The trend of cyber-attacks continues where it left off in 2018; i.e. the same type of attacks are visible around the world and at a.s.r. The growth in digital communication is also increasing the risks of cyber-attacks, as is the introduction of technological initiatives.
Compensation scheme for unit-linked products In 2008, Life concluded an outline agreement with two leading consumer protection organisations to offer compensation to unit-linked policyholders if the cost and/ or risk premium exceeded a specified maximum. A full agreement on the implementation of the compensation scheme was reached in 2012. The total recognised cumulative financial costs relating to the compensation scheme for Individual life in a.s.r.’s income statement up to 2019 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 2019 amounted to € 50.5 million and is available only to cover potential additional compensation (for distressing cases and costs relating to the compensation scheme). Individual cases have a limited impact on the risk profile.
a.s.r. is currently subject to three collective actions. The claims are all based on similar grounds and have been rejected by a.s.r. and a.s.r. defends itself in these legal proceedings. The timing and outcome of these collective actions is currently uncertain. In June 2016, Woekerpolis.nl initiated a collective action, requesting the Midden-Nederland District Court to declare that a.s.r. has sold products in the market which were defective in various respects e.g. lack of transparency regarding cost charges and other product characteristics, and risks against which the insurer had failed to warn, such as substantial stock depreciations, inability to realise the projected final policy value, unrealistic capital projections due to the difference between geometric and arithmetic returns, and general terms and conditions governing costs which Woekerpolis.nl considered unfair.
Business performance | 4.2 Risk management 88 a significant effect on its capital, financial statements and related KPIs. Finance, Risk, Audit and the business lines have all been given attention in the programmes due to the need to develop an integrated vision. See chapter 6.3.3 New standards, interpretations of existing standards or amendments to standards, not yet effective in 2019, for more information.
Emerging risks In addition to the risk priorities, a.s.r. also identified emerging risks. Emerging risks are defined by a.s.r. as new or existing risks with a potentially major impact, where the level of risk is hard to define.
Climate change Insurers increasingly need to take climate change risks into account. Claims ratios might increase as a result of climate change. It is currently difficult to estimate the likelihood of extreme weather. In the long term, it is a challenge to estimate the effects of climate change, as a result of which climate change risks may be underestimated.
The Compliance function is a centralised function which is headed by the a.s.r. Compliance Manager for both a.s.r. and the supervised entities. The compliance function, the second line of defence, is considered a key function in line with the Solvency II regulation. The CEO bears ultimate responsibility for the compliance function and the a.s.r. compliance manager has a direct reporting line and access to him. The a.s.r. compliance manager also has an escalation line to the Chairman of the A&RC and/or the Chairman of the SB in order to safeguard the independent position of the compliance function and enable it to operate autonomously. The a.s.r. compliance manager is entitled to scale up critical compliance matters to the highest organisational level or to the SB.
Responsibilities and duties To enhance and ensure a controlled and sound business operation where impeccable professional conduct is self-evident the Compliance function is responsible for: • Encouraging compliance with relevant rules and regulations, ethical standards and the internal standards derived from them (‘rules’) by providing advice and formulating policies; • Monitoring compliance with rules; • Monitoring the management of compliance risks by further developing adequate compliance risk management, including monitoring and, where necessary, making arrangements relating to measures and actions; • Creating awareness of the need to comply with rules and of social and ethical issues, in which ethical behavior within a.s.r. is self-evident; • Coordinating contacts with regulators in order to maintain effective and transparent relationships with them.
Other monitoring activities on Group and business line level were compliance with the IDD regulation and the quality of information provided to customers. a.s.r. further improved the effectiveness of the compliance function. The compliance risk and monitoring framework was updated and rolled out within a.s.r.
Reporting The Compliance Manager issues quarterly reports on compliance matters and the progress made in the relevant actions at Group level, supervised entity (OTSO) 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 OTSO level is presented to and discussed with the individual members of the EB and the BEC and submitted to the A&RC of the SB. The report is shared and discussed with the DNB, the AFM and the (internal and) external auditor.
Business performance | 4.4 a.s.r.’s approach to addressing climate change 90 4.4 a.s.r.’s approach to addressing climate change
The EB sees climate change as a driver of both risks and opportunities for its business, customers and society at large. As such, the EB is actively involved in managing climate-related risks and strategies, e.g. by: • Reviewing and approving the sustainable growth strategy, with a strategic focus on climate change and energy transition; • Setting and monitoring performance against climaterelated goals and targets; • Reviewing and approving climate-related content in the annual report.
The BEC (see chapter 5.1.2 Executive Board) is responsible for: • Directing the development and implementation of climate-related policies; • Overseeing progress, performance and reporting on climate for the relevant business lines; • Leading external engagement and advocacy on climate-related matters.
In addition to the BEC, there are several other management-level committees in which a.s.r.’s various business lines cooperate to drive action on climate change, such as the NFRC, the Sustainability Committee (SC) of the P&C business, the ESG Committee within a.s.r. asset management and the Central Investment Committee. In 2019 a.s.r. moreover established a group-wide TCFD project team focused on climate, to align the various businesses, ensure consistent and coherent reporting and drive a.s.r.’s programme going forward.
a.s.r. has no company-wide variable remuneration and climate-related performance indicators are thus not linked to variable executive pay. The following reporting lines and responsibilities have been established: Business Unit
Change and Operations identify, assess, monitor and report on climaterelated issues (monthly)
Business performance | 4.4 a.s.r.’s approach to addressing climate change 91 4.4.2 Climate strategy
The bottom-up approach revolves around the relevant business lines within a.s.r. developing measures and tools to mitigate identified climate-related risks or capture its opportunities. This ranges from portfolio construction, exclusions and engagement within its asset management business, to developing new products and services within the real estate, mortgages and P&C businesses.
In the top-down approach, a.s.r. has used four climate scenario sets that combine both physical and transition effects. • 1.5°C temperature rise (approximately Representative
• 2.0°C (approximately RCP 4.5 of the IPCC) temperature rise with an orderly transition towards a lower carbon economy. The current low-carbon and energy measures are expanded and investments made in energy efficient measures, renewable technologies and market instruments. Globally, the transition has a positive impact on GDP growth in the short and medium term of 1%.
Risks arise from industries that rely heavily on fossil fuels in their operations or supply chain (e.g. utilities, oil and gas or transportation) and those relying on historic weather patterns for yield (e.g. agriculture, horticulture).
Overall this implies that there is a higher climatedriven risk associated with these sectors due to the nature of their business, which can be driven by new regulation or policy.
Furthermore, reputation and regulation risks associated with the transition to a low-carbon economy can impact business models and returns.
Physical and transition risk within the investment portfolio a.s.r. asset management aims to provide tailor-made, long-term and sustainable investment solutions for its clients. The normal process includes an extensive analysis of the target asset mix in different economic environments
The result is the impact of the different economic environments and climate scenarios on the RAS. The average impact on the Solvency II ratio is less than 2% which is considered limited. The small impact is due to three reasons: • In a.s.r.’s dynamic investment strategy, the portfolio is de-risked (re-risked) when the Solvency II ratio decreases (increases). This results in lower (higher) returns and lower (higher) capital requirements, leading to a stable Solvency II ratio.
• The a.s.r. investment portfolio is tilted towards European investments. Europe is more resilient to climate change than other economies around the world, resulting in a lesser effect of global warming on the economy. Under the Paris Agreement, developed economies are moreover required to do more to limit carbon emissions than developing economies, leading to higher investments in the 1.5°C and 2.0°C pathways.
Impact of the global warming scenarios on the average Solvency II scenario
• In the 1.5°C disorderly scenario, sudden sales of stranded carbon-related investments occur around 2025. This causes a financial crisis in which the portfolio is de-risked in accordance with the dynamic investment policy to maintain the Solvency II ratio. This leads to lower returns; however, the de-risking is on average slightly more than required, causing the Solvency II ratio to increase slightly (by approximately +0.3%).
• In the 4.0°C+ orderly scenario, the decrease of risk and return is slightly less than is required to perfectly maintain the Solvency II ratio, causing a decrease of approximately 1.2% of the Solvency II ratio.
EU Sustainable Finance Action Plan. The business lines and support departments are responsible for developing mitigation and control measures, such as policies, training or analysis. Monitoring of the strategic risks is done through the quarterly Business Risk Committees (BRC) which include representatives from each business line, Enterprise Risk Management (ERM), Audit and Compliance, and whose reporting flows back up to the NFRC, BEC-risk meeting and the A&RC.
In 2020 the annual ORSA process, as specified through Solvency II, will run continuing on the SRA process. This is a quantitative assessment of the strategic risks identified in the SRA, based on SAA calculations.
Transitioning to a low carbon economy presents opportunities for investment and insurance.
Sustainable finance a.s.r. has set itself a target to invest € 1.2 billion by the end of 2021 in a mix of listed equities, fi xed income, mortgages, private debt , private equity and real estate that delivers positive environmental and social impacts aligned to the SDGs (specifi cally SDGs 7 and 13) alongside responsible fi nancial returns.
Progress to date shows the exposure to this target of € 927 million at 31 December 2019. Holdings include a stake in Fund 1 of Social Impact Ventures, which provides venture capital for early stage growth social enterprises such as SpinDye, Black Bear Carbon, GoodFuels and Taxi Electric. But a.s.r. has also invested in several private loans to develop wind energy in the Netherlands and abroad, or listed bonds to sovereigns, corporates and multilateral agencies that meet a.s.r.’s defi nition of impact investing, over and above the criteria set out in a.s.r.’s SRI policy.
Products and services As one of the largest insurers in the Netherlands, a.s.r. continuously develops new offerings within its mortgages and P&C insurance portfolios that take climate risk into account. a.s.r. positions itself as playing an active role in the energy transition, particularly in the built environment, and wants to work with its customers and distribution channels to increase awareness of sustainability in general, and climate change in particular.
a.s.r. does this through, for example, working to improve energy labelling within the mortgage portfolio so that it can work towards mandating energy effi ciency improvements when it fi nances higher label properties (E, F or G). This in turn can feed in to the annual policy recalibration or re-insurance processes, which review coverage, acceptance, terms and price. A recent example of how a.s.r. addresses climate risk in its P&C product range is the expansion of coverage for buildings and contents with damage due to the fl ooding of secondary rivers. This means that with effect from 1 January 2020, approximately 2 million private and business building and content coverages will automatically be expanded to include cover for damage following secondary fl ooding. Furthermore, due to changing governmental policies and/or new technologies in the transition to a low-carbon economy, new developments are arising which will require new insurance solutions. New products and technologies such as electric cars, heat pumps and solar panels are already included within the existing product portfolio. Also, if a policyholder reports repairable damage to their property or goods, a.s.r. aims to have it repaired in a sustainable way.
reduction of its carbon footprint by 2030, based on the 1990 baseline.
a.s.r. is a signatory of the Spitsbergen ambition and commits to measure the climate impact of the investments in order to contribute to the Dutch climate objectives: at least a.s.r. is an active participant in developing and implementing the SBT methodology, which will provide sectoral decarbonisation pathways and absolute reduction targets (expected in 2020)
Climate risk in P&C Within the ORSA, various stress scenarios are used with a five-year time horizon. This includes ‘storm’ scenarios. In addition, climate impact on the (non-life) portfolio is regularly reviewed both retrospectively and through various climate scenarios for the future. For short and medium-term climate risks (0-5 years) portfolio and actuarial risk analysis are performed. Product managers prepare an annual product forecast which also focuses on new risks and technologies. Risks are managed through risk assessment and selection processes, exposure limitations, exclusions, deductibles, premiums, coverage limits and reinsurance.
Business performance | 4.4 a.s.r.’s approach to addressing climate change 95 4.4.4 Climate metrics and targets a.s.r. has publicly committed itself to several climaterelated targets and initiatives and has developed various metrics in line with the top-down and bottom-up approach that guides it in controlling its climate-related risk while capturing climate-related opportunities.
Impact investing2 (€) € 1.2 billion impact investments (for own account) in 2021 1 This applies to ‘own assets’ which are managed by a.s.r. asset management. 2 The impact investment target and 2019 progress concern impact investments with the intention to make social and environmental impact.
Business performance | 4.5 Statements of the Executive Board 96 4.5 Statements of the Executive Board a.s.r.’s consolidated and company financial statements for 2019, as well as chapters 1 - 5 of the annual report, have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the 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 EB 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 4.2 Risk management); II. The aforementioned systems provide reasonable assurance that the financial reporting does not contain any material inaccuracies (see chapter 4.2 Risk management, 4.3 Compliance and 6.8 Risk management); III. Based on the current state of affairs, the preparation of the financial reports on a going concern basis is justified (see chapter 2. Operating environment and 6. Financial statements); and
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 2019 in accordance with the reporting criteria as included in the section Reporting criteria.
The sustainability information is included in the following chapters of the annual report: • 1. About a.s.r.; • 2. Operating environment; • 3. Sustainable value creation; • 4.1 Group segment information; • Annex A: Facts and figures; • Annex B: About this report; • Annex C: Glossary; • Annex E: Materiality analysis and stakeholder dialogue; • Annex F: GRI Content index.
We are independent of ASR Nederland N.V. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. This includes that we do not perform any activities that could result in a conflict of interest with our independent assurance engagement. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
We believe that the assurance evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.
The absence of an established practice on which to draw, to evaluate and measure sustainability information allows for different, but acceptable, measurement techniques and can affect comparability between entities and over time.
Responsibilities of the Executive Board and the Supervisory Board for the sustainability information The EB is responsible for the preparation of reliable and adequate sustainability information in accordance with the reporting criteria as included in the section Reporting criteria, including the identification of stakeholders and the definition of material matters. The choices made by the
Our responsibilities for the review of the sustainability information Our responsibility is to plan and perform the review in a manner that allows us to obtain sufficient and appropriate assurance evidence for our conclusion.
About the object The tableau was presented to the management of the Holland life insurance company by the staff in 1920, on the occasion of the company’s 25th anniversary.
Governance | 5.1 Corporate Governance 102 5.1 Corporate Governance 5.1.1 General a.s.r. is a public limited company which is listed on Euronext Amsterdam and governed by Dutch corporate law. It has a two-tier board governance structure consisting of an Executive Board (EB) and a Supervisory Board (SB). The EB is responsible for the realisation of corporate objectives, the strategy with its associated risks and the delivery of the results. The SB is responsible for advising the EB, supervising its policies and the general state of affairs relating to a.s.r. and its group entities. As of 1 February 2019 a.s.r. changed its management structure. This was effected through the appointment of a Business Executive Committee (BEC). The BEC works alongside the EB and shares responsibility for the implementation of the business strategy. More information on the governance structure can be found in chapter 5.1.2 Executive Board.
Governance | 5.1 Corporate Governance 105 a.s.r. engages in dialogue with all stakeholders on the principles and objectives of its sustainability policy. To this end, it maintains close contact with internal stakeholders and a broad group of external stakeholders, including customers, shareholders, regulators, politicians and government ministers, as well as trade bodies. In order to continue to drive and monitor sustainability in all its aspects within a.s.r., sustainability has been earmarked as a separate topic. Within the EB, the CEO is ultimately responsible for a.s.r.’s sustainability themes. The Task Force supports the CEO in his responsibility for the definition and implementation of a.s.r.’s sustainability strategy and policy. Each year, the SB discusses and approves the objectives and the progress made in these specific areas. The Director of Corporate Communications coordinates the implementation together with the CSR Task Force. All Task force members subsequently promote this vision and objectives within their own focus areas. The Task Force also sets sustainability KPIs and targets.
Remuneration Information on the remuneration policy for EB members and their individual remunerations can be found in chapter 5.3 Remuneration report.
Additional positions Jos Baeten is currently a member of the EB of the Dutch Association of Insurers (Verbond van Verzekeraars) and a member of the SB of De Efteling B.V. In addition, he is a member of the General Administrative Board of VNO-NCW and a Board Member of Stichting Grote Ogen and Stichting Fietshelm is Hoofdzaak.
Additional positions Ingrid de Swart does not currently hold any additional positions.
Governance | 5.1 Corporate Governance 108 5.1.3 Supervisory Board 1 SB members are reappointed or must resign no later than the next AGM held after this date. 2 Based on the possibility of an appointment for a maximum of twelve years (2 x four years and 2 x two years in accordance with principle 2.2.2.
The SB has three roles: the supervisory role, the advisory role and the employer’s role for the EB. The SB supervises the policy pursued by the EB and the general course of affairs at a.s.r. and its group entities. Specific powers are vested in the SB, including approving certain EB decisions.
Barendregt, Gisella van Vollenhoven and Gerard van Olphen. The composition of the SB of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. is the same as that of ASR Nederland N.V.
Kick van der Pol 15 December 2008 22 May 2019 22 May 2021 2021
Gisella van Vollenhoven 11-2019 05-2023 1970 F • • • • • •
Permanent education and evaluation The SB is responsible for assessing the quality of its own performance. It therefore performs an annual self-assessment and discussion of its own performance and that of its committees and members. A self-assessment with external supervision is carried out every three years. The self-assessment for 2019 was carried out with internal guidance. The assessment was based on written and oral input from the members of the SB, the EB and the Company Secretary. The following aspects were assessed: • Composition and functioning of the SB (strengths and points for improvement); • Effectiveness of processes (information-gathering and decision-making); • Advisory role; • Role as an employer.
In 2019, specific sessions were also organised jointly with the EB and the senior management for the benefit of further education. The first session was a follow-up on the explanation of IFRS 17, the new accounting standard for insurance contracts, led by FRPM. The new regulations will impact future external reporting on insurance contracts. The implementation of IFRS 17 within a.s.r. is a major project. The second session focused on investment management. This knowledge session was led by a.s.r. asset management and took place at the end of the year. During this session, the SB, EB and senior management were given an update on strategic investment management, AI and robotisation in investment management, economic development and the strategic vision for 2020.
Doelen Loterijen N.V. In April 2019, he became Chairman of the SB of Total
Member of the Supervisory Board and member of the Audit & Risk Committee
partner at PwC specialising in the fi nancial services sector, until 1 July 2017. She was also Chair of
Sonja Barendregt has been a member of the SB of Volksbank, of which she is also Chair of the Audit Committee.
Sonja Barendregt was appointed as a member of the SB and Chair of the
in 2018. She is also an accountancy examinations expert at the Erasmus
Non-EB Member of the investment fi rm Kardan N.V., where he is also
Herman Hintzen acted as an adviser to the EB of APG Asset Management and served as Managing Director at the Financial Institutions Investment
Member of the Supervisory Board, Chair of the Remuneration Committee and member of the Selection & Appointment Committee
Committee. She began her career at ING in 1994, holding the positions of Manager Corporate
Risk Management at ING, among other roles. Since 2013, Gisella van
Governance | 5.1 Corporate Governance 111 5.1.4 Corporate Governance Codes and regulations
Articles of Association and rules of procedure The current articles of association (dated 9 June 2016) have been published on a.s.r.’s corporate website: www.asrnl.com. The SB and EB rules are also available on the corporate website. These rules were most recently amended and adopted in 2017 in response to the revised Dutch Corporate Governance Code.
Notwithstanding the above, a.s.r. has decided that all employees and other individuals carrying out activities under its responsibility must take the oath. New employees must take the oath within three months of joining the company.
Governance | 5.2 Report of the Supervisory Board 112 5.2 Report of the Supervisory Board 5.2.1 Meetings of the Supervisory Board 1 Where a SB member stood down or was appointed during the year, only meetings held during his/her tenure are taken into account.
The Supervisory Board (SB) convened 9 routine meetings, 5 extra meetings, including 1 off-site meeting with the Executive Board (EB). In addition, 2 working visits were organised consisting of 6 two-hour meetings with the management teams of the business lines represented in the Business Executive Committee (BEC) (P&C, Disability, Pensions, Individual life & Funeral, Mortgages and Asset Management). SB members were available for consultation in between scheduled meetings. Several ad-hoc meetings were held to discuss issues relating to specific topics such as M&A, remuneration and the selection and appointment of new members of the EB and SB. Regular operational meetings were also held in the absence of the EB. During these meetings, matters such as the (self-evaluation of the SB and the evaluation of the EB members were discussed.
The SB has a good working relationship with the EB. The Chairman of the SB has regular contact with the CEO, and several members of the SB are regularly approached outside meetings for advice on various files. The SB as a whole also receives bi-monthly updates, outside meetings, from the EB on various developments within the company, including product development, (potential) M&A transactions and personnel matters.
In September, the SB was pleased to announce two candidates for membership of the SB, Gisella van Vollenhoven and Gerard van Olphen. On 30 October 2019 both candidates were appointed by the EGM for a period which ends at the 2023 AGM. With the appointments, the SB is strengthened with two excellent members who bring in a great deal of experience and expertise. Gisella van Vollenhoven is an expert in the field of finance, risk management and supervision and Gerard van Olphen adds knowledge of the insurance sector, the management of financial institutions, customer focus and CSR.
M&A Furthermore, as is now publicly known, a.s.r. looked into the possible acquisition of VIVAT by means of an extensive due diligence process, among other things. Although the M&A strategy of a.s.r. focuses in particular on acquisitions of small to medium-sized companies in the Netherlands, a.s.r. feels a fiduciary responsibility to the interests of its stakeholders to also investigate potential value creation through larger acquisitions, if these opportunities arise. During 2019, the potential acquisition of VIVAT has of course been a frequent topic of discussion between the SB and the EB. However, due to the confidential nature of this matter, no further announcements can be made about this. The SB wishes to express its appreciation for the way in which the EB and all the employees involved have shown great commitment in this process.
In view of the above, the SB is pleased that the M&A strategy for bolt-on acquisitions was also properly implemented during 2019. In 2019 a.s.r. nearly completed the integration of Generali Nederland. The last part of the integration of Pensions was completed in the beginning of 2020. Its contribution to the operating result and the return of this acquisition is higher than initially expected. Moreover, in the first half of 2019 this strategy was implemented with the acquisition and closing of Loyalis. With the acquisition of the complementary portfolio of Loyalis a.s.r. strengthens its market position in the field of disability insurance and enhances its leading role as a provider of overall solutions for sustainable employability. a.s.r. expects to realise economies of scale and capital benefits and opportunities to grow further in new segments. During 2019, the integration of Loyalis proceeded according to plan. The life and pensions activities of Loyalis are expected to be integrated into a.s.r. in 2020.
Following a comprehensive process, a decision was made to define a.s.r. bank as a non-core activity from 2019 and to offer it for sale, as its strategic fit was considered insufficient. As a result a.s.r. announced the sale of the savings portfolio of a.s.r. bank to Achmea Bank N.V., which was completed on 2 December 2019. With the sale of the savings portfolio of a.s.r. bank, a.s.r. underlines its focus on value-generating activities. Furthermore, in the beginning of 2020, a.s.r. announced that a.s.r. and Van Lanschot Kempen entered into a partnership agreement for a.s.r.’s investment accounts. This partnership is the final step for a.s.r. in the phase-out of its banking activities and the SB is convinced of the correct settlement of the banking activities.
The SB concludes that a.s.r. is on track to achieve the strategic priorities and the revised medium term targets which were announced at the CMD on 10 October 2018. Organic growth was achieved in line with the strategy. Costs were also generally further reduced (excluding acquisitions), customer service was improved and brand awareness of a.s.r. grew. a.s.r. is also increasingly appreciated for the role it plays in society.
Governance | 5.2 Report of the Supervisory Board 114 and the management structure; • EB and senior management succession planning; • EB remuneration, including the completion of the evaluation and proposed adjustment of the remuneration policy; • HR & culture; reports on employee surveys, sustainable employability and compliance with the a.s.r. code of conduct; • Innovation and technology developments; • NPS reports and developments in the field of brand positioning of a.s.r.; • Financial and ERM, including cybersecurity, the RAS and the ORSA; • Annual and quarterly results, dividends, capital generation and the Solvency II capital position, including the announced new RT1 issue; • Investor relations; • Multi-year budget including medium-term targets, capital & dividend policy, interest risk policy and funding plan; • Legal, regulatory and compliance issues, including the relationship with the Dutch regulators; • Tax policy and developments.
As part of their audit process, EY issued a management letter in November 2019 and a 2019 Audit report in March 2020 to the EB and SB. In the management letter, EY recognises the following: a.s.r. has made major steps to make its management model and organisation more effective. The BEC has been established. In addition, the Finance & Risk department was restructured, an important step towards further quality and improved efficiency.
In addition to these topics, EY has also provided suggestions with a more medium to low priority. EY asks for continued vigilance to ensure these items receive continuous focus so that a.s.r. is sufficiently prepared for the future.
a.s.r. welcomes all suggestions and is committed to implementing these suggestions promptly. The SB was pleased with these conclusions and thanks EY for the audit work performed during the term of the engagement. The SB will monitor the implementation of these items.
As part of the transition to KPMG as the auditor, with effect from 1 January 2020, KPMG have attended the A&RC and the relevant SB meetings since November 2019.
Risk management and solvency At the end of the year, the SB approved the risk appetite for both a.s.r. and its supervised entities. a.s.r.’s risk appetite is mainly based on the Solvency II regime and a prudent approach to risk management translated into standards for solvency, liquidity, efficient processes and achievable returns. The SB was satisfied with the execution of the risk management framework. The level of solvency remains acceptable and adequate thanks to the organisation’s prompt and adequate response to external developments based on the chosen risk appetite and associated risk-mitigating measures. The risk appetite is an important criterion for the SB in making tactical and strategic decisions. The SB appreciates the prudent approach taken to comply with Solvency II and other regulations and regularly engages in dialogue with the EB concerning its views of the targets and intervention level relating to Solvency II ratios.
Throughout the year, the SB regularly discussed the organisation and culture of a.s.r. with the EB. a.s.r.’s in-house CLA ‘De Andere Cao’ became effective on 1 January 2018. At the beginning of 2019 the trade unions and a.s.r. reached an agreement on the continuation of the CLA for a term of two years with retroactive effect from 1 January 2019, which includes a structural wage rise of 3% as of 1 March 2019 and 1 March 2020 and a continuing dialogue regarding sustainable employment. The SB hereby compliments the EB on the progress that has been made in this area and also on the introduction of the employee share purchase plan.
Contacts with the Works Council All SB members attended one or more routine consultative meetings of the Works Council. In addition to these routine meetings, the Works Council maintains regular contact with the Works Council-appointed SB member (Annet Aris until 22 May 2019 and as of 30 October 2019, Gisella van Vollenhoven). After the announcement that Annet Aris would resign after the 2019 AGM, the Works Council started a selection procedure that led to the appointment of Gisella van Vollenhoven. In the meantime, the Works Council has maintained regular contact with the Chairman of the SB, Kick van der Pol. The SB also greatly appreciates its bilateral dialogues with the Works Council, on several occasions together with one or more members of the EB.
The SB has three committees that discuss specific issues and prepare items on which the full SB takes decisions. The chairperson of each committee reports on the main points of discussion and the resulting recommendations are discussed at the subsequent SB meeting. The minutes of the committee meetings are available to the members of the SB.
The A&RC comprises three SB members. The composition of the committee is such as to represent the specific business know-how, financial, accounting and actuarial expertise relating to the activities of a.s.r.
The committee held ten regular meetings in 2019. In accordance with the A&RC Rules of Procedure, committee meetings are also attended by the CFO, the Director of GRM, the Director of Finance, Risk and Performance Management, the Manager of Compliance, the Director of Audit and the independent external auditor.
During the year, outside the regular meetings, the committee met on two occasions with the Audit, Compliance, Risk Management and AF in their roles as countervailing powers. The Chairman of the committee also had two one-on-one meetings with each of the directors of Audit and GRM, the Manager Compliance and two meetings with the external auditor EY.
After each financial quarter, the committee discussed the financial results based on detailed financial, risk, compliance and internal and external audit reports and analyses. Progress on the recommendations of the internal and external auditor was monitored. The full 2019 reporting year was discussed in the first quarter of 2020 based on the (quarterly) internal finance report, the press release, the annual report, the financial statements, the Board Report and the actuarial report. The discussion of the actuarial report was also attended by the AF.
The committee issued positive opinions on the annual report and on the financial statements to the SB.
a.s.r.’s solvency position was reviewed and discussed each quarter. Specific attention was paid to the UFR effect within the Solvency II framework, to the decreasing interest rates and to a.s.r.’s view on a more economic UFR scenario. The A&RC discussed the risk scenarios and the outcomes of the ORSA and discussed the balance sheet plan and the quarterly updates of this. In all risk scenarios of the ORSA, the solvency ratio remained – sometimes after specific management actions – within the boundaries set by a.s.r., demonstrating the robustness of a.s.r.’s solvency and the effectiveness of certain management actions. The future solvency ratio projections include the gradual decrease of the UFR as prescribed by EIOPA.
The A&RC regularly monitored the status of the risk appetite during the year through a.s.r.’s Integrated Risk Dashboard and the status report on the management of risk priorities and at the end of the year, the Committee was informed of the outlines of the reinsurance programme for 2020.
Remuneration Committee In 2019, the composition of the RC was as follows: • Annet Aris (Chair until May 2019) • Herman Hintzen (temporary Chairman in the period from May to November) • Gisella van Vollenhoven (Chair as of November 2019) • Kick van der Pol
In line with the policy, the committee advised the SB on target-setting, performance appraisals and the ex-post assessments of variable payments awarded to identified staff.
From the 2018 AGM until the 2019 AGM the RC devoted considerable time and attention to the evaluation of the remuneration policy for the EB and SB. The committee carefully took into account the opinions of all stakeholders, since there was a risk of damaging the trust of a.s.r. and of jeopardising its market position as a socially responsible insurer. In May 2019, the remuneration policies for the EB and SB were approved by the AGM. An extensive report on this is provided in chapter 5.3 Remuneration report.
At the end of 2019, the a.s.r. remuneration policy was updated in line with new regulations and the RC discussed the implementation of the remuneration policy for a.s.r.’s subsidiaries and participating interests. The Remuneration Disclosure 2018 was prepared and the results of the internal audit report on the application of a.s.r.’s remuneration policy were discussed.
Selection & Appointment Committee In 2019, the composition of the S&AC was as follows: • Annet Aris (Chair until May 2019) • Kick van der Pol (Chairman as of May 2019) • Herman Hintzen (as of May 2019) • Gisella van Vollenhoven (as of November 2019)
The search for a new EB member as the result of the changed management structure announced in 2018 resulted in the appointment of Ingrid de Swart in December 2019. Following the announcement of the resignation of Chris Figee, the search for a new CFO started at the end of October 2019 and resulted in the announcement of the proposed candidate, Annemiek van Melick, and her appointment in February 2020.
Lastly, in 2019 the fourth re-appointment of Jos Baeten as CEO for a four-year term and the re-appointment of Herman Hintzen as a member of the SB were discussed and prepared by the committee. The proposals for the re-appointments will be included as agenda items at the AGM in 2020.
Financial statements and dividend The EB prepared the 2019 annual report and discussed it with the SB in the presence of the external auditor. The 2019 financial statements will be submitted for adoption by the AGM on 20 May 2020. a.s.r. will propose a dividend of € 1.90 per ordinary share, or € 267 million in total, including the interim dividend paid.
Appreciation The SB wishes to express its gratitude to all the employees of a.s.r. (both permanent and contract staff) for their dedication to a.s.r., especially for their efforts with regard to all aspects of ‘the story of a.s.r.’. All our employees have worked collectively to achieve a.s.r.’s mission by helping customers to share risks and build up capital for the future. Together, we are building an insurance company that is both valuable and sustainable. The SB also wishes to express its gratitude to the members of the EB and the senior management for their impressive leadership of a.s.r. which has given a.s.r. a good position in the market. The SB greatly appreciated the ongoing and constructive open dialogue and cooperation with the EB.
Kick van der Pol (Chairman) Cor van den Bos Herman Hintzen Sonja Barendregt Gisella van Vollenhoven Gerard van Olphen
Governance | 5.3 Remuneration report 118 5.3 Remuneration report 5.3.1 Introduction a.s.r. was nationalised in 2008 and from then on, the Dutch State was the sole owner of all a.s.r. shares. As a state-owned financial institution, a.s.r. placed considerable constraints on the remuneration of the Executive Board (EB) and was not permitted to pay a variable remuneration or increase the fixed salary of the members of the EB, pursuant to the Dutch Act on limitation of liability DNB and AFM and bonus prohibition for state-supported enterprises. a.s.r.’s remuneration policy was therefore effectively put on hold and the remuneration of the EB was fixed for many years. In 2016, a.s.r. was re-listed on the stock exchange and has been fully independent from the Dutch State since 14 September 2017. As a result, the freeze of the EB’s remuneration by the act no longer applied. The Supervisory Board (SB) has responded by deciding to reinstate and apply the existing remuneration policy, which included a periodic benchmark comparison.
The 2017 benchmark analysis showed that the salaries of the EB were substantially below the median of the relevant benchmarks. After a shareholder consultation a.s.r.’s SB decided in 2018 to gradually increase the individual remuneration of the members of the EB and reduce the gap with the peer group, in line with the existing remuneration policy. The increase was effected in multiple stages over time in 2018 and 2019. Additionally, the EB has committed itself to taking a percentage of its remuneration in the form of a.s.r. shares. From the IPO in 2016 until the end of 2017 the members of the EB could not buy any a.s.r. shares due to arrangements with its main shareholder at that time, the Dutch State.
At the 2018 AGM, the SB announced that it would assess and evaluate the remuneration policy for the EB. This evaluation took place in 2018 and in the beginning of 2019. As promised, the SB held an extensive consultation round in order to arrive at a proposal for the changed remuneration policy. A large group of shareholders was consulted. Also the Works Council, as the representative body for the a.s.r. employees, several labor unions, and a number of financial spokespersons of the parliamentary parties in the Lower House were consulted. Finally, the SB commissioned a qualitative survey of the general Dutch public by an independent agency with regard to views on remuneration policy and the remuneration of top executives. During the consultation round, ample attention was devoted to public views on the remuneration of top executives in the financial sector and the different methods that can be applied for the remuneration policy, such as a variable component and remuneration in shares. Various scenario analyses were reviewed and assessed in that context.
Whereas the Anglo-Saxon shareholders in particular see variable remuneration as an important element of alignment, the sentiment with regard to this form of remuneration is different among employees, politicians and the general Dutch public. The social sentiment in the Netherlands with regard to variable remuneration in the financial sector is negative. The SB is also not convinced of the effect of variable remuneration, in which the cap of 20% for financial institutions in the Netherlands also plays a role. In addition, this form of remuneration by various stakeholders is not considered appropriate for a socially responsible insurer such as a.s.r. and does not match with the internal remuneration system. Also a payment in shares primarily evoked a negative reaction from politicians, media and employees.
In addition, the employees and the Works Council have called for the total remuneration of an EB member not to exceed the median of the relevant benchmark and to keep the remuneration methodology as similar as possible to that of the total workforce. The SB has tried to find the best possible balance in this respect, whereby the labor market position and the continuity of (the management of) the company also played an important role. Ultimately, the SB took a balanced decision that in its view fits in with the positioning of a.s.r. and is in the best interest of all stakeholders.
Governance | 5.3 Remuneration report 119 to the proposal, but has waived this. The opinion of and input from the Works Council obtained during various contact moments has been included. Regarding the content of the remuneration policy, a.s.r. believes that it is in accordance with current legal requirements. The remuneration policy is clear and understandable. An explanation has been included on how the remuneration policy contributes to the strategy of a.s.r., sustainability and the interests of stakeholders. Account has also been taken of the identity and positioning of a.s.r., the remuneration ratios within a.s.r. and the social support. This has been implemented through the use and concrete interpretation of the four perspectives: the organisational perspective, internal perspective, external perspective and the stakeholder perspective. Certain legal requirements do not apply to a.s.r., as the policy does not include a variable remuneration scheme or a remuneration in shares.
for its customers and increasing the NPS; • CSR: traction on realising CSR objectives for 2020
(among others, a CO2 neutral a.s.r. and distinctive capacity for SRI) and further development of a distinctive ESG position in asset management; • Craftsmanship: further development of a.s.r. as a listed company and to manage the interests of all stakeholders in a balanced manner.
These goals are supplemented with specific strategic priorities for each board member, such as the integration of Loyalis Nederland and preparations for the implementation of IFRS 17. The remuneration is not directly dependent on the achievement of any targets, since the members of the EB do not receive variable remuneration. The objectives are, of course, constantly discussed during the various evaluation interviews between the SB and (the members of) the EB.
The members of the EB work on the basis of a contract for services for an indefinite period of time. These contracts for services expire by operation of law as soon as the parties concerned cease to be members of the EB. Furthermore, the contracts for services can be terminated (prematurely). In that case a.s.r. will observe a notice period of six months. A notice period of three months applies to the members of the EB. The contracts for services also contain a provision for dismissal due to a change of control.
When the remuneration of the EB is compared to the remuneration of all executive directors of all AEX-listed companies, the conclusions can be drawn that the remuneration of a.s.r.’s CEO is among the lowest compared with the CEO remuneration of all AEX companies and that the pay ratio is among the lowest compared with other AEX companies.
3 The commitment on pensions did not change in 2019. The increase in annual pension expenses is caused by a decrease in the interest rates.
Comparative chart over the remuneration and company performance over the last five reported financial years
B. Remuneration Policy as of 1 January 2020 The most important elements for the revised remuneration policy as of 1 January 2020 are: • No introduction of a variable remuneration scheme for the EB members; • Introduction of salary scales for the EB, in line with the other employees of a.s.r. In principle, the EB members progress through the salary scales in the same way as the employees. For the employees, this concerns an annual increase of 3% (provided that there is scope for this in the salary scale). For the EB members, the SB has the option of adjusting this growth path slightly, upwardly or downwardly (increase of 0% to 6%); • The a.s.r. CLA applies to the members of the EB in relation to pay indexation; • The introduction of an adjusted reference group with purely Dutch financial and similar listed companies of a socially responsible character as far as possible, as one of the points for determination of the EB salary scales.
presents itself as a company; 2. The internal perspective: consistency in the internal salary structure; 3. The external perspective: competitive with the external market; 4. The stakeholders’ perspective: taking account of the views on remuneration of different stakeholder groups: customers, shareholders, employees and society.
Item 1. The organisational perspective It is a.s.r.’s opinion that society may expect a.s.r. to be an efficient insurer who handles the funds entrusted to a.s.r. and the environment in which it operates, in a responsible manner. With respect to the remuneration of the EB, society may expect this to be befitting in view of a.s.r.’s character, and that the remuneration policy and the level of the remuneration of directors can be explained based on that perspective.
For this reason a.s.r. has no variable remuneration scheme. a.s.r. is of the opinion that such a scheme is not in line with the company’s culture. The sentiment in society with respect to variable remuneration in the financial sector has also been taken into account in this respect.
the other employees are subject to a salary scale with a range from 70% to 100%. For the employees and the EB members, this maximum is just below the median of the adjusted reference group.
Each year, the SB assesses whether, in addition to the increase in accordance with the CLA wage index, there is cause for a salary increase for the members of the EB within the salary scale. In principle, the members of the EB run through the salary scales in the same way as the employees. For employees, this concerns an annual growth of 3% (provided there is room for this in the salary scale). For the members of the EB, the SB has the option of adjusting this growth path slightly upwards or downwards
The table on the next page shows a comparison of the previous remuneration policy with the current remuneration policy as of 1 January 2020: Executive Board remuneration policy until 31 December 2019 Executive Board remuneration policy as of 1 January 2020
If the SB makes use of this, the increase will lie between 0% and 6%.
The non-financial institutions must comply with at least two of the three criteria set in relation to the comparable size of the companies for inclusion in the peer group (revenue, market capitalisation and number of employees).
The salary scale is tested in relation to the internal salary structure once every two years.
The policy is presented to the General Meeting of Shareholders once every four years and in the event of material changes.
Executive Board remuneration policy until 31 December 2019 Executive Board remuneration policy as of 1 January 2020
To be realised within 7 years 5-year share transfer restriction period 5-year share transfer restriction period
Fiscal discount of 18.5%, related to the 5-year share transfer restriction period.
Participation in a.s.r. shares One of the outcomes of the consultation round is that shareholders attach importance to aligning the involvement and performance of the directors with the success of their own organisation. In addition to the remuneration policy, EB members have committed themselves to taking a percentage of their remuneration in a.s.r. shares, at their discretion. In 2018 each member has signed an individual agreement for the commitment to purchase these shares. The cumulative investment in a.s.r. shares will reach a minimum of 50% of annual gross salary for the CEO and a minimum of 25% of annual gross salary for the other members.
In addition, the remuneration level within the reference group used will be examined. This reference group is the same as the reference group used for the members of the EB.
An overview of the former and current remuneration is given below: Type of remuneration
Aanvullende Ziektekostenverzekeringen N.V. (€ 3,000). 7 Gerard van Olphen was appointed to the SB on 30 October 2019. The remuneration figures for 2019 reflect a partial year as a member of the
SB. 8 Gisella van Vollenhoven was appointed to the SB on 30 October 2019. The remuneration figures for 2019 reflect a partial year as a member of the SB. The fees relate to the amounts received as a committee member of the Selection and Appointment Committee (€ 1,250) and the Remuneration Committee (€ 2,500).
Since its formation on 1 March 2018, a.s.r.’s Works Council has been in operation throughout the year 2019. The accessible, transparent cooperation between the business lines committees, the Works Council and directors which was reported in the 2018 annual report, continued in 2019.
The departure of a member of our Works Council led to new elections which were held in April 2019. These elections elicited much interest from a.s.r. staff. We are pleased that three colleagues stood for election. Since these elections the works council is complete.
The Works Council consists of three women and four men. Both the gender ratio as well as the diversity in age contribute to good dynamics and energy within the group resulting in well considered decisions.
Ad hoc meetings Works Council with a member of the EB 6
Works Council meetings without a member of the EB Works Council 52
The number of requests for an opinion addressed to and dealt with by the Works Council was 9. The number of applications for consent addressed to the Works Council was 3. More requests for an opinion were dealt with this year. These were handled by the business unit committees.
IFRS Standards and interpretations effective in 2019 141 6.3.3 New standards, interpretations of existing standards or amendments to standards, not yet effective in 2019 142 6.3.4 Key accounting policies 144 6.3.5 Other accounting policies 156 6.4 Group structure and segment information 163 6.4.1 Group structure 163 6.4.2 Segmented balance sheet 165 6.4.3 Segmented income statement and operating result 167 6.4.4 Non-life ratios 171 6.4.6 Discontinued operations and assets held for sale and related liabilities 175 6.5 Notes to consolidated balance sheet 178 6.5.1 Intangible assets 178 6.5.2 Property and equipment 180 6.5.3 Investment property 181 6.5.4 Associates and joint ventures 182 6.5.6 Investments on behalf of policyholders 186 6.5.7 Loans and receivables 187 6.5.9 Deferred taxes 189 6.5.10 Other assets 190 6.5.11 Cash and cash equivalents 191 6.5.13 Subordinated liabilities 195 6.5.14 Insurance liabilities 195 6.5.15 Employee benefits 199 6.5.18 Due to customers 205 6.5.19 Due to banks 206 6.5.20 Other liabilities 206 6.6 Notes to consolidated income statement 207 6.6.1 Gross insurance premiums 207 6.6.2 Investment income 208 6.6.3 Realised gains and losses 209 6.6.4 Fair value gains and losses 209 6.6.5 Fee and commission income 210 6.6.6 Other income 210 6.6.7 Net insurance claims and benefits 211 6.6.8 Operating expenses 212 6.6.10 Interest expense 213 6.6.11 Other expenses 214 6.6.12 Income tax expense 214 6.7 Other Notes 216 6.7.1 Fair value of assets and liabilities 216 6.7.2 Offsetting of financial assets and liabilities 224 6.7.3 Fair value of financial assets categorised into two groups based on business model and SPPI test results 224 6.7.4 Related party transactions 227 6.7.5 Employee Share Purchase Plan 228 6.7.6 Contingent liabilities and assets 228 6.7.7 Events after the balance sheet date 231 6.7.8 List of principal group companies and associates 233 6.7.9 Profit appropriation 233
ASR Nederland N.V. (a.s.r.) ranks among the top 3 insurers in the Netherlands. a.s.r. offers products and services in the fields of insurance, pensions and mortgages for consumers, self-employed persons and companies. In addition, a.s.r. is active as an asset manager for third parties.
a.s.r. is listed on Euronext Amsterdam and is included in the AEX index. a.s.r. has a total of 3,906 internal FTE’s (2018: 3,683).
The financial statements for 2019 were approved by the Supervisory Board (SB) on 24 March 2020 and will be presented to the Annual General Meeting (AGM) of Shareholders for adoption on 20 May 2020. The Executive Board (EB) released the financial statements for publication on 25 March 2020.
Financial statements 2019 | 6.1 Introduction 133 6.1.2 Statement of compliance
Liabilities arising from insurance contracts on behalf of policyholders 6.5.14 12,477 10,222
Profit / (loss) from discontinued operations, after tax 6.4.6 1 -36
Basic earnings per ordinary share from continuing operations 6.5.12 6.46 4.59
Diluted earnings per ordinary share from discontinued operations 6.5.12 0.01 -0.24
Consolidated statement of comprehensive income for the year ended 31 December 1 Comparative figures for 2018 have been restated. For details see chapter 6.3.1.
Unrealised change in value of property for own use 6.5.2 7 8
Income tax on items that will not be reclassified to profit or loss 126 -15
Total items that will not be reclassified to profit or loss -377 46
Realised gains/(losses) on available for sale assets reclassified to profit or loss -175 -236
Income tax on items that may be reclassified subsequently to profit or loss -106 61
Total other comprehensive income for the year, after tax -31 -244
Shadow accounting allows a recognised but unrealised gain or loss on an asset to be transferred to liabilities arising from insurance contracts (see accounting policy I, chapter 6.3.4).
U n re al is e d a ct u ar ia l g ai n s an d lo ss e s
(P e n si o n o b lig at io n s)
The actuarial gains and losses related to the pension obligation decreased in 2019 by € 381 million after tax and € 508 million before tax (2018: increased by € 40 million after tax and € 53 million before tax). The decrease is mainly due to a decrease in the discount rate (see chapter 6.5.15).
Financial statements 2019 | 6.2 Consolidated financial statements 139 6.2.5 Consolidated statement of cash flows
Adjustments on non-cash items included in profit: Revaluation through profit or loss -260 -159
Retained share of profit of associates and joint ventures -3 9
Changes in operating assets and liabilities: Net (increase) / decrease in investment property -55 -225
Net (increase) / decrease in amounts due from and to customers -526 -269
Net increase / (decrease) in liabilities arising from insurance contracts 2,101 -528
Net increase / (decrease) in liabilities arising from insurance contracts on behalf of policyholders 1,423 -256
Net (increase) / decrease in other operating assets and liabilities -133 171
Cash flows from investing activities: Investments in associates and joint ventures -36 -
Cash and cash equivalents classified as assets held for sale 50 236
Financial statements 2019 | 6.3 Accounting policies 141 6.3 Accounting policies 6.3.1 Changes in comparative figures
6.3.2 Changes in EU endorsed published IFRS standards and interpretations effective in 2019
The following changes relevant to a.s.r. in the EU-endorsed IFRS standards and IFRIC interpretations are effective from 1 January 2019: • IFRS 16: Leases; • Annual improvements to IFRS standards 2015-2017 cycle: IAS 12 amendment. (See chapter 6.3.1)
For the implementation of IFRS 16 a.s.r. applied the modified retrospective method, meaning that the 2018 comparative figures in the 2019 financial statements are not restated. The application of this standard resulted in an increase in balance total of € 19 million per 1 January 2019 and does not have an impact on equity of the consolidated financial statements of a.s.r. per that date. Per 31 December 2018 a.s.r. reported € 17 million of operating lease commitments. The increase in comparison to the amounts disclosed in the annual report 2018 is mainly the result of the determination of the lease period under IFRS 16 which includes extension options a.s.r. expects to exercise, partially mitigated as the future lease payments are discounted.
Financial statements 2019 | 6.3 Accounting policies 142 6.3.3 New standards, interpretations of existing standards or amendments to standards, not yet effective in 2019
The following new standards, amendments to existing standards and interpretations, relevant to a.s.r. and published prior to 1 January 2020 and effective for accounting periods beginning on or after 1 January 2020, were not early adopted by a.s.r.: • Amendments to IAS 1 and IAS 8: Definition of Material (2020); • IFRS 17: Insurance Contracts (2023); • IFRS 9: Financial Instruments (2023).
IFRS 17 Insurance Contracts IFRS 17 Insurance Contracts was issued by the IASB in May 2017 and will replace IFRS 4 Insurance Contracts. In June 2019, the IASB has issued an exposure draft to IFRS 17 wherein limited but necessary changes to IFRS 17 are proposed. A revised IFRS 17 is expected to be published in mid-2020. The revised IFRS 17 standard is expected to be effective from 1 January 2023, based on the IASB tentative decision taken in March 2020 during the IFRS 17 redeliberations, whereby the implementation of IFRS 17 and IFRS 9 will be delayed by two years. 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 and J).
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, 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.
IFRS 9 Financial Instruments IFRS 9 is effective from 1 January 2018 and EU endorsed. a.s.r. applies the temporary exemption from applying IFRS 9 for predominant insurance entities as permitted by the amendments to IFRS 4. The IFRS 4 amendments postpone the implementation of IFRS 9 until the effective date of the new insurance contracts standard IFRS 17, which is expected to be 1 January 2023. Due to this exemption there is currently no impact of IFRS 9 on the consolidated financial statements of a.s.r. but it may have a significant impact on shareholders’ equity, net result and/or other comprehensive income and on the consolidated financial statements of a.s.r. in 2023. The required disclosures as a result of the temporary exemption from applying IFRS 9 have been provided in 2019 consolidated financial statements chapter 6.7.3 Fair value of financial assets based on SPPI test results.
Classification and measurement The classification and measurement of financial assets under IFRS 9 will depend on a.s.r.’s business model and the instrument’s contractual cash flow characteristics. These may result in financial assets being recognised at amortised cost, at fair value through other comprehensive income (equity) or at fair value through profit or loss. In many instances, the classification and measurement under IFRS 9 will be similar to IAS 39, although certain differences will arise. The classification of financial liabilities remains unchanged. The final outcome of the classification and measurement will be highly dependent on the interaction between IFRS 17 insurance contract accounting and IFRS 9 accounting for financial assets and liabilities, taking into account decisions and guidance prepared in the IFRS 17 and IFRS 9 implementation project.
Level 3. Fair value not based on observable market data The fair value of the level 3 assets and liabilities are determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable current market transactions in the same instrument and for which any significant inputs are not based on available observable market data. The financial assets and liabilities in this category are assessed individually.
Valuation techniques are used to the extent that observable inputs are not available. The basic principle of fair value measurement is still to determine a fair, arm’s length price. Unobservable inputs therefore reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are generally based on the available observable data (adjusted for factors that contribute towards the value of the asset) and own source information.
1 Not measured at fair value on the balance sheet and for which the fair value is disclosed.
The method of determining the fair value of the mortgage equity funds is similar to that of mortgage loans, however it excludes assumptions for originating cost and is determined within the funds structure.
For the categories residential, offices and other in applying the discounted cash flow method, the significant inputs are the discount rate and market rental value. These inputs are verified with the following market observable data (that are adjusted to reflect the state and condition, location, development potential etc. of the specific property): • Market rent per square meter for renewals and their respective re-letting rates; • Reviewed rent per square meter; • Investment transactions of comparable objects; • 10 Year Dutch Government Bond Yield (%) as published by the DNB.
Income capitalisation method Under the income capitalisation method, a property’s fair value is estimated based on the normalised net operating income generated by the property, which is divided by the capitalisation rate (the investor’s rate of return). The difference between gross and net rental income includes the same expense categories as those for the discounted cash flow method with the exception that certain expenses are not measured over time, but included on the basis of a time weighted average, such as the average lease up costs. Under the income capitalisation method, rents above or below the market rent are capitalised separately.
IV. Financial instruments: asset-backed securities The fair value of the asset-backed securities is based on quotes published by an independent data vendor.
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 (purchase gain), 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.
Goodwill has an indefinite useful life and is not amortised. a.s.r. performs an impairment test annually, or more frequently if events or circumstances warrant so, to ascertain whether goodwill has been subject to impairment. As part of this, the carrying amount of the cash-generating unit to which the goodwill has been allocated is compared with its recoverable amount. The recoverable amount is the higher of a cash-generating unit’s fair value less costs to sell and value in use. The carrying value is determined as the net asset value including goodwill. The methodologies applied to arrive at the best estimate of the recoverable amount involves two steps.
If the outcome of the first step indicates that the difference between the recoverable amount and the carrying value may not be sufficient to support the amount of goodwill allocated to the CGU, step two is performed. In step two an additional analysis is performed in order to determine a recoverable amount in a manner that better addresses the specific characteristics of the relevant CGU.
Should VOBA’s carrying amount exceed the difference between the carrying amount of the liabilities arising from insurance contracts and the liabilities identified as part of the LAT and no other adjustment is made to the liabilities as a result of the LAT outcomes, VOBA is impaired to a level where the values are equal. This is charged to the income statement as an impairment loss.
Investment property is primarily recognised using the fair value model. After initial recognition, a.s.r. remeasures all of its investment property (see accounting policy B) whereby any gain or loss arising from a change in the fair value of the specific investment property is recognised in the income statement under fair value gains and losses.
Residential property is generally let for an indefinite period. Other investment property is let for defined periods under leases that cannot be terminated early. Some contracts contain renewal options. Rentals are accounted for as investment income in the period to which they relate.
Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include: • Derivatives that do not qualify for hedge accounting (see accounting policy B and H); • Financial assets, designated by a.s.r. as carried at fair value through profit or loss. This option is available whenever: - It eliminates or significantly reduces a measurement inconsistency that would otherwise arise from measuring assets or liabilities on different bases (accounting mismatch); - a.s.r. manages a group of financial instruments (assets, liabilities or both) on the basis of fair value in accordance with a documented risk management or investment strategy; or - The financial assets contain one or more embedded derivatives and a.s.r. does not separate the derivative from the host contract; and
Incurred but not reported (IBNR) losses are also taken into account. IBNR is estimated by reference to historical loss patterns. The current economic climate is reflected, and account is taken of potentially higher credit risk based on an analysis of the economic situation.
H. Derivatives Derivatives are primarily used by a.s.r. for hedging interest rate and exchange rate risks, for hedging future transactions and the exposure to market risks. Derivatives are mandatorily measured at fair value through profit or loss. a.s.r. does not apply hedge accounting.
Additional provisions are generally recognised for realised gains or losses on financial assets allocated to insurance contracts if and to the extent that the current interest rate is lower than the interest rate that was used in the pricing principles at inception of the insurance contract.
Liabilities arising from life insurance contracts Future obligations in respect of policy benefits for life insurance contracts are calculated based on a net premium method (the present value of future obligations less the present value of future net premiums) using the same principles as for calculating the premium at inception of the insurance contract. A provision for future administrative expenses is recognised for contracts whose future premium payment period is shorter than the future maturity of the insurance policy, or for which no more premiums are paid. A provision is recognised for part of longevity risk associated with life insurance contracts (e.g. group life and annuity contracts), a.s.r. manages the longevity risk exposure in combination with the mortality risk exposure. No addition to the provision for longevity risk is recognised if the outcome of the LAT (see section ‘IFRS LAT Life’ later in this chapter) indicates that the total amount of the provision is adequate.
Additional provisions are generally recognised for realised gains or losses on financial assets allocated to: • Insurance contracts with participation features; • Non-participating insurance contracts if and to the extent that the current interest rate is lower than the interest rate that was used in the pricing principles at inception of the insurance contract.
Expected entitlements to discretionary benefits are recorded in equity. Once a decision has been taken for discretionary participation features, any related benefits are recognised as liabilities.
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 OCI).
would be triggered. This would be the case when current interest rates are lower than the interest rates that were used in the pricing principles at inception of the insurance contract.
Shadow accounting is applied to unrealised value changes in fixed-income financial assets available for sale, specific financial assets designated at fair value through profit or loss, and specific derivatives (i.e. swaptions and interest rate and inflation rate swaps) that are backing the liabilities arising from insurance contracts. The related adjustment to the insurance liability is recognised in OCI if, and only if, the unrealised gains or losses are recognised in other comprehensive income. Unrealised gains and losses on assets at fair value through profit or loss are recognised in the income statement with a corresponding adjustment for shadow accounting in the income statement under ‘Net insurance claims and benefits’.
No shadow accounting is applied to: • Impairments; and • Revaluations of debt instrument that have been subject to impairment.
IFRS Liability Adequacy Test Life The LAT is performed at each reporting date to assess the adequacy of insurance liabilities. The insurance liabilities for the LAT are calculated in accordance with Solvency II, using the Ultimate Forward Rate (UFR) rate prevailing at the reporting date.
Where applicable, the participating features of the insurance contracts, such as profit sharing, are taken into account in the future cash flows. The cash flows are discounted using the Euro swap curve including a credit risk adjustment (CRA), with UFR and volatility adjustment (VA).
Options embedded in insurance contracts Options embedded in insurance contracts are not stated separately. They are treated in the same way as the host contract. These options are recognised in the adequacy test, taking into consideration both the intrinsic and the time value.
Some unit-linked contracts include guaranteed benefits at maturity. To cover these guarantees, an additional obligation is recognised in the balance sheet that depends on the current fund value and the level of the guarantee. Actuarial assumptions about future fund developments and mortality are taken into account in the determination this obligation.
ASR Levensverzekering N.V. (hereafter a.s.r. leven) administers most of the post-employment benefit plans and holds the investments that are intended to cover the employee benefit obligation. These investments do not qualify as plan assets in the consolidated financial statements under IFRS.
Actuarial assumptions may differ from actual results due to changes in market conditions, economic trends, mortality trends and other assumptions. Any change in these assumptions can have a significant impact on the DB obligation and future pension costs.
M. Acquisitions (Business combinations) Acquisitions are accounted for according to the acquisition method, with the cost of the acquisitions being allocated to the fair value of the acquired identifiable assets, liabilities and contingent liabilities. Goodwill, being the difference between the cost of the acquisition and a.s.r.’s interest in the fair value of the acquired identifiable assets, liabilities and contingent liabilities on the acquisition date, is capitalised as an intangible asset. Any gain as a result of a purchase is recognised directly in the statement of profit or loss. Any change, in the fair value of acquired assets and liabilities at the acquisition date, determined within one year after acquisition, is recognised as an adjustment charged to goodwill in case of a preliminary valuation. Adjustments that occur after a period of one year are recognised in the income statement. Adjustments to the purchase price that are contingent on future events, and to the extent that these are not already included in the purchase price, are included in the purchase price of the acquisition at the time the adjustment is likely and can be measured reliably.
Financial statements 2019 | 6.3 Accounting policies 156 6.3.5 Other accounting policies
Common control transactions and mergers If and when common control transactions or legal mergers between entities under common control occur, the pooling of interest method is applied from the acquisition date. Goodwill and intangible asset identified in an initial business combination continue to be presented and recognised by the acquirer.
Non-life insurance contracts Non-life insurance contracts are contracts that provide cover that is not related to the life or death of insured persons. These insurance contracts are classified into the following categories: Disability, Health, Property & Casualty (motor, fire and liability) and Other.
P. Segment information At organisational level, a.s.r.’s operations have been divided into five 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 three separate segments being the Asset Management, Distribution and Services and Holding and Other segment. There is a clear difference between the risk and return profiles of these five segments.
Intersegment transactions or transfers are conducted at arm’s length conditions. For detailed information per segment, please see chapter 6.4, ‘Group structure and segment information’.
The statement of cash flows recognises interest received and paid, and dividends received within cash flows from operating activities. Cash flows from purchasing and selling investments and investment property are included in cash flows from operating activities on a net basis. Dividends paid are recognised within cash flows from financing activities.
T. Property and equipment Property held for own use Property held for own use comprises of land and office buildings and is measured at fair value (revaluation model) based on annual valuations, conducted by external, independent valuators with adequate professional expertise and experience in the specific location and categories of properties.
They are subsequently measured at fair value, including any unrealised fair value changes in equity, taking into account any deferred tax liabilities. For the method of determining the fair value reference is made to accounting policy B for investment property.
Repair and maintenance costs are charged to the income statement in the period in which they are incurred. Expenses incurred after the acquisition of an asset are capitalised if it is probable that the future economic benefits will flow to a.s.r. and the cost of the asset can be measured reliably.
Equipment is depreciated over its useful life, which is determined individually (usually between three and five years). Repair and maintenance costs are charged to the income statement in the period in which they are incurred. Expenses incurred after the acquisition of an asset are capitalised if it is probable that the future economic benefits will flow to a.s.r. and the cost of the asset can be measured reliably.
When the application of the equity method produces information that is not relevant to the investors, a.s.r. may use the exemption of IAS 28 to measure the investments in those associates at fair value through profit or loss in accordance with IAS 39. a.s.r. applies fair value measurement for investments in real estate equity funds and mortgage equity funds, over which a.s.r. has significant influence.
Property developments consist of property under development commissioned by third parties. Development property is measured at cost including any incremental costs (if a.s.r. expects to recover those costs), directly related costs to the contract (i.e. labour, materials, allocation of directly related costs, payments to subcontractors) and construction period interest, less any invoiced instalments and impairments.
Revenue on property development is primarily accounted for at the moment the property is sold. This is a performance obligation satisfied at a point in time. The point in time is the moment a customer obtains control of the promised asset.
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 change in value of property for own use (see accounting policy T); • Reserve for discretionary participation features (see accounting policy I); • Reserve for exchange rate differences arising from assets available for sale.
Other equity instruments This item represents the par value of the other equity instruments. Costs directly attributable to the equity issue and the tax impact thereof are recognised in retained earnings.
Treasury shares Treasury shares are a.s.r.’s own ordinary shares that have been issued and subsequently reacquired by a.s.r. Treasury shares are deducted from equity, regardless of the objective of the transaction. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the instruments. If sold, the difference between the carrying
Financial statements 2019 | 6.3 Accounting policies 160 amount and the proceeds is reflected in retained earnings. The consideration paid or received is recognised directly in shareholders’ equity. All treasury shares are eliminated in the calculation of earnings per share and dividend per common share.
Dividends for the year that are approved after the reporting date are treated as an event after the reporting date.
AA. Leasing A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for a consideration. For contracts that contain a lease component and one or more additional lease or non-lease components a.s.r. applies the practical expedient not to separate non-lease components from lease components.