Part I a.s.r. at a glance 5 1.1 Profile and key figures 6 1.2 Message from the CEO 10 1.4 Strategy and positioning 15 1.5 Brand policy and distribution model 16
Part V Report of the Supervisory Board 63 5.1 Report of the Supervisory Board 64 5.1.1 Financial statements and profit appropriation 64 5.1.2 Issues addressed by the committees 67 5.1.3 Management and supervision 69 5.1.4 Corporate governance 74 5.1.5 Remuneration policy 76 5.1.6 Final word from the Supervisory Board 79
This Annual Report has been prepared based on the G3.1 sustainability reporting guidelines of the Global Reporting Initiative (GRI) as well. These guidelines are a leading benchmark for sustainability reporting. a.s.r.’s sustainability report is governed by level C of the G3.1 guidelines. Part VII of this Annual Report contains a GRI index table, indicating where in the Annual Report the reader can find GRI disclosures. Also, additional information is provided that has not been included in the Annual Report itself. The information contained in the GRI index table has not been audited.
ASR Nederland N.V., hereinafter referred to as a.s.r., is the Dutch insurance company for all types of insurance. Via the a.s.r., De Amersfoortse and Ditzo brands, and specialist labels such as Europeesche Verzekeringen and Ardanta, a.s.r. offers a wide range of financial products covering P/C, life and income insurance, group and individual pensions, health insurance, travel and leisure insurance, and funeral insurance. With the exception of a number of funeral portfolios in Germany and Belgium, a.s.r. operates in the Dutch market.
Besides insurance products, the a.s.r. product range includes savings and investment products and bank savings products. In addition, a.s.r. invests in real estate development and management. Having generated € 3,923 million in gross premium income in 2013 and servicing some 2 million customers, a.s.r. is the fifth largest insurance company in the Netherlands.
It is a.s.r.’s priority to treat customers fairly. Customers can choose to take out insurance from intermediaries or through direct channels. a.s.r.’s core values of being personal, approachable, individual and authentic are reflected in everything we do. a.s.r. wants to give customers good reason to choose its products. But most of all: a.s.r. wants to show customers that they have made the right choice when they call upon their insurer. Customers are insured against risks they cannot bear themselves. a.s.r. is responsible with the insurance premiums and funds entrusted to it. A person insuring their pension with a.s.r., for instance, should be able to trust that their policy will yield pension benefits in 30 years’ time.
In its policies, a.s.r. takes account of the interests of customers, employees and a broad group of external stakeholders (business partners, shareholders, regulators, politicians, regional governments, industry associations, trade unions, non-governmental organizations (NGOs) and local communities). a.s.r.’s corporate social responsibility and concern for the environment are demonstrated by its compliance with the ESG principles of socially responsible investment (see Part III, Corporate Social Responsibility).
In 2013, the insurers once again faced a challenging market. Margins continued to come under pressure, consumer spending fell and businesses closed down. For customers, price is increasingly important in their choice of insurance products. a.s.r. is focusing on the long term by offering fair and transparent products that allow customers to cover risks responsibly. Our strict cost discipline helped us to reduce our costs to an even lower level in 2013, allowing us to offer our customers attractively priced products. We will also further tighten our focus on risk assessment and claims management. Our deliberate choice of value over volume has led to lower premium income in some market segments.
Helping by taking action as an expression of who we aspire to become, resulted in three interesting initiatives in 2013 to underline our commitment to society. Following the start of the FeyBlij campaign early in the year in support of Rotterdam Zoo Blijdorp, we supported a number of independent advisors by facilitating their local media campaigns. Ditzo concluded 2013 by donating part of its media budget for Ditzo healthcare insurance through a social media campaign to the Netherlands Cancer Institute. The dedicated website developed by Ditzo (kijkkankerdewerelduit.nl) attracted almost four million page views. The accompanying YouTube movie was viewed around 1.1 million times. Thanks to all the ‘likes’, a total of one million euros was donated to the Netherlands Cancer Institute. That money is now being put towards cancer research.
a.s.r. posted a profit of € 281 million for 2013. This is our fifth year in profit in a row since gaining our independence in 2008. Solvency remains strong at 268%. Disregarding the additional WGA-ER charge item, the ratio between premium income and claims (the combined ratio) improved in the Non-Life segment. However, our deliberate choice of value over volume led to lower premium income (4%) in the Non-Life segment. At the same time, we note that our updated Voordeelpakket (non-life discount package) has been appreciated by consumers since its introduction.
Notable new products that a.s.r. brought to market in 2013 included: • Lijfrente spaarrekening (annuity-linked savings account). This is a bank savings product offered by a.s.r. whereby the customer fully manages and consults the account online. The deposits benefit from a tax break. The lijfrente spaarrekening is the successor of the lijfrente opbouwrekening.
• Voordeelpakket (non-life insurance package). The updated Voordeelpakket is a complete package of non-life insurance policies. This package offers customers a selection of policies that are appropriate to their circumstances at different times of their lives, including advice from an advisor. Customers also benefit from a discount if they take out several policies within the package.
• BeterDichtbij (health insurance policy). The BeterDichtbij health insurance policy is an a.s.r. initiative in cooperation with an association of 42 regional hospitals (Samenwerkende Algemene Ziekenhuizen). In its initial review, the Dutch Consumers’ Association gave the insurance a four out of five stars rating.
• De Amersfoortse campaign. This TV campaign was not just intended to position business owners and De Amersfoortse; a.s.r. also supports business owners via a crowd funding platform where they can pitch their ideas that are still in need of an investment. De Amersfoortse and a.s.r. will also be investing in these ideas. Preparations for this crowd funding platform took place in 2013. It will launch in 2014.
• Advisor campaign. This campaign, which built on the a.s.r. branding campaign, helped around 50 independent advisors raise their profile in their own region. The campaign included regional radio adverts and outdoor advertising posters.
Three other highlights of 2013: 1. Minister of Finance Jeroen Dijsselbloem chooses two-track approach to a.s.r. privatization In August the Minister of Finance, Jeroen Dijsselbloem, informed the Dutch Parliament of his views on how to return a.s.r. to private ownership. There are two options on the table for the sale of a.s.r.: an IPO or a merger with an insurer already active in the Dutch market. The Executive Board sent all employees a message by email stating that this specifically means that, in the coming period, a.s.r. will make (further) preparations for an IPO, and that options to merge (‘consolidate’) with another insurer active in the Netherlands will be seriously studied.
2. a.s.r. said farewell to Feyenoord After 22 years as main sponsor of Feyenoord football club, it was time for a.s.r. to bid Feyenoord farewell in May. Before the final match of the season, a.s.r.’s Chief Executive Officer, Jos Baeten, addressed a full stadium from the centre spot to thank the club and the fans. Club Chairman, Eric Gudde, had a word of thanks for a.s.r.: ‘a.s.r. has been a sponsor that has always stood behind Feyenoord, in good times and in bad. Loyalty has been key. It is part of this club and part of the supporters of this club.’
Awards, prizes and other honours in 2013 In the development of a.s.r. towards becoming a customer-oriented and transparent insurer, any awards and prizes are a recognition of the positive changes within a.s.r. A selection of prizes awarded to a.s.r. in 2013 or awards which were announced in 2013: Customer focus • Product comparison website Moneyview awarded a.s.r. five stars for a number of products in 2013.
• The Dutch Consumers’ Association was enthusiastic about the vehicle personal injury insurance offered by a.s.r. The test panel gave this insurance product a score of 9, the highest score in comparison with other products.
• The Dutch Consumers’ Association recommended taking out healthcare insurance with Ditzo based on price, the cover provided and the terms and conditions. The recommendation was based on the first healthcare auction that the Association had organized.
Everyone at a.s.r. works each day according to the guiding principle that they can help make the insurance business better. Using alternative business models and starting from an alternative mindset, they revert back to the roots of insurance, i.e. helping people, and back to the philosophy that working together provides certainty to all. Insurance is the essence, and providing certainty is a.s.r.’s reason for being. Helping by taking action.
The legal predecessors of a.s.r. have put service in insurance on the map in the Netherlands. Our history goes back to 1720, and sharing risk was the founding principle. This still holds true for a.s.r. today.
a.s.r. is confident that it can prove its right to exist by thinking in terms of customer interests and perception. This is something that all employees work towards each day. And it is the employees that give the service of a.s.r. a face and determine its quality. a.s.r.’s products and service must match these. Clarity and simplicity combined with efficient business processes and a robust financial position are essential. Customers may rest assured that their risks are covered by an insurer that operates sensibly and avoids waste, but that also listens to them and puts itself in its customers’ shoes.
With the a.s.r., De Amersfoortse, Ditzo, Europeesche Verzekeringen and Ardanta brands, a.s.r. offers a wide range of financial products covering life insurance, non-life insurance, income protection insurance, group and individual pension insurance, health insurance, travel and leisure insurance, and funeral insurance.
a.s.r. embraces a hybrid distribution model, which has been designed to allow customers to manage their insurance themselves and solicit advice when they need it. Customers can always contact a.s.r. about easily resolvable or administrative issues, for instance by calling or sending an email, or they can ask an intermediary for tailored advice. a.s.r. also puts customers’ interests first in developing insurance packages. These are based on customers’ life events, such as buying a house or children leaving home. This makes insurance personal and lays the foundation for different pricing methods.
Ditzo is the online provider of non-life and health insurance policies for people who like to manage their insurance themselves. Customers can take out household contents insurance, third-party liability insurance, residential premises insurance, travel and motor vehicle insurance, and health insurance online.
• Net results 2013 at € 281 million - Non-Life segment: healthy margin (excluding WGA-ER charges) at a combined ratio of 96.5% - Life segment: better performance thanks to cost reduction and higher investment returns - Other segment: better performance in Banking business and scale-down of risks in real estate development • Operating expenses down another € 40 million, i.e. 7%, dropping from € 587 million to € 547 million • Gross premiums written down 9% to € 3,923 million (2012: € 4,290 million) due to market developments and focus on profitability • DNB solvency ratio robust at 268% (year-end 2012: 293%)
Operating expenses, Life and Non-Life -439 -449 Operating expenses, Other -108 -138 Total operating expenses -547 -587
Net results, Non-Life (including additional WGA-ER charges) 59 Net results Life 275 Net results Other -79 Net results 255
After change in accounting policies under IAS19R Net results, Non-Life 5 59 Net results Life 367 275 Net results Other -91 -18 Net results 281 316
1 In 2013, a change in accounting policies was implemented in relation to the recognition of the a.s.r. pension plan (IAS19R), as a result of which the comparative figures for 2012 of the Other segment were restated.
Total equity (including revaluation of real estate) 3,799 3,537 Total equity (IFRS) 3,015 2,663 Return on equity (IFRS) 10.6% 14.1%
Developments in 2013 The insurance market continued to pose challenges in 2013 due to a fall in consumer spending, lagging economic growth and a rising number of insolvencies. Against this backdrop, a.s.r. managed to further improve its performance in 2013.
Margins in the Non-Life segment are sound. Disregarding the additional expense item for Partial Incapacity Policy excess insurance (WGA-ER), all P/C divisions contributed profits. In order to continue the robust performance of the P/C business, increased attention was placed in 2013 on managing claims, mainly by focusing on portfolio management and improving returns, with good results. Consequently, premium income from the other P/C business was weighed down. The market share of the Occupational Disability business was strengthened, and a.s.r. became a permanent player in the Health Insurance market thanks in particular to the success of Ditzo.
The performance of the Life segment improved significantly, which was attributable to lower costs and higher investment returns. The traditional Individual Life business remains an area for concern because it continues to contract. Since interest-rates remain low, a.s.r. has chosen value over volume in the pensions market; the priority is to retain existing customers. This has proven to be successful.
Thanks to stringent capital and risk management, the solvency ratio remained robust at 268%.
a.s.r. sets great store by customer excellence and this is beginning to yield dividends. The Net Promoter Score is the highest since the first measurement in 2009. This means that more customers than ever before are recommending a.s.r. to their family, friends, colleagues or business partners. Among insurers, a.s.r. is ranked fourth based on the Net Promoter Score. New products such as the Voordeelpakket (non-life insurance discount package) and Werknemers Pensioen (Employee Pension) received a warm welcome from both intermediaries and customers.
Gross premiums written Compared to 2012, premium income was down 9% to € 3,923 million (2012: € 4,290 million). The decline relates to both the Non-Life segment (-4%) and the Life segment (-12%).
Operating expenses a.s.r. again structurally lowered its operating expenses; a 7% fall to € 547 million was achieved in 2013. In addition to focusing on cost reduction, a.s.r. continues to make targeted investments, for instance by introducing a new pension product, improving our services (such as the new website launched by Ardanta), by streamlining our processes and systems, and introducing a new IT system for administrating occupational disability.
Breakdown of employee base: Net results The net results 2013 amounted to € 281 million. This amount reflects the higher profitability of the Non-Life segment, which was more than cancelled out by the additional WGA-ER charges (€ 137 million). Disregarding this additional provision, the net results of the Non-Life segment showed strong improvement by rising to € 142 million at a combined ratio of 96.5%.
a.s.r. is engaged in a dialogue with the Works Council and the trade unions to talk about adjustments to the conditions of employment. a.s.r. wants to be a sustainable and future-proof Dutch business by offering easy-to-understand and transparent products as well as keeping costs low. With this in mind, a.s.r. has chosen to reduce the costs associated with its conditions of employment, starting from the principle that all employees should receive pay and benefits that are not necessarily better than those offered by other Dutch businesses, but that are appealing to both current employees and new colleagues.
On 1 May 2014 Chris Figee (41) will join the Executive Board as CFO. He will succeed Roel Wijmenga, who is leaving a.s.r. after 5 years. Chris (H.C.) Figee was previously employed as Director Group Finance at Achmea. In the past he worked for Aegon and McKinsey. Roel Wijmenga joined a.s.r. early 2009, just when the company became independent.
The renovation of the a.s.r. head office at Archimedeslaan in Utrecht will enter phase two in 2014. The first renovated part of the building was completed in March 2014. It houses about 1,600 people who now work in a new, sustainable environment based on the principles of the New World of Work. Their new workplace fully meets the present-day occupational health and safety standards. The renovation of the whole building is scheduled to be completed in 2015. As a result, a.s.r. will ultimately save € 20 million in operating expenses annually.
• Gross premiums written down 4% to € 2,392 million (2012: € 2,487 million)
Profile The Non-Life segment comprises all types of P/C insurance policies that a.s.r. offers to consumers and businesses. These policies insure risks related to motor vehicles, fire, travel and leisure, liability, legal assistance, occupational disability and medical expenses. The policies are offered under the following labels: a.s.r., De Amersfoortse, Europeesche Verzekeringen and Ditzo, both via the intermediary and the direct channels.
Market developments The market for traditional P/C insurance (motor, fire, liability, etc.) was under pressure in 2013. Competition on pricing remained fierce in the reporting period. The autumn storms resulted in more and higher claims for motor vehicles and fire insurance. The persistent economic crisis led to an increase in the number of business closures and reduced the financial scope of businesses, which affected the Occupational Disability business. The overall occupational disability market contracted slightly as a result.
Against all expectations, fewer people switched health insurance providers in 2013. The switching percentage for the time being is 5.7%. Consumers not only took out fewer supplementary policies, but they also cut down on coverage. In addition, they tended to prefer a higher policy excess, thereby reducing their premiums. Through Ditzo and De Amersfoortse, a.s.r. solidified its position in the health insurance market with more than 300,000 customers.
In line with Dutch market developments, the scale of partially fit and new claims was also higher than expected for a.s.r. In 2013, this resulted in an additional WGA-ER charge of € 137 million after tax (2012: € 67 million) due to an increase in the number of prior-year incapacity claims and an overrepresentation of the partially fit in the WGA population.
Additional measures have already been taken to manage and provide insight into claims development on an ongoing basis. Stricter guidelines for accepting new policyholders, more in-depth and verifiable claims processing, and the introduction of a new premium model geared to the employer’s risk profile will contribute vastly to the performance in this area.
Operating expenses On a comparable basis, operating expenses fell by € 3 million to € 240 million and the cost-premium ratio rose from 9.8% to 10.5%. This increase was due to a decrease in premium income. Due to investments in strategic projects, including a new IT system for the Occupational Disability Insurance business in the autumn of 2013, operating expenses in the Non-Life segment did not decline as sharply. In the long run, this new IT system is meant to structurally lower costs by reducing the number of manual actions, thereby increasing efficiency and quality, and freeing up time for advising customers. This unites cost awareness and customer focus in one initiative.
Gross premiums written a.s.r. chooses value over volume. Because of that choice in particular, gross premiums written in the Non-Life segment were down 4% to € 2,392 million (2012: € 2,487 million).
Premium income was up in the Health Insurance and Group Occupational Disability Insurance businesses. The Health Insurance portfolio grew for the second year in a row (+8%), with customers mainly taking out policies online via Ditzo. However, in keeping with market developments, there was
28a.s.r. 2013 annual report Report of the Executive Board also an increase in the number of policyholders cancelling their supplementary insurance or opting for a more limited health insurance package at a lower premium.
Profitability-improving measures and the reassessment of risks in the Motor Insurance and Fire & Property businesses resulted in a decline in premium income. On the other hand, the net results and the combined ratio improved. 2013 saw the introduction of the Vernieuwd Voordeelpakket, an improved and customer-oriented package combining Non-Life products. This package was received well by consumers.
Achievements in 2013 a.s.r. attaches great value to treating customers fairly. The complaints management process was greatly improved in 2013, not just a.s.r.-wide but also within the Non-Life segment, for instance by setting up Customer Contact Centres and using webcare. Thanks to these efforts, a.s.r. was awarded the Keurmerk Klantgericht Verzekeren (Customer-Oriented Insurance Quality Mark) in 2013.
The updated Voordeelpakket, a comprehensive P/C insurance package, was introduced in 2013. With advise from an intermediary, this package offers customers a selection of policies that are appropriate to their circumstances at different times of their lives. The underwriting performance of all product lines improved in 2013 (exclusive of WGA-ER). a.s.r. only sells occupational disability insurance under the De Amersfoortse label, which initiated a transformation in 2013 from being an income protection insurer to an insurance company for business owners.
De Amersfoortse helps business owners to harness and protect their own labour capacity and that of their employees, with a view to providing income security and business continuity.
In addition to these new group insurance products, De Amersfoortse is developing a service package focusing on prevention and return to work. Examples of prevention initiatives are a health questionnaire (De Gezondheidsenquête) and a business profile (Het OndernemerProfiel). The former is a vitality screening of the business owner and the latter a vitality screening of the business and of how the business owner manages it. An example of return-to-work services is the introduction of a returnto -work assistant or manager.
With its products and services, De Amersfoortse targets self-employed business owners and SMEs with a headcount of up to 250.
With respect to health insurance, expectations are that basic coverage will continue to be stripped down and that customers will increasingly opt for low basic premiums and a higher policy excess.
• Strong increase in net results to € 367 million (2012: € 275 million) • Operating expenses down 11% to € 199 million (2012: € 223 million) • Gross premiums written down 12% to € 1,666 million (2012: € 1,891 million) • New life insurance contracts sold (APE) down to € 65 million (2012: € 87 million). Introduction of new Werknemers Pensioen (Employee Pension) in Q4
Market developments The Individual Life insurance market is contracting due to the increasing popularity of bank savings products and further cuts in tax facilities. This market is declining fast and will continue to do so. Consumers increasingly opt for bank savings products to accumulate capital. They are looking for easy-to-understand, transparent and cost-efficient products. Insurance companies are responding to their needs by offering basic products at competitive prices and implementing structural cost reductions. Competition is fierce and margins are under pressure.
The market for funeral insurance is saturated. Achieving growth is a tall order. The ban on commissions is one of the reasons for the 30% to 40% drop in sales of new policies by intermediaries. Service, with a focus on what the customer actually needs rather than promoting products, is the only way for an insurance company to distinguish itself from the competition and truly add value. Customers are showing hybrid behaviour. They use multiple channels and needs are different in each customer segment.
Premium income in the Pensions business was under pressure and fell by 6%. Most of the existing pension contracts remained in effect thanks to an active retention policy. Late 2013, De Amersfoortse introduced the Werknemers Pensioen (Employee Pension). With this new pension proposition, a.s.r. offers a pension product that is transparent and offers freedom of choice, for both employees and employers. Employees can decide for themselves how much risk they are willing to take. Costs are always low and the policy is fully web-based.
The new Life Contact Centre provides much improved customer service with 40% fewer people. In order to guarantee service continuity and bring about further structural cost reductions, the Life business has outsourced some of its activities. This also helps to make costs more flexible. The entire portfolio, including 40 employees, is involved in this process. Further initiatives will be taken in 2014 to make structural cost reductions. The business was awarded the Keurmerk Klantgericht Verzekeren (Customer-Oriented Insurance Quality Mark) and the integration of the Paerel organization into the life business was completed.
In the Pensions business, a deliberate choice was made for value over volume. Focus was on continuing existing contracts and this strategy was successful. The Werknemers Pensioen (Employee Pension), a defined contribution product offered by De Amersfoortse, was introduced in Q4 2013. As a result, the pensions portfolio is again complete and up-to-date.
35a.s.r. 2013 annual report Report of the Executive Board 2.1.4 Other segment
Net results -91 -18 Net results (reported in 2012) - -79 1 In 2013, a change in accounting policies was implemented in relation to the recognition of the a.s.r. pension plan (IAS19R), as a result of which the comparative figures for 2012 of the Other segment were restated.
This also affected the consolidated figures for 2012. This change has an accounting effect on the net results, expenses and total equity, as well as impacting return on equity.
Profile The Other segment comprises the non-insurance business, i.e. the banking operations (a.s.r. Bank and a.s.r. Hypotheken (mortgages)), SOS International (emergency desk), a.s.r. vastgoed ontwikkeling (real estate development) and holding companies. In addition, the Other segment is used to recognize certain holding-related expenses. The Ditzo distribution channel was integrated into the Non-Life segment early in 2013; it no longer falls under the Other segment.
Operating expenses At a.s.r. Bank and in the Mortgage business, a drop in IT and marketing expenses and the reduction in external FTE resulted in lower operating expenses. Together with the effect of Ditzo’s transfer from the Other segment to the Non-Life segment, operating expenses for the Other segment were lower, amounting to € 108 million (2012: € 138 million).
These new products have been successful since their launch. As a result, customer deposits have shown a 10% rise, reaching € 889 million.
Property development In keeping with the strategy of the past few years, a.s.r. vastgoed ontwikkeling (property development) took important steps to reduce risk exposures in its portfolio. Developments have been scaled down, phased out and reduced. The property exposure (balance sheet position plus completion obligations) of the Property Development business was lowered by 25% in 2013; in line with this, total assets, pipeline revenue, the scale of the organization and internal financing were all scaled back in 2013.
Investments on behalf of policyholders 8,049 8,217 Other assets 6,688 7,345 Total assets a.s.r. 43,466 45,639
Nearly 75% of the government bond portfolio of € 9.6 billion has been invested in Dutch and German sovereign bonds. In the course of 2013, the exposure to German government bonds was increased at the expense of Dutch debt instruments. At € 36 million, the exposure to government bonds of peripheral eurozone countries remained highly limited. The exposure to financials was reduced by 16%, from € 5.5 billion to € 4.6 billion, in the reporting period. Senior and subordinated bonds, as well as covered bonds were scaled back through exchanges and sales. The fall in exposure to financials was due, in part, to the reclassification of a number of specific bonds from ‘bonds issued by financial’ to ‘government bonds’. The exposure to non-financials was virtually unchanged (+2% at € 3.4 billion).
Property management a.s.r. vastgoed vermogensbeheer, the Property Development business, invests and manages retail and residential properties, and agricultural land. a.s.r. vastgoed vermogensbeheer seeks stable development of the value of real estate for users, investors and society at large, through active fund, asset and property management.
a.s.r. vastgoed vermogensbeheer issued second and third placements of the ASR Dutch Prime Retail Fund in 2013. As a result, the total share of the fund that has been placed since its creation now stands at over € 500 million. The ASR Dutch Prime Retail Fund plans a fourth placement in 2014.
39a.s.r. 2013 annual report Report of the Executive Board 2.2 Capital management
Capital policy a.s.r. is committed to maintaining a robust capital base that forms a solid foundation for achieving its corporate targets. The a.s.r. capital policy ensures prudent monitoring and control of its solvency ratios, both at group and divisional level. This makes the effective execution of the capital policy a core task for risk management and one of the priorities of a.s.r. Capital management comprises all activities that focus on controlling, managing and monitoring any available and required solvency.
Capital and solvency Equity, including changes in the value of real estate, was up 7%, rising from € 3,537 million to € 3,799 million. This increase was mainly attributable to the net results and increases in gains on unrealized changes in the value of equities and fixed-income securities. The fair market value of investment property exceeded its carrying amount by € 784 million, a € 90 million fall on 2012. Disregarding these changes in value, equity increased by 13% to reach € 3,015 million.
The sensitivity of the solvency ratio (inclusive of the UFR) to the relevant stress scenarios was unchanged from year-end 2012 (-64%). The sensitivity to fluctuations in share prices grew to a limited extent due to higher exposures to equities as a result of purchases and price increases. Solvency has become less sensitive to changes in spreads. The sensitivity to decreases in the value of real estate dropped to a limited extent (from -15% to -13%), primarily due to sales.
For the regulatory solvency ratio excluding UFR the effect is adverse, the interest-rate shock -1% has a negative impact
a.s.r. has more than adequate scope for meeting its minimal funding requirements where appropriate and with the necessary flexibility.
a.s.r. did not raise any additional external financing in 2013. The available financing facilities had not been used at year-end 2013.
The relatively limited funding needs, in combination with the options for raising secured financing, result in ample liquid assets for a.s.r. at this time to carry out its operations.
Ratings a.s.r. wants to achieve a capital position that merits an A rating from Standard & Poor’s. On 23 August 2012, Standard & Poor’s confirmed the A rating of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. It changed its outlook from negative to stable. These ratings were reconfirmed on 19 June 2013.
The Standard & Poor’s ratings were as follows at year-end 2013: Standard & Poor’s ratings Type Rating Outlook Date
ASR Levensverzekering N.V. CCR A Stable 23 August 2012 ASR Levensverzekering N.V. FSR A Stable 23 August 2012 ASR Schadeverzekering N.V. CCR A Stable 23 August 2012 ASR Schadeverzekering N.V. FSR A Stable 23 August 2012
For Standard & Poor’s rating, please log on to the a.s.r. website: www.asr.nl/EN/about-asr
42a.s.r. 2013 annual report Report of the Executive Board 2.3 Risk management
The notes to the financial statements contain a detailed description of risk governance, the risk profile and the related trends in 2013 (see page 113).
In 2013, a.s.r. participated in the Long Term Guarantee Assessment (LTGA) and the ‘Theoretic Solvency Criteria’ (TSC) assessment of DNB. The LTGA is an assessment of the European Supervisor (EIOPA) to test the impact of the market consistent approach on long term guarantee products.
Management of financial risks in 2013 A robust solvency position takes priority over profit, premium income and direct investment income. The Financial Risk Committee assesses the solvency position and the financial risk profile on a monthly basis. Action is taken where appropriate to ensure that the financial risk profile stays within the parameters that have been defined in the a.s.r. risk appetite.
For the purposes of regulatory solvency and the liability adequacy test, a.s.r. was given permission by the regulator to use the ECB AAA government bond curve for discounting insurance liabilities. In July 2013, France faced a downgrade from rating agency Fitch and lost its triple A status. As a consequence, French government bonds were no longer included in the ECB AAA government bond curve, causing the curve for discounting liabilities to drop and leading to a 20% fall in the regulatory solvency ratio. The permission to use the ECB AAA government bond curve was withdrawn in September 2013 at a.s.r.’s request. Since September, insurance liabilities have been discounted using the swap curve as provided by DNB. The effect of this switch to a new discounting curve is a more stable solvency ratio because much of the interest-rate risk is hedged via an overlay of interest-rate swaps. This ties in better with the valuation of the insurance liabilities. In September 2013, the impact of this switch on the regulatory solvency ratio was estimated at -5%.
a.s.r. periodically assesses whether the technical provisions are sufficient to cover insurance liabilities. These provisions were adequate at year-end 2013. The underlying assumptions for assessing the provision are periodically adjusted to economic and non-economic developments. As a result of the increase in life expectancy, the mortality table used for assessing the provision was updated in 2012.
Management of non-financial risks in 2013 The Non-Financial Risk Committee (NFRC) is mandated by the Executive Board to decide on nonfinancial risk policies (the Chairman of the NFRC is the COO of the SME insurance market (member of the Executive Board)). The NFRC monitors that non-financial risks are adequately managed, determines non-financial risk limits at group level and monitors that the risk profile stays within the agreed risk limits. If the risk profile exceeds the limits, the NFRC takes mitigating actions. The NFRC reports to the a.s.r. Risk Committee.
The non-financial risk dashboard was further aligned in 2013 to the risk appetite. The non-financial risk dashboard contains key risk indicators. The non-financial risk dashboard is a tool for business units to assess and identify key risks. Furthermore the non-financial risk dashboard gives insight in the risk profile of the business units.
44a.s.r. 2013 annual report Report of the Executive Board a.s.r. continued to improve its system of internal control. The enterprise wide internal control framework has largely been implemented in the product lines. Operational risks have been identified and assessed and controls are determined and tested from an Enterprise Risk Management perspective. Where needed, plans were devised to further increase their effectiveness. Risk Management will keep monitoring the effectiveness of the controls.
Fundamental changes in the insurance market a. Changes in distribution channel and customer behaviour require a.s.r. to adapt The diminishing insurance market, changes in customer behaviour and the distribution channel require a.s.r to adapt. In addition, the current market is characterized by fierce competition and a growing focus on price by customers, decreasing margins and premium income.
Uncertain financial markets and economic climate The economic climate remains uncertain and forms an unabated high risk for the development of premium and realization of investment returns. Although the risk of unrest in the financial markets remains high, the situation has improved compared to last year. a.s.r. will be vigilant about any developments and has adequate risk control and monitoring in place.
• a.s.r. performed the first test run of the QRT’s in Q4 2013. • a.s.r. participated in the Long Term Guarantee Assessment (LTGA), organized by EIOPA in 2013.
3 Sustainable business practices a.s.r. takes account of sustainability in its business operations wherever possible. This is in keeping with the role that a.s.r. wants to play in society as a responsible insurer.
a.s.r. has identified five areas of priority within its sustainability policy. These areas are insurance, people, investment, environment and society. The principles and objectives of our sustainability policy are established through dialogue with all stakeholders. a.s.r. maintains close contact with a broad group of external stakeholders, including customers, regulators (AFM and DNB), a.s.r.’s shareholder, politicians and ministers, trade bodies and NGOs.
Customer focus The standards of the Customer-Oriented Insurance Quality Mark help a.s.r. to test the level of service provided. In 2013, the Quality Mark was either awarded to, or retained by, the De Amersfoortse, Ditzo and Europeesche Verzekeringen labels despite the more stringent standards. Ardanta met 15 of the 17 standards, but nevertheless failed to retain the quality mark. Worthy of a special mention is the fact that a.s.r. met the requirements of the quality mark for the aspect of Personal Injury, achieving a maximum score of 100%.
Professional oath The members of the Executive Board, the Supervisory Board and all divisional and department heads of ASR Nederland N.V. took the professional oath early in 2013. By taking this oath, they promised to treat customers fairly, act with integrity and observe all laws, rules, regulations and codes of conduct so as to increase trust in the financial sector.
Complaints management a.s.r. has a team tasked with coordinating complaints management, although actual handling of complaints has been decentralized to the various product lines. The key objectives of complaints management within a.s.r. are as follows: • a.s.r. provides easy to understand information on its vision and the resolution of the complaint →
At a.s.r., employees are encouraged to develop themselves professionally in line with the ambitions of the organization, and to take ownership of their personal development, career path and ambitions. The goal is to create an inspiring and healthy work environment that fosters the talents of employees and allows them to reach their full potential. The New World of Work (NWW) is one such initiative to create a pleasant working atmosphere at a.s.r. Key reasons for introducing NWW include: • Employees are better able to find the right balance between work and home life • Employee motivation is increased • Energy consumption and carbon emissions are reduced.
By the end of 2013, nearly all employees at the Archimedeslaan in Utrecht had the tools to work independently of time and place. Around 1,000 employees log onto the network remotely each day.
In 2013, the Engagement Scan was completed by 86% of employees, and 55.1% stated that they felt committed to a.s.r., compared with 44.4% in 2012. This is the largest increase so far and the highest
Diversity At a.s.r., diversity initiatives come in many forms. Employees are encouraged to be active in all manner of business networks in order to broaden their horizons and advance their personal growth.
a.s.r. believes that diversity within its organization is important and is focused on the recruitment, progression and retention of women in management positions. This illustrates the value that a.s.r. attaches to a diverse organization. The Executive Board has been active in driving this issue forward with initiatives such as extra places for women on trainee and management development programmes, a high-intensity mentoring programme and a special focus on hiring women in management positions.
The objectives for 2013 were: Senior management: 25% Middle management: 40% The proportions of women sitting on the Executive Board and the Supervisory Board of a.s.r. at yearend 2013 were 25% and 50%, respectively. The percentages are the same as in 2012 and are still well above the national average.
Talent development and traineeships The fifth cohort of potentials concluded the Management & Professional Development (MD/PD) programme in 2013. a.s.r. intends to ensure that women make up 50% on every MD/PD programme. There were five MD/PD programmes attended by 29 employees (ten women and 19 men). In other words, the proportion of women in this programme was 35%. The programme focuses not only on growth of employees in management positions, but also on the development of professionals. To qualify for the programme, employees need to have at least a college degree and be acknowledged as high potentials by their manager. This is how they prepare themselves for the next step in their career. Vacancies that used to be difficult to fill are now regularly filled by programme participants. Moreover, the programme encourages cooperation between divisions, because it brings together people who work in different areas of the organization.
Sustainable employability In 2013, a dedicated training budget was made available for all employees with a focus on sustainable employability. All training programmes in this field aim to ensure that employees are more broadly employable and to improve their internal labour market mobility.
Career and mobility 22 224 Applying for a job 8 86 Generation management 2 22 Personal development interviews 2 20 Lifecycle policy 2 18 3 Sustainable investor
a poor score in the Freedom in the World Annual Report and the Corruption Perceptions Index. Parts of the SRI policy were expanded and strengthened in 2013; the most recent version of the Sustainable Investment Policy can be found on our website: www.asr.nl/EN/about-asr.
2. We will work together with our clients and business partners to raise awareness of ESG issues, manage risk and develop solutions (Clients & Suppliers, Intermediaries, Reinsurers)
3. We will work together with governments, regulators and other key stakeholders to promote widespread action across society on ESG issues.
a.s.r. believes in engagement through constructive dialogue with the businesses it invests in with the aim of increasing shareholder value and social benefit in the long term. If a business has controversial activities and this dialogue does not come to a positive conclusion, this will result in exclusion from the investment portfolio. In 2013, a.s.r. raised issues with a number of businesses for weaknesses relating to respect for human rights and labour rights, and also relating to environmental pollution. Throughout 2013, dialogue was held with around 20 business in which a.s.r. holds shares; this represents almost 50% of the internally managed equities portfolio. In this dialogue (at least once per year), a.s.r. puts the corporate social responsibility policy of these businesses on the executive agenda and addresses any controversial activities. a.s.r.’s input is generally welcomed by the management of these companies as being constructive.
60% of the residential units in portfolio have an energy performance rating of at least C. This is 15 percentage points more than for the entire Dutch stock. a.s.r. aims to achieve an energy performance rating of at least C for 100% of its residential portfolio by 2020. In 2014, a.s.r. made a start on updating all energy performance ratings issued to date.
A pilot scheme was launched with retail tenants to work together in the field of sustainability. New tenancy agreements now also include standard arrangements on sustainability issues. These sustainability arrangements relate to the follow subjects: • maximizing the efficient and frugal consumption of energy and water; • encouraging the use of environmentally friendly and sustainable materials; • maximizing segregation of waste; • encouraging employees to use sustainable means of transport to shopping centres.
BREEAM (Building Research Establishment Environmental Assessment Method) is a system used to classify sustainable construction.
• In Enschede, a.s.r. has had the Klanderij shopping centre classified according to BREEAM criteria.
• In 2012, a development of 69 apartments was acquired and, in consultation with the developer, a BREEAM sustainability rating of Very Good was achieved.
The BREEAM label is a quality mark that is particularly suited to commercial real estate. For this reason, a.s.r. uses the renowned GPR label for residential developments. Apart from energy efficiency, GPR also addresses environmental impact, healthy living issues in the home and ergonomics.
Land for land ‘Land for land’ is the motto of an initiative by a.s.r. vastgoed ontwikkeling that compensates for every square metre of development by creating a square metre of new green space. As a property developer, a.s.r. vastgoed ontwikkeling seeks to achieve a planned space in which residents and visitors experience a high quality of life. Green spaces and calm areas are essential components of this. In line with its vision on corporate social responsibility, a.s.r. vastgoed ontwikkeling makes a provision each year for the creation of new natural spaces; the value of this provision is based on overall new development projects. The more residential units and retail units are completed by the developer, the higher the amount that a.s.r. invests in natural spaces under the Land for land programme. In this way, the developer gives an added boost to the quality of the urban environment.
4 Sustainable focus on the environment a.s.r. wants to treat nature and the environment with care and lower its environmental impact, and so uses resources, energy and water efficiently. Furthermore, a.s.r. is actively getting to grips with waste management, mobility, energy reduction and carbon emissions, and for this purpose has developed a dedicated environmental management system. The ESG criteria are fully integrated into a.s.r.’s investment policy.
Shared service¹ black and white -13.0% Shared service colour -51.2% Local² black and white -26.5% Local colour -28.3%
Energy In 2008, a.s.r. signed the government’s third multi-year plan (MYP3), setting out national agreements between the government and industry on energy savings. a.s.r.’s office at the Archimedeslaan in Utrecht is equipped with a system for Long-Term Energy Storage (Dutch acronym: LTEO), which uses the earth as a source for heating and cooling the building. This system makes a considerable saving on energy costs. The capacity of the system was therefore increased in 2012 to around 1,800 kW.
Waste a.s.r.’s general principle is to comply with legislation and regulations in relation to waste products. One of the principles set out in the policy is to scale back volumes of waste as far as possible and to recycle as much waste as possible. This policy helped a.s.r. to cut carbon emissions in 2012 by 62%, the equivalent of 697 tonnes of carbon dioxide (the result of 2013 is not yet known). a.s.r.’s waste is processed by SITA, whose data shows that a.s.r. recycles 49% of its waste. Total quantity of waste in 2013: 284,063 kg.
A reduction in the use of water by 10.1% in 2013
Procurement policy a.s.r. is committed to the Manifesto on Socially Responsible Procurement and Business Practices (Dutch acronym: MVIO). The manifesto is an initiative by 17 large businesses in the Netherlands (now with 38 participating businesses) and is supported by NEVI, the Dutch Association for Purchasing Management (www.nevi.nl/mvi). Since 1 January 2013, a.s.r. has added social, environmental and economic impact to its procurement criteria. Sustainable procurement is more than just applying criteria in the procurement process; it is also about the choices in business practices that are translated to the works, supplies or services to be purchased.
Zaak and MVO Nederland, the national knowledge centre and network organization for corporate social responsibility.
‘Helping by taking action.’ With this motto, a.s.r. wants to encourage and help its employees to give something back to society. It is a two-way street: a civil organization or target group receives help and the team spirit and company pride of a.s.r.’s employees are given a boost.
In 2013, more than 1,000 employees contributed to one of the activities that the a.s.r. Foundation offers. The StimulansPlan was used by 30 employees. This plan allows employees to obtain a financial contribution for any volunteer work they do outside a.s.r. Contributions were made to the RopaRun and the Fly4You foundation, for instance.
the Giovanni van Bronckhorst Foundation (SV Gio) was given help in the form of used reading books (collected by employees), laptops and items of furniture. There were also projects that employees could sign up for individually. Cycling enthusiasts took part in the Giro Classico, a cycling race through Utrecht province that was organized to help support the Wilhelmina children’s hospital. Athletic employees took part in the Run4Water race to raise money for better water facilities for schools in Nepal. Other contributions included a Christmas dinner at Resto Vanharte for residents of the Zonnebloem care centre.
61a.s.r. 2013 annual report Executive Board Responsibility Statement 4 Executive Board Responsibility Statement
The Executive Board declares that, to the best of its knowledge: 1. the financial statements give a true and fair view of the assets, liabilities, financial position and earnings; 2. the financial report does not contain any material misstatements and the risk management and control systems functioned properly in the year under review; 3. the Annual Report gives a true and fair view of the situation at the balance sheet date and developments during the year under review; and 4. the Annual Report describes the principal risks that the company faces.
2013 annual report Report of the Supervisory Board 5.1 Report of the Supervisory Board 5.1.1 Financial statements and profit appropriation
The Executive Board submitted the Report of the Executive Board and the financial statements for 2013 to the Supervisory Board. After having discussed the financial statements with KPMG Accountants N.V. (KPMG), the independent external auditor, the Supervisory Board approved them in its meeting on 1 April 2014. The financial statements were audited by KPMG, who issued an unqualified auditor’s report on them. For the independent auditor’s report, see page 206. The Supervisory Board established that the external auditor was independent from a.s.r.
The Supervisory Board has presented the financial statements for adoption to the Annual General Meeting of Shareholders (AGM). The Supervisory Board proposes to adopt the financial statements and to discharge the members of the Executive Board for their policies and the members of the Supervisory Board for their supervision of the policies pursued by the Executive Board and of the general conduct of business at the company and its affiliated entities. For the Executive Board’s profit appropriation proposal to the AGM, which was approved by the Supervisory Board, see page 211 of this report.
• Financial performance (quarterly, interim and annual results) • Solvency • Investment plan • Dividend proposal • Multi-year budget • Risk management and risk appetite • Strategy and future exit to private market • Treating customers fairly (TCF) • Compliance reports • Audit reports • Governance • Performance targets of identified staff
At year end, the Supervisory Board approved the multi-year budget 2014-2018; the supervisory directors considered the budget for the coming years as ambitious and realistic.
The members of the Supervisory Board are happy about the execution of the risk policy. Solvency levels remain high thanks to the organization’s prompt and adequate response to external developments based on the chosen risk appetite and risk-mitigating measures. Where solvency was concerned, the Supervisory Board addressed the decision by DNB with regard to yield curves used in solvency calculations and the future switch to Solvency II, including the minimum solvency requirements under this new regime.
Pension plan for a.s.r. employees Within the scope of cost cuts and market conformity, the Supervisory Board discussed changing the employees’ pay and benefits in general and the pension plan in particular. A motion has been prepared to amend the pension plan such that its administration is simplified, and its cost level and cost flexibility are manageable in the long run. These amendments will affect both active members and pensioners; before being implemented in the first half of 2014, the details of the proposed amendments will first be discussed with the trade unions and the Works Council. With these amendments, the pension plan for deferred members will be brought into line with that of active members.
The Audit & Risk Committee also placed specific focus on the effectiveness of the audit, compliance and risk management functions within a.s.r. The Committee covered the audit plans for 2014 of both internal audit and the independent external auditor, and approved them. The Committee also debated and approved the annual plan of the Integrity department and the risk management plan for 2014. Other topics for discussion included the audit reports of the independent external auditor; audit and compliance reports were discussed quarterly. Outside meetings, the Committee met twice with the audit, compliance and risk management functions in their role of countervailing powers.
During the year, the Committee was concerned with the fundamental changes in the insurance market. Changes in customer behaviours and distribution channels lead to new requirements for the organization. Premium income is being weighed down due, for instance, to the current economic climate and changes in rules and regulations (such as Solvency II). In this stagnating yet changing market, margins are under increasing pressure from fierce competition and rising price awareness among customers.
Acting for the Supervisory Board, the Audit & Risk Committee supervised the performance and independence of the external auditor. In addition, the Audit & Risk Committee spoke about the implications of the changes in the law governing the accounting profession and the continued performance of the audit engagement by the current external auditor over the coming financial years. Under the new Accountancy Profession Act, auditors are no longer permitted to provide non-audit services to audit clients. The Audit department has ceased to prepare periodic reports on all non-audit services provided by the independent external auditor for the Audit & Risk Committee. All assurance engagements not qualifying as audit services are submitted for approval.
The Supervisory Board received the details of the topics for discussion at the same time as the Committee. The written report of the meeting of the Audit & Risk Committee was provided to the Supervisory Board before the start of the next Supervisory Board meeting. The chair of the Committee gave an account of the key issues discussed and the findings and recommendations of the Committee at the beginning of each Supervisory Board meeting.
J.P.M. (Jos) Baeten (CEO) Jos Baeten (born 1958) is the Chairman of the Executive Board and Chief Executive Officer (CEO) of a.s.r. His areas of responsibility are Human Resources, Corporate Communications, Strategy, Marketing, Business Support, CSR, Audit, Integrity and Legal.
Additional positions Jos Baeten is a member of the general meeting of the Dutch Association of Insurers, Vice-Chairman of the Supervisory Committee of Gemiva-SVG Groep, an organization providing support to the disabled, and Chairman of the Supervisory Committee of Stichting Rotterdamse Schouwburg (Rotterdam Theatre). In addition, he sits on the General Administrative Board of the Confederation of Netherlands Industry and Employers (VNO-NCW) and is a member of the Advisory Board of ROC MiddenNederland vocational college.
Additional positions Karin Bergstein is a member of the Supervisory Committee of Stichting Sanquin Bloedvoorziening, a blood bank, and of the Supervisory Board of Utrecht University. She also serves as a supervisory director of ArboNed, a nation-wide occupational health and safety board
M.H. (Michel) Verwoest Michel Verwoest (born 1968) is a member of the Executive Board. His areas of responsibility are the product lines Pensions, Occupational Disability Insurance and Health Insurance. He is also responsible for Property Development, Property Asset Management and Technology & Change (IT&C).
Michel studied marketing at TiasNimbas Business School in Tilburg and business administration at IBO Business School, and held several executive positions at ING Group between 1997 and 2012. Within ING, he served as CEO of RVS Insurance and was in charge of the Individual Life business. His last position within ING Group was that of CEO of Nationale Nederlanden Services/director of Nationale Nederlanden Life. Michel Verwoest was appointed to the a.s.r. Executive Board as of 1 December 2012.
Additional positions Michel Verwoest is a member of the Board of the Dutch Association of Health Insurers and of Stichting Vrienden van de Gelderhorst, a care provider for elderly deaf people. In addition, he sits on the Advisory Board of Post & Blankestijn, a recruitment and secondment company.
Roel Wijmenga, (CFO) Roel Wijmenga (born 1957) is a member of the Executive Board. His areas of responsibility are Finance, Accounting, Reporting & Control, Financial Markets and Risk Management.
Roel studied econometrics and earned a Ph.D. in economics from Erasmus University Rotterdam. He started his career in insurance at AMEV, one of the legal predecessors of a.s.r., where he held several executive positions until 2003. After having left AMEV, he served as a member of the Executive Board of Interpolis and as CFO/member of the Executive Board of Eureko/Achmea. He was appointed to the a.s.r. Executive Board early in 2009.
Additional positions Roel Wijmenga is the Chairman of Stichting Certificering Federatie Financieel Planners, a foundation for the certification of financial planners, and a member of the Board of Stichting DSI, a foundation for the promotion and monitoring of the integrity and reliability of financial services providers and compliance professionals. He also serves on the Financial & Economic Committee of the Dutch Association of Insurers.
First appointed on: 7 December 2010 Current term of office: 7 December 2010-7 December 2014 1 Cor van den Bos 2 Margot Scheltema 3 Kick van der Pol 4 Annet Aris
C.H. (Cor) van den Bos (born 1952) Chair of the Audit & Risk Committee
Cor van den Bos was on the Executive Board of SNS REAAL N.V. until August 2008; in this position, he was responsible for all insurance operations. He is the Chairman of the Supervisory Board of CED, a claims-processing manager, and of Noordwijkse Woningstichting, a housing corporation. Cor also sits on the Supervisory Boards of NIBE-SVV, a knowledge institute and publisher for the Dutch banking, insurance and investment industry, and Trust Hoevelaken. He is also a Non-Executive Member of the Board at investment firm Kardan.
First appointed on: 15 December 2008 Current term of office: 15 June 2011-15 June 2015
M.A. (Margot) Scheltema (born 1954) Member of the Audit & Risk Committee
First appointed on: 15 December 2008 Current term of office: 15 June 2012-15 June 2016
Composition of committees The Audit & Risk Committee has two members, namely Cor van den Bos (chair) and Margot Scheltema. Its meetings are attended by the CFO, the independent external auditor, and the directors of Finance, Audit, Risk Management and Integrity.
The members of the Selection, Appointment & Remuneration Committee are Annet Aris (chair) and Kick van der Pol. Its meetings are attended by the CEO (except when issues relating to the Executive Board are being discussed) and the Human Resources Director, who doubles as secretary of the Committee. The Committee solicits support and advice from departments such as Risk Management, Compliance, Audit and Human Resources. Where needed, the Committee calls in the help of independent legal and pay-and-benefits experts.
The Supervisory Board performs an annual self-evaluation. As part of its self-evaluation in 2013, the Supervisory Board asked for input from the Executive Board and some a.s.r. employees. The outcome
There were no reports of potential conflicts of interest involving the other supervisory directors. The Supervisory Board has been able to discharge its duties fully independently.
Contacts with the Works Council Every member of the Supervisory Board attended a regular consultative meeting with the Works Council. The supervisory directors felt that the consultations with the Works Council were constructive and that high-impact issues were discussed in an open and unbiased manner, with regard to the interests of a.s.r. as a whole and those of the employees alike.
Contacts with external regulators and internal control functions The supervisory directors consulted periodically with the Netherlands Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB). The Audit & Risk Committee spoke twice with the heads of Audit, Integrity and Risk Management (i.e. the internal control functions).
Meetings of the Supervisory Board and committees The Supervisory Board met with the Executive Board 11 times during the reporting period. Six meetings were scheduled as regular meetings and five were ad-hoc meetings to discuss specific issues related to a.s.r.’s future privatization. The Supervisory Board also held periodic work planning meetings. Both the Audit & Risk Committee and the Selection, Appointment & Remuneration Committee met six times in 2013.
Articles of Association and regulations The current Articles of Association and regulations for the Executive Board and the Supervisory Board have been posted on the corporate website: www.asr.nl/EN/about-asr. ASR Nederland N.V. and the Dutch State signed a covenant earlier that formalizes procedural aspects for information provision and decision-making, and policy and parameters for decisions regarding capital reduction and interim and year-end dividend distributions, among other provisions.
Rules for appointing and removing executive and supervisory directors The AGM appoints the members of the Supervisory Board on the (non-binding) recommendation of the Supervisory Board. After having heard the Supervisory Board, the AGM is competent to suspend or remove a member of the Executive Board. The AGM appoints the members of the Supervisory Board on the recommendation of the Supervisory Board. Both the AGM and the Works Council have the right to nominate supervisory directors. The Supervisory Board duly notifies the AGM and the Works Council of when and why they have the right to nominate a supervisory director, and of the profile required of the nominee.
For an overview of how ASR Nederland N.V. applies the Code, please visit the corporate website (www.asr.nl/EN/about-asr) to view the Dutch Corporate Governance Code. Chapter 7 of this Annual Report describes how a.s.r. applies the Dutch Corporate Governance Code in detail.
ASR Nederland N.V. sees much of its mission, vision and core values reflected in the principles of the Dutch Insurance Code and the Dutch Banking Code, and therefore fully endorses these two Codes. By seeking to achieve its mission, vision and core values, ASR Nederland N.V. wants to contribute to improving the workings of the Dutch financial sector and help restore trust in the financial sector, never losing sight of customer interests. Details on how ASR Bank N.V. applies the Dutch Banking Code can be found in its Annual Report that has been posted online on www.asr.nl/EN/about-asr. Section 7 of this report provides details on how ASR Nederland N.V. meets the Dutch Insurance Code.
The remuneration policy is designed to help achieve a.s.r.’s strategy and business targets. The principles of the policy are preservation and furtherance of the integrity and financial robustness of a.s.r., focus on sustainable, long-term value creation for customers and other stakeholders, management of risks and a transparent policy whose structure and methodology is applicable to a.s.r. as a whole. This policy should allow a.s.r. to attract and retain qualified people.
Governance The Supervisory Board is responsible for implementing and evaluating the remuneration policy governing the members of the Executive Board as adopted by the AGM. The Executive Board is responsible for adopting, implementing and evaluating the remuneration policy governing other employees. The Supervisory Board approves the remuneration policy for senior management and monitors its implementation by the Executive Board. The Supervisory Board assesses the principles of the remuneration policy for other employees.
Based on the provisions of CRD III, which are enshrined in the Dutch Restrained Remuneration Policy (Financial Supervision) Regulation, a.s.r. has defined a group of identified staff. The remuneration policy governing identified staff is subject to the approval of the Supervisory Board, which also monitors the Executive Board’s implementation of this policy. Identified staff are taken to include the members of the Executive Board, senior management and one employee in a higher management position.
With effect from 2012, all remuneration groups, except for the Executive Board, have been awarded basic and variable pay.
The basic pay awarded to employees comprises their fixed gross monthly pay, plus 8% holiday allowance and an end-of-year bonus. The level of the basic pay is determined by the weight of an employee’s position and the related remuneration group. Any increases in basic pay are linked to the appraisal of how employees perform their duties in general and their compliance with the a.s.r. core values of being personal, approachable and authentic. The objectives pursued as part of how employees perform their duties are based on a.s.r.’s strategic targets, which centre on helping people by taking action and not just talking about winning back trust or treating customers fairly, but actually doing this. This is reflected in KPIs relating to such issues as a customer dashboard, the Keurmerk
Klantgericht Verzekeren (Customer-Oriented Insurance Quality Mark) and the Net Promoter Score. These KPIs form the basis of challenging individual targets.
Variable pay Of the variable pay component, one-third is determined by an employee’s score on individual targets in a calendar year. The remaining two-thirds are determined by the financial performance of a.s.r. measured in terms of financial results and customer appreciation. At the beginning of every calendar year, employees and their managers agree on individual targets that should be achieved during that year. These targets need to reflect a clear focus on improving our customer appreciation rating. The targets to be achieved in terms of financial results and customer appreciation are adopted annually by the Executive Board and the Supervisory Board. These targets are discussed with, and explained to, the Works Council before they are adopted. Variable pay is a percentage of basic annual pay.
Pension plan The principal features of the pension plan are as follows: • Indexed average-pay scheme (indexing became conditional as of 1 January 2013) • Retirement age: 65 • Partner’s pension: 70% of projected old-age pension • Orphan’s pension: 14% of projected old-age pension • Employee contribution: 6% of pensionable earnings
79a.s.r. 2013 annual report Report of the Supervisory Board 5.1.6 Final word from the Supervisory Board
81a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
83a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Notes to the consolidated balance sheet 6 Intangible assets 155 7 Deferred acquisition costs 156 8 Property, plant and equipment 156 9 Investment property 158 10 Associates and joint ventures 160 11 Financial assets 162 12 Deferred taxes 171 13 Other assets 173 14 Cash and cash equivalents 173 16 Insurance liabilities 176 17 Employee benefits 179 20 Due to customers 184 21 Due to banks 185 22 Other liabilities 185 23 Fair value hierarchy – liabilities 185
Company financial statements 39 Company balance sheet 198 40 Company income statement 199 41 Notes to the company financial statements 199
Deferred acquisition costs 7 241 271 Property, plant and equipment 8 97 75
Cash and cash equivalents 14 1,517 2,556 Total assets 42,431 44,495
Liabilities arising from insurance contracts 16 23,928 25,440 Liabilities arising from insurance contracts on behalf of
The numbers following the line items refer to the relevant chapters in the notes.
85a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Realized gains and losses 25 486 285 Fair value gains and losses 25 348 569 Result on investments on behalf of policyholders 783 948 Fee and commission income 26 45 69
Share of profit/(loss) of associates and joint ventures 14 -9 Total income 3,365 3,644
Attributable to: - Holders of other equity instruments 44 45 - Tax on interest of other equity instruments -11 -11 Profit attributable to holders of equity instruments 281 316 Attributable to non-controlling interests -5 -7
Remeasurements of post-employment benefit obligation 156 -299 Income tax on items that will not be reclassified -39 75 Total items that will not be reclassified to profit and loss 117 -224
Attributable to: - Holders of other equity instruments 44 45 - Tax on interest of other equity instruments -11 -11 Total comprehensive income attributable to holders of equity instruments 478 521 Attributable to non-controlling interests -5 -7
87a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
S h ar e p re m iu m r e se rv e
E q u it y at tr ib u ta b le t o sh ar e h o ld e rs
Profit carried over from previous financial year - - - - 141 -141 - - - - Discretionary interest on other equity instruments - - - - -45 - -45 - - -45 Tax relating to interest on other equity instruments - - - - 11 - 11 - - 11 Acquisition of non-controlling interest - - - - - - - - -2 -2
Unrealized gains and losses include shadow accounting adjustments to the insurance liabilities.
The actuarial gains and losses recognized for post-employment benefit obligations (due to the retrospective application of IAS 19 Revised as of 1 January 2012) are included in total equity.
cash and cash equivalents as at 1 January 2,556 2,573 cash generated from operating activities Profit before tax 360 285
Unrealized (gains) losses on investments at fair value through profit and loss -1 -8 Retained share of profit of associates and joint ventures 13 21
Net (increase) decrease in investment property 72 -129 Net (increase) decrease in investments 376 -607 Net (increase) decrease in investments on behalf of policyholders 168 364 Net (increase) decrease in derivatives 1,316 -107 Net (increase) decrease in amounts due from and to customers -1,251 -751 Net (increase) decrease in amounts due from and to credit
Income tax received (paid) -140 118 cash flows from operating activities -815 160 cash flows from investing activities Investments in associates and joint ventures -4 -35 Proceeds from sales of associates and joint ventures - 6 Purchases of property, plant and equipment -50 -20 Purchase of intangible assets -8 -8 cash flows from investing activities -62 -57
The consolidated financial statements of a.s.r. have been prepared in accordance with the International Financial Reporting Standards (IFRS) – including the International Accounting Standards (IAS) and Interpretations – as adopted by the European Union (EU).
Except for the change in accounting policy as a result of the amendment to IAS 19 Employee benefits a.s.r. has prepared its consolidated financial statements in accordance with the same principles for financial reporting, presentation and calculation methods used for the 2012 consolidated financial statements.
Amendment to IAS 19 Employee benefits As a result of the amendment to IAS 19 Employee benefits which came into effect as of 1 January 2013, € 363 million is added to the provision for employee benefits as of 1 January 2013. Per this date, Equity decreased by € 272 million after tax (€ 91 million) to € 2,663 million. As a result of the retrospective treatment the amendments are effective as of 1 January 2012 resulting in a restatement of the Balance sheet, Income statement and statement of comprehensive income and the statement of changes in Equity. As of 1 January 2012, the other reserves (component of total Equity) were reduced by € 109 million (net of taxation). The statement of comprehensive income and the statement of changes in equity have been restated as a result of a change in the actuarial gains and losses as at 31 December 2012 amounting to -€ 224 million. As of 31 December 2012 the total equity (net of taxation) was reduced € 272 million. The breakdown as shown in the consolidated statement of changes in total equity comprises actuarial gains and losses of -€ 224 million and other reserves amounting to -€ 109 million, which are partially offset by the increase in the profit for the year 2012 amounting to € 61 million.
The amendments to IAS 19 relate primarily to the following components: • Unrealized actuarial gains and losses which were previously reported using the ‘corridor method’
of the unrealized actuarial gains and losses primarily as a result of the manner in which employee contributions are accounted for. The revised unrealized actuarial loss as of 1 January 2012 amounted to € 161 million (31 December 2012: € 299 million).
The change in accounting policy is applied retrospectively as from 1 January 2012. The detailed impact of the change on the balance sheet and income statement for 2012 are as follows: As reported Changes as a result After changes of IAS 19 balance sheet 1 January 2012
• Amendments to IAS 12 Income Taxes - Deferred Tax: Recovery of Underlying Assets of the carrying
amount of an asset measured using the fair value model in IAS 40 Investment Property will, normally, be through sale.
Changes in the principles for financial reporting The following changes in the EU-endorsed IFRS standards and IFRIC interpretations are effective from 1 January 2014. These changes have no material effect on the total equity attributable to shareholders or profit for the year of a.s.r.: • IFRS 10 Consolidated Financial Statements: New consolidation standard that establishes principles for the preparation and presentation of consolidated financial statements when a reporting entity controls one or more investees.
• IFRS 11 Joint Arrangements: This standard describes the accounting for joint arrangements and the classification into two types – joint operations and joint ventures.
In addition to the amendments to IAS 19 Employee benefits, the current presentation differs from last year’s presentation in some aspects. Where applicable, in accordance with IFRS, comparative figures have been put in the new presentation format to ensure comparability.
Subsidiaries The consolidated financial statements include the financial statements of ASR Nederland N.V. and its subsidiaries. Subsidiaries are those entities over which a.s.r. has direct or indirect power to govern the financial and operating policies (‘control’). This is the case if more than half of the voting rights may be exercised or if a.s.r. has control in any other manner. Subsidiaries are fully consolidated from the date on which control is acquired by a.s.r. Subsidiaries are deconsolidated when control ceases to exist.
A subsidiary’s assets, liabilities and contingent liabilities are measured at fair value on the acquisition date and are subsequently accounted for in accordance with a.s.r.’s accounting policies, which are consistent with IFRS.
Upon recognition, investments in associates are initially accounted for at cost price, including any goodwill paid. Subsequent measurement is based on the equity method of accounting. Where the associate’s accounting policies are different from a.s.r.’s, carrying amounts have been changed to ensure that they are consistent with the policies used by a.s.r. For details, see chapter 2.16.
The preparation of the financial statements requires a.s.r. to make estimates and assumptions that have an effect on the reported amounts in the financial statements.
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: Accident and Health, Property and Casualty (motor, fire and liability) and Other.
Life insurance contracts Life insurance contracts (in cash) include savings-linked mortgages, annuities, term insurance policies, savings contracts and funeral insurance contracts. In addition to non-participating life insurance contracts, the insurance portfolio also includes: • individual and group participating contracts; • individual contracts with discretionary participation features (see chapter 2.25); • group contracts with segregated pools with return on investment guarantees.
95a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
There is a clear difference between the risk and return profiles of these three segments. Intersegment transactions or transfers are conducted at arm’s length conditions. For detailed information per segment, see chapter 5, ‘Segment information’.
The fair value is the price that a.s.r. would receive to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the transaction date in the principal market for the asset or liability, or in the most advantageous market for the asset or liability and assuming the highest and best use for non-financial assets.
Financial instruments in this category primarily consist of bonds and equities listed in active markets.
96a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
This category primarily includes: • financial instruments: unlisted fixed-interest preference shares and interest-rate contracts; • financial instruments: loans and receivables1 (disclosure); • other non-financial assets and liabilities1 (disclosure).
Financial instruments: unlisted fixed-interest preference shares and interestrate contracts This category includes unlisted fixed-interest preference shares and interest-rate contracts. The financial instruments valuation techniques use present value calculations and include for derivatives forward pricing and swap models. The observable market data contains yield curves based on company ratings and characteristics of the unlisted fixed-interest preference shares.
This category primarily includes: • financial instruments: private equity investments (or private equity partners); • investment property and buildings for own use1 (disclosure); Financial instruments: private equity investments The main non-observable market input for the private equity investments is the net asset value of the investment as published by the private equity company (or partner).
Income capitalization method Under the income capitalization method, a property’s fair value is estimated based on the normalised net operating income generated by the property, which is divided by the capitalization rate (the investor’s rate of return). The difference between gross and net rental income includes the same expense categories as those for the DCF 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 capitalization method, over (above market rent) and under-rent situations are separately capitalised.
For Retail valuations, the significant inputs are the reversionary yield and the market or reviewed rental value. These inputs are generally verified with the following observable data (that are adjusted to reflect the state and condition, location, development potential etc. of the specific property): • market rent per square metre for renewals; • reviewed rent per square metre (based on the rent reviews performed in accordance with Section 303, Book 7 of the Netherlands Civil).
Value of Business Acquired The Value of Business Acquired (VOBA) represents the difference between the fair value and the carrying amount of insurance portfolios that have been acquired, either directly from another insurer or through the acquisition of a subsidiary. VOBA is recognized as an intangible asset with a finite useful life and amortized over the term of the current insurance contracts at acquisition date, in conjunction with the corresponding obligations. With regard to VOBA, allowance is made for the outcome of the annual compulsory liability adequacy test (LAT) for insurance contracts (see chapter 2.25). Amortization charges related to VOBA are included in net claims and benefits.
Accounting for borrowing costs attributable to the construction of property, plant and equipment is the same as accounting for borrowing costs attributable to investment property. For details, see chapter 2.15.
Investment property is property held to earn rent or for capital appreciation or both. In some cases, a.s.r. is the owner-occupier of some investment property. If owner-occupied properties cannot be sold separately, they are treated as investment property only if a.s.r. holds an insignificant portion for use in the supply of services or for administrative purposes. Property held for own uses (owner-occupied) is recognized within property plant and equipment.
101a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The table below shows the maximum life of components per identified category: (Expressed in years)
Property under development for future use as investment property is recognized as investment property. Valuation is at cost, including any directly attributable expenditure, less any impairment losses. The depreciation of investment property is recognized in the investment income.
If objective evidence of impairment exists, based on the fair value of the investment property, then the investment property is tested for impairment and, if necessary, written down to the fair value of the investment property (see chapter 2.8).
Associates Associates are entities over which a.s.r. has significant influence on operating and financial contracts, without having control. Associates are recognized using the equity method of accounting from the date at which a.s.r. acquires significant influence until the date at which such influence ceases. This means that associates are initially recognized at cost, including any goodwill paid. This value is subsequently adjusted to take account of a.s.r.’s share of the associate’s comprehensive income. Comprehensive income is adjusted in accordance with the accounting principles used by a.s.r.
The classification of the financial assets is determined at initial recognition. The classification depends on the purpose for which the investments were acquired.
a. Financial assets at fair value through profit and loss include: 1. financial assets classified as held for trading. These financial assets include derivatives that do not qualify for hedge accounting (see chapter 2.20); and 2. financial assets, designated by a.s.r. as carried at fair value through profit and loss. This option is available whenever: a. it eliminates or significantly reduces a measurement inconsistency that would otherwise arise from measuring assets or liabilities on different bases (accounting mismatch); or b. 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; c. the financial assets contain one or more embedded derivatives and a.s.r. does not separate the derivative from the host contract.
b. Loans and receivables are measured at fair value plus transaction costs at initial recognition. They are subsequently measured at amortized cost based on the effective interest-rate method, less impairment losses where deemed necessary (see also chapter 2.19).
103a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Impairment of financial assets At each balance sheet date, a.s.r. assesses whether objective evidence exists of impairment of financial assets. Financial assets at fair value through profit and loss are not subject to impairment testing, because the fair value of these assets reflects any impairment losses.
In the case of equity investments available for sale, a significant or prolonged decline in the fair value of the security below its cost is objective evidence of impairment. a.s.r. defines as a significant or prolonged decline if the fair value: • has dropped 25% or more below cost; or • has dropped below cost for an uninterrupted period of twelve months or longer.
Receivables from clients Receivables from clients are primarily comprised of business loans and mortgage loans.
Receivables from banks Receivables from banks concern business loans, deposits and the savings portion of mortgages insured by a.s.r.
104a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Impairment of loans and receivables At each balance sheet date, a.s.r. assesses whether objective evidence of impairment exists of the financial assets classified as loans and receivables.
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.
Currently only a minor level of cash flow hedge accounting is applied in the relation to property development activities.
Contracts that transfer a significant insurance risk from a.s.r. to third parties are accounted for as reinsurance contracts, and defined as outgoing reinsurance.
The amounts that can be collected from reinsurers are estimated using a method that is in line with the reinsurance contract and the method for determining liabilities arising from reinsurance contracts.
At each reporting date, a.s.r. assesses whether objective evidence of impairment exists. If a reinsurance asset is impaired, its carrying amount is reduced to its recoverable amount.
Property developments consist of property under development commissioned by third parties. Measurement is at cost including any directly attributable costs and construction period interest, less invoiced instalments and impairments. If the contract revenue can be reliably estimated, it is accounted for by reference to the stage of completion, using the percentage of completion method. This does not apply if a.s.r. has transferred the significant risks and rewards relating to the development property to the client. Contract revenue is then accounted for upon completion of the development (completed contract method).
Actuarial gains and losses Actuarial gains and losses result from the post-employment benefit pension plans (see chapter 2.27).
107a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Participating contracts include additional obligations relating to contractual dividends or profitsharing. These obligations are stated net of capitalized interest-rate rebates. These interest-rate rebates are amortized in accordance with actuarial principles to the extent that the expected surplus interest is achieved.
Life insurance contracts with a discretionary participation features (DPF) Under DPF life insurance contracts, policyholders are assigned, in addition to their entitlement to a guaranteed element, an entitlement to a potentially significant additional benefits whose amount or timing is contractually at the discretion of a.s.r. These additional benefits are based on the performance of a specified pool of investment contracts, specific investments held by a.s.r. or on the issuer’s net income.
Shadow accounting Shadow accounting is applied in compliance with IFRS 4 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.
Liability Adequacy Test non-life The Liability Adequacy Test (LAT) is performed at each reporting date to assess the adequacy of insurance liabilities for Non-Life. Where the Property and Casualty (motor, fire and liability) and Health liabilities business is concerned, the LAT is performed using statistical analyses. Any identified losses are used as a basis for estimating future claims arising from an insurance contract from the portfolio on the balance sheet date. This is the best estimate. An appropriate risk margin is added. The risk margin is determined for each homogeneous risk group using the Cost of Capital (CoC) method that is also used for life. The total of best estimate and risk margin is compared to the technical provision recorded in the balance sheet. The LAT for the disability portfolio is based on cash flow projections using realistic assumptions comparable to the LAT for the life portfolio (see below).
Risk margin The risk margin is determined for each homogeneous risk group using the CoC method. a.s.r. uses the latest standard Solvency II model, as defined in Long Term Guarantee Assessment (LTGA)
109a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Liabilities arising from insurance contracts for the account and risk of policyholders mainly concern unit-linked contracts. An investment unit is a share in an investment fund that a.s.r. acquires on behalf of the policyholders using net premiums paid by the policyholders. The gain upon maturity of the contract is equal to the current value of the investment units of that fund. The current value of an investment unit (unit value) reflects the fair value of the financial assets contained within a.s.r.’s investment funds divided by the number of units.
The fair value of the financial liabilities is obtained by multiplying the number of units attributed to each contract holder at the end of the reporting period by the unit value for the same date. Allowance is made also for liabilities arising from technical insurance risks (death, occupational disability).
Liabilities arising from insurance contracts on behalf of policyholders also include obligations in connection with savings pools and group pension contracts, with policyholders bearing the investment risk. These liabilities furthermore include a provision for compensating the costs of these contracts as agreed in 2008 with consumer organizations and additional compensation related to the unit-linked insurance contracts (including costs for the implementation and conversion of systems related to the compensation). This provision equals the present value (based on an interest-rate of 4%) of the agreed amounts of compensation (upon maturity), with expenses incurred in prior periods fully provided for. In addition, estimates of additional expenses, such as overheads for administering the compensation scheme, compensation for hardship and surrender, are also taken into account.
For the LAT related to the Liabilities arising from insurance contracts on behalf of policyholders see chapter 2.25.
The liability in respect of defined benefit plans is the present value of the defined benefit obligation at the balance sheet date, less the fair value of plan assets. ASR Levensverzekering N.V., an insurance company and a group entity, is the administrator of the post-employment benefit plans. ASR Levensverzekering N.V. holds the investments that are meant to cover the employee benefit obligation. However, in accordance with IFRS they do not qualify as plan assets in the consolidated financial statements.
Pension obligations are calculated using the projected unit credit method. Inherent to this method is the application of actuarial assumptions for discount rates, future salary increases and bonuses, mortality rates and consumer price indices. The assumptions are reviewed and updated at each reporting date, based on available market data.
111a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Non-life insurance premiums Non-life insurance premiums are accounted for in the period in which they are earned. As indicated in chapter 2.25, invoiced but not yet earned premiums are included under liabilities arising from insurance contracts.
Life insurance premiums Life insurance premiums related to life insurance contracts are recognized as income when received from policyholders. Liabilities arising from insurance contracts are recognized based on estimated future benefits and expenses, and charged to the income statement. These expenses are recorded within ‘technical insurance claims and benefits’. Therefore, in accordance with the matching principle, the profits are realized over the estimated term of the contracts. In accordance with this matching, the acquisition costs are capitalized, deferred and then amortized. For a detailed explanation of the capitalized deferred acquisition costs, see chapter 2.13.
Interest income Interest income for all interest-bearing instruments is recognized using the effective interest-rate method, including all transaction costs incurred and share premium/discount. When a receivable is impaired, its carrying amount is reduced to the recoverable amount, i.e. estimated future cash flows discounted at the original effective interest-rate of the instrument.
Rentals Rentals from investment property are allocated to the period to which they relate.
This mainly relates to commissions paid and amortization of capitalized deferred acquisition costs. For details on capitalized deferred acquisition costs see chapter 2.13.
113a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
This chapter describes the risks a.s.r. is exposed to and how these risks are managed.
• The risk appetite statements have been further developed. Risk appetite statements are established at both group and legal entity level including risk tolerances, limits and targets.
Market risk • The position in financial bonds was reduced in 2013 in accordance with the strategic investment policy. • Within the limits of the risk appetite, the equity exposure increased 2013. The increase was primarily due to the development of the equity prices.
114a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Counterparty default risk • In accordance with the strategic investment plan, the mortgage portfolio increased in 2013. The majority of new mortgages are guaranteed by the Dutch national mortgage guarantee fund (NHG).
Insurance risk – Non-Life • In 2013, the combined ratio increased to 104.6% (2012: 99.2%).This was due to developments in the claims ratio, caused by an increase in claims and the change in liabilities arising from insurance contracts of the product WGA-ER. In the meantime, a.s.r. has taken steps to adjust its prices, tighten its acceptance criteria stricter and improve its claims settlement process, thereby improving its control and insight. The focus will be on reintegration of disabled employees. Excluding WGAER and considering the storm in Q4 2013 the 2013 combined ratio is at a satisfactory level of 96.5%.
• a.s.r. executed an Own Risk and Solvency Assessment (ORSA) at both group and legal entity level in 2013. This assessment helps to identify risks and quantifies the impact of these risks on the forward-looking solvency position.
Operational risk • a.s.r. continued to improve its system of internal control in 2013. The enterprise wide internal control framework is largely implemented in the product lines. Operational risks have been identified and assessed and controls are determined and tested from an Enterprise Risk Management perspective. Full implementation of the internal control framework will be finalized in 2014.
The primary objective of risk management is to support a.s.r. in achieving the required balance between risk and return ensuring strategic goals will be realized. The risk appetite describes the level of risk a.s.r. is prepared to take. The risk appetite has been further refined. Statements at group level have been enhanced, statements at legal entity level have been developed and risk tolerances, limits and targets have been set for all statements Risks are actively managed to ensure that the risks will stay within the defined limits.
• The risk appetite is linked to the strategic pillars and indicates a.s.r.’s willingness to take risks. • A pragmatic approach at both group, legal entity and business unit level to develop a vision with respect to risk which forms the basis of the day-to-day decision making process.
Five risk appetite pillars have been identified which we view as key elements of realizing our strategy. These five pillars are: Capital: Adequate solvency takes priority over profit Adequate capital buffers and financial power to facilitate future developments and continuously meeting our obligations towards policy holders, supervisors and rating agencies. Ensuring the capital buffer is sufficient to maintain an ‘A’ rating.
Various separate risk appetite statements have been established within these five pillars which are translated into boundaries (risk tolerances, limits and targets) and which define the maximum risk that a.s.r is willing to take.
Three lines of defence The risk governance structure is based on the ‘three lines of defence’ model. The ‘three lines of defence’ model consists of three defence lines with different responsibilities with respect to the ownership of controlling risks.
Risk Management The risk management function is an independent function within a.s.r. The Chief Risk Officer (CRO) is responsible for all risk management related activities and reports directly to the CFO. The CRO can report matters directly to the CEO at his own discretion and has a direct and independent reporting line to the Audit and Risk Committee, a sub-committee of the Supervisory Board.
Risk Management is responsible for Enterprise Risk Management. The department consists of the following sub-departments: • Risk Strategy and Policy • Financial Risk Management
118a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Risk committee structure The objective of the risk committees is to manage the risk profile for a.s.r. group, its legal entities and its product lines and to ensure that the risk profile remains within the risk appetite and the underlying risk tolerances and risk limits. When triggers are hit, due to for instance an increase in stock market volatility, a downgrade of corporate and government fixed income investments, or low interest-rates, a.s.r.’s risk committees increase the frequency of their meetings.
119a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Non-Financial Risk Committee The Non-Financial Risk Committee (NFRC) is mandated by the Executive Board to decide on non-financial risk policies. The NFRC monitors that non-financial risks are adequately managed, determines non-financial risk limits at group level and monitors that the risk profile stays within the agreed risk limits. If the risk profile exceeds the limits, the NFRC takes mitigating action. The NFRC reports to the a.s.r. Risk Committee. The Chairman of the NFRC is the COO of the SME insurance market (who is also a member of the Executive Board) and members of the Committee include Managing Directors of P&C, Health, Disability, Travel, Pensions, ICT and Directors of Audit and Integrity and the Head of Risk Strategy and Policy.
Financial Risk Committee The Financial Risk Committee (FRC) has a mandate from the Executive Board to decide on financial risk policies. The FRC manages and controls financial risks (market, insurance (life and non-life) and counterparty default risk) and defines financial risk limits at group level. The FRC also monitors whether the risk profile stays within the risk limits. If the risk profile exceeds these limits, the FRC takes mitigating actions. The FRC reports to the a.s.r. Risk Committee. The Chairman of the FRC is the CFO. Members of the Committee include the Directors of Risk Management, Financial Markets, Audit, Integrity, Finance and Real Estate. The FRC is supported by the Capital, Liquidity and Funding Committee (CLFC).
Capital, Liquidity and Funding Committee The Capital, Liquidity and Funding Committee (CLFC) is a subcommittee of the FRC. As such, the CLFC prepares and assesses the technical analysis of capital, liquidity and funding positions, rating policy, rating model reporting, and treasury activities. The Chairman of the CLFC is the Director of Financial Markets; other members of this sub-committee are representatives of various key financial and risk departments.
Central Investment Committee In addition to the risk committee structure, the Central Investment Committee (CIC) monitors tactical decisions and the execution of the investment policy. It takes major investment decisions within the boundaries of the strategic asset allocation as agreed in the FRC. The CIC bears particular responsibility for investment decisions exceeding the mandate of the investment department. The CIC is chaired by the COO of the Retail insurance market (member of the Executive Board).
3.2.3 Systems and data The availability and reliability of data is important in order to ensure that the correct risk mitigating measures can be taken timely. Risk Management is supported by various IT systems for delivery of the required information.
The five main risk categories1 that a.s.r. recognizes are described below.
Market risk reports are submitted to the FRC on a monthly basis at a minimum. Key reports on market risk include the strategic asset mix report, the economic capital report, the interest-rate risk report and the report on sensitivity of regulatory solvency to major market risks. A summary of sensitivities to market risks for the regulatory solvency, total equity and profit for the year is presented in the tables below.
Type of risk incl UFR excl UFR incl UFR excl UFR
The exposure to property decreased mainly as a result of sales and the sensitivity to property declined accordingly. The exposure to bonds decreased, mainly as a result of an increase in interest-rate. The sensitivity to spread correspondingly decreased.
If the scenarios of the major market risks were to take place simultaneously, a diversified negative effect of 62% (2012: 75%) would result in a regulatory solvency ratio excluding UFR of 174% (2012: 157%). The solvency ratio excluding UFR after stress therefore is above the minimum level of 150%.
1 For the regulatory solvency ratio including UFR, the interest-rate shock +1% has a negative impact. For the regulatory solvency ratio excluding UFR the effect is adverse, the interest-rate shock -1% has a negative impact.
The next table shows sensitivities of total equity and profit for the year. Due to the IFRS accounting treatment (including insurance liabilities discounted with a fixed interest-rate, shadow accounting, valuation of part of the investments at cost, post-employment benefits), these sensitivities can vary substantially from the sensitivities of regulatory solvency.
The exposure to bonds decreased, mainly as a result of an increase in interest-rate. The sensitivity of total equity to spreads correspondingly declined. Since there are no bonds close to impairment level, the sensitivity of profit for the year to spread is very limited.
The sensitivity of total equity to foreign currency declined due to divestments in USD equities and DKK bonds.
123a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Recent years a.s.r. has taken mitigating measures to reduce the interest-rate risk. In 2013 the interestrate risk has been reduced by restructuring the overlay portfolio of interest-rate swaps and swaptions. Mainly the interest-rate risk exposure in different maturity buckets has improved in 2013 and as a result a.s.r. has become less sensitive for non-parallel shifts of the interest-rate curve. a.s.r. intends to further reduce the interest-rate risk exposure in 2014.
Sensitivity of regulatory solvency (excl UFR) to interest-rate changes: Interest-rates -1% Interest-rates +1%
The fair value of equities and similar investments at year-end 2013 was € 1,967 million (2012: € 1,703 million).The exposure increased due to a higher exposure as a result of investments and the favourable development of equity prices.
The sensitivity of the regulatory solvency ratio to changes in equity prices is monitored on a monthly basis. Option contracts, the tax exemption of the participating interests and lower volatility of hedge funds are taken into account when calculating sensitivities.
The sensitivity to equity prices increased due to a higher exposure in equity. At year-end 2013, a small part of the equity risk was hedged with put options.
Sensitivity of regulatory solvency to changes in equity prices: Change in equity prices 31 December 2013 Percentage 31 December 2012 Percentage 3.4.3 Property risk The property risk depends on the total exposure to property. In order to gain a total understanding of the actual property risk, a.s.r. includes property for own use and development property amounting to € 125 million (2012: € 206 million) in the analysis of its property risk. In addition, revaluations to the carrying amount of € 1,046 million have been included (2012: € 1,165 million). The fair value of property and property-related assets was € 3,028 million at year-end 2013 (2012: € 3,372 million), including property for own use.
The exposure to property decreased in 2013 primarily due to the disposal of property.
The property portfolio is diversified across the rural, residential, office and retail sectors in the Netherlands. The allocation to offices is limited (9%) and partly concerns offices for own use. The core profile of the commercial property portfolio is durable and in general ensures a relatively stable development of the value of the portfolio. For example, the retail portfolio mainly consists of ‘A-locaties’. Active management allows a.s.r. to benefit from the rent potential and to keep the vacancy
rates low as much as possible. a.s.r. is the largest private owner of rural estate in the Netherlands and this property portfolio is well diversified regionally within the Netherlands.
The net exposure to USD decreased because of divestments in USD equities. The net exposure to DKK decreased because of divestments in DKK bonds.
3.4.5 Spread risk Spread risk arises from the sensitivity of the value of assets and liabilities to changes in the level of credit spreads on the relevant risk-free interest-rates. Spread risk relates to several types of assets: • fixed-income investments; • deposits; • savings-linked mortgage loans.
The following tables provide a detailed breakdown of fixed-income exposure by rating class, sector, and country of risk and level of subordination for the financial sector. The table includes all bonds, fixed-income funds and loans subject to spread risk according to our risk models.
The changes in the rating distribution of the fixed-income portfolio are attributable to the combination of market factors, such as interest-rates and spread movement, implementation of the investment policy and rating actions by S&P and Moody’s rating agencies. Higher interest-rates and the downgrade of the Dutch sovereign bonds from AAA to AA+ by S&P in November 2013 were the main drivers of the decline in market value of the AAA rating category. Loans to intermediaries and externally managed fixed-income funds are included in the not-rated category.
The market value changes in fixed-income portfolio are to a large extent attributable to changes in rates and credit spreads. Higher rates had a more pronounced impact on the market value of the government portfolio due to its higher interest-rate sensitivity. All credit sectors benefited from tightening credit spreads in 2013. Despite considerable spread performance, the weight of financial institutions in the bond portfolio fell due to a further reduction in our exposure to this sector.
128a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Asset-backed securities (ABS) An asset-backed security is a financial security backed by a portfolio of loans, leases or receivables against assets other than real estate and mortgage-backed securities. This portfolio consists of various securities backed by several types of assets.
Mortgage-backed securities (MBS) Mortgage-backed securities are a type of asset-backed security that is secured by a portfolio of mortgages. a.s.r.’s MBS portfolio of a.s.r. mainly consists (approximately 88%) of AAA tranches in Dutch residential mortgage backed securities. The rest of the portfolio consists of investments in the most senior tranches of UK RMBS (around 4%) and some peripheral exposure (mostly in Spain (5%)), all of which have started to redeem.
The next table gives a detailed overview of the distribution of the total-fixed income portfolio over ratings and sectors.
129a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
in our loan policy. Furthermore the current value of the collateral already incorporates the effect of the ban on commissions. This value is subsequently used in our internal risk-rating model.
Savings-linked mortgage loans Savings-linked mortgages have been sold with savings-linked contracts carried in a.s.r.’s statement of financial position where the mortgage loan is recognized in the balance sheet of third parties. One of the characteristics of a savings-linked mortgage loan is that the interest on the insurance contract and the interest on the mortgage loan are linked. At the same time, a.s.r. extends loans to these third parties with a nominal value equal to the value of the savings-linked contract and at an interest-rate linked to the interest-rate on the mortgage. The amortized cost of these loans amounted to € 2,520 million at year-end 2013 (2012: € 2,330 million).
The credit risk The other 35% of the savings-linked mortgage loans portfolio by credit rating of the counterparty is shown below. Due to the downgrade of Dutch sovereign bonds the government guaranteed savings-linked mortgage loans moved from AAA to AA.
Savings-linked mortgage loans - other 31 December 2013 31 December 2012
130a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Counterparty default risk reflects possible losses due to unexpected default or deterioration in the credit standing of counterparties and debtors. Counterparty default risk affects several types of assets: • mortgages; • derivatives; • reinsurance; • receivables; • cash and cash equivalents.
As a rule, a.s.r.’s mortgage portfolio is secured by collateralizing the linked life insurance contracts. a.s.r. generally does not grant interest-only mortgages.
At year-end 2013 1.6% (2012: 1.0%) of mortgages were in arrears.
3.5.2 Derivatives OTC derivatives are primarily used by a.s.r. to manage the interest-rate risks incorporated in the insurance liabilities. Interest-rate derivatives are traded with a well-diversified and qualitative dealer panel with whom there is an established International Swaps and Derivatives Association (ISDA) contract and a Credit Support Annex (CSA) in place. These CSA’s include specific agreements on the exchange of collateral limiting market and counterparty risk.
131a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
An accumulated impairment loss for receivables of € 35 million was recognized in 2013 (2012: € 35 million).
3.5.5 Cash The current account amounted € 750 million in 2013 (2012: € 756 million). The rating of the counterparties is single A.
• In life insurance and disability insurance these provisions are based on assumptions underlying the premium calculation. In the case of disability current information is taken into account. By applying shadow accounting, recent impact of movement in the riskfree yield curve and credit spreads on corporate bonds are recognized in the provisions. The adequacy of these provisions are reviewed at each statement of financial position date using appropriate current principles.
3.6.1 Non-life insurance portfolio The non-life insurance portfolio of a.s.r. focuses on Accident & Health and Property & Casualty (Motor, Fire and Liability). The insurance contracts are sold to retail and wholesale clients through intermediaries, underwriting agents and direct distribution channels. The non-life insurance portfolio consists mainly of the following categories.
Accident & Health: • Disability: disability coverage in the portfolio includes both individual coverage for self-employed persons and (semi-)group coverage for employees. The latter group also qualifies for employees disability cover (WIA); • Sickness leave: coverage includes continued salary payments for the first two years of the individual’s incapacity for work; • Health insurance: contracts cover medical expenses incurred by physicians and hospitals, and other medical expenses. Basic coverage (‘Basisverzekering’) is mandatory for all residents of the Netherlands and offers limited coverage as stipulated by the Dutch government. Additional coverage (‘Aanvullende verzekering’) is sold for a higher level of medical care.
Property & Casualty: • Motor vehicle third-party liability: motor vehicle liability is a third-party liability insurance that covers bodily injury, medical care and/or loss of income following a road traffic accident, as well as damage caused to another vehicle; • Fire and other damage to property: fire insurance offers policyholders financial protection against damage to their property and material consequences of interruption of operations as a result of the damage sustained; • Other liability: this involves third-party liability insurance for both private individuals and businesses.
Non-life insurance risk Non-life insurance risk primarily comprises of risks resulting from third-party liability, disability and general third-party liability. Liabilities are formed to cover the scale and the long-term character of the claims (especially those involving disability).
Managing non-life insurance risk Insurance risk is the risk that future insurance claims and benefits cannot be covered by premium and/ or investment income, or that insurance liabilities and results are threatened because the assumptions, used in the development and premium-setting of a product are not realistic. Non-life insurance risk is managed by monitoring claims frequency, the size of claims, inflation, handling time, benefit and claims handling costs, and biometrical risks (disability, recovery, illness, death). Concentration risk also qualifies as an insurance risk.
Claims frequency, size of claim and inflation To mitigate the risk of claims, a.s.r. bases its underwriting policy on claims history and risk models. The policy is applied to each client segment and to each type of activity. In order to limit claims and/or ensure that prices are adjusted correctly, the acceptance policy is continually refined using a number of indicators and statistical analyses. The product lines also use knowledge or expectations with respect to future trends to estimate the frequency, size and inflation of claims. The risk of unexpected major damage claims is contained by policy limits, the concentration of risk management and specific risk transfer contracts (e.g. reinsurance).
Handling time The time required for handling and settling claims is an important factor. The settlement of claims that have a long handling time, such as injury or liability claims, can take years. Analyses are performed regularly and based on a.s.r.’s experience in similar cases, historical trends – such as the pattern of liabilities – increases in risk exposure, payment of damages, the scale of current and not yet settled damage claims, court rulings and economic conditions.
These risks are controlled by means of regular evaluation of historical claims patterns, expected future developments and price adjustments. Disability risk is mitigated by a.s.r. through underwriting criteria and a proactive reintegration policy. a.s.r. also mitigates its disability risk through suitable reinsurance.
Concentration risk The risk exposure of a.s.r. on its non-life portfolio is geographically almost entirely located in the Netherlands. Concentration of insurance risks is particularly prevalent in the fire risk portfolio (i.e. home and content, with storm risk forming the most important factor). Storm risk is managed by means of suitable reinsurance (see also ‘Reinsurance’).
Total gross written premium income from non-life insurance activities in 2013 amounted to € 2.392 million (2012: € 2.487 million). In 2013 the net reinsurance premium amounted to € 152 million (2012: € 155 million), which represents 6.33% (2012: 6.02%) of gross premium income.
To limit risk concentration, reinsurance contracts are placed with various reinsurance companies. The reinsurance programme has remained largely the same as 2012 in terms of cover and limits. Minor changes have taken place based on the current risk appetite where necessary. In 2013, a.s.r. purchased excess of loss reinsurance for storm in excess of € 30 million with a limit of € 325 million (2012: € 300 million).
135a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The provision for claims for disability insurance equals the present value of the expected benefits, taking account of the policy terms and conditions and qualifying periods, as well as the chances of recovery and death.
The provisions for claims and the provision for unearned premiums at year-end 2013 can be broken down as follows: 31 December 2013 P&C A&H Total
136a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Policies for life insurance are underwritten by a.s.r. They describe the types of risks and the extent of risk a.s.r. is willing to accept. Policyholders may be subjected to medical screening for individual life insurance.
Longevity risk For contracts that guarantee benefits during a policyholder’s lifetime, longevity risk is mainly a trend risk. The adequacy of insurance liabilities is measured using information gathered from the most recent published mortality table of the Actuarial Society of the Netherlands published in 2012. This recent table contains the latest available data on mortality trends for the Dutch population.
Expense risk Product features ensure that there is no risk on commission fees. Expense risk is therefore restricted to administrative expenses. Projections are made of future administrative expenses and the expected future income from contracts to cover those administrative expenses. This prospective analysis of administrative expenses are the basis for managing and controlling expense risk. In 2013, a.s.r. carried out extensive analysis of the cost allocation process and the modeling of costs in the products in the segment Life. The impact of any (methodological) change in the costs modelling or parameter setting is material on solvency level for these products.
Insurance liabilities Adequacy of insurance liabilities The adequacy of the technical insurance liabilities is tested at least every quarter and evaluated every month (and more frequently, if required). The a.s.r. testing policy for liabilities complies with IFRS requirements and DNB guidelines (see Chapter 2.25).
Life insurance liabilities The technical provision is based on the premium calculation at the time the contract is issued. The probability of death is based on past experience and on expected future developments in mortality
The provision at year-end 2013 can be broken down as follows: Life insurance contracts Individual Group Total
Without profit-sharing 4,161 1,574 5,735 Contractual profit-sharing (and interest margin participation) 5,984 5,819 11,803 Discretionary profit-sharing 2,150 - 2,150
Without profit-sharing 4,089 1,542 5,631 Contractual profit-sharing (and interest margin participation) 6,863 6,617 13,479 Discretionary profit-sharing 2,203 - 2,203
139a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
defined benefit obligation. A description of the plans, assumptions, sensitivities and disclosure related to the post-employment benefits plans is included in Chapter 17. The Economic Capital model (‘ECAP’) that a.s.r. uses, is an important steering mechanism for value management. Interest-rate, longevity and inflation risk incurred for the employee benefits of own staff are taken into account in the calculation of required capital in the ECAP model.
Strategic risk is defined as the risk that a.s.r. will not reach its targets because of invalid decisionmaking, incorrect implementation of decisions and/or failure to respond adequately to market developments. In order to remain a solid, trusted and profitable insurance company in relation to the continuing pressure on the Dutch insurance market, it is extremely important to identify strategic issues and to take the appropriate action.
140a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Control Risk Self-Assessment Under supervision of the Risk Management department, a Control Risk Self-Assessment (CRSA) is conducted annually at all a.s.r. business lines and staff departments. Key risks threatening the achievement of the organization’s strategic objectives are taken into account in the CRSA. Following this assessment, each department prepares a report outlining all identified key risks and the actions that need to be taken to mitigate them. These mitigating actions need to be implemented within a one-year timeframe. This report and the mitigating actions are authorized by the management teams of the business units and the Executive Board. Senior Management signs the Management in Control Statement (MCS) each year which is based on the CRSA. Progress made on the mitigating actions as defined in the CRSA is monitored on a quarterly basis in the Business Risk Committees and reported to the Non-Financial Risk Committee.
Operational losses Any department may suffer operational losses. a.s.r. therefore has a process in place for reporting losses in excess of € 5,000 (five thousand) to the group Risk Management department. Losses below this level are reported within the business unit. The causes of losses are evaluated (incident management) and the losses are reported to the Non-Financial Risk Committee.
Business Continuity Management and Contingency planning Critical processes and activities are identified, including the resources needed to establish similar activities at a remote location. The continuity of the activities and the recovery of systems supporting critical activities is regularly tested. Crisis teams have been established and are trained every year to deal with any type of catastrophe. The objective of the training is to give the teams insight into how they function and help them do their job in case of an emergency. The training also clarifies the roles, duties and responsibilities of the members of the crisis teams.
The group has entered into a limited number of cash flow hedges, for which it applies hedge accounting to hedge some of its interest-rate risk in the Other segment. These hedging transactions, only hedge risk on a limited number of separate property development contracts. Under IFRS, derivatives are measured at fair value in the balance sheet and any changes in the fair value are recognized through profit and loss. In the event that changes in the fair value of hedged risks are not recognized through profit and loss, an accounting mismatch occurs, making the results more volatile. In these cases, hedge accounting is applied to mitigate the accounting mismatch and volatility.
141a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Solvency II is the regulatory framework for European insurance companies that will replace the current Solvency I regime. The introduction of the new regime is intended to harmonize the European insurance market, increase protection of policyholders and improve risk awareness in both the governance and management of insurance companies. Solvency II sets more sophisticated solvency requirements and will form an integral part of the risk management of insurance companies.
In December 2013, the Council of the EU adopted the Solvency II Directive scheduling the application date of the Solvency II Directive for 1 January 2016. In anticipation of the implementation date of 1 January 2016 EIOPA has published Preparatory Guidelines, in particular regarding Pillar 2 topics such as System of Governance and Forward Looking Assessment of Own Risks and Pillar 3 Reporting guidelines. DNB has adopted these guidelines which apply to Dutch insurance companies as of 1 January 2014.
Highlights in 2013 • Solvency II implementation is on track. • ORSA has been further developed and is structurally embedded in the business. The ORSA at group level has been performed for the third time. The ORSA was also carried out at legal entity level in 2013. The ORSA at group and legal entity level will be carried out at least once a year.
• Actions taken in 2012 regarding data management were continued in 2013 and a.s.r. decided to develop EIOPA’s Quantitative Reporting Templates (QRT) with regard to data management in order to comply with Solvency II.
142a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
4 Capital and liquidity management 4.1 Capital management 4.1.1 Capital management objectives The group is committed to maintaining a strong capital position so as to be a robust insurer for its policyholders and other stakeholders. The objective is to maintain a solvency level that is well above the minimum regulatory requirement (Solvency I). Stress tests are performed for principal risks. An additional objective is to achieve a combination of a capital position and a risk profile that is at least in line with a single A rating.
The a.s.r. post-employee benefit plans are insured by ASR Levensverzekering N.V., an a.s.r. group insurance company. The post employee benefit provision in excess of the insurance provisions is eliminated in determining the regulatory solvency available and the regulatory solvency required.
Rating reports can be found on the a.s.r. website: www.asr.nl/EN/about-asr 4.3 Dividend
144a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
145a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The eliminations applied in the reconciliation of the segment information with the consolidated balance sheet and the consolidated income statement are separately presented in chapter 5.2 and 5.3.
The a.s.r. segment reports show the financial performance of each segment. The purpose of these reports is to allocate all items in the balance sheet and income statement to the segments that hold full management responsibility for them.
Segment information has been prepared in accordance with the accounting principles used for the preparation of a.s.r.’s consolidated financial statements (as described in chapter 2).
147a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
148a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Subordinated debt 15 30 - -45 - Liabilities arising from insurance contracts 4,240 21,677 - -1,989 23,928 Liabilities arising from insurance contracts on behalf of policyholders - 8,992 - - 8,992 Employee benefits - - 2,426 - 2,426 Provisions 1 7 30 - 38 Borrowings 5 76 84 -77 88 Derivatives - 533 2 - 535 Deferred tax liabilities 52 -250 198 - - Due to customers 30 319 1,057 -40 1,366 Due to banks 2 675 - - 677 Other liabilities 339 379 668 -20 1,366 Total liabilities 4,684 32,438 4,465 -2,171 39,416
As at 31 December 2012 (restated) Non-Life Life Other Eliminations Total
150a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Change in provision for unearned premiums 1 - - - 1
Insurance claims and benefits recovered from reinsurers 96 14 - - 110 net insurance claims and benefits -1,827 -3,367 - 182 -5,012
151a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Fair value gains and losses -5 574 - - 569 Result on investments on behalf of policyholders - 949 - -1 948
Share of profit/(loss) of associates and joint ventures - 10 -19 - -9
Insurance claims and benefits recovered from reinsurers 101 -1 - - 100 net insurance claims and benefits -1,865 -3,873 - 131 -5,607
Gross premiums written 2,392 2,487 Change in provision for unearned premiums 1 92 Gross insurance premiums 2,393 2,579
Net insurance claims and benefits -1,604 -1,467 Change in liabilities arising from insurance contracts -223 -398 Fee and commission expense -355 -404 Technical result (underwriting) 60 155
Allocated gain (loss) on investments - to technical result 101 83 Allocated gains or losses – to technical result - - Allocated other income and expense – to technical result -3 -5 Operating expenses -240 -225 Restructuring provision expense -11 -18 Technical result – before proceeds (loss) from sales of investments -93 -10
Proceeds (loss) from sales of investments 56 26 Technical result -37 16
Proceeds (loss) from sales of investments 51 14 Technical result 314 195
The increase of profit before tax to € 471 million (+35%) is mainly attributable to a higher contribution of investment results, the focus to decrease operating expenses and lower fee and commission expenses. The cost-premium ratio improved 0.4%-point to 11.6% owing to the decrease of operating expenses that more than offset the decrease of gross written premiums.
Investment results went up thanks to capital gains, less impairments combined with stable investment returns. The development of derivatives and investments on behalf of policyholders explains the volatility of the investment results, but these effects are compensated in the technical provision.
Fire and other property damage 311 299 -162 -90 -35 19
In 2013, the combined ratio increased to 104.6% (2012: 99.2%). This is due to developments in the claims ratio, caused by an increase in claims and the change in liabilities arising from insurance contracts of the product WGA-ER. These losses amounted to € 183 million for a.s.r. in 2013. Disregarding this additional WGA-ER charge, the combined ratio reached a robust 96.5%.
For the calculation of the expense ratio a total of € 16 million (2012: € 23 million) of restructuring provision expenses and internal investment costs have been eliminated from the total operating expenses of € 251 million (2012: € 244 million).
Cost price 70 494 59 623 Accumulated amortization and impairments -67 -250 -53 -370 At 31 december 3 244 6 253
Value of Business Acquired (VOBA) VOBA mainly relates to the acquisition of Stad Rotterdam. At year-end 2013, the remaining amortization period of VOBA is 17 years and the average amortization for the next 5 years is € 18 million per year.
As a result of the amendment in the life insurance market, where commissions to intermediaries no longer is permitted, the DAC is expected to decrease significantly in the next few years, mainly due to amortization.
In 2013 the renovation of the Archimedeslaan 10 has progressed with an amount of € 45 million being invested as additions to the buildings for own use. Depreciation of property, plant and equipment is recorded in operating expenses. Impairments in 2013 amounting to € 21 million (2012: € 12 million) have been recognized as a result of the decommissioning of assets due to the renovation of buildings for own use.
Accumulated depreciation as at 1 January 2013 -95 -138 -233 Depreciation -2 -7 -9 Transferred to investment property - - - Other changes - 2 2 Accumulated depreciation as at
Cost price as at 1 January 2012 170 148 318 Additions 14 6 20 Transferred to investment property -3 - -3 cost price as at 31 december 2012 181 154 335
Other changes - - Accumulated depreciation as at 31 december -329 -345
Reversal of impairments 6 10 Reversal of impairments on disposal 24 4
Proceeds from the sale of investment properties and rentals are recognized as investment income. For details, see chapter 25. In 2013, rentals amounted to € 138 million (2012: € 140 million).
Direct operating expenses arising from the investment property amounted to € 25 million (2012: € 27 million). Given the low vacancy level, virtually all direct operating expenses relate to investment properties generating rental income. Direct operating expenses of investment property are classified as operating expenses.
159a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The property has a relatively fixed return with low vacancy levels as indicated in chapter 9.1. The property portfolio is well diversified consisting primarily of residential, retail, offices and rural property, throughout the Netherlands. The retail portfolio focuses on high street locations with relative low vacancy levels.
160a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The abbreviated balance sheet and income statement information disclosed in the tables below is based on the most recent financial information available from the associates and joint ventures. These are primarily based on the investee’s financial statements and their accounting policies.
Income tax expense or income - - -1 -1 Profit and loss from continuing operations 21 -2 1 20
Post-tax profit and loss from discontinued operations - - - - Other comprehensive income 17 1 - 18
Income tax expense or income - - - - Profit and loss from continuing operations 21 -41 -7 -27
In 2013, loans to associates and joint ventures amounted to € 17 million (2012: € 42 million). These loans are classified as loans and receivables.
Investments on behalf of policyholders - At fair value through profit and loss (Chapter 11.2) 8,049 8,217
11.1 Investments available for sale Investments available for sale can be broken down as follows: Government bonds 8,528 9,271 Corporate bonds 8,047 8,386 Mortgage-backed securities 367 404 Other asset-backed securities 236 261 Unlisted equities 125 55 Listed equities 2,165 1,916 Other investments 123 174
Realized gains through profit and loss 373 248 Revaluation recognized in equity -502 1,482
All investments at fair value through profit and loss are designated as such by a.s.r. upon initial recognition.
11.3 Loans and receivables Loans and receivables can be broken down as follows: Government and public sector 223 244 Mortgage loans 4,796 3,533 Consumer loans 7 8 Other loans 169 208 Total due from customers 5,195 3,993
Impairments - Specific credit risks -62 -58 due from customers 5,133 3,933
Total due from credit institutions 2,592 2,465 - Specific credit risks -61 -29
Due from policyholders 325 217 Due from intermediaries 174 183 Reinsurance receivables 108 82 Other receivables 248 381 Total trade and other receivables 855 863 - Specific credit risks -35 -33
Impairment of loans and receivables The following table breaks down changes in impairments of loans and receivables: Increase in impairments through profit and loss -57 -27 Release of impairments through profit and loss 15 17 Reversal of impairments due to disposal 8 3
A further breakdown of the loans and receivables is included in the fair value hierarchy tables (see chapter 11.5).
166a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Notional amounts are used for measuring derivatives. They are not recognized as assets or liabilities in the balance sheet. Notional amounts do not reflect the potential gain or loss on a derivative transaction. a.s.r.’s counterparty risk is limited to the positive net fair value of the OTC contracts.
The fair value of interest-rate contracts is calculated using OIS discounting: under this method the cash flows of the contracts are estimated using the underlying yield curve of the instrument. In practice, these are Euribor curves with 3-monthly or 6-monthly interest-rate resets. Subsequently, the cash flows are discounted using Eonia for EUR instruments and the US Federal Funds rate for USD instruments. The fair value of the interest-rate contracts using this method form the basis for the amount of collateral that is exchanged between a.s.r. and its counterparties in accordance with the underlying contracts.
Included in the cash and cash equivalents is € 677 million (2012 € 1,882 million) related to the cash collateral received on derivative instruments. This debt to repay the cash collateral is included in the amount due to banks (chapter 21).
11.5 Fair value hierarchy – Financial assets and derivatives The breakdown of the fair value of financial assets and derivatives in accordance with the level of fair value hierarchy, as explained in chapter 2.8, is as follows: Fair value based on quoted prices in an active market
Debt certificates covered by mortgage 367 - - 367 Debt certificates covered by other assets 236 - - 236
Derivatives held for hedging - -2 - -2 Total negative fair value - -535 - -535 cash and cash equivalents - 1,517 - 1,517
Investments available for sale - Government bonds 9,271 - - 9,271
Debt certificates covered by mortgage 404 - - 404 Debt certificates covered by other assets 261 - - 261
Total negative fair value - -366 - -366 cash and cash equivalents - 2,556 - 2,556
Changes in value of investments, realized/unrealized gains and losses: - Fair value gains and losses (see chapter 25.3) 1 3 - - - Realized gains and losses (see chapter 25.2) - - 5 3 - Recognized in Other comprehensive income (unrealized
The financial assets in this category mainly consists of private equity investments. The main nonobservable market input is the net asset value as published by the investee. An increase or decrease in the net asset value of the unlisted equities will have a direct proportional impact on the fair value of the investment.
Investments on behalf of policyholders at fair value through profit and loss Government bonds 254 - - 254
172a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Provisions 1 -1 - - - Amounts received in advance -69 -13 - 11 -71
The increase in the deferred taxes is primarily as a result of the disposal and decrease in the fair value of the derivatives and the related shadow accounting amounting to € 250 million.
Interest expenses incurred related to property developments amounting to € 2 million were capitalized in 2013 (2012: € 4 million) and included in property developments.
15 Equity 15.1 Share capital Share capital can be broken down as follows: Authorized capital: - Ordinary shares; 1,000,000 at a par value of EUR 500 500 500 Of which: unsubscribed shares -400 -400
Tax related to shadow accounting 164 164 Unrealized gains and losses related to segregated
15.3 Actuarial gains and losses The actuarial gains and losses related to the post-employment pension plans amount to -€ 107 million (2012: -€ 224 million). See chapter 17.1 for a summary of the movements in the defined benefit obligation through equity amounting to € 152 million (2012: € 299 million).
15.4 Other equity instruments The issued hybrid Tier 1 instruments are classified as equity instruments. These issues were part of a financial restructuring in June 2009.
175a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
176a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Provision for unearned premiums as at 31 december 414 416 5 38
Provision for claims as at 31 december 3,826 3,710 402 407 non-lIfe InSuRAnce conTRAcTS AS AT 31 decembeR 4,240 4,126 407 445
177a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
At year-end 2013, the liabilities included guarantee provisions directly attributable to policyholders for a carrying amount of €139 million (2012: € 145 million).
The 2013 interest added amounting to € 1,169 million consists of regular interest additions to the insurance liabilities of € 636 million, realized gains and losses € 619 million (see chapter 25.2 and 25.3) and the amortization of realized gains € -86 million.
The table below is a ten-year summary of movements in cumulative benefits in connection with the non-life portfolio for the period from 2004 to 2013.
Gross claims (cumulative) as at 31 December 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total
Gross claims (cumulative) as at 31 December 2012 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total
Claim liabilities prior years 345 Other claim liabilities 71 Shadow accounting 193
16.3 Liabilities arising from insurance contracts on behalf of policyholders Movements in liabilities arising from insurance contracts on behalf of policyholders can be broken down as follows: Premiums received 676 813 Interest added 106 109
Effect of fair value changes related to financial assets 672 826 Technical result -31 -41 Release of cost recovery -130 -163 Changes related to segregated investment pools through equity 34 Other changes 77 91
The costs of post-employment and other long-term employee benefits are as follows: Post-employment benefits pensions -108 -35 Post-employment benefits other than pensions -1 -2
The costs relate to all members of the a.s.r. post-employment benefit plan and included the other income as a result of the amendments to the post-employment benefit plans amounting to € 27 million (2012: € 107 million).
17.1 Pension and other post-employment benefits A number of defined benefit post-employment benefit plans for its employees exist. All employees are formally employed by ASR Nederland N.V. The a.s.r. post-employment benefit plans are based on an average-salary pension. All employees who commenced service after 1 January 2006 are included in one post-employment benefit plan. All other employees remain active within the existing plan at the date of first employment (‘Basic plan’). Furthermore older plans for ‘sleepers and pensioners’ are still active. The methods and techniques used to calculate the defined benefit obligations are based on IAS 19 requirements and calculated by an independent actuary.
The accrued rights of active members in all plans are subject to a conditional indexation, maximised at the level of the CAO wage index. The pensions of current pensioners and the accrued rights of sleepers are also indexed using various indexation provisions. The indexation for the basic plan is linked to the profit sharing of the assets with a maximum of the greater of consumer price index and 3%. The indexation of the other plans are also based on the profit sharing of the assets, however generally have with a maximum indexation ranging between 3% and 4%. The older plans with a limited number of active members have no maximum indexation.
As of 1 January 2014, the accrual rate for old age pensions has been changed to 1.9% (2012: 2.25% or 2.0%). As a result of this amendment a past service cost is accounted for in 2013 amounting to € 27 million which has been recognized in the Other income in 2013 (see chapter 27).
The pension contributions are paid by a.s.r. and employees pay an own contribution of 6% of their pensionable salary.
181a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The table below shows movements in the defined benefit obligation: Pension plans Other post-employment benefits
Defined benefit obligation at 1 January (2012 previously reported) 2,517 2,343 21 21 Change in accounting policy - -86 - Restated opening balance 2,517 2,257 21 21
Remeasurement of liabilities included in OCI Discount rate change -41 301 -1 - Other assumptions change -97 7 -3 - Experience adjustments -14 -9 - - Total -152 299 -4 -
The other assumptions change amounts to € 107 million due to change in indexation percentage sleepers.
The principal actuarial assumptions at year end were as follows: Pension plans Other post-employment benefits
Accrual rate 1.9% 2.25% or 2.0% - - Mortality (years) 22.0 21.8 - - Future mortgage interest (in connection with grantable discounts) - - 3.5% 4.2%
The portfolio of global investments (non-qualifying assets) held by ASR Levensverzekering N.V. to cover the employee benefit expense can be broken down as follows: Asset category 31 December 2013 31 December 2012
The non-qualifying assets managed by group companies are not taken into account for the net defined benefit obligation. At year-end 2013, the fair value of these assets amounted to € 1,915 million (2012: € 1,851 million).
For the investments backing the post-employment benefit plans, a.s.r. has drawn up general guidelines for asset allocation based on criteria such as geographical location and ratings. To ensure the investment strategy remains in line with the structure of pension obligation, a.s.r. regularly performs Asset Liability Management (ALM) studies. Assets are allocated based on these guidelines and on the outcomes of these studies. As the post-employment benefit plans are insured by a group company the asset liability management and risk management is managed in accordance with the insurance portfolio risks management and the specific a.s.r. post-employment benefit plan risks (see chapter 3.6 and 3.6.3 respectively).
Under IFRS, assets managed by insurance companies that form part of the group do not qualify as qualifying assets. Therefore, investment income from these assets has not been included in the above figures. Actual investment returns for 2013 amounted to € 100 million (2012: € 52 million). These returns have been recognized in investment income (chapter 25).
As 31 December 2013 the duration of the defined benefit obligation was 17 years (2012: 18 years).
17.2 Other long-term employee benefits Other long-term employee benefits consist of the employer’s share of liabilities arising from longservice benefits. The table below shows the changes in these liabilities: Net liability as at 1 January 10 8 Total expenses -3 3 Other -1 -1 neT lIAbIlITy AS AT 31 decembeR 6 10
Discount rate 2.4% 1.9% Salary increases 1.5% 2.0% Expected remaining service years 8.7 11.1 18 Provisions
184a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Of the provisions, an amount of € 15 million falls due within one year (2012: € 23 million).
As at year-end 2013, borrowings comprised loans having the following terms to maturity: Falling due within 1 year 50 83 Falling due between 1 and 5 years 21 26 Falling due after 5 years 17 17
As at year-end 2013, the fair value of borrowings was € 88 million (2012: € 126 million). See chapter 23. The average interest-rate payable on other borrowings was 4.20% (2012: 3.67%).
All carrying amounts reflect the fair value as at the balance sheet date (see chapter 23).
185a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The breakdown of the liabilities in accordance with the level of fair value hierarchy, as explained in chapter 2.8, is as follows: Fair value based on quoted prices in an active market
The table below shows the composition of gross insurance premiums: Non-life insurance contracts – gross earned premiums 2,393 2,579
The table below provides an overview of total gross earned non-life insurance premiums. For further details on the individual business lines, see the segment information in chapter 5.5.
Gross premiums written 2,392 2,487 Changes in provisions for unearned premiums 1 92 non-lIfe InSuRAnce conTRAcTS – GRoSS eARned PRemIumS 2,393 2,579
187a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Retained exposure Group Non-recurring premiums written 73 66 Periodic premiums written 250 281 Group total 323 347
The table below breaks down interest income per category: Interest income from receivables due from credit institutions 132 127 Interest income from investments 575 625 Interest income from amounts due from customers 223 179 Interest income from trade receivables and derivatives 309 327 Other interest income 5 59
188a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The effective interest-rate method has been applied to an amount of € 920 million of the interest income from financial assets not classified as stated at fair value through profit and loss (2012: € 921 million).
Dividend and other investment income per category can be broken down as follows: Dividend on equities 43 35 Rentals from investment property 138 140 Other investment income 59 26
ToTAl dIvIdend And oTheR InveSTmenT Income 240 201 25.2 Realized gains and losses The table below shows a breakdown of realized gains and losses per category: Investment property
The 2013 derivatives of -€ 955 million can be broken down in -€ 1,335 million unrealized gains and losses on derivatives and an amount of € 380 million for realized gains and losses on derivatives.
189a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Insurance claims and benefits -5,122 -5,707 Insurance claims and benefits recovered from reinsurers 110 100 neT InSuRAnce clAImS And benefITS -5,012 -5,607
Insurance claims and benefits recovered from reinsurers 96 101 neT InSuRAnce clAImS And benefITS, non-lIfe -1,827 -1,866
Claims paid -2,848 -3,579 Changes in liabilities arising from insurance contracts -246 -384 Changes in liabilities arising from insurance contracts on behalf of
The distribution of a.s.r.’s workforce at 31 December is as follows: Non-life 1,151 1,125
As a result of continuing cost-cutting programmes, the total work force decreased by 9% to 4,164 (2012: 4,579). The ‘total work force’ consists of the number of internal and external FTEs. The number of internal FTEs decreased by 7% to 3,789 (2012: 4,088 FTE) and the number of external FTEs decreased by 24% to 375 (2012: 491 FTE).
Due to the credit and financial crises, impairments have been applied to equities, corporate bonds, associates and joint ventures, mortgage loans and investment property. Further impairments in 2013 relate to goodwill and VOBA.
The table below is a breakdown of the interest expense: Interest on employee benefits -96 -105 Interest on derivatives -214 -231 Interest owed to banks -11 -18 Interest owed to customers -11 -8 Interest on borrowings -4 -7 Other interest expenses -21 -34
Costs associated with sale of development property -195 -159 Operation and depreciation of investment property -57 -60 Other expenses -27 -46
In 2013, the other expenses include an amount of € 714 thousand (2012: € 756 thousand) related to the ‘Crisisheffing’ high income crisis levy of which € 166 thousand (2012: € 132 thousand) relates to the executive directors.
Deferred tax for financial year 247 64 Total deferred tax 247 64
The table below shows a reconciliation of the expected income tax expense with the actual income tax expense. The expected income tax expense was determined by linking up profit before tax to the tax rate in the Netherlands. In 2013, this rate was 25.0% (2012: 25.0%). The enacted tax rate for 2014 will be 25.0%.
193a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Effects of: Tax-exempt interest 5 6 Tax-exempt dividends 8 7 Tax-exempt capital gains 5 5 Changes in impairments -16 -11 Adjustments for taxes due on previous financial years 4 87 Other effects - 1
In July 2012, a.s.r. concluded an agreement with the Dutch Tax Administration relating to corporate tax returns. This agreement clarifies the principles upon which the corporation tax returns commencing from 2001 to 2010 for a.s.r. and its tax entities are to be established. The group recognized tax income and related interest income amounting to € 90 million and € 30 million (see chapter 25.1) respectively in 2012 for the period 2001 to 2010.
A related party is a person or entity that has significant influence over another entity, or has the ability to affect the financial and operating policies of the other party. Parties related to a.s.r. include the Dutch government, NLFI, associates, joint ventures, members of the Executive Board, members of the Supervisory Board and their immediate family members. These parties further include entities over which these persons or entities exercise control or substantial influence, and other affiliated entities.
The remuneration and combined share ownership of the members of the Executive Board are described in chapter 36 (Remuneration of the a.s.r. Executive Board and Supervisory Board).
In the normal conduct of business, a.s.r. entities may issue insurance contracts, business credits, loans or bank guarantees to members of the Executive Board and the Supervisory Board or to these persons’ immediate family members.
Associates Joint ventures Other related parties Total balance sheet items with related parties as at 31 december
Provisions for impairment amounting to € 5 million (2012: € 4 million) have been recognized on the loans and receivables.
In addition to the dividend paid and the discretionary interest to holders of equity instruments amounting to € 88 million (2012: € 71 million) and € 44 million (2012: € 45 million) respectively a.s.r. incurred expenses on behalf of its NLFI amounting to € 4 million for strategic expenses related to the privatization.
Mortgage loans to the Executive Board can be broken down as follows: Amounts in Euros x 1,000 Outstanding Average interest % Settlement
36.1 Remuneration of supervisory directors The annual remuneration for members of the a.s.r. Supervisory Board has been calculated as follows: Amounts in Euros x 1,000 2013 2012
196a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
In accordance with the remuneration law ‘Wet aansprakelijkheidsbeperking DNB en AFM en bonusverbod staatsgesteunde ondernemingen’, issued by the Dutch government, no variable remuneration has been disbursed to the Executive Board Directors for the fiscal year 2013. In 2012 a.s.r. made use of the opportunity as stated in this law to provide a temporary personal allowance to the Executive Board Directors, excluding the Chairman. With this personal allowance, a.s.r. did remain well below the allowed maximum of 20%.
The remuneration can be broken down as follows: Amounts for 2013 in Euros x 1,000
Total, including long-term variable remuneration 1 In 2013 the fixed employee benefits increased in line with the annual CAO-index.
** Term of service as executive director ended on 31 December 2011. Term of service at a.s.r. ended on 30
Governance Code (article II.2.8) and contractual obligations and amounts to a one-year salary.
197a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Provisions are formed for such occurrences if, in management’s opinion and after consultation with its legal advisers, a.s.r. is likely to have to make payments and the payable amount can be estimated with sufficient reliability. The costs of the compensation scheme for unit-linked insurance contracts have been fully recognized in the financial statements based on management’s best knowledge of current facts, actions, claims, complaints and events. Provisions are recognized in the liabilities arising from insurance contracts and legal provisions (see chapter 18).
Investment obligations and guarantees Where property developments are concerned, ASR Vastgoed Vermogensbeheer has assumed investment obligations for an amount of € 261 million (2012: € 403 million) and has issued guarantees to third parties for a total amount of € 330 million (2012: € 330 million).
Lease commitments The table below breaks down the commitments for non-cancellable operating leases as at 31 December: Lease commitments 2013 2012
No later than 3 months 1 1 Later than 3 months and no later than 1 year 3 4 Later than 1 year and no later than 5 years 6 7
Property, plant and equipment 1 - 15 Subsidiaries, joint ventures and associates 2 3,652 3,809 Loans to group companies 3 122 289 Loans and deposits 4 29 31 Receivables from group companies 5 2,283 2,056 Deferred tax assets 6 22 107 Other assets 3 5 Cash and cash equivalents 7 5 166 Total assets 6,116 6,478
Due to the retrospective treatment of IAS 19 Employee benefits and as a result of the legal merger, the comparative figures for 2012 have been restated accordingly (see chapter 41). The numbers following the line items refer to the relevant chapters in the notes to the company financial statements.
41.1 Notes to the company balance sheet 1. Property, plant and equipment The property, plant and equipment consisted of property which was sold in 2013 to a group company for € 14 million based on the fair value of this property at the date of transfer. Immediately prior to the transfer impairment amounting to €1 million was recognized.
200a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The loans to group companies consist primarily of deposits with group companies of € 47 million (2012: € 214 million) repayable within one year and loans of € 30 million (2012: € 30 million) with a maturity term within 3 years and an average interest-rate of 4.5% and loans of € 45 million with a maturity term longer than 3 years and an average interest-rate of 4.3% (2012: 5.9%).
The statutory reserve relates to the revaluation of investments in group companies. Expected claims for additional benefits under insurance contracts with DPF are included in the Other reserves amounting to € 2 million (2012: € 3 million).
Other equity instruments The other equity instruments relate to four different hybrid Tier 1 instruments that are classified as equity (see chapter 15.4).
9. Employee benefits Employee benefits can be broken down as follows (see chapter 17 for further details): Post-employment benefits pensions 2,405 2,517 Post-employment benefits other than pensions 15 21 Other long-term employee benefits 6 10
ToTAl emPloyee benefITS 2,426 2,548 10. Provisions The table below shows movements in provisions: Additional provisions 24 28 Reversal of unused amounts - - Utilized in course of year -23 -31
11. Borrowings The residual term to maturity of the borrowings from group companies amounting to € 30 million (2012: € 30 million) is 7 months (2012: 19 months). The average interest-rate is 3.8% (2012: 3.8%).
The debts to group companies contain short term debts which are immediately collectable and deposits due to group companies with an interest-rate ranging between 1.6% and 1.7%. The maturities of the deposits range between 3 and 12 months.
Auditor’s fees Auditor’s fees are paid to auditors by the company, its group companies and other consolidated companies. The fees paid for the years 2013 and 2012 can be broken down as follows: • fees for audit engagements: these include fees paid for the audit of the consolidated and company financial statements, quarterly reports and other reports; • fees for non-audit services: these include fees for support and advisory services provided during acquisitions.
A breakdown of these fees is provided below: Amounts in Euro's 1,000 2013 2012
Examining and auditing the financial statements under the articles of association and other group company audits under the articles of association 1,863 2,243 Other audit services 681 552 Tax advisory services - 42 Other non-audit services 98 229
A statement of joint and several liability under section 403, Book 2 of the Netherlands Civil Code has been issued by ASR Nederland N.V. for the companies identified in the other information part 7.3.
Supervisory Board Kick van der Pol Annet Aris Cor van den Bos Margot Scheltema
204a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
To: the Shareholder, the Supervisory Board and the Executive Board of ASR Nederland N.V.
Our opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of ASR Nederland N.V. as at 31 December 2013 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements. Key audit matters are selected from the matters communicated with the Executive Board, the Supervisory Board and the Audit and Risk Committee, but are not intended to represent all matters that were discussed with them. Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole. Our opinion on the financial statements is not modified with respect to any of the key audit matters described below, and we do not express an opinion on these individual matters.
Sensitivities in the calculation of the liabilities arising from insurance contracts The calculation of the liabilities arising from insurance contracts is complex and highly judgmental and is based on assumptions which are affected by future economic and political conditions. The assumptions used relate to risks regarding mortality, longevity, catastrophe, lapse and expense. Furthermore the valuation of the liabilities arising from insurance contracts is affected by government regulations, in particular regarding the claim allocations to the Company from workers’ compensations insurance (WGA-ER) and healthcare insurance.
Application of shadow accounting has a significant impact on the financial statements The Company applies shadow accounting in its financial reporting as disclosed in note 2.25. As a result unrealized gains on fixed income investments and interest derivatives, held for hedging the interest risk in the technical provisions, are not recognized in equity or investment income but are added to or deducted from the insurance liabilities. Shadow accounting is only applied for interest effects. Shadow accounting is complex, requires significant Executive Boards judgment and has a significant impact on the technical provisions.
As part of our audit procedures we tested the valuation of the fixed income investments and interest derivatives, held for hedging the interest risk in the technical provisions. Furthermore we tested the internal controls regarding the accounting treatment of the interest results, paying special attention to the appropriate elimination of impairment results on the fixed income investments.
Going concern The Company’s financial statements have been prepared using the going concern basis of accounting. The use of this basis of accounting is appropriate unless the Executive Board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. As part of our audit of the financial statements, we concur with the Executive Board’s use of the going concern basis of accounting in the preparation of the Company’s financial statements.
The Executive Board has not identified a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern, and accordingly none is disclosed in the financial statements.
Based on our audit of the financial statements, we also have not identified such a material uncertainty. However, neither the Executive Board nor the auditor can guarantee the Company’s ability to continue as a going concern.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Executive Board.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Pursuant to the legal requirement under Part 9 of Book 2 of the Dutch Civil Code regarding our responsibility to report on the Report of the Executive Board and the other information: • We have no deficiencies to report as a result of our examination whether the Report of the Executive Board, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the other information as required by Part 9 of Book 2 has been annexed.
210a.s.r. 2013 annual report Other information 7.2 Events after the balance sheet date
There have been no material events after the balance sheet date that would require adjustment to the consolidated financial statements of a.s.r. as at 31 December 2013.
Administratie- en Adviesbureau voor Belegging en Krediet (A.B.K.) B.V.1 100.00 100.00 Amersfoort Non-Life ASR Aanvullende Ziektekostenverzekeringen N.V.1,2 100.00 100.00 Amersfoort Non-Life ASR Basis Ziektekostenverzekeringen N.V.1,2 100.00 100.00 Amersfoort Non-Life ASR Schadeverzekering N.V.1,2 100.00 100.00 Utrecht Non-Life ASR Ziektekostenverzekeringen N.V.1 100.00 100.00 Amersfoort Non-Life Europeesche Verzekering Maatschappij N.V.2 100.00 100.00 Amsterdam Non-Life N.V. Amersfoortse Algemene Verzekering Maatschappij1,2 100.00 100.00 Amersfoort Non-Life ASR Nederland Vastgoed Maatschappij N.V.1 100.00 100.00 Utrecht Life/Non-Life ASR Levensverzekering N.V.1,2 100.00 100.00 Utrecht Life Deltafort Beleggingen I B.V. 50.00 50.00 Amsterdam Life Sycamore 5 B.V.1 100.00 100.00 Utrecht Life Sycamore 6 B.V.1 100.00 100.00 Utrecht Life Brand New Day Premiepensioeninstelling N.V.3 50.00 50.00 Utrecht Life ArboNed Holding B.V. (previously 365 Holding B.V.) 41.00 41.00 Utrecht Other ASAM N.V.1 100.00 100.00 Utrecht Other ASR Bank N.V.3 100.00 100.00 Utrecht Other ASR Betalingscentrum B.V.1 100.00 100.00 Utrecht Other ASR Deelnemingen N.V.1 100.00 100.00 Rotterdam Other ASR Hypotheken B.V.1 100.00 100.00 Utrecht Other ASR Nederland Beleggingsbeheer N.V.3 100.00 100.00 Utrecht Other ASR Nederland N.V. 100.00 100.00 Utrecht Other ASR Pension Fund Services N.V.1 100.00 100.00 Utrecht Other ASR Service Maatschappij N.V.1 100.00 100.00 Rotterdam Other ASR Vastgoed Ontwikkeling N.V. 100.00 100.00 Utrecht Other ASR Vastgoed Vermogensbeheer B.V.1 100.00 100.00 Utrecht Other B.V. Nederlandse Hulpverleningsorganisatie-SOS International 100.00 100.00 Amsterdam Other Het AssuradeurenHuys B.V.3 100.00 100.00 Haarlem Other PoliService B.V.3 100.00 100.00 Zeist Other Servicemaatschappij ‘De Hoofdpoort’ N.V.1 100.00 100.00 Rotterdam Other United Reforce I B.V.1 100.00 100.00 Utrecht Other
1 These are companies for which a statement of joint and several liability under section 403, Book 2 of the
Article 21 of the Articles of Association reads as follows: 1. The Company may distribute any profit to shareholders and other persons entitled to profits only if its net assets exceed the sum of the paid and called-up portion of its capital plus the reserves that must be maintained by law.
3. The annual general meeting of shareholders may, with respect to the stipulations in paragraph 1, either on the recommendation of the management board and with the approval of the supervisory board or on its own initiative make a distribution to be chargeable to the distributable part of the net assets.
5. No profit shall be distributed to the Company in respect of shares held by the Company in its own capital.
The Executive Board will propose to the Annual General Meeting of Shareholders to distribute € 99 million in dividend on ordinary shares for 2013.
2 Supervisory Board 2.1. Composition and expertise 2.1.1 The Supervisory Board shall be composed in such a way as to enable the proper performance of its duties. Key to the proper performance of the Supervisory Board’s duties are complementarity, joint management, independence and diversity.
Compliance with this principle is enshrined in the Supervisory Board’s regulations and profile. The regulations stipulate that the Supervisory Board should be composed in such a way as to enable the proper performance of its duties. The Supervisory Board has drafted a profile detailing its size and composition, taking account of the company’s nature and business, and of the expertise, experience and independence called for in its members. The Supervisory Board aims for diversity in its membership as to age and gender, amongst others. Once a year, the Supervisory Board evaluates its profile in order to learn lessons for its composition, practices and competencies. When candidates are nominated for appointment or re-appointment, the requirements regarding the composition and competencies of the Supervisory Board are considered in light of the profile.
The Supervisory Board’s regulations, its general profile and a short CV of each member have been posted on www.asr.nl/EN/about-asr.
The Supervisory Board has four members. The question whether the size of the board remains adequate and appropriate was again discussed at the 2013 self-assessment. In view of the company’s nature and business and the desired experience and expertise, the Supervisory Board deems four members a suitable number to enable the proper performance of its duties and those of its committees.
The Supervisory Board’s regulations require the Supervisory Board to take into consideration the interests of all stakeholders of a.s.r. and all its regulated entities, including any relevant corporate social responsibility aspects of the various divisions.
Shortly after their appointment, Supervisory Board members follow a tailored induction programme to introduce them to a.s.r and their role as Supervisory Board members. The programme focuses on a.s.r.’s role in society, including the interests of customers, intermediaries, employees and the shareholder. The Supervisory Board explicitly considers the interests of the various stakeholders in any issue it deals with. In order to gain a good understanding of these interests, the Supervisory Board conducted several interviews with the shareholder, the regulators and the Works Council in 2013.
2.1.4 Each Supervisory Board member shall be capable of assessing the main aspects of the insurer’s overall strategy in order to form a considered and independent opinion of the basic risk exposures. Each member shall also have the specific expertise required to perform his or her role within the Supervisory Board. To this end, an individual profile – in line with the general profile for the Supervisory Board – shall be compiled whenever a vacancy arises.
At least once a year, the Supervisory Board discusses its own performance and that of its individual members, and the conclusions to be drawn from this. As mentioned, the desired profile, composition and competencies of the Supervisory Board are discussed once a year.
In 2013, the Dutch Central Bank (DNB) re-evaluated the suitability and reliability of all four Supervisory Board members within the scope of the Dutch Financial Supervision Act. DNB confirmed the suitability of all four members for their current position on the Supervisory Board.
On appointment, the chair and members of the Supervisory Board pledged to make themselves sufficiently available and accessible to enable the proper performance of their duties as Supervisory Board members and Supervisory Board Committee members. And they have done so.
Members’ availability may be deduced from their attendance at meetings, as disclosed in this annual report. At only one meeting did one member fail to attend. All other meetings in 2013 were attended by all members of the Supervisory Board. Outside meetings, members may be contacted (individually) and are available for discussion and consultation.
a.s.r. has a careful, restrained and sustainable remuneration policy. The members of a.s.r.’s Supervisory Board are paid a fee proportionate to the time required to perform their duties. The size of their fee does not depend on a.s.r.’s results and is adopted by the Annual General Meeting of Shareholders (AGM).
2.1.9 An evaluation of the effectiveness of the continuing education referred to under principle 2.1.8 shall form part of the Supervisory Board’s annual assessment.
215a.s.r. 2013 annual report Other information 2.1.10 In addition to Supervisory Board’s annual self-assessment, the Supervisory Board’s performance shall be assessed once every three years under independent guidance. This shall include an evaluation of individual members’ commitment, the culture within the Supervisory Board as a whole and the relationship between the Supervisory and Executive Boards.
2.2.2 Members of the audit and risk management committee shall be subject to specific requirements concerning competence and experience. Some members of the risk management committee need to possess in-depth knowledge of the financial and technical aspects of risk management or have the experience needed to make a thorough risk assessment, and some members of the audit committee shall possess in-depth knowledge of financial reporting, internal control and auditing or have the experience needed to exercise thorough supervision of these matters.
The ARC’s regulations stipulate that the ARC is to be composed in such a way as to ensure the availability of sufficient knowledge and/or experience of the financial and technical aspects of risk management, financial reporting, internal control and auditing to enable proper supervision in these matters.
The ARC consists of two members, appointed by the Supervisory Board. The regular meetings of the ARC, held no fewer than five times a year, are to be attended by, at least, the members of the ARC, the CFO and the heads of the Audit, Risk Management and Integrity departments (the latter being responsible for Compliance). The ARC members and their CVs are listed on pages 70 and 72 of this annual report. The CVs of the members show that this principle is met.
3 Executive Board 3.1. Composition and expertise 3.1.1 The Executive Board shall be composed in such a way as to enable the proper performance of its duties. Key to the proper performance of the Executive Board’s duties are complementarity, joint management and diversity.
The Executive Board has four members. The composition of the Board is characterized by complementarity and diversity of gender and age, as evidenced by the abbreviated CVs posted on the website www.asr.nl/EN/about-asr and included on page 69 of this report.
3.1.2 Each member of the Executive Board shall possess in-depth knowledge of the financial sector in general and the insurance industry in particular, of the insurer’s role in society and of the interests of all stakeholders. Each member shall also be highly knowledgeable, capable of analysing and deciding on the main aspects of the insurer’s overall strategy and forming a considered and independent opinion of the risk exposures.
3.1.4 All Executive Board members shall take part in the programme referred to under 3.1.3 and satisfy the permanent education requirements. This is a prerequisite for being able to perform adequately as an Executive Board member. The Supervisory Board shall ascertain whether the members of the Executive Board possess the required expertise.
The Supervisory Board’s regulations stipulate that it will periodically assess the performance of the Executive Board members by ascertaining whether they continue to satisfy the suitability requirements imposed by the Dutch Central Bank (DNB). All Executive Board members attended the CE sessions (see 3.1.3). The suitability requirements were covered in the target-setting meetings and performance appraisals conducted with the Executive Board members.
3.1.5 Each year, the insurer shall disclose in its annual report how it has implemented principles 3.1.3 and 3.1.4.
In performing its duties, the Executive Board carefully balances the insurer’s commercial interests against the financial risks, taking all the stakeholders and the applicable laws and codes of conduct into consideration and basing itself on the risk appetite as proposed by the Executive Board in accordance with the regulations and adopted by the Supervisory Board.
The CFO has three further areas of responsibility besides Risk Management, i.e. Financial Markets, Finance and Accounting, Reporting & Control. The CFO’s duties pertaining to these areas of responsibility – and any (financial) results gained from them – do not involve any customer-driven, commercial activities.
a.s.r.’s Executive Board is responsible for the management of a.s.r and its affiliated companies. This responsibility includes the achievement of targets for a.s.r. as a whole, the strategy and associated risk profile, developments in financial performance and any social aspects of doing business that are relevant to a.s.r. The Executive Board is responsible, in particular, for carefully balancing the commercial interests and the risk appetite. Carefully balancing all interests of stakeholders is common practice at a.s.r. and, as such, has been included in the Executive Board’s regulations and the internal Code of Conduct.
218a.s.r. 2013 annual report Other information a.s.r. put this ambition and these principles into practice in 2013 by, for example, developing the next generation non-life, occupational disability and pension insurance products. These products are straightforward, transparent and easy-to-understand, and all information pertaining to them was pretested on customers for ease of understanding and findability. They can be offered to customers at a low price, because a.s.r. can operate efficiently using new IT platforms.
a.s.r.’s Product Approval and Review Process (PARP) is an assured part of the entire product development and testing process. Multidisciplinary development teams, the Product Teams and the PARP Board (see principle 4.5) work in accordance with the PARP. The PARP Board tests the quality of new products and assesses whether customer information is understandable, balanced and complete. a.s.r. also conducts a risk assessment of its existing product line to verify whether products still satisfy today’s requirements.
a.s.r. works according to the Continuous Improvement approach and customer needs, complaints and contacts obtained through closed-loop customer feedback. The closed-loop customer feedback enables employees to obtain feedback from customers on a continuous basis, translate these into ideas for improvement and implement targeted improvements. For customer feedback to be truly valuable, it needs to be integrated into day-to-day processes and behaviour. At the end of 2013, 700 a.s.r. employees received and used customer feedback every day.
Via the Customer Complaints department, a.s.r. also implements and assures issues that are important to its customers. This allows a.s.r. to be open to complaints, learn from them and strengthen ties to customers. The Executive Board is involved in the handling of complaints addressed to them and provides substantive input. In its complaints handling, a.s.r. aims for communication that is personal, engaged and written in plain language. a.s.r.’s core values (i.e. personal, approachable and individual and authentic) are shared throughout the organization and employees are encouraged to act upon them – amongst each other and towards customers – by helping by taking action and avoiding waste. The Executive Board uses periodic performance reports to monitor customer treatment within the different divisions of a.s.r.
Under the Dutch Oath or Affirmation (Financial Sector) Regulation, the members of the Executive and Supervisory Boards as well other policymakers took this oath/affirmation in February 2013.
a.s.r.’s risk appetite is reviewed by the Executive Board on an annual basis (or in the event of major adjustments) and submitted for approval to the Supervisory Board. Each year, the Executive Board determines the risk-related priorities for a.s.r on the basis of a company-wide risk assessment. The risk-related priorities are approved by the ARC.
The Supervisory Board exercises periodic supervision over a.s.r.’s risk management. One of the topics discussed in a.s.r.’s Audit & Risk Committee is the risk profile. This discussion is based on financial and non-financial risk reports, and is aimed at monitoring whether the risk profile is in line with the risk appetite. The Supervisory Board’s decision-making is prepared by the ARC. Nevertheless, the Supervisory Board as a whole remains responsible for its decisions, even the ones prepared by a committee. This principle is enshrined in the regulations of both the Supervisory Board and the ARC.
4.3 The Supervisory Board shall periodically assess, at strategic level, whether the overall business operations are in line with the insurer’s risk appetite. The Executive Board shall provide the Supervisory Board with the information needed to perform this assessment in such a manner as to enable the latter to form a considered opinion.
By segregating policy-making, policy implementation and compliance monitoring duties, a large measure of independence is achieved in risk management and risk management monitoring. a.s.r. has structured this segregation of duties in accordance with the principle of the three lines of defence. The first line of defence is responsible for identifying and managing risks to the business. The second line of defence is responsible for monitoring risk management and implementing integrated, effective risk management systems for the first line of defence. The third line of defence, formed by Audit, is responsible for an independent assessment of the effectiveness of the risk management system, the internal control structure and the adequacy of governance.
4.5 Each insurer shall have a product approval process in place. The Executive Board shall be responsible for setting up and ensuring the effectiveness of the product approval process. Products going through an insurer’s product approval process shall only be marketed or distributed after careful consideration of the risks by the insurer’s risk management function and after a careful assessment of other relevant aspects, such as the duty of care towards customers. Internal audit shall, on the basis of an annual risk assessment, conduct an audit to determine whether the design, existence and operation of this process are effective and report their findings to the Executive Board and the risk management or other relevant committee of the Supervisory Board.
a.s.r. has chosen to be a different insurer, the one that, based on its core values of being personal, approachable, individual and authentic, really makes the difference to its customers. To that end, a.s.r. follows the Proposition Approval & Review Process (PARP). This process was approved by the Executive Board and delegates the Executive Board’s power of final approval before a product is introduced to the PARP Board.
The Audit Department assists management in achieving the company’s goals by giving a professional, independent opinion of processes of governance, risk management and internal control. The Audit Department evaluates the effectiveness of governance, risk management and internal control processes, and gives practical advice on process optimization. This statement of duties has been set down in the Audit Charter. The Audit Department reports its findings to the Executive Board and, by means of the quarterly management report, to the ARC.
221a.s.r. 2013 annual report Other information 5.2 The insurer shall have its own internal audit function, which shall occupy an independent position. The head of the internal audit function shall report to the chair of the Executive Board and have a reporting line to the chair of the Audit Committee.
• Both the assessment and remuneration criteria should comply with the terms laid down in the various national standards1.
• Striking a balance between trust in the intrinsic motivation of managers on the one hand and setting clear targets against which managers are assessed and remunerated, on the other.
• Company and individual performance is assessed on the basis of customer satisfaction and financial and risk indicators.
223a.s.r. 2013 annual report Other information 6.2.2 The Supervisory Board shall discuss the highest variable remuneration on an annual basis. The Supervisory Board shall oversee the Executive Board in the performance of its duty to ensure that all variable remuneration offered by the insurer is in line with the remuneration policy adopted by insurer and, particularly, that it satisfies the principles set down in this section. The Supervisory Board shall also discuss any material retention, exit and joining packages and ensures that these comply with the remuneration policy adopted by the insurer and are not excessive.
The Supervisory Board is responsible for the Executive Board members’ annual performance appraisal and assessment. The Supervisory Board is also explicitly responsible for overseeing the assessment and remuneration of the control functions. The Executive Board conducts an annual assessment of the overall performance of all senior managers accountable to them and reports its findings to the Supervisory Board. The Supervisory Board ascertains whether the assessments comply with the adopted remuneration policy.
Human Resources reports on an annual basis to the SAR Committee and the Supervisory Board on the following topics: • a.s.r.’s stance on pay and benefits • existing pay and benefits arrangements • compliance with arrangements and procedures as well as possible exceptions • the assessment results of the control functions’ senior management • any exit packages that have been awarded • the most notable issues regarding pay and benefits • reasons, if any, to amend components of the remuneration schemes.
224a.s.r. 2013 annual report Other information 6.3.2 A golden handshake awarded to an Executive Board member shall not exceed the equivalent of one annual salary (the ‘fixed pay’ component). If a member of the Executive Board leaves office during their first term and it is evident that a golden handshake of up to one annual salary would be unreasonable, this member shall be eligible for a golden handshake of up to two times the annual fixed salary.
The maximum severance pay for new and incumbent Executive Board members is one year’s fixed salary. In the event of a change of control, the employment contracts of incumbent Executive Board members will remain valid for at least one year, during which time they will be available to perform their regular duties. In this context, a change of control means the transfer or acquisition of control over ASR Nederland N.V. or its affiliates.
6.3.3 The long-term component shall be taken into account in awarding variable pay to members of the Executive Board, as should profitability and continuity. A material part of the variable remuneration shall be awarded conditionally and not paid until at least three years later.
Remuneration is an instrument specifically designed to help achieve the strategy, business targets and ambitions a.s.r. has formulated. Annual performance targets are set for individual objectives, financial performance and customer satisfaction in order to create focus on the long-term interests of all stakeholders. In addition, variable pay is structured in line with the provisions of the Third Capital Requirements Directive and its transposal into Dutch law in the form of the RBB. This means that a material share (i.e. 50%) of variable pay is awarded conditionally in the form of cash and non-cash instruments. The conditional variable pay is deferred for three years; a reappraisal is performed at the end of the three-year period, after which the cash part is paid out. The non-cash component is subject to an additional retention period of two years.
6.4 Variable pay 6.4.1 The award of variable pay shall be linked to the insurer’s long-term objectives.
6.4.3 Variable pay shall be based on the performance of the individual, their division and the insurer as a whole, and be measured using performance criteria that are assessable and set in advance. In addition to financial criteria, non-financial performance criteria shall also play an important role in an individual’s assessment. Performance criteria for the insurer’s remuneration policy shall be formulated as objectively as possible.
Variable pay is set each year on the basis of the scores on three components: individual performance, financial performance and customer satisfaction (with the exception of control functions as mentioned in 6.4.1). This means that 40% to 60% of variable pay depends on non-financial criteria. The performance criteria provide no incentives for irresponsible risk-taking.
6.4.4 When assessing performance on the basis of the agreed criteria, the financial performance shall be adjusted to allow for actual and estimated risks and costs of capital.
6.4.5 In exceptional circumstances, e.g. if application of the agreed criteria would result in a member of the Executive Board unjustly being awarded variable pay, the Supervisory Board shall have the discretionary power to adjust the variable pay if it is of the opinion that not doing so would have unjust or unintended consequences.
The members of the Executive Board are assessed on pre-agreed targets. These targets and general performance are assessed by the Supervisory Board on an annual basis. So long as variable pay components have not been awarded unconditionally, and if unadjusted variable pay would be unfair and unreasonable, the Supervisory Board has the power to adjust the amount of the variable pay to a suitable level.
6.4.6 The Supervisory Board shall be entitled to claim repayment of variable pay awarded to an Executive Board member on the basis of incorrect financial or other data from that member.
The company has the power to reclaim all or part of any variable pay awarded on the basis of incorrect information about the achievement of targets or the occurrence of circumstances that were a precondition for the variable pay to be awarded. Such proceedings may also be instituted by the Supervisory Board on behalf of a.s.r. Compliance will indicate whether there are grounds for invoking the claw-back clause, which is a part of the remuneration and conditions of employment policies for senior management and the Executive Board and is referred to in the assessment letter.
The insurer shall have a procedure in place for assuring timely identification and implementation of new rules and regulations and review this procedure on an annual basis. The following corporate functions should be involved in the procedure as a minimum: the Executive Board, the internal supervisor, risk management, compliance, internal audit and the actuarial function.
Based on their own professional expertise, the functions involved (Audit, Risk Management, Compliance, Legal, Finance, Human Resources, Actuarial and Accounting, Reporting & Control) identify applicable rules and regulations relevant to a.s.r. Such information is obtained from newsletters, the Internet and other media, memberships of industry and trade associations, such as the Dutch Association of Insurers, the Dutch Banking Association, the Dutch Fund and Asset Management Association, and from expert external service providers such as law firms. The set of duties (or Charter) of each of these functions includes the duty to inform stakeholders within a.s.r. of new rules and regulations in a timely manner, to give advice where needed and to monitor implementation (Compliance). Secondly, periodic communications about proposed and current rules and regulations are distributed throughout a.s.r. Finally, Compliance publishes a biannual list for the benefit of senior management and the Executive and Supervisory Boards detailing all the existing and new rules and regulations pertaining to supervision relevant to a.s.r.
Derivative A financial instrument with all three of the following characteristics: (a) its value changes in response to the change in a specified interest-rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract (sometimes called the ‘underlying’); (b) it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and
Gross premiums written Total revenues (earned or otherwise) expected to be received for insurance contracts over the life of the contract, including reinsurance premiums.
Impairment The amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount. The asset’s carrying amount is reduced to its fair value and recognized in profit and loss.
Test margin The test margin for the regulatory solvency available is the excess of the liability arising from the insurance contract and the outcome of the DNB liability adequacy test (DNB LAT).’
The Annual Report is based on the G3.1 guidelines for sustainability reporting of the Global Reporting Initiative (GRI). The GRI uses application levels to indicate the extent to which its reporting principles and guidelines have been applied. a.s.r.’s sustainability report is governed by level C of the G3.1 guidelines. The GRI index table outlined below indicates where in the Annual Report the reader can find GRI disclosures.
Organizational Profile 2.1 Name of the organization. ASR Nederland N.V 2. 2 Primary brands, products, and/or services. Part I (a.s.r. at a glance), Section 1.1 (Profile and key figures) Part I (a.s.r. at a glance), Section 1.5 (Brand policy and distribution model)
2.5 Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.
2.6 Nature of ownership and legal form. Part V (Report of the Supervisory Board), Section 5.1.4 (Corporate governance).
Part II (Report of the Executive Board), Section 2.1 (Financial performance).
Report Parameters 3.1 Reporting period (e.g., fiscal/calendar year) for information provided.
3.2 Date of most recent previous report. 28 March 2012. 3. 3 Reporting cycle (annual, biennial, etc.). Annual. 3. 4 Contact point for questions regarding the report or its contents.
The provided quantitative and qualitative information concerns a.s.r. as a whole, except where explicitly stated that information applies to one specific business unit or a division of the organization.
3.7 State any specific limitations on the scope or boundary of the report.
All reported figures are comparable to those reported last year. The comparative figures have been restated to reflect any changes in accounting policies. Part II (Report of the Executive Board), Section 2.1 (Financial performance).
3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the indicators and other informative in the report.
3.10 Explanation of the effect of any restatements of information provided in earlier reports, and the reasons for such restatement (e.g., mergers/acquisitions, change of base years/periods, nature of business, measurement methods).
4. 4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body.
GRI Appendix I 238 4.15 Basis for identification and selection of stakeholders with whom to engage.
Labour practices lA1 Total workforce by employment type, employment contract, and region broken down by gender.
Part II (Report of the Executive Board), Section 2.1.1 (ASR Nederland N.V.) GRI Appendix II
Code Aspect Disclosure Page lA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees.
Only the selection system has an option that is not available to part-time employees: back-office employees working fewer than 1,976 hours per year cannot work 52 or 104 hours more or less on an annual basis. Employees on a one-year contract do not qualify for parental leave.
92.7% come under the collective bargaining agreement for back-office employees; 4.1% come under the collective bargaining agreement for front-office employees; 3.2% do not come under a collective bargaining agreement (HM, SM and Executive Board).
Code Aspect Disclosure Page lA11 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.
lA12 Percentage of employees receiving regular performance and career development reviews.
100%: all employees are educated about performance and career development during target-setting, progress and performance appraisal meetings with their managers.
en8 Total water withdrawal. Part III (Corporate Social Responsibility), section entitled Sustainable focus on the environment.