Part II Report of the Executive Board 19 2.1 Financial performance 20 2.1.1 ASR Nederland N.V. 20 2.1.2 Non-life segment 26 2.1.3 Life segment 31 2.1.4 Other segment 35 2.2 Capital management 39 2.3 Risk management 42
Part VI Financial Statements 81 Consolidated financial statements 84 Notes to the consolidated balance sheet 155 Notes to the consolidated income statement 186 Other notes 194 Company financial statements 198
This Annual Report spans the period from 1 January 2013 to 31 December 2013. Where the data in this report does not match the 2012 annual report, this is indicated in the text. The Annual Report is based on factual information from internal sources, financial information provided by Accounting, Reporting & Control, Risk Management, Human Resources, Legal, Compliance and Business Support, and information from the Supervisory Board. 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.
6a.s.r. 2013 annual report a.s.r. at a glance 1.1 Profile and key figures
The Dutch State has been the sole shareholder of a.s.r. since 3 October 2008. In 2011, the Dutch State transferred all a.s.r. shares to NL Financial Investments (NLFI) in exchange for depositary receipts for the shares.
a.s.r. chooses to be that ‘other’ insurance company. The insurer that helps people by taking action and by launching new, easy-to-understand products and adapts existing products based on customer feedback. a.s.r. wants to offer security to people living in uncertainty by offering financial continuity in their lives and allowing them to take calculated risks.
a.s.r.’s main office is located at the Archimedeslaan in Utrecht, the Netherlands. Other branches in the Netherlands are located in Amersfoort, Amsterdam and Enschede, and at the Pythagoraslaan in Utrecht. Thanks to the New World of Work, a.s.r.’s nearly 3,800 employees can choose their own time and place of work.
Organizational structure a.s.r. is managed by the Executive Board (www.asr.nl/EN/about-asr). The Executive Board bears full responsibility for the three reporting segments: Non-Life, Life and Other.
The Non-Life segment comprises all types of non-life insurance policies that a.s.r. offers to consumers and business owners. 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.
The Life segment comprises all insurance policies that involve asset-building, asset reduction, asset protection, funeral expenses, and term life insurance for consumers and business owners. Products are
9a.s.r. 2013 annual report a.s.r. at a glance offered under the a.s.r., De Amersfoortse and Ardanta labels. The vast majority of these policies are distributed via the intermediary channel. Funeral insurance, immediate annuities, term life insurance and pension insurance can also be taken out online.
In 2013 we made significant progress, which makes who we want to be crystal clear: a sustainable, robust and future-proof insurer that is seen to put continuity and certainty for its customers first. We have noticed that customers and other stakeholders appreciate the course we have taken. We are an insurer that helps by taking action, and we play a role that benefits society. A further structural reduction in costs, the introduction of new, simplified products and improved customer service all contribute to this. The motto for our customer service is ‘first time right’. Stable earnings and prudent capital adequacy also contribute to our ambition of offering our customers certainty.
In the Life business, a.s.r. also prefers value over volume. By working more efficiently and adjusting the organization to this choice, costs will be decreased even further. In the mortgage market, we are seeing that the WelThuis Hypotheek mortgage meets customers’ need for a transparent, comprehensible product. In the savings market, too, a.s.r.’s bank savings products meet the changing wishes of customers. a.s.r. added a new product to the defined contributions market with the introduction of its Werknemers Pensioen (Employee Pension) product. This is an accessible product that focuses on employees and provides all information online. In a market characterized by stiff competition, we have managed to retain our position as market leader in occupational disability 1.2 Message from the CEO
11a.s.r. 2013 annual report a.s.r. at a glance insurance. Adequate action on prevention and return-to-work has proved to be a valuable trump. In health insurance, we have seen a considerable increase in the number of customers in the past year. Our Europeesche Verzekeringen and Ardanta labels put in a good performance in the year under review.
An important moment in 2013 was the letter sent by the responsible minister to the Dutch Parliament in August, marking a key development in a.s.r.’s position with the Dutch State as the sole shareholder. There are two options on the table for the privatization of a.s.r.: an IPO or a merger with an insurer already active in the Dutch market. a.s.r. is preparing itself for either scenario. It is clear in any case that a.s.r. is in good business health, has good prospects and is ready to return to private ownership.
Significantly for a.s.r., we made progress in several senses with the transition of the business. A tangible example is formed by the first phase of the renovation of our main offices at the Archimedeslaan in Utrecht. The project is progressing well and on schedule, which meant that the first employees moved into the new wing at the start of 2014. Our choice for renovation and centralization creates a considerable cost saving and will strengthen our teamwork. We are proud to have been awarded the BREEAM Excellent certification, the highest standard of sustainability for existing buildings.
Throughout 2013, a.s.r. continued to be a business in transition in a market in transition. The only constant factor in the years ahead will be the need to adjust to changing circumstances. This means that, over the coming years, we will continue to work hard in line with our strategy, allowing consumers and businesses to insure risks at the right price or to entrust their asset building to us. This will place great demands on the adaptability of our employees, especially if there are changes to the organization that may have an impact on their personal situation. I am proud of how our employees have dealt with this and continue to devote all their energy to helping customers as well as possible. We are able to ensure continuity thanks to the dedication of our people. Continuity for our customers. Continuity in our path to a sustainable business with the right balance between costs, premium income, return and solvency. Continuity in our strategy and positioning. This is our assurance of a healthy future. I have complete faith that we will be successful in achieving this!
The central theme throughout 2013 was highlighting our strategy: the introduction of new products for customers, our positioning, an ongoing focus on efficiency improvements, further cost reductions, the action needed to meet the requirements – where known – of Solvency II, preparations for the introduction of SEPA, and also the renovation of the offices at the Archimedeslaan in Utrecht.
• Werknemers Pensioen (pension plan). In this plan, employees decide for themselves how they want to save for their pension, either by investing or with a 100% guaranteed pension benefit. The Werknemers Pensioen plan is transparent and the costs are clear. It is clear in this product what the employer pays and what costs have to be contributed by the employee.
• Kijk kanker de wereld uit (Rid the world of cancer campaign). Rather than spending money on media adverts for Ditzo’s healthcare insurance, a.s.r. instead decided to give the money to cancer research. More than one million viewers watched and shared the video featuring John de Wolf on the dedicated website kijkkankerdewerelduit.nl and on social media. Anyone viewing, sharing or liking the video helped raise money for the Netherlands Cancer Institute. The maximum € 1 million available was achieved within four days.
3. Renovation taking shape In 2013, the first phase of the renovation of the Archimedeslaan main offices was nearing completion, with the first group of colleagues due to move into the renovated part of the building in early 2014. The renovation of the building is unique in more ways than one. Not only does the new space meet the most stringent environmental and sustainability standards (BREEAM Excellent rating) and offer opportunities for the New World of Work (NWW), but it is the largest renovation project ever in the Netherlands where employees have been able to remain in the building during the renovation works.
This is the highest score possible. Five stars were awarded to a.s.r.’s legal assistance insurance in the product rating category. a.s.r.’s lijfrente spaarrekening (annuity-linked savings account) was given five stars in the price category. The De Amersfoortse’s occupational disability insurance was given five stars in the flexibility category.
Quality Mark. • Europeesche Verzekeringen won the Best Travel Insurance Award 2012, presented in 2013. • Ditzo won the Customer Centric DNA Awards, an award for the most customer-oriented insurer. • Ditzo took first place in the Preferenso Service Award 2012, presented in 2013. • Customer service colleagues took fifth place in the National CQ test television programme. • SOS International won the IAG Innovation Award 2013 with the INFO Tag.
• a.s.r. received an honourable mention in the report by the Monitoring Talent to the Top committee, in which Dutch businesses commit themselves to appointing more women in senior positions (see Part III).
• a.s.r. vastgoed ontwikkeling is the most sought-after employer in the construction sector. • Highest score for employee engagement in 2013 since 2008 (for more details, see Part III).
Investors for Sustainable Development (VDBO) (www.vbdo.nl). • a.s.r. took third place in the Sustainable Working Award.
2013 annual report a.s.r. at a glance 1.4 Strategy and positioning a.s.r. offers people certainty in uncertain situations. a.s.r. achieves this by ensuring financial continuity in people’s lives and by allowing them to take out insurance for risks that they are unable to carry alone, and to help customers grow their assets for the future.
Part of a.s.r.’s strategy is to prevent waste by a continuous drive to improve efficiency in line with the motto of ‘first time right’ and to lower costs by standardizing processes and products and by increasing the degree of Straight Through Processing. One aspect of efficiency involves the outsourcing of work to specialist partners. a.s.r. has chosen to introduce outsourcing in controlled stages.
a.s.r. is the label for private individuals. Its key values are: helping people by taking action and avoiding waste. Life and non-life insurance policies, mortgages and savings and investment products are primarily sold through the intermediary channel. The a.s.r. label also includes insurance for corporate clients. In addition, a.s.r. manages and develops real estate.
Over the coming years, De Amersfoortse will focus more and more on becoming the number one insurance label for business owners. Pension insurance was added to the portfolio of income protection and health insurance in 2013. De Amersfoortse’s priorities are offering peace of mind, now and in the future, advice from a trusted advisor and convenience through online management and services. With this proposition, De Amersfoortse is transforming from an income protection insurer to the insurance company for business owners in the Netherlands. De Amersfoortse’s products and services are sold exclusively through intermediaries. From 2013 onwards, income insurance will only be sold via the De Amersfoortse brand, based on profiles from corporate clients. This means business owners will receive a competitive proposition when taking out disability or income protection insurance.
Ardanta is a specialist in funeral insurance. Although it collaborates mainly with independent intermediaries, products are sold in partnership with undertakers as well. In addition, Ardanta has launched a website called www.doodgaanendoorgaan.nl (Dutch only), which educates customers well in advance about funeral arrangements and related issues.
2013 annual report Report of the Executive Board 2.1 Financial performance 2.1.1 ASR Nederland N.V.
Gross premiums written, Non-Life 2,392 2,487 Gross premiums written, Life 1,666 1,891
This also affected the consolidated figures for 2012. This change has an accounting effect on the net results, operating expenses and total equity, as well as on return on equity.
Notes to a.s.r. key figures • Ditzo has been integrated into the Non-Life segment as of 1 January 2013. The effect of this shift on the cost-premium ratio of the insurance business in 2012 was 0.3%-point (from 10.2% to 10.5%). On a comparable basis, the cost-premium ratio for the insurance business saw a 0.4%-point increase, rising to 10.9%, despite implemented cost-saving measures.
The Banking business is developing well. It has doubled its share of the mortgage market thanks to the WelThuis mortgage and the a.s.r. online savings account. As a result, a.s.r. was the sixth largest mortgage lender in the Netherlands at year-end 2013. What’s more, a.s.r. is now the second largest mortgage lender amongst insurers.
In 2013, a.s.r. again took a number of steps to improve its efficiency and reduce costs; that has resulted in a better performance of the divisions.
a.s.r. works hard to win back customer trust. On one hand by showing our commitment to society through ‘help’ campaigns, on the other by improving customer services. In this context, we set up Customer Contact Centres in the divisions in 2013 so as to more easily draw upon existing expertise and to improve customer service.
22a.s.r. 2013 annual report Report of the Executive Board a.s.r.’s performance and results are due to employees’ efforts. While the market changes continually and a.s.r. is adapting, employees continue to focus on improving customer service and earning back customer trust. Thanks to the commitment of all employees, a.s.r. is able to guarantee continuity for customers and create a meaningful future for a.s.r., all stakeholders and society at large.
The fall in premium income in the Non-Life segment to € 2,392 million (2012: € 2,487 million) manifested itself in nearly all product groups; it relates to the choice of value over volume as well as to a market that is in decline in some respects. Higher product sales were neutralized by a greater number of policy cancellations as a result of the focus on profitability and business closures by selfemployed persons.
In the Fire & Property business, risks were reassessed, which led to the cancellation of some policies; as a result, a.s.r. was less affected by large fires in 2013. The total Health Insurance portfolio continued to grow, predominantly due to a successful Ditzo campaign.
Gross premiums written in the Life segment were down 12%, falling from € 1,891 million to € 1,666 million. This drop was mainly attributable to lower income from regular premium policies. The volume of policy surrenders in the Individual Life business was halved in 2013 after the peak in 2012; it has now returned to ‘normal’ levels from a historical perspective. Focus on profitability also led to a further decline in immediate annuities/single premium policies. Premium income from the Pensions business fell by 6%. The new Werknemers Pensioen (Employee Pension) was introduced in late 2013. The first contracts have now been signed and the number of calls for tenders is rising. Premium income from the Funeral Insurance business was virtually stable, despite a declining market, thanks in part, to the acquisition of de Facultatieve.
In addition to this decline, operating expenses have become more flexible in 2013 so that they can be adapted to the volume of the insurance portfolio. In the Life business, various support services have been outsourced. Also, the Health Insurance business makes use of third-party IT systems.
Headcount The headcount of internal employees fell from 4,088 FTE to 3,789 FTE in 2013. The largest group of employees who left (266) came under the scope of the Redundancy Plan. Another 78 employees left a.s.r. at their own request, 59 employees reached the end of their temporary contracts and 70 employees agreed to consensual termination of their employment contracts. On average, employees stay with a.s.r. for 14.8 years.
In the Life segment, the net results increased from € 275 million to € 367 million due to higher investment returns and lower operating expenses. In addition, several impairment losses recognized in previous years were reversed, following the tentative recovery of the financial markets.
The Other segment recognized a one-off tax benefit of € 90 million in 2012. The accounting policies of IAS19R also affected this segment (€ +61 million), because this segment includes the a.s.r. pension plan. Disregarding the tax benefit and the effect of IAS19R accounting policies, earnings in this segment rose by € 78 million, primarily due to lower operating expenses, a better performance of the Banking business and fewer incidental impairments. The risks incurred by the Property Development business were further scaled down, thereby reducing losses.
Outlook for 2014 The Dutch State has been the sole shareholder of a.s.r. since October 2008. In September 2011, all shares in a.s.r. were transferred to Stichting Administratiekantoor Beheer Financiële Instellingen (NL Financial Investments or NLFI), a trust office. a.s.r. has never received state aid. a.s.r. has the ambition to return to the private market. a.s.r. is large and robust enough to operate as an independent insurer in the Dutch market.
In addition to offering good prices, a.s.r. believes strongly in investing in long-term relationships with customers and intermediaries by offering high-quality and transparent products and services that truly meet customer needs. The role of the intermediary channel will continue to be vital.
The development of a crowd funding platform for business owners who hold policies with De Amersfoortse is a precursor to other a.s.r. initiatives to create customer loyalty and improve customer service. The online platform (www.doorgaan.nl; in Dutch) allows business owners, who have difficulty securing traditional finance, to look for funding for their ideas. De Amersfoortse will create campaigns for business owners and call upon others to help them launch or continue their business. Social media offer more and more direct opportunities to reach customers, who tend to form groups and communities, and join forces. Organizational changes that will be implemented in the near future focus on capitalizing on the resulting demand and offering appropriate services. Obviously, maintaining a robust solvency ratio will continue to play a fundamental role in a.s.r.’s operations in the future.
a.s.r. will start using the Next Generation Financial Services (NGFS) payments system in 2014, thereby satisfying the requirements of the European SEPA (Single Euro Payments Area) rules that came into effect in February 2014. Until NGFS becomes operational, a.s.r. will work in partnership with Equens to satisfy the SEPA requirements.
26a.s.r. 2013 annual report Report of the Executive Board 2.1.2 Non-Life segment
• Net results in Non-Life segment dominated by additional WGA-ER charges • Net results disregarding WGA-ER charges at € 142 million - Better performance in all product lines, except for Occupational Disability Insurance business - Taking account of additional WGA-ER charges, net results down € 59 million to € 5 million
• Combined ratio disregarding additional WGA-ER charges at 96.5% (including WGA-ER charges: 104.6%)
• Operating expenses down 1% to € 240 million on comparable basis, despite investments in claims management and process optimization
1 Ditzo has been integrated into the Non-Life segment since 2013. The cost-premium ratio for 2012 on a comparable basis was 9.8%. Operating expenses for 2012 were € 243 million on a comparable basis.
The falling trend in holidays continued on into 2013. The winter season showed a 6% decline, which was only barely compensated by disappointing summer bookings. Spending while on holiday was lower too. Consumers waited longer to purchase or replace recreational items and they spent more time using their own caravans, boats and other recreational items. This increases the chances of claims. Overall, the ongoing drop in disposable income and the rising unemployment rate accounted for a 4% fall.
Net results Earnings in the Non-Life segment were dominated by the sector-wide losses on WGA-ER. These losses amounted to € 137 million for a.s.r. in 2013. Disregarding this additional WGA-ER charge, the net results in the Non-Life segment was up 13%, reaching € 142 million, with a robust combined ratio of 96.5%. All product lines improved their performance.
The measures taken to reduce claims and actively manage portfolios have improved the performance in the Motor and Fire product groups. On the other hand, autumn storms resulted in additional claims for a.s.r. amounting to approximately € 22 million after tax in total. The number of large claims in the Commercial Fire Insurance business declined thanks, in part, to the pursued prevention policy and the reassessment of risks. This goes against the overall picture in the Netherlands where a record number of 148 large fires occurred in 2013 (figures by the NIVRE). The net results from the Health Insurance business also increased in 2013.
In addition, more focus is being placed on helping employees return to work once they have suffered an incapacity. Arrangements have now been made between the Dutch Association of Insurers and the Employee Insurance Agency (UWV) about reassessments and transfer of information, which will help to improve claims management and assessment of incapacity. Partly for that reason, a.s.r. will continue to play a role in this market.
Apart from the WGA-ER charge, a.s.r.’s Occupational Disability Insurance business is sound. a.s.r. not only leads the market measured in premium income, but also in prevention and return to work initiatives.
The volume of the occupational disability insurance market declined further in the reporting period as a result of the economic crisis. a.s.r. saw a limited increase in its premium income in this market segment and managed to strengthen its position of market leader. Surrenders in the portfolio for individual occupational disability insurance policies increased as a result of a premium adjustment and business closures.
The Next Generation Group Occupational Disability Platform (in Dutch: NGA Collectief) was launched in order to improve the online service offering and pass on synergy benefits with the Health Insurance and Pensions businesses to customers. After the roll-out, three existing obsolete systems will gradually be phased out. Besides providing benefits to customers, this offers a substantial cost reduction, particularly where management and maintenance are concerned.
In the reporting period, the Occupational Disability business focused heavily on claims management, both where individual and group policies were concerned. In addition, holders of individual policies were more actively approached, in which process customers with expiring policies were offered renewal policies in an attempt to retain them. a.s.r. has led the market for income protection insurance for many years. This position was strengthened in 2013.
The increasing need among customers to take out insurance policies online is reflected in the successful introduction of health insurance by Ditzo, which was able not only to donate € 1 million to the Netherlands Cancer Institute with the ‘help’ campaign in 2013, but also to welcome about 51,000 new customers with effect from 1 January 2014.
Outlook for 2014 The P/C market is not expected to show growth in volumes in 2014. a.s.r. does, however, predict a further shift towards products that can be purchased directly via online platforms. By improving its websites, and smartphone and tablet applications such as Ditzo’s, a.s.r. increases the options for customers to select the distribution channel of their choice.
Many of a.s.r.’s customers receive their services and advice from intermediaries, who also increasingly use online applications (offered via service providers). By partnering up with intermediaries and service providers, new customers are being drawn in and existing customers receive excellent services.
The occupational disability market is likely to recover in 2014 because of the economic outlook. The first signs of recovery emerged around the turn of the year; with this, the recession in the Netherlands seems to be over. a.s.r. is cautiously optimistic about developments in the year to come where business start-ups and business terminations are concerned. These developments affect sales of new insurance policies and organic growth. Business terminations and insolvencies also put pressure on uncontrollable policy cancellations. In 2014, the Occupational Disability business is also expected to suffer from an increase in claims. Overall, the business will concentrate on improving returns through cost efficiencies, premium adjustments and claims management. De Amersfoortse’s integrated product propositions will be broadened, linking them explicitly to health and pension insurance. a.s.r. is also committed to further improvements to the service offering in the areas of prevention and return to work. By doing so, we will make full use of the expertise and strengths available at De Amersfoortse.
In the travel and leisure market, the drop in holiday bookings and (replacement) purchases of recreational items is expected to persist in 2014, which will have a direct effect on travel and leisure insurance.
Regular premiums written 1,421 1,552 Single premiums 245 339 Gross insurance premiums 1,666 1,891
Profile The Life segment comprises all insurance policies that involve asset-building, asset reduction, asset protection, term life insurance and funeral expenses for consumers and business owners. These operations are being conducted by ASR Levensverzekering N.V. Products are offered under the a.s.r., De Amersfoortse and Ardanta labels. The vast majority of these policies are distributed via intermediaries, but funeral insurance, immediate annuities and pension insurance can also be taken out online.
In the Pensions business, the shift from defined benefit (DB) plans to defined contribution (DC) plans is permanent, as is the shift to a more individual approach to pension insurance. Pension products are developing into simple, low-cost products for which service charges and asset management fees are due only; margins on these products will be low for providers. One example of such a lowcost, transparent pension product is the a.s.r. Werknemers Pensioen (Employee Pension), which was introduced in Q4 2013.
Net results The net results increased by € 92 million from € 275 million to € 367 million. The improvement is due to a reduction in operating expenses. Investment returns also increased, partly due to the second and third placement of the Dutch Prime Retail Fund and the sale of a share of the residential real estate portfolio.
Operating expenses In 2013, operating expenses decreased by € 24 million, reaching € 199 million (2012: € 223 million) and the cost-premium ratio improved by 0.4%-point to 11.6%. Operating expenses therefore declined faster than premium income, which was realized by a reduction in internal FTE, outsourcing activities and lower marketing expenses, among other factors.
Gross premiums written In the Life segment, gross premiums written declined from € 1,891 million to € 1,666 million, a 12% decrease.
The decline is in line with the market and attributable to a 28% decrease in new single premiums sold and an 8% decrease in regular premiums. This decline is due, in part, to the ban on commissions in the life insurance business that was introduced early in 2013, next to the falling demand for life insurance products and the choice of value over volume. Since 2013, consumers have been required to pay separately for advisory and intermediary services relating to complex financial products, such as life insurance policies. The decline is also due to the deliberate choice of value over volume, as a result of which the Individual Life product group offered immediate annuity/single premium products at less competitive prices and volumes progressively declined.
The Institution for Occupational Retirement Provision (IORP), a joint venture between a.s.r. and Brand New Day, continued to grow in 2013. The combination of a clear product, low costs and excellent service appeals to customers. In a competitive market, more than 500 businesses have now signed a pension contract for more than 7,500 members in total. The number of new calls for tenders continues to increase.
Despite difficult market conditions, in the Funeral Insurance business gross premiums written declined to a limited extent (-1%), mainly as a result of the portfolio acquired from de Facultatieve on 1 May 2013. Sales of new policies are under pressure in the funeral insurance market. This is partly due to the ban on commissions that came into effect on 1 January 2013 and independent brokers’ reserve to discuss advisory and management costs with customers. In Q4, Ardanta started providing practical information to customers and others about aspects surrounding a death in the family and funeral arrangements. For instance, via the website Doodgaanendoorgaan.nl, which has been well received in the market and judging from the large number of visitors, clearly meets consumers’ needs.
Achievements in 2013 2012 saw the completion of the programme to compensate unit-linked policy holders in the Individual Life business. In dialogue with the Netherlands Authority for the Financial Markets (AFM), 40,000 customers were approached in 2013 and educated about the value growth in their policy; they were encouraged to make a conscious decision about their future insurance plans. This group of customers will be broadened in 2014. Also in 2013, a start was made with automatically switching customers to a next generation of low-cost mixed funds at no charge. A letter on this topic was sent to 120,000 customers. Over 98% of these customers ultimately approved the switch.
By offering customers a new product, a.s.r. can retain their capital when life insurance policies expire and reach payout. The Direct Ingaande Lijfrente (immediate annuity product) proved to meet a need. In this regard, a.s.r. works in close collaboration with intermediaries to retain customers and offer them appropriate products. Thanks to this active targeting of customers, savings deposits held by a.s.r. Bank rose by nearly € 30 million over a short period of time. What is more, customers have said that they appreciate this supportive approach.
Ardanta focuses on existing customers in particular; it provides support to customers who are dealing with a death in the family and have to make funeral arrangements. Consequently, there are now two online channels that account for 15% of premium income. Ardanta launched a website by the name of doodgaanendoorgaan.nl (in Dutch) in 2013. This website educates customers about the practical aspects of funeral arrangements. There is also an option to take out funeral insurance via the website. More than 80,000 visitors have been welcomed to the website since its launch. In addition, a front office was set up to answer any questions customers may have when taking out insurance. Costs, lapses and early surrenders were brought under further control in 2013; in addition, costs were made more flexible, which has resulted in positive net results. The successful acquisition of de Facultatieve insurance portfolio confirms the belief that Ardanta is a strong portfolio consolidator.
Outlook for 2014 Expectations are that the individual life portfolio will show a further decline. The market for mortgagelinked asset-building products will also keep shrinking as a result of a shift to other mortgage types, such as straight-line mortgages and annuity mortgages. Customer retention, further cost cuts and cost flexibility will stay the main priorities in this contracting life market to be able to add value on a sustainable basis. Structural complexity reductions and creating customer loyalty by offering simplicity and convenience, for instance by increasing self-activation and electronic data exchanges, give direction to further developments in a.s.r.’s service provision.
The importance of statutory old-age pension as a basic pension provision is waning because of the rise in life expectancy and increasing ageing. Tax-efficient facilities for top-up pension are being curbed and the percentage of gross salary that can be used for tax-facilitated pension savings will be reduced. Because of more stringent rules, it is likely that a rising number of small pension funds will be prepared to transfer their plan assets and administration to insurance companies because they lack the scale to bear the increasing costs.
Within the Pensions business, the shift from defined benefit to defined contribution plans is expected to continue. The same goes for the shift towards a more individual approach to pensions. Pension products are developing into simple, low-cost products for which service charges and asset management fees are due only; margins on these products will be low for providers.
Key figures of Other segment, including eliminations (in millions of euros)
Developments in Other segment In 2012, a one-off tax credit of € 90 million was recognized in this segment as part of a prior-year tax settlement. Disregarding this tax credit and the impact of IAS19R, the net results in the Other segment increased from € -169 million to € -91 million. The increase was due, among other things, to a better performance by the Banking business, the scaling down of risks and lower losses at a.s.r. vastgoed ontwikkeling (property development). The net results also improved as a result of fewer impairment losses on associates and private loans. In addition, interest paid was lower on an incidental basis including interest accrual on the pension entitlements of a.s.r. employees.
The net results from the Banking business increased thanks to a higher interest margin, lower operating expenses and an increase in sales of new WelThuis mortgages. In 2013, sales of new mortgages amounted to € 1,411 million (2012: € 839 million), nearly doubling a.s.r.’s market share to 4.0% (2012: 2.2%). This makes a.s.r. the sixth largest mortgage lender in the Netherlands. a.s.r. Bank saw its portfolio of savings deposits rise by 10%, reaching € 889 million (2012: € 808 million) due to deposits into the lijfrente opbouwrekening annuity account. An online savings account was introduced in the autumn.
Compared to 2012, a.s.r. vastgoed ontwikkeling had less of a negative impact on the results. This was due, in particular, to fewer impairment losses on land holdings and future construction projects. The strategy to reduce risks in this portfolio was again pursued in 2013. The completion of the IJDock development in Amsterdam marked a milestone in Q4 2013. a.s.r. built a hotel, shops and offices on this peninsula, most of which have now been sold.
Banking Consumers are showing renewed interest in developing their asset position and income protection at a later age (including pension benefits). a.s.r. is seeing rising demand for low-risk asset products in combination with a preference for protection under the Dutch deposit guarantee scheme. More and more customers consider asset-building and reduction through savings products as a viable alternative to life insurance policies. Examples include tax-facilitated products such as annuity accounts and asset reduction accounts.
That is why a.s.r. Bank introduced two new products in 2013: • the online annuity savings account (online lijfrente spaarrekening) for structured capital growth in the future; • the online savings account (online direct internet spaarrekening) for instant access savings and deposits.
Outlook for 2014 a.s.r. Bank will actively continue to roll out online savings products. On the investment front, preparations are in full swing to be able to offer a.s.r. mixed funds with efficient cost ratios to customers in 2014. A new fee structure will be introduced in 2014, based on which investors will be provided a better understanding of the fees associated with holding an account and conducting transactions. The Banking business has now taken steps in developing medium-term and long-term sustainability targets for selecting investments. The sustainability targets will apply to the a.s.r. house funds (for customers) and to portfolio investments alike.
The performance of the property development business will depend on the situation on the retail and residential property markets in the coming year as well. Going forward, property developments will primarily be undertaken in city centres. For this reason, a.s.r. vastgoed ontwikkeling, the Property Development business, has strengthened its strategic focus and expertise in the areas of complex urban development and redevelopment.
37a.s.r. 2013 annual report Report of the Executive Board 2.1.5 Investments
The total fixed-income portfolio was reduced from € 21.4 billion to € 18.8 billion. This drop was attributable to higher interest-rates and an increase in the mortgage portfolio. In 2013, the mortgage portfolio showed a 35% rise, from € 3.5 billion to € 4.8 billion. The interest-rate risk on assets versus liabilities is actively hedged via an overlay portfolio.
The equity portfolio rose from € 1.7 billion to € 2.1 billion, i.e. 19%, thanks to rising share prices and purchases of Dutch and European equities. This limited increase following purchases is in keeping with the policy of selective re-risking. The real estate portfolio showed an 8% fall from nearly € 3.0 billion to just over € 2.7 billion, primarily as a result of disposals.
By creating property funds, a.s.r. wants to increase the flexibility of its investment property portfolio without affecting the portfolio’s critical mass that has taken more than a century to build. Boasting funds and in-house asset and property management specialists, a.s.r. vastgoed vermogensbeheer has a lot of experience and a good reputation in the Dutch property market. Some non-strategic residential investment properties were sold in 2013. This sale was in keeping with a.s.r. vastgoed vermogensbeheer’s strategy to concentrate the residential portfolio in the strongest economic regions and to rejuvenate the portfolio.
The ASR Dutch Core Residential Fund was created on 1 January 2013. This fund comprises of a portfolio of apartments and single-family homes in the Netherlands with a fair market value of approximately € 750 million. In addition, the value of the pipeline of development and redevelopment projects to be completed in the next few years amounts to some € 75 million.
The capital position is governed by various rules and limits that were instituted to absorb losses and to guarantee financial robustness. Compliance with the rules is monitored and enforced by internal management and control models. In doing so, a.s.r. seeks to optimize its capital position within the parameters set by regulators and stakeholders, actively monitor capital risks and meet the agreed limits. One of the priorities in this regard is satisfying the capital requirement that is needed to be awarded an A rating at a.s.r. level.
The Solvency I rules that are enforced by the regulator form the current regulatory framework. In addition to supervision under Solvency I, the rules and regulations of the Solvency II regime are becoming increasingly clear. Although the effective date for Solvency II has been delayed, this has not stopped a.s.r. from preparing its organization and processes for the introduction of this regime. In mid-2013, the regulator also introduced the theoretical solvency criterion (TSC), which is used to extrapolate a number of risk scenarios in accordance with Solvency II principles ahead of the introduction of Solvency II.
The Solvency II rules require a different methodology for measuring and managing available and required capital. a.s.r. has incorporated this method into its management approach and further tweaked its practical application. a.s.r. regularly measures and manages its available and required capital under Solvency II; this process is an integral part of managing the capital position of a.s.r. as a whole.
The Treasury department is responsible for capital management in the Financial Markets department. As part of the capital management procedures, Treasury is accountable to the a.s.r. risk committee structure that was set up for this purpose. This guarantees its independent position and the segregation of duties, and is in keeping with the a.s.r. governance structure.
DNB solvency (exclusive of the UFR) stood at 268% at year-end 2013 (year-end 2012: 293%). This high solvency ratio is a reflection of a.s.r.’s stable foundation. In accordance with regulatory requirements, the UFR has been applied since June 2012. Disregarding the UFR, the solvency ratio was virtually stable at 236% (2012: 231%).
1 For the regulatory solvency ratio including UFR the interest-rate shock +1% has a negative impact.
IAS 19 revised for accounting for employee pensions came into force on 1 January 2013. As a result of this standard, an amount of € 363 million has been added to the provision for employee pensions with effect from 1 January 2013. Equity, exclusive of changes in the value of real estate, was down from € 2,935 million to € 2,663 million as of that date. IAS 19 revised does not impact the DNB solvency ratio.
Funding As an insurer, a.s.r. has a relatively limited need for funding. From this perspective and from the viewpoint of risk management, a.s.r. relies on the money and capital markets to a minimal extent. This is in keeping with the prudent policy and financial robustness that a.s.r. pursues.
As access to, and costs associated with, funding channels can range over time, a.s.r. seeks to create a balanced spectrum of funding options. a.s.r. has currently achieved this by keeping its programmes up-to-date both in terms of secured and unsecured financing, so as to ensure access to the money and capital markets, and minimize funding costs.
Dividend The Executive Board plans to distribute € 99 million in dividend on ordinary shares, a 12% increase on 2012. Similar to last year, this represents 40% of the net results attributable to shareholders.
Risk management in 2013 The objective of the risk committees is to manage the risk profile for a.s.r. group 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, for instance, to an increase in stock market volatility, a downgrade of corporate and government fixed income investments, or low interest-rates, a.s.r. increases the meeting frequency of the risk committees.
The risk appetite describes the level of risk a.s.r. is prepared to take. In 2013, the risk appetite has been further refined. Statements at group level have been enhanced, statements at legal entity level (OTSO - Onder Toezicht Staande Onderneming) 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 defined for financial and non-financial risks. The risk appetite is defined by the Executive Board and endorsed by the Supervisory Board.
a.s.r. conducts an own risk and solvency assessment (ORSA) annually, or more often when required by significant changes in the risk profile. The ORSA is a tool for risk and capital management. In this assessment, strategic risks are transposed into scenarios. For these scenarios the impact on the balance sheet, the solvency position and the income statement is simulated. Management actions are defined in order to mitigate the effect of the scenarios. In 2013 the ORSA was performed at both group and legal entity level.
a.s.r. participated voluntary in the pilot exercise of DNB for recovery plans in 2013. The goal of the recovery plan is to ensure that a.s.r. has effective plans in place to deal with potential severe financial stress resulting from a wide range of different causes of various circumstances. The recovery plan should enable a.s.r. to significantly reduce the likelihood of failure in such extreme scenarios. The recovery plan will ensure that a.s.r. is better prepared for crisis situations. In 2014, the recovery plan will be further embedded in the organization.
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. The full implementation of the internal control framework will be finalized in 2014.
In 2013, the exposure to market risk changed slightly. The exposure to equities increased gradually as a result of positive revaluations and investments. The hedge of the interest-rate risk was improved over the maturity buckets by restructuring the portfolio of swaps and swaptions. However, this did not impact the sensitivity to a parallel shift of the yield curve. The exposure to (subordinated) financials was selectively reduced. The fall in real estate exposure is in line with the investment policy and was due mainly to the sale of property.
Starting from Q2 2012, DNB has prescribed the application of the UFR to the yield curve used to discount insurance liabilities, meaning that the yield curve at maturities of more than 20 years gradually approaches a level of 4.2%, which signifies an increase. This represents a considerable boost of the solvency position for a.s.r. For the sake of prudence, the solvency position is also assessed exclusive of the UFR.
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, every department writes a report outlining all identified key risks and the actions that need to be taken to mitigate these risks. 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 annually signs their Management in Control Statement (MCS) 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.
Major risks for 2014 The risk priorities of a.s.r. are defined annually by the Executive Board. Defining risk priorities is a bottom-up process. Risk priorities are based, for instance, on the Control Risk Self Assessments of the business units. Risk Management reports the actual status of the risk priorities and progress of the defined actions in the a.s.r. Risk Committee on a quarterly basis.
b. Discrepancy between developments in cost- and sales volumes Premium income is under pressure as a result of the current economic situation and changing legislation. This pressure can manifest itself in an increase in non-life policy cancellations, loss of retention in the life business and a drop in sales of new insurance contracts. At the same time, the new organizational requirements for insurance companies limit the scalability of departments. It is an increasing challenge to match the planned cost reductions with the decrease in premium income.
Increased claim culture of society This risk may manifest itself as a result of an increasing legalization of society and the uncertainty of the current legal disputes of other insurance companies. Court rulings and decisions by arbitration boards may have an industry-wide impact, as well as triggering widespread media attention and evoking negative sentiments among policy holders. This potentially increases the reputation risk for a.s.r. The current transparency dossier has largely been finalized. Although firm compensation agreements have been made with the foundations to compensate policy holders, the risk of new claims is ever-present.
Information security risk Due to technological developments such as cloud computing, bring your own device, social media and online distribution, further integration of a.s.r. data with the environment is necessary. This requires a.s.r. to constantly stay on top of these developments to anticipate on future cyber-attacks and information security risks and to prevent confidential (financial) information or (client) information is unintentionally available for others. A high level of awareness regarding the use of confidential information and the safeguarding of assets of the company, employees and customer data, is of great importance.
Impact of supervision, laws and regulations The Dutch insurance market is characterized by a strong increase of regulation. New laws and regulations are introduced rapidly. The increasing pressure from politics and supervisors could have the following implications:
• a.s.r. might suffer reputational damage if it is not able to implement new requirements promptly. • A substantial part of available capacity is spent implementing new requirements, shifting focus away from the core activities of a.s.r., which are undertaken in the interest of customers. • Processes will become less efficient and work pressure will increase. • Fines and legal action will be imposed on a.s.r. if it is unable to implement new requirements promptly.
Solvency II 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.
Solvency II at a.s.r. in 2014 With the introduction of the Preparatory Guidelines and the application date set at 1 January 2016, a.s.r. will continue with the preparations for Solvency II readiness. Priority will be given to implementation of all Preparatory Guidelines to ensure that Solvency II requirements will be implemented in 2016. With another two years to go a.s.r. expects to be ready for the application of the Solvency II Directive as of 1 January 2016.
1 Sustainable insurance company a.s.r’s key task is to offer people certainty in uncertain situations. Financial robustness is inextricably linked to this and is therefore the number one priority. a.s.r. creates insurance products that meet customers’ needs and have been tested by a customer panel or a selection of customers. Market surveys and customer panels are just two instruments that a.s.r. uses to find out about its customers’ needs.
Ensure that customers can access and understand information is a continual effort. In addition to the customer information improvement plan, which lists all the steps that a.s.r. is making to improve the findability and intelligibility of information, and the approval and review process for new and existing products (PARP – product approval and review process), a.s.r. also achieves this by customer panels. Assurance is provided on the one hand by improving style guides and training courses in B1/ Customer-friendly information. On the other hand, a.s.r.’s core values and the various codes of conduct ensure sustainability in attitude and conduct in this area. In 2013, a.s.r. developed a number of new well-aligned products. Furthermore, a.s.r. has received a number of awards and recommendations, illustrating that a.s.r. is on the right track (see 1.3).
Customer appreciation rating a.s.r. uses the Net Promoter Score (NPS) to measure customer perceptions of its products and services, and has the ambition to lead the field by 2015, measured in terms of its NPS compared to its peers. In winter 2012-2013, a.s.r.’s NPS stood at -44. This is fourth place in the rankings of industry peers that a.s.r. compares itself to. It is also the highest score by a.s.r. since the first scoring in 2009. These results are not satisfactory and a.s.r. continues to take action to improve them.
• It should be easy for customers to lodge a complaint → a complaint form can easily be found on the website.
Complaints help a.s.r. to learn from things that go wrong and understand customers better. Customers who submitted a complaint about a.s.r. in 2013 were asked to share their experience about how the complaint had been dealt with. This customer feedback is used where needed to solve customers’ problems, to structurally improve service and to develop individual employees’ complaint handling skills. This helps reduce repeat occurrences of the same problem, and led to two specific targets for 2013. First, to try to talk more to customers that have made complaints in order to gain a better understanding of the customer’s complaint and to ask questions to clarify things. And second, to check after the complaint has been addressed whether the customer also feels that the issue has been resolved. In 2013, we spoke to almost 70% of customers who had made a complaint and more than half of them stated that they felt the matter had been resolved.
A specific example of a change in the way complaints are dealt with, is that the customer is asked, in a personal conversation, whether the case relating to the complaint can be closed.
The Engagement Scan is a key indicator of how employees feel about a.s.r. at a time of transition as a.s.r. prepares for the approaching privatization. Engaged employees are an essential condition if a.s.r. is to be an insurer that is trusted by customers. Apart from asking questions about employee engagement, trust and team dynamics, the scan also includes questions relating to how a.s.r. employees ensure that customer interests are met. The outcomes of the Engagement Scan are used to review the past period, but also, and more particularly, to see how employee engagement can be strengthened going forward. To do this, managers and their HR advisors evaluate the Engagement Scan and they attend workshops to prepare for team meetings when the results are discussed with the teams.
percentage yet. Furthermore, the proportion of employees who did not feel committed fell by onethird.
New this year were questions on leadership (such as ‘my line manager gives me individual attention’ and ‘within the team, I am not afraid to stand up for myself and my ideas’). These questions all scored 7.9 or higher. This means that there is a good awareness of core values and there is room for individual attention, ideas and dialogue. The questions about treating customers fairly also have an overall positive score, although employees did indicate that the scope to serve customers well in their day-today work could be greater.
Number of women in the workforce 1,443 (37.3%) 1,612 (37.8%) Number of women in middle management 227 (26.0%) 226 (26.2%) Number of women in senior management 25 (25%) 21 (21%) Number of women on the Executive Board 1 (25%) 1 (25%) Number of women on the Supervisory Board 2 (50%) 2 (50%)
The a.s.r. Talent Development Programme is designed specifically for young emerging talents (trainees). The programmes takes two years to complete. The most recent group started in September 2012 and will have completed their training in late 2014. The trainees, who are part-time Business Administration students, rotate between a.s.r. divisions in four modules of six months each, taking on a different role in each module. After their traineeship, most of the trainees are offered a management position, or they are asked to join a specialist team.
Code of conduct a.s.r. has a code of conduct setting out guidelines on how employees should interact with each other and how to approach specific situations. These include an integrity code, rules on handling
price-sensitive information and private investment transactions (insider rules), and a whistle-blowing procedure. a.s.r. also supports the industry’s code of ethics (such as the Dutch Code of Conduct for Insurers). There are also internal codes in place relating to various themes, including Customer Due Diligence (know your customer before doing business with them), Intermediaries (including an obligation to report suspicions of inappropriate conduct by an intermediary) and financial services (including a duty of care and an incentives policy).
As an institutional investor, one way in which a.s.r. demonstrates its social responsibility is in its use of ethical and sustainability criteria in the investment policy. All investments managed by the Financial Markets department are screened based on the socially responsible investment (SRI) policy, focusing on aspects such as social and environmental criteria. Countries and businesses that do not meet the criteria are excluded. Positive selection takes place where scores on the named aspects are above average. Screening of businesses is based on external, independent research by Vigeo (www.vigeo.com/csr-rating-agency), our screening provider accredited by Arista standards. Furthermore, independent external certification is provided by Forum Ethibel (forumethibel.org/ content/home.html) in the form of an annual audit of a.s.r.’s investment portfolio.
In asset management, a.s.r. makes its selection based on best practices and best products in accordance with environmental, social and governance (ESG) criteria. The policy applies to all investments in countries (government bonds) and in businesses (equities and corporate bonds). This means, for instance, that a.s.r. invests more in businesses that score best on the ESG criteria within their branch of industry as long as they match the investment guidelines of the portfolio. a.s.r. also invests in businesses that make a sustainable contribution to society, for instance by processing or recycling their waste, use of clean energies (solar and wind), reducing their environmental impact or energy consumption, and that – just as a.s.r. does – make a contribution to the circular economy. Further expansion took place in 2013, with a third round of investment in waste processing/recycling. A total of € 35 million has now been invested in impact investments. Impact investments are investments made in companies, organizations and funds with the intention to generate a beneficial social and environmental impact, in addition to a financial return.
a.s.r. also implements a strict exclusion policy in relation to controversial activities by countries and businesses. This covers producers of, for example, controversial or offensive weapons, nuclear energy, gambling and tobacco. a.s.r. also requires businesses to comply with international conventions on human rights and labour rights, and applies criteria relating to gender equality, freedom of union and the exclusion of child labour. With regard to investments in sovereign debt, a.s.r. excludes countries that have
a.s.r. subscribed to the United Nations Principles for Responsible Investment (UNPRI) in 2011. These principles aim to encourage socially responsible investment. More than 95% of external asset managers responsible for a.s.r.’s investments have now also signed the UNPRI. ESG aspects are being incorporated into the investment processes of increasing numbers of external asset managers. a.s.r. has been a signatory to the United Nations Global Compact Principles (UNGC) since 2011. The UNGC asks businesses to embrace, support and implement within their sphere of influence a number of principles relating to human rights, labour standards, the environment and the fight against corruption. a.s.r. also abides by the Sustainable Investment Code of the Dutch Association of Insurers, which came into effect on 1 January 2012. The Code stipulates that the investment policies of members of the Association must take account of environmental, social and corporate governance (ESG) aspects at the entities in which they invest.
Finally, a.s.r. signed the United Nations Principles for Sustainable Insurance (UN PSI) in 2013. These principles were published in 2012 at the UN Conference on Sustainable Development (www.unepfi.org/psi). These have now been signed by 38 insurance companies around the world (reference date: 31 December 2013), including six Dutch insurers. The UN PSI principles are as follows: 1. We will embed in our decision-making Environmental, Social and Governance (ESG) issues relevant to our insurance business (Company Strategy, Risk Management and Underwriting, Product & Service development, Claims Management, Sales & Marketing and Investment Management)
For the third consecutive year a.s.r. achieved third place in the annual survey conducted by the Dutch Association of Investors for Sustainable Development (Dutch acronym: VDBO) among 30 insurers in the Netherlands. Aside from policy, implementation and transparency of investments, VDBO also appraised governance (management and supervision of the investments) for the first time in 2013. a.s.r. was the only insurer to obtain the maximum score for governance.
comparison of the sustainability aspects of the ten largest life insurance providers in the Dutch market. In the first publication (www.eerlijkeverzekeringswijzer.nl), a.s.r. came in third place among all surveyed insurers and was praised for its policy on weapons. The FIG also conducted a Practical Study of Human Rights among 17 Dutch banks and insurance companies, the results of which were published in December 2013. With a score of 7 out of 10, a.s.r. came joint second, with the FIG remarking that a.s.r. is meeting its responsibilities sufficiently. Following the two FIG publications, a.s.r. consulted with FIG to make further improvements in its socially responsible investment policy. This resulted in a number of useful suggestions for a.s.r. from the six founding organizations. Public responses to the SRI policy received via the website of FIG were followed-up by a.s.r.
ISAE 3402 type II assurance certification The Financial Markets and Commercial Real Estate and Residential department of a.s.r. (a.s.r. vastgoed vermogensbeheer) are ISAE 3402-certified. An independent auditor performed an audit of the processes of these departments and issued an ISAE 3402 type II assurance certificate. This quality mark is a key indicator that a.s.r. has full and proper insight into the processes involved in investment, including execution and control measures. The Financial Markets department has been awarded ISAE 3402 type II certification every year since 2010. The Commercial Real Estate and Residential department received its certification for the second year running.
Sustainable real estate a.s.r. vastgoed vermogensbeheer (real estate management) invests in retail units, residential units, offices and agricultural land, and sustainability has been firmly embedded in its business practices. A supplier of green energy has been chosen to service the entire property portfolio. Furthermore, all tenants of a.s.r.’s buildings are encouraged to save energy. Energy consumption is measured with the aim of raising awareness of consumption and, in consequence, reducing consumption.
a.s.r. also maintains our properties in accordance with specified sustainability criteria. Examples: • An energy performance rating of A was specified for the renovation of the a.s.r. office in Utrecht. • The design of the renovated building on the Archimedeslaan obtained a BREEAM certification of
Excellent. • a.s.r. is also making efforts to achieve a BREEAM certification of Excellent for the renovated building on completion.
This is the first shopping centre in the Netherlands where not just the general and public spaces have been certified, but also all retail units. The centre was awarded a certification of Good.
• For the renovation of offices in the real estate portfolio (Willemswerf, Rotterdam/Hoogoorddreef, Amsterdam/Pettelaarpark 30, Den Bosch), energy-saving measures were taken, achieving an improvement of two positions in the energy performance rating.
60% of the residential units in portfolio have an energy performance rating of at least C
The residential portfolio is maintained in compliance with the requirements of corporate social responsibility. One way this is achieved is by clustering maintenance tasks and by using only three certified contractors. The reference frameworks are established at the start of the year, allowing the maintenance to be carried out throughout the course of the year without many additional actions. This also makes the administrative actions more efficient (including a reduction in number of invoices, fewer consultation meetings and less paperwork). Since 2011, only FSC-certified timber has been used when kitchens of rental properties are refitted. All removed materials are segregated and recycled.
Similarly, sustainability is important in the developments of a.s.r. vastgoed ontwikkeling, given that they often endure for many generations. In order to control the sustainability of its developments, a.s.r. vastgoed ontwikkeling has embraced an internationally recognized sustainability standard (BREEAM). The BREEAM certificate not only considers the extent of energy savings, it also focuses on elements such as use of materials, health and location. BREEAM certification has now been obtained for a number of completed developments, including a shopping centre in Waddinxveen, which was the first shopping complex in the Netherlands to be awarded this certification. Other developments to be awarded this certification include the Monarch development in The Hague and the Amsterdam Law Courts in the Amsterdam IJDock district.
a.s.r. vastgoed ontwikkeling’s Land for land programme supports the Utrechts Landschap nature conservation organization with the purchase of land to extend nature conservation areas in the Utrecht province. The focus is on the areas around the edge of the city of Utrecht. The first plots of land (three hectares of natural green space) were purchased in October 2012. In early 2014, Utrechts Landschap made a second purchase with financial support from the Land for land programme. The plot of land purchased totaled almost three hectares, which will make it possible to complete the green corridor from the Kromme Rijn area via Voorveldse Polder and Hooge Kampse Plas to Noorderpark.
Resources In 2010, it was decided to renovate the Archimedeslaan main offices rather than to build a new office. While this is a sustainable option in itself, more important still is that on completion the building will
use 50% less energy (with the energy performance rating improving from G to A). Earlier decisions, the benefits of which are still being felt, include the individual login code required to print documents, and the fact that the default setting for the printers is to print double-sided in black and white. Increased use of digital distribution of mail items has also made a contribution.
The New World of Work was introduced company-wide at a.s.r. As a result, employees took up digital ways of working, and digitalized their archives as well. Which is why in 2012, there was an increase in paper offered for recycling. Employees cleaned out and minimized the amount of physical files. Working strictly digital is now far more common, which explains the lower recycling numbers over 2013.
Residual waste 114,340 116,710 Energy (green electricity and heat) Paper and cardboard 118,030 180,270 Raw material for the paper industry Other 20,460 119,015 Energy (green electricity and heat) Organic waste 22,350 19,710 Biogas
Water Total consumption in 2013 was 44,621 m³. This compares to 49,674 m³ in 2012 (exclusive of Europeesche Verzekeringen), a reduction by 10.1%.
The renovated a.s.r. building will use 50% less energy (with the energy performance rating improving from G to A)
Transport In many areas, a.s.r. is making efforts to improve the sustainability of employee travel between home and work and also business travel. For instance, the choice of company cars has been limited to those with an A, B or C label. The car-sharing scheme is regularly highlighted and employees from Utrecht and Amersfoort are no longer allowed to park their vehicle at the office building if they live within 10 km by bicycle of their office. The purchase of Utrecht Bereikbaar travel cards (known as Q passes from 2014) is facilitated by a.s.r. These travel cards allow employees to use public transport at a concessionary rate. There are also a number of other schemes to encourage bicycle use, including a tax break on new bicycle purchases, the Rijnsweerd bike hire scheme, an a.s.r. e-bike with charging points in the bike shed, ‘Rij 2 op 5’ (a bicycle promotion campaign) and a mobile bicycle repairman.
The implementation of the socially responsible procurement policy focuses on the following aspects: 1. a.s.r. informs suppliers in advance that environmental and social factors are weighed in the selection process; 2. a.s.r. has adopted a set of environmental and social criteria (these are category-specific); 3. a.s.r. challenges its suppliers to come up with alternatives that constitute a better match for today’s environmental and social criteria; 4. a.s.r. has signed the Circular Procurement covenant, an initiative of The Circle Economy, De Groene
Moreover, a.s.r. wants to ensure that international human rights are respected throughout the production process of the goods and services that are purchased. These sustainability aspects are assessed in all new contracts and contract renewals.
More than 40 teams, varying in size, combined a team-building exercise with giving back to the community by doing odd jobs for various organizations, including Kamp Amersfoort and a number of care farms. Other teams helped out with the cooking for users of food banks, or by taking disadvantaged people for a fun day out. Apart from these team activities, a.s.r. Foundation also runs a number of projects of its own. As part of the FeyBlij campaign, for instance, the learning centre of
SV Gio was given help in the form of used reading books and laptops
The consolidated and company financial statements for 2013 of ASR Nederland N.V., as well as Part I, II and III of the Annual Report, have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and with Part 9, Book 2 of the Netherlands Civil Code.
The Executive Board Jos Baeten Karin Bergstein Michel Verwoest Roel Wijmenga
Supervision The Supervisory Board addressed the following issues: Routine assets Specific issues
• Developments in occupational disability insurance (WGA-ER) • Non-life insurance: product development and developments in combined ratio • Pensions: market developments and new products • Life insurance: after-sales services to unit-linked policyholders • ICT: infrastructure and architecture • Pension plan and pay and benefits of a.s.r. employees • Performance of Supervisory Board and Executive Board • Consolidation relating to SNS REAAL
Financial performance The quarterly financial performance was a standing agenda item in Supervisory Board meetings. Developments in premium income and the combined ratio were recurring items. The status of cost cuts and improvements in claims management were discussed extensively. Particular focus was placed on developments in the partial incapacity policy excess insurance (WGA-ER) portfolio. In the context of retention of premium income, the members of the Supervisory Board educated themselves broadly about the introduction of new propositions for generating sales of new policies. Opportunities and plans for premium income retention and customer loyalty programmes were also discussed at length with the supervisory directors.
Risk management and solvency The risk appetite, which was approved early in the year by the Supervisory Board for ASR Nederland N.V. and its supervised subsidiaries, acted as an important benchmark for both tactical and strategic decisions. In weighing risk and return, solvency was regarded as a priority over net results and net results as a priority over premium income.
Market developments and strategy A key issue in the meetings of the Supervisory Board in 2013 was the potential consolidation of the insurance sector and a.s.r.’s possible role in it. Partly at the request of the shareholder, various scenarios were extrapolated for a.s.r.’s future exit to the private market. In addition, developments in the pensions business and the introduction of the new Werknemers Pensioen (Employee Pension) were covered specifically. The supervisory directors are excited about the simplicity, transparency and low costs of this new proposition in the defined contribution market.
Governance On account of an earlier DNB survey of the design and effectiveness of the governance structure and various meetings on this topic with DNB, a final decision was taken at year-end 2013 about the governance structure of a number of licensed subsidiaries. This means that a Supervisory Board was created as of 1 January 2014 for three insurance companies for which DNB had granted a dispensation, i.e. N.V. Amersfoortse Algemene Verzekering Maatschappij, ASR Schadeverzekering N.V. and ASR Levensverzekering N.V. Following this, DNB cancelled the dispensation. It was decided that the members of the Supervisory Board of these subsidiaries would be the same as those serving on the Supervisory Board of ASR Nederland N.V. (see Section 5.1.3 Management and supervision, Procedures, Appointment and reappointment of executive and supervisory directors on page 69).
The Articles of Association were amended following changes in the law (One-Tier Board Act) and as a result of requirements imposed upon the shareholder by the Authority for Consumers & Markets (ACM) on account of the transfer by the State of SNS REAAL to NLFI. The measures were imposed by the ACM so that the financial institutions in which NLFI holds shares will each continue to operate as autonomous entities with independent decision-making powers. The regulations of the Supervisory Board and Executive Board were also updated (see www.asr.nl/EN/about-asr for the Articles of Association and regulations).
67a.s.r. 2013 annual report Report of the Supervisory Board 5.1.2 Issues addressed by the committees
Audit & Risk Committee After the close of each quarter, the Committee meeting addressed the financial performance based on detailed audit and assessment reports. Supplementary to the periodic audit and assessment report, the full financial year 2013 was also discussed based on the report of the Executive Board, the financial statements and the actuarial report. The Committee issued a positive opinion on these issues to the Supervisory Board.
Early in 2013, the Audit & Risk Committee addressed the risk appetite, based on a detailed risk assessment. The Committee also periodically monitored the status of the risk appetite, using such tools as the Integrated Risk Dashboard and status reports on managing risk priorities. The a.s.r. risk appetite is based on a prudent approach to risk management and transposed into requirements for solvency, liquidity and returns; solvency takes priority over the net results and net results takes priority over premium income. After the Committee had issued a positive opinion, the risk appetite was approved in the Supervisory Board. The multi-year budget 2014-2018, the investment plan and the risk priorities for 2014 were discussed at year end.
The Committee considered the changes and improvements introduced within a.s.r. in 2013 sustainable; planned cost savings have been implemented and the organizational structure simplified further. The Committee will closely monitor any new initiatives for 2014 that are designed to match the cost level with the level of premium income. Further cost cuts and cost flexibilization are crucial in this process to allow a.s.r. to continue to compete in the various market segments in which it operates.
In the Committee’s opinion, a.s.r. has a solid financial foundation. The solvency ratio is highly robust, both under Solvency I and Solvency II. Sensitivities to fluctuations in the yield curve and changes in possible future stress scenarios within the various investment categories are firmly under control. This strong foundation allows a.s.r. to be responsible about adapting to the changing insurance market.
Selection, Appointment & Remuneration Committee The Selection, Appointment & Remuneration (SAR) Committee met six times in 2013. In accordance with policy, the Committee advised the Supervisory Board on target-setting, performance appraisals and the ex-post assessment of the variable pay awarded to identified staff.
In Q1 2013, the members of the Supervisory Board, Executive Board and all other policy-makers gathered in a plenary session to take an oath/make an affirmation (see page 75). The Supervisory Board attaches great value to this procedure because it ties in with the change in mentality of a.s.r. employees. The SAR Committee has adopted a procedure to ensure that all new policy-makers take the oath or make the affirmation.
The Committee discussed the Dutch Executives’ Pay (Standards) Act on a number of occasions. At a.s.r., it applies to top executives of ASR Aanvullende Ziektekostenverzekering N.V. and ASR Basis Ziektekostenverzekeringen N.V. The remuneration of the employees governed by this Act is within the standards defined.
In a number of meetings, the Committee talked about the plans of the Executive Board to scale back the pay and benefits of a.s.r. employees. As part of this, the costs associated with the a.s.r. pension plan will also be lowered. A final decision on this issue is scheduled to be taken early in 2014. The Committee also covered the remuneration policy of ASR Bank N.V. and aligned it to the comments of DNB in this regard. Identified staff of ASR Bank N.V. no longer receive variable pay; the variable component was converted into a fixed allowance.
2013 annual report Report of the Supervisory Board 5.1.3 Management and supervision
K.T.V. (Karin) Bergstein Karin Bergstein (born 1967) is a member of the Executive Board. Her areas of responsibility are the product lines Non-Life, Life, Banking and Funeral and the divisions Intermediary Distribution, Customer Service and Europeesche Verzekeringen.
Karin studied medical biology at Utrecht University and earned an MBA from Nyenrode University and the University of Rochester in the United States. She started her career at ING Bank in 1991, where she held various positions until 2010. Her last position was that of Director of Products & Processes, which gained her a seat on the Executive Board of ING Bank Nederland. She previously also served as CEO of ING Car Lease International. Karin Bergstein was appointed to the a.s.r. Executive Board in September 2011.
Education and evaluation The members of the Executive Board attended three continuing education (CE) sessions in 2013. The first two sessions focused on reputation management and generation management. The third session used game simulations to highlight value management from the perspective of solvency and cyber risks. The Executive Board members also took individual courses as part of the CE programme.
In the second half of 2013, the Executive Board evaluated its performance with the assistance of an external party. Based, in part, on input from supervisory directors and senior managers, it was established that the Executive Board is effective and performs well, although the team is relatively new. On account of recommendations from the evaluation, the Executive Board will try to capitalize even more on the diversity of the team and clarify, to the organization, the steps taken to make a decision.
In addition to the self-evaluation, the performance of the members of the Executive Board was also appraised by the Supervisory Board in 2013 within the scope of the annual appraisal round.
C. (Kick) van der Pol (born 1949) Chairman of the Supervisory Board Member of the Selection, Appointment & Remuneration Committee
Kick van der Pol is the Chairman of the Board of Directors of Ortec Finance, Chairman of the Board of the Federation of Dutch Pension Funds and Chairman of the Advisory Board of Syntrus Achmea, a pension administrator. He is also a member of the Bank Council of DNB and a member of the Board of the Confederation of Netherlands Industry and Employers (VNO-NCW). In the past, Kick served as Vice-Chairman of the Executive Board of Eureko/Achmea and as Chairman of the Executive Board of Interpolis.
First appointed on: 15 December 2008 Current term of office: 15 June 2010-15 June 2014
Composition of the Supervisory Board The composition of the Supervisory Board is such that each supervisory director should have the skills to assess the main aspects of the overall policy and that the Supervisory Board as a whole meets the profile thanks to a combination of the experience, expertise and independence of the individual supervisory directors. The Supervisory Board has four members. The Supervisory Board is diverse in terms of the gender and professional background of its members. The diversity of its members guarantees the complementary profile of the Supervisory Board.
Education and evaluation Three CE sessions were organized for the members of the Supervisory Board in 2013. These sessions addressed developments in consumer behaviour, developments in rules and regulations, and value management respectively.
Independence and conflicts of interest In 2009, Cor van den Bos announced that his role as Chairman of the Supervisory Board of CED might cause a conflict of interest if CED-related issues were to be discussed in the Supervisory Board of a.s.r. This was not the case in 2013.
In 2012, Margot Scheltema announced that her appointment as of 1 January 2013 as a deputy member of the Enterprise Division of the Amsterdam Court of Appeal might cause a conflict of interest. The supervisory directorship did not lead to potential conflicts of interest in 2013.
Contacts with the shareholder With effect from 29 September 2011, the shareholder has been represented by Stichting Administratiekantoor Beheer Financiële Instellingen (NLFI), a trust office. The Supervisory Board was in touch with NLFI several times in 2013.
Contacts with the independent external auditor The independent external auditor attended the meeting in which the Supervisory Board addressed the annual and interim financial results. The independent external auditor was also present at all meetings of the Audit & Risk Committee. The two Supervisory Board members of the Audit & Risk Committee consulted with the independent external auditor once, without the other members of the Committee being present. And the chair of the Audit & Risk Committee consulted with the independent external auditor once outside the presence of the other regular attendants of the Audit & Risk Committee meetings; one of the topics discussed was the auditor’s independence.
N.V. Amersfoortse Algemene Verzekering Maatschappij and Europeesche Verzekering Maatschappij N.V. The four members of the Executive Board were appointed as executive directors under the Articles of Association of these four legal entities as of the same date. The composition of the Supervisory Board of ASR Basis Ziektekostenverzekeringen N.V. and ASR Aanvullende Ziektekostenverzekeringen N.V. changed on 1 January 2014 as well. Kick van der Pol, Annet Aris, Jos Baeten and Michel Verwoest were appointed as supervisory directors.
Kick van der Pol Annet Aris Cor van den Bos Margot Scheltema
Plenary sessions 11/11 11/11 11/11 10/11 Audit & Risk Committee - - 6/6 5/6 Selection, Appointment & Remuneration Committee 6/6 6/6 - 5. 1.4 Corporate governance
If the nomination is subject to an enhanced right of recommendation as stipulated in Article 17(7) of the Articles of Association, the Supervisory Board also notifies the AGM and the Works Council of this enhanced right. By virtue of the enhanced right of recommendation, one-third of the members of the Supervisory Board is appointed after having been nominated by the Works Council, unless the Supervisory Board raises objections because it expects the recommended person to be unsuitable for the job of supervisory director or because the Supervisory Board will not be properly balanced in terms of its composition if the Works Council’s candidate is appointed. The enhanced right of recommendation applied to the appointment of one of the members of the Supervisory Board.
Members of the Supervisory Board can be removed only by the Enterprise Section of the Amsterdam Court of Appeal if they neglect their duties, for other compelling reasons or because of a drastic change in circumstances. In addition, the AGM may oust the full Supervisory Board by adopting a motion of no confidence, resulting in the immediate removal of all supervisory directors. Finally, the Supervisory Board may also suspend an individual supervisory director.
Dutch Corporate Governance Code Although ASR Nederland N.V. is under no obligation to do so, it endeavours to comply with the Dutch Corporate Governance Code as much as possible. The Code does not apply to ASR Nederland N.V. because its shares or the depositary receipts are not listed.
Governance Principles for Insurers and the Dutch Banking Code Banks licensed in the Netherlands have been subject to the Dutch Banking Code since 1 January 2010. This Code, which was drafted by the Dutch Banking Association, contains principles for governance and governance oversight, risk management, audits and remuneration policy. Similar principles have been in force for all licensed insurers with effect from 1 January 2011. They have been formalized in the Governance Principles for Insurers, or the Dutch Insurance Code, which applies to all licensed insurers within ASR Nederland N.V.; the Dutch Banking Code applies to ASR Bank N.V.
76a.s.r. 2013 annual report Report of the Supervisory Board 5.1.5 Remuneration policy
Groups 4 and 5 are governed by the industry-wide collective bargaining agreement (CBA) for backoffice positions and for front-office positions in the insurance sector respectively, and by the CBAs concluded by a.s.r. itself, i.e.: • CBA selection system for contract hours and pay-and-benefits package • CBA job classification and pay structure for back-office positions • CBA job classification and pay structure for front-office positions
Features of remuneration system The basis of the remuneration system is the principle that the average level of total pay should be below the median of that of the peer group.
Basic pay The basic pay awarded to the members of the Executive Board comprises a fixed amount per month. The pay is indexed in accordance with the CBA for the insurance industry.
Executive Board 0% 0% Senior management 45% 60% Higher management 20% 40% Back office 9% 18% Front office 9% 18%
Executive Board In accordance with the Act limiting the liability of DNB and AFM and prohibiting bonuses at stateaided enterprises, the members of the Executive Board of a.s.r. are not awarded any variable pay as long as a.s.r. falls under the scope of this Act. To somewhat mitigate the resulting loss of income, the Selection, Appointment & Remuneration Committee has proposed to utilize the one-off option offered under the Act to award a temporary personal allowance. By setting the allowance at 16% on average, the Selection, Appointment & Remuneration Committee has deliberately kept it well below the permitted 20%; as a result, the remuneration of the members of the Executive Board is far below the market median. The Supervisory Board has agreed to this proposal. The CEO has not been awarded a personal allowance.
Identified staff Identified staff are conditionally awarded a material share (i.e. 50%) of their variable pay 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 component is paid out. The noncash component is subject to an additional retention period of two years. Some of the unconditional variable pay is paid out in cash right away. The non-cash component of the unconditional variable pay is also retained for two years.
Pre-pension allowance All employees who worked at a.s.r. on or after 1 January 2006 will be awarded an allowance under the Dutch Early Retirement, Pension and Life-course Savings Act (Dutch acronym: VPL), under which the standard retirement age was set at 65 as of 1 January 2006. The allowance was originally designed to offer employees the option of saving up for early retirement. Newly hired employees are awarded a 1% allowance on their pensionable income. Employees hired before 2006 come under the transitional facility, which means that they qualify for a pre-pension allowance as well.
The members of the Supervisory Board would like to express their gratitude for the efforts put in by the members of the Executive Board and the openness that they displayed in their dialogue with the Supervisory Board. The supervisory directors have a positive opinion of how a.s.r. has implemented the planned cost cuts and how it has simplified its organizational structure and processes. Thanks to this firm foundation, a.s.r. will be able to adapt further to the rapid changes in the insurance sector, and to do so responsibly and sustainably.
In the aftermath of a drastic restructuring, which resulted in many colleagues being let go, the Supervisory Board would also like to express its immense appreciation for the commitment and energy that was shown once again by the employees in 2013.
Based on experience gained earlier, the members of the Supervisory Board have every confidence that the Executive Board and the employees alike will continue to apply themselves in 2014 to adapting a.s.r. to the changing market and treating customers fairly every single day, thereby helping a.s.r. to develop into a truly socially relevant insurer.
The Supervisory Board Kick van der Pol Annet Aris Cor van den Bos Margot Scheltema
82a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Table of contents All amounts quoted in the tables contained in these financial statements are in millions of euros, unless otherwise indicated.
Consolidated financial statements Consolidated balance sheet 84 Consolidated income statement 85 Consolidated statement of comprehensive income 86 Consolidated statement of changes in equity 87 Consolidated statement of cash flows 88 1 General information 90 2 Accounting policies 91 3 Risk management 113 4 Capital and liquidity management 142 5 Group structure and segment information 145
Notes to the consolidated income statement 24 Gross insurance premiums 186 25 Investment income 187 26 Fee and commission income 189 27 Other income 189 28 Net insurance claims and benefits 189 29 Operating expenses 190 30 Acquisition costs 191 31 Impairment of assets 191 32 Interest expense 192 33 Other expenses 192 34 Income tax expense 192
Other notes 35 Related party transactions 194 36 Remuneration of the Executive Board and
84a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Investments on behalf of policyholders 11 8,049 8,217 Loans and receivables 11 8,484 7,197
Share premium reserve 962 962 Unrealized gains and losses 15 583 503 Actuarial gains and losses 15 -107 -224 Other reserves 699 504 Profit for the year 281 316 Total equity attributable to shareholders 2,518 2,161
Deferred tax liabilities 12 - Due to customers 20 1,366 1,415 Due to banks 21 677 1,882
Gross premiums written 3,923 4,290 Change in provision for unearned premiums 1 92 Gross insurance premiums 24 3,924 4,382 Reinsurance premiums -164 -162 net insurance premiums 3,760 4,220
Insurance claims and benefits 28 -5,122 -5,707 Insurance claims and benefits recovered from reinsurers 28 110 100 net insurance claims and benefits -5,012 -5,607
Income tax (expense) / gain 34 -84 24 Profit for the year 276 309
As of 1 January 2013, the amendments to IAS 19 Employee Benefits have become effective. Due to the retrospective treatment the comparative figures for 2012 have been restated accordingly (see chapter 2.2).
86a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Unrealized change in value of available-for-sale financial assets -502 1,482 Shadow accounting 620 -916 Segregated investment pools -34 -32 Share of other comprehensive income of associates and joint ventures -3 13 Unrealized change in value of cash flow hedges 2 -1 Tax relating to components of other comprehensive income -3 -117 Total items that may be reclassified subsequently to profit and loss 80 429
Shadow accounting allows a recognized but unrealized gain or loss on an asset to be transferred to insurance liabilities (see chapter 2.25).
P ro fi t fo r th e y e ar
N o n c o n tr o lli n g in te re st
Profit carried over from previous financial year - - - - 228 -228 - - - - Discretionary interest on other equity instruments - - - - -44 - -44 - - -44 Tax relating to interest on other equity instruments - - - - 11 - 11 - - 11
The change in accounting policies amounting to -€ 109 million is as a result of the amendment to IAS 19 Employee benefits (see chapter 2.2).
Other reserves amounting to € 699 million (2012: € 504 million) consist primarily of retained earnings. Unrealized gains and losses include shadow accounting adjustments (see chapter 2.25). For more detailed information on the unrealized gains and losses, see chapter 15.2.
88a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Amortization/depreciation: - Deferred acquisition costs 31 91 - Property, plant and equipment 9 12
Net (increase) decrease in trade and other receivables 8 3 Net (increase) decrease in reinsurance contracts 38 18 Net increase (decrease) in liabilities arising from insurance
89a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
cash flows from financing activities Repayment of debt certificates - -1 Repayment of subordinated debts - -20 Proceeds from issues of borrowings 27 51 Repayment of borrowings -57 -32 Dividend paid -88 -71 Discretionary interest to holders of equity instruments -44 -45 Non-controlling interests - -2 cash flows from financing activities -162 -120 cash and cash equivalents as at 31 december 1,517 2,556 further details on cash flows from operating activities Interest received 1,337 1,366 Interest paid -260 -288 Dividends received 43 35
91a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The financial statements for 2013 were approved by the Supervisory Board on 1 April 2014 and will be presented to the Annual General Meeting of Shareholders for adoption. The Executive Board released the financial statements for publication on 17 April 2014.
92a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
• When employee benefit plans are modified, all costs resulting from the changes are recognized directly in the income statement. Therefore upon transition the negative past service costs amounting to € 15 million at 1 January 2012 were recognized directly in total equity (31 December 2012: € 87 million).
• The net impact of the above mentioned amendments resulted in a € 146 million increase in the employee benefits provision as of 1 January 2012 (31 December 2012: € 363 million).
Deferred tax liabilities 69 -37 32 balance sheet 31 december 2012
Income tax gain/(expense) 44 -20 24 Profit for the year 248 61 309 Profit attributable to holders of equity
Other changes In addition to the amendments to IAS 19 Employee benefits, the following changes in the EUendorsed IFRS standards and IFRIC interpretations have been effective since 1 January 2013. These changes have no material effect on the total equity or profit for the year of a.s.r.: • IFRS 13 Fair Value Measurement: This standard explains how to measure fair value for financial reporting purposes and includes additional disclosure requirements. The changes to the extent that they are applicable for financial statements have been included in the 2013 financial statements.
• Amendments to IFRS 7 Financial Instruments: Disclosures - Offsetting financial assets and financial liabilities and IAS 32 Financial instruments: Presentation - Offsetting financial assets and financial liabilities.
93a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Associates Associates are those entities over which a.s.r. has significant influence, but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The consolidated financial statements include a.s.r.’s share of profit of associates from the date that a.s.r. acquires significant influence until the date that significant influence ceases.
Joint ventures Joint ventures are accounted for using the equity method of accounting. They are recognized from the date that a.s.r. first obtains joint control until the moment that this control ceases.
94a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Critical accounting estimates and assumptions relate to: • the fair value of unlisted financial instruments (see chapter 2.8 and 2.17); • the estimated useful life and residual value of property, plant and equipment, investment property, and intangible assets (see chapter 2.14 and 2.15); • the measurement of capitalized deferred acquisition costs (see chapter 2.13); • the measurement of liabilities arising from insurance contracts (see chapter 2.25); • actuarial assumptions used for measuring employee benefit obligations (see chapter 17); • when forming provisions, the required estimate of existing obligations arising from past events; • the recoverable amount of impaired assets (see chapter 2.8, 2.17, and 2.19).
Insurance contracts are defined as contracts under which a.s.r. accepts significant insurance risk from policyholders by agreeing to compensate policyholders if a specified uncertain future event adversely affects the policyholder. These contracts are considered insurance contracts throughout the remaining term to maturity, irrespective of when the insured event occurs. In addition, these contracts can also transfer financial risk.
Life insurance contracts on behalf of policyholders Claims from these life insurance contracts are directly linked to the underlying investments. The investment risk and return are fully for policyholders (see chapter 2.26). Life insurance contracts for the account and risk of policyholders are generally comprised of contracts where premiums, after deduction of costs and risk premium, are invested in unit-linked funds. For some individual contracts, a.s.r. guarantees returns on unit-linked investment funds. In addition, group life insurance contracts with unguaranteed segregated pools (discretionary self-insurance) are classified as life insurance contracts on behalf of policyholders.
At organizational level, a.s.r.’s operations have been divided into operating segments. These segments are: Non-life, Life and Other. The Non-Life and Life segment comprises all the respective non-life and life insurance entities and their subsidiaries. The segment Other comprises the non-insurance related operations, such as a.s.r. Bank, a.s.r. Hypotheken, a.s.r. Vastgoed Ontwikkeling, SOS International, and several holding companies, including ASR Nederland N.V.
Where possible, a.s.r. determines the fair value of assets and liabilities on the basis of quoted prices in an active market. In the absence of an active market for a financial instrument, the fair value is determined using valuation techniques. Although valuation techniques are based on observable market data where possible, results are affected by the applied assumptions, such as discount rates and estimates of future cash flows. In the unlikely event that the fair value of a financial instrument cannot be measured, it is carried at cost.
Fair value hierarchy The following three hierarchical levels are used to determine the fair value of financial instruments and non-financial instruments when accounting for assets and liabilities at fair value and disclosing the comparative fair value of assets and liabilities: Level 1. Fair value based on quoted prices in an active market Level 1 includes assets and liabilities whose value is determined by quoted (unadjusted) prices in the primary active market for identical assets or liabilities. A financial instrument is quoted in an active market if: • quoted prices are readily and regularly available (from an exchange, dealer, broker, sector organization, third party pricing service, or a regulatory body); and • these prices represent actual and regularly occurring transactions on an arm’s length basis.
Financial instruments: Loans and receivables The fair value of the loans and receivables is based on the discounted cash flow method. It is obtained by calculating the present value based on expected future cash flows and assuming an interestrate curve used in the market that includes an additional spread based on the risk profile of the counterparty.
Other non-financial assets and liabilities For other non-financial assets and liabilities where the fair value is disclosed these fair values are based on observable market inputs, primarily being the price paid to acquire the asset or received to assume the liability at initial recognition, given that the transactions have taken place at an arm’s length basis. Where the payment terms are longer than one year valuation techniques using present value calculations are applied using current interest-rates.
Level 3. Fair value not based on observable market data At Level 3, the fair value of the assets and liabilities is determined using valuation techniques for which significant inputs are not based on observable market data. In these situations, there are can also be marginally active or inactive markets for the assets or the liabilities. The financial assets and liabilities in this category are assessed individually. Valuation techniques are used to the extent that observable inputs are not available. The basic principle of fair value measurement remains to determine a fair, arm’s length price. Unobservable inputs therefore reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are generally based on the available observable data (adjusted for factors that contribute towards the value of the asset) and own source information.
1 For fair value disclosure purposes, which differs from the balance sheet valuation method.
97a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
For investment property and buildings for own use the following valuation methods are in place to determine fair value by the external professional appraisers for disclosure purposes: Reference transactions Independent professional appraisers use reference transaction of comparable objects to determine the fair value of the property. The reference transactions of comparable objects are generally based on observable data consisting of the land register ‘Kadaster’ and the rural land price monitor as published by the Dutch government ‘grondprijsmonitor’ in an active property market and in some instances accompanied by own use information.
DCF method Under the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset’s life including an exit or terminal value. This method involves the projection of a series of cash flows on the investment property dependent on the duration of the lease contracts. To these projected cash flow series, a market-derived discount rate is applied to establish the present value of the cash flows associated with the asset. The exit yield is normally separately determined and differs from the discount rate. The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related re-letting, redevelopment, or refurbishment. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of investment property. Periodic cash flow is typically estimated as gross income less vacancy (excepting for the rural category), non-recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.
For the categories residential, offices and other in applying the DCF method, the significant inputs are the discount rate and market rental value. These inputs are verified with the following market observable data (that are adjusted to reflect the state and condition, location, development potential etc. of the specific property): • market rent per square metre for renewals and their respective re-letting rates; • 10 year discount rate as published by the Dutch Central Bank.
For rural valuations, in applying the DCF method, the significant inputs are the discount rate and market lease values. These inputs are verified with the following market observable data (that are adjusted to reflect the state and condition, location, development potential etc. of the specific property): • market value per sq. hectare per region in accordance with the ‘rural land price monitor’; • 10 year discount rate as published by the Dutch Central Bank.
98a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The fair value of investment property and buildings for own use, are appraised annually. Valuations are performed by independent professional appraisers who hold recognized and relevant professional qualifications and have recent experience in the location and category of the property being valued. Market value property valuations will be prepared in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation Standards, 6th Edition (the ‘Red Book’). a.s.r. provides the professional appraisers with adequate information, in order to conduct a comprehensive valuation. At least once every three years a rotation or change in professional appraisers takes place.
The accounting policies for the treatment of investment property and buildings for own use is described in chapter 2.15 and 2.14 respectively. The fair value of investment property and buildings for own use is disclosed in chapter 9.2.
All purchases and sales of financial instruments, which have to be settled in accordance with standard market conventions, are recognized at the transaction date, which is the date on which a.s.r. becomes party to the contractual stipulations of the instrument. Any purchases and sales other than those requiring delivery within the time frame established by regulations or market conventions are accounted for as forward transactions until the time of settlement. For details on these transactions, see chapter 2.20 ‘Derivatives and hedge accounting’.
2.10 Securities lending a.s.r. participates in security lending transactions under which collateral is received in the form of securities or cash. Cash received as collateral is recognized on the balance sheet and a corresponding liability is recognized as liabilities arising from securities lending in ‘Due to banks’. Securities lent remain on the balance sheet. Securities received as collateral are not recognized in the balance sheet.
99a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Goodwill has an indefinite useful life and is not amortized. a.s.r. performs an annual impairment test, or more frequently if events or circumstances so warrant, to ascertain whether goodwill has been subject to impairment. As part of this, the carrying amount of the cash-generating unit to which the goodwill has been allocated is compared with its recoverable amount. The recoverable amount is the higher of a cash-generating unit’s fair value less costs to sell and value in use. The value in use of a cash-generating unit is the present value of the future cash flows expected to be derived from it. If the recoverable amount is lower than its carrying amount, the difference is directly charged to the income statement as an impairment loss.
100a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The value of the capitalized deferred acquisition costs is assessed at each reporting date to ascertain whether there is evidence of impairment, as part of the Liability Adequacy Test (see chapter 2.25). Amortization of deferred acquisition costs is recorded in acquisition costs in the income statement.
Property held for own use, buildings under construction for own use and operating assets are recognized at cost, less accumulated depreciation (except for land, which is not depreciated) and/ or any accumulated impairment losses. Cost corresponds with the cash paid or the fair value of the consideration given to acquire the asset.
Buildings are depreciated using the straight-line method based on expected useful life, taking into account their residual value. The useful life of buildings is assessed for every individual component (component approach) and is assessed every year. Property is classified into the following components: land, shell, outer layer, systems, fittings and fixtures (both rough finish and detailed finish).
For the maximum useful life of the components, see the table in chapter 2.15. Operating assets are depreciated over their useful lives, which are determined individually (usually between three and five years).
If objective evidence of impairment exists, property, plant and equipment are tested for impairment and if necessary, written down to the fair value of the property, plant and equipment (see chapter 2.8).
Investment property is recognized at cost less accumulated depreciation and impairments losses, if any. Buildings are depreciated using the straight-line method based on their expected useful life and taking account of the residual value. Land is not depreciated. The residual value and the estimated useful life are determined separately for every main component (component approach) and assessed at every balance sheet date.
If there is a change in the designation of property, it can lead to: • reclassification from property, plant and equipment to investment property: at the end of the period of owner-occupation or at inception of an operating lease with a third party; or • reclassification from investment property to property, plant and equipment: at the commencement of owner-occupation or at the start of developments initiated with a view to selling the property to a third party.
The following categories of investment property are recognized by a.s.r. based primarily on the techniques used in determining the fair value of the investment property: • retail; • residential; • rural; • offices; • other (consisting primarily of parking); and • investment property under development.
102a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
When a.s.r. becomes party to a financial asset contract, the related assets are classified into one of the following categories: a. financial assets at fair value through profit and loss; b. loans and receivables; c. financial assets available for sale.
Financial assets at fair value through profit and loss are stated at fair value. At initial recognition, transaction costs are expensed in the income statement. Realized and unrealized gains and losses in the fair value are also recognized in the income statement.
c. Financial assets available for sale are financial assets that are not accounted for as financial assets at fair value through profit and loss, or as loans and receivables. At initial recognition, financial assets available for sale are measured at fair value (including transaction costs). They are subsequently measured at fair value, including any unrealized fair value changes in equity, taking into account any deferred tax liabilities. Financial assets available for sale include equities (ordinary and preference shares), bonds, other fixed-income securities, unit trusts, variable-income securities and interests in investment pools.
For detailed information on the fair value of the financial assets see chapter 2.8.
The (fixed income) financial assets available for sale will be tested for impairment if objective evidence exists that the counterparty will default. Objective evidence includes: bankruptcy, financial reorganization or delinquency in payments for more than 30 days. The assessment may also involve circumstances requiring a more detailed estimate, such as in the event of an equity deficit, recurring financial difficulties, downgrading of the credit rating or other creditors reverting to legal action. This assessment takes place at each reporting date in the Level of Concern Committee, where the portfolio managers and analysts assign a level of concern from ‘Nil’ to ‘Three’ to each of the fixed income assets. A level of concern ‘Nil’ means that there is no reason for concern, while a level of concern ‘Three’ indicates that the situation is critical and that an impairment is highly recommended. The final decision to take an impairment loss on a financial asset or to reverse a prior impairment is taken in the quarterly Impairment Committee, chaired by the director Financial Markets.
Impairment losses are taken directly to the income statement and represent the difference between amortized cost and the fair value at the balance sheet date, net of any previously recognized impairments.
Loans and receivables are measured at amortized cost based on the effective interest-rate method, less impairments where deemed necessary.
An individually assessed asset is considered impaired if objective evidence exists that a.s.r. will be unable to collect all the amounts due by the counterparty in accordance with the contractual terms and conditions. The amount of the impairment loss is equal to the difference between the asset’s carrying amount and its recoverable amount. The recoverable amount equals the present value of estimated future cash flows, including amounts realized from guarantees and securities furnished, discounted at the financial asset’s original effective interest-rate.
The effectiveness of the hedge is assessed on an on-going basis throughout the financial reporting periods for which the hedge was designated. A hedge is considered effective if the change in the fair value or the cash flows of the hedged item is offset by changes in the fair value or the cash flows of the hedging instrument.
Changes in the fair value of the effective portion of derivatives that have been designated and qualify as cash flow hedges are recognized as an unrealized gain or loss in a separate component of equity. Fair value changes in the ineffective portion are recognized in the income statement. The amounts recorded in equity are reclassified to profit or loss in the same period or periods during which the hedged firm commitment or highly probable forecast transaction affects results.
105a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
If a hedge no longer meets the criteria for hedge accounting or is otherwise discontinued, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction or the firm commitment is settled. If the forecast transaction or the firm commitment is no longer expected to take place, any related cumulative gain or loss on the hedging instrument that was reported in equity is recognized in the income statement.
Cash and cash equivalents include cash in hand, deposits held at call with banks, cash collateral and other short-term highly liquid investments with original maturities of three months or less.
Reserve for unrealized gains and losses This reserve consists of: • unrealized gains and losses from financial assets available for sale net of tax and taking account of adjustments due to shadow accounting (see chapter 2.25); • actuarial gains and losses resulting from the post-employment benefit pension plans
106a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
• unrealized gains and losses on the effective portion of cash flow hedges net of tax (see chapter 2.20); • reserve for discretionary participation features (see chapter 2.25); • reserve for exchange rate differences arising from financial assets available for sale.
Other equity instruments This item represents the par value of the other equity instruments, less costs directly attributable to the equity issue and net of tax.
General This includes liabilities arising from insurance contracts issued by a.s.r. that transfer significant insurance risks from the policyholder to a.s.r. These contracts may also transfer financial risk.
The estimates are based on individual assessments of the reported claims, on past experiences and estimates of trends in claims behaviour, social factors, economic factors and relevant court decisions. In the process of determining the liabilities, allowance is made for amounts recoverable from third parties and expected subrogation reimbursements.
a net premium method (the present value of future obligations less the present value of future net premiums) using the same principles as for calculating the premium at inception of the insurance contract. A provision for future administrative expenses is recognized for contracts whose future premium payment period is shorter than the future maturity of the insurance policy, or for which no more premiums are paid. A provision is recognized for part of longevity risk associated with life insurance contracts (e.g. group life and annuity contracts), a.s.r. manages the longevity risk exposure in combination with the mortality risk exposure. No addition to the provision for longevity risk is recognized if the outcome of the LAT (see below) indicates that the total amount of the provision is adequate.
Additional provisions are generally recognized for realized gains or losses on financial assets allocated to: • insurance contracts with participation features; • non-participating insurance contracts if and to the extent that the current interest-rate is lower than the interest-rate that was used in the pricing principles at inception of the insurance contract. These financial assets include fixed-income financial assets available for sale, specific financial assets designated at fair value through profit and loss, and specific derivatives designated as held for trading (swaptions and interest-rate swaps). The realized gains or losses are amortized based on the remaining maturity period of the disposed financial assets.
Shadow accounting allows a recognized but unrealized gain or loss on an asset to affect the measurement of its insurance liabilities in the same way that a realized gain or loss does.
108a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
No shadow accounting is applied to: • impairments; • revaluations of debt instruments that have been subject to impairment.
Liability Adequacy Test life The LAT is performed at each reporting date to assess the adequacy of insurance liabilities. Liabilities are adequate if the technical provision recognized in a.s.r.’s balance sheet for Life segment as a whole at least equals the best estimate of the life insurance liabilities including an appropriate risk margin. If there is a deficiency in the life insurance liabilities are increased to adequate levels through a charge to the income statement. Also unrecognized gains and losses from relevant assets that are not carried at fair value in the balance sheet are taken into account to the extent these assets are allocated to cover the insurance liabilities. The various elements of the liability adequacy test are further discussed below.
Where applicable, the participating features of the insurance contracts, such as profit sharing, are taken into account in the future cash flows. Since 30 September 2013, the cash flows are discounted using the DNB swap curve including the UFR as published by the Dutch Central Bank.
specifications, to quantify the risks. The risks that are incorporated in the risk margin are: mortality, longevity, disability, lapse, catastrophe, expense, non-hedgeable financial risk and operational risk. All these risks are projected into the future. The total risk for every future year is determined based on correlations between the risks described in the Solvency II standard model. The projected total risk for every year is multiplied by a cost of capital charge and discounted at the balance sheet date.
Dutch Central Bank Liability Adequacy Test For the De Nederlandsche Bank (DNB, which is the Dutch Central Bank and insurance regulator) solvency (regulatory solvency) a.s.r. uses the Dutch Central Bank Liability Adequacy Test (DNB LAT). As no surrender value floor is applied in the IFRS LAT The LAT used for IFRS purpose (‘LAT’ or ‘IFRS LAT’), as described above, differs from the DNB LAT. See for further explanation on surrender value floors and prudential filters the ‘Wet op het financieel toezicht’ (The Dutch Act on Financial Supervision which regulates the supervision of financial institutions in the Netherlands).
Options embedded in insurance contracts Options embedded in insurance contracts are not stated separately but treated in the same way as the host contract. These options are measured using an adequacy test, taking into consideration the intrinsic value and the time value.
Some unit-linked contracts include guaranteed benefits at maturity. To cover these guarantees, an additional obligation is recognized in the balance sheet that depends on the current fund value and the level of the guarantee. In determining this obligation actuarial assumptions about future fund developments and mortality are taken into account.
Pension obligations A number of defined benefit plans for own staff exist. These are schemes under which staff are awarded pension benefits upon retirement, usually dependent on one or more factors, such as years of service and compensation. The defined benefit obligation is calculated at each reporting date by independent actuaries.
When employee benefit plans are modified, all costs and benefits, resulting from the changes are recognized directly in the income statement.
Other post-retirements obligations a.s.r. offers post-employment benefit plans, such an arrangement for mortgage loans at favourable interest-rates. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology that is similar to that for defined benefit plans.
At initial recognition, debt instruments and other loans are stated at fair value, net of transaction costs incurred. Subsequent valuation is at amortized cost. Any difference between the proceeds and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest-rate method.
Realized gains and losses include proceeds from the disposal of investment property, financial assets available for sale, associates and joint ventures.
With respect to financial assets available for sale, realized gains or losses are comprised of: • the proceeds from the sale or disposal of an asset or liability less the amortized cost of the asset or liability sold, • impairments previously recognized and • hedge accounting adjustments. Any unrealized gains and losses previously recorded in equity (the difference between the carrying amount and amortized cost) are recognized in the income statement.
Fair value gains and losses include realized and unrealized changes in the value of financial assets at fair value through profit and loss and derivatives. With respect to derivatives, this is based on the fair value excluding accrued interest (clean fair value).
112a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Fee and commission income relates mainly to reinsurance, asset management and other services. These items are generally recognized as income in the period in which the services are performed.
This item includes changes in liabilities arising from insurance contracts (see chapter 2.25) and the related benefits. Expenses associated with contracts on behalf of policyholders relate to changes in liabilities arising from insurance contracts on behalf of policyholders, including the benefits charged to the liabilities.
This item relates to expenses associated with a.s.r.’s operations that are directly attributable to the reporting period, such as marketing costs, ICT expenses, consulting fees, business accommodation expenses, cost of temporary staff, and depreciation charges.
Income tax is based on profit before tax, after any adjustments for previous periods and changes in deferred tax assets and liabilities using the tax rates and tax laws that have been enacted or substantially enacted by the end of the reporting period. Income tax is recognized in the period in which the income was achieved.
a.s.r. is exposed to the following types of risks: market risk, counterparty default risk, insurance risk, strategic risk and operational risk. The risk appetite is established at both group and legal entity level and includes limits for executing the strategy. The risk environment requires continuous integrated monitoring and assessment of risks in order to understand and manage complex risk interactions across the organization.
General • The Economic Capital model (ECAP) of a.s.r. is an integral and essential part of the steering mechanism for value management. The dynamic investment policy is based on the ECAP solvency ratio and specific risk budgets.
• Risk appetite and Key Risk Indicator framework function as tools for optimizing risk returns at both group and business unit level.
• Various value metrics (MCEV, ECAP (internal model), SCR, VANB) have been integrated. • Standard and Poor’s has confirmed a.s.r.’s rating of A with a stable outlook.
Risk governance • Risk governance ensures a robust and responsive governance structure that adequately manages the risks to which a.s.r. is exposed. • In the regular risk management process, specifically during the euro crisis, the risk committees continued to prove their importance. The risk committees monitor a.s.r.’s risk profile. In extreme circumstances the risk committees will meet more frequently in order to ensure that measures for mitigating risks are implemented promptly.
• The interest-rate risk hedging has improved over the maturity buckets by restructuring the portfolio swaps and swaptions. This did not, however, affect the sensitivity to a parallel shift of the interest rate curve.
Insurance risk – Life • The used non-economic assumptions for valuing and assessing the individual and group life insurance portfolios are frequently monitored. a.s.r. has a well balanced portfolio of both long and short life risks. As a consequence a change in mortality assumptions has a limited impact on the market value of the company.
Strategic risk • Scenario analysis supports a.s.r. being better prepared for potential future risks. As in previous year, a.s.r. carried out a Control Risk Self-Assessment (CRSA) in 2013. Major risks relating to the realization of strategic objectives of the business units were identified. The impact on strategy achievement was measured qualitatively and controls for mitigating these risks were determined.
• a.s.r. participated voluntarily in the pilot exercise of DNB for recovery plans in 2013. The goal of the recovery plan is to ensure that a.s.r. has effective plans in place to deal with potential severe financial stress resulting from a wide range of different causes of various circumstances.
• In 2013, the non-financial risk dashboard was further aligned with the risk appetite. The nonfinancial 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.
Solvency II • a.s.r. participated in the Long Term Guarantee Assessment (LTGA) in 2013. The LTGA is an assessment of the European Supervisor (EIOPA) to test the impacts of the market consistent approach on long term guarantee products.
Capital management and solvency • For the purposes of DNB solvency, the DNB swap curve has been used for discounting insurance liabilities instead of the ECB AAA since September 2013. DNB prescribes application of the Ultimate Forward Rate (UFR) on the discounting curve. This has a significant positive effect on regulatory solvency and the interest-rate sensitivity becomes adverse. A decline in the interest-rate leads to an increase in regulatory solvency.
115a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
• To ensure a strong solvency position regardless of the impact of the UFR, a.s.r. monitors the solvency position both excluding and including the UFR impact on the discounting curve.
• In anticipation of the implementation of Solvency II, management will steer both on Solvency I and Solvency II ratio’s.
• a.s.r. decided to start recognizing diversification in the calculation of the aggregated market stress scenario in 2013. The correlation factors of Solvency II have been applied. This has a positive effect on the solvency ratio after the stress scenario.
The Enterprise Risk Management framework describes our risk management system. The Enterprise Risk Management framework ensures that our strategic and business objectives can be achieved and our obligations towards our stakeholders can be met. The a.s.r. Enterprise Risk Management (ERM) framework is based on the COSO (Committee of Sponsoring Organizations of the Treadway Commission) ERM model. The framework comprises the following risk management elements: 3.2.1 Strategy (including risk appetite) a.s.r.’s risk strategy is to embed risk management in day-to-day decision making facilitating the Executive Board in the execution of the strategy.
Risk appetite The risk appetite sets boundaries for risks a.s.r. is willing to take in order to realize a.s.r.’s strategic objectives. The risk appetite is a tool for optimizing risk and return. The risk appetite reflects the risk management strategy of a.s.r. and influences the way the organization is managed.
The risk appetite is based on the three strategic pillars of a.s.r., customer interests, financial solidity and efficiency of processes. The risk appetite of a.s.r. is established at both group and legal entity level and contains boundaries for executing a.s.r.’s strategy.
Governance: Sustainable and balanced consideration of all interests of our stakeholders A balanced governance which ensures that all interests of our stakeholders are taken into account in a sustainable and balanced way.
The risk profile of a.s.r. is monitored on a continuous basis, based on a clear risk appetite. The risk profile is monitored by a.s.r.’s risk committees on a quarterly basis.
3.2.2 Risk governance a.s.r. has a risk governance framework which comprises the duties and the responsibilities of the risk management function and the risk committee structure. The independent role of risk management and its responsibility as an assurance function are anchored throughout the organization. The objective of the risk committees is to manage the risk profile for a.s.r. group and its product lines staying within risk tolerances and risk limits.
117a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
• The first line is responsible for the identification and management of risk in daily business. The first line has day-to-day responsibility for operations (sales, pricing, underwriting, claims handling, etc.) and is primarily responsible for risk management. The first line is formed by the Executive Board, the management teams of the business lines and their employees.
• The second line challenges the first line and supports the first line to achieve its business objectives in accordance with the risk appetite. The second line has sufficient countervailing power to prevent risk concentrations and other forms of excessive risk taking. It is responsible for developing risk policies and for monitoring the compliance with these policies and the broader risk management framework in the first line. The second line of defence is formed at group level and includes both the Risk Management department and the Integrity department.
Risk Strategy and Policy Risk Strategy and Policy is responsible for the strategic risk and operational (including IT) risk management at a.s.r. The responsibilities with regard to strategic risk management include the further development of a.s.r.’s risk management culture, the annual update of the risk strategy (risk appetite), the monitoring of risk priorities and the risk profile of a.s.r., the ORSA process, the recovery
plan and model validation. The responsibilities with regard to operational risk management include management in control and operational losses. Furthermore Risk Strategy and Policy is responsible for Solvency II monitoring.
Financial Risk Management Financial Risk Management (FRM) is responsible for the group actuarial function, the asset and liability management function and integrated balance sheet management. FRM is responsible for the development of financial risk policies and the implementation of these policies at group and legal entity level. The department is also responsible for the methodology and the development of models used in calculating economic capital. FRM reports economic capital both at group and at legal entity level. FRM tests the reported market value and market risk and compares these against a.s.r.’s risk limits and risk budget.
As part of the actuarial function, FRM reviews the technical provisions, monitors the methodologies, assumptions and models used in these calculations and assesses the adequacy and quality of data used in the calculations. FRM regularly reports to the Financial Risk Committee, the Executive Board and the Audit and Risk Committee on the reliability and adequacy of the calculation of the technical provisions.
a.s.r. Risk Committee The a.s.r. Risk Committee is a sub-committee of the Executive Board and monitors a.s.r.’s overall risk profile on a quarterly basis. Every year, the Risk Committee approves the risk preferences and risk limits for a.s.r. The a.s.r. Risk Committee also monitors the management of a.s.r.’s risk priorities’. a.s.r.’s Executive Board participates fully in the a.s.r. Risk Committee which is chaired by the CEO. The involvement of the Executive Board ensures that risk awareness and risk decisions are embedded at the appropriate level. In addition to the Executive Board, the Chief Risk Officer, Director of Audit, Director of Integrity and Director Financial Markets are members of the Committee.
The a.s.r. Risk Committee receives information from the Financial Risk Committee and the Non-Financial Risk Committee. These committees have mandates to manage and control a.s.r.’s risk profile in line with the risk preferences and limits.
Business Risk Committees The business lines manage and control their risk profile through the Business Risk Committees (BRC). The BRC’s monitor that the risk profile of the business line stays within the risk preferences defined by the business line. The BRC reports to the FRC and the NFRC. The Chairman of the BRC is the Managing Director of the business line and its members include key officers of the business line, Compliance and Audit.
3.2.4 Risk procedures & policies a.s.r.’s risk classification covers all Solvency II risks and is in line with the Focus approach as applied by DNB. a.s.r. has established policies for each of the risks (market, counterparty default, insurance, strategic and operational). In each case the policy defines the risk, the risk limits and the risk mitigation techniques.
3.2.5 Risk culture Risk awareness is an important topic at a.s.r to emphasize the human aspect in the mitigation of risks. Risk Management carried out several actions in 2013 in order to raise the risk awareness. These actions focused on ‘hard’ elements/controls (risk governance, annual refinement of the risk appetite, monitoring risk appetite in the risk committees and risk assessments) and ‘soft’ elements/controls (education, risk awareness survey and communication via the intranet).
120a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
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 costs, claims and benefits differ from the assumptions used in the development and premium-setting of a product. Two different major types of insurance risk are distinguished, non-life (including health) and life.
Pension risk incurred on the employee benefits is categorized as an insurance risk.
Operational risk Operational risk is the risk of losses resulting from inadequate or failing internal processes, persons and systems, or from external events (including legal risk).
121a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The sensitivity to equity prices increased in comparison to 2012, due to a higher exposure in equity investments as a result of investments and the favourable development of equity prices. A small part of the equity risk was hedged with put options at year-end 2013.
In 2013 a.s.r. decided to start recognizing diversification in the calculation of the aggregated market stress scenario. The correlation factors of Solvency II are applied. The impact of the diversification is 12% when the UFR is not applied.
When applying the UFR, a diversified negative effect of 64% (2012: 64%) would result in a regulatory solvency ratio (incl UFR) of 204% (2012: 229%).
122a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The sensitivity of total equity to equities increased in 2013 due to higher exposure to equities. The sensitivity of profit for the year to equities -20% declined since fewer equities are close to the impairment level and the positive effect of put options is greater.
The sensitivity of total equity to an increase of 1% in interest-rates is positive (€ 120 million per year-end 2013). The decline in the value of the assets is not fully compensated by the change of the provision for shadow accounting.
The sensitivity of both total equity and profit for the year to property declined, as fewer properties are close to their impairment level.
3.4.1 Interest-rate risk Interest-rate risk is the risk that the value of assets, liabilities or financial instruments will change due to fluctuations in interest-rates. Many insurance products are exposed to interest-rate risk; the value of the products is closely related to the applicable interest-rate curve. The interest-rate risk of insurance products depends on the term to maturity, interest-rate guarantees and profit-sharing features. Life insurance contracts are particularly sensitive to interest-rate risk (see Chapter 3.6.2).
For the purposes of regulatory solvency, a.s.r. was given permission by the regulator to use the ECB AAA government bond curve for discounting insurance liabilities. The downgrade of France by Fitch in July 2013 led to a decline in the discounting curve and a corresponding decline in regulatory solvency of 20%. The permission to use the ECB AAA curve was withdrawn at a.s.r.‘s request of September 2013. The insurance liabilities are thus discounted on the basis of the swap curve as published by DNB. Application of the new discounting curve leads to a more stable solvency ratio. As of September 2013 the impact on the regulatory solvency ratio was estimated at -5%.
In 2013 the discounting curve increased with 30 to 60 basispoints.
Interest-rate risk is managed by aligning fixed-income investments to the profile of the liabilities. Among other instruments, swaptions and interest-rate swaps are used for hedging the specific interest-rate risk arising from interest-rate guarantees and profit-sharing features in life insurance products.
124a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
3.4.2 Equity risk The equity risk depends on the total exposure to equities. In order to maintain a good understanding of the actual equity risk, a.s.r. has made a number of adjustments to the IFRS classification for risk purposes. For example, bond funds classified in the statement of financial position under equities are not included here.
The equities are diversified across the Netherlands (including participating interests) and other European countries. A limited part of the portfolio consists of investments in the Pacific, private equity and hedge funds.
The sensitivity of regulatory solvency to changes in property value is monitored on a monthly basis. The sensitivity decreased primarily due to the lower exposure to property.
Sensitivity of regulatory solvency to changes in property prices: Change in property prices 31 December 2013 Percentage 31 December 2012 Percentage
Because of its lower volatility, the shock for rural property is set at -7.5%.
3.4.4 Currency risk Currency risk arises from the sensitivity of assets and liabilities to changes in the level or volatility of foreign exchange rates.
Assets in scope of spread risk are by definition not in scope of counterparty default risk (see Chapter 3.6)
126a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Where relevant, credit ratings provided by the external rating agencies are used to determine risk budgets and monitor limits. A limited number of bond investments do not have an external rating. These investments are generally assigned an internal rating. Internal ratings are based on methodologies and rating classifications similar to those used by external agencies.
Redemptions are responsible for the decline in the market value of the Structured Entities. Most redemptions took place in the MBS portfolio, which consists predominately of Dutch residential MBS investments. In total, redemptions amounted to approximately €103 million. The market value of the remaining structured products portfolio increased in the course of 2013 due to tightening credit spreads.
As a.s.r. participates in structured entities solely for investment purposes, no other commitments or guarantees have been made to the structured entities concerned. The maximum exposure is therefore limited to the fair value of the structured entity and amounts to € 600 million (2012: € 640 million).
Other structured financial instruments (SFI) This part of the portfolio consists of equity tranches of CDO’s, i.e. the most risky tranche in the CDO structure. These ‘first loss’ tranche will be the first to fall in value if losses occur in the assets that back the CDO and are not rated. The largest positions (almost 50%) in this portfolio is a so-called ‘combination note’, which is a combination of an equity piece and a safer rated tranche or zero coupon bond. This rated tranche serves as principal protection for the equity piece. The other positions in this portfolio are almost all equity pieces of European CLO’s.
At year-end 2013, the outstanding amount of loans to intermediaries was € 96 million (2012: € 114 million) and cumulative impairments amounted to € 53 million (2012: € 42 million). The loans are generally secured by collateralizing an insurance portfolio. At year-end 2013, 20% (2012: 15%) of the loans were in arrears.
Deposits Total deposits amounted to € 850 million (2012: € 1,779 million) of which € 153 million (2012: € 737 million) had a single A rating, € 69 million (2012: € 36 million) a triple A rating and € 611 million (2012: € 1,006 million) is on secured deposit.
The credit risk of the savings-linked mortgage loans depends on the counterparty. For 50% of the portfolio the counterparties are Special Purpose Vehicles. The risk is limited due to the robust quality of the mortgages in the Special Purpose Vehicles in combination with the tranching.
a.s.r. has a cession-retrocession agreement with the counterparty for 15% of the portfolio, for which the risk is limited. Effectively, a.s.r. receives the underlying mortgage loans as collateral, mitigating the credit risk of the savings-linked mortgage loans.
3.4.6 Concentration risk In order to avoid concentrations in a single obligor, a.s.r. applies a limit on maximum exposure of € 700 million for issuers rated single A rating and higher and € 350 million for issuers rated BBB. The limits apply to the total investment portfolio. The exposure of assets treated in section 3.5 are not included, which is consistent with Solvency II. The CLFC monitors concentration risk on a quarterly basis. All exposures were within the limits at year-end 2013.
3.5.1 Mortgages Mortgages are granted for the account and risk of third parties and for a.s.r.’s own account. The a.s.r. portfolio consists only of Dutch mortgages with a limited credit risk. In line with the strategic investment plan, the mortgage portfolio increased by € 1.263 million in 2013. The majority of new mortgages in 2013 were guaranteed by the Dutch national mortgage guarantee fund (NHG).
Although residential property prices over the past three years have declined, the indexed value of the collateral of most mortgages is higher than at issue date.
Mortgage < 75% value under foreclosure (indexed) 868 18% 947 27% Mortgage < 100% value under foreclosure (indexed) 434 9% 470 13% Mortgage < 125% value under foreclosure (indexed) 476 10% 430 12% Mortgage > 125% value under foreclosure (indexed) 221 5% 157 5%
3.5.3 Reinsurance When entering into reinsurance contracts for fire and catastrophe, a.s.r. requires the counterparty to be rated at least single A. With respect to long-tail business and other sectors, the minimum permitted rating is single A.
The table above shows the exposure to reinsurers per rating. The total exposure to reinsurers at year3. 5.4 Receivables The receivables of a.s.r. amount to € 855 million.
Receivables from policyholders 325 217 Receivables from intermediaries 174 183 Receivables from reinsurance operations 108 82 Other receivables 248 381
Insurance risk is the risk that future insurance claims and benefits cannot be covered by premium and investment income. The risk exposure is mitigated by diversification across a comprehensive range of insurance products. Insurance risk is divided into non-life and life risk. The non-life portfolio covers the property and casualty, disability and healthcare sectors. The life portfolio is a well-diversified portfolio consisting of products with either mortality risk or longevity risk.
The variability of risk is further restricted by careful selection and acceptance criteria, as well as underwriting guidelines and reinsurance arrangements. The risks are periodically assessed for each of the insurance segments. If and where required, actions are initiated to adjust the overall risk profile in line with guidelines agreed at group level.
Every insurance segment within a.s.r. holds insurance provisions for future claims arising from existing contracts and assigns assets to cover these insurance liabilities. • In property & casualty insurance, sickness leave insurance and accident & health insurance (excluding disability insurance), these provisions are based on case reserves estimates for reported claims, as well as additional provisions such as IBN(E)R provisions. The adequacy of these provisions are reviewed at each statement of financial position date using appropriate current principles.
132a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
In particular for WGA the provision depends unavoidably on expert judgement. Since the WIA law was introduced in 2006 and the WGA product has a two year waiting period, only limited and often unstable claims information is available. In particular, expert judgment is used on longer term recoveries and the outflow to the IVA (Inkomensvoorziening Volledig Arbeidsongeschikten) of fully disabled. Both will be stimulated by disability reassessments. First indications are that these are effective. The effectiveness will be closely monitored in 2014. A scenario analysis shows a pre-tax sensitivity of ca. 20 million when applying conservative assumptions.
The conclusion is that these shocks have no impact on the 2013 and 2012 total equity and the profit for the years, because a.s.r. would still pass the Liability Adequacy Test. The shocks will result in a decrease of the surplus in de Liability Adequacy Test but the outcome would still be positive. For a description of the LAT, see Chapter 2.25.
133a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Combined ratio 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. In the meantime, a.s.r. has taken steps to adjust its prices, make its acceptance criteria stricter and make improvements to the claims settlement process, thereby gaining control and insight. The focus will be on reintegration of disabled employees. Excluding WGA-ER and considering the storm in Q4 2013 the combined ratio in 2013 was at a satisfactory level of 96.5%.
Illness, disability and recovery are affected by the economic climate, government intervention, progress in medical science and, in particularly, healthcare costs.
134a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The above diagrams illustrate the distribution of gross premium income and gross claims reserves across the different business lines. Disability insurance contracts account for a relatively large proportion of the claims reserve in relation to premiums. Due to the rapid settlement of the P&C portfolio in general, which generates 41% of premium income, it only represents 21% of the total claims reserve.
Reinsurance When deemed effective in terms of capital relief versus costs incurred, a.s.r. enters into reinsurance agreements for non-life portfolios to mitigate insurance risks. Reinsurance can be taken out for each separate claim (per risk), for the accumulation of claims due to natural disasters or to human actions (per event), or for both these risks. The level of retention in the various reinsurance contracts is aligned to the size and the risk profile of the underlying portfolios, taking account of the cost of reinsurance on the one hand and of the risk that is retained on the other. By determining the retention, the impact on the statement of financial position is taken into account as well. The difference in the retention of disability depends on the structure of the contract (basic coverage or indexed).
The results of a.s.r.’s basic health insurance (‘Basisverzekering’) include an estimate related to the expected settlement because of equalization (‘vereveningsmethodiek’). The estimate is made by internal actuaries per year based on the latest updated health information for the Netherlands. At the end of the first quarter, a.s.r. monitors if the assumptions used are correct. The final settlement is recognized three years after the end of the financial year.
Provision for claims 790 3,036 3,826 Provision for unearned premium 212 202 414 31 December 2012 P&C A&H Total
Provision for claims 795 2,915 3,710 Provision for unearned premium 216 200 416
The increase of the provision for claims of A&H in 2013 stems primarily from WGA-ER.
For the retained disability portfolio, a provision is formed for current risk exposure on contracts concluded in 2013 that run until 31 December 2015. This provision is based on the difference between premiums required for accounting and actuarial purposes.
Life insurance risk A life insurance product provides an entitlement to a benefit at the time of death of the insured and/or a benefit at a predetermined date/interval if the insured is alive at that time. The uncertainties related to a life insurance contract have to do with the date of death of the insured (mortality, longevity and catastrophe risk), the lapse rate (the possibility that a contract lapses), and the future development of expenses associated with the policy. A specific feature of life insurance contracts is that they usually last for many years. This feature increases the uncertainties with respect to life contracts. The risk that the investment income will not be not sufficient is regarded as market risk (see Chapter 3.5).
The following life risks are distinguishes by a.s.r.: • Mortality risk: the risk of losses due to the possibility that actual mortality exceeds expected mortality; • Longevity risk: the risk of a structural increase in the insured’s life expectancy that leads to an increase in expectations of future annuity and pensions benefits; • Catastrophe risk: the risk of a large-scale one-off loss due to a single event causing high deathclaims, such as a pandemic; • Lapse risk: the risk of losses due to policyholders exercising their rights, if any, to surrender their contracts; • Expense risk: the risk of losses due to a change in the level, development or volatility of company expenses.
Managing life insurance risk Life insurance risk is mitigated by pricing and underwriting policies.
Pricing is based on profit capacity calculations. The necessary price to cover the risks is calculated. The risk are quantified on the basis of best estimate assumptions of mortality rates, surrenders, expenses and interest-rates.
Mortality risk Mortality risk can be broken down into volatility and trend uncertainty for the best estimate assumptions. • Volatility: random fluctuations in annual mortality rates in relation to the modelled trend. • Trend uncertainty: structural decline in the insured’s life expectancy.
The mortality risk is limited by the policy of periodically updating mortality tables. Reinsurance arrangements have been put in place to cover the volatility risk of large losses that might arise from single events that have been insured for large amounts.
137a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Although a lapse does not lead to a direct loss in the statement of income, due to the surrender value requirement underlying the provision, a lapse might lead to a loss of future profits. These effects of lapse risk are monitored in the current Solvency II-based risk frameworks, as are other life risks.
To limit risk concentration, reinsurance contracts are placed with different reinsurance companies. a.s.r. has the following retentions for life insurance: Highest retention Highest retention Highest retention Highest retention
The overall adequacy of the liabilities arising from insurance contracts at 31 December 2013 has been confirmed by internal actuaries and certified by external actuaries.
138a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
3.6.3 Pension risk; post- employment benefits Pension risk is defined as the risk that the liabilities exceed the assets of a defined benefit pension plan. To fulfil the obligation to finance the plan, a.s.r. has insured the post-employment benefit plans for a.s.r.’s employees with ASR Levensverzekering N.V. a group company. A number of defined benefit plans for own staff are operated by a.s.r. ASR Levensverzekering N.V., an insurance company and a group entity, is the insurer of the post-employment benefit plan and as such the asset liability management and risk management is performed in accordance with the relevant insurance risks as disclosed in Chapter 3.6.2. The non-qualifying assets managed by group companies are used to fund the liability which has not been deducted from the net defined benefit obligation. These are schemes under which staff are awarded pension benefits upon retirement. Pension risk is therefore incurred for these plans and consists mainly of longevity risk and inflation risk. The most recent mortality table ‘AG Prognosetafel 2012-2062’ is used in the calculation of the
Strategic risk Risk priorities a.s.r.’s risk priorities are set annually by the Executive Board. Defining the risk priorities is a bottom-up process. Risk priorities are based on the Control Risk Self Assessments of the business units among other factors. Risk Management reports the actual status of the risk priorities and progress of the defined actions in the a.s.r. Risk Committee on a quarterly basis.
Own Risk and Solvency Assessment a.s.r. conducts an own risk and solvency assessment (ORSA) at both group and legal entity level annually, or more frequently if required by significant changes in the risk profile The ORSA is a tool for risk and capital management. In this assessment, strategic risks are transposed into scenarios. In these scenario’s the impact on the balance sheet, the solvency position and the income statement is simulated. Management actions are defined in order to mitigate the effect of the scenario’s.
management in control operational losses business continuity and contingency planning Information security
Operational risk Management in Control Management in Control is a tool to assess operational risks to further improve the efficiency and the effectiveness of the organization. Every business unit has identified the key risks in their business processes and has taken actions to implement key controls to mitigate these risks. Key controls are periodically tested for operational effectiveness. The outcome of the test results, and thereby the status of being ‘in control’ is reported to the Business Risk Committee and the Non-Financial Risk Committee on a quarterly basis.
Information security Because of the importance of information security in an increasingly digital community, a.s.r. devotes special attention to the efficiency, effectiveness and integrity of ICT. Risk Management facilitates this by focusing on improving information and access security. The control of logical access to the key applications in the financial reporting process remains a high priority. The logical access control procedure helps a.s.r. to enhance the integrity of applications and data. The logical access control procedure also prevents fraud by improving segregation of duties and by conducting regular checks of actual access levels within the applications. Proper understanding of information and security risks is essential, and this is why an awareness campaign was launched in 2012 and continued in 2013 to further improve the risk awareness of employees.
For details on the notional amounts and the fair values of the derivatives for hedging purposes, see Chapter 11.4.
The group is preparing for the Solvency II capital requirements. In 2013, a.s.r. continued to implement a process to report the Solvency Capital Requirement as defined by Solvency II using the latest standard Solvency II model, as defined in the LTGA specifications, to quantify the risks.
In addition, a.s.r. uses an Economic Capital (ECAP) method that reflects its own risk profile more accurately. The ECAP method will be refined further. Both SCR and ECAP are reported on a semiannual basis and proxies are made on a monthly basis.
4.1.2 Solvency The regulatory solvency capital of a.s.r. can be broken down as follows: Regulatory solvency available (incl UFR) 4,182 4,620 Regulatory solvency required 1,563 1,574 Regulatory solvency ratio (incl UFR) 268% 293%
The regulator has prescribed application of the UFR to the discounting curve since 30 June 2012. As a result, the forward interest-rates converge to a level of 4.2%. This has an impact of 32% (2012: 62%) on the regulatory solvency ratio. With respect to 2012 this impact has decreased because of the higher interest-rate levels in 2013. Since this assumption is artificial and might be too optimistic, a.s.r. also evaluates its solvency position without applying the UFR to the discounting curve.
a.s.r. decided to start recognizing diversification in the calculation of the aggregated stress scenario in 2013. The correlation factors of Solvency II are applied. The impact of the diversification is 12% (2012: 16%). The total impact of the stress scenarios including diversification is 62% (2012: 75%), resulting in a solvency ratio (excl UFR) after stress of 174% (2012: 157%).
143a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
When applying the UFR, a total impact of the stress scenarios of 64% would result in a regulatory solvency ratio (incl UFR) of 204%.
Correction hybrids -4 -8 Correction intangible assets -191 -327 Revaluation of property (exclusive of non-controlling interest) 785 874 Test margin 265 963 Elimination of post-employment benefit plan 312 455
With the consent of DNB, the margin on insurance liabilities (DNB LAT margin) has been taken into account in determining regulatory solvency. For a description of the LAT, see Chapter 2.25.
Standard & Poor’s confirmed the singleA rating of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. on 19 June 2013.
The group intends to distribute a stable dividend to the shareholders each year, subject to capital management objectives. Dividends are based on a pay-out of 40%-45% of profit attributable to holders of equity instruments after distribution to holders of hybrid Tier 1 instruments.
With regard to liquidity management, a.s.r. needs to be able to meet its obligations towards policyholders and other creditors at all times. Unexpected cash outflows could occur as result of lapses in the insurance portfolio, withdrawals of savings, or payments related to the CSA of derivatives. Unexpected cash outflows can be covered by cash and cash equivalents (€ 750 million), liquid government bonds (€ 9,389 million), and other bonds and shares.
31 December 2013 < 1 year 1-5 year 5-10 year 10-20 year > 20 year 31 December 2012 < 1 year 1-5 year 5-10 year 10-20 year > 20 year
The a.s.r. group comprises a number of operating and holding companies. The legal structure and segments of the most significant a.s.r. group entities is as follows: 1 Registered non-life insurance companies 2 Registered life insurance companies 3 Other wft registered companies (included in segment Other)
146a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The segment ‘Other’ includes among others, the following entities: • ASR Nederland N.V. (including the group related activities) and other holding companies; • ASR Bank N.V.; • ASR Hypotheken B.V.; • ASR Deelnemingen N.V.; • ASR Vastgoed Ontwikkeling N.V.; • ASR Vastgoedvermogensbeheer B.V.; • B.V. Nederlandse Hulpverleningsorganisatie-SOS International; • ASR NL Beleggingsbeheer N.V.
As from 2013, Ditzo B.V., the distribution channel, has been fully included in the Non-Life segment following the legal merger with ASR Schadeverzekering N.V. Previously the underwriting income and expenses were recognized in the Non-Life segment and the income and expenses related to the distribution were included in segment Other.
The legal merger of ASR Nederland N.V. with ASR Verzekeringen N.V. and Amersfoortse Verzekeringen N.V. is effective as of 9 September 2013, retrospectively from 1 January 2013.
Equity attributable to holders of equity instruments 898 2,632 -497 - 3,033 Non-controlling interests - - -18 - -18 Total equity 898 2,632 -515 0 3,015
149a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Equity attributable to holders of equity instruments 947 2,717 -988 - 2,676 Non-controlling interests - - -13 - -13 Total equity 947 2,717 -1,001 - 2,663
Fair value gains and losses -11 357 2 - 348 Result on investments on behalf of policyholders - 783 - - 783
Ditzo has been integrated into the Non-Life segment since 2013. Operational expenses on a comparable basis for 2012 were € 243 million.
152a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Retained gains or losses on the sale of investments relate to the realized total revaluation of investment property and financial assets available for sale, to the extent that these cannot be allocated to the different non-life and life products. These gains or losses are recorded in profit or loss.
The profit before tax decreased to the amount of € 2 million. This is mainly caused by an increase in occupational disability insurance claims amounting to € 81 million, primarily relating to the product WGA-ER. The gross premiums written decreased in relation to 2012 by 4% which is mainly driven by the choice of prioritizing return over revenue. The operating expenses increased compared to 2012 due to the transfer of Ditzo and investments in strategic projects.
153a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Gross premiums written 1,666 1,891 Change in provision for unearned premiums - - Gross insurance premiums 1,666 1,891
Net insurance claims and benefits -2,912 -3,663 Change in liabilities arising from insurance contracts -455 -209 Fee and commission expense -65 -138 Technical result (underwriting) -1,779 -2,126
Allocated gain (loss) on investments - to technical result 1,634 1,911 Allocated gains or losses - to technical result 619 654 Allocated other income and expense – to technical result -2 -30 Operating expenses -199 -221 Restructuring provision expense -10 -7 Technical result – before proceeds (loss) from sales of investments 263 181
154a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The Non-Life segment combined ratio can be broken down as follows: Claims ratio 78.3% 73.4% Commission ratio 15.8% 16.7% Expense ratio 10.5% 9.1%
1 Including change in liabilities arising from insurance obligations 2 Including restructuring provision expenses
155a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Intangible assets can be broken down as follows: Value Of Business Acquired (VOBA) 244 264 Software and other intangible assets 6 2
At 1 January 3 264 2 269 Acquisitions 2 1 5 8 Amortization - -20 -1 -21 Impairments -2 -1 - -3
156a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Goodwill For the purposes of impairment testing, goodwill is allocated to the cash-generating units of the relevant operating segment. The goodwill as at 31 December 2013 relates to ASR Nederland Vastgoed Maatschapij N.V. and B.V. Nederlandse Hulpverleningsorganisatie-SOS International in segment Life and Other respectively.
Property, plant and equipment can be broken down as follows: Land and buildings for own use 85 59
The fair value of the land and buildings for own use based on the external valuations is disclosed in chapter 9.2.
157a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Cost price as at 1 January 2013 181 154 335 Additions 49 1 50 Transferred to investment property - - - cost price as at 31 december 2013 230 155 385
Impairments as at 1 January 2013 -27 - -27 Impairments -21 - -21 Transferred to investment property - - - Impairments as at 31 december 2013 -48 - -48
Accumulated depreciation as at 1 January 2012 -93 -130 -223 Depreciation -3 -9 -12 Transferred to investment property 1 - 1 Other changes - 1 1 Accumulated depreciation as at
Impairments as at 1 January 2012 -16 - -16 Impairments -12 - -12 Transferred to investment property 1 - 1 Impairments as at 31 december 2012 -27 - -27
158a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
9 Investment property 9.1 Investment property – Cost Price less accumulated depreciation and impairments
Transferred from other assets - - Transferred from property, plant and equipment -1 3 Other changes - - cost price as at 31 december 2,095 2,240
Other changes - - Impairments as at 31 december -149 -121
In 2013, the second and third tranche in ASR Dutch Prime Retail Fund (DPRF) was transferred by a.s.r. to institutional investors thereby further reducing a.s.r.’s property exposure from 67% to 58%.
Impairments amounting to € 58 million (2012: € 19 million) were recognized in 2013, mainly relating to residential and commercial property.
Investment property with a cost price less accumulated depreciation and impairment of € 909 million (2012: € 570 million) is held by the ASR Dutch Prime Retail Fund and ASR Dutch Core Residential Fund which are governed under fund agreements.
F ai r va lu e b as e d o n o b se rv ab le m ar ke t d at a
At year-end 2012, the fair value of investment property and land and buildings for own use amounted to € 2,881 million and € 115 million respectively.
The property portfolio is classified as a level 3 ‘not measured on the basis of market observable market data’. Non-observable market inputs are used in the valuation methods, in addition to the observable market inputs. The fair value measurement is based on valuations by independent professional appraisers. These valuations were performed for the entire investment property and buildings for own use portfolios. Independent professional appraisers use reference transactions of comparable objects, in combination with the DCF and income capitalization method, to determine the fair value of the property. The reference transactions of comparable objects are generally based on observable data consisting of the land register ‘Kadaster’ and the rural land price monitor as published by the Dutch Government ‘Grondprijsmonitor’ in an active property market.
Deltafort Beleggingen I B.V. - joint venture 50% 141 149 Real estate development joint ventures ranging between 11% and 50% 34 40 Other associates 15 24
161a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
162a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Deltafort Beleggingen I B.V., a 50% joint venture, participates in the ordinary and preference shares of Ahold N.V., and has its registered office in the Netherlands. a.s.r. retains the rights to its specific investments – contributed at the start of the arrangement - and their related income.
The real estate development joint ventures consist of numerous contractual agreement with other developers and property owners, whereby the parties agree to develop real estate projects. Various guarantees for the real estate development projects have been issued by a.s.r. (see chapter 38).
Financial assets can be broken down as follows: Investments - Available for sale (Chapter 11.1) 19,591 20,467 - At fair value through profit and loss (Chapter 11.2) 64 80
163a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Changes in investment available for sale 31 December 2013 31 December 2012
Exchange rate differences -67 -7 cARRyInG AmounT AT 31 decembeR 19,591 20,467
Impairment of investments available for sale The following table is a breakdown of impairments of investments available for sale: Increase in impairments through profit and loss -21 -69 Release of impairments through profit and loss 53 16 Reversal of impairments due to disposal 87 242 Translation differences and other adjustments -25 -11
The increase in translation differences and other adjustments relates mainly to exchange rate differences on investments available for sale. Impairments recognized on government bonds have been based on the existing impairment policy.
164a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
11.2 Investments at fair value through profit and loss Investments at fair value through profit and loss can be broken down as follows: Company
A further breakdown of the investments at fair value through profit and loss and investments on behalf of policyholders is included in the fair value hierarchy tables (see chapters 11.5 and 11.6 respectively).
Equities and bonds are lent in exchange for a fee, with collateral obtained as security. At the end of 2013, the value of the securities lent was € 7,052 million (2012: € 8,846 million) with the collateral furnished as security representing a value of € 8,840 million (2012: € 10,610 million) consisting of mortgage loans and corporate and government bonds.
165a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The increase in the mortgage loans is primarily due to the increased sales of the ‘WelThuis Hypotheek’ in 2013.
Included in the due from banks is an amount of € 2,520 million (2012: € 2,330 million) related to savings-linked mortgage loans.
11.4 Derivatives Derivatives consist of derivatives held for trading and for a limited amount held for cash flow hedging.
Derivatives held for trading are comprised of all derivatives that do not qualify for hedge accounting. Changes in the fair value of derivatives held for trading are recorded in investment income (under ‘fair value gains and losses’, see chapter 25.3).
Listed derivatives are traded on the basis of standard contracts. As a result of margin obligations dictated by the different stock exchanges, they do not generally carry any significant counterparty risk. Derivatives transacted in the over-the-counter (OTC) market are agreed mutually by the contractual parties.
At year-end 2013, the derivatives can be broken down as follows: Positive fair value Negative fair value Notional amount derivatives held for trading foreign exchange contracts
Positive fair value Negative fair value Notional amount derivatives held for trading foreign exchange contracts
The cash flows in connection with interest-rate contracts included in derivatives held for cash flow hedging end in 2016. No cash flow hedges became ineffective in 2013. No amounts were transferred from the cash flow hedging reserve to the income statement.
168a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Corporate bonds classified as Level 2 include unlisted fixed-income preference shares amounting to € 379 million (2012: € 416 million).
169a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
170a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Fair value of financial assets on the basis of level 3 valuation technique 2013 2012 2013 2012
Total revaluations of investments, held at year-end, recognized in the income statement 6 3 - -
Not measured on the basis of observable market data 31 December 2012 Level 1 Level 2 Level 3 Total fair value
The listed equities consist mainly of investments in funds amounting to € 6,494 million (2012: € 6,589 million) and € 699 million (2012: € 641 million) in direct equity investments.
Deferred taxes are formed for differences between the carrying amount of assets and liabilities and their tax base at the enacted tax rate, taking into account tax-exempt components. The enacted and current tax rate of 25.0% (2012: 25.0%) is applied when calculating deferred tax.
Intangible assets - - - - - Premium and claims reserve 1,114 -176 -147 - 791
Intangible assets 3 - - -3 - Premium and claims reserve 666 211 237 - 1,114
173a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The table below shows the composition of other assets: Deferred investment and interest income 509 481 Property developments 125 206 Prepaid costs and other non-financial assets 5 31
The decrease of property developments is the result of the strategy to reduce risks and the completion and sale of some projects amongst which IJDock in Amsterdam at a.s.r. vastgoedontwikkeling.
Due from banks 750 757 Due from banks falling due within three months 767 1,799
SubScRIbed And PAId-uP cAPITAl: - oRdInARy ShAReS; 200,000 AT A PAR vAlue of euR 500 100 100
Tax related to shadow accounting 319 - - - 319 Unrealized gains and losses related to segregated
Tax related to segregated investment pools 6 - - - 6
Life insurance contracts have been entered into that, in addition to offering a guaranteed element, also give policyholders a right to additional benefits (see chapter 2.25). Expected claims for additional benefits under these insurance contracts with discretionary participation features (DPF) are included in the DPF reserve. This reserve is recognized as a component of the unrealized gains and losses recorded in equity. Expected claims for additional benefits under insurance contracts with DPF are included in the DPF component.
Hybrid Tier 1 instrument variable interest (3-month Euribor + 2.3%) 84 84 Per quarter with effect from 26 October 2009 Hybrid Tier 1 instrument 6.25% fixed interest 12 12 Per quarter with effect from 30 September 2009 Hybrid Tier 1 instrument 10% fixed interest 382 382 Annually with effect from 26 October 2010 Hybrid Tier 1 instrument 7.25% fixed interest 37 37 Annually with effect from 30 September 2010
The Tier 1 instruments bear discretionary interest and have no maturity date, but can be redeemed at the option of a.s.r. on any coupon due date with effect from: Date
Hybrid Tier 1 instrument variable interest (3-month Euribor + 2.3%) 26 October 2009 Hybrid Tier 1 instrument 6.25% fixed interest 30 September 2009 Hybrid Tier 1 instrument 10% fixed interest 26 October 2019 Hybrid Tier 1 instrument 7.25% fixed interest 30 September 2019
If the hybrid Tier 1 instrument at 10% fixed interest is not redeemed on 26 October 2019, the interestrate will be changed to 3-month Euribor plus 9.705%, with a quarterly coupon date with effect from 26 January 2020.
The following amounts were distributed to holders of equity instruments (x € 1,000): Hybrid Tier 1 instrument variable interest (3-month Euribor + 2.3%) 2,174 2,830 Hybrid Tier 1 instrument 6.25% fixed interest 771 967 Hybrid Tier 1 instrument 10% fixed interest 38,631 38,631 Hybrid Tier 1 instrument 7.25% fixed interest 2,731 2,731
The tier 1 instruments are classified as equity as there is no requirement to settle the obligation in cash or another financial asset or to exchange financial assets or financial liabilities under conditions that are potentially unfavourable for a.s.r. Discretionary interest payments are adjusted against equity upon payment.
Provision for unearned premiums 414 416 5 38 non-life insurance contracts 4,240 4,126 407 445
Changes in liabilities arising from life insurance contracts can be broken down as follows: Acquisition of insurance portfolios 33 - Premiums received 898 982 Interest added 1,169 1,369
Technical result -84 -71 Release of cost recovery -158 -173 Changes in shadow accounting through equity -518 839 Changes in shadow accounting through income -1,323 153 Other changes -169 -129
Provision for profit-sharing, bonuses and discounts At 1 January 10 12 Profit-sharing, bonuses and discounts granted in the financial year -1 -2
178a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Claim liabilities prior years 508 Other claim liabilities 75 Shadow accounting 91
179a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
At year-end 2013, the liabilities included a guarantee provision for a carrying amount of € 47 million (2012: € 55 million) and a provision related to unit-linked insurance contracts and pension contracts for a carrying amount of € 218 million (2012: € 266 million). These provisions relate to compensation for the cost of these contracts.
Employee benefits can be broken down as follows: Post-employment benefits pensions (Chapter 17.1) 2,405 2,517 Post-employment benefits other than pensions (Chapter 17.1) 15 21 Post-employment benefit obligation 2,420 2,538
Other long-term employee benefits 3 -3 coSTS of PoST-emPloymenT benefITS -106 -40
As of 1 January 2013, the indexation for active members is conditional and depends on the realized surplus interest of the managed assets. As a result of this amendment a past service cost is accounted for in 2012 amounting to € 107 million which has been recognized in the restated Other income in 2012 (see chapter 27).
The benefits under these plans are dependent on factors such as years of service and compensation. Pension obligations are determined using mortality tables, the rate of employee turnover, wage drift and economic assumptions such as inflation, and the discount rate. The post-employment benefit plans for a.s.r.’s employees has been insured by ASR Levensverzekering N.V. since 2008. Besides pension benefits, the costs of the defined benefits plans include personnel arrangements for financial products (such as mortgages), which remain in place after retirement.
Included in income statement Current service cost, contributions by employer 39 38 1 1
Experience adjustments to qualifying investments, gain (loss) - - - - As % of qualifying investments as at 31 December - - - - Experienced adjustments to defined benefit obligation, loss (gain) 14 60 3 2 As a % of liabilities as at 31 December 0.6% 2.3% 21.5% 7.3%
182a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Expected return on plan assets - - - - Future salary increases (including price inflation and merit) 1.5% 2.0% 1.5% 2.0% Future pension increases (including price inflation) 1.8% 2.0% - - Indexation % active employees 0.6% 0.5% 0.6% 0.5%
(AA rating) and the duration of the pension obligation; • most recent mortality table is used ‘AG Prognosetafel 2012-2062’. The methods used for determining the DBO and assumptions are consistent with those applied in 2012.
The sensitivity of the above actuarial assumption to reasonable possible changes at the reporting date to one of the relevant actuarial assumptions whilst other assumption remain constant, would have affected the defined benefit obligation by the amount shown as follows: Pension plans Other post-employment benefits
Indexation active employees (1% movement) 40 -24 - - Indexation sleepers (1% movement 402 -313 - - Future salary growth (1% movement) 11 -10 - - Future pension growth (1% movement) 448 -334 - - Future mortality (1 year movement) -68 67 - -
183a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
As an employer, a.s.r. is expected to pay contributions for pension plans and other post-employment in the coming financial year amounting to € 126 million (excluding the positive effect of the investment income) and € 0.6 million respectively.
The underlying assumptions are as follows: Actuarial year-end assumptions 31 December 2013 31 December 2012
The table below shows movements in provisions: Additional foreseen amounts 45 35 Reversal of unused amounts - -2 Usages in course of year -38 -32
The provisions were created for: • tax and legal issues; • staff restructuring expenses; • retention of disability risk instead of insuring it with UWV (Employed Persons Insurance
Amounts owed to customers can be broken down as follows: Debts to policyholders, agents and intermediaries 458 591 Debts to reinsurers 19 19
The average interest-rate payable for the cash collateral received in 2013 is 0.09% (Eonia) (2012: 0.23%). There are no specific terms and conditions, because they are dependent on the development of the value of the underlying instrument.
Other liabilities can be broken down as follows: Deferred income 318 246 Accrued interest 114 113 Other liabilities 315 294 Short-term employee benefits 63 71 Trade payables 202 211 Tax payable 354 163
There is no significant difference between the carrying amount of other liabilities and their fair value (see chapter 23).
Life insurance contracts retained exposure 898 1,000 Life insurance contracts on behalf of policyholders 633 803 Total life insurance contracts 1,531 1,803
Non-recurring and regular insurance premiums can be broken down as follows: Premiums life 2013 2012
Individual Non-recurring premiums written 104 184 Periodic premiums written 471 469 Individual total 575 653
ToTAl conTRAcTS ReTAIned exPoSuRe 898 1,000 on behalf of policyholders Group Non-recurring premiums written 21 47 Periodic premiums written 233 249 Group total 254 296
Individual Non-recurring premiums written 4 3 Periodic premiums written 375 504 Individual total 379 507
Total life insurance contract premiums including the elimination of € 91 million in premiums related to the a.s.r. post-employment benefit plans (2012: € 88 million) and the elimination of investment fees amounting to € 44 million.
25 Investment income 25.1 Total investment income The table below shows a breakdown of investment income per category: Interest income 1,244 1,317 Dividend and other investment income 240 201
Interest income includes € 31 million (2012: € 27 million) in interest received on impaired fixed-income securities. Other interest income for 2012 includes an amount of € 30 million related to the agreement reached with the Dutch Tax Administration (see chapter 34).
Fee and commission income consists of the following components: Asset management for third parties 1 5 Commission on reinsurance 35 50 Other fee and commission income 9 14
Other income can be broken down as follows: Proceeds from property developments 139 92 Other income 66 172
In 2013, other income includes income related to the amendment to the a.s.r. post–employment benefit plans amounting to € 27 million (2012: € 107 million) (see chapter 17).
Net insurance claims and benefits can be summarized as follows: Total Non-Life and Life 2013 2012
190a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Amortization of VOBA (Chapter 6) -19 -17 Insurance claims and benefits -3,199 -3,740
Cost of external staff -59 -76 Consultancy costs and fees -75 -66 Marketing, advertising and public relations expenses -21 -24 Technology and system costs -40 -46 Amortization of software (Chapter 6) -1 -1 Depreciation of property, plant and equipment (Chapter 8) -9 -12 Other operating expenses -34 -28 Total other operating expenses -239 -253
Operating expenses are allocated to the Non-Life and Life segments. However, in the presentation of the a.s.r.’s workforce per segment, employees, administrative expenses and overheads have not been allocated to segments.
191a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Acquisition costs can be broken down as follows: Commission fees -424 -494 Recognized in deferred acquisition costs - 1 Amortization of deferred acquisition costs (chapter 7) -31 -91
The table below is a summary of impairments: Intangible assets -3 -3 Property, plant and equipment (chapter 8) -21 -11 Investment property (chapter 9) -52 -9 Associates and joint ventures (chapter 10) -5 -17 Investments available for sale (chapter 11) 32 -53 Loans and receivables (chapter 11) -42 -10
192a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The income tax expense can be broken down as follows: Current tax for financial year -252 -132 Current taxes referring to previous periods -79 92 Total current tax -331 -40
194a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
The table below shows the financial scope of a.s.r.’s related party transactions: • associates; • joint ventures; • other related parties.
195a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
These mortgage loans held by the members of the Executive Board have been issued based on current personnel conditions. The normal employee conditions consists of limits and thresholds to which personnel interest-rate discount applies. For mortgage loans greater than € 340 thousand arm’s length conditions apply. The normal employee conditions are applied to insurance contracts held by the members of the Executive Board.
36.2 Remuneration of current and former executive directors The remuneration of current and former executive directors is in accordance with the 2013 remuneration policy. This policy was approved by the shareholder.
2 The pension benefits include pensions and VPL. In 2013, no additional charges were made and no additional pension benefits have been granted to the executive directors. The changes in the cost of pension benefits are mainly the result of the relatively low discount rate assumption at the end of 2012 as compared to the end of 2011 due to the lower interest-rates throughout the market. Furthermore, the impact of age, years of service, gender and age differentiated disability, mortality as well as other actuarial assumptions influence the movement in the pension benefits. In 2012 pension indexation has been changed from unconditional to conditional and pension benefits are normalized accordingly in 2013. The pension benefits have been determined in accordance with IAS 19R and the 2012 comparative figures have been restated to reflect the impact of the adoption of IAS19R by a.s.r.
June 2012. The termination benefit has been determined in 2012 in accordance with the Dutch Corporate
On 1 November 2013, ASR Deelnemingen N.V. acquired 100% of the shares of Solid Mortgages B.V. for an amount of € 2 million.
Claims and disputes The group is a respondent in a number of claims, disputes and legal proceedings arising from the normal conduct of business.
As for other claims and legal proceedings against a.s.r. known to management (and for which, in accordance with the defined principles, no provision has been formed), management feels, after having sought expert advice, that these claims have no chance of success, or that a.s.r. can successfully mount a defence against them, or that the outcome of the proceedings is unlikely to result in a significant loss for a.s.r.
a.s.r. has issued guarantees to third parties for a total amount of € 437 million (2012: € 504 million) for real estate development projects and the acquisition of property. Those guarantees were issued by principals for the execution of projects for the benefit of clients.
Other commitments have been entered into primarily for facility and ICT contract related to an amount of € 41 million (2012: € 37 million).
Profit for the year 8 281 316 Total equity attributable to shareholders 2,518 2,161
199a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Share of profit/(loss) of group companies 296 220 Other income and expenses after tax -15 96
General The consolidated financial statements of a.s.r. for 2013 have been prepared in accordance with IFRS – including the International Accounting Standards (IAS) and Interpretations – as accepted within the European Union. In accordance with Section 362(8), Book 2 of the Netherlands Civil Code, the ASR Nederland N.V. Executive Board has decided to apply the same accounting policies to the consolidated financial statements as to the company financial statements. This has been the practice since 2005.
Changes in accounting policies and presentation Except for the change in accounting policy as a result of the amendment to IAS 19 Employee benefits a.s.r. has prepared its company financial statements in accordance with the same principles for financial reporting, presentation and calculation methods used for the 2012 company financial statements. See chapter 2.2 for the detailed impact of these changes.
The current presentation also differs from last year’s presentation in some respects mainly due to the legal merger. Where applicable, the comparative figures have been restated. The changes in presentation as a result of the legal merger do not have an effect on a.s.r.’s profit for the year, total comprehensive income and total equity.
Additions to capital 153 77 Share of profit 296 220 Dividend received -697 -421
Change in DPF component -2 - Other changes -1 54 3. Loans to group companies
4. Loans and receivables 5. Receivables from group companies Receivables from group companies includes the receivable with respect to non-qualifying plan assets (see chapter 17) administered by ASR Levensverzekering N.V. amounting to € 2,031 million (2012: € 1,984 million). The remaining portion of the receivables from group companies are payable on demand.
6. Deferred tax assets The deferred tax assets relate primarily to employee benefits (including the asset resulting from the insurance contracts which is administered by the ASR Levensverzekering N.V.) amounting to € 42 million (2012: € 125 million) off set by the equalization reserve of € 18 million (2012: €14 million).
201a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Result carried over from previous financial year - - - - 141 -141 - - - Change in reserves required by law - - - 2 - - 2 - 2 Profit carried over from previous financial year - - - - - - - - - Discretionary interest on other equity instruments - - - - -45 - -45 - -45 Issue of other equity instruments - - - - - - - - - Cost of issue of other equity instruments - - - - - - - - - Change in reserves required by law - - - - - - - - - Tax relating to interest on other equity instruments - - - - 11 - 11 - 11
Result carried over from previous financial year - - - - - - - - - Change in reserves required by law - - - - - - - - - Profit carried over from previous financial year - - - - 228 -228 - - - Discretionary interest on other equity instruments - - - - -44 - -44 - -44 Issue of other equity instruments - - - - - - - - - Cost of issue of other equity instruments - - - - - - - - - Change in reserves required by law - - - - - - - - - Tax relating to interest on other equity instruments - - - - 11 - 11 - 11
For a break down of the Share capital see chapter 15.1.
The payments of all amounts due in respect of the Other equity instruments is guaranteed on a subordinated basis by ASR Levensverzekering N.V., a group company.
202a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Provisions primarily relate to provisions for: • staff restructuring; and • retained disability risk.
The timing of the outflow of resources related to these provisions is uncertain because of the unpredictability of the outcome and time required for the settlement of disputes.
Other liabilities 49 62 Accrued interest - 3 Short-term employee benefits 10 10 Trade payables 12 26 Tax payables 354 163
203a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
ToTAl AudIT feeS 2,642 3,066 41.3 Contingent liabilities Joint and several liability ASR Nederland N.V. forms a fiscal unity for Corporate Income Tax and VAT with nearly all of its subsidiaries. The company and its subsidiaries that form part of the fiscal unity are jointly and severally liable for taxation payable by the fiscal unity.
Investment obligations and guarantees ASR Nederland N.V. has issued guarantees to third parties for a total amount of € 323 million (2012: € 323 million) for real estate development projects and the acquisition of property.
Lease commitments For the table with the breakdown of the commitments for non-cancellable operating leases see chapter 38.
Commitments to group companies ASR Nederland N.V has committed to a capital increase of ASR Bank N.V. amounting to € 17 million for the period 2013 to 2017. The amount will be paid in tranches when required by ASR Bank N.V. depending on its required solvency. As a consequence of the growing business capital the first tranche amounting to € 7,2 million was made in 2013.
Our opinion with respect to the consolidated financial statements In our opinion, the consolidated 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 and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
Our engagement We have audited the financial statements 2013 of ASR Nederland N.V., Utrecht (‘the Company’). The financial statements include the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated balance sheet as at 31 December 2013, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes, comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise the company balance sheet as at 31 December 2013, the company income statement for the year then ended and the notes, comprising a summary of the accounting policies and other explanatory information.