As part of a drive to focus more on core activities, B.V. Nederlandse Hulpverleningsorganisatie SOS International (hereafter SOS International) was classified as discontinued operations at the end of 2015. As a consequence, the financial results of SOS International are disclosed in condensed form in the income statement. With this in mind, the operations were recognized as held for sale in the balance sheet. In January 2016 CED-Group acquired SOS International and as such SOS International was derecognized.
Intro d uctio n 5.5 Notes to the consolidated balance sheet 5.5.1 Intangible assets
Goodwill For the purpose of impairment testing, goodwill is allocated to the cash-generating units (CGU) of the relevant operating segment. As a result of acquisitions during 2016, disclosed as changes in the composition of the group (please see chapter 5.4.5) the amount of goodwill increased by € 31 million (2015: € 152 million).
Net carrying value as at 31 December 149 22 171 166
Depreciation of property, plant and equipment is recorded in the operating expenses (see chapter 5.6.8).
The fair value of land and buildings for own use based on the external valuations is disclosed in chapter 5.7.1.3.
Changes in value of investments, realized / unrealized gains and losses: - Fair value gains and losses 129 144
Transferred between investments on behalf of policyholders and investment property 2 27
The vacancy rate of Retail increases due to redevelopments and the termination of contracts with V&D following its bankruptcy. The increase in the vacancy rate of Offices is mainly due to the relocation of Amersfoortse division to the a.s.r. headquarter in Utrecht, and the shift from offices own use to the investment portfolio as a consequence.
Associates and other joint ventures ranging between 10% and 50% 18 19
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 166
The information disclosed in the table below is based on the most recent financial information available from the associates and joint ventures. These are primarily based on the investee’s financial statements and their accounting policies.
In 2016, loans to associates and joint ventures amounted to € 4 million (2015: € 10 million). These loans are classified as Related party transactions (see chapter 5.7.2).
At fair value through profit and loss (chapter 5.5.5.2) 131 133
The financial assets and derivatives increased in 2016 by € 2,833 million primarily due to increase in the loans and receivables (€ 988 million) as a result of higher production of mortgages, increase in total value of derivatives (€ 664 million) due to the decrease of the long-term interest rate and increase in cash and cash equivalents by € 952 million primarily as a result of the cash collateral received (€ 640 million) due to the increase in the fair value of the derivatives and the increase in the retained holding cash position.
The equities consist primarily of listed equities and investments in investment funds.
Intro d uctio n 5.5.5.2 Investments at fair value through profit and loss
Total investments at fair value through profit and loss 131 7,745 7,876
Investments at fair value through profit and loss 31 December 2015 Investments
Changes in investments at fair value through profit and loss 2015 Investments
Total due from credit institutions consist for € 2,845 million (2015: € 2,800 million) out of savings-linked mortgage loans.
Both cleared and non-cleared derivatives are traded on the basis of standardized contracts. Cleared derivatives and options do not generally carry significant counterparty risk, as a result of Initial- and variation margin obligations set by the central clearing parties. Bilateral non-cleared derivatives transacted in the over-the-counter (OTC) market also have limited risk as a result of variation margin exchange between a.s.r. and it’s counterparties.
The 2016 derivatives do not include the derivatives on behalf of policyholders (2016: € 8 million, 2015: nil).
The fair value of interest-rate contracts is calculated by first determining the cash flows of the floating leg based on the Euribor-curve corresponding the interest reset period (3 months, 6 months or 12 months) of the swap. Then the net present value of the floating and fixed leg is determinded by discounting the cash flows with the Overnight Indexed Swap (OIS) curve.
All cash and cash equivalents are freely available, except cash related to cash collateral which is managed separately from other cash equivalents. The cash components include € 2,443 million (2015: € 1,803 million) related to cash collateral received on derivative instruments. The cash components related to cash collateral paid amount to € 32 million (2015: € 6 million).
Interest expenses on cash collateral is standardized in the ISDA/CSA’s and based on EONIA.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 175
Interest expenses capitalized related to property developments were € 1 million (2015: nil) and included in property developments. Prepaid costs and other non-financial assets include prepaid commissions Non-life assurance.
Number of shares (Amounts in € millions) Number of shares (Amounts in € millions)
In March 2016, Stichting Administratiekantoor beheer financiële instellingen (NLFI) in its capacity as the sole shareholder issued a resolution that the company’s articles of association will be amended to, inter alia, split the ordinary shares in the company’s capital, into a higher number of ordinary shares, without impacting the amount of the company’s total equity. After the stock split had been effected, the nominal value per ordinary share in the company’s capital was decreased to € 0.16. An amount of € 76 million was subsequently transferred from share capital to the share premium reserve.
Following the IPO on 10 June 2016, a total of 52.2 million ordinary shares of ASR Nederland N.V., representing 35% of the outstanding and issued ordinary shares (150 million) were listed on Euronext Amsterdam. An over-allotment option (greenshoe) of 7.8 million shares was granted by NLFI to the Joint Global Coordinators. On 9 July 2016 the over-allotment option was partly exercised and in total a number of 2,249,855 over-allotment shares have been sold. Following the partial excercise of the Over-Allotment Option, the offering comprises 54,449,885 ordinary shares representing approximately 36.3% of the total number of 150 million issued and outstanding ordinary shares in the capital of the company. The remaining shares (63,7%) are held by NLFI on behalf of the Dutch government. No preference shares were issued.
In January 2017, NLFI sold 20,400,000 shares in a.s.r. at a price of € 22.15 per share. a.s.r. will not receive any proceeds of the sale. a.s.r. repurchased 3,000,000 Shares in the offering, which is the maximum to which a.s.r. is currently authorized to acquire shares in its own capital. After cancellation of the 3,000,000 Shares that a.s.r. acquired in the offering, NLFI’s shareholding in a.s.r. is expected to represent 50.1% of a.s.r.’s share capital.
Unrealized gains and losses related to segregated investment pools -85 - -85
Unrealized gains and losses related to segregated investment pools -68 - -68
Tax related to segregated investment pools 17 - 17 5.5.8.3 Actuarial gains and losses The actuarial gains and losses related to the pension obligation increased from € -467 million to € -755 million primairily due to remeasurements as a result of changes in interest rate (see chapter 5.5.11).
5.5.8.4 Other equity instruments In 2015, a.s.r. neither issued nor redeemed any equity instruments.
Hybrid Tier 2 instrument 5% fixed interest 497 497 Annually with effect from 30 September 2015
If the hybrid Tier 1 instrument at 10% fixed interest is not redeemed on 26 October 2019, the interest rate will be changed to 3-month Euribor plus 9.705%, with a quarterly coupon date with effect from 26 January 2020.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 178
Net profit (loss) attributable to holders of ordinary shares for calculating the earnings per ordinary share 625 586
Weighted average number of ordinary shares in issue 1 150,000,000 150,000,000
Basic earnings per ordinary share from continuing operations (in euros) 1 4.05 4.08
Basic earnings per ordinary share from discontinued operations (in euros) 1 0.12 -0.17
The notes were issued in order to strengthen the quality of a.s.r. capital and the net proceeds from the notes were applied by a.s.r. for its general corporate purposes.
Life insurance contracts excl. own pension contracts 27,873 26,073 193 201
Non-life insurance contracts as at 31 December 4,611 4,513 442 410
Changes in the composition of the group - 3,181 - -
Premiums received in 2016 include the premiums related to the acquired insurance portfolio, NIVO Uitvaartverzekeringen amounting to € 323 million, and a single premium of a pension portfolio amounting to € 195 million. The acquisition has been included as per 18 March 2016. In 2015 premiums received included single premium of a pension portfolio amounting to € 370 million.
Intro d uctio n 5.5.10.2 Claims development table, non-life The table below is a ten-year summary of movements in gross cumulative claims in connection with the non-life portfolio for the period from 2007 to 2016.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 182
Intro d uctio n 5.5.10.3 Liabilities arising from insurance contracts on behalf of policyholders
Movements in liabilities arising from insurance contracts on behalf of policyholders
Effect of fair value changes related to financial assets 262 496
Liabilities arising from insurance contracts on behalf of policyholders also include liabilities where conversions and switches have occurred in the insurance contract administration. The insurance contract still meets the definition of and continues to be classified as an insurance contracts on behalf of policyholders and therefore continues to be included in the insurance contracts on behalf of policyholders administration. However, as a result of the conversion and switches, liabilities arising from insurance contracts on behalf of policyholder amounting to € 2,157 million (2015: € 2,054 million) are - in the classification and subsequent presentation - not backed directly with investments on behalf of policyholders. The related investments are included and presented in investments (available for sale) and loans and receivables.
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 for factors such as inflation, and the discount rate.
The post-employment benefit plans for ASR Nederland N.V. employees is primarily based on the following conditions: • The accrual rate for old age pensions 1.875% (2015: 1.875%); • Retirement age 67 years (2015: 67 years); • Maximum pensionable salary capped at € 101,519 (2015: € 100,000); • Minimum franchise has changed.
Financial Statements 2016 | 5.5 Notes to the consolidated balance sheet 184
Other group companies employees The other group companies which have been acquired have defined contribution and defined benefit plans. The defined benefit plans consist primarily of indexed average salary pension plans, taking into account a franchise and are based on the following primary conditions: • The accrual rate for old age pensions ranging between 1.75% and 1.875% (2015: ranging between 1.75% and 1.875%); • Retirement age 67 years (2015: 67 years); • Maximum pensionable salary capped at € 101,519 (2015: € 100,000).
The amount recognized as an expense for the defined contribution plans in 2016 amounts to € 0.4 million of which € 0.3 million one-off costs in relation to pay-off of a defined contribution plan of one of the acquisitions insured with a third party.
Following development after April 2016, past service cost has been recognized in other income amounting to € 100 million, resulting from the amendment to the a.s.r. post-employment benefit plan for future inflation indexation for former employees. Hereby all future inflation indexation has become conditional upon there being sufficient funds available in the separate account that was set up in the past to fund future inflation indexation.
Experience adjustments are actuarial gains and losses that have arisen due to differences between actuarial assumptions. The following table provides information about experience adjustments with respect to qualifying plan assets and the defined benefit obligation: Experience adjustments to qualifying investments, gain (loss) 5 -2
As % of qualifying investments as at 31 December 23.3% -10.5%
All methods used for determining the DBO and assumptions are consistent with those applied in 2015.
Plan assets The pensions related to other group companies which have been acquired in 2015, are administered and guaranteed by a number of insurance companies outside of the group. As such the plan assets recognized relate to the insurance contracts and amount to € 23 million (2015: € 21 million).
For the non-qualifying assets backing the post-employment benefit plans, a.s.r. has drawn up general guidelines for the asset mix based on criteria such as geographical location and ratings. To ensure the investment guidelines remain in line with the conditions of the post-employment benefit obligations, a.s.r. regularly performs Asset Liability Management (ALM) studies. Transactions in the non-qualifying assets are done within the guidelines. As the post-employment benefit plans are a liability on group level, the underlying insurance and market risks are in scope of a.s.r.’s risk policies. (see chapter 5.8). The overall interest-rate risk of the group is managed using interest-rate swaps and swaptions. ASR Levensverzekering N.V., manages the interest rate risk through an overlay interest hedging strategy using swaps and swaptions (see chapter 5.8.4.1) for the company as a whole. The swaps and swaptions are not specifically allocated to the a.s.r. post-employment benefit plans. Therefore the (un)realized gains and losses from swaps and swaptions as a whole are accounted for in liabilities arising from insurance contracts, in accordance with the shadow accounting policy, whereas the impact of changes in interest rates on the provisioning for Employee benefits based on IAS19 is part of actuarial gains and losses that are recognized in equity (see note 5.5.8.3).
Intro d uctio n 5.5.11.2 Post-employment benefits other than pensions The other post-employment benefits defined plans consist of personnel arrangements for financial products (such as mortgages and health insurance), which remain in place after retirement.
In the calculation of the defined benefit obligation the: • Discount rate is determined based on the return (zero coupon rate) of high-quality corporate bonds (AA rating) and the duration of the pension obligation. The discount rate methodology is based on the IBoxx € Corporates AA 10+ curve; • Most recent mortality table ‘AG Prognosetafel 2016’ is used, in combination with the latest the ‘CVS Sterftestatistiek Pensioenen 2006-2015’ for experience factors.
Other long-term employee benefits consist of the employer’s share of liabilities arising from long-service benefits.
The timing of the outflow of resources related to these provisions is uncertain because of the unpredictability of the outcome and the time required for the settlement of disputes. The provisions for staff restructuring are based on arrangements agreed in the Collective Bargaining Agreement, restructuring plans, and on decisions made by a.s.r.’s management. An amount of € 30 million of the provisions is expected to fall due within one year (2015: € 37 million).
At year-end 2016, the fair value of borrowings was € 114 million (2015: € 55 million). See chapter 5.7.1.2. The average interest rate payable on other borrowings was 2.19% (2015: 2.28%).
The average interest rate for the cash collateral received in 2016 is -0.32% (EONIA) (2015: -0.11%). There are no specific terms and conditions, because these depend on the development of the value of the underlying instrument.
a.s.r. has bonds that have been transferred as a result of reverse repurchase agreements, but do not qualify for derecognition amounting to € 103 million (2015: nil).
The other liabilities of € 432 million (2015: € 440 million) consist amongst others of payables, accruals related to investments and construction depots for rural housing mortgages.
There is no difference between the carrying value of other liabilities and their fair value (see chapter 5.7.1.2).
Financial Statements 2016 | 5.6 Notes to the consolidated income statement 191
Total life insurance contract premiums include the elimination of € 88 million in premiums related to the a.s.r. postemployment benefit plans (2015: € 53 million) and the elimination of investment fees amounting to € 30 million (2015: € 34 million). The Non-recurring premiums written Individual increased to € 417 million in 2016, mainly resulting from the increase in the funeral portfolio (single premium of € 323 million).
The effective interest method has been applied to an amount of € 901 million of the interest income from financial assets not classified at fair value through profit and loss (2015: € 893 million). Interest income includes € 16 million (2015: € 15 million) in interest received on impaired fixed-income securities.
Reversal of impairments on fixed-interest securities as a result of disposal amounts to € 2 million (2015: € 3 million).
Total fee and commission income amounts to € 59 million (2015: € 52 million) of which € 34 million (2015: € 26 million) commission income from reinsurance.
In 2016, the item Other income includes a past service cost related to the amendment to the a.s.r. post–employment benefit plans amounting to € 100 million (see chapter 5.5.11.1).
Changes in liabilities arising from insurance contracts on behalf of policyholders 56 -156
Operating expenses 2016 decreased to € 569 million (2015: € 575 million), despite increase in costs as a result of acquisitions (see chapter 5.4.5), cost incurred to acquire these business and costs incurred for the preparation of the privatization.
The total work force decreased to 4,160 FTE (2015: 4,248 FTE). The ‘total work force’ consists of the number of internal and external FTEs. The number of internal FTE decreased to 3,461 FTE (2015: 3,650 FTE) as a result of continuing costcutting programmes and the sale of B.V. Nederlandse Hulpverleningsorganisatie SOS International per 25 January 2016 within the segment Distribution and Services. The number of external FTE increased to 699 FTE (2015: 598) due to several projects in 2016.
The costs associated with sale of development property include an amount of nil (2015: € 91 million) related to impairments on land and property development projects held as other assets.
Investments at fair value through profit and loss Unlisted equities - 2 62 64
From: Level 1: Fair value based on quoted prices in an active market - 395 - 395
The following table shows the movement in financial assets and liabilities measured at fair value (recurring basis) including investment on behalf of policyholders and investment property that are categorized within level 3.
Fair value of financial assets classified as fair value through profit and loss
Total revaluations of investments, held at year-end, recognized in the income statement -3 14
Changes in value of investments, realized/unrealized gains and losses: - Realized gains and losses (see chapter 5.6.3) 3 14 - Recognized in Other comprehensive income (unrealized gains and losses) 8 -7
The sensitivities of the investment property held on behalf of the policyholders have been included in the sensitivities related to investment property included in chapter 5.7.1.3.
Intro d uctio n 5.7.1.2 Financial instruments not measured at fair value for which the fair value is disclosed The breakdown of the fair values of financial assets and liabilities not measured at fair value, but for which the fair value is disclosed in accordance with the level of fair value hierarchy, as explained in accounting policy B, is as follows: Fair value of financial assets and liabilities
Amounts due to customers and due to banks presented as level 1 primarily comprise savings and cash collateral received. The accrued interest included in other liabilities follows the classification of the underlying assets. Level 2 category financial assets relates primarily to savings-linked mortgage loans amounting to a fair value of € 4,514 million (2015: € 4,360 million).
The mortgage loan portfolio is classified as level 3 ‘not measured on the basis of market observable market data’. Nonobservable market inputs are used in the valuation methods, in addition to the observable market inputs. The valuation method used to determine the fair value of the mortgage loan portfolio is based on the spread on the interest rate curve for discounting the mortgage portfolio cash flows on consumer rates and includes assumptions for originating cost, proposal risk, and the options related to early redemption and moving. The mortgage loan portfolio consists of high quality mortgages with a relatively fixed return, limited impairments and arrears (see chapter 5.5.5.3). The mortgage loan consists only of Dutch mortgages with a limited counterparty default risk in line with the strategic investment plan (see chapter 5.8.4).
Intro d uctio n 5.7.1.3 Property (including land and buildings for own use) The breakdown of the Investment property and land and buildings for own use in accordance with the fair value hierarchy, as explained in accounting policy B, is as follows: Fair value of the investment property and land and buildings for own use
Investments on behalf of policyholders: Land and buildings for own use - - 149 149
Investments on behalf of policyholders: Land and buildings for own use - - 155 155
The property portfolio is classified as a level 3 ‘not measured on the basis of market observable market data’. Nonobservable 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 have been performed for the entire portfolio of investment property and buildings for own use. Independent professional appraisers use reference transactions of comparable properties, 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.
Unobservable and observable inputs used in determination of fair value (continued)
A related party is a person or entity that has significant influence over another entity, or has the ability to affect the financial and operating policies of the other party. Parties related to a.s.r. include NLFI and the Dutch State with control, associates, joint ventures, members of the Executive Board, members of the Supervisory Board, close family members of any person referred to above, entities controlled or significantly influenced by any person referred to above and any other affiliated entity. a.s.r. has applied the partial exemption for government-related entities.
The remuneration of the a.s.r. Executive Board and Supervisory Board are described in chapter 5.7.3 (Remuneration of the a.s.r. Executive Board and Supervisory Board).
Financial scope of a.s.r.’s related party transactions 2016 Associates Joint ventures Other related parties Total
Transactions in the income statement for the financial year 2015 Associates Joint ventures Other related parties Total
In addition to the dividend paid in 2016 of € 170 million (2015: € 139 million) and the discretionary interest to holders of equity instruments of € 45 million in 2016 (2015: € 45 million) the Ministry of Finance charged a.s.r. for incurred expenses in relation to NLFI amounting to € 5 million (2015: € 2 million) which includes expenses related to the IPO. These expenses are recognized in the Consolidated income statement.
These mortgage loans held by the members of the Executive Board have been issued based on current employee conditions. The employee conditions include limits and thresholds to the amounts that qualify for a personnel interestrate discount. For mortgage loans higher than € 340 thousand arm’s length conditions apply. The insurance contracts held by the members of the Executive Board are subject to the normal employee conditions.
Board member As a committee member Total 5.7.3.2 Remuneration of current and former Executive Board members The remuneration of the executive board members is in accordance with the 2016 remuneration policy.
In accordance with the remuneration law ‘Wet aansprakelijkheidsbeperking DNB en AFM en bonusverbod staatsgesteunde ondernemingen’, issued by the Dutch government, no variable remuneration has been disbursed to the executive directors for the period as from the 2011 a.s.r. financial year until the current 2016 a.s.r. financial year. In 2016 the fixed employee benefits of board members only increased with the annual CAO-index.
2 The amount as a committee member also includes remuneration for services as supervisory board member of ASR Bank N.V. amounting to € 4,000 per annum per supervisory board member.
Dutch insurers see an increase in insurance policies complaints/claims based on grounds other than cost compensation. Current and possible future legal proceedings could have a substantial financial and reputational impact. However, because the book of policies of a.s.r. dates back many years, contains a variety of products with different features and conditions and because of the current lack of legal precedents, no reliable estimation can be made regarding the timing and the outcome the current and future legal proceedings. Therefore, the potential risks and the effects upon a.s.r.’s financial position and business cannot be reliably estimated or quantified at this time. Currently there are no indications that a provision would be necessary for a.s.r.
1 The fixed employee benefits of the three ordinary executive board members are similar and amount to € 410 thousand in 2016. Variations arise as a result of the fiscal treatment of lease cars depending on the price and private use of the car and a change in the fiscal treatment of mortgage related interest benefits.
2 The decrease in annual pension expenses is caused by an increase of the interest rates. The calculation of the annual pension expenses is based on the total granted pension rights during the term of service at a.s.r. Further changes in the cost of pension benefits are mainly the result of the impact of age, term of service, gender and age differentiated disability, mortality and other actuarial assumptions. The pension costs include pensions based on maximum pensionable salary cap, compensation for maximum pensionable salary cap (at employees discretion to be utilized for pensions) amounting to € 209 thousand (2015: € 205 thousand) in total, and VPL. The 2015 pension benefits of
Later than 3 months and no later than 1 year 4 3
Later than 1 year and no later than 5 years 9 9
ASR Bank N.V. 3 100.00 100.00 Utrecht Banking and Asset Management
ASR Nederland Beleggingsbeheer N.V. 3 100.00 100.00 Utrecht Banking and Asset Management ASR Vastgoed Vermogensbeheer B.V. 1,3 100.00 100.00 Utrecht Banking and Asset Management
Boval Flexis Pensioen B.V. 3 50.00 50.00 Zoetermeer Distribution and Services
Van Kampen Geld B.V. 3 100.00 100.00 Purmerend Distribution and Services
Brand New Day Premiepensioeninstelling N.V. 3,6 55.00 55.00 Amsterdam Holding and Other
ASR Service Maatschappij N.V. 1 100.00 100.00 Rotterdam Holding and Other
Administratie- en Adviesbureau voor Belegging en Krediet (A.B.K.) B.V. 1 100.00 100.00 Amersfoort Holding and Other
Risk management is an integral part of our daily business activities. a.s.r applies an integrated approach in managing risks, ensuring that our strategic goals (customer interests, financial solidity and efficiency of processes) are maintained. This integrated approach ensures that value will be created by identifying the right balance between risk and return, while ensuring that obligations towards our stakeholders are met. Risk management supports a.s.r. in the identification, measurement and management of risks and monitors to ensure adequate and immediate actions are taken in the event of changes in a.s.r.’s risk profile.
a.s.r. strives to find an optimal tradeoff between risk and return, also known as value steering. Value steering is applied in decision-making throughout the entire product cycle: from PARP (Product Approval Review Process) to the payment of benefits and claims. At the more strategic level, decision-making takes place through balance sheet management. A robust solvency position takes precedence over profit, premium income and direct investment income. Risk tolerance levels and limits are captured in the financial risk appetite statements (financial RAS) and monitored by the Financial Risk Committee (FRC). The FRC evaluates financial risk positions against the RAS on a monthly basis. Where appropriate, further mitigating measures are taken. Decisions that may have significant impact are made by the a.s.r. Risk Committee.
As of 1 January 2016 the Solvency II regime is in place. a.s.r. measures its risks based on the standard model as prescribed by the Solvency II regime and therefore the risk management framework and this chapter are fully in aligned with Solvency II. The Solvency Capital Requirement (SCR) is determined as the change in own funds caused by a predetermined shock which is calibrated to a 1-in-200 year event. The basis for these calculations are the Solvency II technical provisions which are calculated as the sum of a best estimate and a risk margin.
Intro d uctio n 5.8.1 Risk management system including the own risk and solvencyassessment Risk Management System
It is of great importance to a.s.r. that risks within all business lines are timely and adequately controlled. In order to do so, a.s.r. has implemented a Risk Management framework based on internationally recognized and accepted standards (such as COSO ERM and ISO 31000:2009 risk management principles and guidelines). With the aid of this framework, material risks that a.s.r. is, or can be, exposed to are identified, measured, managed, monitored and evaluated. The framework is both applicable to a.s.r. Group and the underlying business entities.
Systems and data In order to report the correct figures and to apply risk-mitigating measures timely, it is of vital importance to have qualitatively adequate data and systems. To ensure this, a.s.r. had developed policies for data quality in line with Solvency II. Tools, models and systems are implemented to support the risk management process by giving guidance and insight in the key risk indicators, risk tolerance levels, boundaries and actions and remediation plans to mitigate risks.
Risk policies and procedures The classification of risks within a.s.r. is performed in line with the Solvency II risks. Each risk category consists of a policy that explains how risks are identified, measured and controlled within a.s.r.
Risk culture Risk culture is an important subject that emphasizes the human side of risk management. The Executive Board has a distinguished role in expressing the appropriate norms and values (tone at the top). a.s.r. employs several measures to increase the risk awareness and, in doing so, the risk culture.
Risk strategy and risk appetite The risk strategy of a.s.r. aims to ensure that management decisions lead to a risk profile that remains in line with the mission of the organization. The risk strategy entails all processes to manage identified risks and to take advantage of opportunities that come around. In order to achieve this, a risk appetite is established so that the risk profile can be managed within the boundaries as determined by the Executive Board and approved by the Supervisory Board. These risk boundaries are set with the goal of remaining a solid insurance company with the right balance between risk and return. The risk appetite describes the level of risk a.s.r. is prepared to take to realize the strategic goals. Risk exposures are actively managed to ensure that the risks will stay within the defined limits.
Cost effectiveness The Group aims to continuously focus on effectively managing its costs.
The strategic pillars are translated in key risk appetite pillars that represent the focus points supporting the realization of the strategic objectives from a risk management perspective. The figure below illustrates the key risk appetite pillars. Consequently, these risk appetite pillars are the basis for the establishment of risk appetite statements.
Value creation by efficient allocation of capital resulting in realizing value and return objectives. This will safeguard the efficiency of business operations and continuity of a.s.r. in the long term.
Maintaining continuity by accepting only risks that a.s.r. understands and by efficient, controlled and integer business operations.
A balanced governance which ensures that all interests of our stakeholders are taken into account in a sustainable and balanced way.
Business Risk Committee a.s.r. Risk Committee a.s.r. Audit & Risk Committee
Through a top-down strategic risk analysis at group level and bottom-up control risk self assessments from the legal entities the most important strategic risks are identified. For each of these risks an estimation of the probability and impact is made to prioritize the risks. The outcomes of these analyses are input for defining the level of risk the organization is willing to take in order to achieve strategic goals. The risk appetite is formulated to provide steering and direction to the management of the strategic risks. The risk appetite contains a number of qualitative and quantitative risk statements. The statements point out the risk preferences and tolerances of the organization and are viewed as key elements for the realization of our strategy. With the use of hard and soft limits the boundaries for accepting risks are objective and evident. Soft limits are used as early warning signals to prevent risk taking beyond the hard limits. The performance against these statements is monitored in the risk committees. The statements and limits are evaluated regularly to maintain alignment with the strategy.
• Responsible for providing dedicated assurance services and oversees and assesses the functionng and the effectiveness of the first two lines of defense
Positioning of key functions Within the risk governance, the key functions (compliance, risk, actuarial and audit) are organised in accordance with Solvency II regulation and play an important role as countervailing power of management in the decision making process. The four key functions are independently positioned within a.s.r. The risk and actuarial function are positioned under responsibility of the CFO; the compliance and audit function under the responsibility of the CEO. All functions take place in the central risk committees. None of the functions has voting rights in the committees, in order to remain fully independent as countervailing power. All functions have direct communication lines with the Executive Board and can escalate to the chairman of the Audit & Risk Committee of the Supervisory Board.
Enterprise Risk Management Enterprise Risk Management is responsible for the second line strategic risk and operational (including IT) risk management and the enhancement of the risk awareness within the organisation. The responsibilities with regard to strategic risk management include the development of risk policies, the annual update of the risk strategy (risk appetite), the coordination of the CRSA process, the monitoring of the non-financial risk profile and risk priorities of a.s.r. For the management of operational risks, a.s.r has a solid Risk-Control framework in place that contributes to its long-term solidity. The quality of our framework is continuously enhanced by the analysis of operational incidents and periodic assessments. Enterprise Risk Management actively promotes risk awareness at all levels to contribute to the vision of staying a socially relevant insurer.
Audit The Audit department, the third line of defense, provides an independent opinion on governance, risk and management processes, with the goal of supporting the Executive Board and the other management of a.s.r. in achieving the corporate objectives. To that end, Audit evaluates the effectiveness of governance, risk and management processes, and provides pragmatic advice that can be implemented to further optimize these processes. In addition, senior management can engage Audit for specific advisory projects.
Risk committee structure a.s.r. has established a structure of risk committees with the objective to monitor the risk profile for a.s.r., its legal entities and its business lines in order to ensure that it remains within the risk appetite and the underlying risk tolerances and risk limits. When triggers are hit or likely to be hit, risk committees can decide to take measures and to increase the frequency of their meetings. For each of the risk committees a statute is drawn up in which the tasks, composition and responsibilities of the committee are defined.
All members of the Executive Board participate in the a.s.r. Risk Committee, which is chaired by the CEO. The involvement of the Executive Board ensures that risk decisions are being addressed at the appropriate level within the organization. In addition to the Executive Board, the CRO, Director of Audit and Director of Compliance are members of the Committee.
Non-Financial Risk Committee The Non-Financial Risk Committee discusses, advises and decides upon non-financial risk policies. The most relevant risk policies are approved by the a.s.r. Risk Committee. The Non-Financial Risk Committee monitors that non-financial risks are adequately managed and monitors that the risk profile stays within the agreed risk limits. If the risk profile exceeds the
Intro d uctio n limits, the Non-Financial Risk Committee takes mitigating actions. The Non-Financial Risk Committee reports to the a.s.r. Risk Committee. The Chairman of the Non-Financial Risk Committee is the COO (who is also a member of the Executive Board).
Capital, Liquidity & Funding Committee The Capital, Liquidity and Funding Committee is a subcommittee of the Financial Risk Committee. As such, the Capital, Liquidity and Funding Committee prepares and assesses the technical analysis of capital, liquidity and funding positions, rating policy, rating model reporting, and treasury activities. The Chairman of the Capital, Liquidity and Funding Committee is the Director of Group Asset Management.
Central Investment Committee In addition to the risk committee structure, the Central Investment Committee monitors tactical decisions and the execution of the investment policy. It takes investment decisions within the boundaries of the strategic asset allocation as agreed upon in the Financial Risk Committee. The Central Investment Committee bears particular responsibility for investment decisions exceeding the mandate of the investment department. The Central Investment Committee is chaired by the COO (member of the Executive Board).
Systems and data Tools, models and systems are implemented to support the risk management process by giving guidance and insight in the key risk indicators, risk tolerance levels, boundaries and actions and remediation plans to mitigate risks. The availability, adequacy and quality of data and IT systems is important in order to ensure that correct figures are reported and risk mitigating measures can be taken in time. It is important to establish under which conditions the management information that is submitted to the risk committees has been prepared and which quality safeguards were applied in the process of creating this information. This allows the risk committees to ascertain whether the information is sufficient to base further decisions on. a.s.r. has a Data Governance and Quality policy in place to support the availability of sound management information. This policy is evaluated on an annual basis and revised at least every three years to keep the standards in line with the latest developments on information management. The quality of the information is reviewed on the basis of the following aspects, based on Solvency II: • Completeness (including documentation of accuracy of results); • Adequacy; • Reliability; • Timeliness.
The information involved tends to be sensitive. To prevent unauthorized persons from accessing it, it is disseminated using a secure channel or protected files. a.s.r.’s information security policy contains guidelines in this respect.
There are technical solutions for accomplishing this, by enforcing a layered approach (defense-in-depth) of technical measures to avoid unauthorized persons (i.e. hackers) to compromise a.s.r. corporate data and systems. In this perspective, one may think of methods of logical access management, intrusion detection techniques, in combination with firewalls that are aimed at preventing hackers and other unauthorized persons from accessing information stored on a.s.r. systems. Nevertheless, confidential information can also have been committed to paper. In addition to technical measures the physical measures, such as the lock-down of a certain room, can also form part of the information security environment. a.s.r.’s information security policy is based on ISO 27002 ‘Code of practice for information security management’. This Code describes best practices for the implementation of information security.
The Executive Board clearly recognizes the importance of risk management and is therefore represented in all of the major group level risk committees. Risk Management is involved in the strategic decision-making process, where the company’s risk appetite is always considered. The awareness of risks during decision-making is continually addressed when making business decisions, for example by discussing and reviewing risk scenarios and the positive and/or negative impact of risks before finalizing decisions.
It is very important that this risk awareness trickles down to all parts of the organization, and therefore management actively encourages personnel to be aware of risks during their tasks and projects, in order to avoid risks or mitigate them when required. The execution of risk analyses is embedded in daily business in, for example, projects, product design and outsourcing.
Furthermore, a.s.r. believes it is important that a culture is created in which risks can be discussed openly and where risks are not merely perceived to be negative: risks can also present a.s.r. with opportunities. Risk Management (both
Intro d uctio n centralized and decentralized) is positioned as such, that it can communicate and report on risks independently and transparently, which also contributes to creating a proper risk culture.
Risk management process The risk management process typically comprises of five important steps: 1) identifying; 2) measuring; 3) managing; 4) monitoring and reporting; and 5) evaluating. a.s.r. has defined a procedure for performing risk analyses and standards for specific assessments.
Identifying Management should endeavor to identify all possible risks that may impact the strategic objectives of a.s.r., ranging from the larger and/or more significant risks posed on the overall business, down to the smaller risks associated with individual projects or smaller business lines. Risk identification comprises of the process of identifying and describing risk sources, events, and the causes and effects of those events.
Measuring After risks have been identified, quantitative and/or qualitative assessments of these risks take place to estimate the likelihood and impact associated with them. Methods applicable to the assessment of risks are: • Sensitivity analysis; • Stress testing; • Scenario analysis; • Expert judgments (regarding likelihood and impact); and • Portfolio analysis.
Risk management strategies are chosen in a way that ensures that a.s.r. remains within the risk appetite tolerance levels and limits.
Insurance risk Insurance risk is the risk that premium and/or investment income will not be sufficient to cover current or future payment obligations, owing to the application of inaccurate technical or other assumptions and principles when developing and pricing products. a.s.r. recognizes the following Insurance risks: • Non-life insurance risk; • Life insurance risk; • Health.
Strategic risk Strategic risk is the risk that a.s.r. or its business lines fail to achieve the objectives owing to incorrect decision-making, incorrect implementation and/or an inadequate response to changes in the environment.
Such changes may arise in the following areas: • Demographics; • Competitive conditions; • Technology; • Macroeconomic conditions; • Laws and regulations and ethical standards; • Stakeholders; • Group structure (for product lines only).
As of 1 January 2016 the Solvency II regime is in place. a.s.r. measures its risks based on the standard model as prescribed by the Solvency II regime. The Solvency Capital Requirement (SCR) for each insurance risk is determined as the change in own funds caused by a predetermined shock which is calibrated to a 1-in-200 year event. The basis for these calculations are the Solvency II technical provisions which are calculated as the sum of a best estimate and a risk margin.
SCR sensitivities a.s.r. has assessed the impact of various sensitivities on the solvency ratio. The sensitivities as at 31 December 2016, expressed as impact on the Group solvency ratio (in percentage points) are as follows: Solvency II sensitivities 31 December 2016 Effect on: Type of risk (%-points) Available capital Required capital Ratio
Measured as the impact of a 5% decrease in all mortality rates. A mitigating effect will occur between mortality and longevity rates.
For the life portfolio, the provision at year-end 2016 can be broken down as follows under Solvency II: Life - Solvency II technical provision
Pricing is based on profit capacity calculations. A calculation is made of the price required to cover the risks. A calculation is made of the price required to cover the insurance liabilities, expenses and risks. Underwriting policies describe the types of risks and the extent of risk a.s.r. is willing to accept. Policyholders may be subjected to medical screening for individual life insurance.
Buy out reinsurance The Group enters into reinsurance contracts to minimize insurance risks. Reinsurance may be in place for a separate contract or for all or part of the portfolio. In order to optimise its balance sheet risks, ASR Levensverzekering N.V. entered into a reinsurance agreement with Legal and General Re (via Hannover Re as fronting reinsurer) in 2015. The agreement entailed the transfer of € 209 million in pension obligations to Legal and General Re.
Mass lapse cover The required capital (SCR) for a mass lapse event is reduced by the proceeds that are to be expected from a reinsurance arrangement (Mass Lapse Cover) with RGA, Münich Re and some other reinsurers. This arrangement covers the risks of a mass lapse event of parts of the portfolio to the extent that the mass lapse is more than 25% and less than 40%.
The Health insurance portfolio of a.s.r. contains the following insurance risks: • SLT Health risk - This risk is applicable to the SLT Health portfolio. The calculation is scenario-based. The scenarios are similar to the scenarios that are used to calculate the Life insurance risk; • NSLT Health risk - This risk is applicable to the NSLT Health portfolio. The calculation is factor-based. The risk is calculated similarly to the Non-Life insurance risk; • Health Catastrophe risk - This risk is applicable to the entire Health portfolio. The calculation is scenario-based.
Disability-morbidity risk Morbidity or disability risk is the main risk to the SLT Health portfolio. The scenario analysis consists of a 35% increase in disability rates over the next year, combined with a decrease in revalidation rates of 25%.
Expense risk The effect of a permanent increase in costs is calculated, which is used for determining the best estimate. The scenario analysis contains an increase in the costs of 10% and an increase in the cost inflation of 1pp per year.
Future Management Action According to the insurance conditions, a.s.r. has the ability to adjust the premiums and insurance conditions in the future. Therefore, a.s.r. applies a future management action, as noted in Article 23 of the Delegated Acts, when calculating the SLT Health risk for the portfolios with contract boundaries exceeding three years.
NSLT Lapse risk The basic and additional health insurance are compulsory insurance contracts for one year without intermediate possibility of termination and therefore lapse risk is negligible for the basic health insurance.
Health Catastrophe risk Medical Expense A health catastrophe for NSLT Health portfolio is an unexpected future event with a duration of one year. The risk is determined ultimo year. The amount of catastrophe risk is apparent from the number of insured and parameters for mass accident scenario and pandemic scenario that have been approved by Dutch Central Bank in consultation with Health Insurers Netherlands. Accident concentration is not applicable for NSLT Health. The catastrophe risk has a projection of one year (T) following from the contract boundary of one year in accordance with the Dutch Health Insurance Act. After year T the risk is ‘zero’. Catastrophe risk for AV equals zero.
In this scenario, an accident takes place during a major public event. The risk is that 10% of the attendees are killed, 1.5% are permanently disabled, 5% are disabled for 10 years, 13.5% are disabled for 12 months and 30% need medical attention; • Accident concentration scenario In this scenario, an accident takes place on site, with the most of our insured at the same location. The risk is that 10% of those present are killed, 1.5% are permanently disabled, 5% are disabled for ten years, 13.5% are disabled for 12 months and 30% need medical attention; • Pandemic scenario In this scenario, there is a pandemic, which causes 1% of those affected to be hospitalized and 20% to see a local practitioner.
For the SLT Health portfolio, the provision at year-end 2016 can be broken down as follows under Solvency II: Similar to Life Techniques - Solvency II technical provision
Technical provision 859 5.8.2.2.3 Managing health and non-life insurance risk Health and non-life insurance risk is managed by monitoring claims frequency, the size of claims, inflation, handling time, benefit and claims handling costs, and biometrical risks (disability, recovery, illness, death). Concentration risk also qualifies as an insurance risk.
An overview of the claim development at a.s.r. can be found in chapter 5.5.10.2.
To limit risk concentration, reinsurance contracts are placed with various reinsurance companies. a.s.r. requires the counterparties to be rated at least single A. The reinsurance programme has remained largely the same as in previous years in terms of cover and limits. The most significant reinsured risks are windstorm and individual disability. In 2015, a.s.r. purchased excess of loss reinsurance for accident year 2016 for windstorm in excess of € 30 million with a limit of € 344 million. For individual disability for self-employed policyholders, approximately 30% of the inception risk is reinsured.
Market risk is the risk of potential losses due to adverse movements in financial market variables. Exposure to market risk is measured by the impact of movements in financial variables such as equity prices, interest rates and property prices. The various types of market risk which are discussed in this section, are: • Interest rate risk; • Equity risk; • Property risk; • Currency risk; • Spread risk; • Concentration risk.
A summary of sensitivities to market risks for the regulatory solvency, total equity and profit for the year is presented in the tables below.
a.s.r. applies the transitional measure for equity risk for shares in portfolio at 31 December 2015. The SCR equity shock was 22% at 31 December 2015 and linear, increasing to (i) 39% + equity dampener for type I shares and (ii) 49% + equity dampener for type II shares. The equity dampener has a value between -10% and 10%. In the event of increasing equity prices, the equity dampener will have a smaller dampening effect.
UFR of 3.2% after the last liquid point of 20 years remained unchanged.
Measured as the impact of a parallel 1% upward and downward movement of the interest rates. For the liabilities, the extrapolation to the UFR of 4.2% after the last liquid point of 20 years remained unchanged.
The sensitivities of total equity to equities decreased in 2016 in line with the lower exposure to equities. The sensitivity of profit in the equity down scenario is due to the impact of the put options (€ 22 million) and impairments of shares (€ -34 million). The sensitivity of profit in the equity up scenario is due to the impact of the put options (€ -7 million).
The required capital for interest rate risk is determined by calculating the impact on the available capital due to changes in the yield curve. Both assets and liabilities are taken into account. The interest rate risk is the maximum loss of (i) an upward shock or (ii) a downward shock of the yield curve according to the prescribed methodology. a.s.r. applies a look-through approach for investment funds to assess the interest rate risk.
5.8.3.3 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. applies the look-through approach for investment funds to assess the equity risk.
The required capital for equity risk is determined by calculating the impact on the available capital due to an immediate drop in share prices. Both assets and liabilities are taken into account. Stocks listed in regulated markets in countries in the EEA or OECD are shocked by 39% together with the symmetric adjustment of the equity capital charge (type I). Stocks in countries that are not members of the EEA or OECD, unlisted equities, alternative investments, or investment funds in which the look-through principle is not possible, are shocked by 49% together with the symmetric adjustment of the equity capital charge (type II). The basic shock for strategic participations is 22%.
Intro d uctio n a.s.r. applies the transitional measure for equity risk for shares in portfolio at 31 December 2015. The SCR equity shock was 22% at 31 December 2015 and linear increasing in 7 years to (i) 39% + equity dampener for type I shares and (ii) 49% + equity dampener for type II shares. This resulted in a reduction of the average risk charge of equity risk of about 13% per 31 December 2016.
Intro d uctio n 5.8.3.4 Property risk The property risk depends on the total exposure to real estate. In order to maintain a good understanding of the actual property risk, a.s.r. applies the look-through approach for investment funds to assess the property risk.
Composition of property portfolio The property risk depends on the total exposure to property, which includes both property investments and property held for own use. The fair value of property was € 3,298 million at year-end 2016 (2015: € 2,939). The increase in 2016 was a result of both transactions and increases in property prices.
Composition property portfolio 2015 5.8.3.5 Currency risk Currency risk measures the impact of losses related to changes in currency exchange rates. The table below provides an overview of the largest currency exposures in the portfolio.
The required capital for currency risk is determined by calculating the impact on the available capital due to a change in exchange rates. Both assets and liabilities are taken into account. For each currency, the maximum loss due to an upward and a downward shock of 25% is determined, where lower shocks are applied to several currencies (Danish crown; Bulgarian lev). For SCR currency risk, the look-through approach is applied for investment funds.
In 2016 a.s.r. has sold AAA rated government bonds (mainly German bonds) and bought non-AAA government bonds (mainly French and Belgium bonds) with a shorter duration. Interest rate risk is kept stable with interest rate swaps.
Above differences can be explained by the previously mentioned transactions in AAA rated government bonds (mainly German bonds) and non-AAA government bonds (mainly French and Belgium bonds). Moreover, a.s.r. bought Spanish and Irish government bonds in 2016, which explains the increase in Periphery.
The financial bond portfolio slightly decreased due to the reduction of covered bonds. a.s.r. don’t invest in new Tier 1 financial bonds, redemptions therefore lead to the decrease in the Tier 1 portfolio.
Redemptions are responsible for the decrease in the market value of the Structured Entities and occurred mainly in the MBS portfolios. The revaluations on the structured products portfolio decreased slightly in the course of 2016.
Collateralized debt obligation (CDO) CDOs are securities backed by a pool of bonds, loans or other assets. CDOs do not specialize in one type of debt, but are often non-mortgage loans or bonds. CDOs are unique in that they represent different types of debt and counterparty default risk. In the case of CDOs, these different types of debt are often referred to as ‘tranches’ or ‘slices’. Each slice has a different maturity and risk associated with it. The CDO portfolio of a.s.r. currently consists mainly of senior tranches in collateralized loan obligations (CLOs), which are CDOs backed by a portfolio of European bank loans. The portfolio also contains various CDOs with several types of collateral, such as loans to smaller financial institutions and ABS.
The non-rated category corporates includes predominantly externally managed fixed-income funds and loans issued to intermediaries. The group applies stringent application and approval procedures to these loans. Following an intermediary’s application, their credit quality is determined based on an internal risk-rating model. The loan application is then submitted for approval to the Credit Committee.
5.8.3.7 Market risk concentrations Concentration risk is the risk of an accumulation of exposures with the same counterparty.
Assets that are in scope of spread risk are, by definition, not in scope of counterparty default risk and vice versa.
The Solvency II regime makes a distinction between two types of exposures: • Type 1: These counterparties generally have a rating (reinsurance, derivatives, current account balances, deposits with ceding companies and issued guarantee (letter of credit). The exposures are not diversified; • Type 2: These counterparties are normally unrated (receivables from intermediaries and policyholders, mortgages with private individuals or SMEs). The exposures are generally diversified.
Amount 31 December 2015 Percentage 5.8.4.2 Savings-linked mortgage loans The counterparty default risk of the savings-linked mortgage loans depends on the counterparty. For 56% 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 42% of the portfolio, for which the risk is limited. Effectively, a.s.r. receives the underlying mortgage loans as collateral, mitigating the counterparty default risk of the savings-linked mortgage loans.
Savings-linked mortgage loans: other 5.8.4.3 Derivatives OTC derivatives are primarily used by a.s.r. to manage the interest-rate risks incorporated into the insurance liabilities. Interest-rate derivatives are traded with a well-diversified and qualitative dealer panel with whom there is an established International Swaps and Derivatives Association (ISDA) contract and a Credit Support Annex (CSA) in place. These CSAs include specific agreements on the exchange of collateral limiting market and counterparty risk. The outstanding value of the interest rate derivative positions is matched by collateral received from eligible counterparties, minimizing the net counterparty default risk.
Intro d uctio n 5.8.4.6 Cash and deposits The current accounts amounted € 1,799 million in 2016 (2015: € 1,444 million).
Liquidity risk is the risk that a.s.r. is not able to meet its financial obligations to policyholders and other creditors when they become due and payable, at a reasonable cost and in a timely manner. Liquidity risk is not quantified in the Solvency Capital Requirement of a.s.r, and is therefore separately discussed here.
Liquidity risk - required capital 31 December 2016 < 1 year 1-5 year 5-10 year 10-20 year > 20 year 31 December 2015 < 1 year 1-5 year 5-10 year 10-20 year > 20 year
The required capital for operational risk, based on the standard model, is presented below.
Identifying With the operational targets as a starting point, each business entity performs risk assessments to identify events that could influence these targets. In each business entity the business risk manager facilitates the periodic identification of the key operational risks. All business processes are taken into account to identify the risks. All identified risks are prioritized and recorded in a risk-control framework.
Managing For each risk, identified controls are implemented into the processes to keep the level of risk within the agreed risk appetite. In general, risks can be accepted, mitigated, avoided or transferred. A large range of options is available to mitigate operational risks, depending on the type. For each control an estimation is made of the net risk, after implementing the control.
Monitoring and reporting The effectiveness of operational risk management is periodically monitored by the business risk manager at each business entity. For each control in the risk-control framework a testing calendar is established, based on accounting standards. Each control is tested regular and the outcomes on the effectiveness to manage the key risks are reported to the management board. Outcomes are also reported to the Non Financial Risk Comite (NFRC) and a.s.r. Risk Committee.
Operational incidents Operational incidents with operational losses in excess of € 5,000 are reported to Group Risk Management, in accordance with the operational risk policy. The causes of losses are evaluated in order to learn from these experiences. An overview of main losses is reported to the NFRC. Actions are defined and implemented to avoid repetition of operational losses.
Intro d uctio n information, security and cyber risks is essential, and this is why actions are carried out to create awareness among employees and business lines.
Reasonable assurance and model validation a.s.r aims to obtain reasonable assurance regarding the adequacy and accuracy of the outcomes of models that are used to provide best estimate values and solvency capital requirements. To this end, multiple instruments are applied, including model validation. The validation of models is prioritized based on materiality, which is determined by means of an assessment of impact and complexity. Impact and complexity is expressed in terms of High (H), Medium (M), or Low (L). In the pursuit of reasonable assurance, model risk is mitigated and unpleasant surprises are avoided.
Strategic risk is defined as the risk that a.s.r. will not reach its strategic objectives, because risk considerations are not or incorrectly addressed in decision-making processes, incorrect implementation of decisions and/or failure to respond adequately to market developments. Strategic risk management aims to identify and manage the most significant risks that may impact a.s.r.’s strategic objectives. Subsequently, the aim is to identify and analyze the risk profile as a whole, including risk interdependencies. The ORSA process is designed to identify, measure, manage and evaluate those risks that are of strategic importance to a.s.r.: Identifying Through the ORSA process a Control Risk Self-Assessment (CRSA) is conducted annually for all a.s.r. business entities to identify risks that have an impact on the achievement of the organization’s strategic objectives. At group level a Strategic Risk Analysis is performed based on all available internal and external information and developments. This approach combines a bottom up (CRSA’s) and top Down (SRA) method to identify risks. The outcomes of the CRSA’s and SRA are jointly translated into risk scenarios and ‘risk priorities’, in which the most significant risks for a.s.r. are represented. The Executive Board of a.s.r. decides annually on the most important risk priorities.
Measuring a.s.r. conducts an own risk and solvency assessment (ORSA) at both group and legal entity level each year or more frequently if required by significant changes in a.s.r.’s risk profile. The ORSA is a tool for risk and capital management. Through the ORSA process, the likelihood and impact of the identified risks are assessed, by transposing the risks into scenarios, taking into account (the effectiveness of) risk mitigating measures and planned improvement actions. Information from other processes is used to gain additional insights into the likelihood and impact.
After introduction of Solvency II legislation more internal measures are based on Solvency II. For example management targets or soft limits based on UFR scenario’s.
In accordance with a.s.r.’s dividend policy, the liquidity of the underlying entities is not taken into account for the liquidity position of the group. However, the capital is recognized in the capital position of the group, since a.s.r. has the ability to realize the capital of this OTSO, for example by selling the entity. Specifically regarding Basis Ziektekostenverzekering N.V. in 2016, no dividend or capital withdrawals have taken place.
Intro d uctio n 5.9.2 Solvency Capital Requirement and Minimum Capital Requirement
Relevant regulation and current guidance (Delegated Acts, Level 3 guidelines, Dutch Central Bank Q&A’s and IAS12) is taken into account in the development of the LAC DT methodology.
Standard & Poor’s confirmed the single A rating of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. on August 8, 2016.
Rating reports can be found on the a.s.r. website: 5.9.3 Dividend policy and capital actions
Intro d uctio n 5.10 Company financial statements 5.10.1 Company balance sheet
Income from subsidiaries and investments Share of profit/(loss) in subsidiaries 5.10.3.3 668 621
The loans to group companies consist primarily of deposits with group companies of € 77 million with an average interest rate of 1.8% (2015: € 20 million) repayable within one year, no loans with a maturity term within 3 years (2015: nil) and loans of € 15 million (2015: € 14 million) with a maturity term longer than 3 years and an average interest rate of 4.3 % (2015: 4.3%).
Other changes -40 13 5.10.3.6 Deferred tax assets The deferred tax assets primarily to employee benefits (including the asset resulting from the insurance contracts which is administered by ASR Levensverzekering N.V. amounting to € 150 million (2015: € 106 million) off set by the equalization reserve of € 53 million (2015: € 39 million).
5.10.3.7 Other receivables The other receivables are including receivables from group companies. The receivables from group companies includes the receivable with respect to non-qualifying plan assets (see chapter 5.5.11) administered by ASR Levensverzekering N.V. amounting to € 2,669 million (2015: € 2,525 million) including the separate account to fund future inflation indexation amounting to € 327 million as at 31 December 2016 (2015: € 306 million). The remaining portion of the receivables from group companies is payable on demand.
5.10.3.8 Cash and cash equivalents Cash and cash equivalents are stated at face value. They are fully and freely available to the company.
Change in reserves required by law - - - 43 -43 - - -
Tax relating to interest on other equity instruments - - - - 11 11 - 11
Statutory reserves The statutory reserves relate to the revaluation of investments in group companies. The statutory reserves are maintained in relation to the (not yet received as dividend) share in the result (and other additions to equity) of group companies accounted for using the equity method since initial recognition reduced with the amount of dividend that a.s.r. is able to distribute without restrictions. The statutory reserves are not freely distributable. Refer to chapter 5.9 for more information on the regulatory restrictions.
Intro d uctio n 5.10.3.14 Due to banks In 2016 due to banks contained € 75 million (2015: nil).
The interest rate is 1-month Euribor + 0.65%. There is no significant difference between the carrying amount of € 75 million (2015: nil) due to banks and the fair value of these liabilities.
5.10.3.16 Operating expenses The operating expenses of € 86 million (2015: € 105 million) consist of the part of the total operating expenses related to Holding – activities. Please refer to chapter 5.6.8 for the total operating expenses of the group.
In the above mentioned years no fees were paid for tax-related advisory services to EY Accountants LLP (2016), KPMG Accountants N.V. (2015), and no fees were paid to other EY or KPMG networks, other than EY Accountants LLP and KPMG Accountants N.V.
Intro d uctio n 5.10.3.19 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 separately liable for taxation payable by the fiscal entity.
A statement of joint and several liability under section 403, Book 2 of the Netherlands Civil Code has been issued by ASR Nederland N.V. for the companies identified in chapter 5.7.6 List of principal group companies and associates.
Commitments to group companies ASR Nederland N.V has committed to a capital increase of ASR Bank N.V. amounting to € 35 million for the period until 2018. 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 tranches amounting to € 19 million have already been made until end of 2016 (2015: € 5.8 million).
These transactions mainly consist of dividends, discretionary interest, loans and related interest, and operating expenses and are conducted on terms equivalent to those that prevail in arm’s length transactions. These disclosures related to these transactions are included in the relevant note in the company financial statements and in the consolidated financial statements (see primarily chapters 5.7.2 and 5.7.6).
Report on the audit of the financial statements 2016 included in the Annual Report 260
To: the General Meeting of Shareholders and the Supervisory Board of ASR Nederland N.V.
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 2016, and of its result and its cash flows for 2016 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; • The company financial statements give a true and fair view of the financial position of ASR Nederland N.V. as at 31 December 2016, and of its result for 2016 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
Other | 6.1 Report on the audit of the financial statements 2016 included in the Annual Report 261
Scope of the group audit ASR Nederland N.V. is at the head of a group of entities, including the principal subsidiaries as set out in note 5.7.6 of the annual accounts. The financial information of this group is included in the consolidated annual accounts of ASR Nederland N.V.
The group consolidation, financial disclosures and a number of complex items were audited by the group engagement team at the ASR Nederland N.V. level. These included taxation, pension, Solvency and goodwill impairment testing. We involved several EY specialists to assist the audit team, including specialists from our tax, valuations, actuarial and treasury departments.
Adequacy of insurance contract liabilities (including shadow accounting) due to the complexity and use of assumptions
The calculation of the Liabilities arising from insurance contracts and the related Liability Adequacy Test (LAT) is complex and highly judgmental and is based on assumptions that are subject to uncertainties regarding future outcomes. Various economic and non-economic assumptions are being used to estimate these longterm liabilities, both in the insurance contract liabilities as reported in the balance sheet and in the LAT. The assumptions for life contracts used relate to risks regarding interest, mortality, longevity, morbidity, catastrophe, lapse and expense and for non-life contracts liabilities these are the disability, claims and recovery rate assumptions. Also the cost compensation for unit-linked insurance contracts impacts the valuation of the Liabilities arising from insurance contracts and the related LAT as disclosed in note 5.9.2. and 5.3.5. (J).
Furthermore, the valuation of the Liabilities arising from insurance contracts is affected by and sensitive to government regulations, in particular regarding the claims from workers’ compensations insurance (WGA-ER) and in the healthcare insurance domain. The company applies shadow accounting in its financial reporting as disclosed in note 5.5.10 and 5.5.11.1. The company has comprehensive procedures and internal controls in place to determine the shadow accounting. ASR Nederland’s LAT is performed in order to confirm that insurance contract liabilities, net of deferred acquisition cost, are adequate in the context of expected future cash outflows. The company has comprehensive procedures and internal controls in place to determine the value of the Liabilities arising from insurance contracts and the related LAT (see notes 5.8.3). The LAT discount rate is based on Solvency II guidance. As disclosed in note 5.8.4 the UFR has a significant impact on the LAT and the available solvency of the company.
We involved internal actuarial specialists in performing the audit procedures in this area. This includes assessing the appropriateness of assumptions used in the valuation of the individual life and pension contracts, non-life contracts and healthcare insurance contracts by reference to company and industry data and expectations of investment returns, future longevity and expense developments. Furthermore key audit procedures included assessing ASR Nederland N.V.’s methodology for calculating the insurance liabilities, assessing the changes in the company’s approach to liability adequacy testing and an assessment of internal controls in this respect, including the analyses of the movements in insurance contracts liabilities and technical provisions adequacy surplus during the year. We assessed whether the movements are in line with the changes in assumptions adopted by ASR Nederland N.V., our understanding of developments in the business and our expectations derived from market experience. We assessed the main assumptions used for the determinations of the insurance liabilities, LAT and Solvency II calculations. We tested the design and operating effectiveness of the controls used for the determinations of the insurance liabilities, LAT and Solvency II calculations. Shadow accounting is complex, requires judgment regarding results that apply for shadow accounting and has a significant impact on the Liabilities arising from insurance contracts. We tested the internal controls regarding the accounting of the (un)realized results on the fixed income investments, interest derivatives and inflation rate swaps, held to reduce the interest risk and inflation risk in the Liabilities arising from insurance contracts and relating shadow accounting adjustments. Furthermore we tested the application of shadow accounting by checking the reconciliations between (un)realized results on swaps and swaptions and the related shadow accounting adjustment in the Liabilities arising from insurance contracts.
In the Capital management section of the annual accounts included in note 5.9, ASR Nederland N.V. provides disclosures on its capital position in accordance with Solvency II, which is effective since 1 January 2016. As disclosed in the Capital management paragraph in section 5.9.2. all relevant regulations and guidance have been taken into account in the development of the ASR Nederland N.V. loss absorbing capacity of deferred taxes methodology. Further, in the calculation of the Solvency II ratio, ASR Nederland N.V. has not provided for a contingent liability in respect of the unit-linked issue in the Netherlands. ASR Nederland N.V assessed that it is impossible at this time to make reliable estimates of the number of expected proceedings, possible future precedents and the financial impact of current and possible future proceedings. Changes to the interpretation of the Solvency II requirements of the loss absorbing capacity of deferred taxes and the accounting for contingent liability for the unit linked issue can materially impact the Solvency II ratio disclosed.
ASR Nederland N.V. is highly dependent on its IT infrastructure for the continuity of the operations. ASR Nederland N.V. continues to invest in its IT infrastructure and processes to meet clients’ needs and business requirements. ASR Nederland is continuously improving the efficiency and effectiveness of its IT infrastructure and the reliability and continuity of the electronic data processing, including its defense against cyber-attacks.
In addition to the financial statements and our auditor’s report thereon, the Annual Report contains other information that consists of: • Management report; • Other information pursuant to Part 9 of Book 2 of the
Our responsibilities for the audit of the financial statements Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
Other | 6.1 Report on the audit of the financial statements 2016 included in the Annual Report 265
Intro d uctio n 6.2 Provisions of the Articles of Association regarding profit appropriation
Article 35, 36 and 37 of the Articles of Association: Distributions – General
37.2 To the extent that the distributions described in Article 37.1 sections a. through c. (or any part thereof) cannot be paid out of the profits shown in the annual accounts, the deficit shall be paid out of the Company’s reserves, subjet to Articles 35.1 and 35.2.
The Foundation has been formed under Dutch law. Its objects are to promote and protect the interests of a.s.r., its business and its stakeholders, and to counter possible influences that might threaten the continuity, independence, strategy and/or identity of a.s.r. or its business to such an extent that this could be considered contrary to the aforementioned interests.
a.s.r. has granted a call option to the Foundation under an agreement dated 27 May 2016; this agreement outlines the conditions under which the call option can be exercised. The call option is a continuous and repeatedly exercisable right, pursuant to which the Foundation is entitled to subscribe for preference shares, up to the lower of (a) the total number of shares that form a.s.r.’s issued capital at the time of the call option is exercised, less the number of preferred shares already held by the Foundation at that time (if any) and less one, or (b) the maximum number of preferred shares that may be issued under the authorized share capital as included in the Articles of Association of a.s.r. at the time of the call option is exercised. The Foundation has the right to exercise the call option at any time, either fully or in part. If and for as long as NLFI holds more than one-third of the shares that form part of the company’s issued share capital, the Foundation cannot exercise the call option without NLFI’s prior consent. The exercise price of preference shares issuable under the call option is equal to 25% of the nominal amount of those preference shares.
The board of the Foundation met twice in 2016. At one of these meetings, the entire Executive Board of a.s.r. gave an account of the company’s general affairs, financial reporting and relationship with its shareholders. In addition, attention was given to the Foundation’s financial housekeeping and the documentation of procedures and processes. The board of the Foundation also followed the developments of the company outside of board meetings, for instance through the board member’s receipt of the company’s press releases.
The Foundation is an independent legal entity for the purposes of Section 5:71(1)(c) of the Dutch Financial Markets Supervision Act.
Absenteeism due to illness Average number of days an employee is unfit for work due to illness.
Business Process Outsourcing (BPO) BPO involves the contracting out a knowledge-intensive process to a third-party service provider. The key differences between BPO and ‘standard’ outsourcing are that BPO entails the outsourcing of the entire process and that the process in question is characterized by in-depth technical expertise.
Clean fair value The fair value of an asset or liability, exclusive of the unrealized portion of accrued interest.
Crowd funding When projects are funded by the crowd, the project initiator describes the rewards he or she will provide to the crowd funders in return for the investments they will make.
Expense ratio Expenses, including internal costs of handling nonlife claims, less internal investment expenses and less restructuring provision expenses, expressed as a percentage of net earned premiums.
Forestry code of conduct A code of conduct that is designed to give managers a tool for treating nature respectfully with due observance of the law. It was written by Bosschap, the product
Impact investments Investments made in companies, organizations and/or funds with a view to having a beneficial impact on society and the environment while achieving an acceptable financial return.
Impairment The amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount. The asset’s carrying amount is reduced to its fair value and recognized through profit and loss.
Industrial accident An industrial accident is an accident that happens in the course or as a result of work performed for a.s.r., causing injury to an employee and resulting in absenteeism, permanent disability or death. Accidents happening during an employee’s travel to or from work do not qualify as industrial accidents, although they can at times be regarded as industrial accidents if vehicles owned by a.s.r. are involved.
ISAE 3000 ISAE 3000 is the standard for assurance on non-financial information. ISAE 3000 is issued by the International Federation of Accountants (IFAC). The standard lays down guidelines for the ethics, quality management and performance of an ISAE 3000 engagement. Generally speaking, ISAE 3000 is applied to audits of internal control, sustainability and regulatory compliance.
ISAE 3402 type II assurance report Statutory provisions (Section 4.16 of the Dutch Financial Supervision Act) dictate that financial institutions are required to demonstrate that their outsourced processes are properly managed. As a result, a financial institution will always require a supplier to provide a Service Organization Control (SOC) report before this supplier
Intro d uctio n can provide services to the financial institution. ISAE 3402 is the global standard for SOC reports. The ISAE 3402 report demonstrates that all of the financial institution’s outsourced processes are properly managed. Joint venture A contractual arrangement under which two or more parties undertake an economic activity that is subject to joint control.
Lease car fuel consumption Fuel consumption is expressed in litres (petrol, diesel, electricity and GHC). This is converted into joule.
Long-Term Energy Storage (LTES) Long-Term Energy Storage is a system for capturing energy from the earth. The underground storage of energy is used to heat and cool office buildings. In summer, ground water with a temperature of 10 to 12 degrees Centigrade is pumped up from a 50-metre deep cold well. In the heat exchanger in the building, the air for the air conditioning system meets the cold water and the air loses its heat to the groundwater, which warms up. The reverse applies in winter.
Net Promoter Score (NPS) A management tool that can be used to gauge the loyalty of an organization’s customers. The NPS is the outcome of the answer to the following question: 'How likely is it that you would recommend [type of policy] offered by [insurer] to your family, friends or colleagues?'
Principles for Responsible Investments The United Nations Principles for Responsible Investments are a framework for institutional investors. The principles, which were launched in April 2006, pertain to the integration of environmental, social and governance aspects into investment policies. For more information, see unpri.org.
Sickness frequency Average number of times one employee calls in sick in a particular period.
Sustainability sheet An appendix to a contract that sets out the sustainability agreements between the parties.
Volunteering Volunteer activities undertaken by a.s.r. employees, partly during work hours (eight hours per year) and partly during their own free time, to contribute to community initiatives/ social projects that are developed or supported by a.s.r. as part of its financial literacy drive.
Environmental Assessment Methodology CAGR Compound Annual Growth Rate CCR Counterparty Credit rating (Standards and
Poor’s) CDO Collateralized Debt Obligation CDS Credit Default Swap CRSA Control Risk Self-Assessment CoC Cost of Capital CoE Cost of Equity COSO Committee of Sponsoring Organizations of the
IFRS International Financial Reporting Standards IFSR Insurer Financial Strength Rating (Standard &
Investors Kifid Financial Services Complaints Authority KKV Dutch label for a customer oriented insurance KPI Key Performance Indicator LAC DT Loss Absorbing Capacity Deferred Tax LAT Liability Adequacy Test LTEO Long-Term Energy Storage LTGA Long-Term Guarantee Assessment MVI Socially Responsible Procurement and
Business Practices MYP3 Multi-Year Energy Efficiency Plan 3 NEPROM Association of Dutch Property Developers NPS Net Promoter Score NRW Dutch Council of Shopping Centres OIS Overnight Index Swap ORSA Own Risk and Solvency Assessment OTC Over The Counter PARP Product Approval and Review Process P&C Property and Casualty QIS Quantitative Impact Studies (Solvency II) RICS Royal Institution of Chartered Surveyors SaaS Software as a Service SCR Solvency Capital Requirement SME Small and Medium-sized Enterprises SRI Socially Responsible Investment TVOG Time Value of Financial Options and
Transferable Securities UFR Ultimate Forward Rate USD United States Dollar VBDO Dutch Association of Investors for Sustainable
• Paris Pledge for Action a.s.r. signed the Paris Pledge for Action on 11 December 2015. In it, the signatories express their firm support for the new climate agreement that was signed during the Paris COP21. The Paris Pledge for Action is an initiative of the French presidency of the COP21, which calls upon all organizations, enterprises, regions, cities and investors to subscribe to the Paris Pledge for Action. Through this pledge, organizations, including a.s.r., confirm their commitment to a safe and stable climate, in which the increase in temperature is limited to well below 2 degrees Centigrade (parispledgeforaction.org).
• Multi-Year Energy Efficiency Agreement (MYA3) In 2008, a.s.r. signed the government’s third multiyear energy efficiency agreement (MYA3), in which it was agreed that organizations would commit to the ambition to reduce their energy consumption by 2% every year, ultimately culminating in a 30% improvement by 2020 from benchmark year 2005.
• Circular Procurement Green Deal a.s.r. has participated in the Circular Procurement Green Deal since November 2013. The essence of circular procurement is that a procurement officer ascertains that a producer (or another processing party) manages to reuse products or materials in a new cycle when they have reached the end of their useful life.
• Circle Economy a.s.r. has been a member of Circle Economy since July 2013; Circle Economy is a cooperative that joins forces with its corporate and public members to create a circular economy. With this membership, a.s.r. has undertaken to initiate at least one circular project per year and share the results with the network. In 2016 there was no circular project at a.s.r.
• Dutch Business Sustainable Mobility Pledge a.s.r. signed the Dutch Business Sustainable Mobility Pledge on 19 October 2016. As a member of the Dutch business community, a.s.r. intends to play a leading role in the actions to prevent climate change, by reducing a.s.r.’s carbon footprint and supporting a shift towards a more sustainable balance of mobility modes. In order to achieve this, a.s.r. pledges to: 1. Investigate its options for reducing its carbon emissions by shifting towards sustainable mobility;
• MVOI covenant a.s.r. Bank signed the MVOI covenant with other Dutch banks, trade unions, NGOs and the Dutch government in The Hague on 28 October 2016. The covenant is designed to allow banks to be more mindful of human rights when making investments or providing loans. Relevant aspects may include occupational health and safety issues, the freedom to belong to a trade union, child labour and country rights. The covenant was ratified by 13 Dutch banks and governs all their lending operations, anywhere in the world.
• FIRA sustainability platform a.s.r. has been a member of the FIRA Platform since 2013. FIRA connects organizations with sustainable business practices to potential sustainable suppliers. Suppliers post their sustainability performance on the platform, allowing procurement officers to choose the most suitable supplier. If it should become clear in an outsourcing process that a supplier has not committed itself to a sustainability initiative, the supplier in question is required to register with FIRA and achieve Bronze level within a year if it is awarded the project. Of a.s.r.’s top 250 of suppliers, 74 (29.6%) have now registered with FIRA. Together with a number of other large players, a.s.r. has launched an initiative to join forces so it can step up its influence on suppliers that are unwilling to register with
FIRA. As part of this initiative, a.s.r. has posted a FIRA statement on its website.
• ISAE 3402 and ISAE 3000 type II assurance certification To demonstrate that a.s.r. is in control of its processes, Financial Markets is ISAE 3402-certified. An independent auditor performed an audit of the processes of this department and issued an ISAE 3402 type II assurance certificate. This quality mark is a key indicator that a.s.r. has full and adequate insight into the processes involved in investments, including execution and controls. The Financial Markets department has been awarded ISAE 3402 type II certification every year since 2010. a.s.r. REIM has been awarded ISAE 3000 Type II certification for its three funds, i.e. the ASR DPRF (retail fund), the ASR DCRF (residential fund) and the ASR Property Fund.
• Dutch Association of Institutional Property Investors (IVBN) This organization looks after the shared interests of large pension funds, insurance companies, asset managers and property funds (both listed and unlisted).
• Dutch Association of Investors for Sustainable Development (VBDO) a.s.r. has been a member of the Dutch Association of Investors for Sustainable Development since 2009. This Association promotes awareness among investors of their contribution to sustainability, for instance by conducting different types of benchmark surveys. a.s.r. is included in the benchmark for responsible investments by insurance companies in the Netherlands.
• MVO Nederland, the Dutch national sustainability expertise centre MVO Nederland wants to inspire, connect and accelerate organizations on their way towards climateneutral, circular and inclusive business models with robust and stable earnings to contribute to a sustainable and fair world. It does so by bringing together governments, institutes of knowledge, NGOs and trade unions, focusing on issues such as the climate, energy, commodities, materials, waste, the working population and empowerment.
• Fair Insurance Guide The Fair Insurance Guide is a joint initiative of Amnesty International, the Dutch Society for the Protection of Animals, the FNV trade union, Friends of the Earth Netherlands, Oxfam Novib and PAX. The surveys
• De Tussenvoorziening De Tussenvoorziening is a foundation whose mission is to help vulnerable people by offering them housing facilities and financial support. The support provided to the target group is designed to improve people’s living conditions and prevent them from relapsing. a.s.r. helps De Tussenvoorziening by providing coaches, teaching competency and job application courses, and by offering financial support to the target group. a.s.r. encourages its employees to commit themselves to De Tussenvoorziening or one or more of its patrons for a certain period by volunteering their time.
• Sport&zaken Sport&zaken brings about partnerships between sports organizations and businesses that have a passion for sports. a.s.r. contributes project-based expertise to sports federations, associations and socially relevant sports organizations, and does so free of charge. Sport&zaken offers sports and exercise activities on behalf of a large number of sports organizations. a.s.r. signed a partnership agreement with Sport&zaken in December 2015.
• a.s.r. real estate funds awarded international quality mark Financial Markets was awarded an ISAE 3402 type 2 certificate. The ASR Dutch Prime Retail Fund, the ASR Dutch Core Residential Fund and the ASR Property Fund also received an international quality mark. They were all presented with ISAE 3000 type 2 certificates. This certificate, which was issued by independent auditor KPMG, confirms that the investment processes of all three a.s.r. real estate funds are effective and efficient, and meet the strictest of standards. Being awarded the certificate boosts the confidence of our clients that the funds are managing their assets effectively.
• a.s.r. receives another award for its investment funds ASR Nederland Beleggingsbeheer won a Thomson Reuters Lipper Award in the annual competition organized by a US-based research institute. The award was presented to the best-performing fund house in the category Lipper Fund Family Award 2016 – Overall Small. ASR Nederland Beleggingsbeheer received the Group Award as the best-performing fund house as manager of such funds as the ASR investment funds and the ASR mixed funds with assets invested worth more than € 6.3 billion.
• a.s.r. ranked first by Fair insurance Guide a.s.r. did very well in a benchmark study of ten insurance companies, scoring a 10 in three categories in the annual study commissioned by the Fair Insurance Guide (for more information, see Chapter 2.5, Result in table Non-financial targets).
• Young Professional of the Year Three members of the a.s.r. team, Niek Schoones, Eline Rugebregt and Guus Focken were awarded the title of Young Professional of the Year. This marked the first time since the start of the annual competition that an a.s.r. team was awarded this prestigious title. The competition is organized by ICA (InterCompany Association), which represents more than 45 young professional associations of Dutch companies. neXus, a.s.r.’s young professionals association, is also affiliated with ICA.
• Ditzo a positive exception in Dutch Consumers’ Association study Ditzo was mentioned as a positive exception in a study performed by the Dutch Consumers’ Association of the transparency of medical bills. The Association claims that many health insurers make it difficult for policyholders to retrieve their medical bills, but that Ditzo’s ‘mijn’ portal is accessible and well-organized.
Campaigns a.s.r.’s mission and values are reflected in our campaigns. In 2016, these included: a.s.r. consumer campaign In the second quarter of 2016, a.s.r launched a largescale (brand) campaign featuring Junte Uiterwijk (a.k.a. rapper Sticks). This campaign showed the public what a.s.r. stands for and what drives us. It also demonstrated that we want to listen to our customers and do our best to meet their needs every single day. We want to be a socially relevant and valued insurance company. We help by taking action. We walk the walk, rather than talking the talk. The campaign met with overwhelming response and a.s.r.’s brand recognition has risen. We clearly managed to position ourselves as ‘the different insurer’.
These campaigns help Ditzo to meet the need of customers to get their questions answered right away.
Internal and external customer surveys among consumers The checks a.s.r. has instituted for this purpose are formed by the PARP process and a.s.r.’s own NPS measurement. Another key instrument that contributed to process improvements in 2016 was that of customer journeys.
a.s.r. is also reviewed by external independent organizations. This offers input from the Treating Customers Fairly dashboard, the Customer-Oriented Insurance Quality Mark and the Fair Insurance Guide.
Readability tests Use plain language in messages and making them easier to read
Once only Fashioning insights to form input for communication with unit-linked policyholders
Job group Male Female Total 1 Employees who work less than a full-time equivalent (FTE).
Industrial accidents An industrial accident is an accident that happens in the course or as a result of work performed for a.s.r., causing injury to an employee and resulting in absenteeism, a permanent disabilty or death. Accidents happening during an employee’s travel to or from work do not qualify as industrial accidents.
The a.s.r. policy addresses: 1. Initial accident reports 2. Incident reports 3. Reports to Labour Inspectorate 4. Insurance - Liability insurance - Group accident insurance
Inappropriate behaviour a.s.r. has installed a Complaints Procedure for Inappropriate Behaviour, which governs all employees who have an employment contract with ASR Nederland N.V. as well as interns, holiday workers, temporary staff and other external staff who work for ASR Nederland N.V. If an employee is confronted with inappropriate behaviour during their work for ASR Nederland N.V., he or she can file an individual complaint with the Complaints Committee for Inappropriate Behaviour instituted by ASR Nederland N.V. This Committee advises the Executive Board on the validity of the complaint in accordance with the complaints procedure that has been adopted in dialogue with the Works Council. a.s.r. has also appointed two external confidential counsellors. Employees are free to avail themselves of the option to engage these counsellors.
a.s.r. qualifies the following as inappropriate behaviour: any form of behaviour that is sexual and/or otherwise hurtful, intimidating or offensive in nature. In concrete terms, this would include asking for sexual favours, making offensive oral statements or displaying physical conduct of a sexual nature. This specifically includes: • Inappropriate sexual advances; • Requests for sexual favours; • Any other type of verbal or physical conduct of a sexual or otherwise hurtful or offensive nature where: - Subjection to the conduct in question is an implicit or explicit condition for the job or the appointment; - A person uses subjection to or rejection of that conduct as a basis for their decision-making with respect to the job or the appointment; - Such conduct is meant to create an intimidating, hostile, hurtful or offensive climate, or results in such a climate.
Skydoo, a digital platform for facilitating the acceptance process between intermediairies and lenders
Additional environmental information a.s.r. seeks to be a leader in sustainable business practices in the financial sector. It aims to realize this ambition in its investment policy and in its own business practices, from operating energy efficiently to pursuing a sustainable procurement policy.
a.s.r. purchases electricity from wind energy generated in Sweden via CertiQ certificates.
Residual Converted into (partially green) energy and heat 206,473 (-14%) 241,235
Paper and cardboard Recycled in the paper industry as a high-grade base material 120,359 (-27%) 163,924
Swill Converted into biogas, making this waste flow entirely green 11,261 (0,9%) 11,371
Recycling a.s.r. uses coffee cups of the sustainable ‘cup2paper’ concept. These paper cups are reusable and fully recyclable; their production process is 100% carbonneutral. The concept also encompasses the collection and recycling process after use. The use of fewer cups has a positive impact on the environment as well as a cost-saving effect, as waste processing is less time-consuming. Since the introduction of cup2paper, 15.84 % of all cups have been recycled.
Selling process, improvements to product offering, advice and service provision, knowledge transfer and networking
Delivery of products or services and follow-up of appointments if requested/
1 This does not include loss adjusters, crash repair companies and benefits paid by a.s.r. product lines, such as occupational disability, P&C and pensions.
Ch. 1.4 Investor Relations Ch. 2.5.4 Environment / Housing Ch. 2.5.4 Environment / Procurement Ch. 5.4 Group structure and segment information Ch. 5.4.5 Acquisitions Ch. 5.4.6 Discontinued operations and assets held for sale and related liabilities Ch. 5.5.8 Equity
Ethics and integrity 2016 102-16 Values, principles, standards, and norms of behaviour
Ch. 2.5 Sustainability / Governance 102-21 Consulting stakeholders on economic, environmental, and social topics
GRI Standard Disclosure Location of disclosure, url(s) and/or information 102-25 Conflicts of interest Ch. 4.1 Corporate Governance asrnl.com / Rules of procedure for the Supervisory Board / 9. conflicting interests asrnl.com / Rules of procedure for the Executive Board of ASR Nederland N.V. / Article 14 Conflict of interest (in Dutch only)
Ch. 4.1.1 Supervisory Board / Education and evaluation Ch. 4.1.2 Executive Board / Education and evaluation 102-29 Identifying and managing economic, environmental, and social impacts asrnl.com / Dutch Code of Conduct for Insurers asrnl.com / Rules of procedure for the Executive Board of ASR Nederland N.V. / Article 3.6 (page 5) Ch. 2.6 Sustainability / governance Ch. 3.1 Themes in 2016 Ch. 3.5 Risk Management and Compliance 102-30 Effectiveness of risk management processes
Ch. 3 Business Report Ch. 4 Governance Report 102-32 Highest governance body’s role in sustainability reporting
In 2016 there were no critical concerns. Ch. 3.5 Risk management and Compliance Risk management Ch. 5.8.2.1 Enterprise Risk Management Framework/ Risk committee structure Ch. 5.8.2.1 Enterprise Risk Management Framework / Risk management process 102-35 Remuneration policies Ch. 4.3 Remuneration report 102-36 Process for determining remuneration
GRI Standard Disclosure Location of disclosure, url(s) and/or information 102-38 Annual total compensation ratio
Appendix H, Additional information: table Interaction with stakeholders and identified aspects 102-43 Key topics and concerns raised
Appendix H, Additional information: table Interaction with stakeholders and identified aspects 102-44 Key topics and concerns raised throug stakeholder engagement
Ch. 5.4.1 Group structure 102-46 Defining report content and topic boundaries
Ch. 5.3.1 Changes in accounting estimates as of 1 January 2016 Ch. 5.3.2 Changes in EU endorsed published IFRS Standards and Interpretations effective in 2016 102-49 Changes in reporting Ch. 5.3.1 Changes in accounting estimates as of 1 January 2016 Ch. 5.3.2 Changes in EU endorsed published IFRS Standards and Interpretations effective in 2016 102-50 Reporting period 1 January to 31 December 2016 102-51 Date of most recent report 4 April 2016 102-52 Reporting cycle Annual 102-53 Contact point for questions regarding the report
GRI Standard Disclosure Location of disclosure, url(s) and/or information 102-54 Claims of reporting in accordance with the GRI Standards
Ch. 1.1 Notes to the reader 102-55 GRI content index Appendix I, GRI Content Index 102-56 External assurance Ch. 1.1 Notes to the reader / Reporting proces Ch. 2.6 Assurance report of the independent auditor on the sustainability information Ch. 6.1 Report on the audit of the financial statements 2016 included the annual report
Management approach 2016 103-1 Explanation of the material topic and its Boundary
Ch. 2.5 Value creation model / Material aspects / Delineation of material aspects Appendix H Additional information: table Identified material aspects 103-2 The management approach and its components
Market Presence 2016 202-1 Ratios of standard entry level wage by gender compared to local minimum wage
Ch. 2.5.2 People / a.s.r. Code of Conduct 205-2 Communication and training about anticorruption policies and procedures
Ch. 2.5.2 People / a.s.r. Code of Conduct 205-3 Confirmed incidents of corruption and actions taken
Failure to observe these rules of conduct will be considered a serious breach of the trust that the employer has in the employee, and will lead to disciplinary action. Compliance produces quarterly reports and ad-hoc reports related to unethical conduct and fraud that are discussed by the Executive Board and the Audit & Risk Committee.
Anti-competitive Behaviour 2016 206-1 Legal actions for anticompetitive behaviour, anti-trust, and monopoly practices
Ch. 2.5.4 Environment: Table Environmental performance Appendix G, Additional environmental information: table Energy consumption and water withdrawal
Appendix G, Additional environmental information 302-3 Energy intensity Electricity (kWh) 6,493,692 FTE 3,365 Ratio 1,292 302-4 Reduction of energy consumption
Ch. 2.5.4 Environment / Mobility policy Appendix G, Additional environmental information, table Energy consumption and water withdrawal 302-5 Reductions in energy requirements of products and services
Ch. 2.5.4 Environment, table Environmental performance Appendix G, Additional environmental information: • Table Electricity • Table Energy consumption and water withdrawal
GRI Standard Disclosure Location of disclosure, url(s) and/or information 305-3 Other indirect (Scope 3) GHG emissions
Not applicable 305-7 Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air emissions
Not relevant for a financial institution 306-2 Waste by type and disposal method
Ch. 2.5.4 Environment / Waste 306-3 Significant spills Not relevant for a financial institution 306-4 Transport of hazardous waste
Not relevant for a financial institution 306-5 Water bodies affected by water discharges and/or runoff
Supplier Environmental Assessment 2016 308-1 New suppliers that were screened using environmental criteria
Ch. 2.5.4 Environment / Procurement, table Supply chain Appendix C, Standards, covenants and memberships / Guidelines and memberships / FIRA
Ch. 2.5.4 Environment / Procurement / Outsourcing policy Appendix C, Standards, covenants and memberships / Guidelines and memberships / FIRA
Only the selection system has an option that is not available to part-time employees working fewer than 1,976 hours per year cannot work 52 or 104 hours more or less on an annual basis. a.s.r. operates only in the Netherlands.
403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities
The obligations under the collective bargaining provisions for the insurance sector (Ch. 2.5 Value creation, People, Health and vitality) form the parameters for the occupational health and safety policy.
Training and Education 2016 404-1 Average hours of training per year per employee
Ch. 2.5.2 People / Sustainable employability / Training and development 404-2 Programs for upgrading employee skills and transition assistance programmes
Ch. 2.5.2 People / Sustainable employability / Training and development / Review
All employees with an a.s.r. contract undergo a performance and career development review every year.
Appendix F, Additional employee information: • Breakdown by male and female employees at 31 December • Staff turnover at 31 December, by age category 405-2 Ratio of basic salary and remuneration of women to men
Appendix F, Additional employee information: table Breakdown of employees by salary scale
Men and women with comparable work experience, achievements and potential are equally rewarded. For comparable roles, differences in performance may result in differences in salary level.
Freedom of Association and Collective Bargaining 2016 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk
Ch. 2.5.3 Investments / Human Rights / Procurement Ch. 2.5.3 Investments Ch. 2.5.4 Environment / Procurement
The security staff in the office is not trained in human right policies. All security guards and emergency responders (100%) have taken emergency response courses.
Rights of Indigenous Peoples 2016 411-1 Incidents of violations involving rights of indigenous peoples
412-3 Significant investment agreements and contracts that include human rights clauses or that underwent human rights screening
Local Communities 2016 413-1 Operations with local community engagement, impact assessments, and development programs
Ch. 2.5.3 Investments: • Exclusion criteria for countries and companies • ESG Integration for best-in-class investments
Customer Health and Safety 2016 416-1 Assessment of the health and safety impacts of product and service categories
Content, particularly with regard to substances that might produce an environmental or social impact x
417-2 Incidents of noncompliance concerning product and service information and labeling
The review of products showed on several occasions that there is room for improvement in information provision. These findings have been followed up.
Total number of leaks, thefts, of losses of losses of customer data: • Received: 262 • Reported to Dutch Data Protection Authority: 51