Archimedeslaan 10 P.O. Box 2072 3500 HB Utrecht www.asrnl.com 2017 Annual Report
1 Introduction 1.1 At a glance 6 1.2 Key figures 8 1.3 Message from the Chairman 10 2 About a.s.r.
Annual Report | 2017 5 5 Financial statements 2017 5.2 Consolidated financial statements 123 5.3 Accounting policies 130 5.4 Group structure and segment information 153 5.5 Notes to the consolidated balance sheet 164 5.6 Notes to the consolidated income statement 191 5.7 Other notes 198 5.8 Risk management 216 5.9 Capital management 250 5.10 Company financial statements 254 6 Other information 6.1 Independent auditor’s report 261 6.2 Provisions of the Articles of Association regarding profit appropriation 271 7 Report of Stichting Continuïteit ASR Nederland 273
G EU Directive: disclosure of non-financial information and diversity information 293
The financial statements for 2017 as included in this Annual Report are on the agenda for adoption at the Annual General Meeting of shareholders of 31 May 2018.
• a.s.r. bank • a.s.r. mortgages • a.s.r. asset management • a.s.r. real estate investment management
• VKG • Dutch ID • SuperGarant • Corins • PoliService 1.1 At a glance
Other locations: Ardanta in Enschede and a number of distribution units at various locations in the Netherlands.1720
Privatisation completed a.s.r. first insurer issuing Euro dominated Restricted Tier 1 Contingent Convertible capital instrument
Introduction | 1.3 Message from the Chairman 10 1.3 Message from the Chairman
In 2017, we achieved a number of visible results in this area, such as the creation of a Health Impact Bond for the successful occupational reintegration of cancer patients, the creation of a new credit ESG fund in which external investors can participate and the announcement of our intention to provide, in conjunction with Triodos Bank, € 600 million in financing to sustainable projects over the next four years. a.s.r. is also increasingly being recognised and acknowledged in the market as a prominent exponent of sustainability. In 2017, this was confirmed by various studies (VBDO, Eerlijke Verzekeringswijzer and the annual sustainability report of the United Nations Principles for Responsible Investments (UN PRI)).
We will continue to focus on operating in a smarter, more efficient and more cost-effective way. To this end, in 2017 we further simplified our organisation by merging a number of staff departments. To speed up the digital transformation and better anticipate evolving customer needs, we also established the Innovation & Digital team to meet growing customer demand for online communication. Using artificial intelligence and robotics, this team is further automating (simple) processes to give our employees more scope to focus on complex customer queries and work that adds greater value. The Innovation & Digital team is also exploring evaluating new (insurtech) initiatives and testing and building initiatives of its own.
2018 is the final year of the medium-term targets that we announced at the IPO in 2016. During the fourth quarter, at our first Capital Markets Day on 10 October, we will present an update on our strategy and renewed mediumterm financial targets. Before this, we have our General Shareholders’ Meeting on 31 May, where we look forward to meeting our shareholders and presenting our results.
a.s.r. will focus on learning in order to develop continuously. We are committed to understanding our customers’ needs and will continue to innovate and develop new services. We aim to proactively offer innovative solutions for prevention and in addressing risk issues of our customers. We are also committed to competent and efficient claims handling, which allows us to continuously offer our customers attractively priced solutions to cover their risks. To enable our customers to build up capital, we focus on developing asset management solutions.
Intro d uctio n 2.1.1 Strategic pillars a.s.r. defines four pillars as guiding principles in its strategy. These principles ensure that a.s.r. creates value for all its stakeholders within its general ‘value over volume’ principle.
Meeting customers’ needs a.s.r. offers customers transparent products that aim to meet their needs. a.s.r. continuously strives to improve its services to its customers and to the intermediary channel. a.s.r. is aware of its position and its role in the wider community, and gives due consideration to its impact on the environment.
a.s.r. operates a multi-brand, multi-channel distribution strategy. The key distribution channel is the intermediary channel in the form of independent advisors and brokers. a.s.r. feels that advisors and brokers are well-positioned to provide customers with independent advice and to help them select the products that are best tailored to their individual needs, be it the transfer of risks or savings and pension solutions. a.s.r. also offers products and services directly to customers wishing to take out insurance without the advice of an independent advisor.
In order to respond swiftly to market trends and evolving customer behaviour and needs, a.s.r. has an efficient, streamlined organisational structure in which business lines generally have end-to-end responsibility through the inclusion of decentralised functions such as distribution, product marketing and IT. In recent years, a.s.r. has also acquired distribution service providers, giving it an additional source of information on changing customer behaviour and needs.
a.s.r. applies these capabilities to all of its insurance products. a.s.r.’s insurance expertise has contributed to a strong combined ratio in the Non-life segment for many years.
Cost effectiveness Cost competitiveness is a key prerequisite for commercial success as well as for bottom-line performance. Cost awareness is embedded throughout the organisation. It has become an integral part of a.s.r.’s culture.
a.s.r. is permanently focused on responsible expenditure management, and aims to further improve its cost effectiveness over the coming years. End-to-end responsibility in the various business lines, fewer management layers and the decentralisation of certain functions such as distribution, product marketing and IT will all help to maintain cost effective. a.s.r. will continue to simplify and rationalise its existing product portfolio, particularly in the life and pensions businesses. a.s.r. is reducing the number of back-office systems in its business lines.
a.s.r.’s cost base has become more agile. It has been outsourcing certain activities to third parties, enabling it to achieve cost benefits. a.s.r. does not outsource activities involving its intellectual capital, which is seen as essential to its insurance operations and contributes to its unique competitive position. Such activities include pricing, underwriting, asset management and claims management (including medical advisors and personal injury claims).
Cash-generating business model a.s.r.’s financial objective is to achieve robust, high-quality earnings and strong capital generation backed by a moderate financial framework. This enables a.s.r. to deliver on its promises, providing customers with the financial protection they expect and offering attractive returns to shareholders.
Acquisitions are evaluated against strict financial criteria as well as the stategic fit in the categories mentioned above. Generali Nederland was signed in 2017 (and closed in February 2018) adding € 313 million¹ of GWP in Disability/Property and Casualty (P&C) and € 96 million¹ of GWP to a.s.r.’s life segment.
Robust and predictable backbooks This category represents large life and pension-insurance books that have been built up over many years and are major contributors to a.s.r.’s profit. These businesses offer limited or no growth potential except for buying ‘blocks of business’. These books are excepted to inevitably decline over time. a.s.r. is committed to safeguard the value of these service books by lowering and variabilising its cost base, by providing a high level of customer
About a.s.r. | 2.1 Our strategy 16 service to prevent unnatural lapses and by protecting the investment margin by hedging interest rate sensitivity. To make the individual life cost base, more variable, a.s.r. is migrating its individual life portfolios to a Software as a Service (SaaS) platform, managed by an external provider. a.s.r. has been successful in this strategy given the portfolios which have already been migrated in time and on budget. This migration is on track and is scheduled for completion mid-2019. The Generali Nederland book will be migrated to this platform, presenting the first external ‘block of business’. This will also enable a.s.r. to become a consolidator of individual life backbooks.
In asset management, a.s.r. is focused on expanding its third-party asset management activities through product development and bolt-on acquisitions. With the acquisition of BNG in 2016 and First Investments in 2017, skills and approximately € 5.5 billion in assets under management were added. Regarding asset management product development, a.s.r. launched the ASR Hypotheek fonds (‘a.s.r. mortgage fund’) in 2017.
Input: An important input for an insurer such as a.s.r. is financial capital. In addition, human capital is crucial in order to deliver services and products. The relationships with and knowledge of intermediaries and other partners are also vital in this context.
Output & outcome: a.s.r. creates value for its customers by helping them to prevent or mitigate risks and to build up capital for the future. a.s.r. does this by offering sustainable, transparent and comprehensible insurance products and by investing customer premiums carefully and responsibly. An important objective of its activities is satisfied customers, shareholders and engaged employees. Also important is the mandate, the license to operate, that a.s.r. receives from the society at large (e.g. media, regulators, business partners) to continue operating.
a.s.r. also cares about its direct impact on the environment. In order to minimise environmental impact, a.s.r. uses resources such as energy and water efficiently.
• Banking and Asset Management: a.s.r. bank, a.s.r. mortgages, a.s.r. asset management, a.s.r. real estate investment management • Distribution and Services: VKG, Dutch ID, Corins, SuperGarant, PoliService
Manufactured capital and Natural capital • Buildings • ICT • Energy
Intellectual capital & Social and relationship capital • Intermediaries • Business partners
Intro d uctio n 2.2.1 Sustainability governance a.s.r. seeks to be a leader in sustainable business practices in the financial sector and takes account of sustainability wherever possible. a.s.r. does this on the basis of four themes that fall under Corporate Social Responsibility (CSR): ‘Sustainable insurer’, ‘Sustainable investor’, ‘Sustainable employer’ and the ‘Social role of a.s.r.’.
About a.s.r. | 2.2 Value creation model 20 2.2.2 a.s.r.’s contribution to the UN Sustainable Development Goals
On 25 September 2015, 193 world leaders committed themselves to seventeen Sustainable Development Goals (SDGs) to work on sustainable development worldwide. Between now and 2030, these goals will focus on the eradication of global poverty and inequality, combating climate change and creating a prosperous and peaceful life for all. Not only governments, but also companies have a contribution to make in this context.
Decent work and economic growth: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.
a.s.r. also contributes to other SDGs that are further reflected in the relevant sections. Below is a brief overview of its impact, subdivided into the four themes: ‘Sustainable insurer’, ‘Sustainable investor’, ‘Sustainable employer’ and ‘Social role’.
Sustainable insurer a.s.r. investigates the possibilities of making its insurance products and services more sustainable. a.s.r. focuses on prevention, safety and building up capital responsibly. For example, there is attention for climate adaptation (SDG 13) within Non-life. Within Pensions, the SRI policy and the exclusion list of Group Asset Management is pragmatically applied (for the relevant SDGs, see below, under ‘Sustainable investor’). And within Disability, De Amersfoortse has started a partnership with other parties to get people, who have or had cancer, back to work (SDG 3 and 8). Also, in order to further strengthen the impact of a.s.r., conscious choices are made in whether or not to enter into relationships with customers and suppliers by pursuing the Customer Due Diligence (CDD) policy (for more information about CDD policy see also Chapter 2.4 and 3.1.3). Read more about a.s.r.’s impact regard its products and services in Chapter 3.2 (Segment performance).
Opportunities • New technology is creating new forms of risks for which customers seek cover. (e.g. cyber risk and security, for more information see Chapter 3.3.1 (Risk Management); • Technological developments could disrupt traditional insurance models; • Customers are becoming more comfortable with exploring opportunities with nontraditional ‘start-up’ companies in the financial sector. They could be willing to consider products that offer something different than traditional savings and pension models; • Technologies can help customers and solve their problems; • Talent with digital skills is crucial for success and is becoming increasingly difficult to find. The in-house development of this talent is key; • Through technology, customers or alternative platforms are able to offer services themselves without or with less help from traditional parties. More and more alternative collectives and several platforms are emerging in this way.
Intro d uctio n a.s.r.’s answers Technological developments are changing the world. They are providing new opportunities for optimising current service delivery and developing additional services. Big data also poses an ethical dilemma. Full transparency on individual profiles could lead to a selective acceptance of risks, undermining the collective principle of insurance.
The selected approach is in line with the a.s.r. business strategy, which aims to improve and further develop the current business and to proactively develop new business. This can give rise to a conflict of interests, for example in finding a balance between the optimisation of current processes and transformation on the one hand and disruptive initiatives on the other.
Investments in optimisation generally yield more revenue and security. Transformation and disruptive models, on the other hand, require different skills and metrics. They may create more risk in the short term, but in the longer term they could provide more value for all stakeholders. Bringing innovation together in one place within the organisation forces clear choices to be made.
In 2017, the Innovation & Digital team contributed to a new and dedicated website with an innovative tool: www.potjevoorlater.nl. This gives customers an easy way to decide how they want to live later on in life and how much money they will need to do so. The website serves a clear customer need now that the State is stepping back and people are having to save more for their pensions themselves.
Big data plays an important role in many innovations. Mission Control is also considering applications such as prevention of damage to cars. a.s.r.’s knowledge on the number, times and locations of claims can be translated into customer information and used to develop new products and services, such as an insurance product for a specific route and/or a specified number of kilometres.
In 2017, the Innovation & Digital team built a new website for De Amersfoortse using an innovative ‘target groupdriven ’ concept. Customers don’t automatically see all information on the website, but each target group is offered only the information that is relevant. In late 2016, the asr.nl website was also overhauled, becoming a fully dialogue-driven insurance website in the Netherlands. The new website was further optimised during the year. In 2017, asr.nl was awarded a silver jury prize by ‘Lovie’ for Europe’s best website, chiefly for its uniqueness in financial services.
Economic developments The insurance industry has operated in a low interest rate environment for many years. Institutional investors such as insurance companies search for adequately yielding assets for their investment portfolios. Global economic growth accelerated in 2017. Economic growth in the Eurozone and the United States was healthy and stock markets in these regions performed very well. Interest rates rose somewhat, yet remained at historically low
a.s.r.’s answers a.s.r. expects the risk of rising rates to be higher than that of lower rates. a.s.r. is positioning its investment portfolio and interest rate hedging strategy accordingly.
Social and demographic developments Trends in society are encouraging the development of new products and services and/or altering the procedures adopted by insurance companies. Different factors play a role in this context.
Risks • Prolonged low interest rate environment and/or financial markets turmoil, and reduced rewards for risk which may squeeze future profits and as reduced investment returns this may reduce the attractiveness of spread-based businesses such as defined benefit plans. For more information see Chapter 3.3.1 (Risk Management); • Capital-light life products (e.g. defined contribution plan products).
Fewer people spend their entire working life with the same employer. Jobs are continually being created and evolve or disappear over time. This process also invokes many job switches, including from flexible to definite contracts, from having an employer to being self-employed and vice versa. In recent years, the trend towards fewer permanent employees, more employees on flexible contracts and more self-employed people has become more pronounced.
Opportunities • Changes in consumer behaviour, resulting in declining and evolving demand for insurance products. For more information see Chapter 3.3.1 (Risk Management); • Supporting the health of customers and employees is in line with a.s.r.’s objective to contribute to society and potentially lower claims in Health and Disability; • Further reduction of the principle of solidarity and growing attention for individual solutions, possibly offset by mandatory solutions for uninsurable groups; • Increasing number of self-employed professionals (ZZP), seeking insurance and savings solutions; • Customers need to prepare for longer working life in order to sustain lifestyle.
a.s.r.’s answers a.s.r. recognises the need for clear and sound regulation, as this will help to build and maintain trust in the financial sector. It is important, however, to achieve the right balance and prevent regulation from severely disrupting the business, which will in turn increase costs for customers and reduce their appetite for buying protection for risks, also those which they may not be able to bear individually. The Legal and Integrity departments supervise controlled and ethical business operations, investing heavily in awareness and knowledge. In 2017, for example, all employees were asked to take part in an online game and Q&A session (Gamification) which refreshed their knowledge of the code of conduct, among other aspects. A legislative and regulatory committee was set up in 2017 to respond efficiently to changing legislation and regulations. This committee helps the various business lines identify and apply legislative changes in time. a.s.r. is currently investigating to what extent automation can play a role. Products are also being rationalised and the ICT system landscape of e.g. P&C, Individual life and Pensions is being simplified. This will mitigate the impact of legislation and regulations.
Financial implications of climate change Climate change poses significant financial challenges and opportunities, now and in the future. The risk-return profile of organisations exposed to climate-related risks may change significantly as such organisations are increasingly impacted by the physical effects of climate change, climate policy and new technologies. Climate change also alters the risk profile of insurers as the predictability of the weather decreases and claim patterns potentially change over time. Well-educated and experienced employees who understand underwriting and risk-pricing are therefore crucial for the future profitability of insurers. Risk prevention is likely to become more important.
a.s.r.’s answers a.s.r. is aware of the importance and responsibility of its combined role as an insurance company, asset-holder and manager of assets and real estate. Climate change poses a direct threat to a.s.r.’s business, both in term of its liabilities – the claims it has to pay out – and in terms of its assets – the value of its investments. Climate change also enforces unprecedented necessity for action.
Opportunities • Developing additional services to differentiate and help make customers more aware of the need for prevention (expertise, inspection, prevention and damage repair); • Climate change may impact clients’ perception of exposure to risks they are unable or unwilling to bear and persuade them to seek insurance cover; • Growing investor attention for ESG criteria provides a basis for ESG-driven investment funds.
Risks • Impact of climate change on the risk profile of P&C business, P&C clients and a.s.r. itself as an asset manager.
a.s.r.’s answer When opportunities for acquisitions arise in the market, a.s.r. reviews these opportunities carefully and thoroughly based on pre-determined criteria. a.s.r. does not acquire at any price, but only if doing so is in line with its strategy, complies with strict financial frameworks and strengthens the sum of the parts. The preference is for consolidation of single lines of business allowing other parts of the company to continue their day-to-day business without interference. In the past three years, a.s.r. has made ten acquisitions that fit this policy. In 2017, a.s.r. announced the acquisition of Generali Nederland. In addition to organic growth, a.s.r. sees further opportunities to grow its business through acquisitions.
book for life and funeral insurance; • Opportunities to grow organically and inorganically in the non-life and disability insurance markets.
Intro d uctio n 2.4 Our stakeholders and material issues a.s.r.’s main stakeholders are its customers, employees, shareholders and society at large. It is in continuous dialogue with these stakeholders about its priorities, objectives and policy, a context in which customers play a central role. Long-term relationships with its customers enable a.s.r. to create long-term value for its employees, shareholders and society at large as well.
Employees Employees want a professional working relationship allowing them to make their own career choices and to retain and enhance their attractiveness to the labour market. They also want to be proud of the company they work for. Personal development, pride and income security within (and eventually after) a.s.r. translate into employee engagement. All this makes a positive contribution to the interests of a.s.r. and its stakeholders.
Society at large Other a.s.r. stakeholders are business partners including intermediaries, regulators, politicians, trade unions, the media and civil society organisations. They expect a.s.r. to create a sustainable and responsible societal value in both the short and long term.
Dialogue with stakeholders a.s.r. believes it is important to maintain a good relationship and good communications with all of its stakeholders, therefore a.s.r. conducts an ongoing dialogue with its stakeholders. Last year, it invited a group of internal and external stakeholders to engage in an in-depth discussion of a number of material issues. This dialogue concerned the testing and updating of the materiality matrix from 2016 to determine relevant reporting themes for 2017 and to support the development and implementation of (sustainability) policies.
Social and ethical dilemmas a.s.r. wants to play a prominent role in corporate social responsibility (CSR) in the financial sector. As an insurer, investor, employer and as a committed member of the community, a.s.r. is always looking for the right balance between people, planet and profit.
For the investments of Group Asset Management (GAM), the Socially Responsible Investment (SRI) policy applies. The SRI policy focuses on the screening of large, international and listed companies on ethical and sustainability criteria. Countries and external providers are also screened. These screenings result in an SRI exclusions list for investing. GAM also excludes businesses based on their conduct, such as gross violations of the UN Global Compact principles, for example in the area of human rights, labour rights and the environment.
The 2016 materiality matrix was the starting point for determining a.s.r.’s material themes for 2017. The themes in the materiality matrix were further tested during internal and external stakeholder dialogues and adjusted on the vertical axis where necessary. Senior managers at a.s.r. were also consulted to reassess the material themes. These are themes that are relevant for the implementation of the strategy and long-term value creation of a.s.r. (horizontal axis). The Executive Board has validated the materiality matrix.
A Customer satisfaction Degree of customer satisfaction in terms of quality and availability of services, comprehensible communication and customer orientation.
C Transparent product and service descriptions Clear and accessible communication with customers about products and services to enable them to understand the added value and characteristics of a product or service in order to facilitate choice.
E Continuing to meet increasingly stringent legislation and regulations Compliance with ever-evolving national and international legislation and regulations and the resulting requirements of regulators.
J Vitality Helping employees to remain mentally and physically healthy and vital at work so that they can continue to add value to a.s.r.
K Risk management Risk management is an integral part of daily business operations. a.s.r. applies an integral approach to managing risks, thereby ensuring that strategic objectives are met. Value is created by striking the right balance between risk and return, whilst ensuring that obligations to stakeholders are met. Risk management supports and advises a.s.r. in identifying, measuring and managing risks, and ensures that adequate and immediate action is taken in the event of changes in the risk profile.
M Information and cyber security a.s.r.’s protection against, and response to, attack, theft or damage to infrastructure, hardware, software or information (customer data), as well as disruption or misdirection of the services it provides by managing people, processes and technology.
N Climate change The impact and risks of climate change on a.s.r.’s customers, advisors, products and services.
O Diversity A balanced workforce composition based on age, gender, cultural or social origin, skills, views and working styles.
P Assessing suppliers on their impact on society Encouraging environmental and social standards in a.s.r.’s supply chain as well as assessing the positive and negative impact of suppliers on society.
Q Contributing to financial self-reliance Offering the knowledge and skills of its employees to help people avoid getting into debt or to get them out of debt.
Our mission is helping by doing. Employees are a crucial factor in successfully executing a.s.r.’s strategy. As described in the story of a.s.r. (Chapter 2.1 Our strategy), customers and the wider society benefit from the excellent service, expertise, positive attitude and social commitment of its employees.
The a.s.r. culture The story of a.s.r. was written in early 2017. a.s.r.’s strategy, mission, vision and core values were also reformulated at this time (see also Chapter 2.1 Our strategy). Everyone at a.s.r. abides by the organisation’s core values, which sets out the basic approach and are used as a behavioural compass. These core values are: • ‘I’m helpful’. Employees are approachable, listen attentively, then help with solutions using their expertise, experience and commitment; • ‘I think ahead’. Employees empathise and think ahead to proactively help customers, advisors and colleagues; • ‘I act decisively’. Employees are alert and sharp to content and process, and come up with solutions. They coordinate, are persistent and stand by their commitments.
Leadership is key to all this. Not only from managers, but from everyone. The way in which employees interact with each other ties in with this: for example, in the sharing of practical dilemmas. There is no hierarchy in this regard. The point of departure is that employees help each other, learn from each other and work together to come up with a solution. There is room for dialogue, the framework in which work is done are clear and responsibility is placed at the lowest possible level. It is about doing rather than talking.
Vitality At the beginning of 2017, the Works Council approved the 2016-2020 working conditions policy, after which implementation began. One of the initiatives is Periodic Medical Examinations (PMEs) within all business lines. A PME, known within a.s.r. as the ‘vitality scan’, identifies vitality and health, the work-life balance and possible health risks in all employees. A PME has been offered on a voluntary basis and aims to make employees more aware of the interaction of work and health. They are also given advice on how to deal responsibly with potential health problems and work-related risks. Employees receive a personal report. If necessary, they are invited to attend an interview with an employment expert or the company doctor.
Employees were given guidance in the context of redundancy 182 112
Recruitment and selection a.s.r. is regularly looking for new employees who have the ability to learn and develop, have the right knowledge and skills and who feel attracted to ‘the story of a.s.r.’. For HR, therefore, 2017 was partly dominated by employer branding to increase the positive brand awareness of a.s.r. As a result, the recruitment site ‘werkenbijasr.nl’ was brought into line with ‘the story of a.s.r.’. The same was done with the social media which a.s.r. uses to recruit new employees.
In 2017, 389 new employees joined a.s.r. In 2017, 31% of vacancies were filled internally; which was within the 30% target.
Diversity and inclusivity a.s.r. strives for an inclusive culture in which differences between employees are recognised, valued and exploited. At a.s.r., everyone who wants to use their talents to achieve the company’s objectives will have the opportunity to do so, regardless of gender, age, ethnicity or sexual orientation. By diversity, a.s.r. means all aspects in which people differ from each other: both visible differences, such as age or gender, and less visible ones, such as cultural and social background, physical and mental capacity and styles of working.
The fundamental principles of a.s.r.’s diversity policy: 1. A balanced workforce composition based on age, gender, cultural or ethnic origin, physical and mental capacity, beliefs and working styles; 2. Promotion of a balanced composition of management through a policy of positive discrimination; 3. Equal development opportunities for all employees; 4. Participation of people with limited labour market potential.
Objectives of the diversity policy At least 30% of the Supervisory Board, Executive Board and senior management are women. In 2017, both the Supervisory and Executive Boards had three male members and one female member. This brings the representation of women to 25% on both Boards. On 31 December 2017, senior management consisted of 22 members, 6 of whom were women and 16 of whom were men (27%:73%). In order to achieve the 30% target, application of the diversity policy has been explicitly included in the recruitment of the Supervisory and Executive Board members. Diversity policy is part of the recruitment process and the employee review, in which, among other things, succession planning is discussed.
Employee engagement and organisational success In early 2017, a.s.r. replaced the employee engagement survey for measuring employee satisfaction with the Denison organisational success survey, which measures the success of an organisation in several dimensions and hence gives a broader picture than engagement alone. The results are more comparable to the global benchmark of large organisations, which use the Denison organisational success survey.
Over two thirds of a.s.r. employees (69%) took part in this scan. As this was a new research method, the results could not be directly compared to those of previous employee engagement surveys. However, it is clear that a.s.r. achieved a high score for engagement in 2017 compared to other companies. In ‘commitment’ (a co-determining factor for engagement in which vision, core values and and behaviour, knowledge development and empowerment are included), a.s.r. attained a place in the highest scoring 30% of the global benchmark using the new methodology.
With effect from 1 January 2018, all employees will be paid a negotiated pay raise of 2%.
Principles and governance Chapter 1.3 of the published remuneration policy (see www.asrnl.com) sets out the applicable principles. Governance is covered in Chapter 7.
Key features of the remuneration system The fixed pay awarded to the a.s.r. employees consists of a fixed gross monthly salary, a fixed allowance (as a result of the conversion of variable pay for those employed at a.s.r. on 1 July 2014), 8% holiday allowance and a yearend compensation. The level of fixed pay depends on the weight attributed to an employee’s role, the relevant salary group and the employee’s general performance rating (assessment of deliverables and agreements on appropriate conduct). Fixed pay is adjusted for structural wage developments in accordance with the 2017 CLA. Variable remuneration awarded to identified staff prior to 1 July 2014 is paid in instalments over the next few years. Identified staff are conditionally awarded a material share (i.e. 50%) of their variable pay in the form of cash and non-cash instruments. The conditional variable pay is deferred for three years; a reappraisal is carried out at the end of the three-year period, after which the cash component is paid out. The non-cash component is subject to an additional retention period of two years. Some of the unconditional variable pay is paid out in cash immediately. The non-cash component of the unconditional variable pay is also retained for two years.
Intro d uctio n forms of variable remuneration which occur only occasionally and are awarded in accordance with legislation and regulations. The same applies to severance pay. In December 2017, the Supervisory Board and the Executive Board decided to grant all employees of a.s.r. a one-off payment equal to a monthly salary. It has been agreed with DNB to qualify this payment as a one-off variable payment.
The aim of this phased approach is to encourage employees to work at an early stage on increasing their labour market value and thus take more control of their own career opportunities. The sooner they start working on their development, the bigger the budget a.s.r. will make available.
The a.s.r. code of conduct The a.s.r. code of conduct sets out the required attitude and behaviour of employees. The aim of the code of conduct is to protect a.s.r.’s reputation through the integrity and professional conduct of all its employees. It covers behaviour that upholds the principles of a.s.r. as expressed in ‘the story of a.s.r.’.
Under the Whistleblower policy, employees and third parties, including former employees, clients and other contracting parties, can report cases of alleged malpractice anonymously, freely and without feeling threatened. Violation of or non-compliance with the a.s.r. code of conduct may lead to disciplinary action.
An integrity screening is carried out prior to hiring new employees. This also applies to everyone who regularly works for a.s.r., including suppliers and brokers. In this way, a.s.r. seeks to prevent the risk of physical, financial or reputational damage to the company, its customers and/or other business relations.
Business performance 1 After proposed dividend and excluding a.s.r. bank. Solvency II ratio 203% pre-dividend.
During the IPO-process and listing in 2016 on Euronext Amsterdam, a.s.r. communicated the following targets for the medium-term.
In 2016, a.s.r. announced a dividend policy with effect as from 2017. The annual dividend will be based on a pay-out ratio of 45% to 55% of net operating result attributable to shareholders (i.e. net of hybrid costs). a.s.r. applies a boundary condition based on its
Solvency/capital a.s.r. aims to maintain a Solvency II ratio – based on the Standard formula – of above 160%.
Additionally, a.s.r. wants to attain a single A (S&P) ‘Financial Strength Rating’ for its insurance subsidiaries and a financial leverage of below 30%.
Operating return on equity increased to 15.6% (2016: 14.6%). The increase was attributable to an increase in the operating result which exceeded the increase in equity. The outcome remains well above the target of up to 12%. Return on equity on IFRS basis stood at 21.2% (2016: 17.0%).
Operating expenses amounted to € 584 million (2016: € 569 million). Operating expenses associated with ordinary activities (part of the operating result) were € 560 million, which is an increase of € 11 million compared with the same period last year. This was mainly attributable to higher current net service costs for a.s.r.’s own pension scheme, an increased cost base because of acquisitions and investments in the growth segments Banking and Asset Management and Distribution and Services. In the Non-life and Life segment operating expenses decreased.
Dividend Management proposes to distribute a cash dividend of € 229.7 million for the full year 2017. This is a € 43 million (23%) increase compared to the cash dividend of € 187.0 million for 2016. The increase in dividend is driven by the improved operating result. The proposed annual dividend is in line with the earlier announced dividend policy for 2017 and based on a pay-out ratio of 45% to 55% of net operating result attributable to shareholders (i.e. net of hybrid costs).
Following the approval of the Annual General Meeting on 31 May 2018, the dividend will become payable with effect from 7 June 2018. The a.s.r. stock will trade ex-dividend on 4 June 2018.
In 2018, a.s.r. intends to introduce interim dividend, set at 40% of the total dividend for the previous year (in 2018: € 0.65 per share). The interim dividend is within the framework of the dividend policy and under the condition of sufficient results payable after HY results.
The Solvency II ratio increased by 7%-points to 196% (year-end 2016: 189%). The Solvency II ratio before the proposed dividend amounts to 203%. The Solvency II ratio increased mainly due to organic capital creation, positive capital market developments and issue of a Restricted Tier 1 bond (RT1). These developments were partially offset by re-risking of the investment portfolio (including impact of low interest rates), the lower volatilityadjustment, the proposed dividend over 2017 and the buy-backs of own shares.
GNL is the group company of a number of entities, the main being Generali levensverzekering maatschappij N.V. and Generali schadeverzekering maatschappij N.V. GNL focuses on non-life and life insurance contracts in the Dutch market. Generali Nederland N.V. has been renamed to ASR Utrecht N.V.
The full integration of GNL’s activities into a.s.r. will take place in phases and is likely to be completed by 2020 at the latest. GNL staff will move to a.s.r. locations in the course of 2018. The GNL products will be rebranded into a.s.r. or one of a.s.r.’s labels in due course. Legal mergers between Generali levensverzekering maatschappij N.V. and ASR Levensverzekering N.V. as well as Generali schadeverzekering maatschappij N.V and ASR Schadeverzekering N.V. are expected to take place in 2018.
Customer satisfaction ‘Meeting customer needs’ is one of the strategic pillars of a.s.r. Continuous efforts are being made to improve processes to better help customers and to develop sustainable insurance products. One of the ways in which this is done is by making information accessible and understandable. To this end, a.s.r. invests in new (more digital and accessible) IT platforms. Customers are increasingly asking for clear and comprehensible information. They want to be able to make an informed and fitting choice in the purchase of insurance products and services. In order to monitor and where necessary improve the performance of a.s.r., various customer and intermediary surveys are carried out. Two of those are the Net Promoter Score (NPS) and the Customer Interest Central Dashboard of ‘AFM’ (Dutch Authority for the Financial Markets).
NPS a.s.r. continuously measures the Net Promoter Score (per business line). At the beginning of 2017, a new method was chosen in which the questions were tightened. The question to the customer now places the emphasis on the employee of a.s.r.: How likely is it that you will recommend a.s.r. to family, friends and colleagues based on your experience with me? This used to be: How likely is it that you will recommend us to a friend or colleague? A comparison with earlier NPS measurements is therefore not possible (the score went from +5 in December 2016 to +36 in January 2017).
Customer Interest Central Dashboard The Customer Interest Central Dashboard (Dutch abbreviation: KBC) provides insight into the extent to which the sector places customer interest at the centre of its products and services. Various research modules are the basis for this. The modules that formed part of the Customer Interest Central Dashboard in 2017 were ‘Mortgage Advice and Management’, ‘Payment Arrears at Mortgages’, ‘Claims handling’, ‘(Aftercare) Investment Insurance’ and ‘Information Provision by Insurers’. The table below shows the scores of a.s.r. The scores are compared to the average score of all the companies that were researched. a.s.r. scored above-average in the provision of information on life insurance policies. Just like last year, a.s.r. scored high in the research into claims handling at Non-life. a.s.r. also performed above-average in managing the existing mortgage portfolio. This was mainly due to the good score on the policy aspect. a.s.r. can improve even further in the module ‘Payment Arrears at Mortgages’. This involves providing information and activating and supporting vulnerable mortgage holders. A plan of action has now been drawn up for this purpose. a.s.r. also lags behind in the area of arrears management, particularly in terms of quality control and policy. A number of actions have already been taken to meet these concerns. It has also been established that a.s.r. has sufficiently complied with (the aftercare of) investment insurance policies. Surveys and quality checks have led to improvements. a.s.r. has made a great deal of effort to actively approach clients with an investment insurance policy and has achieved good results.
Complaints management The Complaints Management team monitors the implementation of a.s.r.’s complaints policy and directs the complaints organisation. The complaints handling itself is decentralised within the organisation. Key objectives of complaints management are: • a.s.r. is open to complaints, making it easier for customers to lodge a complaint; • a.s.r. communicates its views and a resolution of the complaint in an understandable fashion; • a.s.r. wants to learn from its mistakes. Therefore we welcome any complaints.
Training complaints officers In collaboration with the bureau Interim & Meer, a.s.r. has developed tailor-made training programmes for complaints officers, enabling them to develop the necessary skills to conduct complaints interviews. During this training programme, the complaints officers will learn what the customer expects from them, and how this can be given shape in a proper way. After completing the training, the officers will be able to conduct a highquality interview and will know the importance of a proper introduction. They will be capable of discovering the customer’s real question and bringing the interview to a satisfactory end. The training programmes are completed with personal coaching relating to complaints interviews conducted in which the subject matter is put into practice.
One of the questions is whether the complaint has been settled in the customer’s opinion.
Transparent product and service descriptions Customers increasingly value transparent products and services with clear choices. This is also one of the outcomes of the central stakeholder dialogue (for more information see Chapter 2.4 Our stakeholders and material issues).
Integrity a.s.r. strengthens its ultimate raison d’ être, helping people, by being a sustainable insurer at the heart of communities and having an unbreakable reputation as a solid and responsible financial institution. Integrity and ethical conduct are prerequisites for an unbreakable reputation. In addition to the use of clear frameworks, sound and controlled business operations are above all driven by good intrinsically secured core values. Ethical behavior is naturally and open to discussion. Ethical dilemmas are discussed and shared. The culture that accompanies this is one of continuous learning and being accessible.
a.s.r. has a central Integrity department, responsible for of Compliance and Security Matters. The department supervises sound and controlled business operations, including monitoring the reputational risks of a.s.r. The framework is formed by laws and regulations and standards of a.s.r. itself, including the a.s.r. code of conduct. Safeguarding the customer’s interests is central in this context. a.s.r. also wants to ensure in respect of all its employees that ethical behaviour is self-evident. That is why a.s.r. continually invests in raising awareness on the various themes of integrity. Employees are encouraged to make integrity issues open to discussion and enter into dialogue. Various activities took place in 2017 to further raise awareness. For more information on this, see Chapter 2.5 (Our People, page 37, paragraph ‘Ethical behaviour’).
In general, the number and scope of integrity-related risks is limited. From a compliance perspective, changing legislation and regulations are the main risk to sound and controlled business operations. This is partly due to the usually short implementation time. Continued attention will also be needed for future changes in legislation and regulations and the related monitoring.
Assessing suppliers on their impact on the society a.s.r. considers it important to operate in a responsible and sustainable manner. It also expects this from its suppliers.
SRP annex is part of the procurement contracts concluded between a.s.r. and its suppliers.
Contributing to financial self-reliance a.s.r. helps customers in sharing risks and building up assets together for the future. Customers must be able to make conscious financial choices and be financially self-sufficient for this.
a.s.r. foundation For a.s.r. social involvement is more than just sustainable entrepreneurship. It also means investing in various sustainable social initiatives. That is why a.s.r. foundation initiates projects with the help of the voluntary efforts of colleagues with regard to two themes: • Financial self-reliance: providing help to prevent people from getting into debt or to get people out of debt again with the help of voluntary commitments of employees; • Helping by doing: inspiring, motivating and mobilising a.s.r. employees to voluntarily engage in community activities in a broad sense, at home or in a team.
Voluntary contribution to Helping by doing/roll up your sleeves – MTA (number of times)
Total Voluntary contribution (number of hours) 6,825 9,437 5,634 2 Because colleagues are or can be committed to various projects, we speak of number of times instead of a unique number of individuals.
3 In the 2016 Annual Report, the total voluntary commitment was 966 times and 6,426 hours. This included other projects that a.s.r. no longer offers in 2017, which is why a.s.r. excludes them from this comparison
a.s.r.’s businesses put the ten rules of the ethical manifesto into effect in their own way. Several results from 2017: • Suspension of 300 insured persons at the Dutch Central Administration Office (Dutch abbreviation: CAK)
because payment arrangements were made with these customers via pro-active receivables management; • The development of arrears on mortgage loans from short-term to long-term (> 3 months) decreased strongly.
From 0.57% (arrears percentage on mortgage loans) in 2015 to 0.21% in 2017. In addition to help from the economy, the deployment of a job coach and budget coach also contributed to the decline.
1 87% of all lease cars are allocated to head office.
2 In 2017, a new more accurate calculation method was used, resulting in an increase in the total footprint of 3.65% compared to 2016. In order to be able to compare results with previous year, the results for 2016 have been recalculated in this overview on the basis of the new calculation method and adjusted emission factors for 2017 for waste and mobility.
3 This includes the fossil fuel consumption of all a.s.r. lease cars.
Tons of carbon equivalents (scope 1, 2 and 3) 7,724.61 7,708.2
1 Usage of electricity and gas 2 Gold Standard Project Bolivia: Compensation via Gold Standard certificates stands for the amount of CO2 that the forest holds. Trees are planted if necessary, but compensation also takes place by the conservation of the forest through education, alternative income support for local residents etc.
In 2017, mobility at a.s.r. can be broken down as follows: Mobility
Geothermal energy In 2017, a.s.r. continued its collaboration with a consortium of organisations consisting of a.s.r., Utrecht University, Stichting Kantorenpark Rijnsweerd (Rijnsweerd business park foundation), energy firm Engie, the University of Applied Sciences Utrecht and University Medical Center Utrecht. The consortium submitted a research document to the Dutch Ministry of Economic Affairs about whether geothermal heat/electricity can be used to heat or cool office buildings, thus making them virtually carbon-neutral.
At an organisational level, a.s.r.’s operations are divided into six operating segments. These segments are the Non-life and Life segment and the segments Banking and Asset Management, Distribution and Services, Holding and Other (including Eliminations) and Real Estate Development.
Profit / (loss) for the year attributable to holders of equity instruments 190 143
Robotics In 2017, P&C began using Robotic Process Automation (RPA) in order to more efficiently perform routine tasks. The aim is to migrate the Avéro Achmea portfolio using RPA.
Sustainability P&C has a number of CSR initiatives. These focus on three pillars: prevention, safety and sustainability. The ambitions of P&C are as follows: • To be recognised by customers, advisors and employees for its contribution to prevention and sustainability; • To advise and communicate on how to prevent damage; • To make the customer’s environment safer; • In the event of damage: to promote sustainable recovery.
To achieve these ambitions, P&C took the following actions in 2017: • Preventive measures were organised for (potential) customers and advisors; • Knowledge sessions for advisors on electrical equipment/NEN, vehicle crime, calamities and climate & sustainability were organised; • In cooperation with the Amsterdam Amstelland fire brigade, home visits were organised; • New ‘fly and drive safely’ apps were launched; • Preventive content was shared via social media with appealing titles such as ‘Driving a car with your slippers on: is that allowed?’, ‘Avoid overheating in bed’ and ‘Prevent car theft with a keyless starter system’.
Ditzo Ditzo has been an independent business within the P&C segment since 2014. Ditzo wants to continuously address the (latent) problems in the market. To this end, it goes back to its core business of providing insurance based on the theme ‘redesigning, because things can be done better’. In this context, Ditzo touches on socially relevant themes such as the use of social media in traffic. For example, Ditzo has conducted a campaign with media company RUMAG against the use of mobile phones in traffic.
Impact and risks of climate change Within P&C, the Climate Committee was started in 2017. The objective of the committee is to determine the measures and solutions necessary to manage climate risks in the a.s.r. portfolio and to provide clients with the best possible support and information. Adaptation of climate change by the (international) insurance sector is of major importance in a.s.r.’s view. It supports societies in reducing their vulnerability to climate change and, where possible, in benefiting from it.
Climate has a major impact on our customers and on a.s.r. as an insurer. One example is the severe hailstorm in June 2016. At that time, in a relatively small area in the south of our country, a very substantial cost of claims arose (for all insurers in total approximately € 500 million). The number of claims was extremely high. Climate has a particular impact on products in the sectors of Fire (buildings, household effects/inventory) and Traffic, for both business and private customers.
Disability a.s.r. was one of the first insurers to respond to the demand for disability insurance solutions under the De Amersfoortse brand and today offers a broad range of disability insurance products for SMEs, self-employed persons and individual customers.
a.s.r. has been a thought leader in this market, with a market share of 21.6% in 2016 (2015: 21.4%), measured by GWP. The total Dutch disability insurancemarket measured by GWP amounted to € 3.61 billion in 2016¹. In 2017 a.s.r. was the second largest provider of disability insurance products in the Netherlands, after the merger of NN and Delta Lloyd.
Products • Disability self-employed: - Products for self-employed entrepreneurs to protect against loss of income in the event of sickness or disability; - Products for employees to protect the payment of fixed expenses in the event of sickness or disability and to cover loss of income above the wage limit (WIA - Dutch Work and Income (Capacity for Work Act) supplementary insurance) in the event of disability.
In addition to insurance products, a.s.r. offers the services of in-house medical advisors, occupational reintegration managers, vocational experts and external parties offering reintegration, health and safety services (arbodiensten), combined with skilled claims handlers, for all policyholders, to assist with their occupational reintegration. In Group Disability, a.s.r. also has a joint venture with another new insurer called ‘Keerpunt’ (a workplace reintegration services provider), in addition to its own in-house specialists.
Market The Dutch disability market is divided into: • Disability self-employed: the entrepreneur has no social security concerning loss of income caused by sickness or disability and is able to insure disability risk up to retirement age. In the event of disability, the claim will depend on the amount and period insured, the degree of disability and the own risk period (>14 days). Return to work programs and skilled claims handling processes are key for insurers in managing COR and profitability; • Group Disability (the employer and its employees): - Sickness Leave (short term, 2 years): Employers are - in the event of sickness leave of the employee responsible for continued payment of salary to the employee for up to two years. The employer can insure this risk on the private market which in practice is done by most SMEs. Disability insurers can differentiate themselves in the support they deliver for reintegration. After two years of sickness leave the employer is no longer responsible for the salary payment and the employee can be laid off; - Disability (long-term, up to retirement age): After two years of sickness the employee may appeal to the WIA. WIA is the Act relating to work and income according to labour capacity); a public act for all employees in the Netherlands administered by UWV (Employee Insurance Agency). UWV checks the sick employee and determines the amount of benefit based on the individual’s earning capacity (e.g. the income that the (partly) sick employee can earn through work). This can involve a significant fall in income. Insurers have developed several products to cover this risk, so disabled employees can receive - in addition to the payment of the WIA - up to 80% of their last earned income. These products are often offered by employers as secondary employment conditions to employees. The employer may also choose to bear the risk himself and transfer that risk to an insurer (WGA-ERD).
Strategy and achievements a.s.r. has a strong position in the Dutch disability insurance market and with De Amersfoortse brand it believes it is well-positioned to capture profitable growth opportunities in this market. Furthermore, a.s.r. has a leading position in the advisory distribution channel. Disability insurance is expected to grow in line with general macro-economic developments. a.s.r. intends to pursue growth opportunities especially within the SME and self-employed customer segments, leveraging its strength in the intermediary channel. Customer interest comes first in all this. Disability will start working on the basis of the outcomes of customer journeys. For example: • Conducting interim and final talks at claims handling in order to increase customer satisfaction and the NPS; • Customised quotation software to increase ease of use; • More personal contact by the medical department and increased use of the vocational experts.
Customer satisfaction In order to further improve customer service, the portfolio of sickness leave insurance has been converted into a new IT platform with a high degree of straight through processing. As a result, customers can arrange more of their insurance administration themselves, and faster.
Health With a market share of 2.1%, a.s.r. was the eighth largest provider of health insurance products in the Dutch market in 2017, as measured by number of customers1. a.s.r. offers health insurance products under the brands Ditzo and De Amersfoortse.
Strategy and achievements a.s.r.’s strategy for Health is to run it as an ‘independent’ division within a.s.r., meaning that Health intends to fund the growth of its business exclusively by organically generated capital without any capital injection from a.s.r. group.
Digitisation and innovation Health aims for further digitisation and innovation. In this way, Health supports its health customers as much as possible with digital services, such as the My Environment (MijnOmgeving) and mobile app for, among other things, simple declaration of expenses. Last year, this app from Ditzo and De Amersfoortse was awarded the second-best declaration app of all health insurers. The aim is also to digitise the acceptance and declaration processes.
Extra service ‘Pechvogelhulp’ In 2017, ‘Pechvogelhulp’ was added as a new cover. ‘Pechvogelhulp’ is an extra service for all customers who have health insurance with Ditzo. ‘Pechvogelhulp’ provides cover for extra medical costs of up to € 10,000 after an accident in the Netherlands. These are costs that the basic insurance or supplementary health insurance does not reimburse.
The Life segment comprises the life insurance entities Pensions, Individual life and Funeral. The segment offers insurance policies that involve asset building, immediate (pension) annuities, asset protection, term life insurance and funeral expenses for consumers and business owners. The operations are conducted by life legal entity ASR Levensverzekering N.V. With an 14.8% market share in 20161 (2015: 12.9%), a.s.r. occupies a third place in the life market in the Netherlands.
New business (APE) 89 152 1 DNB - At the moment of writing, the market share figures for 2017 are unknown.
Products • Defined contributions (DC): a.s.r. provides pension products based on defined contribution with recurring premiums where benefits are based on investment returns on specified funds in some cases with guarantees. • Defined benefits (DB): a.s.r.’s DB Pension products are traditional ‘capital intense’ insurance products based on life-long guaranteed pension payments with recurring premiums with or without profit-sharing. These products also provide an option for additional single premiums for indexation and back services¹.
Strategy and achievements The DC proposition of a.s.r. (the Employee Pension called WnP) is aimed to be competitive in pricing (Top 3), rewarded for its fund selection (by independent advisors) and digital in communication to the employees of a.s.r. customers. In 2017, a.s.r. implemented several improvements (relabelling to a.s.r. brand, adjusting life cycles, changing fund selection, improving portals and redesigning Sales & Customer Service) to strengthen the position of WnP in the market. The results of these efforts are already reflected in our excellent top 3 position in IG&H’s important pension survey.
1 The purchase of pension over past years of service (versus coming service = future years of service). This occurs in final salary schemes.
Term life insurance offering consists of traditional life insurance policies that pay death benefits without a savings or investment feature. a.s.r.’s term life insurance products are mainly sold in combination with mortgage loans or investment accounts and generally require recurring premium payments.
a.s.r. is well positioned to become the consolidator in the Dutch back book market. With the acquisition of Generali Leven, a.s.r. added ‘block of business’ for the first time. The book will be migrated in the same way as the migrations resulting from the service book strategy.
1. Optimise customer satisfaction To increase the value of the individual life book, a.s.r.’s strategy is to maximise customer satisfaction. a.s.r. believes that maintaining customer satisfaction is crucial to efficiently manage the way in which customers behave and to avoid unnatural lapses. While focusing on customer satisfaction, a.s.r. strives to further digitise its services and to make the services easier to use for its customers.
Digitisation and innovation In 2017, in line with its strategy, Individual life focused on improving customer-oriented communication. Where possible, communication was digitised. Processes were also improved, partly as a result of the use of robotisation. Individual life also worked on completing the activation of unit-linked insurance policies. Non-accumulating policies (NOP) reached an activation rate of 99.9% and activation of unrestricted policies was fully completed. For more information, see Chapter 3.3.1 (Risk Management – Unit-linked insurance policies).
In 2017, investments were made in improving the data quality of the insured persons’ information; 227,000 addresses were retrieved.
Research on awareness raising about the consequences of a death In May 2017, Ardanta commissioned a survey among more than a thousand Dutch people 1 in the Randstad conurbation to gain insight into the awareness of Dutch people about the consequences of a death.
The results of the research showed that 86% of the respondents did talk about death with family and friends, but the topics discussed were superficial and rarely actually recorded. When asked what they were most concerned about when they die, people’s main concern was the grief of their families. In addition, 76% of the respondents reported that they had not arranged anything to care for their children in the event of death.
1 Of the respondents, over 45% were over 50 years old and 60% of the respondents had children, of which 36.3% were over 18 years old.
The Banking and Asset Management segment consists of all banking activities and activities related to asset management, including investment property management. These activities are carried out by: Banking: • ASR Bank N.V.
Profit / (loss) for the year attributable to holders of equity instruments 6 5
Mortgages The Dutch housing market continued its strong recovery from the average 22% fall in prices between 2008 and 2013. Housing prices increased by 7.6% on average in 2017, compared to 2016, and they are now on average 23% above the 2013 trough. Especially the four largest cities and their suburban areas show some signs of overheating in terms of affordability and supply.
Residential mortgage lending by insurers and other non-bank institutions, institutional investors and insurers to consumers and business continues to be a serious alternative to mortgage lending by banks. At present, the former group fund approximately 30% of new mortgage production (source: Dutch land registry). The definitive Basel 4 guidelines, especially those regarding the use of a capital floor, which were published on 7 December 2017, may have an impact on the Dutch mortgage market. Given that the guidelines were published recently and still need to be translated into European legislation, a.s.r. cannot at this point in time estimate what their impact will be.
Savings Owing to the ECB’s continued monetary stimulus, saving rates continued to fall in the Netherlands during 2017 and they are now at historic lows. This keeps curbing the growth of the savings market, despite the fact that private spendable income has increased due to the economic recovery. Customers are increasingly looking for easy and ’round-the-clock’ access to their savings accounts. Other providers are only ‘one click away’ and online has become the norm. Consumers will increasingly want to be able to get an overall picture of their (future) income. Awareness in this context is growing and this is also facilitated by advances in technology.
a.s.r. bank has active relationships with some 2,000 independent financial intermediaries to meet the needs of customers and provide independent advice. One of the ways in which a.s.r. bank maintains these relationships is by offering intermediaries webinars on its products and processes.
Products a.s.r. offers asset management services for pension funds, insurance companies, guarantee and donor-advised funds, charities, local and regional authorities, healthcare and education institutions and other parties in the social playing field.
The product array consists of: euro corporate bonds, interest rate overlay, euro government bonds, euro equities, balanced mandates, tailor-made bond portfolios, interloans, fixed-income index investments, real estate and a mortgage fund proposition. a.s.r. offers tailor-made solutions with a sound return on investment. In addition to tailor-made mandates, a.s.r. offers institutional investment funds and integrated/comprehensive management with modular elements such as ALM advice or reports for regulators.
Market In addition to complying with more complex and increasing legislation and regulations and at the same time achieving economies of scale, consolidation in the asset management market is also strengthening. The number of independent Dutch asset managers is decreasing while at the same time there is a need for specific knowledge of the Dutch market. This offers opportunities for a.s.r. asset management as a down-to-earth and Dutch asset manager.
Acquisition of First Investments The acquisition of First Investments was completed in December 2017. With the arrival of the First Investments team, a.s.r. strengthens its proposition in the field of (tailor-made) matching/return solutions for pension funds in particular.
The a.s.r. Socially Responsible Investment (SRI) policy describes the ethical and sustainability criteria that apply to a.s.r. investments for internal and external client portfolios, covering internally managed as well as externally managed assets. The SRI policy and its results are explained in more detail below. The full a.s.r. SRI policy is available on asrnl.com.
ESG Integration for best-in-class investments Best-in-class investing is part of the a.s.r. selection process for companies based on ESG best practices and products. a.s.r. favours companies that deliver above-average in the area of ESG policy and implementation. Based on VigeoEiris research, they are classified as pioneering, best-in-class and performing above average in the industry companies using a relative, sector-based ranking for six domains of analysis: Human Resources, Environment, Market Ethics, Good Governance, Social Impact and Human Rights. A detailed description of these criteria is published on asrnl.com.
Screening process VigeoEiris (vigeoeiris.com), an independent agency accredited by Arista, screens companies based on the a.s.r. SRI policy along the Equitics® methodology developed by Vigeo. The Arista Standard sets the rules for assessing evidence of transparency and verifiability of the processes involved in the Responsible Investing research. In addition, Forum Ethibel (forumethibel.org) conducts an independent audit and certification of SRI principles in a.s.r.’s investment portfolio and the engagement process on a semi-annual basis.
Intro d uctio n 1 The list of engaged companies is published on the a.s.r. website, including controversial issues and status of engagement.
Externally managed assets The external providers SRI policy is a key decision criterion in the selection of external managers. As minimum standards, a.s.r. requires exclusion of controversial weapons according to the Sustainable Investing Code from the Dutch Insurance Association and a best possible effort to be a signatory to the UNPRI and the UN Global Compact principles. In addition, a.s.r. engages with its external managers to enhance their SRI policies and implementation of the policies as well as their transparency. In 2017, a.s.r. engaged actively with new and existing managers such as BNP Paribas AM, who was one of the managers to expand its SRI criteria to exclude tobacco activities from its investments. a.s.r. receives frequent sustainability reporting from its external managers and, whenever possible, a.s.r. requests impact metrics along with the SDG reporting.
On the asset management front, 2017 was a year to strengthen the implementation of the a.s.r. SRI policy in the defined contribution pension (DC pension) product and external clients offering to improve their SRI weighting.
Target Result 2017 Result 2016 100% compliance with own SRI policy a.s.r. real estate investment management a.s.r. real estate investment management (a.s.r. reim) invests in direct and indirect real estate and manages real estate portfolios for institutional investors. The substantial Dutch retail, residential and office portfolio is open to institutional investors who are looking for stable capital growth. Clients can participate in the funds of a.s.r. reim; ASR Dutch Prime Retail Fund, ASR Dutch Core Residential Fund and ASR Dutch Mobility Office Fund. Institutional investors can also appoint a.s.r. reim to manage their mandates for national and international real estate. On behalf of a.s.r.’s own account investments, a.s.r. reim manages the largest private portfolio of agricultural land in the Netherlands, and the ASR Property Fund for unit-linked insurance products.
Market Not only the economy in the Netherlands is prospering, the Dutch real estate markets also demonstrated sound figures last year. Both income return and capital growth were quite positive. In general, vacancy levels are dropping (or were low already) and user demand is increasing, resulting in upward pressure on rents but also increases in overall market valuations, ultimately reducing rental yields as a percentage of market values. Especially at prime locations there is a stronger upward movement achievable. The Dutch real estate investment market had a very good year. Once again, the total investment volume broke a record. In 2017, it was over 25% higher than a year earlier. Macro-economic prospects for the years to come are good: above-average GDP growth rates are forecasted for 2018 and 2019. The unemployment rate, which is already low, is expected to decline further to a stable level of below 4%. This will be positive for the Dutch real estate markets, both for occupier and investor. On average, a.s.r. real estate expects positive market dynamics, increasing rents and decreasing vacancy levels. Overall, a.s.r. real estate expects the property investment market to show healthy demand again. The availability of supply will determine the final level of investment volumes. Geographic differences will nonetheless remain substantial. a.s.r. reim will therefore continue to focus on key regions, towns and locations. However, acquiring high-quality products, will continue to be a challenge, given current investor demand and the low supply levels on good locations. Due to the limited supply and currently lower yields in the most attractive areas of the Netherlands, investors are expected to shift their focus slightly to non-core areas.
Strategy and achievements The strategy aims to create long-term value for investors. To this end, agreements are made and in which returns are to be achieved at acceptable risk levels. For the longer term, it is important that real estate contributes substantially to the (economic) objectives of tenants and lessees.
• Of the ten major life insurers in the Netherlands, a.s.r. ranks first in the Fair Insurance Guide in terms of environmentally responsible investment (MVB) policy.
• a.s.r. has been awarded an A+ rating for strategy and governance in the annual sustainability report of the United Nations Principles for Responsible Investments (UNPRI), the international network for promoting sustainable investment practices to asset managers.
In January 2017, a.s.r. reim’s team for rural real estate investments organised a meeting with relations with soil fertility as the main topic on the table. a.s.r. reim considers it important to deal with the use of soil in a sustainable way, so that the quality is guaranteed for future generations. A fertile soil is essential for a good yield and preservation of the value of the land. This benefits farmers and landowners.
Tenant satisfaction Real estate is not only approached as an investment, a.s.r. reim also aims for aware, involved and satisfied tenants. In this context, a.s.r. reim conducts periodical tenant satisfaction surveys amongst tenants of residential, retail, office and rural real estate. The feedback will show how they rate the services, properties and their living and working environments. The outcomes are processed by asset management and, where applicable, discussed with the internal or external property managers. a.s.r. reim aims to achieve an average tenant satisfaction rating of at least 7 (out of 10).
A rural portfolio that is asbestos-safe 45% of the holdings in the portfolio were declared asbestos-safe 27% of the holdings in the portfolio were declared asbestos-safe 1 The KPI ‘Portfolio asbestos-safe’ includes the number of rehabilitated properties plus the number of properties sold compared to the portfolio of 2015.
Sustainable investing By participating annually in GRESB, a.s.r. reim improves its transparency and awareness of sustainability. In 2017, all three funds improved their scores in comparison with their scores in 2016. As a result, all of the funds now score above the average for their peer groups.
The Distribution and Services segment covers activities relating to the distribution of insurance contracts and intermediary services, and is carried out by Van Kampen Groep Holding B.V. (VKG), Dutch ID B.V., Corins B.V., SuperGarant Verzekeringen B.V. and PoliService B.V.
Profit / (loss) for the year attributable to holders of equity instruments 12 9
Market The footprint of a.s.r. in the distribution landscape through the aforementioned distribution businesses also contributes to insight in developments within the insurance distribution market. Recent developments in this market show that the distribution landscape remains in motion. Relevant developments in the distribution landscape are for example the growth of service providers and mandated broker businesses, as well as the ongoing consolidation of intermediaries.
Strategy and achievements a.s.r. acquired the businesses VKG, Dutch ID, Corins and SuperGarant in 2015 and 2016, consistent with its strategy of seeking to enhance and strengthen its relationships with intermediaries. a.s.r. believes that VKG, Boval, SuperGarant and Corins will similarly benefit from their inclusion in a.s.r., since a.s.r.’s support (e.g. for product offerings and/or innovation possibilities) will allow them to develop and grow their businesses.
The acquisitions offered a.s.r. forward integration in the insurance chain and improved insights into customer needs, which a.s.r. believes will enable it to adjust its product portfolio and/or distribution mix and therefore align its product range more closely with customer needs. a.s.r. also believes these acquisitions provide learning and innovation opportunities by giving it the ability to develop and test new product ideas with direct input from the distribution and customer sides. The integrated chain approach enables a.s.r. to accelerate the implementation and marketing of innovations and new products, allowing it to innovate quickly and implement its learning throughout the rest of the organisation.
VKG VKG is a full service provider and a mandated broker to a number of Dutch insurance companies, including a.s.r.’s P&C insurance business. As at 31 December 2017, VKG acted as service provider and as a mandated broker for 23 financial institutions, and distributes products from 94 insurers, banks and other credit institutions through VKG’s relationships with intermediaries. VKG also provides access to the insurance exchange and mortgages. Based on these associations, VKG offers administration and consulting services to advisors for their commercial and
Business performance | 3.2 Segment performance 74 back-office operations. As at 31 December 2017, VKG had agreements with approximately 3,000 advisors in the Netherlands, 500 of whom have fully outsourced their administrative functions to VKG.
Dutch ID (Boval and Felison) Dutch ID is an advisor, service provider and mandated broker to a.s.r.’s disability and P&C insurance businesses, as well as to other insurance companies operating in the Dutch non-life insurance market.
PoliService Poliservice is an intermediary for a.s.r. and its business which sells, gives advise and manages different types of insurance, giving direct mortgage and pension advice to its customers and managing the portfolios of intermediaries that have ceased to operate. It acts as a tied agent and is also an insurance intermediary for a.s.r.’s own employees.
Profit / (loss) for the year attributable to holders of equity instruments -45 2
Operating result decreased with € 12 million from € -87 million to € -99 million. This is mainly the result of higher current net service costs (€ 11 million) for a.s.r.’s own pension scheme. As a result of lower discount rates primo 2017.
The incidental items amounted to € 15 million compared to € 92 million in 2016. The decrease mainly relates to a release in 2016 of € 100 million of a.s.r.‘s post-employment benefit plan for future inflation indexation for former employees (IAS 19).
Profit before tax decreased from € 5 million to € -84 million. This decrease was mainly attributable to the above mentioned incidental items.
Business performance | 3.2 Segment performance 76 3.2.6 Real Estate Development
Profit / (loss) for the year from continuing operations 14 3
Profit / (loss) for the year attributable to holders of equity instruments 12 8
The profit from discontinued operations in 2016 (€ 4 million) was related to projects sold in 2016.
a.s.r. uses a multi-brand model which is designed to target different market segments and comprises three core brands: a.s.r., De Amersfoortse and Ditzo, as well as two niche brands: Europeesche Verzekeringen and Ardanta.
Ditzo Ditzo is a.s.r.’s online brand, focusing on P&C and health products for retail clients. Ditzobranded products are sold online (directly) through its own and aggregator websites.
Business performance | 3.3 Risk management and Compliance 78 3.3 Risk management and Compliance 3.3.1 Risk management
Risk management is an integral part of a.s.r.’s daily business operations. a.s.r. applies an integrated approach to managing risks, ensuring that strategic objectives are met. Value is created by striking the right balance between risk and return and capital, whilst ensuring that obligations to stakeholders are met. The Risk Management Function (RMF) supports and advises a.s.r. in identifying, measuring and managing risks, and ensures that adequate and immediate action is taken in the event of developments in the risk profile.
Strategic risk management in 2017 Strategic risk management aims to identify and manage the key risks that could affect a.s.r.’s strategic objectives. Essential elements of strategic risk management are Control and Risk Self-Assessment (CRSA), Own Risk and Solvency Assessment (ORSA) and Recoveryplan.
The RMF monitors the risk profile of a.s.r. and its legal entities in order to ensure that it stays within the risk appetite. The risk appetite is defined as the level and type of risk a.s.r. is willing to bear in order to meet its strategic, tactical and operational objectives. The risk appetite is formulated to give direction to the management of the (strategic) risks. The risk appetite contains a number of qualitative and quantitative risk appetite statements, and is defined for both financial (FR) and non-financial risks (NFR).
Intro d uctio n 4 ASR Nederland N.V. has a minimum SCR ratio of 120%. FR
a.s.r. has adopted a combined top-down (Strategic Risk Analysis) and bottom-up (Control Risk Self-Assessments) approach for identifying major risks to which it can be exposed. Output from the Strategic Risk Analysis (SRA) and Control Risk Self-Assessments (CRSA) provides insight into the overall risk profile of a.s.r. and the risk profiles of the underlying legal entities. The main risks are translated into ‘risk priorities’ at group level and are monitored throughout the year in the a.s.r. Risk Committee.
As part of the regular ORSA process, a.s.r. annually assesses the accuracy of the Solvency II standard formula, taking into account the identified risks and those risks that are not part of the standard formula (such as inflation risk, strategic and reputational risk, model risk, contagion risk and liquidity risk).
Developments in financial markets throughout 2017 were favourable and contributed to the growth of the group’s own funds. Despite the slight increase, interest rates remained low and continued to be a dominant theme. The interest rate hedge was reduced to enable a.s.r. to benefit from a potential future rise in interest rates. Group Risk Management (GRM) carried out a review on the underlying proposals. Its conclusion was that the down-side risk was acceptable vis-à-vis the current solvency level. The interest rate sensitivity of the SCR ratio remained within the limits of the interest rate policy during 2017. Exposure to shares, property and corporate bonds rose during 2017 in order to support the anticipated capital generation. The corresponding increase in the required capital for market risk remained within the limits set. Finally, net exposure to core sovereign bonds was reduced in order to mitigate the negative effects of a potential normalisation of swap spreads. GRM subscribed to this modification in the bond portfolio.
Business performance | 3.3 Risk management and Compliance 82 that a ruling, although only legally binding on the parties involved in the proceedings, could be applied to or be relevant for other unit-linked life insurance policies sold by a.s.r. Consequently, the financial consequences of any current and/or future legal proceedings brought upon a.s.r. could be substantial for a.s.r.’s life insurance business, and may have a material adverse effect on a.s.r.’s financial position, business, reputation, revenues, results of operations, solvency, financial condition and/or prospects.
Legal proceedings a.s.r. is the subject of a number of legal proceedings initiated by individual unit-linked policyholders, represented in most cases by claims organisations. While fewer than 15 cases are pending before Dutch courts, including courts of appeal and fewer than 120 cases are pending before the FSCB (the Dispute Committee and the Committee of Appeal of the FSCB), there is no assurance that further proceedings will not be brought against a.s.r. in the future. Future legal proceedings regarding unit-linked life insurance policies could be brought against a.s.r. by consumers individually, by consumer organisations acting on their behalf or in the form of a class action. There is also ongoing lobbying by consumer protection organisations such as the Consumentenbond and Stichting Geldbelangen to gain sustained media attention for unit-linked life insurance policies. These organisations argue, amongst other things, that consumers did not receive sufficient compensation under the compensation scheme.
Continuing low interest and volatile markets The (cash-generating) business models of insurers are being severely impacted by structurally low interest rates. It is becoming an ever-increasing challenge to generate sufficient returns on investment and to be able to reinvest against attractive terms. The pressure to generate investment returns (search for yield) creates much tension between risk and return. Unforeseen political developments and/or macroeconomic trends combined with decreased liquidity in the market due to the limited scope banks have to supply money creates the threat of financial markets becoming volatile and could in turn weaken a.s.r.’s solvency position. a.s.r. will remain permanently alert to the risk of a scenario developing in Europe with a major impact on capital and solvability. It therefore continuously monitors its interest rate position and reports the findings to the Financial Risk Committee. The Interest Rate Risk Committee then holds preparatory discussions to decide whether or not to adjust the interest rate hedge. The consequences of possible interest rate fluctuations are also examined more fully in the Strategic Asset Allocation (SAA), an annual ALM study which a.s.r. conducts at its own expense, and also to some extent in the ORSA.
Business performance | 3.3 Risk management and Compliance 84 in 2017 a.s.r. set up a multidisciplinary legislation and regulation committee to help the various businesses signal and adopt legislative amendments in good time. The committee reports to the NFRC. a.s.r. has also set up an internal centralised project group to monitor legislation on data protection, Algemene Verordening Gegevensbescherming (AVG). This project group manages and supports processes, policy guidelines and the interpretation of privacy aspects throughout a.s.r. In addition, in 2017 knowledge sessions were again organised for the decentralised project organisations, a fit-gap analysis was conducted and policy guidelines were formulated. The set-up and approach used by a.s.r. to meet the stricter requirements imposed by the AVG (GDPR) in a timely manner were also assessed externally. a.s.r. must be fully compliant by 25 May 2018.
a.s.r. made ongoing investments throughout 2017 to further strengthen its defences against cybercrime and to enhance the expertise of its teams. a.s.r.’s cybercrime experts closely monitor and evaluate developments in cybercrime, and take suitable measures where necessary. a.s.r. regularly tests the organisation’s ability to detect and respond to cyber incidents (red team test). In 2017 this test was carried out by a leading security company in the Netherlands. An awareness programme to improve the ability of employees and management to recognise phishing and other cyber threats was conducted throughout 2017, and due to the importance of the different outsourcing initiatives, a.s.r. also screened the cyber controls of its own suppliers. As a result, a.s.r. has succeeded in keeping obstacles to a minimum. Partnerships with other financial institutions and public agents, such as the Dutch National Cyber Security Center (NCSC), are crucial to mounting an effective defence against cybercrime, and a.s.r. is actively involved in this.
The mission of the compliance function is to enhance and ensure a controlled and sound business operation where impeccable, professional conduct is self-evident.
Positioning and structure of the compliance function The compliance function is a centralised function and, together with Investigation, part of the Integrity department. The Integrity department is headed by a director who is appointed as the a.s.r. compliance officer for both a.s.r. and the supervised entities. The compliance function, the second line of defence, is considered a key function in accordance with the Solvency II regulation. The CEO has ultimate responsibility for the compliance function and the a.s.r. Compliance Officer reports directly to him. The Integrity Director, in addition to the direct reporting obligation to the CEO and the boards under the articles of association, has also a formal reporting obligation to the Chairman of the a.s.r. Audit and Risk Committee or the Chairman of the Supervisory Board to safeguard the independent position of the compliance function and enables it to operate autonomously. The a.s.r. Compliance Officer is entitled to upscale critical compliance matters to the highest organisational level or the Supervisory Board.
Responsibilities and duties The compliance function, as part of the second line of defence, is responsible for: • Encouraging compliance with relevant rules and regulations, ethical standards and the internal standards derived from them (‘rules’) by providing advice and formulating policies; • Monitoring compliance with rules; • Managing compliance risks by developing adequate compliance risk management, including monitoring and, if necessary, making arrangements related to management actions to be taken; • Creating awareness about compliance with rules and social and ethical issues, in which context ethical behaviour within a.s.r. is self-evident; • Coordinating contacts with regulators in order to maintain effective and transparent relationships with them.
Annual compliance plan Developments in rules, the management of high compliance risks and action plans provide the basis for the annual compliance plan and the compliance monitoring activities. a.s.r. continuously monitors changing legislation and regulations and assesses the impact and corresponding actions to be taken. In 2017, a.s.r. paid specific attention to: • General Data Protection Regulation (GDPR): The privacy officer falls under Compliance and is a member of the central project group AVG. Compliance advises on privacy issues and monitors as second line of defence the progress made in implementing the AVG within the businesses and tests compliance with legislation and regulations; • MiFID2: Legal Affairs in collaboration with Compliance has conducted a substantive test for compliance of the existing policy documents and processes. It was established that these meet the MiFID 2 rules; • Insurance distribution directive (IDD): Compliance and Legal Affairs together with representatives of the relevant businesses are taking stock of the impact of this directive, whose implementation has been postponed until October 2018; • Compliance: In 2017, Compliance conducted a.s.r.-wide monitoring surveys into compliance with the sanction regulations and CDD policy, privacy and quality of customer contacts and underlying procedures.
As required by Section 5:25c paragraph 2(c) of the Dutch Financial Supervision Act, the Executive Board declares that, to the best of its knowledge: 1. The financial statements provide a true and fair view of the assets, liabilities, financial positions and earnings of a.s.r. and the enterprises included in the consolidation taken as a whole; 2. The management report provides a fair view of the position at the balance sheet date and developments during the year under review and the enterprises included in the consolidation taken as a whole, together with a description of the principal risks confronting a.s.r.
(see Chapter 2.1 Our strategy and 5 Financial statements 2017); and iv. The report states those material risks and uncertainties that are relevant to the expectation of the company’s continuity for the period of twelve months after the preparation of the report (see Chapter 2.1 Our strategy, 2.3 Key trends and 5 Financial statements 2017).
Intro d uctio n 3.5 Assurance report of the independent auditor
The Sustainability information consists of the following Chapters and Annexes: • 1 Introduction • 2 About a.s.r.
Basis for our conclusion We have performed our review engagement on the sustainability information in accordance with Dutch law, including Dutch Standard 3810N ‘Assurance engagements relating to sustainability reports’, which is a specified Dutch Standard that is based on the International Standard on Assurance Engagements (ISAE) 3000 ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’. Our responsibilities under this standard are further described in the section ‘Our responsibilities for the review of the sustainability information’ of our report.
We are independent of a.s.r. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. This includes that we do not perform any activities that could result in a conflict of interest with our independent assurance engagement. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
Unreviewed references to external sources The references to external sources or websites in the sustainability information are not part the sustainability information as reviewed by us. We therefore do not provide assurance on this information.
Business performance | 3.5 Assurance report of the independent auditor 88
Responsibilities of the Executive Board and the Supervisory Board for the sustainability information The Executive Board is responsible for the preparation of the Sustainability Information in accordance with the Sustainability Reporting Standards (option: core) of GRI and the applied supplemental reporting criteria as disclosed in Annex B of the Annual Report including the identification of stakeholders and the definition of material matters. The choices made by the Executive Board regarding the scope of the Sustainability Information and the reporting policy are summarised in Annex A of the Annual Report.
The Executive Board is also responsible for such internal control as management determines is necessary to enable the preparation of the sustainability information that are free from material misstatement, whether due to fraud or errors.
Our responsibilities for the review of the sustainability information Our responsibility is to plan and perform our review engagement in a manner that allows us to obtain sufficient and appropriate assurance evidence for our conclusion.
Procedures performed to obtain a limited level of assurance are aimed to determine the plausibility of information and vary in nature and timing from, and are less in extent, than for a reasonable assurance engagement. The level of assurance obtained in review engagements is therefore substantially less than the assurance obtained in audit engagements.
We apply the ‘Nadere voorschriften kwaliteitssystemen’ (Regulations for Quality management systems) and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and other applicable legal and regulatory requirements.
The procedures of our review engagement consisted amongst others of • Performing an external environment analysis and obtaining insight into relevant social themes and issues and the characteristics of the organisation; • Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the sustainability information, including the evaluation of the results of the stakeholders’ dialogue and the reasonableness of estimates made by management; • Obtaining an understanding of the reporting processes for the sustainability information, including obtaining a general understanding of internal control relevant to our review engagement; • Reconciling the relevant financial information with the financial statements; • Identifying areas of the sustainability information where material misstatements, whether due to fraud or error, are likely to arise, and performing further procedures aimed at determining the plausibility of the sustainability information responsive to this risk analysis. These procedures consisted amongst others of: - Interviewing relevant staff at corporate business level responsible for the sustainability strategy, policy and results; - Interviewing relevant staff responsible for: - Providing the information for; - Carrying out internal control procedures on; and - Consolidating the data in the sustainability information; - Reviewing relevant internal and external documentation, on a limited test basis, in order to determine the reliability of the sustainability information; and - An analytical review of the data and trends submitted for consolidation at corporate level. • Evaluating the presentation, structure and content of the sustainability information as a whole, including the disclosures, in relation to the reporting criteria used.
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the review engagement and significant findings that we identify during our review engagement.
General a.s.r. is a public company with limited liability under Dutch Law. The company has a two-tier board structure; it has a Supervisory Board and an Executive Board. a.s.r. has been listed on Euronext Amsterdam since 10 June 2016. Since the listing, a.s.r. has applied a full two-tier board structure.
Sell down and contact shareholders In 2017, NLFI’s interest was reduced completely and all shares of a.s.r. are now tradable on the stock exchange. The sell downs are further described in Chapter 4.2 (Our investors). As NLFI’s interest has been reduced completely, the Relationship Agreement, describing the rights and obligations relating to the share ownership, lapsed. Contacts with shareholders are currently conducted entirely on the basis of the Policy on fair disclosure and bilateral dialogue with shareholders (the Relationship Agreement was an exception to this). The Policy on fair disclosure and bilateral dialogue with shareholders is published on asrnl.com. The Disclosure Committee of the Group is, for example, responsible for advising and supporting the Executive Board in relation to supervision on the accuracy and timeliness of public disclosures by a.s.r.
The Executive Board is collectively responsible for the day-to-day conduct of business of a.s.r. as a whole and for its strategy, structure and performance. In performing its duties, the Executive Board is guided by a.s.r.’s interests, which include the interests of the businesses connected with a.s.r., which, in turn, include the interests of customers, shareholders, employees and society in general. For the performance of its duties, the Executive Board is accountable to the Supervisory Board and to the General Meeting of shareholders.
Certain resolutions of the Executive Board require approval of the Supervisory Board and/or the General Meeting. These resolutions are outlined in the articles of association of a.s.r. and in the Rules of Procedure of the Executive Board. Both are available on asrnl.com.
Composition According to the articles of association, the Executive Board consists of a minimum of two members, including at least a CEO and CFO. The Supervisory Board appoints the Executive Board members and may suspend or dismiss any member of the Executive Board at any time. The Supervisory Board notifies the General Meeting of proposed appointments. Only candidates found to meet the ‘fit and proper test’ under the Dutch Financial Supervision Act are eligible for appointment. In 2017, there were no changes in the composition of the Executive Board.
a.s.r. aims to have an adequate and balanced composition of the Executive Board. The Executive Board in 2017 consisted of four members, one woman and three men. In 2017, the Supervisory Board adopted a formal diversity policy. a.s.r. uses the following definition for diversity: a balanced composition of the workforce, based on age, gender, cultural or social origin, competences, views and working styles. One of the objectives is an Executive Board consisting of at least 30% women and at least 30% men. The current composition of the Executive Board does not meet the gender balance of having at least 30% women amongst the members of the Executive Board. a.s.r. will continue to strive for an adequate and balanced composition of the Executive Board in future appointments, by taking into account the diversity policy and all relevant selection criteria such as executive experience, experience in finance and experience in the political and social environment.
Education and evaluation With a view to innovation, the members of the Executive Board spent a week in Silicon Valley, California, in early 2017, visiting Singularity University and several innovative companies. During this trip, the members of the Executive Board were informed about the latest developments and gained inspiration to work on certain themes within a.s.r., such as robotisation and developments in the field of health.
Specific sessions were also organised jointly with the Supervisory Board with the aim of further education. The first session was a training (and live play) of the defence manual led by a commercial bank and law firm. All disciplines that have a role in the defence manual were involved. The second session concerned a note to IFRS 17, the new accounting standard for insurance contracts. The new rules will affect the future external reporting on insurance contracts. The implementation of IFRS 17 within a.s.r. is an extensive project that will have a major impact.
The Executive Board evaluated its own performance regularly in 2017 by holding what are known as Executive Board team conduct evaluation sessions. Furthermore, a specific self-evaluation session was held after the results of a 360-feedback questionnaire was received. With this 360-feedback, the Executive Board (as a whole) received feedback from members of the Supervisory Board, senior management, two members of the Works Council and from themselves. In the context of the 360-feedback questionnaire, the leadership themes from ‘the story of a.s.r.’ were specifically asked for; dilemmas, dialogue, clear frameworks and actions. The outcome of the questionnaire was discussed within the Executive Board under the guidance of an expert/consultant of the supplier of the 360 tooling to further interpret the results. The overall impression that emerged from this self-assessment was positive. It turned out that the Executive Board is more critical of itself than other providers of feedback are. Positive points include the open and interested attitude of the Executive Board and its decisiveness/execution power. Recommendations include providing clearer frameworks to senior management and openly discussing dilemmas that where opinions diverge the Executive Board and for which more time is needed in decision-making.
Dutch Banking Code ASR Bank N.V. is subject to the Dutch Banking Code (latest version 1 January 2015). This Code, which was drafted by the Dutch Banking Association, contains principles for governance and governance oversight, risk management, audit and remuneration policy. ASR Bank N.V. is governed by this Code. Details on how ASR Bank N.V. complies with the Dutch Banking Code can be found in its Annual Report, which is available online at asrnl.com.
For banks based in the Netherlands, such as ASR Bank N.V., all persons working under the responsibility of the bank need to take a similar bankers’ oath with effect from 2015. In addition, persons having taken the bankers’ oath are thereby subject to disciplinary rules.
Regardless of the above, a.s.r. has decided that employees and other persons performing activities under its responsibility must take the oath. New employees take the oath within three months of joining the company.
Decision on disclosure of non-financial information and Decision on disclosure of diversity policy a.s.r. also wants to be transparent about non-financial information in its Management Report. Since the reporting year 2017, the relating legal requirements have been tightened up for large companies of public interest. These organisations, including a.s.r., are expected to make clear how they deal with environmental, social and personnel issues, respect for human rights and the fight against corruption and bribery in their business operations and value chain. Large listed companies must also provide insight into the diversity policy regarding the Executive Board and Supervisory Board. Annex F indicates where the information requirements of the new legislation can be found in the annual report.
CV’s of the Executive Board a.s.r.’s registered address, 10 Archimedeslaan, 3584 BA Utrecht, the Netherlands, serves as the business address for all members of the Executive Board.
Jos Baeten studied law at Erasmus University Rotterdam and started his career in 1980 when he joined Stad Rotterdam Verzekeringen N.V., one of a.s.r.’s main predecessors. He joined the Executive Board of Stad Rotterdam Verzekeringen N.V. in 1997 and was appointed CEO of this company in 1999. He then joined the Management Board of Fortis ASR Verzekeringsgroep N.V., becoming Chairman of the Board of De Amersfoortse Verzekeringen N.V. in June 2003. In 2005, Jos Baeten was appointed Chairman of the Board of Directors of Fortis ASR Verzekeringsgroep N.V.
Jos Baeten was appointed CEO of a.s.r. on 26 January 2009. Current term of office: 2017 – 2021
Additional positions Currently, Jos Baeten is a member of the Executive Board of the Dutch Association of Insurers (Verbond van Verzekeraars) and Chairman of the Supervisory Board of Stichting Theater Rotterdam. In addition, he is a member of the General Administrative Board of VNO-NCW and a Board Member of Stichting Grote Ogen and Stichting Fietshelm is Hoofdzaak.
Chris Figee was appointed as a member of the Executive Board on 1 May 2014. Current term of office: 2014 – 2018 (proposed re-appointment will be discussed at the General Meeting of Shareholders on 31 May 2018)
Additional positions Chris Figee is a member of the Board of Stichting DSI and a member of the Supervisory Board of Unicef Nederland.
Karin Bergstein studied medical biology at Utrecht University (Masters in 1991) and in 1998 earned an MBA from Nyenrode University and the University of Rochester in the United States. She started her career in 1991 at ING Bank, where she held various positions until 2010. Her last position was that of Director of Products & Processes, which gained her a seat on the Executive Board of ING Bank Nederland. Prior to that, she served as CEO of ING Car Lease International from 2003 until 2009.
M.H. (Michel) Verwoest Michel Verwoest (Dutch, 1968) has been responsible (as of 1 March 2017) for the product lines P&C, Disability Insurance, Health Insurance, Services and a.s.r.’s distribution companies.
Michel Verwoest studied marketing at TiasNimbas Business School in Tilburg and business administration at IBO Business School, and held several executive positions at ING Group between 1997 and 2012. At ING, he served as CEO of RVS Insurance and was in charge of the individual life business of Nationale Nederlanden. His last position in the insurance business of ING Group was a managing board member of Nationale Nederlanden Netherlands.
Additional positions Michel Verwoest is a member of the Supervisory Board of Human Total Care.
CV’s of the Supervisory Board a.s.r.’s registered address, Archimedeslaan 10, 3584 BA Utrecht, the Netherlands, serves as the business address for all the members of the Supervisory Board. The retirement schedule of the Supervisory Board can be found on asrnl.com. A member of the Supervisory Board is reappointed or retires no later than at the next General Meeting which takes place after the end of the term of appointment.
Chairman of the Supervisory Board Member of the Selection & Appointment Committee and the Remuneration Committee
Kick van der Pol (Dutch, 1949) serves as Chairman of the Board of Directors of Ortec Finance and Chairman of the Board of the Federation of Dutch Pension Funds. He is also a member of the DNB’s Bank Council and a member of the Supervisory Board of the Holding Nationale Goede Doelen Loterijen N.V. In the past, Kick van der Pol served as Vice-Chairman of the Executive Board of Eureko/Achmea and as Chairman of the Executive Board of Interpolis.
First appointed on: 15 December 2008 Current term of office: 2014 – 2018
Chair of the Selection & Appointment Committee and the Remuneration Committee Member of the Audit & Risk Committee
First appointed on: 15 December 2008 Current term of office: 2015 – 2019
First appointed on: 1 January 2016 Current term of office: 2016 – 2020
Governance | 4.2 Our investors 98 4.2 Our investors a.s.r. attaches great value to a strong relationship with the investment community in the broadest sense and sets high standards with respect to transparent communication and fair disclosure. The aim of a.s.r.’s investor relations is to provide all relevant information that could help investors to make well-informed investment decisions. a.s.r. makes every effort to ensure that the information it discloses is accurate, complete and provided timely.
a.s.r. provides relevant insight into its activities via selected financial and non-financial disclosures. To that end, a.s.r. regularly updates the markets on its financial performance, the progress it makes in the execution of its strategy and any other relevant developments via press releases, webcasts, conference calls and other means. a.s.r. seeks active engagement with existing and potential shareholders, bondholders, research analysts and rating agencies to build enduring relationships based on constructive dialogue. a.s.r.’s executive management team hosts one-on-one and group investor meetings during (international) roadshows or in-house, and also attends broker-organised investor conferences. Please refer to the corporate website for a.s.r.’s policy on fair disclosure and bilateral dialogue.
Initial public offering and subsequent selldowns by the Dutch State a.s.r. became a listed company following an initial public offering (IPO) on 10 June 2016. Stichting Administratiekantoor Beheer Financiële Instellingen (NLFI), which acted on behalf of the Dutch State, placed 36.3% of the shares in the market at an introduction price of € 19.50 per share. During 2017, NLFI executed four further selldowns (in January, April, June and September) in which it disposed its entire position in a.s.r.
Dividend a.s.r. strives to pay a dividend that creates sustainable long-term value for its shareholders. Over the 2017 financial year, a.s.r. proposes to pay a dividend of € 1.63 per share, an increase of 28.3% compared to the prior year (2016: € 1.27 per share). The increase in dividend reflects a.s.r.’s strong operational and financial performance over 2017. a.s.r. has a dividend policy with a pay-out ratio of 45% to 55% of the net operating result attributable to shareholders (i.e. net of hybrid costs). In 2018, a.s.r. intends to introduce interim dividend, set at 40% of the total dividend for the previous year (in 2018: € 0.65 per share). The interim dividend is within the framework of the dividend policy and under the condition of sufficient results.
To support its ability to pay out cash dividends, a.s.r. maintains a cash target of € 350 million at the holding company. a.s.r. aims to operate at a Solvency II ratio above a management threshold level. This management threshold level is currently defined as above 160% of the SCR. In general, a.s.r. would not expect to pay a cash dividend (interim or final) if the Group level Solvency II ratio falls below 140%.
Major shareholders Dutch law requires shareholders to report their holdings in Dutch listed companies to the Dutch Authority for the Financial Markets (‘AFM’), when these holdings exceed 3% of the total outstanding share capital (and at certain higher thresholds). According to the AFM register, the following shareholders had a position in a.s.r. of more than 3% as at 31 December 2017: • OMAM Inc. 3.02% (reported on 28 November 2017) • NN Group N.V. 3.02% (reported on 23 October 2017) • UBS Group AG 4.97% (reported on 13 October 2017) • Standard Life Aberdeen Plc 4.97% (reported on 15 September 2017) • Franklin Mutual Series Fund Inc. 3.00% (reported on 14 September 2017) • Norges Bank 3.95% (reported on 13 June 2017) • JP Morgan Asset Management Holdings Inc. 3.00% (reported on 5 June 2017) The stated percentages are the interests reported by the relevant shareholders to the AFM on the indicated dates. It is possible that the stated interests differ from the current position of the relevant shareholder.
Intro d uctio n a.s.r. has ratings from Standard & Poor’s. The single A rating of the insurance entities has applied since 29 September 2008; the stable outlook since 23 August 2012.
ASR Schadeverzekering N.V. IFSR A Stable 23 August 2012 10% Tier 1 hybrid bond BBB+ 21 August 2012 7.253% Tier 1 hybrid bond BBB+ 21 August 2012 5% Tier 2 hybrid bond BBB- 16 September 2014 5.125% Tier 2 hybrid bond BBB- 16 September 2014 4.625% Tier 1 hybrid bond BB 5 October 2017
Governance | 4.3 Supervisory Board report 102 4.3 Supervisory Board report 4.3.1 Supervisory Board
Name D at e of in it ia l a p p oi nt m en t
/d is cl os ur e, co m m un ic at io n
A member of the Supervisory Board is reappointed or retires no later than at the next Annual General Meeting of Shareholders, which takes place after the end of the term of appointment. The term of appointment of the current Chairman will end at the 2019 General Meeting and the Vice-Chairman, who is also Chairman of ARC, at the 2020 General Meeting. A selection process for new members was started in 2017 with the help of an external agency (see also Selection and Appointment Committee). To the Supervisory Board’s delight, the interviews resulted in two strong (female) candidates who enjoy the trust of all Board members for a nomination. The Dutch Central Bank has approved both proposed appointments and the Supervisory Board will nominate both candidates for appointment for a four-year period at the 2019 Annual General Meeting of Shareholders. One of the two candidates is a financial expert and envisaged to succeed the present Chairman of ARC. The other candidate brings with her complementary knowledge and experience. The Supervisory Board will be expanded with this candidates.
Education and evaluation The Supervisory Board performs an annual self-assessment. A self-assessment with external guidance is carried out every three years. The self-assessment for 2017 was performed with external guidance. The assessment was based on written and oral input from the members of the Supervisory Board, the members of the Executive Board, the Corporate Secretary and several senior managers. The following aspects were assessed: • Composition of the Supervisory Board; • Communication, information-gathering and decision-making; • Interaction and dynamics; and • Important supervisory issues.
Strategy Each year, the Executive Board presents various matters to the Supervisory Board for approval, such as the (quarterly) figures, the multi-year budget, the investment plan and the risk appetite. These documents were all discussed and approved by the Supervisory Board in 2017. The Executive Board also discusses the strategy in detail with the Supervisory Board. The Supervisory Board supports the Executive Board’s value creation model as well as the starting point of value over volume. In 2017, a great deal of attention was paid to the solvency and capital position and, of course, the implementation of a.s.r.’s (portfolio) strategy. The Supervisory Board notes that progress was made in all areas. In 2017, for example, organic growth was achieved in line with the strategy and a number of acquisitions were made. Costs were also generally further reduced, efficiency was improved, customer service was improved and the brand awareness of a.s.r. increased.
In recent years, a.s.r. reim was transformed from a solely internally focused business line into a business line that now also serves external customers. A further growth of Assets under Management (AuM) was achieved last year. The confidence of institutional investors increased in recent years and a.s.r. reim also works together with Group Asset Management in this area.
The market for health insurance is a very politically driven market with intensive regulation. The business started an excellent collaboration with Disability through the ‘Doorgaan’ proposition. This proposition, although relatively new, shows good developments by focusing more on prevention. Developments in the area of longterm employability of employees were also discussed at length. Two trends can be seen: postponement of the retirement age and an ageing population. It is likely that the present political and economic climate will once again lead to choices in terms of long-term employability. a.s.r. health will follow this closely. To conclude, the ways in which a.s.r. is active in the pension market and the developments and trends that can be seen in this market were discussed at length.
Financial and operational matters within the Non-life domain have been well organised in recent years. Since 2013, the business segment has shown a better COR than the market, and a strong growth. Product rationalisation was discussed as well as a further variability of costs and the progress on the new IT-platform.
The Supervisory Board is periodically informed of developments in the field of unit-linked insurance. The legal proceedings involving a.s.r. have been discussed at length. The total range of judgements by judges and dispute committees is very diverse and has so far not led to a different approach to this matter for a.s.r. The Supervisory Board appreciates the commitment and dedication of the team. a.s.r. has received good scores from the AFM on its capitalisation policy, especially for the quality of capitalisation. In December 2017, all insurers, including a.s.r., published the scores on their website. At the end of 2017, almost all customers with non-accruing investment insurance were capitalised by a.s.r. From 2018 onwards, continuous aftercare will follow.
IT and innovation In 2017, a.s.r. also continued to implement its IT strategy. Almost all business lines have now opted for an IT system that is well suited to the future, both in terms of customer expectations and cost flexibility.
The Supervisory Board is also regularly informed about developments in the field of innovation. At the beginning of 2017, the Supervisory Board also supported the Executive Board in its decision to implement an organisational change, including the creation of the Innovation & Digital team. Innovation at a.s.r. is organised along three horizons: optimisation, transformation and disruption. Various initiatives and projects have been started, with a clear distance being taken from the existing organisation in order to be able to test and grow.
Financial performance The Supervisory Board met once a quarter to discuss the financial performance, covering standing issues such as developments in earnings, premium income, returns and solvency. The members of the Supervisory Board were satisfied with a.s.r.’s financial performance in 2017. The increase in underlying earnings was due to an improvement in underwriting profit and growth, also thanks to strategic acquisitions that contributed to a sustainable increase in profits.
The status of cost savings and improvements in claims management were discussed extensively. The combined ratios of the different non-life operations were below 100%. The solvency ratio is evidently robust. The Supervisory Board further considers as one of a.s.r.’s key priorities to increase premium income where possible, despite the fact that the market can be challenging, for instance, due to saturated submarkets and low levels of interest rates. In this process, a.s.r. prefers to pursue value over volume.
Risk management and solvency At year-end, the Supervisory Board approved the risk appetite for both a.s.r. and the supervised entities. a.s.r.’s risk appetite is based on the Solvency II regime and a prudent approach to risk management, translated into standards for solvency, liquidity and achievable returns. The Supervisory Board is satisfied with the execution of the risk management. Solvency levels remain acceptable and adequate thanks to the organisation’s prompt and adequate response to external developments based on the chosen risk appetite and the associated riskmitigating measures. The risk appetite is an important criterion for the Supervisory Board in making tactical and strategic decisions. The Supervisory Board appreciates the prudent approach taken to comply with Solvency II and other regulations and regularly engages in dialogue with the Executive Board about its views of the targets and intervention level related to Solvency II ratios.
Culture and Treating Customers Fairly (TCF) Each quarter, the Supervisory Board considered the theme of Treating Customers Fairly on the basis of various reports, including the a.s.r. TCF Dashboard. The TCF Dashboard sets out developments and results with respect to TCF and of the best practices shared and lessons learned in this regard across the organisation. The Supervisory Board believes that a.s.r. goes to great lengths to deliver a good TCF performance.
The Supervisory Board regularly discussed the organisation and culture of a.s.r. with the Executive Board. In 2017, the commitment of employees increased and a great deal of attention was paid to culture. The Supervisory Board compliments the Executive Board on ‘the story of a.s.r.’ in which the core values and competencies were redefined. The culture of a.s.r. was also discussed by the Supervisory Board with the Works Council. Finally, a.s.r. took a good step forward in the past year with the negotiations on its own in-house Collective Labour Agreement, which came into force on 1 January 2018.
The Supervisory Board compliments the Works Council on the decision to introduce a new employee participation model from the start of the new Works Council term (2018-2020). This is in line with the way in which a.s.r. is organised. The hope is that the new model will increase employee involvement in employee participation and effectiveness.
Contacts with external regulators and auditors The Supervisory Board consulted periodically with the Dutch Central Bank (DNB). The independent external auditor, EY, attended the Supervisory Board meetings at which the annual and interim financial results were discussed. During these meetings, the auditor elaborated on the audit reports and answered specific questions.
There are three committees that support the Supervisory Board; the Audit & Risk Committee, the Remuneration Committee and the Selection & Appointment Committee. The committees are responsible for preparing items delegated to them on which the chair of each committee verbally reports the main points of discussion and the resulting recommendations in the next meeting of the Supervisory Board. The records of the committees are also shared with the members of the Supervisory Board.
After each quarter end, the Committee met to discuss the financial results based on detailed risk, compliance and internal and external audit reports and analyses. Progress on the recommendations of the internal and external auditor was monitored. The full 2017 reporting year was discussed in the first quarter of 2018 on the basis of the press release, the Annual Report, the financial statements, the Board Report and the actuarial report. The Committee advised the Supervisory Board positively. The discussion of the actuarial report was also attended by the Actuarial Function. The Committee issued positive opinions on the Annual Report and the financial statements to the Supervisory Board.
In 2017 the outcomes of the SCR calculations and the ORSA were discussed by the Committee. The UFR effect within the Solvency II framework was highlighted and special attention was paid to the economic UFR scenario that has been defined by a.s.r. At year-end, the Audit & Risk Committee also discussed the updated risk appetite statement for 2018, which is based on a detailed risk assessment. The risk appetite for 2018 was approved by the Supervisory Board. The a.s.r. risk appetite is based on a prudent approach to risk management and translates the risk appetite into requirements for solvency, liquidity and returns; solvency takes priority over profit and profit takes priority over premium income. Furthermore, a.s.r.’s updated capital and dividend policy was discussed and positive advice for approval was given to the Supervisory Board.
The Committee discussed the potential issuance of Tier 1 capital in the second half of 2017. Also, the key changes due to the forthcoming implementation of IFRS9 and IFRS17 were highlighted in a special meeting. The Committee periodically monitored the status of the risk appetite during the year via a.s.r.’s Integrated Risk Dashboard and the status report on the management of risk priorities. The Committee was informed of the outlines of the reinsurance programme. Also, the internal control structure (Management in Control 2.0) was a regular item of discussion by the Committee. The structure allows the management of a.s.r. to verifiably manage the principal risks that pose a threat to achieving the company’s strategic targets.
To conclude, in December, the multi-year budget for 2018-2020 and the investment plan for 2018 were discussed at length, after which the multi-year budget was adopted by the Supervisory Board.
In 2017, the Remuneration Committee used the services of Korn Ferry for a benchmark of the remuneration for the Executive Board (periodic three-year benchmark). In the run-up to the sell down, the Remuneration Committee held extensive discussions on the remuneration of the Executive Board and the fact that, after the sell down, the remuneration policy can be applied to the members of the Executive Board (as also applied to the employees of a.s.r.). Various scenarios were discussed. The interests of various stakeholders were weighed up, such as those of customers, employees, directors and shareholders. At year-end 2017, the Supervisory Board decided to gradually increase the remunerations of the members of the Executive Board with effect from 1 January 2018. This resolution is further explained in more detail in the Remuneration report, Chapter 4.4.
Selection & Appointment Committee Among other things, the Selection & Appointment Committee advises the Supervisory Board on selection and appointment procedures, on the compositions of the Boards and it prepares (re)appointments of members. The Selection & Appointment Committee was in session on four occasions in 2017 and its members are Annet Aris (chair) and Kick van der Pol. Its meetings are also attended by the CEO (except when issues relating to the Executive Board are being discussed) and the Human Resources Director, who doubles as secretary.
To conclude, the Selection and Appointment Committee discussed the annual assessments of senior management. A nine-box grid was used to evaluate senior managers and to discuss their individual development and possible successors. The Selection and Appointment Committee was also informed about the results of the Denison scan, a new tool to measure the success of the organisation.
Appreciation The Supervisory Board wishes to express its gratitude to the members of the Executive Board and senior management for impressively leading a.s.r. and thereby giving a.s.r. a good position in the market. This also allowed a fast selldown in 2017. The Supervisory Board very much appreciated the continuous open and constructive dialogue and cooperation between the Executive Board and the Supervisory Board. The Supervisory Board also wants to thank all employees of a.s.r. (in employment or on a contract basis) for their dedication to a.s.r. and especially with regard to all aspects of the story of a.s.r. (as described in Chapter 2.1 Our strategy). All employees help to achieve the mission of a.s.r. to helping customers to share risks and build up capital for the future. Together, we are building a useful and sustainable insurer.
The AGM has decision-making powers concerning the remuneration policy that applies to the Executive Board and the individual remuneration of the members of the Supervisory Board. The Supervisory Board informs the AGM about the individual remuneration of the members of the Executive Board. The Supervisory Board has decision-making powers with regard to determining the individual remuneration of the members of the Executive Board in accordance with the remuneration policy.
Remuneration 2017 In line with a.s.r.’s remuneration policy, the remuneration of the members of the Executive Board consists structurally of fixed remuneration, it does not include a variable remuneration system. This comprises a fixed amount per month, including holiday allowance. The pay is indexed in accordance with the CBA for the insurance industry.
Following the successfull return of a.s.r. to the market as fully listed company, the Supervisory Board and the Executive Board decided in December 2017 to grant all employees of a.s.r. an exceptional one-off payment equal to a monthly salary (including the members of the Executive Board). It has been agreed with DNB to qualify this payment as a one-off variable payment.
Customer: operational improvements and creating a recognisable positioning of a.s.r. for its customers. CSR: traction on realisation CSR objectives for 2020 (among others, a CO2 neutral a.s.r. and distinctive capacity for socially responsible investment). Craftsmanship: further development of a.s.r. as a listed company.
Pay ratio highest and the median salary The pay ratio is 9.05. This is the pay ratio of the annual total compensation for the highest-paid individual (€ 543,000) and the median annual total compensation for all employees (€ 60,000). In 2016 the pay ratio was 9.15 (€ 540,000/€ 59,000).
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 utilised for pensions) amounting to € 206 thousand (2016: € 209 thousand) in total, and
Adjustment of remuneration of the Executive Board as from 1 January 2018 The Supervisory Board has decided, now that a.s.r. is an independently listed company is no longer subject to previously mentioned specific regulation, to apply the (existing) remuneration policy also to the Executive Board. and adjust the remuneration of the members of the Executive Board.
As part of the remuneration policy, comparisons are made with Dutch financial institutions and medium-sized listed Dutch companies outside the financial sector on a periodical basis. The comparison that was made in 2017 showed that the salaries of the members of the Executive Board were substantially below the median of the relevant benchmarks. In line with the remuneration policy, wich takes into account the principles of the Dutch Corporate Governance Code, a.s.r.’s Supervisory Board has decided to gradually increase the individual remuneration of the members of the Executive Board and reduce the gap with the peer group.
The remuneration policy applying to the members of the Supervisory Board, including fees, expense allowances and other benefits, has been adopted by the Annual General Meeting of Shareholders. The remuneration paid to the members of the Supervisory Board does not depend on the financial performance of a.s.r. and none of the members of the Supervisory Board own a.s.r. shares.
The annual fee paid to each member of the Supervisory Board is € 30,000; that paid to the Chairman of the Supervisory Board is € 45,000. In addition, the annual fee paid to each member of the Audit and Risk Committee is € 10,000; that paid to each member of the Selection and Appointment Committee is € 2,500; and that paid to each member of the Remuneration Committee is also € 2,500. In addition members of the Supervisory Board who also serve as a member of the Supervisory Board of ASR Bank NV receive €4,000 per annum. Annual fees are not paid to members of the Executive Board who are also a member of the Supervisory Board of one of the Group entities such as ASR Bank N.V.
Remuneration of the Supervisory Board The annual remuneration for members of the Supervisory Board has been calculated as follows.
2 The amount as committee member includes remuneration for services as member of the Audit and Risk Committee amounting € 10,000.
The Works Council of a.s.r. regularly consults with the Chairman or members of the Executive Board, the secretary of the Executive Board and the HR Director. There are also ad hoc meetings as needed. In 2017, the Works Council received a total of five requests for advice and three requests for approval. Important topics in 2017 were the transition to a new employee participation model, the completion of the privatisation of a.s.r. and various acquisition processes. In early 2018 elections will be held and a new Works Council and new Business Unit committees (OCs) will be elected. In the last months of 2017, the Council was busy preparing for these elections.
Transition to new employee participation model On behalf of the Works Council, the Committee on Modern Participation examined whether the current employee participation model is still adequate in relation to the way in which a.s.r. is organised. In addition, it examined how to increase employee involvement in employee participation. Based on this research, the Committee proposed a new employee participation model in late 2016. The model was optimised in the course of 2017 and translated into the (future) daily practice. In the summer of 2017, it was definitively decided to start working with the new model from the start of the new Works Council term (2018-2020). The new model should lead to increased visibility of the Works Council and OCs and thus increase accessibility for employees. More involved employees in various issues leads in turn to a broader embedding of employee participation in the organisation.
Employee participation a.s.r. as of 1 March 2018 - The Other Works Council
The most important changes when compared to the current situation are as follows: • Reducing the number of elected members (Works Council from 19 to 7 and OCs from 5 to 3); • The involvement of external members on an ad hoc basis; • Establishing a council of employees (meeting between the Works Council and delegates of the OCs).
The Works Council is pleased with the end result and looks forward confidently to the future of employee participation within a.s.r.
a.s.r. fully privatised The year 2017 was also the year in which a.s.r. again became fully privately owned. The Works Council was closely involved in the entire privatisation process. The primary focus for the Works Council was the right balance between the interests of the employees, the company and other stakeholders. The Works Council considers it important that the story of a.s.r. is expressed in a credible manner and that a careful balance is struck between the various interests. Customers need to recognise that a.s.r. is indeed the insurer with a difference that it claims to be. The Works Council regularly discussed with the Chairman of the Executive Board how to maintain this course of action now that a.s.r. is fully privatised again. The Works Council believes that the story is shared consistently with the various stakeholders and that this should remain a constant focus of attention.
Apart from these issues, several acquisition files were discussed in 2017. The acquisition of Generali Nederland was discussed extensively in the Works Council. This led to a positive advice. This acquisition strengthens a.s.r.’s position in the Dutch market. Moreover, Generali fits in well with a.s.r. in terms of culture. The first contacts with the Works Council of Generali are very positive.
(in € millions) (Before profit appropriation) Note 31 December 2017 31 December 2016
Where applicable, in accordance with IFRS, comparative figures have been included in the new presentation format to ensure comparability. For the change in the definition of operating result see Chapter 5.4.1.
Unrealised change in value of property for own use 5.5.2 3 10
Income tax on items that will not be reclassified to profit or loss -28 91
Total items that will not be reclassified to profit or loss 83 -281
Unrealised change in value of available for sale assets 126 864
Realised gains/(losses) on available for sale assets reclassified to profit or loss -395 -460
Income tax on items that may be reclassified subsequently to profit or loss -18 -16
Total items that may be reclassified subsequently to profit or loss 141 33
Total other comprehensive income for the year, after tax 224 -248
Shadow accounting allows a recognised but unrealised gain or loss on an asset to be transferred to liabilities arising from insurance contracts (see accounting policy I, Chapter 5.3.4).
U nr ea lis ed g ai ns an d lo ss es
A ct ua ri al g ai ns a nd lo ss es
O th er e q ui ty in st ru m en ts
The actuarial gains and losses (after tax) impacted equity positively by € 81 million (2016: negative impact of € 288 million), primarily due to the increase (€ 2016: decrease) in the discount rate of the benefit obligation. For more information see Chapter 5.5.15.
Financial statements 2017 | 5.2 Consolidated financial statements 128 5.2.5 Consolidated statement of cash flows
Adjustments on non-cash items included in profit Revaluation through profit or loss -184 -124
Changes in operating assets and liabilities Net (increase) / decrease in investment property 60 -262
Net (increase) / decrease in amounts due from and to customers -266 -533
Net (increase) / decrease in amounts due from and to credit institutions -619 689
Net (increase) / decrease in other operating assets and liabilities -70 -318
Cash flows from financing activities Proceeds from issues of borrowings 30 76
Cash and cash equivalents classified as assets held for sale - -
In addition the current presentation differs from last year’s presentation in some aspects. Where applicable, in accordance with IFRS, comparative figures have been included in the new presentation format to ensure comparability. The main change in presentation is driven by the expansion and increased focus of the asset management activities to third parties, as a result of which fee income of Asset Management (segment Banking and Asset management), until 2016 presented as part of investment income, is presented in the line item fee and commission income.
Share of profit / (loss) of associates and joint ventures 3 4 7
Profit / loss from discontinued operations, after tax 17 -13 4
Financial statements 2017 | 5.3 Accounting policies 132 5.3.2 Changes in EU endorsed published IFRS standards and interpretations effective in 2017
The changes have no material effect on total equity attributable to shareholders, profit or loss or disclosures for the reporting period of a.s.r.
The main following new standards, amendments to existing standards and interpretations, published prior to 1 January 2018 and effective for accounting periods beginning on or after 1 January 2018, were not early adopted by a.s.r.: • IFRS 9: Financial Instruments (2018); • IFRS 15: Revenue from Contracts with Customers (2018); • Clarifications to IFRS 15: Revenue from Contracts with Customers (classification) (2018); • IAS 40: Transfers of investment property (2018); • Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (2018); • Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (2018); • IFRIC 22: Foreign Currency Transactions and Advance Consideration (2018); • Annual improvements to IFRSs 2014-2016 cycle: IFRS 1 First-time adoption of IFRS and IAS 28 Investments in
Associates and Joint Ventures (2018); • IFRS 16: Leases (2019); • Amendments to IFRS 9: Prepayment Features with Negative Compensation (2019); • Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures (2019); • IFRIC 23: Uncertainty over Income Tax Treatments (2019); • Annual improvements to IFRSs 2015-2017 cycle (2019); • IFRS 17: Insurance Contracts (2021).
With the exception of IFRS 9 and IFRS 17 Insurance Contracts the changes in the above IFRSs and IFRIC interpretations are not expected to have a material effect on total equity attributable to shareholders, profit or loss or disclosures for the reporting period of a.s.r.
Based on the amended IFRS 4 and the a.s.r. 2015 Annual report, a.s.r. meets the criteria of a predominant insurer as the percentage of the total carrying amount of its liabilities connected with insurance related activities to the total carrying amount of all its liabilities exceeds 90%. As a result a.s.r. decided to apply the temporary exemption from applying IFRS 9 until IFRS 17 (new accounting standard for insurance contracts) is implemented. The implementation of amended IFRS 4 will not have a significant impact on the consolidated financial statement of a.s.r.; but it does introduce additional disclosure requirements.
At this moment, given the complexity and options available in IFRS 17, it is too early to quantify the actual impact on IFRS equity and profit for the year. However, a.s.r. expects IFRS 17 to have a significant impact.
Classification and measurement The classification and measurement of financial assets under IFRS 9 will depend on a.s.r.’s business model and the instrument’s contractual cash flow characteristics. These may result in financial assets being recognised at amortised cost, at fair value through other comprehensive income (equity) or at fair value through profit or loss. In many instances, the classification and measurement under IFRS 9 will be similar to IAS 39, although certain differences will arise. The classification of financial liabilities remains unchanged. The final outcome of the classification and measurement will be highly dependent on the interaction between IFRS 17 insurance contract accounting and IFRS 9 accounting for financial assets and liabilities taking into account decisions and guidance prepared in the IFRS 17 and IFRS 9 implementation project. Identifying potential accounting mismatches and addressing volatility / predictability of the income statement will be a.s.r.’s major priority.
Hedge accounting The hedge accounting requirements of IFRS 9 aim to simplify the application of hedge accounting.
A. Estimates and assumptions The preparation of the financial statements requires a.s.r. to make estimates, assumptions and judgements in applying accounting policies that have an effect on the reported amounts in the financial statements. These relate primarily to the following: • The fair value and impairments of unlisted financial instruments (see accounting policy B and E); • The estimated useful life, residual value and fair value of property and equipment, investment property, and intangible assets (see accounting policy C, D and T); • The measurement of liabilities arising from insurance contracts (see accounting policy I); • Actuarial assumptions used for measuring employee benefit obligations (see Chapter 5.5.15); • When forming provisions, the required estimate of existing obligations arising from past events; • The recoverable amount of impaired assets (see accounting policy B, E and G).
Fair value hierarchy The following three hierarchical levels are used to determine the fair value of financial instruments and nonfinancial instruments when accounting for assets and liabilities at fair value and disclosing the comparative fair value of assets and liabilities: Level 1. Fair value based on quoted prices in an active market Level 1 includes assets and liabilities whose value is determined by quoted (unadjusted) prices in the primary active market for identical assets or liabilities.
This category primarily includes: I. Financial instruments: unlisted fixed-interest preference shares and interest rate contracts; II. Financial instruments: loans and receivables (excluding mortgage loans)¹; III. Other financial assets and liabilities¹.
Discounted cash flow method Under the discounted cash flow method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset’s life including an exit or terminal value. This method involves the projection of a series of cash flows on the investment property dependent on the duration of the lease contracts.
The significant inputs for retail valuations are the reversionary yield and the market or reviewed rental value. These inputs are generally verified with the following observable data (that are adjusted to reflect the state and condition, location, development potential etc. of the specific property): • Market rent per square meter for renewals; • Reviewed rent per square meter (based on the rent reviews performed in accordance with Section 303, Book 7 of the Dutch Civil Code).
The accounting policies for the treatment of investment property and buildings for own use are described in accounting policy D and T respectively. The fair value of investment property and buildings for own use is disclosed in Chapter 5.5.2, 5.5.3, 5.7.1.
D. Investment property Investment property is property held to earn rent or for capital appreciation or both. Property interests held under operating leases are classified and accounted for as investment property. In some cases, a.s.r. is the owneroccupier of investment properties. If owner-occupied properties cannot be sold separately, they are treated as investment property only if a.s.r. holds an insignificant portion for use in the supply of services or for administrative purposes. Property held for own uses (owner-occupied) is recognised within property and equipment.
If there is a change in the designation of property, it can lead to: • Reclassification from property and equipment to investment property: at the end of the period of owneroccupation or at inception of an operating lease with a third party; or • Reclassification from investment property to property and equipment: at the commencement of owneroccupation or at the start of developments initiated with a view to selling the property to a third party.
Borrowing costs directly attributable to the acquisition or development of an asset are capitalised and are part of the cost of that asset. Borrowing costs are capitalised when the following conditions are met: • Expenditures for the asset and borrowing costs are incurred; and • Activities are undertaken that are necessary to prepare an asset for its intended use.
Financial assets available for sale Financial assets available for sale are financial assets that are not accounted for as financial assets at fair value through profit or loss, or as loans and receivables. On initial recognition, financial assets available for sale are measured at fair value (including transaction costs). They are subsequently measured at fair value, including any
Financial statements 2017 | 5.3 Accounting policies 140 unrealised fair value changes in equity, taking into account any deferred tax liabilities. Financial assets available for sale include equities (ordinary and preference shares), bonds, other fixed-income securities, unit trusts, variableincome securities and interests in investment pools.
Fixed-income financial assets available for sale are tested for impairment if objective evidence exists that the counterparty will default. Objective evidence includes: bankruptcy, financial reorganisation or delinquency in payments for more than 30 days. The assessment may also involve circumstances requiring a more detailed estimate, such as in the event of an equity deficit, recurring financial difficulties, downgrading of the credit rating or other creditors reverting to legal action. This assessment is made at each reporting date by the Level of Concern Committee, where the portfolio managers and analysts assign a level of concern from ‘Nil’ to ‘Three’ to each of the fixed-income assets. A level of concern ‘Nil’ means that there is no reason for concern, while a level of concern ‘Three’ indicates that the situation is critical and that an impairment is highly recommended. The final decision to recognise an impairment loss on a financial asset or to reverse a prior impairment loss is taken in the quarterly Impairment Committee, chaired by the Group Asset Management director.
An individually assessed asset is considered impaired if objective evidence exists that a.s.r. is unable to collect all the amounts due by the counterparty in accordance with the contractual terms and conditions. The amount of the impairment loss is equal to the difference between the asset’s carrying amount and its recoverable amount. The recoverable amount equals the present value of estimated future cash flows, including amounts realised from guarantees and securities provided, discounted at the financial asset’s original effective interest rate.
The estimates are based on individual assessments of the reported claims, on past experiences and estimates of trends (expert judgement) in claims behaviour, (national) social factors and economic factors and relevant court decisions. In the process of determining the liabilities, allowance is made for amounts recoverable from third parties and expected subrogation reimbursements.
Liabilities arising from life insurance contracts Future obligations in respect of policy benefits for life insurance contracts are calculated based on a net premium method (the present value of future obligations less the present value of future net premiums) using the same principles as for calculating the premium at inception of the insurance contract. A provision for future administrative expenses is recognised for contracts whose future premium payment period is shorter than the future maturity of the insurance policy, or for which no more premiums are paid. A provision is recognised for part of longevity risk associated with life insurance contracts (e.g. group life and annuity contracts), a.s.r. manages the longevity risk exposure in combination with the mortality risk exposure. No addition to the provision for longevity risk is recognised if the outcome of the LAT (see below) indicates that the total amount of the provision is adequate.
Obligations to insurers where a.s.r. qualifies as the reinsurer, and with no significant insurance risk being transferred to a.s.r., are recognised as debts to policyholders.
OCI). Under shadow accounting, adjustments are made to the insurance liability to reflect the unrealised gains or losses from the financial instruments backing these insurance liabilities. The shadow accounting policy is applied to certain types of insurance liabilities: • Insurance contracts with participation features; • Non-participating insurance contracts if and to the extent that the IFRS LAT would be triggered. This would be the case when current interest rates are lower than the interest rates that were used in the pricing principles at inception of the insurance contract.
K. Employee benefits (IAS 19) Pension obligations A number of defined benefit plans for own staff exist. These are schemes under which staff are awarded pension benefits upon retirement, usually dependent on one or more factors, such as years of service and compensation. The defined benefit obligation is calculated at each reporting date by independent actuaries. The majority of employees are formally employed by ASR Nederland N.V. A limited amount of employees are employed by other group companies.
Changes in the expected actuarial assumptions and differences with the actual actuarial outcomes are recognised in the actuarial gains and losses included in other comprehensive income (component of total equity).
Where applicable in the notes to the financial statements the reclassification to assets held for sale and liabilities related to assets held for sale are recognised in the changes in the composition of the group.
Life insurance contracts Life insurance contracts (in cash) include savings-linked mortgages, annuities, term insurance policies, savings contracts and funeral insurance contracts. In addition to non-participating life insurance contracts, the insurance portfolio also includes: • Individual and group participating contracts; • Individual contracts with discretionary participation features (see accounting policy I); and • Group contracts with segregated pools with return on investment guarantees.
If objective evidence of impairment exists, joint ventures are tested for impairment and, if necessary an impairment is recognised in the income statement.
Joint operations a.s.r. has a limited number of non-material joint operations. These are recognised in relation to a.s.r’s interest in the joint operation’s individual balance sheet and income statement items.
Assets arising from reinsurance contracts are recognised under reinsurance contracts, except for current receivables from reinsurers, which are included under loans and receivables.
X. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, cash collateral and other shortterm highly liquid investments with original maturities of three months or less.
Discretionary interest on other equity instruments Discretionary interest on other equity instruments is recognised in equity upon payment.
Dividends Dividend income is recognised in the income statement when a right to receive payment is established.
Payments made under operating leases (a.s.r. is the lessee) are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
KK. Income tax expense Income tax is based on profit before tax, after any adjustments for previous periods and changes in deferred tax assets and liabilities using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Income tax is recognised in the period in which the income was earned.
Financial statements 2017 | 5.4 Group structure and segment information 153
Legal structure of the most significant a.s.r. group entities as per 31 December 2017
Segment information The operations of a.s.r. have been divided into six operating segments. The main segments are the Non-life segment and Life segment in which all insurance activities are presented. The other activities are presented as four separate segments being the Banking and Asset Management, Distribution and Services, Holding and Other and Real Estate Development.
Insurance activities Insurance entities are entities that accept the transfer of insurance risks from policyholders. The Non-life segment consists of non-life insurance entities and their subsidiaries. These non-life insurance entities offer non-life insurance contracts. The Life segment comprises the life insurance entity and their subsidiaries. These life insurance entities offer financial products such as life insurance contracts and life insurance contracts on behalf of policyholders. The Non-life and Life segments have different levels of profitability and growth opportunities, as well as a different outlook and risk profile. See Chapter 5.7.7 for a list of principal group companies and associates in the relevant segments.
Other activities The other activities consist of: • The Banking and Asset Management segment involves all banking activities and the activities related to asset management including investment property management. These activities include amongst others ASR Bank N.V., ASR Vastgoed Vermogensbeheer B.V., ASR Vermogensbeheer N.V., ASR Financieringen B.V. and First Investments B.V.; • The Distribution and Services segment includes the activities related to distribution of insurance contracts and includes the financial intermediary business of PoliService B.V., Van Kampen Groep Holding B.V. (and Van Kampen Geld B.V.), Dutch ID B.V., SuperGarant Verzekeringen B.V. (as of April 2017 including subsidiary VSP Risk B.V.) and Corins B.V.; • The Holding and Other segment consists primarily of the holding activities of ASR Nederland N.V. (including the group related activities), other holding and intermediate holding companies and the activities of ASR Deelnemingen N.V.; and
The eliminations applied in the reconciliation of the segment information to the consolidated balance sheet and the consolidated income statement are separately presented in Chapter 5.4.2 and 5.4.3.
Segment information has been prepared in accordance with the accounting principles used for the preparation of a.s.r.’s consolidated financial statements (as described in Chapter 5.3). Goodwill and other intangibles are presented in the related CGU’s segment. Intersegment transactions are conducted at arm’s length conditions. In general, cost related to centralised services are allocated to the segments based on the utilisation of these services.
Financial statements 2017 | 5.4 Group structure and segment information 155
Intro d uctio n 5.4.3 Segmented income statement and operating result
The incidentals in 2017 are mainly related to the a.s.r. post-employment benefit plans in segment Holding and Other (see Chapter 5.6.6) and to the run-off activities in segment Real Estate Development. Furthermore, various relatively small administrative differences of prior years have been resolved which led to a release of provisions in the Life insurance business of in total € 27 million. This amount is classified as an incidental as it does not reflect the underlying performance of the insurance portfolio.
Fair value gains and losses 15 94 1 - 2 - 9 121
The incidentals in 2016 are mainly the past service cost related to the amendment to the a.s.r. post-employment benefit plans in segment Holding and Other (see Chapter 5.6.6).
Financial statements 2017 | 5.4 Group structure and segment information 161
Adjustments: - Compensation capital gains (Disability) 13 37 - Interest accrual on provisions (Disability) 64 62 - Prudence margin (Health) -1 -4
Acquisitions in 2017 VSP Risk In April 2017 SuperGarant Verzekeringen B.V. acquired 100% of the shares of VSP Risk B.V. With this acquisition SuperGarant strengthens its position of advisory center for offering integrated disability propositions. VSP Risk B.V. operates as an intermediary with focus on small and medium-sized enterprises. The staff of VSP Risk B.V. will be employed by SuperGarant Verzekeringen B.V.
First Investments In December 2017 a.s.r. Vermogensbeheer N.V. acquired 100% of the shares of First Investments B.V. With this acquisition a.s.r. Vermogensbeheer N.V. will strengthen its position as an asset manager for institutional clients. First Investments is specialised in innovative investment solutions for the pension sector. Its assets under management, which total are well over € 550 million, have been invested in customised solutions for balance sheet management (matching and return). The staff of First Investments B.V. is employed by ASR Nederland N.V.
Financial statements 2017 | 5.4 Group structure and segment information 162
Acquisitions in 2016 In 2016 a.s.r. concluded three acquisitions, which are in line with a.s.r.’s strategic focus in strengthening its position in the Asset management market and the Distribution and Services market.
BNG Vermogensbeheer In May 2017 the final acquisition balance sheet of BNG Vermogensbeheer B.V. (now a.s.r. Vermogensbeheer N.V.) was established. No differences with the provisional balance sheet were identified, therefore no retrospective adjustments were made.
SuperGarant In September 2017 the final acquisition balance sheet of SuperGarant was established. No differences with the provisional balance sheet were identified, therefore no retrospective adjustments were made.
Corins In October 2017 the final acquisition balance sheet of Corins B.V. was established. No differences with the provisional balance sheet were identified, therefore no retrospective adjustments were made.
Financial statements 2017 | 5.4 Group structure and segment information 163
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 164 5.5 Notes to the consolidated balance sheet 5.5.1 Intangible assets
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 165
Intro d uctio n additional analysis was performed in order to determine a recoverable amount in a manner that better addresses the specific characteristics of the CGU. Assumptions used in the step 2 internal model are: • A steady state growth rate used to extrapolate cash flow projections beyond the budget periods (1.6%) which reflects the market segment in which the CGU’s operate; • Future cashflows are based on expected market developments and past experience and on the long term characteristics of the markets in which the CGU’s operate; • The (pre-tax) discount rate used in the estimate of value in use is 8.6% for Banking and Asset Management segment and 7.7% for Distribution and Services segment.
A deterioration within reasonable limits on one of the above mentioned assumptions in isolation would not lead to an impairment. The buffer is also capable of absorbing a combination of negative factors. However, should circumstances on multiple factors deteriorate significantly, it could lead to a negative outcome for the buffer (the difference between the recoverable value and the book value).
Value of Business Acquired (VOBA) VOBA mainly relates to the acquisition of Amersfoortse Stad Rotterdam. At year-end 2017, the remaining amortisation period of VOBA is 13 years and the average amortisation for the next 5 years will be € 9 million per year.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 166
Land and buildings for own use Equipment Total 2017 Total 2016
Gross carrying amount as at 31 December 229 179 408 429
Net carrying value as at 31 December 147 24 171 171
The fair value of land and buildings for own use based on the external valuations is disclosed in Chapter 5.7.1.3.
In 2017, the real estate equity funds ASR DMOF, ASR DCRF and ASR DPRF were reclassified to investments. For more information reference is made to Chapter 5.5.5.
At equity method Associates and joint ventures ranging between 10% and 50% 45 20
The real estate equity funds consists of the ASR DMOF, ASR DPRF and the ASR DCRF. The interests in these funds are classified and presented as an investment at fair value through profit or loss. For more information, please refer to Chapter 5.5.5 and 5.7.1.
Some participating interests in which a.s.r. has an interest of less than 20% qualify as associates, because a.s.r. has significant influence as a result of contractual agreements. a.s.r. also has interests of 50% or more in associates at fair value through profit or loss. a.s.r. has no control over these entities as the ability to direct the relevant activities is limited by contractual agreements and therefore does not consolidate these entities.
At fair value through profit or loss (Chapter 5.5.5.2) 1,706 131
The investments at fair value through profit or loss increased in 2017 by € 1,575 primarily due to the transfer of real estate equity funds from investment property.
The equities consist primarily of listed equities and investment in investment funds.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 169
All investments at fair value through profit or loss are designated as such by a.s.r. upon initial recognition. For more detailed information about the fair value valuation of the investments, please refer to Chapter 5.7.1.
Changes in the composition of the group - 1 a.s.r. has equities and bonds that have been transferred, but do not qualify for derecognition amounting to € 5,491 million (2016: € 5,183 million). The majority of these investments are part of a securities lending programme whereby the investments are lent in exchange for a fee with collateral obtained as a security. The collateral furnished as security representing a fair value of € 7,073 million (2016: € 6,447 million) consists of mortgage loans and corporate and government bonds. See accounting policy R about securities lending.
Due to further tranches in real estate equity funds which were sold by a.s.r. to institutional investors and transactions in fund participations in the context of the legal merger of ASR Nederland Vastgoed Maatschappij N.V. with ASR Levensverzekering N.V., which occurred in 2017, we reassessed the classification of these funds. This leads to an adjustment in the classification of investment property to real estate equity funds, which are classified as investments at fair value through profit or loss.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 171
Total due from credit institutions consist for € 2,811 million (2016: € 2,845 million) out of savings-linked mortgage loans.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 172
Derivatives consist primarily of derivatives used to hedge interest rate movements. Changes in the fair value of derivatives at fair value through profit or loss are recorded in ‘fair value gains and losses’, see Chapter 5.6.4.
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 determined by discounting the cash flows with the Overnight Indexed Swap (OIS) curve.
Deferred taxes are formed for differences between the carrying amount of assets and liabilities and their tax base at the enacted tax rate, taking into account tax-exempt components. The enacted and current tax rate of 25.0% (2016: 25.0%) is applied when calculating deferred tax.
In 2017, the decrease in the deferred tax asset is mainly caused by the recalculation of the technical provision of life insurance. Other changes consist predominately of reclassifications per 1 January 2017 to separately present the fiscal reserves line item and the intangible assets line item on VOBA which used to be classified as other.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 174
Liabilities arising from insurance contracts 1,785 279 87 - - 2,151
In 2016, the increase in the deferred tax assets is the result of the increase of the related shadow accounting in the liabilities arising from insurance contracts and the decrease of financial assets held for trading and investments.
Prepaid costs and other non-financial assets include prepaid commissions Non-life insurance.
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 € 2,166 million (2016: € 2,443 million) related to cash collateral received on derivative instruments.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 175
The claim related to cash collateral paid on derivative instruments is included in the amount loans and receivables (Chapter 5.5.7). Debt related to cash collateral received on derivatives instruments is included in the amount due to banks (Chapter 5.5.19).
Preference shares: - Authorised capital; par value of € 0.16 350 56 350 56
Following the IPO in June 2016, the Dutch State completely brought back its interest in a.s.r. to the private market in 2017 (2016: 63.7%). NLFI, which is acting on behalf of the Dutch State, sold its shares in a.s.r. and completed the full divestment of a.s.r. in September 2017. No preference shares were issued.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 176 5.5.12.2 Unrealised gains and losses recorded in equity
Unrealised gains and losses related to segregated investment pools -85 - -85
5.5.12.4 Treasury shares The amount of treasury shares held in 2017 of € 188 million (2016: nil) is presented separately within shareholder’s equity. The number of treasury share is 6 million (2016: nil). The repurchase is in line with a.s.r.’s strategy of using capital in value creating opportunities and by returning capital to its shareholders in an efficient manner, for example through participation in a sale of shares by NLFI.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 177
Net profit (loss) attributable to holders of ordinary shares for calculating the earnings per ordinary share 872 625
Basic earnings per ordinary share from continuing operations (in €) 6.03 4.14
Basic earnings per ordinary share from discontinued operations (in €) - 0.03
Diluted earnings per share at year-end 2017 2016 - Net profit from continuing operations 872 621 - Effect of Restricted Tier 1 capital instrument - -
The subordinated liability is classified as liability given the obligation to settle the loans and pay the coupon. They are considered Tier 2 for regulatory purposes.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 179
Life insurance contracts excluding own pension contracts 26,478 27,873 180 193
Provision for unearned premiums as at 31 December 302 345 3 3
Provision for claims (including IBNR) as at 31 December 4,277 4,266 363 439
Non-life insurance contracts as at 31 December 4,579 4,611 366 442
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 180
Total life insurance contracts as at 31 December 26,478 27,873 180 193
The other changes mainly concern the reassessment of policy data prior to an IT conversion that led to an adjustment of € 152 million from insurance contracts on behalf of policyholders to insurance contracts.
The insurance liabilities are deemed to be adequate following the performance of the Liability Adequacy Test (LAT) taking into account the UFR of 4.2% applicable for 2017. The future UFR is subject to developments in the real interest rate and, based on the in 2017 published EIOPA UFR methodology, would result in a UFR of 3,65% in 2021. The UFR under Solvency II and therefore also for the LAT will decrease in 2018 from 4.2% to 4.05% with future decreases expected in the coming years. a.s.r. performed a sensitivity analysis on the impact of the development of the UFR as if the UFR would have been 3.65% at 31 December 2017 and concluded that it still has an adequate surplus of the insurance liabilities over the IFRS-LAT.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 181
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 182 5.5.14.3 Liabilities arising from insurance contracts on behalf of policyholders
At year-end 2017, the liabilities included a guarantee provision for a carrying amount of € 30 million (2016: € 28 million) and a provision related to unit-linked insurance contracts and pension contracts for a carrying amount of € 47 million (2016: € 139 million). These provisions relate to compensation for the cost of these contracts. The other changes mainly concern the reassesment of policy data prior to an IT conversion that led to an adjustment of € 152 million from insurance contracts on behalf of policyholders to insurance contracts.
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 € 2,086 million (2016: € 2,157 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.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 183
The costs of the post-employment benefits pensions relate to all members of the a.s.r. post-employment benefit plan.
ASR Levensverzekering N.V., an insurance company and a group entity, is the insurer of the majority of the post-employment benefit plans. As this company holds the separated investments that are meant to cover the employee benefit obligation, they do not qualify as plan assets in accordance with IAS 19 and are therefore included in financial assets.
ASR Nederland N.V. employees The a.s.r. post-employment benefit plans are based on an average-salary pension. All employees who commenced service after 1 January 2006 are included in one post-employment benefit plan (‘Basic plan’). All other employees remain active within the existing plan at the date of first employment. Previous plans for former employees are also still active. The methods and techniques used to calculate the defined benefit obligations are based on IAS 19 requirements and calculated by an independent actuary.
a.s.r. pays the contributions except for an own contribution of the employees of 6% of their pensionable salary.
The amount recognised as an expense for the defined contribution plans in 2017 amounts to € 1.3 million (2016: € 0.4 million). The increase is related to one of the group companies change in classification from defined benefit plan to a defined contribution plan.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 184
Employees account for 26% (2016: 26%) of the DBO, 41% (2016: 41%) of the DBO relates to former employees currently receiving pension benefits, 28% (2016: 28%) of the DBO relates to deferred pensioners and 5% (2016: 5%) of the DBO relates to other members.
The discount rate has increased by 0.2% point to 1.9% at 31 December 2017 (2016: 1.7%), resulting in a € 105 million increase in the DBO (2016: € 397 million decrease).
The change in other assumptions amounts to € -17 million (2016: € -27 million) due to a change in indexation percentage of former employees.
As a % of liabilities as at 31 December 0.1% 0.9%
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 recognised relate to the insurance contracts and amount to € 10 million (2016: € 23 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 5.8.7) 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)realised 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 recognised in equity (see note 5.5.12.3).
As an employer, a.s.r. is expected to pay contributions for pension plans and other post-employment benefits in the coming financial year amounting to € 105 million (excluding the positive effect of the investment income) and € 0.2 million respectively.
Intro d uctio n 5.5.15.2 Post-employment benefits other than pensions The other post-employment benefits plans consist of personnel arrangements for financial products (such as mortgages and health insurance), which remain in place after retirement.
Remeasurement of liabilities included in OCI Discount rate change -1 -
The sensitivity of the above actuarial assumptions to feasible possible changes at the reporting date to one of the relevant actuarial assumptions whilst other assumption remain constant, would have affected the defined benefit obligation by the amounts of € 0 million increase or € 1 million decrease as a result of a movement of the discount rate by 1%.
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 188 5.5.15.3 Other long-term employee benefits Other long-term employee benefits consist of the employer’s share of liabilities arising from long-service benefits.
An amount of € 25 million of the provisions is expected to fall due within one year (2016: € 30 million).
Financial statements 2017 | 5.5 Notes to the consolidated balance sheet 189
As at year-end 2017, borrowings comprised loans having the following terms to maturity: Borrowings comprised loans
The major part of the decrease (€ 47 million) in borrowings is caused by a reassessment of the classification of the real estate equity funds, which resulted in a reclassification of DMOF, DCRF and DPRF to investments. For more information reference is made to Chapter 5.5.5. The other movements in 2017 relate to the issue of new borrowings and repayment of borrowings in the normal course of business. Refer to 5.2.5 Consolidated statement of cash flows, cash flows from financing activities.
In order to increase its financial flexibility and take advantage of the current favourable market conditions, a.s.r. decided to increase the existing unsecured revolving facility with ABN AMRO by € 100 million to € 350 million with a duration of two years in August 2016. These borrowings are used for investment purposes (property, group pension contracts), for balance sheet management, and for short-term cash flow management.
There is no difference between the carrying value of other liabilities and their fair value (see Chapter 5.7.1.2).
Financial statements 2017 | 5.6 Notes to the consolidated income statement 192
A total of € 79 million in premiums (2016: € 88 million) related to the a.s.r. post-employment benefit plans, investment fees amounting to € 31 million (2016: € 30 million) and Disability premiums amounting to € 2 million (2016: nil) have been eliminated and are therefore not included in the gross insurance premiums, investment income and operating expenses.
Financial statements 2017 | 5.6 Notes to the consolidated income statement 193
Gains and losses on investment property and property for own use 65 130
Financial assets at fair value through profit or loss 65 2
All changes in fair value presented here are changes to the so-called ‘clean fair value’. This is the fair value net of accrued interest recognised in interest income and expense.
Total changes in impairments of investments available for sale 24 1 5.6.10 Interest expense
The increase of € 66 million in other expenses is primarily related to a pension portfolio transfer with a negative interest surplus.
Financial statements 2017 | 5.6 Notes to the consolidated income statement 197
The movements in the current taxes referring to previous periods and deferred tax in 2017 are mainly caused by the recalculation of the technical provision of life insurance.
The profit is almost entirely earned and taxable in the Netherlands. The effective income tax rate is 19.5% (2016: 23.5%).
Financial statements 2017 | 5.7 Other notes 198 5.7 Other notes 5.7.1 Fair value of assets and liabilities
Investments at fair value through profit or loss Equities 92 - 29 121 Real estate equity funds - - 1,585 1,585
Reclassification between categories 2016 To level 1 To level 2 To level 3 Total
Level 2: Fair value based on observable market data 102 - 8 110
Amounts due to customers and due to banks presented as level 1 primarily comprise savings and the liability recognised for the 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 € 4,042 million (2016 € 4,514 million).
Investments at fair value through profit or loss: Real estate equity funds (Chapter 5.5.5.2) - - - -
The property portfolio is classified as a level 3 ‘not measured on the basis of market observable market data’. Non-observable market inputs are used in the valuation methods, in addition to the observable market inputs. The fair value measurement is based on valuations by independent professional appraisers. These valuations 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 capitalisation 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.
Development investment property 17 n/a n/a n/a n/a n/a n/a n/a n/a n/a
Real estate equity funds 1,585 DCF 80,707,002 5.1% 0% -79 - 79
Investments on behalf of policyholders Investment property 85 DCF total 8,372,483 mean 9.8% -5% - 4 9
Investments at fair value through profit or loss Real estate equity funds - n/a n/a n/a n/a n/a n/a n/a n/a n/a
Investments on behalf of policyholders Investment property 193 DCF total 14,755,897 mean 7.5% -5% - 10 21
Land and buildings for own use 149 DCF total 8,950,000 mean 6.2% -5% - 8 15
Intro d uctio n 5.7.2 Offsetting of financial assets and liabilities
The following tables include information about rights to offset and the related arrangements. The amounts included consist of all recognised financial instruments that are presented net in the balance sheet under the IFRS-EU offsetting requirements (legal right to offset and intention to settle on a net basis) and amounts presented gross in the balance sheet but subject to enforceable master netting arrangements or similar arrangements.
Net amounts of financial assets presented in the statement of financial
These mortgage loans held by the member 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 interest-rate 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.
The remuneration of the Executive and Supervisory Board members is determined in accordance with the current Articles of Association of ASR Nederland N.V.
Following the IPO of a.s.r. in 2016, the Dutch State sold its remaining a.s.r. shares in a final transaction on 14 September 2017. This transaction was the completion of a period of state-ownership of a.s.r. that started in 2008. As of 2011, as state-owned financial company, a.s.r. was subject to a special law (Wet aansprakelijkheidsbeperking DNB en AFM en bonusverbod staatsgesteunde ondernemingen) which prohibited the pay of variable remuneration as well as the increase of fixed remuneration. With a.s.r.’s return to the market now fully completed, a.s.r. resumed the remuneration policy for the members of the Executive Board.
Once every three years, an independent consultant performs a market comparison (remuneration benchmark). The 2017 benchmark analysis highlights a considerable gap between a.s.r. and the relevant peer group. This has prompted the Supervisory Board to increase the salary of the members of the Executive Board. As this decision
In accordance with the remuneration law ‘Wet aansprakelijkheidsbeperking DNB en AFM en bonusverbod staatsgesteunde ondernemingen’, issued by the Dutch government, no variable remuneration has been disbursed to the Executive Board members for the period as from the 2011 a.s.r. financial year until 2016 a.s.r. financial year. In 2017 the increase in short-term variable employee benefits is caused by the one-off variable payment in December. In 2017 the fixed employee benefits of board members only increased with the annual CAO-index.
1 The amount as committee member also includes remuneration for services as member of the S&B (Selectie & Benoeming) and R (Remuneratie)
3 The commitment on pensions has not changed in 2017. The increase in annual pension expenses is caused by a decrease of the interest rates. 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 utilised for pensions) amounting to € 206 thousand (2016: € 209 thousand) in total, and VPL. The Pension benefits, excluding compensation for maximum pensionable salary cap, represent post-employment benefits.
Intro d uctio n 5.7.5 Contingent liabilities and assets 5.7.5.1 General claims and disputes The group is a respondent in a number of claims, disputes and legal proceedings arising from the normal conduct of business.
As for other claims and legal proceedings, against a.s.r. known to management (and for which, in accordance with the defined principles, no provision has been formed), management believes, after having sought expert advice, that these claims have no chance of success, or that a.s.r. can successfully mount a defense against them, or that the outcome of the proceedings is unlikely to result in a significant loss for a.s.r. For further information related to the Unit-Linked Products (beleggingsverzekeringen) refer to Chapter 5.7.5.2.
5.7.5.2 Unit-Linked Products (beleggingsverzekeringen) Background Since the end of 2006, individual unit-linked life insurance products (beleggingsverzekeringen) have received negative attention in the Dutch media, from the Dutch Parliament, the AFM, consumers and consumer protection organisations. Elements of unit-linked policies are being challenged or may be challenged on multiple legal grounds. The criticism and scrutiny on unit-linked life insurance products led to the introduction of compensation schemes by Dutch insurance companies that have offered unit-linked products. In 2008, a.s.r. leven reached an outline agreement with two main consumer protection organisations to offer compensation to unit-linked policyholders in case the cost charge and/or risk premium charge exceeds a defined maximum. A full agreement on implementation of the compensation scheme was reached in 2012. The total recognised cumulative financial costs relating to the compensation scheme for Individual life in a.s.r.’s income statement until 2017 was € 1,031 million. This includes, amongst other things, compensation paid, amortisation of surrender penalties and costs relating to improved product offerings. The remaining provision in the balance sheet as at 31 December 2017 amounted to € 45.3 million and is solely available to cover potential additional compensation (schrijnende gevallen) and costs relating to the compensation scheme. On the basis of this agreement, a.s.r. offered consumers additional measures such as alternative products and less costly investment funds. In addition to the compensation scheme, a.s.r. has implemented additional measures (flankerend beleid), including the ten best in class principles as formulated by the Dutch Minister of Finance. On 17 July 2015, the Dutch Ministry of Finance published an Order in Council (Algemene Maatregel van Bestuur), pursuant to which insurance companies can be sanctioned if they do not meet the compulsory targets set for approaching policyholders of unit-linked life insurances and prompting them to review their existing policies.
Legal proceedings a.s.r. is subject to a number of legal proceedings initiated by individual unit-linked policyholders, in most cases represented by claims organisations. While to date fewer than 15 cases are pending before Dutch courts and courts of appeal and fewer than 120 cases are pending before the Financial Services Complaints Board (‘FSCB’) (the Dispute Committee as well as the Committee of Appeal of the FSCB), there is no assurance that further proceedings will not be brought against a.s.r. in the future. Future legal proceedings regarding unit-linked life insurance policies might be brought upon a.s.r. by consumers individually, by consumer organisations acting on their behalf or in the form of a collective action. Furthermore, there is an ongoing lobby by consumer protection
5.7.5.3 Obligations and guarantees Investment obligations for an amount of € 82 million (2016: € 245 million) have been assumed / issued for investment property.
Investment obligations and guarantees for a total amount of € 166 million (2016: € 334 million) have been issued, for real estate development projects and the acquisition of property. Those guarantees were issued by principals for the execution of projects for the benefit of clients.
Other commitments, primarily facility management and ICT related, have been entered into for an amount of € 46 million (2016: € 53 million).
Later than 1 year and no later than 5 years 134 287
5.7.6 Events after the balance sheet date a.s.r. acquires Generali Nederland On 6 February 2018, ASR Nederland N.V. announced the completion of its acquisition of Generali Nederland N.V. (hereafter GNL) by acquiring all issued and outstanding shares for a total consideration of € 145 million paid in cash.
The closing for the transaction of Generali Nederland took place on 5 February 2018. As a result these activities are not included in the consolidated financial statements as of 31 December 2017. a.s.r. will fully include the results and the balance sheet positions in the a.s.r. consolidated financial statements from the closing date. The full integration of GNL’s activities into a.s.r. will take place in phases and is likely to be completed by 2020 at the latest. GNL staff will move to a.s.r. locations in the course of 2018. The GNL products will be rebranded into a.s.r. or one
Financial statements 2017 | 5.7 Other notes 214 of a.s.r.’s labels in due course. GNL life and GNL non-life have been transferred to ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. respectively in preparation for the legal mergers which are expected to take place in 2018.
Given the recent closing, the initial accounting for GNL is ongoing and as such the opening balance sheet presented below is provisional (i.e. identifiable intangible assets and contingent liabilities, if any, have not yet been recognised in the initial opening balance sheet). In accordance with IFRS 3 business combinations, the final opening balance sheet will be drawn up within 12 months of the closing date. The provisional balance sheet based on fair value uses the following techniques and assumptions: • Financial assets and liabilities (including investments and loans and receivable) were remeasured to fair value at the closing date. • Liabilities arising from insurance contracts were remeasured to fair value as defined in IFRS; this resulted in a significant increase predominately resulting from applying a different market consistent discount rate assumption and risk adjustment using a cost of capital approach at the closing date.
Intro d uctio n 5.7.7 List of principal group companies and associates
ASR Vastgoed Vermogensbeheer B.V.¹,³ 100,00 100,00 Utrecht Banking and Asset Management
Brand New Day Premiepensioeninstelling N.V.3,4 50,00 50,00 Amsterdam Holding and Other
Risk management is an integral part of a.s.r.’s daily business operations. a.s.r. applies an integrated approach to managing risks ensuring that strategic objectives are met. Value is created by striking the right balance between risk and return and capital, whilst ensuring that obligations to stakeholders are met. The Risk Management Function (RMF) supports and advises a.s.r. in identifying, measuring and managing risks, and monitors that adequate and immediate action is taken in the event of developments in the risk profile.
a.s.r. is exposed to a number of risks, such as strategic risk, market risk, counterparty default risk, liquidity risk, insurance risk, and operational risk. Its risk appetite is formulated at both group and legal entity level and establishes a framework of risk appetite statements that supports effective risk selection and monitoring.
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 recognised and accepted standards (such as COSO ERM and ISO 31000:2009 risk management principles and guidelines). Using 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 (legal) business entities.
Risk appetite The risk appetite is defined as the level and type of risk a.s.r. is willing to bear in order to meet its strategic, tactical and operational objectives. Risk preferences in the form of qualitative risk appetite statements and risk tolerances presented by quantitative risk appetite statements, guide the organisation in the selection of risks. Risk appetite statements are implemented within the business through the use of risk limits. The risk appetite statements in 2017 are: Risk appetite Statement ASR Nederland N.V. 2017 1 ASR Nederland N.V. places long-term value creation at the forefront of its (strategic) operations. ASR Nederland N.V. is a socially responsible organisation which ensures that all stakeholders’ interests are met in a balanced and sustainable way.
2 ASR Nederland N.V. ensures that operational risks are controlled efficiently and effectively: a. ASR Nederland N.V. has efficient and effective business processes; b. ASR Nederland N.V. has reliable financial reports; c. ASR Nederland N.V. has controlled internal and external outsourcing; a) ASR Nederland N.V. has IT that processes information reliably.
N.V. meets the (reasonable) expectations of stakeholders and offers solid and reliable products which are cost-efficient, useful, safe and comprehensible to customers, intermediaries and ASR’s internal organisation. Conducting honest business ensures that ASR’s reputation, business model and financial solidity are protected.
5 ASR Nederland N.V. remains within the bandwidth of periodically reassessed market risk budgets.
12 ASR Nederland N.V. has a maximum combined ratio of 99%.
The classification of risks within a.s.r. is performed in line with, but is not limited to, the Solvency II risks. Each risk category consists of a policy that explicates how risks are identified, measured and controlled within a.s.r.
Risk management process The risk management process contains all activities within the RM processes to structurally 1) identify risks; 2) measure risks; 3) manage risks; 4) monitor and report on risks; and 5) evaluate the risk profile and risk management framework. At a.s.r., the risk management process is used to implement the risk strategy in the steps mentioned. These five steps allow for the risks within the company to be managed effectively.