Part I a.s.r. at a glance 5 Message from the Chief Executive Offi cer Striking the right balance 7
Part II Report of the Executive Board 11 2.1.1 ASR Nederland N.V. 13 2.1.2 Non-Life segment 16 2.1.3 Life segment 19 2.1.4 Other segment 22
Part VII Other information 183 Independent auditor’s report 184 Events after the reporting date 185 List of principal group companies and associates 186 Other equity interests 187 Provisions of the Articles of Association regarding profi t appropriation 187 Profi t appropriation 187 Glossary 188 List of acronyms 191 Contact details and publication 192
We are a robust and independent insurance company. We believe helping people is the core of insurance, which forms the basis of our mindset and positioning. For us, this means that we take a modest approach that corresponds with our role in society. In view of this and other considerations, we further refi ned our marketing strategy, our branding and our distribution strategy in the second half of 2012. We are continually seeking to strike the right balance between cost, premium income, return and solvency.
In 2012, a.s.r. succeeded in serving its customers better. We have, for instance, restructured and improved our complaints handling procedures. As part of the campaign to put customers interests fi rst, a.s.r. also managed to achieve the highest score among insurers for information offered to customers. Furthermore, the Ardanta, De Amersfoortse, Ditzo and Europeesche Verzekeringen brands all retained their Customer-Oriented Insurance Quality Mark (Dutch acronym: KKV).
The fi gures for 2012 show a mixed picture. All in all, we succeeded in maintaining our solvency at an undiminished high level, yet falling premium income and rising claims do give us cause for concern. In 2012, a.s.r. reported a net result of € 255 million, a 20% increase compared to 2011. a.s.r. will pay € 88 million in dividend to the shareholder. As in 2011, this will be 40% of the net result attributable to the shareholder.
The claims ratio in the Non-Life segment deteriorated in 2012. Targeted controls and further cost savings helped to improve this ratio in the second half of the year, compared to the fi rst half.
In a market characterized by tough competition, we maintained our leading position in occupational disability insurance. Adequate action on prevention and reintegration proved to be trump cards. The health insurance business experienced a considerable increase in the number of customers in the past year.
On closer examination of the a.s.r. divisions in 2012, it is clear that the market for individual life insurance continues to stagnate. For this reason, we have introduced a bank savings product in our asset-building offering, among other alternatives. In the mortgage market, we regained ground in 2012 thanks to the success of the WelThuis mortgage.
8 a.s.r. 2012 annual report a.s.r. at a glance 1 About a.s.r.
a.s.r. is confi dent that its right to exist is justifi ed by thinking in terms of customer interests and perception. Products and services need to refl ect these principles. Clarity and simplicity combined with effi cient business processes and a robust fi nancial position are essential in this regard. Customers can rest assured that their risks are covered by an insurer that operates responsibly and avoids waste. That listens to them and is available across a variety of channels.
Ditzo is the online provider of non-life and health insurance policies for people who like to manage their insurance online and are more price-conscious.
Serving a.s.r.’s customer groups is based on three principles. First is the focus on key products: income protection, non-life and health insurance. This is the foundation. Second, advisors will continue to be the main distribution channel. They stand to benefi t if customers can also contact a.s.r. in other ways, and for this reason a.s.r. will be going online with asr.nl for the fi rst time in its 293-year history. Telephone services will be further streamlined and professionalized. Third, standardization will form the principle for servicing private individuals and business owners. This is in the interests of customers, because it will provide them the right service at the right price. Large cor porate clients that are comfortable with this arrangement, are also welcome to avail themselves of a.s.r.’s services.
The focus is on working together with advisors who strike the right chord with the various customer groups. Account managers play a key role in this. Each advisor has an account manager, who will either visit in person or be offi ce-based, depending on the type of relationship they have with a.s.r. Account managers work for both the a.s.r. and De Amersfoortse brands. They, for their part, are supported by a number of non-life, pension and income protection specialists.
a.s.r. 2012 annual report 9a.s.r. at a glance a.s.r. has embraced the hybrid distribution model. This aims to cater to the needs of customers who alternate between managing their own affairs and needing advice. This means that customers can always contact a.s.r., for instance via the website or by phone. The development of insurance packages also centres around customers. They are based on customers’ life events, such as buying a house or their children leaving home.
This puts a personal touch on insurance and lays the foundation for a different approach to pricing.
From 2013 on, income protection insurance will only be sold via De Amersfoortse on the basis of business owner profi les. Business owners will be made a competitive offer when they are accepted for occupational disability insurance. Pensions and non-life products will follow.
Part of a.s.r.’s strategy is to prevent waste by a continuous drive to improve effi ciency and lower costs, in part by standardizing processes and products, and by increasing the degree of Straight Through Processing. One aspect of effi ciency involves the outsourcing of work to specialist partners. a.s.r. has chosen to introduce outsourcing in controlled stages.
• Non-Life segment: 6% increase • Life segment: 13% decrease • Operating expenses decreased 6% to € 585 million
(UFR) at 293% • DNB solvency on comparable basis stable at 231%
Notes to key fi gures In 2012 the calculation of the cost-premium ratio and the combined ratio improved compared to 2011, and the provision for restructuring expenses is no longer included in the costpremium ratio. On a comparable basis, the cost-premium ratio over 2011 was 10.2%, equal to the cost-premium ratio over 2012. The cost-premium ratio over 2011 reported earlier was 11.8%.
On a comparable basis, the combined ratio increased by 4.2 percentage points to 99.2% in 2012, which was attributable to the impact of the Resumption of Work (Partially Fit Persons) Regulation (Dutch acronym: WGA) in particular. The combined ratio for 2011 stood at 98.9%.
The insurance market once again turned out to be a diffi cult market in 2012 with low consumer confi dence. In the non-life market, the increase in claims expenses placed margins under pressure. This resulted in extra diligence when it comes to managing claims and the implementation of premium adjustments. The declining market for life insurance remains an area of focus. The choice for return over premium in this market affects sales volumes.
The economic situation remained uncertain in 2012; the global slowdown in economic growth continued. Under the infl uence of the persisting euro crisis, European interest rates continued to drop. Although the volatility of the stock and credit markets was high, the sentiment improved during the year and stock markets clearly fi nished the year at a higher level. Managing interest rate and investment risks continued to be vital. In this market, a.s.r. managed to maintain its solvency at a constant strong level. Under these economic conditions, a.s.r.’s investment policy is primarily focused on managing risks.
Despite the one-off release of a provision for tax purposes of € 90 million, the net result of the Other segment grew from € -68 million to € -79 million. The risks of property developments and land banking in the property development portfolio were further scaled back. Aside from this, the drop was also attributable to higher operating expenses and one-off investment income in 2011.
Number of employees The number of internal FTE’s decreased from 4,264 FTE’s to 4,088 FTE’s in 2012. The largest group of employees who were let go (120) came under the scope of the Redundancy Plan. Another 89 employees left a.s.r. at their own request, 37 employees reached the end of their temporary contracts and 74 employees agreed to consensual termination of their employment contracts. On average, employees stay with a.s.r. for 14.5 years.
The value of the fi xed-income portfolio was up mainly thanks to lower interest rates. a.s.r. also continued to restructure the interest rate risk in 2012. In doing so, it reduced its sensitivity to interest rate volatility and released the cash that was received as collateral, while preserving the effectiveness of the interest rate hedges. The year under review also saw limited growth in the equity portfolio in accordance with the investment policy thanks to the purchase of equities in the Netherlands and Europe, the United States and emerging markets. The steps that have been taken over the past few years have clearly benefi ted the robust solvency position and reduced the sensitivity of the balance sheet to market risks.
Real estate management The mission of a.s.r. Vastgoed Vermogensbeheer, a.s.r.’s real estate management business, is to invest in relatively low-risk real estate in the Netherlands under the adage “investing in eternal real estate”. a.s.r. seeks to increase the fl exibility of its real estate portfolio by creating property funds. The ASR Dutch Prime Retail Fund, which was established in 2011, had sold € 380 million worth of participations to third parties (i.e. institutional investors) by the end of 2011. In 2012, all the necessary preparations were made to establish the ASR Dutch Core Residential Fund. All residential properties owned by a.s.r. were transferred to this fund.
• Net result at € 59 million (2011: € 145 million) due to increase in claims expenses
• Operating expenses decreased by 8% to € 226 million (2011: € 245 million)
• New production amounting to € 303 million is 33% higher than in 2011
The Non-Life segment comprises all types of non-life insurance policies that a.s.r. offers to consumers and business owners. These policies insure risks related to motor vehicles, fi re, travel and leisure, liability, legal assistance, occupational disability and medical expenses. The policies are offered under the following labels: a.s.r., De Amersfoortse, Europeesche Verzekeringen and Ditzo, both via the intermediary and the direct channels.
In 2012, the crisis caused people to take fewer and shorter holidays to less far away and less luxurious destinations. In addition, they waited longer to replace recreational items and put off new purchases. Similar to 2011, consumers spent more time using their own boats, caravans and other recreational items, which increased the chance of claims.
Net result The net result of the Non-life segment decreased from € 145 million to € 59 million in 2012. This is primarily due to increased claims expenses. For example, the occupational disability insurance segment shows a trend of higher infl ow and a later outfl ow, primarily due to economic conditions. Also, investment returns are lower due to changes in the combination of investments.
The Occupational Disability Insurance business managed to limit its WGA claims because, based on its expertise, a.s.r. charged more realistic prices than its competitors. Although market share was lost,a.s.r.’s position as market leader became stronger. This confi rms that a.s.r.’s products were priced right.
The fact that the Occupational Disability Insurance business is committed to treating customers fairly is demonstrated by its meeting the quality mark requirements of the Dutch Insurance Review Agency (Dutch: Stichting toetsing verzekeraars).
And by a clear improvement in the dashboard rating of individual policies by the Netherlands Authority for the Financial Markets (AFM) from 2.4 to 4.1 on a scale from 1 to 5. A lot of is being invested in the IT platform of the next generation of occupational disability insurance policies, allowing a.s.r. to improve its offering of online services to customers. The Group Occupational Disability Insurance business will migrate to this new platform in 2013; the Individual Occupational Disability Insurance business will follow suit in 2014.
Another area of focus for Non-Life in 2012 was increasing the expertise of our Non-Life account managers and front offi ce staff. Initiatives such as Closed Loop Feedback, which uses customer feedback to respond quickly to complaints, questions and trends, and customer-oriented courses in the Health Insurance business are good examples of how a.s.r. seeks to achieve this.
The new platform for other non-life policies allows a.s.r. to offer more modern and standardized products. The new IT platforms are essential in streamlining our business processes, particularly because they increase the degree of Straight Through Processing.
Europeesche Verzekeringen discontinued its direct sales in 2012 and now focuses fully on intermediary distribution. Europeesche Verzekeringen continues to offer online policies, which can be purchased via online intermediaries. Customers rate these services highly, which was illustrated by the fact that they awarded Europeesche Verzekeringen the Travel Feather Award for being the best travel insurance company of 2012.
Expectations for the health insurance market are that basic coverage will continue to be stripped down. The Dutch government is also considering introducing an income-related policy excess. Owing, in part, to the economic crisis, more customers will decide to lower their top-up coverage. Health insurers will increasingly take on a directing role and be instrumental in reducing the costs of the health insurance system by way of contracted care.
• Net result at € 275 million (2011: € 135 million) • Gross premiums written decreased by 13% to € 1,891 million
Notes to key fi gures of Life segment Total gross premiums written include the premium for the company’s own pension plan in the amount of € 88 million (2011: € 82 million). The calculation method of the cost-premium ratio improved in 2012 compared to 2011. On a comparable basis, the costpremium ratio increased by 0.9 percentage points in 2012 to 12.0%. The cost-premium ratio over 2011 as reported earlier stood at 12.8%.
The persistent economic crisis, low interest rates and the changes in the tax regime are weighing down the pension market. Overall, a.s.r. does not expect to see a recovery of new production in the pension market in the short term. In addition, the increase in life expectancy is putting greater pressure on the mortality margin. In response, the Pensions business adjusted its rates for renewals or new propositions.
Gross premiums written Revenue in the Life segment decreased by 13% in 2012, from € 2,166 million to € 1,891 million. Revenue from the Individual Life business is under pressure owing to the contracting market for asset-building by private individuals and a high level of lapses and early surrenders. The compensation process for unit-linked policyholders prompted some customers to convert their existing policies, which led to an increase in new production of the lijfrente opbouwrekening (annuity savings account). Sales of the WelThuis mortgage, in combination with the renewed savings-linked mortgage and a competitive rate for the term life insurance, were successful. The strong decrease in single premiums is due to the preference of return over premium, as a result of which a less competitive premium was utilized.
Operating expenses Operating expenses decreased by € 34 million to € 223 million in 2012 (2011: € 257 million). The cost-premium ratio rose by 0.9 percentage points owing to a drop in premium income that more than offset the decrease in expenses.
Compensation process All customers with individual unit-linked policies have now been compensated. The last group of the 900,000 policyholders in total received compensation in the fi rst quarter of 2012. This project concerned a total expense of € 894 million up to the end of 2012.
Net result The net result in 2012 stood at € 275 million (2011: € 135 million). The increase was mainly attributable to higher investment results. The 2011 net result was propelled by the introduction of the ASR Prime Retail Fund and disposal of real estate.
Focus on return over growth continued to be the guiding principle for 2012. In the Individual Life business, this led to fewer new single premium policies being sold and a drop in immediate annuities. Securing a.s.r.’s profi tability was a key priority.
As in 2011, policy focused on reducing the number of product categories and offering transparent and modern products only. Further effi ciencies will be implemented by the new Contact Center, for which Individual Life started a pilot late in 2012. The purpose of the pilot is to fi nd out whether better and more effi cient services can be provided to customers and advisors by creating a single Contact Center in which the services of the Life Front Offi ce and the Life Customer Contact Center are integrated. This is in line with the restructuring that is meant
The Pension business focused on retaining existing customers in 2012. This business not only developed a new DC proposition, but also worked on improvements for existing customers. Up-to-date product leafl ets are available on the website and all messages are written in plain language. In 90% of cases, customers receive a response within the set deadline; in general, customers are happy about how their complaints are handled.
In 2012, Ardanta used the feedback from customer panels and intermediaries to create more transparent products. The complaints handling process was improved: customers are now informed about how their complaint is addressed. In addition, fees charged for products are fully transparent. At year-end, the rates were gender-neutral and did not include any commission. Acting ahead of the drop in sale of new insurance contracts, the tied-agents network was scaled back by 60%. This network also deals with customers who do not, or no longer, have an intermediary.
The market for mortgage-linked asset-building products will keep shrinking as a result of a shift to other mortgage types, such as bank savings products, savings-linked mortgages and annuity mortgages.
In 2013, a next generation of relatively low-priced mixed funds (TER 0.35%) will be introduced for customers with Waerdye (HLSc porfolio), AMEV (NIP), De Amersfoortse (DAV), NGL and, possibly later, Falcon/Interlloyd policies. The structural reduction in future fees for existing customers is considered the most important criterion in this respect. The Pension business will also focus on retaining customers. The pension insurance cost compensation process will be fi nalized in 2013, meaning that all customers will have been informed and that their compensation will have been calculated.
In this segment, Ditzo operates as a distributor of insurance contracts via the direct online channel. Ditzo’s underwriting income is recognized within the Non-Life segment. ASR Vastgoed Ontwikkeling N.V., which is one of the largest retail, residential and area developers in the Netherlands, focuses on developing combined-use residential and retail spaces in complex urban environments.
Operating expenses In spite of the lower operating expenses in the Banking organization and Ditzo, operating expenses in the Other segment increased from € 119 million in 2011 to € 136 million in 2012. The increase was due to changes in the expense allocation method.
Net result The net result of the Other segment decreased by € 11 million from € -68 million in 2011 to € -79 million in 2012, despite the one-off release of a prior-year provision for tax purposes of € 90 million. The decrease was mainly attributable to a strong decline in earnings at a.s.r. Vastgoed Ontwikkeling, higher operating expenses and one-off investment income in 2011.
The Mortgage business took a number of steps to increase its effi ciency. Not only did it reduce the number of FTE’s, but it also opted to implement a single IT system for savings and investments instead of operating two. Although this will require additional efforts early on, the rewards in terms of lowering expenses will be signifi cant in the future.
House prices are likely to continue to drop in 2013, but a.s.r. expects mortgage sales to show a limited increase on 2012 thanks to the WelThuis mortgage products that were introduced earlier and received a warm reception in the market. Despite low interest rates, the savings market will offer opportunities because many customers will be wanting to supplement their pension provisions.
The property development market for homes and retail locations will continue to suffer in 2013. Local authorities and investors will have limited scope for investments and housing associations are abandoning developments as a result of new government policy. In the year ahead, earnings from property development will continue to depend on new developments in the residential and retail markets, which makes them diffi cult to predict.
The a.s.r. capital policy ensures prudent monitoring and control of its solvency ratios, both at group and divisional level.
The capital position is governed by various rules and limits that were instituted to absorb losses and to guarantee fi nancial robustness. Compliance with the rules is monitored and enforced by regulators as well as via internal management and control models. In doing do, a.s.r. seeks to optimize its capital position within the parameters set by regulators and stakeholders, actively monitor capital risks and meet the agreed limits. One of the priorities in this regard is satisfying the capital requirement that is needed to be awarded an A rating at group level.
Treasury is responsible for capital management in the Financial Markets department. As part of capital management procedures, Treasury is accountable to the a.s.r. risk committee structure that was set up for this purpose. This guarantees its independent position and the segregation of duties, and is in keeping with the a.s.r. governance structure.
Reaching 90 percentage points, the sensitivity of solvency (exclusive of UFR) to the stress scenarios used by a.s.r. increased compared to 2011 (51 percentage points). The sensitivity to fl uctuations in share prices grew, due to higher exposures to equities as a result of purchases and price increases. Although some fi nancial bonds were sold, the sensitivity to changes in spreads increased because of a rise in the value of corporate bonds and improvements in the calculation method. The sensitivity of the solvency ratio (exclusive of UFR) to a 1% drop in interest rates rose, because of a decrease in interest rates and changes in the slope of the yield curve. Inclusive of the UFR, the interest rate sensitivity is the exact opposite. A 1% increase in interest rates suppresses the solvency ratio by 18%.
The revised IAS 19 for accounting for employee pensions came into force on 1 January 2013. As a result of this standard, an amount of € 372 million has been added to the provision for employee pensions effective 1 January 2013. As of that date, equity dropped by € 279 million after tax to € 2,656 million. Where a.s.r. is concerned, the revised IAS 19 does not impact the DNB solvency ratio.
As an insurer, a.s.r. has a relatively limited need for funding. From this perspective and from the viewpoint of risk management, a.s.r. relies on the money and capital markets to a minimal extent. This is in keeping with the prudent policy and fi nancial robustness that a.s.r. pursues.
a.s.r. did not raise any additional external fi nancing in 2012. The available fi nancing facilities had not been drawn at yearend 2012. The relatively limited funding needs, in combination with the option for raising secured fi nancing, result in ample liquid assets for a.s.r. at this time to carry out its operations.
The Executive Board plans to distribute € 88 million in dividend on ordinary shares. Similar to last year, this represents 40% of the net result attributable to shareholders.
Besides the solvency position, it is also important to thoroughly map out the risks that affect solvency. a.s.r. wants to achieve a capital position that merits an A rating from Standard & Poor’s. On 23 August 2012, Standard & Poor’s confi rmed the A rating of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. It changed its outlook from negative to stable.
For Standard & Poor’s rating, please log on to the a.s.r. website: www.asr.nl.
26 a.s.r. 2012 annual report 2.3 Risk management a.s.r. uses an integrated approach to managing risk. It has robust risk management procedures (i.e. the Integrated Risk Management, or IRM, framework) in place for identifying and managing all risks. This framework provides a.s.r. with information regarding the integrated risk profi le and enables it to take and manage risks responsibly. Information on the level of risk and the correlation between risks, allows a.s.r. to accept only those risks that are responsible and come with appropriate returns. In this way, IRM contributes to the fi nancial robustness of a.s.r. and the improvement of its operational performance.
The notes to the fi nancial statements contain a detailed description of risk governance, the risk profi le and the related trends in 2012 (see page 81).
In 2012, Standard & Poor’s changed its outlook for a.s.r. from negative to stable. a.s.r. mainly has its integrated risk management framework and balance sheet management to thank for this improved rating.
In keeping with external regulations such as Solvency II, a.s.r. started to focus more intensively on market value in 2012. This is illustrated in a.s.r.’s dynamic investment policy, in which the appetite for market risk is dependent on developments in solvency. The dynamic investment policy is used to adjust market risk so as to secure fi nancial robustness and to benefi t where possible from higher returns on more high-risk portfolio investments such as equities, real estate and corporate bonds. The policy to further reduce interest rate risk over the years to come is also based on managing market value.
Another important development is the further organizationwide implementation of the internal control structure, which is referred to as the management in control framework. This framework, which has been developed from an integrated risk management perspective, periodically tests the controls that are in place in the core processes.
A robust solvency position takes priority over profi t, premium income and direct investment income. The Financial Risk Committee assesses the solvency position and the fi nancial risk profi le on a monthly basis. Action is taken where appropriate to ensure that the fi nancial risk profi le stays within the parameters that have been defi ned in the a.s.r. risk appetite.
Similar to 2011, the euro crisis continued to dominate the fi nancial markets in 2012. Exposures to government bonds issued by peripheral countries is virtually non-existent. Exposures to bonds issued by fi nancial institutions were further scaled back. Equity exposures were increased within the parameters of the risk appetite in order to be able to benefi t from higher expected returns. Property exposures were stable; despite the economic decline, the value of the a.s.r. portfolio increased on balance in 2012. Owing, in part, to developments in, and uncertainties surrounding, the application of the Ultimate Forward Rate (UFR) under the current regulatory framework and Solvency II, the interest rate risk was reduced at a slower pace. a.s.r. did, however, restructure interest rate hedges by purchasing interest rate swaps and selling swaptions.
a.s.r. 2012 annual report 27 a.s.r. periodically assesses whether the technical provisions are suffi cient to cover insurance liabilities. These provisions were adequate at year-end 2012. The underlying assumptions for assessing the provision are periodically adjusted to economic and non-economic developments. As a result of the increase in life expectancy, the mortality table used for assessing the provision was updated in 2012. In addition, lapse rates showed an increase as a result of the implementation of the compensation process. The lapse rates used have been adjusted accordingly.
Management of non-fi nancial risks in 2012 The Non-Financial Risk Committee assesses the non-fi nancial risk profi le on a quarterly basis. Additional measures are taken where needed to reduce the non-fi nancial risk. Thanks, in part, to the implementation of the management in control framework, non-fi nancial risks were managed better in 2012.
All divisions performed the annual Control Risk Self-Assessment (CRSA) in 2012. The CRSA is a risk identifi cation methodology used to identify risks that pose a threat to the achievement of the strategic targets. A qualitative assessment is also made of the risk and the required risk management actions. a.s.r.’s risk priorities are defi ned based on the CRSA.
In addition, a.s.r. further rolled out its internal control structure in 2012. A framework of standards was developed for the entire organization in 2011. Controls were implemented and the effectiveness of most of them was assessed in 2012. Where needed, plans were devised to further increase their effectiveness. Risk Management will keep monitoring the effectiveness of the controls.
Risk awareness Risk management and awareness of information security and other security aspects will continue to be focal points. There is a risk of confi dential formation – fi nancial, customer-related or otherwise – being disclosed to third parties, whether intentional or unintentional. This can lead to damage to a.s.r.’s reputation. The level of awareness regarding the importance of dealing with confi dential information and employee and customer details, and the protection of corporate property needs to be raised further. In 2012, attention was being devoted to managing risks associated with safety and security, including information security, and raising awareness regarding this issue.
The Solvency II requirements support a.s.r. in its efforts to make further improvements to its risk management procedures. The Solvency II framework rests on three pillars: the fi rst pillar describes how to defi ne the risk profi le and the related capital requirements. The second pillar involves supervision and defi nes the role of the regulator and the requirements with regards to the responsibilities of the insurance company, its Executive Board and its senior management. The third pillar focuses on market discipline and describes disclosure and transparency requirements for the benefi t of both the public and the regulator. This public information allows stakeholders to assess the fi nancial stability of an insurance company. Solvency II creates a new set of regulatory requirements and a solvency framework that is based on market-consistent valuation. The solvency requirements will better refl ect the risks that insurance companies incur.
a.s.r. has actively worked on implementing the Solvency II requirements since 2009. In 2010, focus was mainly on Pillar 1 activities, shifting more to Pillar 2 activities in 2011. In addition to concentrating on Pillar 2 activities, a.s.r. also started to develop Pillar 3 reports in 2012. a.s.r. performed an ORSA for the third time in 2012. In addition, the quality, reliability and integrity of data have been improved. The effectiveness of the risk management function has increased, creating better compliance with Solvency II.
The potential delay in the effective date of Solvency II offers a.s.r. the opportunity, in the year ahead, to pay extra attention to the quality of source data and reports, and to document that this quality is at the required level.
The role in society that a.s.r. wants to play as an insurer forms the starting point of our Corporate Social Responsibility (CSR) policy. To a.s.r., this means that what is right in the longer term is preferable to any short-term gains. As an insurer, employer and investor, and for the environment, a.s.r. takes account of sustainability in its business operations where possible.
a.s.r. learns from complaints: customer feedback is used to solve customers’ problems, to structurally improve service and to develop the complaint handling skills of individual employees. This makes it possible to keep repeat complaints to a minimum, for instance.
Purchasing a.s.r. is committed to the Sustainable Procurement & Business Practices Manifesto. The manifesto is an initiative by 17 large businesses in the Netherlands and is supported by NEVI, the Dutch Association for Purchasing Management (www.nevi.nl/mvi). Since 1 January 2013, a.s.r. has added impact on society to its procurement criteria. This impact could be social, environmental or economic. Sustainable purchasing is more than just applying criteria in the procurement process; it is also about choices made in business operations that translate to the works, supplies or services to be purchased.
The implementation of the Socially Responsible Procurement policy focuses on the following aspects: 1. a.s.r. informs suppliers in advance that environmental and social factors are weighed in the selection process; 2. a.s.r. has adopted a set of environmental and social criteria
At a.s.r., employees are encouraged to develop professionally and to take ownership of their personal development, career path and ambitions. The goal is to create an inspiring and healthy work environment that fosters the talents of employees and allows them to reach their full potential.
The introduction of NWW (New World of Work) is one such initiative to create a pleasant working atmosphere at a.s.r. The most important reason for a.s.r. to introduce NWW was that it gives employees the opportunity for a better work/life balance, thereby boosting their motivation. Moreover, NWW helps to reduce our energy consumption and our carbon emission. By the end of 2012, 80% of employees at the Utrecht offi ce had the tools to work independently of time and place. Around 1,000 employees log onto the network remotely each day.
After all managers had taken a train-the-trainer workshop early in 2012, they entered into a dialogue with their people about embedding the core values in their day-to-day activities. In the second half of 2012, the emphasis shifted to ‘helping by taking action’. How does a.s.r. transpose its core values into identifi ably better services for customers? All managers followed a course in ‘control and fl exibility’ which taught them to strike the right balance in the activities of their teams, allowing employees to develop their own initiatives and approaches.
The targets that a.s.r. set for 2012 were: Middle management: 32%. This target was achieved in 2012 by fi ve of the eight divisions. Senior management: 19%. This target was achieved.
Talent development 2012 was the fourth year in which a number of high-potentials started the Management and Professional Development Programme. This programme has been designed for talented employees who are willing to invest extra time and energy in their career at a.s.r. The programme focuses not only on the career advancement of employees in management positions, but also on the development of professionals. To qualify for the programme, employees need to have at least a college degree and be acknowledged as high potentials by their manager. Spread across a range of modules, programme participants are asked to work on a strategy problem, gain knowledge of change management, write and carry out a project plan, and manage their own development targets. This is how talent advances to the next step in their career. Vacancies that used to be diffi cult to fi ll are now regularly fi lled by programme participants. The programme also encourages cooperation between divisions,
a.s.r. 2012 annual report 33 because it brings together people who work in different areas of the organization. The a.s.r. Talent Development Programme is designed specifi cally for talented young individuals. The two-year programme delivers a new group of enthusiastic young people every year. The trainees, who are part-time Business Administration students, rotate between a.s.r. divisions in four modules of six months each, taking on a different role in each module. After their traineeship, most of the trainees are offered a management position, or they are asked to join a specialist team.
Sustainable facilities Employees at a.s.r. are offered a variety of sustainable facilities, such as a company-sponsored gym membership, the Utrecht Bereikbaarpas travel card, ‘mobility markets’ that offer employees alternatives to car travel, and participation in the Rij2op5 campaign (an initiative of the Dutch Cyclists’ Union and employers to encourage employees to use the bike for their daily commute). Furthermore, all employees with a company car are also given an NS Business Card to give them the choice to travel by train. Initiatives in the area of mobility were broadened in 2012 to include a pilot in which employees could try out an electric bicycle for a limited period, free bicycle maintenance and the installation of several charging points for e-bikes in the bicycle parking area at the a.s.r. offi ce in Utrecht.
a.s.r. also supports the Spitsvrij initiative, a partnership between the Utrecht provincial authorities and the Ministry of Infra structure and Environment, designed to improve traffi c fl ows on roads. Participants in the scheme could earn money by reducing or quitting their peak-time driving on roads in the UtrechtHilversum -Amersfoort triangle.
Codes of conduct a.s.r. has codes of conduct setting out guidelines on how employees are expected to interact with each other and how to approach specifi c situations. These include an integrity code, insider rules and a whistle-blowing procedure.
a.s.r. also supports the industry’s rules of ethics (such as the Code of Conduct for Insurers). Furthermore, there are codes in place relating to various themes, including Client/Customer Due Diligence (know your client before doing business with them), Intermediaries (including an obligation to report suspicions of inappropriate conduct by an intermediary) and Financial Services (including a duty of care and an incentives policy).
In asset management, the emphasis is on affi rmative action on best practices and best products, based on environmental, social and governance (ESG) criteria. The policy applies to all investments in countries (government bonds) and in businesses (equities and corporate bonds). This implies, for instance, that a.s.r. invests more in businesses that score well on ESG criteria within their sector of industry. a.s.r. also invests in businesses that make a sustainable contribution to society, by processing or recycling their waste, using clean energy and reducing their environmental impact or energy consumption. a.s.r. also observes strict exclusion criteria for producers of controversial weapons, nuclear energy, pesticides, alcohol, and for the gambling- and sex industry, and businesses engaged in animal testing.
In accordance with the Dutch Corporate Governance Code and the a.s.r. Socially Responsible Investment Policy, a voting policy has been developed for a.s.r. to fulfi l its role as an institutional investor. Voting accountability offers insight into the exercise of voting rights at shareholder meetings of Dutch associates. The voting policy and voting accountability information can be found on the a.s.r. website.
Throughout 2012, meetings were held with many businesses in which a.s.r. holds shares; this represents almost 50% of the internally managed equities portfolio. In this dialogue (at least one meeting per year at executive level), a.s.r. puts the CSR policy of businesses on the agenda and addresses any controversial activities. The input by a.s.r. is generally welcomed by the management of these companies as being constructive.
As in the previous year, in 2012 a.s.r. achieved third place in the annual survey conducted by the Dutch Association of Investors for Sustainable Development (VBDO) among 30 insurers in the Netherlands. a.s.r. was praised for such aspects as its Corporate Social Responsibility policy, which applies to all managed assets.
Sustainable real estate a.s.r. Vastgoed Vermogensbeheer, the Property Asset Management business, invests in retail units, residential properties, offi ces and agricultural land. Sustainability has been fi rmly embedded in its business processes. A supplier of green energy has been chosen to service the entire property portfolio. Furthermore, all tenants of a.s.r. buildings are encouraged to conserve energy. a.s.r. Vastgoed Vermogensbeheer is also a player in several industry associations to help put sustainability even more clearly on the map.
Tenants’ energy consumption for general facilities is measured with a view to raising awareness of energy use and ultimately reducing their consumption. Of the a.s.r. property portfolio, 50% of residential properties have an energy performance rating of C or better, which is 10 percentage points higher than the housing stock in the Netherlands as a whole.
We also maintain our properties in accordance with specifi ed sustainability criteria. One example of this is that the renovation of the a.s.r. building in Utrecht will lead to an “A” rating for energy performance and a “very good” BREEAM rating for sustainability. A system of ground source heating and cooling (Long-Term Energy Storage) will contribute to achieving this. BREEAM (Building Research Establishment Environmental Assessment Method) is a system used to certify sustainable construction.
In 2012, a new development of 69 apartments in Zoetermeer was acquired and, in collaboration with the developer, a “very good” BREEAM sustainability rating was achieved. In the residential property portfolio, efforts also made to cluster maintenance work, to make for more effi cient logistics and billing processes. Furthermore, quantifi cation of customer satisfaction will be improved. Since 2011, only FSC-certifi ed timber has been used when the kitchens of rental properties are refi tted.
Since 2009, a.s.r. Vastgoed Ontwikkeling has abided by its Land-for-Land initiative: for every square metre of property that a.s.r. Vastgoed Ontwikkeling develops, it will give one square metre of land to nature. To implement this policy, an agreement was signed in 2012 with Utrechts Landschap, a foundation for the protection of nature and culture. Thanks to this support, Utrechts Landschap has been able to acquire land in the Tuinen van Utrecht area, which will contribute to the creation of a green corridor to the east of the city of Utrecht.
In 2008, a.s.r. signed the government’s third multi-year plan, setting out national agreements between the government and industry on energy savings. This is an expression of a.s.r.’s intention to reduce energy consumption by 30% per FTE by 2020 compared to 2005. Since 2009, all electricity used by a.s.r. has come from sustainable sources. Sustainability considerations
a.s.r. 2012 annual report 35 also featured in the 2010 decision to renovate the offi ce building at Archimedeslaan 10 in Utrecht rather than opting for a new build.
a.s.r. 2012 annual report 39 4.1 Governance report 4.1.1 Financial statements and appropriation of profi t
The Executive Board submitted the Report of the Executive Board and the fi nancial statements for 2012 to the Supervisory Board. After having discussed the fi nancial statements with KPMG, the independent external auditor, the Supervisory Board approved them in its meeting on 28 March 2013. The fi nancial statements were audited by KPMG, who issued an unqualifi ed auditor’s report on them. For the auditor’s report, see page 184. The Supervisory Board established that the external auditor was independent from a.s.r.
The Supervisory Board addressed the following issues: Financial results In its meetings, the Supervisory Board focused heavily on the fi nancial results. An issue that was discussed regularly was the combined ratio. The members of the Supervisory Board feel that this ratio requires further improvement. The Supervisory Board also spoke frequently about developments in costs. Costs need to be cut further and cost patterns should become more fl exible as the market is contracting and premium volumes are dropping. With that in mind, the Supervisory Board agrees with the decision to outsource a number of administrative services in the Life business. The members of the Supervisory Board were also glad to see the detailed, step-by-step approach that allows the organization to carry lessons learned in each step forward to the next phase. The necessity of cost cuts is counterbalanced by the need for investments in product development, further service improvements and claims management. Striking a balance between these aspects was a recurring topic of discussion between the Supervisory Board and the Executive Board.
Solvency and risk management The ongoing turmoil in the European fi nancial markets and its impact on solvency was a recurring agenda item for the Supervisory Board. The Supervisory Board adopted the risk appetite in the fi rst quarter of 2012. In weighing risk and return, solvency is a priority over profi t and profi t is a priority over premium income.
Solvency levels remain high thanks to the organizations prompt and adequate response to external developments based on the chosen risk appetite and risk-mitigating measures. The members of the Supervisory Board are especially happy about the execution of the risk policy. The a.s.r. investment policy, derived from the risk policy, has centered on further risk reduction in recent years. For instance, the share of more high-risk asset categories in the portfolio, over 80% of which consist of fi xedincome securities, has been scaled back. As a result exposures to particularly peripheral eurozone countries and the fi nancial sector was reduced drastically. The interest rate risk was also optimized considerably.
The Executive Board decided at year-end 2010, to establish property funds in order to further reduce the risk profi le of investment property in the portfolio and to make the investment policy more fl exible. The ASR Prime Retail Fund was established and placed in 2011. The Supervisory Board approved the establishment of a second fund, i.e. the ASR Dutch Core Residential Fund, in 2012. The residential properties owned by ASR Nederland Vastgoed Maatschappij N.V. and ASR Levensverzekering N.V. will be transferred to this new fund.
Customer interests and Corporate Social Responsibility (CSR) The members of the Supervisory Board agree with the Executive Board that the reason for being for a.s.r. lies in a focus on customer interests and a positive customer experience. For this reason, customer interest was an explicit theme in the discussion of various issues in Supervisory Board meetings. Customer interest took centre-stage, for instance, in the debate about unit-linked insurance policies, but it also played a prominent role in deliberations about such issues as dividend, occupational disability insurance premium adjustments and standardization of non-life products and processes.
To monitor the status of improvements in the areas of customer interest and customer experience, the customer information dashboard periodically came up for discussion. Based on this dashboard, the members of the Supervisory Board were kept up-to-date on issues such as the outcome of quality mark surveys and NPS. The members of the Supervisory Board are content about the use of the customer dashboard and see opportunities for refi ning the dashboard as such that customer interests will come to play an even greater role in the organization ’s decision-making processes.
Compliance and Audit The Supervisory Board discussed the reports of Compliance and Audit on a quarterly basis. Reports and fi ndings from reviews by external regulators were also debated extensively. To the satisfaction of the members of the Supervisory Board, the number of problems reported by the two departments decreased in the year under review; existing issues were resolved and there were only a limited number of new problems. The Supervisory Board will persist in stressing the importance of constant management focus and discipline to continue the policy of resolving issues.
a.s.r. 2012 annual report 41 subsidiaries, as such that a Supervisory Board will be created in the second quarter of 2013 for three insurance companies that were granted dispensation by DNB, i.e. N.V. Amersfoortse Algemene Verzekering Maatschappij, ASR Schadeverzekering N.V. and ASR Levensverzekering N.V.
The Audit and Risk Committee debated the risk appetite, which was defi ned based on a detailed risk assessment, early in 2012; the risk appetite was monitored during the year using the Financial Risk dashboard. The Committee issued a positive opinion on the risk appetite to the Supervisory Board. The a.s.r. risk appetite has been transposed into requirements for capital, liquidity and returns; solvency takes priority over profi t and profi t takes priority over premium income. Thanks to the fact that the risk appetite and the underlying governance model were defi ned and adhered to, a.s.r. was able to respond quickly to different developments in the market and take the right action.
In the Committee’s opinion, a.s.r. has a solid fi nancial foundation. Solvency is adequate, both under Solvency I and II, and exposures, e.g. to changes in interest rates, are well under control. Additional cost cuts were implemented and the organization was restructured to keep up with the changes in the insurance market and in the asset-building market in particular. Although the Committee is pleased with the results, it also believes that further steps are required for a.s.r. to maintain its competitive edge going forward. In various market segments, margins are being weighed down by developments in society and increased competition. With this in mind, it is crucial that a.s.r. continues to save on costs, in order to create a sustainable future for a.s.r. in these segments.
Parallel to cost cuts, the Committee endorses the need for improving the operational performance and sets great store by strict discipline in managing and implementing these improvements. A good example is the application of the a.s.r. approach to unit-linked insurance policies, which had major fi nancial and operational impact in 2012. This approach effectively puts customers’ interests fi rst by offering them new perspectives.
The Chair of the Committee consistently reported the main issues to the Supervisory Board during the Board’s next meeting. Moreover, the Audit and Risk Committee provided the Supervisory Board with written reports of its deliberations, fi ndings and recommendations.
At the Selection, Appointment and Remuneration Committee’s request, the customer component of variable pay (one of several components) was transposed into concrete key performance indicators (KPIs) for putting customer interest fi rst, using the up dated customer dashboard. These KPIs were presented to the Supervisory Board early in 2013, after which they were adopted.
The Chair of the Selection, Appointment and Remuneration Committee consistently reported to the Supervisory Board any topics discussed, and provided the Supervisory Board with written reports of the Committee’s deliberations, fi ndings and recommendations.
J.P.M. (Jos) Baeten LL.M. (CEO) Jos Baeten (born 1958) is the Chairman of the Executive Board and Chief Executive Offi cer (CEO) of a.s.r. His areas of responsibility also include Human Resources, Corporate Communications, Marketing, Business Support, Audit, Integrity and the Corporate Support Departments.
Karin Bergstein studied medical biology at Utrecht University and earned an MBA from Nyenrode University and the University of Rochester in the United States. She started her career at ING Bank in 1991, where she held various positions until 2010. Her last position was that of Director of Products & Processes, which gained her a seat on the Executive Board of ING Bank Nederland. She previously also served as CEO of ING Car Lease International. Karin Bergstein was appointed to the Executive Board of a.s.r. in September 2011.
R.Th. (Roel) Wijmenga, Ph.D. (CFO) Roel Wijmenga (born 1957) is a member of the Executive Board. His areas of responsibility are Accounting, Reporting & Control (ARC), Financial Markets and Risk Management.
Education With a view to lifelong learning, the members of the Executive Board followed three training sessions in 2012. The sessions were focused on driving on value and the application of the RARORAC, the theory and practice of the Own Solvency and Risk Assessment (ORSA) and the theme of balanced and consistent decision-making. Additionally, the Executive Board members also followed individual training courses with a view to lifelong learning.
C. (Kick) van der Pol, Ph.D. Chairman of the Supervisory Board Member of the Selection, Appointment and Remuneration Committee
A.P. (Annet) Aris MSc Chair of the Selection, Appointment and Remuneration Committee
44 a.s.r. 2012 annual report and Germany-based Kabel Deutschland AG, Jungheinrich AG, Tomorrow Focus AG and Hansa Heemann AG. In addition, she is an adjunct professor of strategy at INSEAD international business school (Fontainebleau, France).
First appointed on: 7 December 2010 Current term of offi ce: 7 December 2010-7 December 2014
C.H. (Cor) van den Bos MSc Chair of the Audit and Risk Committee
Until 2009, Margot Scheltema (born 1954) served as the CFO of Shell Nederland B.V., prior to which she had held several international management positions at Shell since 1986. She is a supervisory director of Triodos Bank, Schiphol Group, TNT Express and Lonza Group of Basel, Switzerland. She is also a member of the Supervisory Boards of Rijksmuseum and Energy Centre Netherlands (ECN); she serves as an external member of the Audit Committee of ABP, a pension fund. Margot Scheltema is a deputy member of the Enterprise Division of the Amsterdam Court of Appeal.
First appointed on: 15 December 2008 Current term of offi ce: 15 June 2012-15 June 2016
Composition of the Supervisory Board The composition of the Supervisory Board is such that each supervisory director should have the skills to assess the main aspects of the overall policy and that the Supervisory Board as a whole meets the profi le thanks to a combination of the experience, expertise and independence of the individual supervisory directors. The Supervisory Board has four members. The Supervisory Board is diverse in terms of gender and the professional background of its members. The diversity of its members guarantees the complementary profi le of the Super visory Board.
Composition of committees The Audit and Risk Committee has two members, namely Cor van den Bos (Chair) and Margot Scheltema. Its meetings are attended by the CFO, the independent external auditor, and the heads of Audit, Risk Management, Integrity, and Accounting, Reporting & Control.
The members of the Selection, Appointment and Remuneration Committee are Annet Aris (Chair) and Kick van der Pol. Its meetings are attended by the CEO (except when issues relating to the Executive Board are being discussed) and the Human Resources Director, who doubles as secretary of the Committee. The Committee solicits support and advice from departments such as Risk Management, Compliance, Audit and Human Resources. Where needed, the Committee calls in the help of independent legal and pay-and-benefi ts experts.
Contacts with Works Council A mixed delegation of the Supervisory Board attended four regular consultative meetings with the Works Council. The supervisory directors found the talks with the Works Council to be constructive and would express their appreciation of the receptiveness of all Works Council members, as well as their efforts and commitment.
Contacts with shareholder With effect from the second half of 2011, the shareholder has been represented by Stichting Administratiekantoor Beheer Financiële Instellingen (NL Financial Investments or NLFI), a trust offi ce. The Supervisory Board was in touch with NLFI several times in 2012.
Contacts with independent external auditor The independent external auditor attended the meeting in which the Supervisory Board addressed the annual and interim fi nancial results. The independent external auditor was also present at all meetings of the Audit and Risk Committee. The members of the Audit and Risk Committee and the independent external auditor deliberated once without the other permanent delegates to the Audit and Risk Committee meetings being present.
There were no changes in the composition of the Supervisory Board in 2012. Margot Scheltema, who was scheduled to retire on 15 June, was re-appointed for another four-year term on that same date. Cor van den Bos and Margot Scheltema were appointed to the Supervisory Board of ASR Bank N.V. as Chairman and a member respectively as of 26 March 2012.
In January and May 2012, the Supervisory Board met twice without the Executive Board being present. These meetings covered the remuneration policy for the Executive Board.
Both the Audit and Risk Committee and the Selection, Appointment and Remuneration Committee met seven times in 2012. The Committee members attended every meeting.
Executive Board The Executive Board is responsible for the day-to-day conduct of business at a.s.r. as a whole, devises the company strategy and formulates policy. To discharge its duties, the Executive Board takes decisions, which are submitted to the Supervisory Board or the AGM for approval where required.
Rules for appointing and removing executive and supervisory directors The AGM appoints the members of the Executive Board. After having heard the Supervisory Board, the AGM can suspend or remove a member of the Executive Board. The AGM appoints the members of the Supervisory Board on the recommendation of the Supervisory Board. Both the AGM and the Works Council have the right to nominate supervisory directors. The Supervisory Board duly notifi es the AGM and the Works Council of when and why they have the right to nominate a supervisory director, and of the profi le required of the nominee.
If the nomination is subject to an enhanced right of recommendation as stipulated in Article 17(7) of the Articles of Association, the Supervisory Board also notifi es the AGM and the Works Council of this enhanced right. By virtue of the enhanced right of recommendation, one-third of the members of the Supervisory Board is appointed after having been nominated by the Works Council, unless the Supervisory Board raises objections because it expects the recommended person to be unsuitable for the job of supervisory director or because the Supervisory Board will not be properly balanced in terms of its composition if the Works Council’s candidate is appointed. The enhanced right of recommendation applied to the appointment of one of the members of the Supervisory Board.
Members of the Supervisory Board can be removed only by the Enterprise Section of the Amsterdam Court of Appeal if they neglect their duties, for other compelling reasons or because of a drastic change in circumstances. In addition, the AGM may oust the full Supervisory Board by adopting a motion of no confi dence, resulting in the immediate removal of all supervisory directors. Finally, the Supervisory Board may also suspend an individual supervisory director.
Dutch Corporate Governance Code Although ASR Nederland N.V. is under no obligation to do so, it endeavors to comply with the Dutch Corporate Governance Code as much as possible. The Code does not apply to ASR Nederland N.V. because its shares or the depositary receipts for its shares have not been admitted to an offi cial listing on a stock exchange or similar platform.
Governance Principles for Insurers and Dutch Banking Code Banks licensed in the Netherlands have been subject to the Dutch Banking Code since 1 January 2010. This Code, which was drafted by the Dutch Banking Association, contains principles for governance and governance oversight, risk management, audits and remuneration policy. Similar principles have been in force for all licensed insurers with effect from 1 January 2011. They have been formalized in the Governance Principles for Insurers, or the Dutch Insurance Code, which applies to all licensed insurers within ASR Nederland N.V.; the Dutch Banking Code applies to ASR Bank N.V.
The members of the Supervisory Board are pleased about the steps that a.s.r. took in 2012 to preserve its robust fi nancial base and to make the organization more cost-effi cient and customeroriented. They would like to express their gratitude for the efforts put in by the members of the Executive Board and the openness that they showed in their discussions with the Supervisory Board. The Supervisory Board also much appreciates the expertise and energy that the employees displayed once again in 2012, particularly in a period in which the organization underwent drastic changes and many colleagues were let go.
The Supervisory Board Kick van der Pol Ph.D. Annet Aris MSc Cor van den Bos MSc Margot Scheltema MSc
In its remuneration policy, a.s.r. distinguishes between fi ve groups, as follows: 1. Executive Board 2. Senior management 3. Higher management 4. Back offi ce 5. Front offi ce
The foundation of the remuneration system is the principle that the average level of total pay should be below the median of that of the peer group.
This group is also governed by a claw-back mechanism and a fairness clause, meaning that the Supervisory Board can claw back any variable pay already awarded if it was determined and awarded based on incorrect information. In addition, the Supervisory Board has the right to adjust the level of the conditional variable pay if, unchanged, the payment goes against the principles of reasonableness and fairness.
The principal features of the pension plan are as follows: • Indexed average-pay scheme (indexing became unconditional as of 1 January 2013) • Retirement age: 65 • Partner’s pension: 70% of projected old-age pension • Orphan’s pension: 14% of projected old-age pension • Employee contribution: 6% of pensionable earnings
All employees who joined a.s.r. on or after 1 January 2006 will be awarded an allowance under the Dutch Early Retirement, Pension and Life-course Savings Act (Dutch acronym: VPL), under which the standard retirement age was set at 65 as of 1 January 2006. The allowance was originally designed to offer employees the option of saving up for early retirement. Newly hired employees are awarded a 1% allowance on their pensionable income.
The Executive Board Jos Baeten LL.M. Karin Bergstein MSc Michel Verwoest M.A. Roel Wijmenga Ph.D.
Consolidated balance sheet 58 Consolidated income statement 59 Consolidated statement of comprehensive income 60 Consolidated statement of changes in equity 61 Consolidated statement of cash fl ows 62 1 General information 64 2 Accounting policies 65 3 Risk management 81 4 Capital and liquidity management 104 5 Group structure and segment information 106
Notes to the balance sheet 117 6 Intangible assets 118 7 Deferred acquisition costs 119 8 Property, plant and equipment 120 9 Investment property 122 10 Associates and joint ventures 123 11 Financial assets 126 12 Deferred taxes 138 13 Reinsurance contracts 140 14 Other assets 140 15 Cash and cash equivalents 141 17 Subordinated debt 144 18 Insurance liabilities 144 19 Employee benefi ts 149 22 Due to customers 155 23 Due to banks 156 24 Other liabilities 156
Notes to the income statement 157 25 Gross insurance premiums 158 26 Reinsurance premiums 160 27 Investment income 160 28 Fee and commission income 162 29 Other income 162 30 Net insurance claims and benefi ts 163 31 Operating expenses 164 32 Acquisition costs 165 33 Impairment of assets 165 34 Interest expense 166 35 Other expenses 166 36 Income tax expense 167
Company Financial Statements 175 41 Company balance sheet 176 42 Company income statement 177 43 Notes to the company fi nancial statements 177
Independent auditor’s report 184 Events after the reporting date 185 List of principal group companies and associates 186 Other equity interests 187 Provisions of the Articles of Association regarding profi t appropriation 187 Profi t appropriation 187 Glossary 188 List of acronyms 191 Contact details and publication 192
All amounts quoted in the tables contained in these fi nancial statements are in millions of euros, unless otherwise indicated.
Liabilities arising from insurance contracts on behalf of policyholders 18 8,926 9,202
Insurance claims and benefi ts recovered from reinsurers 30 100 142
Share of other comprehensive income of associates and joint ventures 13 -4
Unrealized change in value of cash fl ow hedges -1 1
O th er e q u it y in st ru m en ts
N on c on tr ol li n g in te re st
Profi t carried over from previous fi nancial year - - - 317 -317 - - - -
Discretionary interest on other equity instruments - - - -45 - -45 - - -45
Profi t carried over from previous fi nancial year - - - 141 -141 - - - -
Tax relating to interest on other equity instruments - - - 11 - 11 - - 11
Unrealized (gains) losses on investments at fair value through profi t or loss -8 -6
Retained share of profi t of associates and joint ventures 21 5
Net increase/decrease in amounts due from and to customers -751 -605
ASR Nederland N.V., is a public limited company under Dutch law having its registered offi ce located at Archimedeslaan 10, 3584 BA in Utrecht, the Netherlands.
Financial Statements a.s.r. 2012 annual report 65 2 Accounting policies 2.1 General
Pursuant to the options offered by Section 362, Book 2 of the Netherlands Civil Code, ASR Nederland N.V. has prepared its company fi nancial statements in accordance with the same principles as those used for the consolidated fi nancial statements.
The fi nancial statements for 2012 were approved by the Supervisory Board on 28 March 2013 and will be presented to the Annual General Meeting of Shareholders for adoption. The Executive Board released the fi nancial statements for publication on 5 April 2013.
The accounting policies for the fi nancial statements for 2012 are consistent with the principles applied to the fi nancial statements for 2011.
The following change in the EU-endorsed IFRS standards and IFRIC interpretations have been effective since 1 January 2012. Except for the amendments to IAS 19 Employee Benefi ts, these changes have no material effect on the fi nancial statements of a.s.r.
and there is a revision in the computation of the unrealised actuarial gains and losses. The revised unrealised actuarial loss as of 1 January 2012 amounts to € 170 million (31 December 2012: €. 459 million). The corresponding unrealised actuarial losses under the current IAS 19, as at 1 January 2012 and 31 December 2012 amount to € 279 million and € 568 million respectively (see chapter 19). The difference between the current and the revised value is primarily due to the change in the treatment of the employee contributions and the exclusion of cost surcharges in determining the defi ned benefi t obligation; • when employee benefi t plans are modifi ed, all costs resulting from the changes are recognized directly in the income statement. Currently, the cost that apply to the non-vested benefi ts are recognized over the expected remaining service period, which is determined by the average time of employees remaining in service. Upon transition the negative past service costs amounting to € 15 million at 1 January 2012 will be recognized directly in total equity (31 December 2012: € 87 million); • the net impact of the above mentioned amendments results in a €155 million increase in the employee benefi ts provision as of 1 January 2012 (31 December 2012: € 372 million); • disclosure related to the characteristics of the defi ned benefi t plans and the associated risks; • taking into account the adjustments as discussed above the total equity (net of taxation) as at 1 January 2012 and 31 December 2012 will be reduced by € 116 million and € 279 million respectively. Profi t for the year 2012 will increase by € 61 million; • the a.s.r. post-employee benefi t plans are insured by ASR Levensverzekering N.V., an a.s.r. group insurance company. As a result the post employee benefi t provision in excess of the insurance provisions held related to the a.s.r. postemployment benefi t plans, are eliminated in determining the regulatory solvency available. The regulatory solvency ratio therefore remains unchanged; • the recognition of ‘unrealized actuarial gains and losses’ through equity will create volatility in total equity going forward; • the change in accounting policy will be applied retrospectively as from 1 January 2013. In 2013, the detailed impact of the change on the balance sheet and income statement for 2012 are as follows:
• IFRS 12 Disclosure of Interests in Other Entities: Improvements to the disclosure of a reporting entity’s interests in other entities. The standard sets out disclosure requirements for reporting entities that have an interest in a subsidiary, joint venture, associate or unconsolidated structured entity (effective 1 January 2014).
• Amendments to IAS 12 Income Taxes - Deferred Tax: Recovery of Underlying assets of the carrying amount of an asset measured using the fair value model in IAS 40 Investment Property will, normally, be through sale.
The current presentation differs from last year’s presentation in some respects. Where applicable, comparative fi gures have been put in the new presentation format. The changes in presentation do not have an effect on a.s.r.’s profi t for the year, total comprehensive income and total equity.
Subsidiaries The consolidated fi nancial statements include the fi nancial statements of ASR Nederland N.V. and its subsidiaries. Subsidiaries are those entities over which a.s.r. has direct or indirect power to govern the fi nancial and operating policies
Balance sheet 1 January 2012 As reported Changes as a result of IAS 19
Associates Associates are those entities over which a.s.r. has signifi cant infl uence, but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The consolidated fi nancial statements include a.s.r.’s share of profi t of associates from the date that a.s.r. acquires signifi cant infl uence until the date that signifi cant infl uence ceases.
Joint ventures Joint ventures are accounted for using the equity method of accounting. They are recognized from the date that a.s.r. fi rst obtains joint control until the moment that this control ceases.
The estimates and assumptions are based on management’s best knowledge of current facts, actions and events. The actual outcomes may ultimately differ from the results reported earlier on the basis of estimates and assumptions. A detailed explanation of the estimates and assumptions are given in the relevant notes to the consolidated fi nancial statements.
68 a.s.r. 2012 annual report Financial Statements 2.7 Product classifi cation
Insurance contracts are defi ned as contracts under which a.s.r. accepts signifi cant insurance risk from policyholders by agreeing to compensate policyholders if a specifi ed uncertain future event adversely affects the policyholder. These contracts are considered insurance contracts throughout the remaining term to maturity, irrespective of when the insured event occurs. In addition, these contracts can also transfer fi nancial risk.
The fair value is the price that a.s.r. would receive to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the transaction date in the principal market for the asset or liability, or in the most advantageous market for the asset or liability.
This category primarily includes unlisted fi xed-interest preference shares and interest rate contracts. The fi nancial instruments valuation techniques use present value calculations and include for derivatives forward pricing and swap models.
Valuations are performed by external professional appraisers who hold recognized and relevant professional qualifi cations and have recent experience in the location and category of the investment property being valued. Market value property valuations will be prepared in accordance with the RICS Valuation Standards, 6th Edition (the ‘Red Book’). a.s.r. provides the professional appraisers with adequate information, in order to conduct a comprehensive valuation. At least once every three years a rotation or change in professional appraisers takes place. The accounting policies for the treatment of investment property and property for own use is described in chapter 2.16 and 2.15 respectively.
Any purchases and sales of fi nancial instruments, which have to be settled in accordance with standard market conventions, are recognized at the transaction date, which is the date on which a.s.r. becomes party to the contractual stipulations of the instrument. Any purchases and sales other than those requiring delivery within the time frame established by regulations or market conventions are accounted for as forward transactions until the time of settlement. For details on these transactions, see chapter 2.21 ‘Derivatives and hedge accounting’.
The statement of cash fl ows recognizes interest received and paid, and dividends received within cash fl ows from operating activities. Cash fl ows from purchasing and selling investments and investment property are included in cash fl ows from operating activities on a net basis. Dividends paid are recognized within cash fl ows from fi nancing activities.
Intangible assets are carried at cost, less any accumulated amortization and impairment losses. The residual value and the estimated useful life of intangible assets are assessed on each balance sheet date and adjusted where applicable.
Goodwill has an indefi nite useful life and is not amortized. a.s.r. performs an annual impairment test, or more frequently if events or circumstances so warrant, to ascertain whether goodwill has been subject to impairment. As part of this, the carrying amount of the cash-generating unit to which the goodwill has been allocated is compared with its recoverable amount. The recoverable amount is the higher of a cash-generating unit’s fair value less costs to sell and value in use. The value in use of a cashgenerating unit is the present value of the future cash fl ows expected to be derived from it. If the recoverable amount is lower than its carrying amount, the difference is directly charged to the income statement as an impairment loss.
Value Of Business Acquired (VOBA) The value of business acquired (VOBA) represents the difference between the fair value and the carrying amount of insurance portfolios that have been acquired, either directly from another insurer or through the acquisition of a subsidiary. VOBA is recognized as an intangible asset with a fi nite useful life and amortized over the term of the current insurance contracts at acquisition date, in conjunction with the corresponding obligations. With regard to VOBA, allowance is made for the outcome of the annual compulsory liability adequacy test (LAT) for insurance contracts (see chapter 2.26).
Should VOBA’s carrying amount exceed the difference between the carrying amount of the liabilities arising from insurance contracts and the liabilities identifi ed as part of the LAT and no other adjustment is made to the liabilities as a result of the LAT outcomes, VOBA is impaired to a level where the values are equal. This is charged to the income statement as an impairment loss.
The value of the capitalized deferred acquisition costs is assessed at each reporting date to ascertain whether there is evidence of impairment.
Property held for own use, buildings under construction for own use and operating assets are recognized at cost, less accumulated depreciation (except for land, which is not depreciated) and/or any accumulated impairment losses. Cost corresponds with the cash paid or the fair value of the consideration given to acquire the asset.
For the maximum useful life of the components, see the table in chapter 2.16. Operating assets are depreciated over their useful lives, which are determined individually (usually between three and fi ve years).
Investment property is property held to earn rentals or for capital appreciation or both. In some cases, a.s.r. is the owner-occupier of some investment property. If owner-occupied properties cannot be sold separately, they are treated as investment property only if a.s.r. holds an insignifi cant portion for use in the supply of services or for administrative purposes. Property held for own uses is recognized within property plant and equipment.
If there is a change in the designation of property, it can lead to: • reclassifi cation from property, plant 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
• reclassifi cation from investment property to property, plant and equipment: at the commencement of owner-occupation or at the start of developments initiated with a view to selling the property to a third party.
The table below shows the maximum life of components: Property under development for future use as investment property is recognized as investment property. Valuation is at cost, including any directly attributable expenditure, less any impairment losses.
Land Not applicable Not applicable Not applicable Not applicable Not applicable
Joint ventures Joint ventures are contractual arrangements whereby a.s.r. and one or more parties undertake an economic activity that is subject to joint control. Joint control exists only when the strategic fi nancial and operating decisions relating to the activity require the unanimous consent of the parties sharing control.
These interests are recognized using the equity method of accounting as applied to associates. The interests are recognized in the fi nancial statements from the date on which a.s.r. fi rst obtains joint control until the date that this joint control ceases.
When a.s.r. becomes party to a fi nancial asset contract, the related assets are classifi ed into one of the following categories: a. fi nancial assets at fair value through profi t and loss; b. loans and receivables; c. fi nancial assets available for sale.
The classifi cation of the fi nancial assets is determined at initial recognition. The classifi cation depends on the purpose for which the investments were acquired.
Financial assets at fair value through profi t and loss are stated at fair value. At initial recognition, transaction costs are expensed in the income statement. Realized and unrealized gains and losses in the fair value are also recognized in the income statement.
Re c. Financial assets available for sale are fi nancial assets that are not accounted for as fi nancial assets at fair value through profi t and loss, or as loans and receivables. At initial recognition, fi nancial assets available for sale are measured at fair value (including transaction costs). They are subsequently measured at fair value, including any unrealized fair value changes in equity, taking into account any deferred tax liabilities. Financial assets available for sale include equities (ordinary and preference shares), bonds, other fi xed-income securities, unit trusts, variable-income securities and interests in investment pools.
For detailed information on the fair value of the fi nancial assets see chapter 2.9.
Impairment of fi nancial assets At each balance sheet date, a.s.r. assesses whether objective evidence exists of impairment of fi nancial assets. Financial assets at fair value through profi t and loss are not subject to impairment testing, because the fair value of these assets refl ects any impairment losses.
In the case of equity investments available for sale, a signifi cant or prolonged decline in the fair value of the security below its cost is objective evidence of impairment. a.s.r. defi nes as a signifi cant or prolonged decline if the fair value: • has dropped 25% or more below cost; or • has dropped below cost for an uninterrupted period of twelve months or longer.
If, at a later stage, the fair value of the fi nancial assets available for sale should increase and the increase can be objectively related to an event occurring after the impairment loss was recognized in profi t or loss, the impairment loss is reversed through the income statement. Impairment losses on equities are not reversed, and any increases in fair value are recorded in equity.
Investments made for the account and risk of policyholders mainly concern unit-linked insurance contracts. In addition, they concern group contracts with unguaranteed segregated pools (discretionary self-insurance). These investments are carried at fair value. Any realized and unrealized value changes of the investments are recognized in the income statement as gains or losses on investments on behalf of policyholders.
Impairment of loans and receivables At each balance sheet date, a.s.r. assesses whether objective evidence of impairment exists of the fi nancial assets classifi ed as loans and receivables.
Loans and receivables that are not individually signifi cant are grouped on the basis of similar credit risk characteristics.
Financial Statements a.s.r. 2012 annual report 75 2.21 Derivatives and hedge accounting
Derivatives are primarily used for hedging interest rate and exchange rate risks, for hedging future transactions and the exposure to market risks.
At the inception of the hedge, a.s.r. documents the risk management objective and strategy for undertaking the hedge, as well as the relationship between the hedging instrument, the hedged item, and the method for assessing the effectiveness of the hedging transaction. It is also confi rmed that the hedge is expected to be effective throughout the hedging period.
The effectiveness of the hedge is assessed on an ongoing basis throughout the fi nancial reporting periods for which the hedge was designated. A hedge is considered effective if the change in the fair value or the cash fl ows of the hedged item is offset by changes in the fair value or the cash fl ows of the hedging instrument.
Only assets, liabilities, fi rm commitments or highly probable forecast transactions involving a party external to a.s.r. can be designated as hedged items.
Changes in the fair value of the effective portion of derivatives that have been designated and qualify as cash fl ow hedges are recognized as an unrealized gain or loss in a separate component of equity. Fair value changes in the ineffective portion are recognized in the income statement. The amounts recorded in equity are reclassifi ed to profi t or loss in the same period or periods during which the hedged fi rm commitment or highly probable forecast transaction affects results.
If a hedge no longer meets the criteria for hedge accounting or is otherwise discontinued, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction or the fi rm commitment is settled.
Contracts that transfer a signifi cant insurance risk from a.s.r. to third parties are accounted for as reinsurance contracts, and defi ned as outgoing reinsurance.
Property developments consist of property under development commissioned by third parties. Measurement is at cost including any directly attributable costs and construction period interest, less invoiced instalments and impairment losses. If the contract revenue can be reliably estimated, it is accounted for by reference to the stage of completion, using the percentage of completion method. This does not apply if a.s.r. has transferred the signifi cant risks and rewards relating to the development property to the client. Contract revenue is then accounted for upon completion of the development (completed contract method).
Reserve for unrealized gains and losses This reserve consists of: • unrealized gains and losses from fi nancial assets available for sale net of tax and taking account of adjustments due to shadow accounting (see chapter 2.26); • a.s.r.’s share of unrealized gains and losses of associates and joint ventures (see chapter 2.17);
• unrealized gains and losses on the effective portion of cash fl ow hedges net of tax (see chapter 2.21); • reserve for discretionary participation features (see chapter 2.26).
• reserve for exchange rate differences arising from fi nancial assets available for sale.
Dividends on ordinary share capital Dividends on ordinary shares are recognized as a liability and recognized in equity when they are approved by a.s.r.’s shareholders. Interim dividends are recognized in equity when they are paid. Dividends for the year that are approved after the reporting date are dealt with as an event after the reporting date.
Loss obligations in respect of occupational disability are discounted. The recognized provisions are suffi cient to cover the cost of claims and claims handling fees. a.s.r. discounts obligations for losses only for claims with determinable and fi xed payment terms.
Liabilities arising from life insurance contracts Future obligations in respect of policy benefi ts 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 recognized for contracts whose future premium payment period is shorter than the future maturity of the insurance policy, or for which no more premiums are paid. A provision is recognized for part of longevity risk associated with all group life insurance contracts, a.s.r. manages the longevity risk exposure in combination with the mortality risk exposure. No addition to the provision for longevity risk is recognized if the outcome of the LAT (see below) indicates that the total amount of the provision is adequate.
The realized gains or losses are amortized based on the remaining maturity period of the disposed fi nancial assets.
Obligations to insurers where a.s.r. qualifi es as the reinsurer, and with no signifi cant insurance risk being transferred to a.s.r., are recognized as debts to policyholders.
Shadow accounting is applied to unrealized value changes in fi xed-income fi nancial assets available for sale, specifi c fi nancial assets designated at fair value through profi t and loss, and specifi c derivatives designated as held for trading (swaptions and interest rate swaps).
The related adjustment to the insurance liability is recognized in other comprehensive income if, and only if, the unrealized gains or losses are recognized in other comprehensive income. Unrealized gains and losses on assets at fair value through profi t and loss are recognized in the income statement with a corresponding adjustment for shadow accounting in the income statement.
See for further explanation on surrender value fl oors and prudential fi lters the ‘Wet op het fi nancieel toezicht’ (The Dutch Act on Financial Supervision which regulates the supervision of fi nancial institutions in the Netherlands).
Liabilities arising from insurance contracts for the account and risk of policyholders mainly concern unit-linked contracts. An investment unit is a share in an investment fund that a.s.r. acquires on behalf of the policyholders using net premiums paid by the policyholders. The gain upon maturity of the contract is equal to the current value of the investment units of that fund. The current value of an investment unit (unit value) refl ects the fair value of the fi nancial assets contained within a.s.r.’s investment funds divided by the number of units.
Some unit-linked contracts include guaranteed benefi ts at maturity. To cover these guarantees, an additional obligation is recognized in the balance sheet that depends on the current fund value and the level of the guarantee. In determining this obligation actuarial assumptions about future fund developments and mortality are taken into account.
Pension obligations A number of defi ned benefi t plans for own staff exist. These are schemes under which staff are awarded pension benefi ts upon retirement, usually dependent on one or more factors, such as years of service and compensation. The defi ned benefi t obligation is calculated annually by internal actuaries.
The liability in respect of defi ned benefi t plans is the present value of the defi ned benefi t obligation at the balance sheet date, less the fair value of plan assets together with adjustments for unrecognized gains or losses and past service costs. The fi nancing cost related to employee benefi ts is recognized in interest expense.
Other long-term employee benefi ts Plans that offer benefi ts for long-service leave, but do not qualify as a post-employment benefi t plan, such as jubilee benefi ts, are measured at present value using the projected unit credit method.
Other post-retirements obligations a.s.r. offers post-employment benefi t plans, such an arrangement for mortgage loans at favourable interest rates. The entitlement to these benefi ts is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefi ts are accrued over the period of employment using an accounting methodology that is similar to that for defi ned benefi t plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to income over the expected remaining working lives of the related employees.
Interest income Interest income for all interest-bearing instruments is recognized using the effective interest rate method, including all transaction costs incurred and share premium/discount. When a receivable is impaired, its carrying amount is reduced to the recoverable amount, i.e. estimated future cash fl ows discounted at the original effective interest rate of the instrument.
Realized gains and losses include proceeds from the disposal of investment property, fi nancial assets available for sale, associates and joint ventures. With respect to fi nancial assets available for sale, realized gains or losses are comprised of : • the proceeds from the sale or disposal of an asset or liability less the amortized cost of the asset or liability sold, • impairment losses previously recognized and • hedge accounting adjustments.
Fair value gains and losses include realized and unrealized changes in the value of fi nancial assets at fair value through profi t and loss and derivatives. With respect to derivatives, this is based on the fair value exclusive of accrued interest (clean fair value).
Investments on behalf of policyholders are measured at fair value through profi t and loss. Any changes in value are recognized in result on investments on behalf of policyholders. This also includes interest income and dividends received on investments on behalf of policyholders.
Personnel expenses are mainly comprised of salaries, social security contributions and pension costs.
Income tax is based on profi t before tax, after any adjustments for previous periods and changes in deferred tax assets and liabilities using the tax rates and tax laws that have been enacted or substantially enacted by the end of the reporting period. Income tax is recognized in the period in which the income was achieved.
The types of risks a.s.r. is exposed to, are grouped into fi ve categories: market risk, counterparty default risk, insurance risk, strategic risk and operational risk. The risk appetite of a.s.r. has been defi ned and it monitors how the risk profi le keeps in step. The risk environment requires continual integrated monitoring and assessment in an integrated manner in order to understand and manage complex risk interactions across the organization.
• The risk appetite statements were further developed. The risk appetite is used for risk steering in the risk committees. The risk appetite is based on a.s.r.’s strategy.
• The Economic Capital model (‘ECAP’) of a.s.r. is an integral and essential part of the steering mechanism with regards to value management. The dynamic investment policy is based on the ECAP solvency ratio and specifi c risk budgets.
Risk governance • In the regular risk management process, specifi cally during the euro crisis, the risk committees continued to prove their importance. The risk committees monitors a.s.r.’s risk profi le. In extreme circumstances, the frequency of the risk committee meetings is increased, to ensure a.s.r. of its solid solvency position.
Counterparty default risk • In accordance with the strategic investment plan, the mortgage portfolio increased in 2012. The majority of new mortgages were guaranteed by the Dutch national mortgage guarantee fund (NHG).
Insurance risk – Non-Life • The combined ratio increased to 99.2% (2011: 95.0%) in 2012 due to developments in the claims ratio, caused by an increase in claims and the change in liabilities arising from insurance contracts. Reducing the combined ratio is a priority of a.s.r. The calculation method of the combined ratio changed in 2012. The interest rate effect on the claims ratio on income portfolio and restructuring provision expenses in the expense ratio are no longer included in the combined ratio. The combined ratio as reported in 2011 was 98.9%.
Self-Assessment (CRSA). Major risks related to business units were identifi ed. The impact on strategy achievement is measured qualitatively and controls for mitigating these risks were determined.
Principal risks are identifi ed and assessed and controls are determined and tested from an Enterprise Risk Management (ERM) perspective.
Solvency II • The quality and reliability of data has improved. This contributes to better steering information and facilitates decision-making. Further improvements in data quality remain a focus for a.s.r.
Enterprise Risk Management (ERM) enables a.s.r. to understand the relationship between risks and the company’s strategic targets.
Strategy The risk strategy of a.s.r. supports the company’s overall strategy. The primary objective of risk management is to support a.s.r. in achieving the required balance between risk and return, while remaining fi nancially solid. The risk strategy describes solvency targets and a.s.r.’s risk preferences and risk appetite are also derived from the risk strategy. The risk appetite describes the level of risk a.s.r. is prepared to take. In 2012, it was enhanced further, specifi cally with regard to operational and reputation risk. Risks are actively managed so that they stay within the defi ned limits.
Systems and data In order to take the right risk mitigating measures, availability and reliability of data is important. Risk management is supported by different IT systems to deliver the required information.
• Third line – responsible for the internal audit of the ERM framework, the internal control system and the adequacy of the risk governance. The third line is formed by the internal audit department.
The risk management organization and the risk committee structure, which are part of risk governance, are described in more detail in the next section.
3.3.1 Risk management organization In 2012, a.s.r. further improved the risk management function into a strong independent function. Integrity is responsible for compliance risks and investigation. The Risk Management department at group level is responsible for ERM. Risk management duties have been embedded in the business lines. In general, risks are managed by the business lines on the basis of group policies and guidelines. When required or where effi ciency gains may be realized, risk management is executed at group level. Risk Management at group level defi nes risk policies for the whole of a.s.r., securing a consistent approach to the management of risks across the organization.
In addition, fi rst and second line of defence duties and responsibilities were more strictly separated in 2012. Duties and responsibilities of the former Insurance Risk and Value Management department regarding fi rst line of defence tasks were decentralized to the business lines. Second line of defence duties and responsibilities of the Insurance Risk and Value Management department, primarily the actuarial function, were combined with the ALM function into the newly formed Financial Risk Management department.
Risk Management The risk management function is an independent function within a.s.r. Its main objective is to control and monitor a.s.r.’s solidity. To execute this role properly, the Chief Risk Offi cer (CRO) can escalate matters directly to the CEO and has a direct and independent line to the Audit and Risk Committee, a subcommittee of the Supervisory Board.
Risk Strategy & Policy Risk Strategy & Policy is responsible for developing and implementing the ERM framework, including further development of a.s.r.’s risk management culture, risk strategy, risk appetite, transparent risk governance, model governance validation, risk policies, classifi cation of risk types, advising on value management and the internal control system. Furthermore, the department is responsible for monitoring the risk priorities and monitoring the non-fi nancial risks. Risk Strategy & Policy is also responsible for a.s.r.’s ORSA process (including the risk self-assessments), which will be mandatory under Solvency ll legislation.
As part of the actuarial function, FRM coordinates the calculation of the technical provisions, monitors the methodologies, assumptions and models used in these calculations and assesses the adequacy and quality of data used in the calculations. Furthermore, FRM compares the outcome of the calculations against experience. FRM regularly informs the Financial Risk Committee, Executive Board and the Audit and Risk Committee of the reliability and adequacy of the calculation of the technical provisions.
The compliance function is an independent and centralized function within a.s.r. To execute this role properly, the director of Group Integrity reports directly to the CEO and has a direct and independent line to the Audit and Risk Committee.
Financial Statements a.s.r. 2012 annual report 85 3.3.2 Risk committee structure The risk committees manage the risks and returns that impact the achievement of a.s.r.’s strategic objectives. The risk committees consistently monitor whether the risk profi le continues to be in line with the risk appetite. When triggers are hit, due to for instance an increase in stock market volatility, a downgrade of corporate and government fi xed income investments, or low interest rates, a.s.r. increases the meeting frequency of the risk committees.
The a.s.r. Risk Committee receives information from the Financial Risk Committee and the Non-Financial Risk Committee. These committees have the mandates to manage and control a.s.r.’s risk profi le in line with the risk preferences and limits.
Non-Financial Risk Committee The Non-Financial Risk Committee (NFRC) has a mandate from the Executive Board to decide on non-fi nancial risk policies. The NFRC manages and controls non-fi nancial risks, determines non-fi nancial risk limits at group level and monitors that the risk profi le stays within the agreed risk limits. If the risk profi le exceeds the limits, the NFRC takes mitigating actions. The NFRC reports to the a.s.r. Risk Committee. The Chairman of the NFRC is a COO and members of the Committee include representatives of various key product and staff departments.
As mentioned above, a.s.r. develops policies for each of the principal risks that it is exposed to. These policies, which are updated annually, describe the risk defi nition, the risk limits and the risk mitigation techniques.
The fi ve main risk categories1 that a.s.r. recognizes are described below.
Market risk arises from changes in the level or the volatility of market prices. Exposure to market risk is measured by the impact of movements in fi nancial variables such as equity prices, interest rates and property prices. The several types of market risk, which are discussed in this section, are: • interest rate risk; • equity risk; • property risk; • currency risk; • spread risk; • concentration risk.
1 IFRS refers to credit risk as spread risk or counterparty default risk.
Counterparty default risk Counterparty default risk refl ects possible losses due to unexpected default or deterioration in the credit rating of counterparties and debtors.
Strategic risk Strategic risk is the risk that a.s.r. will not reach its targets because of invalid decision-making, incorrect implementation of decisions and/or failure to respond adequately to market developments.
The sensitivities of regulatory solvency ratio to market risks are as follows: Compared to 2011, the sensitivity to equities increased due to a higher exposure to equities. Although the exposure to bonds in fi nancial institutions was actively decreased, the sensitivity to spreads increased due to the increasing value of the bonds and due to an improvement in the calculation method.
If the scenarios of the major market risks were to take place simultaneously, an undiversifi ed negative effect of 90% (2011: 51%) would result in a regulatory solvency ratio excluding UFR of 141% (2011: 179%). At the end of 2012 this ratio dropped signifi cantly due to adjustments of the non-economic assumptions for the valuation of insurance liabilities (mortality, cost, and lapse) and unfavourable developments of the interest rates. Risk mitigating measures will be taken in order to achieve a ratio higher than 150%. When applying the UFR, an undiversifi ed negative effect of 77% would result in a regulatory solvency ratio (incl UFR) of 216%.
The sensitivities of total equity and profi t for the year to market risk are as follows: The sensitivity of total equity to equities increased due to a higher position in equities. The sensitivity of profi t for the year to equities increased since more equities are close to the impairment level.
Scenario Total equity 2012 Profi t for the year 2012 Total equity 2011 Profi t for the year 2011
Interest rate risk is managed by aligning fi xed-income investments to the profi le of the liabilities. Among other instruments, swaptions and interest rate swaps are used for hedging the specifi c interest rate risk caused by interest rate guarantees and profi t-sharing features in life insurance products.
The interest rate risk is quantifi ed on a monthly basis by means of duration and scenario analyses. Duration is a measure for interest rate sensitivity, which gauges how much the fair value changes at a small parallel shift in the interest rate curve.
The duration of both assets and liabilities increased as a result of the lower interest rate curve. The duration gap did not change, the duration of the liabilities still exceeds the duration of the assets. Since the fair value of the assets is higher than the fair value of the liabilities, the impact of the duration gap is limited.
Comparable effects are seen in the sensitivity of the regulatory solvency ratio (excl UFR) to changes in interest rates. The sensitivity of the regulatory solvency ratio (excl UFR) to a drop in interest rates of 1% changed from -7% to -32%. This is a result of the decrease of the interest rates as well as the changed shape of the interest curve (excl UFR) in the longer maturities.
Sensitivity of regulatory solvency (excl UFR) to interest rate changes: 3.5.2 Equity risk The equity risk depends on the total exposure to equities. In order to maintain a good understanding of the actual equity risk, a.s.r. has made a number of adjustments to the IFRS classifi cation for risk purposes. For example, bond funds classifi ed in the balance sheet under equities are not included here.
The fair value of equities and similar investments at year-end 2012 was €1,703 million (2011: € 1,231 million). The increase in exposure to equities is due to purchases and favourable developments in equity prices.
The sensitivity of the regulatory solvency ratio to changes in equity prices is monitored on a monthly basis. Option contracts and the tax exemption of the participating interests and lower volatility of hedge funds are taken into account when calculating sensitivities. Compared to 2011, sensitivities increased due to a higher exposure to equities and less protection from put options.
Sensitivity of regulatory solvency to changes in equity prices 3.5.3 Property risk The property risk is dependent on the total exposure to property.
In order to gain a total understanding of the actual property risk, a.s.r. includes the property for own use and development property amounting to € 206 million (2011: € 209 million) in the analysis of the property risk. Note that substantial provisions for future loss on development property have been taken in 2012. In addition, revaluations to the carrying amount of €1,165 million have been included (2011: € 1,151 million). The fair value of property and property-related assets was € 3,372 million at year-end 2012 (2011: € 3,169 million), including property for own use. Despite the unfavourable economic circumstances there was a limited positive revaluation on the property portfolio. The exposure increased as a result of purchases.
The sensitivity of regulatory solvency to changes in property value is monitored on a monthly basis. The sensitivity increased primarily due to a property purchase.
The policy is primarily to hedge currency risks. However, certain currency exposures are permitted from a tactical perspective
90 a.s.r. 2012 annual report Financial Statements within a specifi c risk budget. In 2012 the exposure to US dollars and Canadian dollars was increased. A substantial part of the asset position in US dollar concerns equities.
Fixed-income investments Spread risk is managed on a portfolio basis within limits and risk budgets established by the relevant Risk Committees.
Where relevant, credit ratings provided by the external rating agencies are used to determine risk budgets and monitoring limits. A limited number of bond investments do not have an external rating. These investments are generally awarded an internal rating. Internal ratings are based on methodology and rating classifi cations similar to those used by external agencies.
The change in market values of fi nancial institutions bonds refl ects both the gradual reduction in our exposure to senior and subordinate securities in line with our strategic investment plan as well as substantial positive spread performance achieved in the course of 2012. Part of the proceeds were allocated to bond portfolios and reinvested in government, covered bonds and non-fi nancial credits.
The decrease in the market value of the structured entities portfolio is due to a combination of redemptions in the portfolio and a reclassifi cation of certain instruments following changes in the benchmark sector classifi cation. Most redemptions took place in the MBS portfolio, which consists predominantly of Dutch residential MBS investments. In total, redemptions were € 135 million. The market value of the remaining structured products portfolio increased in the course of 2012 due to tightening spreads.
Mortgage-backed security (MBS) Mortgage-backed securities are a type of asset-backed security that is secured by a portfolio of mortgages. The MBS portfolio of a.s.r. mainly consists (ca. 85%) of AAA tranches in Dutch Residential Mortgage Backed Securities. The rest of the portfolio consists of UK RMBS (ca. 4%) and some peripheral exposure, mostly in Spain (5%). In all securities a.s.r. has invested in the most senior tranche, which all have started redeeming.
Other structured Financial instruments (SFI) This part of the portfolio consists of equity tranches of CDO’s, i.e. the most risky tranche in the CDO structure. These ‘fi rst loss’ tranche will be hurt fi rst when losses occur in the assets that back the CDO and is not rated. The two biggest positions (together approximately 60%) in this portfolio are so called ‘combination notes’, which are a combination of an equity piece and a rated tranche or zero coupon bond. This rated noted or zero coupon bond serves as principal protection for the equity piece. The other positions in this portfolio are almost all equity pieces of European CLO’s.
3.5.6 Concentration risk In order to avoid concentrations in a single obligor, a.s.r. has set a limit on maximum exposure of € 750 million for single A rating and higher and € 350 million for BBB. The limits apply to the total investment portfolio. The CLFC monitors concentration risk on a quarterly basis. Per 2012 all exposures are within the limits.
3.6.1 Mortgages Mortgages are granted for the account and risk of third parties and for a.s.r. own account. The a.s.r. portfolio consists only of Dutch mortgages with a limited credit risk. In line with the strategic investment plan, the mortgage portfolio increased by € 678 million in 2012. The majority of new mortgages 2012 were guaranteed by the Dutch national mortgage guarantee fund (NHG).
At year-end 2012, 1.0% (2011: 1.7%) of mortgages were in arrears.
3.6.2 Derivatives OTC derivatives are primarily used by a.s.r. to manage the interest rate risks incorporated in the insurance liabilities. Interest rate derivatives are traded with a well diversifi ed and qualitative dealer panel with whom there is an established International Swaps and Derivatives Association (ISDA) contract and a Credit Support Annex (CSA) in place. These CSA’s include specifi c agreements on the exchange of collateral limiting market and counterparty risk. In 2012, the value of the a.s.r. swap(tion) positions increased, primarily due to a decline in interest rates. The outstanding value of the interest derivatives positions is matched by collateral received from eligible counterparties, limiting the net credit risk to a minimum.
3.6.5 Cash The current account amounted to € 756 million in 2012 (2011: € 1,773 million). The rating of the counterparties is single A.
• In property & casualty insurance, sickness leave insurance and accident & health insurance (excluding disability insurance), these provisions are based on case reserves estimates for reported claims, as well as additional provisions like IBN(E)R
Inaccuracies in the techniques applied, assumptions made and the data used for the statistical analyses are possible. This may expose a.s.r. to the risk that claims may exceed the available insurance provisions formed, to meet the obligations under the insurance contracts.
In particular the Dutch Insurance industry with a Medical Expenses Insurance portfolio generally has to deal with shortcomings in the execution of reliable statistical analysis on behalf of adequate reserving and pricing, due to the nature of the business and the impact of the national health regulation on this industry.
The strong solvency buffer is held by a.s.r. to cover the risk that claims may exceed the available insurance provisions and to ensure its solidity. The solvency position of a.s.r. is determined and continuously monitored in order to asses if a.s.r. meets the regulator requirements.
Accident & Health: • Disability: disability coverage in the portfolio includes both individual coverage for self-employed persons and (semi-) group coverage for employees. The latter group also qualifi es for occupational disability cover (WIA).
• Sickness leave: coverage includes continued salary payments for the fi rst two years of the individual’s incapacity for work.
Property & Casualty: • Motor vehicle third-party liability: motor vehicle liability is a third-party liability insurance that covers bodily injury, medical care and/or loss of income following a road traffi c accident, as well as damage caused to another vehicle.
Combined ratio In 2012, the combined ratio increased to 99.2% (2011: 95.0%) This is due to developments in the claims ratio, caused by an increase in claims and the change in liabilities arising from insurance contracts. This lead to an increase in the combined ratio by 4.2%-points in total, but it remained below 100%.
In 2012, the calculation method of the combined ratio changed. The interest rate effect on the claims ratio on income portfolio and restructuring provision expenses in the expense ratio are no longer included in the combined ratio. The combined ratio, on a comparable basis, amounted to 95.0% compared to the previously reported 98.9%.
Managing non-life insurance risk Insurance risk is the risk that future insurance claims and benefi ts cannot be covered by premium and/or investment income, or that insurance liabilities and results are threatened because the assumptions, used in the development and premium-setting of a product, are not realistic. The non-life insurance risk is managed by monitoring claims frequency, the size of claims, infl ation, handling time, benefi t and claims handling costs, and biometrical risks (invalidity, convalescence, illness, death). In addition, concentration risk also qualifi es as an insurance risk.
Handling time The time required for handling and settling claims is an important factor. The settlement of claims that have a long handling time, such as injury or liability claims, can take years. Analyses are performed regularly, based, for instance, on a.s.r.’s experience in similar cases, historical trends – such as the pattern of liabilities – increases in risk exposure, payment of damages, the scale of current and not yet settled damage claims, court rulings and economic conditions.
Illness, morbidity and recovery are affected by the economic climate, government intervention, progress in medical science and, in particularly, healthcare costs.
These risks are kept under control by means of regular evaluation of historical claims patterns, expected future developments and price adjustments. The occupational disability risk is mitigated by a.s.r. through underwriting criteria and a proactive reintegration policy and a.s.r. also minimizes its occupational disability risk through suitable reinsurance.
The above diagrams illustrate the distribution of gross premium income and gross claims reserves across the different business lines. Disability insurance contracts account for a relatively large claims reserve in total premiums. Due to the rapid settlement of the P&C portfolio in general, which generates 47% of premium income, it only represents 21% of the total claims reserve.
Total gross written premium income from non-life insurance activities in 2012 amounted to € 2,487 million (2011: € 2,353 million). In 2012, € 155 million (2011: € 206 million) was paid in reinsurance premium, i.e. 6.02% (2011: 8.49%) of gross premium income.
Reinsurance When deemed necessary, a.s.r.’s insurance businesses agree on reinsurance contracts for non-life portfolios to minimize insurance risks. Reinsurance can be taken out for each separate claim (per risk), for the accumulation of claims due to natural disasters or to human actions (per event), or for both risks. In the Netherlands, extreme weather conditions form the largest disaster risk. This applies to storms in particular.
Reinsurance companies are selected based on the management of the risk that the counterparty represents (expressed in the rating), weighing considerations involving the price. To limit risk concentration, reinsurance contracts are placed with different reinsurance companies.
The adequacy of the liabilities arising from insurance contracts are tested every quarter. For P&C, sickness leave and accident & health insurance (excluding disability insurance), the test is based on the requirement that for each homogeneous product group the level of available provisions should reach a confi dence level of at least 95% (WFT LAT). Since 2012 diversifi cation benefi ts are taken into account in the calculation of the confi dence level.
The provision for claims for occupational disability insurance equals the present value of the expected benefi ts, taking into account the policy terms and conditions, and qualifying periods, as well as chances of recovery and death. For disability insurance, the test is based on worst-case stress scenarios and a.s.r. also holds buffer capital in excess of the level of the liabilities. Given the sensitivities of the parameters, a.s.r. realises that this leads to large variances in the outcomes.s Therefore a.s.r. choose a set of prudent parameters. Monitoring of the parameters is of importance in order to timely observe developments that can infl uence the outcomes. This is also applicable to the WGA-ER.
The provisions for claims and the provision for unearned premiums at year-end 2012 can be broken down as follows: The increase of the provision for claims of A&H in 2012 is primarily explained by two developments. Firstly, the provision increased because of new production of Ditzo and Aevitae. Secondly, the decreased interest rates resulted in an increase in the provision shadow accounting for disability insurances.
3.7.2 Life insurance portfolio The life insurance portfolio of a.s.r. is diverse. The portfolio can be divided into two main product types: individual life (including funeral insurance) and group life. Due to a.s.r.’s diversifi ed life insurance portfolio, the longevity risk is limited. The longevity risk in parts of the a.s.r. insurance portfolio is compensated by the opposite risk (mortality risk) in other parts of the life portfolio (funeral, term insurance).
Life insurance risk A life insurance product provides an entitlement to a benefi t at the time of death of the insured and/or a benefi t at a predetermined moment/interval if the insured is alive at that time. The uncertainties related to a life insurance contract have to do with the moment of death of the insured (mortality, longevity and catastrophe risk), the lapse rate (the possibility that a contract lapses), and the future development of expenses associated with the policy. A specifi c feature of life insurance contracts is that they usually last for many years. This feature increases the uncertainties with respect to life contracts. The risk that investment income is not suffi cient is regarded as market risk (see Chapter 3.5).
The following life risks are distinguishes by a.s.r.: • Mortality risk: the risk of losses due to the possibility that actual mortality exceeds expected mortality.
• Longevity risk: the risk of a structural increase in the insured’s life expectancy that leads to an increase in expectations of future annuity and pensions benefi ts.
Mortality risk Mortality risk can be broken down into volatility and trend uncertainty for the best estimate assumptions. • Volatility: random fl uctuations in annual mortality rates in relation to the modeled trend. • Trend uncertainty: structural decrease in the insured’s life expectancy.
The mortality risk is limited due to the policy of periodically updating mortality tables. Reinsurance arrangements have been put in place to cover the volatility risk of large losses that might arise from single events that have been insured 2012 P&C A&H Total
100 a.s.r. 2012 annual report Financial Statements for a large amount. Most of a.s.r.’s mortality risk is offset by the opposite risk (i.e. longevity risk) in other parts of the life insurance portfolio.
Longevity risk For contracts that guarantee benefi ts during the lifetime of a policyholder, longevity risk is mainly a trend risk. The adequacy of insurance liabilities is measured using information gathered from the most recent published mortality table of the Actuarial Society of the Netherlands published in 2012. This recent table contains the latest available data on mortality trends for the Dutch population.
After deduction of capitalized acquisition costs if applicable, the provision for each life insurance contract equals at least the surrender value or the paid-up value of the contract. As a result, the fi nancial statements do not recognize any direct loss from lapses.
Expense risk Product features ensure that there is no risk on commission fees. Expense risk is therefore restricted to administrative expenses. Projections are made of future administrative expenses and the expected future income from contracts to cover expenses. This prospective analysis of administrative expenses are the basis for managing and controlling expense risk.
The level of retention in different reinsurance contracts is aligned to the size and the risk profi le of the underlying portfolios. This includes taking into account the cost of reinsurance on the one hand and the risk that is retained on the other. Reinsurance companies are selected based on the management of the risk that the counterparty represents (expressed in the rating), weighing considerations involving the price.
To limit risk concentration, reinsurance contracts are placed with different reinsurance companies. a.s.r. has the following retentions for life insurance: Retentions Highest retention at risk
Adequacy of insurance liabilities The adequacy of the technical insurance liabilities is tested at least every quarter and evaluated every month (and more frequently, if required). The a.s.r. testing policy for the liabilities complies with IFRS requirements and DNB guidelines (see Chapter 2.26).
The provision at year-end 2012 can be broken down as follows: Life insurance contracts 2012 Individual Group Total
Insurance contracts on behalf of policyholders 2012 Individual Group Saving Fund Insurance
102 a.s.r. 2012 annual report Financial Statements 3.7.3 Pension risk employee benefi ts Pension risk is defi ned as the risk that the liabilities exceed the assets of a defi ned benefi t pension plan. A number of defi ned benefi t plans for own staff are operated by a.s.r. These are schemes under which staff are awarded pension benefi ts upon retirement. Pension risk is therefore incurred for these plans and consists mainly of longevity and infl ation risk. In 2012, the interest rate reduced by 0.8%-points to 3.8% due to a decrease of the AA-rated bonds. This increased the defi ned benefi t obligation by € 360 million. In the calculation of the defi ned benefi t obligation the most recent mortality table is used “AG Prognosetafel 2012-2062”. The upgrade to this table from the previous table increased the defi ned benefi t obligation by € 46 million. Infl ation and indexation risk are partly mitigated by the change in the plan for active participants. he Economic Capital model (‘ECAP’) that a.s.r. uses, is an important steering mechanism for value management. Interest rate, longevity and infl ation risk incurred for the employee benefi ts of the own staff of a.s.r. are taken into account in the calculation of required capital in the ECAP model.
Strategic risk is defi ned as the risk that a.s.r. will not achieve its targets because of failure to respond adequately to market developments. Due to the continuing pressure on the Dutch insurance market, it is extremely important to identify strategic issues and to take the right actions.
Operational risk is the risk of losses resulting from inadequate or failed internal processes, human or systems errors, or from external events (including legal risk). The main areas where operational risks are incurred are IT, outsourcing, integrity, legal issues and operations.
Every department of a.s.r. (business lines and corporate support) incurs strategic and operational risk.
Strategic and operational risk management The following processes are in place with respect to strategic and operational risk in 2012: • CRSA; • Operational loss registration; • Crisis training; • Information security; • Management in Control.
Control Risk Self-Assessment (CRSA) Under supervision of the Risk Management department, a Control Risk Self-Assessment (CRSA) is conducted annually in all a.s.r. departments. Any risk threatening the achievement of the organization’s targets is taken into account in the CRSA.
Operational losses Every department can suffer operational losses. Therefore, a.s.r. has a process in place for reporting losses in excess of € 5,000 and evaluating the sources of these losses (incident management). Losses exceeding € 100,000 are reported to the NFRC.
Solvency II sets solvency requirements that are better aligned to the risks incurred by insurers and will form an integral part of the risk management of insurance companies. Solvency II will have great impact on the insurance market. In accordance with Solvency II, assets and liabilities are measured on the basis of fair market value.
The delay of Solvency II’s implementation deadline provides a.s.r. an opportunity to fi nalize and embed Solvency II. Additionally, it changes the focus from being Solvency II compliant in time, to further enhancing data and reporting quality in 2013.
The group is preparing for the Solvency II capital requirements. In 2012, a.s.r. continued to implement a process to report the Solvency Capital Requirement as defi ned in the Quantitative Impact Studies of Solvency II. Additionally, a.s.r. also uses an Economic Capital (ECAP) method that better refl ects its own risk profi le. The ECAP method will be refi ned further. Both SCR and ECAP are reported on a semi-annually basis and proxies are made on a monthly basis.
Besides monitoring on a group level, a.s.r. also monitors and manages the regulatory solvency at a registered insurance company level. DNB approval is required, prior to dividend payments or other repayments of equity by ASR Nederland N.V. and any of the registered group insurance company.
The a.s.r. post-employee benefi t plans are insured by ASR Levensverzekering N.V., an a.s.r. group insurance company. The post employee benefi t provision in excess of the insurance provisions is eliminated in determining the regulatory solvency available and the regulatory solvency required.
On 23 August 2012 Standard & Poor’s confi rmed the ‘A’ rating of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V, while changing the outlook from negative to stable.
On 19 December 2012 Fitch Ratings withdrew its ratings on several a.s.r. legal entities at the request of a.s.r. Rating reports can be found on the a.s.r. website: of a lapse in the insurance portfolio, withdrawals of savings, or payments related to the CSA of derivatives. Unexpected cash outfl ows can be covered by cash and cash equivalents (€ 757 million), liquid government bonds (€ 9,914 million), and other bonds and shares.
ASR Schadeverzekering N.V. FSR A Stable 23 August 2012 2012 < 1 year 1-5 year 5-10 year 10-20 year > 20 year 2011 < 1 year 1-5 year 5-10 year 10-20 year > 20 year
106 a.s.r. 2012 annual report Financial Statements 5 Group structure and segment information 5.1 Group structure
The a.s.r. group comprises a number of operating and holding companies. The legal structure and segments of the most signifi cant a.s.r. group entities is as follows: 1 Registered non-life insurance companies 2 Registered life insurance companies 3 Other DNB registered companies
The Life segment comprises all life insurance entities and their subsidiaries. These life insurance entities offer fi nancial products such as life insurance contracts and life insurance contracts on behalf of policyholders. Since 14 November 2011, the activities of Paerel Leven N.V. have been included in the Life segment, however the impact on the profi t for the period for a.s.r. and the Life segment is limited. The legal merger of ASR Levensverzekering N.V. and Paerel Leven N.V. is effective as of 28 June 2012, retrospectively from 1 January 2012. The Non-life and Life segments have different levels of profi tability and growth opportunities, as well as a different outlook and risk profi le.
The segment ‘Other’ includes among others, the following entities: • ASR Nederland N.V. (including the group related activities)
and other holding companies; • ASR Bank N.V.; • ASR Hypotheken B.V.; • ASR Deelnemingen N.V.; • Ditzo B.V.; • ASR Vastgoed Ontwikkeling N.V.; • ASR Vastgoedvermogensbeheer B.V.; • B.V. Nederlandse Hulpverleningsorganisatie-SOS International.
The a.s.r. segment reports show the fi nancial performance of each segment. The purpose of these reports is to allocate all items in the balance sheet and income statement to the segments that hold full management responsibility for them.
108 a.s.r. 2012 annual report Financial Statements 5.2 Segmented balance sheet
Liabilities arising from insurance contracts on behalf of policyholders - 8,926 - - 8,926
Net insurance claims and benefi ts -1,865 -3,873 - 131 -5,607
Share of profi t/(loss) of associates and joint ventures - 8 - - 8
Insurance claims and benefi ts recovered from reinsurers 126 16 - - 142
Net insurance claims and benefi ts -1,573 -2,266 - 146 -3,693
The technical result includes insurance premiums, allocated investment income less insurance expenses (claims), distribution expenses and operating expenses. Income from investments includes rentals, interest income, dividends and revaluations. Realized gains and losses relate to fi nancial assets classifi ed as available for sale and investment property, as well as gains and losses on fi nancial assets recognized at fair value through profi t and loss.
Retained gains or losses on the sale of investments relate to the realized total revaluation of investment property and fi nancial assets available for sale, to the extent that these cannot be allocated to the different non-life and life products. These gains or losses are recorded in profi t or loss.
Allocated other income and expense – to technical result -5 -7
The gross premiums written increased in relation to 2011 by 6%. This is manly caused by the successful introduction of Ditzo Zorg (health insurance).
The operating expenses decreased compared to 2011, due to the successful cost reduction program and the improved cost allocation.
The development of ‘derivatives’ and ‘investments on behalf of policyholders’ explains the volatility of the post ‘allocated investment result’. These effects are mainly compensated by shadow accounting respectively an addition to liabilities arising from insurance contracts on behalf of policyholders’.
The operating expenses included in the technical accounts are presented in the consolidated income statement under operating expenses and staff expenses. This is explained in more detail in the table below: In 2012 an improved method of cost allocation has taken place resulting in additional costs being allocated to the segment Other.
Operational and staff expenses not included in operating expenses in technical account -3
G ro ss p re m iu m s w ri tt en
O p er a ti n g ex p en se s*
The non-life combined ratio can be broken down as follows: In 2012, the calculation method of the combined ratio changed. The interest rate effect on the claims ratio on income portfolio and restructuring provision expenses in the expense ration are no longer included the combined ratio. The combined ratio on a consistent basis for 2011 is 95.0% compared to the previously reported 98.9%. This leads to an increase of the combined ratio in 2012 on a consistent basis of 4.2%-points.
In 2011, goodwill decreased by € 13 million as a result of impairments related to negative developments in the ASR Vastgoed Ontwikkeling. Furthermore the goodwill recognized following the Paerel Leven N.V. acquisition of € 4 million has been fully impaired as this goodwill was deemed not recoverable.
Intangible assets can be broken down as follows: 6 Intangible assets 2011 Goodwill Voba Software Total
The impairment of the VOBA in 2011 amounting to € 3 million related to the Occupational Disability portfolio.
As explained in chapter 2.13, goodwill is tested for impairment at least once a year.
Amortization schedule for Value of Business Acquired (VOBA) VOBA mainly relates to the acquisition of Stad Rotterdam. At year-end 2012, the remaining amortization period of VOBA is 18 years.
120 a.s.r. 2012 annual report Financial Statements 8 Property, plant and equipment
At year-end 2012, the fair value of land and buildings for own use amounted to € 115 million (2011: € 132 million). This value is determined annually on the basis of external valuations.
Investment property is leased to third parties and is primarily diversifi ed over the rural, residential, offi ce and retail sectors in the Netherlands.
In 2011, a.s.r. transferred investment property to the ASR Dutch Prime Retail Fund and in December 2011 the fi rst tranche was disposed of to institutional investors.
Investment property with a cost price less accumulated depreciation and impairment of € 570 million (2011: € 532 million) is held by the ASR Dutch Prime Retail Fund and is governed under the fund agreement.
Direct operating expenses arising from the investment property amounted to € 27 million (2011: € 29 million). The percentages of vacant properties are as follows: Therefore, virtually all direct operating expenses relate to investment properties generating rental income. Direct operating expenses of investment property are classifi ed as operating expenses.
The impairment on associates and joint ventures concerns primarily an impairment on 365 Holding B.V.
Profi t or loss from continuing operations 21 -41 -7 -27
Profi t or loss from continuing operations 16 -2 -5 9
Financial assets can be broken down as follows: The table below gives a detailed overview of the types of fi nancial assets held: Investments
At fair value through profi t and loss (Chapter 11.2) 80 87
C om p a n y in ve st m en ts
In ve st m en ts on b eh a lf o f p ol ic yh ol d er s
All investments at fair value through profi t and loss are designated as such by a.s.r. upon initial recognition.
Debt certifi cates covered by other assets - 12 - 1 - 13
Revaluation through profi t or loss 8 10 860 -428 868 -418
Loans and receivables can be broken down as follows: Included in the due from banks is an amount of € 2,330 million (2011: € 2,240 million) related to savings-linked mortgage loans.
Derivatives consist of derivatives held for trading and those held for cash fl ow hedging.
Derivatives held for trading are comprised of all derivatives that do not qualify for hedge accounting. Changes in the fair value of derivatives held for trading are recorded in investment income (under ‘fair value gains and losses’, see chapter 27.3). Listed derivatives are traded on the basis of standard contracts. As a result of margin obligations dictated by the different stock exchanges, they do not generally carry any signifi cant counterparty risk. Derivatives transacted in the over-the-counter (OTC) market are agreed mutually by the contractual parties.
At year-end 2012, the derivatives can be broken down as follows: To mitigate interest rate risk a.s.r. effectively entered into forward starting swaps by combining receiver and payer swaps. The notional amounts of both receiver and payer swaps are included in the total notional amounts. The fair value of interest rate contracts is based on the underlying yield curve of the instrument. In practice, these are euribor curves with 3-monthly or 6-monthly interest rate resets.
Included in the cash and cash equivalents is € 1,882 million (2011 € 1,716 million) related to the cash collateral received on derivative instruments. This debt to repay the cash collateral is included in the amount due to banks (chapter 23).
31 Dec. 2012 Positive fair value Negative fair value Notional amount
Debt certifi cates covered by other assets 261 - - 261
Corporate bonds classifi ed as Level 2 include unlisted fi xed-income preference shares amounting to € 416 million (2011: € 415 million). The fi nancial assets classifi ed as Level 3 comprises primarily private equity investments.
The fi nancial instruments in this category mainly consists of private equity investments. The main non-observable market input is the net asset value as published by the investee.
In ve st m en ts a t f a ir v a lu e th ro u g h p ro fi t a n d lo ss
Reclassifi cation of investments from/to Level 3 valuation technique - - 6 -
Financial Statements a.s.r. 2012 annual report 137 11.6 Fair value hierarchy – Investments on behalf of policyholders
a ir v a lu e b a se d on q u ot ed p ri ce s in a n a ct iv e m a rk et
F a ir v a lu e b a se d on q u ot ed p ri ce s in a n a ct iv e m a rk et
F a ir v a lu e b a se d on o b se rv a b le m a rk et d a ta
Investments on behalf of policyholders at fair value through profi t and loss
C h a n g es re co g n iz ed in p ro fi t a n d lo ss
The reinsurance contracts can be broken down as follows: Movements in insurance claims and benefi ts recovered from reinsurers classifi ed as insurance liabilities can be broken down as follows: The table below shows the composition of other assets: Interest expenses incurred related to property developments amounting to € 4 million, were capitalized in 2012 (2011: € 5 million) and included in property developments.
All cash and cash equivalents, except for an amount of € 72 million related to cash collateral given, are freely available to the Group.
Financial Investments (NLFI) in exchange for depositary receipts for the shares. There were no changes in share capital during the fi nancial year.
Authorized capital: - Ordinary shares; 1,000,000 at a par value of EUR 500 500 500
142 a.s.r. 2012 annual report Financial Statements 16.2 Unrealized gains and losses recorded in equity
Unrealized gains and losses related to segregated investment pools -24 - - - -24
Tax related to shadow accounting and segregated investment pools 325 - - - 325
Hybrid Tier 1 instrument 6.25% fi xed interest 12 12 Per quarter with effect from 30 September 2009
Hybrid Tier 1 instrument 10% fi xed interest 382 382 Annually with effect from 26 October 2010
Hybrid Tier 1 instrument 7.25% fi xed interest 37 37 Annually with effect from 30 September 2010
The Tier 1 instruments bear discretionary interest and have no maturity date, but can be redeemed at the option of a.s.r. on any coupon due date with effect from: If the hybrid Tier 1 instrument at 10% fi xed interest is not redeemed on 26 October 2019, the interest rate will be changed to 3-month Euribor plus 9.705%, with a quarterly coupon date with effect from 26 January 2020.
The following amounts were distributed to holders of equity instruments (x € 1,000): The tier 1 instruments are classifi ed as equity as there is no requirement to settle the obligation in cash or another fi nancial asset or to exchange fi nancial assets or fi nancial liabilities under conditions that are potentially unfavourable for a.s.r. Discretionary interest payments are adjusted against equity upon payment.
Hybrid Tier 1 instrument variable interest (3-month Euribor + 2.3%) 26 oktober 2009
Hybrid Tier 1 instrument variable interest (3-month Euribor + 2.3%) 2,830 3,061
Provision for unearned premiums as at 31 December 416 507 38 42
The provisions for claims comprises: Changes in liabilities arising from life insurance contracts can be broken down as follows: At year-end 2012, the liabilities included a guarantee provision for a carrying amount of € 145 million (2011: € 129 million).
Profi t-sharing, bonuses and discounts granted in the fi nancial year -2 -1
148 a.s.r. 2012 annual report Financial Statements 18.3 Liabilities arising from insurance contracts on behalf of policyholders
Movements in liabilities arising from insurance contracts on behalf of policyholders can be broken down as follows: At year-end 2012, the liabilities included a guarantee provision for a carrying amount of € 55 million (2011: € 110 million) and a provision related to unit-linked insurance contracts and pension contracts for a carrying amount of € 266 million (2011: € 371 million). These provisions relate to compensation for the cost of these contracts.
Effect of fair value changes related to fi nancial assets 826 -503
Employee benefi ts can be broken down as follows: ASR Levensverzekering N.V., an insurance company and a group entity, is the insurer of the post-employment benefi t plan. As this company holds the separated investments that are meant to cover the employee benefi t obligation, they do not qualify as plan assets in accordance with IAS 19 and are therefore included in fi nancial assets.
The costs of post-employment and other long-term employee benefi ts are as follows: The costs relate to all members of the a.s.r. post-employment benefi t plan.
The accrued rights of active members in all plans are subject to a conditional indexation, maximised at the level of the CAO wage index. The pensions of current pensioners and the accrued rights of sleepers are also indexed using various indexation provisions. The indexation for the basic plan is linked to the profi t sharing of the assets with a maximum of the greater of consumer price index and 3%. The indexation of the other plans are also based on the profi t sharing of the assets, however generally have with a maximum indexation ranging between 3% and 4%. The older plans with a limited number of active members have no maximum indexation.
The benefi ts under these plans are dependent on factors such as years of service and compensation. Pension obligations are determined using mortality tables, the rate of employee turnover, wage drift and economic assumptions such as infl ation, and the discount rate. The discount rate is determined based on the return (zero coupon rate) of high-quality corporate bonds (AA rating) and the duration of the pension obligation. The post-employment benefi t plans for a.s.r.’s employees has been insured by ASR Levensverzekering N.V. since 2008.
The tables below provide further information on gross provisions, qualifying plan assets and the carrying amounts recognized in the balance sheet item for pensions and other post-employment benefi ts.
Assets managed by group companies have not been included in the above fi gures. At year-end 2012, the fair value of these assets amounted to € 1,851 million (2011: € 1,684 million).
The table below shows movements in the defi ned benefi t obligation: The following table shows the changes in unrecognized negative past service cost: The following table provides an overview of changes in total unrecognized actuarial (gains) losses on assets and liabilities: Pension plans Other post-employment benefi ts
Defi ned benefi t obligation at 31 December 2,615 2,343 21 21
Unrecognized negative past service cost as at 31 December 87 15 - -
Actuarial (gains) losses on defi ned benefi t obligation -308 -116 -1 -3
Amortization of unrecognized actuarial (gains) losses on defi ned benefi t obligation 7 - -2 -1
The principal actuarial assumptions at year end were as follows: The portfolio of global investments (non-qualifying assets) held by ASR Levensverzekering N.V. to cover the employee benefi t expense can be broken down as follows: Pension plans Other post-employment benefi ts
Future salary increases (including price infl ation) 2.0% 2.1% - -
Future pension increases (including price infl ation) 2.0% 2.1% - -
Future mortgage interest (in connection with grantable discounts) - - 4.2% 3.8%
As a fi nancier of the post-employment benefi t plans, a.s.r. has drawn up general guidelines for asset allocation based on criteria such as geographical location and ratings. To ensure that the investment strategy remains in line with the structure of pension obligation, a.s.r. regularly performs Asset Liability
Management (ALM) studies. Assets are allocated based on these guidelines and on the outcomes of these studies.
As an employer, a.s.r. is expected to pay the following contributions towards the post-employment benefi ts in the coming fi nancial year: 19.2 Other long-term employee benefi ts
Other long-term employee benefi ts consist of the employer’s share of liabilities arising from long-service benefi ts. The table below shows the changes in these liabilities: Pension plans Other post-employment benefi ts
Pension plans with defi ned benefi ts Other post-employment benefi ts
The underlying assumptions are as follows: The table below shows movements in provisions: The provisions were created for: • tax and legal issues; • staff restructuring expenses; retention of disability risk instead of insuring it with UWV (Employed Persons Insurance Administration Agency).
The provision for legal issues is based on best estimates available at year end, making allowance for expert legal opinions. The timing of the outfl ow of resources related to these provisions is uncertain because of the unpredictability of the outcome and the time required for the settlement of disputes.
As at year-end 2012, borrowings comprised loans having the following terms to maturity: As at year-end 2011, the fair value of borrowings was € 126 million (2011: € 107 million). The average interest rate payable on other borrowings was 3.67% (2011: 4.26%).
These borrowings are used for investment purposes (property, group pension contracts), for balance sheet management, and for short-term cash fl ow management.
Amounts owed to customers can be broken down as follows: All carrying amounts refl ect the fair value as at the balance sheet date.
Total life insurance contract premiums including the elimination of € 88 million in premiums related to the a.s.r. post-employment benefi t plans (2011: € 82 million).
Non-recurring and regular insurance premiums can be broken down as follows: Premiums life 2012 2011
Dividend and other investment income per category can be broken down as follows: 27.2 Realized gains and losses
Financial assets at fair value through profi t or loss 50 10
Fee and commission income consists of the following components: Other income can be broken down as follows: Other income includes income related to the curtailment of the a.s.r. post –employment benefi t plans amounting to € 26 million (see chapter 19) recognized in 2012.
Fair value gains and losses and realized gains and losses on fi xed-interest securities (chapter 27.2) amounting to € 690 million (2011: € 69 million) are recognised as provisions for liabilities arising for the life insurance contract and included in the net insurance claims and benefi ts (see chapter 30).
a.s.r. 2012 annual report 163Financial Statements 30 Net insurance claims and benefits
Net insurance claims and benefi ts can be summarized as follows: Total non-life and life 2012 2011
Operating expenses are allocated to the non-life and life segments. However, in the presentation of the a.s.r.’s workforce per segment, employees, administrative expenses and overheads have not been allocated to segments.
The operating expenses include an amount of € 756 thousand related to the 2012 “Crisisheffi ng” high income crisis levy of which € 132 thousand relates to the executive directors.
a.s.r. 2012 annual report 165Financial Statements 32 Acquisition costs 33 Impairment of assets
Reversal of impairments on bonds as a result of disposal 191 165
The table below is a breakdown of the interest expense: Included in the costs associated with sale of development property is an amount of € 64 million related to provisions recognized for possible future loss related to land and property development projects held as other assets.
170 a.s.r. 2012 annual report Financial Statements 37 Related party transactions
The table below shows the fi nancial scope of a.s.r.’s related party transactions: • associates; • joint ventures; • other related parties.
Provisions for impairment amounting to € 4 million (2011: € 11 million) have been recognized on the loans and receivables. Mortgage loans to the Executive Board can be broken down as follows: These mortgage loans held by the members of the Executive Board have been issued based on normal personnel conditions. The normal personnel conditions consists of limits and thresholds to which personnel interest rate discount applies.
For mortgage loans greater than € 340 thousand arm length conditions apply. The normal employee conditions are applied to insurance contracts held by the members of the Executive Board.
The amount was agreed upon in 2005 and does not concern any of the persons mentioned in the tables above.
rm va ri a b le e m p lo yee
rm va ri ab le e m pl oy ee b en efi t s
To ta l d is b u rs ed re m u n er a ti on
On 5 July 2012, ASR Nederland Vastgoed Maatschappij N.V. acquired 100% of the shares of Terra Landelijke Eigendommen Exploitatie B.V. for an amount of € 43 million consisting primarily of investment property. a.s.r. recognized an amount of € 2 million in goodwill in addition to the fair value amount of the initially acquired shareholders’ equity.
176 a.s.r. 2012 annual report Financial Statements 41 Company balance sheet
Financial Statements a.s.r. 2012 annual report 177 42 Company income statement 43 Notes to the company financial statements
The consolidated fi nancial statements of a.s.r. for 2012 have been prepared in accordance with IFRS – including the International Accounting Standards (IAS) and Interpretations – as accepted within the European Union. In accordance with Section 362(8), Book 2 of the Netherlands Civil Code, the ASR Nederland N.V. Executive Board has decided to apply the same accounting policies to the consolidated fi nancial statements as to the company fi nancial statements. This has been the practice since 2005.
Investments in group companies are carried at net asset value, in accordance with the accounting policies used in a.s.r.’s consolidated fi nancial statements. The share of profi t of group companies is reported in conformity with the accounting policies used in a.s.r.’s consolidated fi nancial statements.
The loans to group companies consist primarily of deposits with group companies of € 214 million (2011: € 577 million) repayable within one year and loans of € 30 million (2011: € 74 million) with a maturity term within 3 years and an average interest rate of 4.5% and loans of € 40 million with a maturity term longer than 3 years and an average interest rate of 5.9% (2011: 5.2%).
P ro fi t f or th e ye a r
E q u it y a tt ri b u ta b le to s h a re h ol d er s
Change in reserves required by law - - - 1 - - 1 - 1
Profi t carried over from previous fi nancial year - - - - 317 -317 - - - --
180 a.s.r. 2012 annual report Financial Statements 8. Subordinated debt The private loan of € 20 million was settled in terms of the agreement on 20 March 2012. The average interest rate on the subordinated loans was 6.6%.
A breakdown of these fees is provided below: 43.3 Contingent liabilities
Joint and several liability Since 3 October 2008, the company and its subsidiaries have been part of the tax entity a.s.r. for corporation tax purposes. Until 2 October 2008, the company and its subsidiaries were part of the Fortis Utrecht N.V. tax entity for corporation tax purposes. All companies within the tax entity are joint and several liable for the corporate tax debt.
Up to 31 December 2008, a.s.r. was a member of a VAT tax group of a.s.r. companies and other former Fortis group companies that had their registered offi ces in the Netherlands. Since 1 January 2009, there has been a new VAT group of a.s.r. companies. By law, the individual members of the tax group are jointly and severally liable for one another’s VAT debts.
Investment obligations and guarantees ASR Nederland N.V. has issued guarantees to third parties for a total amount of € 323 million (2011: € 323 million) for real estate development projects and the acquisition of property.
Lease commitments The table below breaks down the commitments for non-cancellable operating leases as at 31 December: ASR Nederland N.V has commited to a capital increase of ASR Bank N.V. amounting to € 17 million for the period 2013 to 2017. The amount will be paid in tranches when required by ASR Bank N.V. depending on its required solvency.
To: the Executive Board and Supervisory Board of ASR Nederland N.V.
Management’s responsibility Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the annual report in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Furthermore, management is responsible for such internal control as it determines is necessary to enable the preparation of the fi nancial statements that are free from material misstatement, whether due to fraud or error.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.
Opinion with respect to the company fi nancial statements In our opinion, the company fi nancial statements give a true and fair view of the fi nancial position of ASR Nederland N.V. as at 31 December 2012 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code.
There have been no material events after the balance sheet date that would require adjustment to the consolidated fi nancial statements of a.s.r. as at 31 December 2012.
Administratie- en Adviesbureau voor Belegging en Krediet (A.B.K.) B.V.1 100.00 100.00 Amersfoort Non-life
The list of equity interests required under Sections 379 and 414, Book 2 of the Netherlands Civil Code has been fi led with the Trade Register of the Chamber of Commerce in Utrecht.
5. No profi t shall be distributed to the Company in respect of shares held by the Company in its own capital.
Amortized cost The amount at which the fi nancial asset or the fi nancial liability is measured at initial recognition minus principal repayments, plus or minus the accumulated amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction for impairment or uncollectibility.
Associate An entity over which a.s.r. has signifi cant infl uence and that is neither a subsidiary nor an interest in a joint venture.
Discretionary Participation Feature (DPF) A contractual right to receive, as a supplement to guaranteed benefi ts, additional benefi ts that are likely to be a signifi cant portion of the total contractual benefi ts, whose amount or timing is contractually at the discretion of the issuer, that are contractually based on the performance of a specifi ed pool of contracts or type of contract, realized and/or unrealized investment returns on a specifi ed pool of assets held by the issuer, or the profi t or loss of the company, fund or other entity that issues the contract.
Fair value hedge A hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized fi rm commitment, on an identifi ed portion of such an asset, liability or fi rm commitment, that is attributable to a particular risk and could affect profi t or loss.
Goodwill An asset representing the future economic benefi ts arising from other assets acquired in a business combination that are not individually identifi ed and separately recognized.
Investment contract A life insurance contract that transfers fi nancial risk with no signifi cant insurance risk.
Notional amount An amount of currency, a number of shares, a number of units of weight or volume or other units specifi ed in a derivatives contract.
Value Of Business Acquired (VOBA) The present value of future profi ts embedded in acquired insurance contracts. VOBA is recognized as an intangible asset and amortized over the effective life of the acquired contracts.
ASR Nederland N.V. Archimedeslaan 10 P.O. Box 2072 3500 HB Utrecht www.asr.nl