The financial statements for 2016 as included in this Annual Report are on the agenda for adoption at the Annual General Meeting of shareholders of 31 May, 2017.
Management report 1.1 Notes to the reader 6 1.2 a.s.r. at a glance 8 1.3 Message from the Chairman 11 1.4 Investor relations 13 2 Strategic Report 19 2.2 Key trends 23 2.4 Value creation 33 2.6 Assurance report of the independent auditor on the sustainability information 56 3 Business Report 59 3.2 Business environment 64 3.3 Business segments 69 3.4 Group and segment financial performance 82 3.5 Risk management and Compliance 93 3.6 Executive Board In Control Statement 98 4 Governance Report 99 4.1 Corporate governance 100 4.2 Supervisory Board report 109 4.3 Remuneration report 113 4.4 Employee representation 117
Introduction In this report ASR Nederland N.V. (hereinafter referred to as ‘a.s.r.’ or ‘the Group’) gives an account of its 2016 financial performance, provides a transparent overview of its strategy, businesses, risk management and governance (activities and objectives). a.s.r. also uses this report to describe the interrelationships between its strategy and governance and the social and economic context in which it operates. The Annual Report comprises the following four chapters: • Strategic Report; • Business Report; • Governance Report; • Financial Statements. Completed by Other information and the Report of ‘Stichting Continuïteit’.
This year, a.s.r. has taken another step towards integrated reporting. In this Annual Report, a.s.r. discloses and explains its material financial and non-financial performance, its strategy and governance, relevant external developments and the risks and opportunities a.s.r. faces.
Presentation of information a.s.r.’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) – including the International Accounting Standards (IAS) and Interpretations – as adopted by the European Union (EU), and with the financial reporting requirements included in section 391, Title 9, Book 2 of the Dutch Civil Code and the Dutch Code of Conduct for Insurers issued by the Dutch Association of Insurers.
The consolidated financial statements are presented in euro (€), this being the functional currency of a.s.r. and all its entities. All amounts quoted in the tables contained in these financial statements are in millions of euros, unless otherwise indicated.
a.s.r. has integrated the material sustainability issues into this report as from 2016. The sustainability information contained in this Annual Report has been prepared in accordance with the Sustainability Reporting Standards, CORE option, of the Global Reporting Initiative (GRI).
The GRI Content Index outlines the indicators on which a.s.r. reports and shows where these indicators can be found in the Annual Report. The table also includes additional information that has not been included in the Annual Report itself. For the GRI Standards Content Index please see page 296.
Reporting process Relevant topics for this report were selected based on a materiality survey among internal and external stakeholders using the GRI Standards indicators, in which the materiality of items is ranked according to the importance that stakeholders attach to them. For more information, please see Appendix H.
Intro d uctio n the sustainability information in this Annual Report with a limited level of assurance. The objective is to provide a statement as to whether the information in this Annual Report is presented in accordance with the GRI Sustainability Reporting Standards, the Guidance Note on Sustainability Reporting of the Dutch Accounting Standards Board (Raad voor de Jaarverslaggeving) and a.s.r.’s internal reporting criteria.
EY has conducted the assurance review in accordance with Dutch law including the Dutch Auditing Standards. This requires that EY complies with prevailing ethical requirements, which are available for consultation on nba.nl.
For a download of this report or more information, please visit us at asrnl.com/investor-relations or asrnederland.nl/ investor-relations or contact us at ir@asr.nl.
Intro d uctio n 1.2 At a glance a.s.r. is the Dutch insurance company for all types of insurance. Via the brands a.s.r., De Amersfoortse and Ditzo as well as niche brands such as Europeesche Verzekeringen and Ardanta, a.s.r. offers a wide range of financial products covering P&C (Property & Casualty), occupational disability and health insurance (non-life), individual life, group and individual pensions and funeral expenses insurance (life). It also offers asset management services, banking services and distribution services to intermediaries.
Corporate Governance Structure a.s.r. has a two-tier board consisting of an Executive Board and a Supervisory Board.
1 The figures for 2015 have been restated due to retroactive adjustments to the provisions related to acquisitions (one year window) and immaterial adjustments related to the accounting for a.s.r.’s employee benefits.
3 In 2016, the absolute carbon footprint was up as a result of the relocation of Europeesche Verzekeringen, which resulted in an increase in headcount of 528 FTEs in Utrecht.
Our operating result was also strong and showed an increase of 11.5% to € 599 million in 2016. And thanks to our strict cost discipline, we managed to reduce our cost levels by € 6 million. In this we have already successfully absorbed the additional costs from the acquired businesses.
During the past year we continued to focus on offering easy-to-understand and transparent products and services that meet the needs and requirements of our customers as well as the intermediary channel. Judging from last year’s sharp increase in our Net Promoter Score, a tool used to gauge the loyalty of our customers and intermediaries, we have once again made strides in this area. A keen eye for our customers, combined with our specialist expertise, is meant to raise our services to a level that will also encourage others to choose a.s.r.
a.s.r. has also operated a real estate investment management business for many years. In addition to running its existing residential and prime retail funds, a.s.r. REIM also established an office fund worth € 400 million in 2016; this fund is open to institutional investors.
Our ‘value over volume’ strategy is based on value creation, and in this process we focus on long-term and medium-term objectives. a.s.r. is on track to achieve its objectives. To this end, one of our focal points is optimizing our business portfolio. In this context, 2016 saw a number of acquisitions, the sale of two business units and the streamlining of our existing business.
In summary: things are looking good for a.s.r. We want to maintain a strong financial framework, supported by a responsible risk policy, a robust Solvency II position and a sound investment policy. But we also need to be open to change and be able to adapt at any time. After all, as far as we are concerned, financial reliability, combined with innovation of our products and focus on the needs of our customers and intermediaries, supplemented by the utilization of opportunities in the market, are prerequisites for a solid future.
Intro d uctio n 1.4 Investor relations a.s.r. sets great store in a strong relationship with the investment community in the broadest sense and sets high standards with respect to transparent communication and fair disclosure. a.s.r. strives to provide relevant insight into its activities via selected financial and non-financial disclosures.
Initial public offering a.s.r. once again became a listed company following an Initial Public Offering (IPO) on 10 June 2016. Stichting Administratiekantoor Beheer Financiële Instellingen (NLFI), which is acting on behalf of the Dutch State, placed 54.5 million shares (36.3% of the 150 million issued and outstanding shares) in the market at the introduction price of € 19.50 per share. The shares are listed on Euronext Amsterdam (symbol ASRNL) and have been included in the AMX index (Amsterdam Midcap Index) since 19 September 2016.
Major shareholders Dutch law requires shareholders to report their holdings in Dutch listed companies to the Dutch Authority for the Financial Markets (‘AFM’), when these holdings exceed 3% of the total outstanding share capital (and at certain higher thresholds). According to the AFM register, the following shareholders had a position in a.s.r. of more than 3% as at 31 December 2016: NLFI 63.7% (reported on 14 June 2016) and Silver Point Capital L.P. 3.67% (reported on 10 June 2016). The stated percentages are the interests reported by the relevant shareholders to the AFM on the indicated dates.
Share price performance The introduction price of a.s.r. at IPO was € 19.50. At 30 December 2016 the closing price was € 22.60, representing a share price performance of 15.9% (annualized 25.4%).
Dividend a.s.r. strives to pay a dividend that creates sustainable long term value for its shareholders.
Over 2016, a.s.r. proposes to pay a dividend of € 187 million. This dividend is higher than the previously communicated € 175 million and is underpinned by a.s.r.’s strong financial performance over 2016. It is also in line with the dividend policy that became effective on 1 January 2017. From 2017, a.s.r. has a dividend policy with a pay-out ratio of 45% to 55% of the net operating result attributable to shareholders (i.e. net of hybrid costs). To support its ability to pay out cash dividends, a.s.r. maintains a cash target of € 350 million at the holding company.
7 April a.s.r. sells real estate development business to Meijer Realty Partners 13 May
The Fair Insurance Guide awards a.s.r. the highest score for its sustainable investment policy
Stationslocaties C.V. and aims to start an Office fund in 2017 a.s.r. signs Ethical Manifest to help customers with late payments to find a solution a.s.r. Asset Management kicks off as third party asset manager a.s.r. acquires Corins
Strategy 25 2.3.3 Brand and distribution strategy 29 2.3.4 Tax strategy 31 2.3.5 Sustainability strategy 31
Having generated € 4,328 million in gross written premiums (GWP) in 2016. a.s.r. is one of the larger insurance companies in the Netherlands.
In the coming years, a.s.r. aims to continue to develop into a company that is increasingly recognized by customers as one that meet the terms of its licence to operate through ‘helping by taking action’. Customers will recognize this in the positive experience they have with a.s.r., in all its aspects. a.s.r. is able to empathize with the needs of its customers and deliver its products and services in a clear and transparent manner. a.s.r. helps people to share risks and accumulate capital for later in life. Our customer experience score will increase over the next three years. This customer experience will convince existing customers that they want to remain a.s.r. customers for the long term and expand their product package. At the same time new customers will come to a.s.r. on the basis of the warm recommendations from customers and financial advisers. a.s.r. considers providing top-quality service as a major factor in its current and future success.
I am helpful a.s.r. employees empathize with the needs of their customers, plus they listen and they show interest. They truly represent a.s.r., both internally and externally.
I act decisively We are committed and know how to act. We take a practical approach. We do this in a personal way and always based on our professional expertise.
• Track record of attractive return on equity, capital and cash generation
• Consolidation potential in the ‘closed’ book for life and funeral insurance
• New and/or changing legislation governing insurance products or unit-linked policies
• In view of the current technological revolution, the insurance business model is liable to be disrupted and shaken to the core
Besides these – occasionally cyclical – trends, we see a pension market with growth potential, particularly in solutions that do not necessarily result in an increase in
Intermediaries and other distribution channels 78% 80% 79% 79% 80% 80%
Trends and disruptions in the medium term Traditionally, a.s.r. has provided insurance services that offer customers certainty in unexpected situations and cover for risks they are unwilling or unable to bear themselves. In view of the current technological revolution, the insurance business model is liable to be disrupted. While recent technological developments have mainly impacted the various distribution models, the underwriting column of the value chain now seems to be vulnerable, for instance due to technological and social changes.
Effects of innovation There are more developments that might also affect the business model of traditional insurers, such as the application of deep and machine learning. And the focus of reinsurers on bearing risk is shifting to focusing on optimizing/providing capital under the Solvency II regime.
As a result of these technological developments, customers are being offered new services that give easier access, increases transparency, speed and offer more relevance. Smartphones and tablets are increasingly being used as customer interfaces. As a result it makes their lives easier and more pleasant. Big data is generating a lot of information that can be used for a range of purposes such as (i) better customization for tailor made solutions to meet customer requirements, (ii) pricing risks, (iii) improving retention rates, (iv) generating leads, (v) detecting fraud. The Internet of Things, where multiple devices are constantly online and are sending or receiving relevant information, improves prevention, thereby also changing the insured interest. The health related technology ensures a longer healthy life. Predictability of people’s health is increasing, thanks in part to wearables, which give customers (and insurance companies, where possible) more information that helps them move from cure to prevention.
Through blockchain, a control system that exchanges and verifies data, multiple computers control the ledger of the transaction(s). This system then eradicates the need for human intervention and multiple third parties to check the reliability of a transaction...
Social developments Developments in society promote the development of new products and services and/or affect the procedures followed by insurance companies. Different themes play a role in this respect.
Consumer behaviour is shifting from owning items to sharing them. The role of traditional players in the energy and telecommunications markets is changing and companies such as Philips are changing course, in this case from lighting to medical equipment. Thought patterns are shifting from ‘trust in institutions’ to ‘trust in the masses’, e.g. TripAdvisor. Conversely, we are seeing a strong trend towards individualization in terms of behaviour in society: ‘why should I pay for the risk incurred by someone else?’ This development is being intensified by so-called usage-based insurance (UBI), which allows for drastic differentiation that might lead to further individualization. This is putting pressure on the solidarity principle, potentially resulting in ‘uninsurable risks’ at the peripheries of society.
Politics and supervision There is a trend towards more regulation and government interference, and a need to strengthen the role of regulators. Consumer protection is leading and risk mitigation is broadly supported by politicians and regulatory bodies. There is increasing pressure from a regulatory perspective. We are seeing an additional shift from principle-based to rule-based. This is illustrated by the emergence of Solvency II and other future accounting standards (e.g. IFRS 17). In addition, there are more European rules on the way (comparable to what is happening in the banking sector), which will diminish the role of national legislatures.
Cash-generating business model a.s.r.’s strategy is to focus on ‘value over volume’.
Meeting customers’ needs a.s.r. offers its customers simple, transparent products that aim to fulfil their needs. a.s.r. employees are driven to help customers whenever possible, and communicate with them in clear and easy-to-understand language. a.s.r. focuses on retail customers, self-employed individuals and small and medium-sized enterprises (SMEs).
Through the enhanced decentralization of distribution, product marketing and IT, a.s.r. aims to further simplify its organizational structure, so it can remain agile and responsive to changes in market trends and customer behaviour and needs.
Excellence in pricing, underwriting and claims handling a.s.r. maintains a disciplined pricing strategy, based on deep knowledge of customer behaviour. a.s.r., continues to build on its experience and skills related to pricing, underwriting and claims handling, as the company believes these are key drivers in the creation of sustainable value.
Cost effectiveness Cost competitiveness is a key factor for commercial success, as well as bottom-line performance. Cost awareness has been embedded throughout the organization and its daily operations and has become an integral part of a.s.r.’s culture.
a.s.r. continuously focuses on costs and aims to lower its operating expenses over the coming years. End-to-end responsibility in the various business segments, fewer management layers and decentralization of certain functions, such as distribution, product marketing and IT, are instrumental in maintaining cost effectiveness.
Furthermore, a.s.r. has successfully made parts of its cost base more flexible. In order to achieve this goal, a.s.r. outsources certain activities to third parties with the required expertise, enabling the company to achieve cost benefits or efficiencies of scale. Examples of this are software-as-a-service (SaaS) solutions in Individual Life, Pensions and Health; IT outsourcing (ITO) for Individual Life and business process outsourcing (BPO) for part of the portfolio for Individual Life and Pensions. a.s.r. does not outsource any of its activities that it considers essential to its insurance operations and that give a.s.r. its unique competitive position. These include pricing, underwriting, asset management and claims management (including medical advisors and personal injury claims) services.
a.s.r. will also continue to work on simplifying and rationalizing its existing product portfolio, particularly in the Life and Pensions businesses. a.s.r. seeks to minimize the number of back-office systems in all its business lines.
a.s.r. has a conservative risk profile and has set minimum solvency levels designed to absorb potential losses and to maintain financial robustness while optimizing its capital position within the parameters set by the regulator. For further details on the strategy of the individual business lines, see chapter 3.3.
a.s.r. classifies its activities in four categories: I) activities that provide stable cash flows and generates value, with relatively strong growth potential; II) businesses that represent robust and predictable back books and contribute to current profits; III) activities that offer business enhancement opportunities, typically capital light, and the final category; IV) activities that are non-core and which will ultimately be divested.
Stable cash flow and value-generating business, with relative growth potential In Non-life, a.s.r.’s focus is on maintaining profitable underwriting and pricing discipline, in combination with excellent claims handling for our customers. a.s.r. strives for selective growth in this segment. Maintaining our leadership position in the intermediary distribution channel is key to this ambition. Non-life insurance offers a.s.r. relative organic growth potential.
The funeral insurance business generates value for a.s.r.’s stakeholders, although organic growth is limited. a.s.r.’s cost-efficient platform in the funeral insurance business puts the company in a strong competitive position. Furthermore, the funeral insurance business carries mortality risks that strongly diversifies with longevity risk in a.s.r.’s pension businesses. These benefits are demonstrated in a.s.r.’s acquisition of AXENT and the acquisition of the NIVO portfolio. Given the long duration of the funeral businesses, a.s.r. will benefit from these advantages for a long time to come/long into the future.
Robust and predictable back books This category represents large Life books that have been build up over many years and are major contributors to a.s.r.’s profit.
These businesses offer limited or no growth potential and these books will decline over time. a.s.r. focuses on safeguarding the value of the service books. a.s.r. is doing this by either lowering its cost base or making it more variable, providing high customer service to prevent unnatural lapses and protecting the investment yield by hedging the interest rate sensitivity. To make its cost base in Individual life more variable, a.s.r. is migrating the seven Individual life portfolios to a Software as a Solution (SaaS) platform managed by an external provider. This migration is on track we expect to complete this process by the end of 2018. Upon completion, this will give a.s.r. the foundation it needs to become a consolidator in the market.
Business enhancement opportunities a.s.r. sees growth opportunities in fee business and capitallight business. These include capital-light pension propositions such as Defined Contribution pensions, Institutions for Occupational Retirement Provision (IORP) and General pension funds (APF). a.s.r. has developed and launched competitive propositions in each of these pension solutions.
Over the past few years, a.s.r. has transformed into a number of independently operating business lines with more integrated service departments. This has made our operations more agile. Management is focused more on the market and on subject matter expertise in such areas as underwriting and pricing, as well as in asset management.
Level 3 disruption (5+ years): truly transformational disruptive models that enable entirely new players to suddenly conquer a share of the market or tap a new market. These models cannot (almost by definition) be defined at this time, but examples can already be seen in other sectors in industry.
a.s.r. seeks to generate an ROE of up to 12% per year in the medium term. For the long term, a.s.r. aims to achieve an operating ROE of above 10% on average.
In 2016, a.s.r. announced a dividend policy for 2017. Going forward, the annual dividend will be based on a pay-out ratio of 45% to 55% of net operating result attributable to shareholders (i.e. net of hybrid costs). a.s.r. applies a boundary condition based on its Solvency II position. a.s.r. does not plan to pay a cash dividend if the Solvency II ratio were to fall below 140%.
Under the a.s.r. brand, a.s.r. offers products for P&C (all customers segments), pensions
(DB products for the commercial market), individual life (term life and annuity) and banking products (mortgages, savings and investments) for retail clients. The a.s.r.
DB pension products), as well as online (e.g. term life, savings and individual annuity).
Europeesche Verzekeringen Under the Europeesche Verzekeringen brand, a.s.r. sells travel and leisure insurance.
Europeesche Verzekeringen insurance policies are sold through the intermediary channel, including through specialist partners, such as tour operators, sports federations and online channels. The Europeesche Verzekeringen brand primarily targets retail customers.
Ardanta Ardanta is a.s.r.’s funeral insurance brand. Most of Ardanta’s funeral insurance policies have historically been sold via the intermediary channel. Currently, Ardanta utilizes a multi-channel distribution strategy by offering its products through intermediaries, direct sales and online. The Ardanta brand targets retail customers. With the acquisition of
a.s.r.’s tax policy a.s.r. wants to be a socially responsible taxpayer that bases its actions on professional tax compliance practices. a.s.r. does not push its limits when it comes to tax planning.
Covenant in January 2013. This covenant formalizes how a.s.r. and the Dutch Tax & Customs Administration will treat each other: with mutual trust and an open and transparent attitude. By signing the covenant, a.s.r. has undertaken to develop and maintain a system of internal and external controls, the goal being to prepare and file acceptable tax returns (for more information, see chapter 5.6.12).
In its business operations, a.s.r. deliberately focuses on long-term value creation according to the triple bottom line principle of People, Planet and Profit. To this end, a.s.r. engages in a continuous dialogue with its stakeholders, increasingly qualifying CSR as one of its core values.
a.s.r. has divided the dimensions of People, Planet and Profit into the following five focus areas: Five focus areas of People, Planet and Profit
People Employees are encouraged to make the most of their potential. By connecting with customers, the business and HR, each employee becomes an a.s.r. ambassador, both within and outside the company.
Investments a.s.r. takes ownership by taking into account ethical and sustainability criteria in its investment policy.
What does CSR entail in the people dimension? • Providing a broad range of training and development opportunities; • Encouraging the vitality of employees; • Offering a healthy work/life balance.
What does CSR entail in the environment dimension? • Being efficient with water, energy and resources by avoiding waste and improving a.s.r.’s environmental performance; • Placing focus on waste management, making mobility more sustainable, reducing energy consumption and reducing carbon emissions; • Encouraging employees to adopt sustainable conduct outside of working hours too; • Increasing sustainable production and conduct by our suppliers.
What does the focus area CSR in the society dimension entail? • Demonstrating added value based on independent surveys conducted by the government, public interest organizations and academia in the areas of transparency and investing; • Reporting based on the guidelines of the Global Reporting Initiative (GRI); • Engaging in a dialogue with internal and external stakeholders; • Communicating transparently with stakeholders, for instance about policy conditions, via press releases and the Executive Board Report; • Mobilizing employees to volunteer their time for social projects; • Launching projects within the scope of financial selfreliance; • Contributing to the conservation of cultural and social heritage.
To ensure that we create value in the long term, we need to have and maintain a good understanding of relevant material aspects. In 2016, a.s.r. updated its list of material aspects and in the process combined this list with supporting KPIs from the Corporate Social Responsibility (CSR) focus areas.
Materiality The final list of material aspects was put together based on: • Stakeholder contacts on the basis of the stakeholder model; • The Report of the Executive Board for 2015; • Desk research by MVO Nederland; • The GRI Guidelines; • Trends and developments in society.
Management approach to material aspects The sustainability steering group bears final responsibility for the further implementation of the material aspects. After identification of the material aspects, they were linked to the KPIs (see chapter 2.5). This process revealed that a number of these aspects had already been incorporated into the KPIs and some had been incorporated in a.s.r.’s day-to-day business practices.
Determination of material aspects All information relating to policy, strategy and related indicators are related to a.s.r.’s own organization unless indicated otherwise in the report.
Harry Filon – Sustainable recovery Stakeholder segment – Suppliers – Primary process
Don Gerritsen – PRI Stakeholder segment – Public interest groups – NGO
a.s.r. subscribed to the Principles for Responsible Investment (PRI) in 2011. By doing so, it clearly undertook to integrate sustainability indicators into its investment strategy. To put this in practice, a.s.r. weighs environmental, social and governance indicators in its investment decisions. a.s.r. continues to develop in the area of sustainable investment, for instance by intensifying the dialogue with businesses in which it invests. We wholeheartedly encourage this and are looking forward to our ongoing cooperation.
‘The partnership between a.s.r. and Reinaerde brings unison, enthusiasm and inspiration for both employees and patrons of Reinaerde and a.s.r. employees. I heard an a.s.r. employee say after a day of picking apples and pears at ‘t Burgje in Odijk with Reinaerde people: ‘This was the most fun team-building event ever!‘
Financial capital • Investors: equity and loan capital • Banks: borrowings • Customers: premiums savings and fees
• Contribution to the economic stability of the Netherlands and hence to securing a financial future, e.g. by paying tax
• Product portfolio that ties in with the need in society
• Reduction in carbon emissions at head office and in the use of fossil fuels
• Climate-neutral business practices 1 1 The emission is only at our own operations (excluding Scope 3 GHG protocol).
• a.s.r. is ranked in the top 3 of relevant sustainability indices.
• Active engagement dialogues: at least seven engagement projects per year.
a.s.r. seeks to play a prominent role in sustainable business practices in the financial sector.
(eerlijkeverzekeringswijzer.nl). Of the ten largest life insurance companies in the Netherlands, a.s.r. is ranked first in the FIG in terms of sustainable investment policy. a.s.r. scored a 10 out of 10 for its policies on armaments, health and human rights.
• In July, the FIG conducted a second case study on transparency and accountability, in which a.s.r. was referred to as one of the positive exceptions within the Dutch insurance sector.
• a.s.r. will develop a new pay-and-benefits package together with HR and the
• In 2016, a.s.r. will develop a definition of ‘sustainable insurance’ for each business line that is appropriate to that business line.
• Funding of at least ten start-ups in 2016 through De Amersfoortse’s Doorgaan.nl crowdfunding platform.
The sustainability vision is discussed and will be fleshed out in collaboration with the business lines.
• Reducing the carbon footprint of the a.s.r. head office at Archimedeslaan 10 by 2% in 2016, compared with 2015.
2.5.1 Insurance a.s.r. is confident that it can justify its licence to operate by thinking in terms of customer interests and customer perception. a.s.r.’s products and services are at the basis of this licence to operate. Clarity, simplicity, efficient business processes and a robust financial position are essential in this context.
2 The emission is only at our own opertions (excluding Scope 3 GHG protocol).
Inadequate matching of content to customer needs initiatives to reduce paper output in 2017
Intro d uctio n 2. Six socially relevant branded content publications In 2016 a.s.r. achieved the increase in scope and engagement for its labels by simplifying and providing access to relevant content for prospects, customers and advisers via branded content publications such as: • Infographics and videos with prevention pointers; • School challenge for primary schools in the Utrecht area.
3. Launching at least ten initiatives to reduce paper output in 2017 a.s.r. met this target. As a part of this drive, the company launched a number of initiatives in 2016 to refer customers to the right contact channel immediately to reduce paper output. These initiatives included: • An email database that records email addresses and opt-ins from all business lines in a central location; • Thanks to a newly initiated change to the IT system in 2017 call centre agents will be able to save a calling customer’s email address and their opt-ins; • Banners and contact forms promote digital communications and allow customers to enter their email address and opt-ins; • P&C has phased out redundant/obsolete products and letters; • At De Amersfoortse Health, the group of customers who still receive paper correspondence was encouraged to switch to online correspondence.
Total funding since creation: € 1,878,418, of which cofunded by De Amersfoortse: € 205,195.
Internal reviews • Product Approval & Review Process (PARP): To offer products and services that meet the right criteria, new and existing products are tested every six weeks in the PARP Committee (see chapter 5.8.3.2). In 2016, seven new propositions, 22 product adjustments and 20 reviews of existing products were submitted to the PARP Committee for approval.
• Customer journeys In order to identify potential improvements and implement these improvements, a.s.r. will engage in a dialogue with customers about their experience with the labels a.s.r., De Amersfoortse and Ardanta.
This survey of all Dutch insurance companies and banks, conducted by the Dutch financial markets regulator (AFM) benchmarks the extent to which Dutch financial institutions focus on customer interests in their products, services and processes. a.s.r. achieved a score of 4.2 out of 5 on the Customer Centricity Dashboard for 2015/2016.
• Customer-Oriented Insurance Quality Mark This is a quality mark for providing easy-to-understand information to customers, offering insurance policies that are appropriate and providing the best possible services. a.s.r., De Amersfoortse, Ditzo and Europeesche Verzekeringen managed to retain the quality mark. In the theme study Complaints, a.s.r. finished third in the top six of large insurance companies. Ardanta does not have the quality mark, but used customer journeys to build on various initiatives to provide its customers with appropriate levels of service.
Customer journey a.s.r. organised a Complaints customer journey in 2016. The recommendations were translated into improvement actions through workshops and a telephone coach.
Having an expert, qualified and healthy workforce is a key factor in a.s.r. success in achieving its objectives. That is why a.s.r. is committed to attracting, retaining and captivating the right people, offering them extensive scope for training and development, and facilitating a healthy work/life balance.
and 6. Absenteeism and sickness frequency Absenteeism and sickness frequency are indicators of the vitality of our employees and hence of our organization. The absenteeism tracking system measuring daily absenteeism and absenteeism rate in accordance with CBS standards, which differ from the a.s.r. standards. Social and Medical Teams are in regular contact with the occupational health & safety service, the management and HR about the absenteeism and sickness frequency levels per team, department and business line.
Over the past few years, a.s.r. has launched various initiatives to reduce the absenteeism rate and the level of sickness frequency. For details on these initiatives, see later on in this chapter.
Sickness frequency 0.9 1.0 7. 50% of vacancies filled by internal candidates Starting from the same number of vacancies (300), the goal was to fill half of these vacancies (150) with internal candidates. In this context, a.s.r. invests in the personal agility of its employees and encourages them to take charge of their own sustainable employability in the labour market. It turned out that most of the vacancies were available in specific disciplines requiring specialist college or university education. As a result, a.s.r. did not have enough internal candidates to meet this KPI in the full.
Diversity a.s.r. is committed to offering people from vulnerable groups in society a place within its organization.
Sustainable employability In order to also enable employees to participate in the labour market for as long and as actively as possible, they need to be motivated and have the right skills and training background. a.s.r. creates opportunities that enable each employee to increase their chances on the labour market. In this process, employees can seek the guidance of career coaches and an extensive range of workshops and courses.
Through The New World of Work and the provision of convenience services, a.s.r. tries to contribute to a healthy work/life balance for its employees. a.s.r. put extra focus on health and vitality in 2016 through initiatives such as the national stair-climbing week, the week of work-related stress and (anti)bullying week.
All development programmes consist of modules, span a year and focus on themes such as captivating, developing, inspiring and strengthening. The modus operandi ranges from workshops, peer reviews, mentoring, individual courses, management lunches and group assignments to participation in social projects. Delegates decide for themselves what they sign up. Participation is voluntary, but not without obligation.
Trainee programme a.s.r. offers a trainee programme in which trainees spend 18 months at a business unit, during which they are involved in four different projects. This allows the trainees, who are university-educated, to build up targeted knowledge and experience. Trainees are hired specifically for a business line or discipline. After the traineeship, the trainee is offered a job. Five trainees started in 2015 and in 2016, six trainees were taken on in April and ten in November.
Leadership development In 2016 a.s.r. set up a leadership development programme which will be kicked off in 2017.
Dutch Financial Supervision Act (Wft) On 1 January 2017, a set group of front-office staff are required to meet the requirements of the new professional competence framework of the Dutch Financial Supervision Act. This means that they need to have earned professional qualifications and must be able to demonstrate that they are taking continuing education courses. In November 2016, 187 employees were Wft-certified and two employees holding a role governed by the Wft were not Wft-certified. One of these two people will leave the organization; while the second has signed up for On the Move.
This narrows down the group of potential candidates, so that a.s.r. engages only with candidates who are actually suitable for a role. a.s.r. is also making more and more use of social media to showcase vacancies and what is like to work at a.s.r. a.s.r. employees are given priority to retain knowledge and experience for the organization and to increase people’s internal agility.
Pay and benefits Based on the outcome of the survey of pay and benefits (the preference scan) in October 2015, a.s.r. initiated the project to modernize its pay-and-benefits package in 2016. a.s.r. asked the Works Council what criteria should be the pay-and-benefits package meet to qualify as sustainable and future-proof. These are: freedom of choice, fewer rules, transparency and clarity, sustainability, focus on development/growth, simplicity, mature employment relationship and competitiveness.
The redundancy plan 2015 was in force for 2016. In 2017 and 2018, The Other Plan will be different in terms of both design and scope; it will focus on development and sustainable employability. A (potential) restructuring will be divided into three stages: • My Plan, stage 1: expectation of (potential) redundancy; • My Plan, stage 2: after notice of redundancy; • My Plan, stage 3: from the time of redundancy.
policy with specific focus on integration of commercial asset management responsible investment policy (L)
If a.s.r. does not invest in a socially responsible manner, investments may not match the values and standards of our policyholders, creating the risk of loss or reputation engagement dialogues
Meeting customer needs 10. Publication of list of excluded companies and countries for companies and for countries
Therefore, the tenant satisfaction has a different value compared to 2015.
Sustainable investing at a.s.r. The a.s.r. SRI policy has been integrated into the investment practice by way of: Exclusion criteria for countries and companies a.s.r. pursues a strict exclusion policy based on controversial activities that we apply to internally managed portfolios, both for countries and companies. This policy covers producers of controversial or offensive armaments, nuclear energy (if more than 50% of a company’s revenues), gambling and tobacco. In 2016, a.s.r. analyzed and identified climate-related risks for its investment portfolio, such as stranded assets and changing business models in the mining and energy sectors. As a first step, a.s.r. expanded its exclusion policy for companies to include severe environmental breaches or the generation of 30% or more from their direct revenues from coal. a.s.r. also requires businesses to comply with international conventions on human rights and labour rights, and applies criteria related to gender equality, freedom of union, exclusion of child labour, indigenous people’s rights, etc. By the end of 2016, 186 of the screened companies had been excluded due to their involvement in human rights violations (3), labour rights violations (3), environmental violations (6), armaments (68), tobacco (15), gambling (31), coal (55) and nuclear energy-related activities (5). With regard to investments in sovereign debt, a.s.r. has excluded 81 countries that are poor performers in the annual report of Freedom in the World or have a low ranking on the Corruption Perceptions Index.
Sreening process VigeoEiris (vigeo-eiris.com), an independent agency accredited by Arista, screens companies using the a.s.r. SRI policy as a basis. The Arista Standard sets the rules for assessing evidence of transparency and verifiability of the processes involved in Responsible Investing research.
In addition, Forum Ethibel (forumethibel.org) carries out an independent audit and certification of SRI principles in a.s.r.’s investment portfolio and the engagement process on a semi-annual basis.
ESG Integration for best-in-class investments Best-in-class investing is part of the a.s.r. selection process for companies based on ESG best practices and products. a.s.r. favours companies that deliver an above-average performance in the area of ESG policy and implementation. Based on VigeoEiris research, they are classified as pioneering, best-in-class and sustainable companies using a relative, sector-based ranking for six domains of analysis: Human Resources, Environment, Market Ethics, Good Governance, Social Impact and Human Rights. A detailed description of these criteria has been posted on asrnl.com.
Voting policy A shareholders’ right to vote is essential for the proper functioning of a corporate governance system. We exercised this right whenever relevant. a.s.r.’s voting policy (asrnl.com) has been developed in accordance with the Dutch Corporate Governance Code and a.s.r.’s SRI policy. This policy is applicable to all internally managed listed equities. In 2016, a.s.r. voted at nearly 93% of the shareholder meetings held by equity investments.
Investment portfolio Moreover, a.s.r. fully endorses human rights in its business dealings, for instance by implementing various policies, such as the voting policy or the Socially Responsible Investment Policy. a.s.r. signed the United Nations Principles for Responsible Investments (UNPRI) in 2011. a.s.r. always verifies, with the assistance of an independent international screening agency, whether companies included in its investment portfolio are not involved in human rights abuses.
Sustainable real estate 11. Tenant satisfaction rating of at least 7.0 a.s.r. Real Estate Investment Management (a.s.r. REIM) seeks to rent properties to committed, mindful and satisfied tenants. In this context, it periodically performs customer satisfaction surveys of tenants of residential properties (ASR DCRF), retail and office properties (ASR DPRF and ASR PF) and lessees and leaseholders (rural real estate).
The most recent surveys have shown that the scores achieved were as follows (on a ten-point scale): ASR DCRF: 7.1; ASR DPRF: 7.2; rural real estate: 7.5. In other words, these business lines met the target. With a score of 6.5, the Office business line fell short of the mark; its key objective is to improve upon this score. This target will apply in the coming year.
12. National property portfolio asbestos-safe by 2020 a.s.r. REIM seeks to minimize the presence of asbestos in its existing Dutch property stock. To achieve this, the entire portfolio of retail, office and residential properties has been made asbestos-safe. Some buildings in the rural real estate portfolio may still contain asbestos. In order to make its rural real estate portfolio fully asbestos-safe by 2020, the goal for 2016 was to conduct an asbestos screening and to perform asbestos abatement procedures at no less than 5% of at-risk addresses. a.s.r. exceeded this goal in 2016 was amply achieved: 27% of the addresses in the portfolio were declared asbestos-safe.
Making real estate more sustainable a.s.r. REIM seeks to make the properties in its portfolio more sustainable at natural moments using as many green solutions as possible using sustainable materials and methods and with a keen eye for the risks associated with asbestos and soil pollution.
The ambition is to achieve and retain Green Star status (highest rating) for all three funds.
If our services place insufficient focus on climate issues, a.s.r. may not be perceived as committed to society, creating the risk of loss of reputation 14. Saving on fossil fuel consumption (carbon emissions) with respect to mobility on 2015
14. Achieving a saving of at least 5% on fossil fuel consumption related to employee mobility in 2016 compared with 2015 Mobility (business travel and commuter travel) accounts a major proportion of a.s.r.’s carbon footprint: this is calculated based on the fuel consumption of the various vehicles.
Intro d uctio n a.s.r. can achieve the greatest impact on the further reduction of direct carbon emissions by cutting mobilityrelated emissions.
The increase in commuter mileage was due to the relocation of Europeesche Verzekeringen to Utrecht (see Housing). The increase in airplane mileage was due to the IPO, as a.s.r. gave multiple analyst presentations in Europe and beyond.
Business travel 36.6 32.98 1 In 2016, electricity use was offset by the use of Swedish wind energy, using emission factor zero.
Housing a.s.r. completed the sustainable renovation of its head office in 2016. As a result, the building’s energy efficiency label improved from G to A++ and the building was awarded a BREEAM Excellent rating.
Energy The 30% energy efficiency improvement under the MYA3 covenant (see Appendix C) was achieved back in 2014. a.s.r. achieved further savings in 2016 by closing the Amsterdam branch and through the sustainable renovation of the head office. In 2017, the Long-Term Energy Storage (LTEO) (see page 273) and the power plant will be better matched to further streamline the operation of all installations in the office.
Geothermal energy In 2016, a consortium of organizations submitted a quality document to the Dutch Ministry of Economic Affairs within the scope of the research being conducted into whether geothermal heat/electricity can be used to heat or cool the office building, thereby making it virtually carbon-neutral.
In addition to drafting the annex, a.s.r. verified suppliers using FIRA and by asking relevant sustainability questions were in procurement processes in 2016 in accordance with the a.s.r. procurement policy and within the scope of CSR.
Socially Responsible Procurement (SRP) The SRP policy is implemented as follows: • a.s.r. uses a fixed set of (category-specific)
environmental and social criteria; • a.s.r. informs suppliers in advance that these criteria form part of the selection process; • a.s.r. challenges suppliers to come up with alternatives that are a good match for contemporary criteria.
Estimated value of payments € 311 million1 1 This does not include the primary costs of loss adjusters, crash repair companies and benefits paid by a.s.r. product lines such as occupational disability, P&C and pensions.
At portfolio level, a.s.r. maintains a conservative reinsurance cover for catastrophes. The duration of reinsurance contracts is an adequate match for the duration of P&C contracts. As a result, even relatively sudden changes in climate risk can be priced adequately and transferred if necessary.
Liability risk associated with climate change a.s.r.’s P&C portfolio is largely made up of retail customers and SMEs. National and provincial government, authorities and energy companies, do not mesh with the a.s.r. P&C risk appetite. The underwriting of municipal liability within the Large Corporates team poses a potential risk. At present, the P&C business provides cover to 15 municipalities.
The claims-made principle also remains in effect: • A claim must be filed during the policy period; • The circumstance or event must have taken place during the (retroactive) policy period.
In the case of higher-risk organizations (municipalities, construction companies, industry, etc.) are concerned, the P&C business exercises extreme restraint in granting retroactive cover. It is usually capped at no more than five years prior to the effective date of the policy. This sharply reduces the risk of prior-year claims, when compared to the loss occurrence system. The product may still pose a risk if a causal connection can be demonstrated between operations and climate change. The first lawsuits related to this topic in the United States (where liability is usually more likely to be awarded than in the Netherlands) have not yet led to a demonstration of this causal connection. If this connection, liability cover also requires damage to property or personal injury. Pure financial losses are excluded under a.s.r.’s liability policy.
Contribution to financial education and self-reliance of financially vulnerable groups in the
Failure to contribute to the support of financially vulnerable groups in society may lead to a.s.r. being perceived as not committed to society, creating the risk of consequential losses to its reputation
If the capital position falls short of the mark, there is a chance that the buffers may be inadequate to absorb all risks, leaving a.s.r. with insufficient resources to meet all its financial obligations 16. Transparency Benchmark 2016 • At least 100 points in total; • At least half of maximum number of points for
a.s.r. participated in the Transparency Benchmark for the fifth time last year and moved up from a ranking of 136 to a ranking of 60. This improvement was partly due to the limited assurance EY provided on the CSR-related KPIs and the GRI G4-based reports.
Achieved • Number of participants: 181 employees; • Number of hours: 2,034.
In this domain, a.s.r. worked with such partners as FC Utrecht, Feyenoord, Humanitas, the National Institute for Family Finance Information (Nibud) and Stichting De Tussenvoorziening, which connect a.s.r. employees with patrons and provide them with (long-term) support.
a.s.r. Foundation One way in which a.s.r. applies its motto ‘helping by taking action’ in concrete terms is through the a.s.r. Foundation. The a.s.r. Foundation executes the company’s CSR policy by: • Inspiring, motivating and mobilizing employees to volunteer their time for social projects. a.s.r. provides financial support and let employees volunteer during working hours; • Organizing projects to increase financial self-reliance.
Employees can submit an incentive plan for a financial contribution to a volunteer project in their own neighbourhood; • Social Team Activity (STA) On the basis of this initiative, a.s.r. employees go to work at all manner of non-profit organizations, including Reinaerde, Zonnehuizen, Careyn, Abrona, Pameijer and Resto VanHarte; • Sports Employees can take part in sports projects for charity, such as the Utrecht Science Marathon, Singelloop, City Swim, Classico Giro and the Finance Run.
Strategic Report | 2.6 Assurance report of the independent auditor 56
Based on the procedures we performed, nothing has come to our attention that causes us to believe that the Sustainability Information does not present, in all material respects, a reliable and fair view of: • The policy and business operations with regard to sustainability; and • The thereto related events and achievements for the year ended 31-12-2016, in accordance with the Sustainability Reporting Standards of the Global Reporting Initiative (GRI) and the supplemental internally applied reporting criteria as disclosed in chapter 2.5 and the appendices on page 269 of the Annual Report.
Our scope The Sustainability Information comprises the chapters 1 ‘Introduction’ and 2 ‘Strategic Report’ and the appendices C, D, E, F, G, H and I of the Annual Report 2016.
Our responsibilities for the review of the Sustainability Information Our responsibility is to plan and perform the review assignment in a manner that allows us to obtain sufficient and appropriate assurance evidence for our conclusion.
We apply the ‘Dutch Supplemental rules for audit firms with respect to assurance assignments (RA)’ (Nadere voorschriften accountantskantoren ter zake van assurance opdrachten) and accordingly maintain a comprehensive of quality control system including documented policies and procedures regarding compliance with ethical requirements, professional standards and other applicable legal and regulatory requirements.
Strategic Report | 2.6 Assurance report of the independent auditor 57
The level of assurance obtained in review engagements is therefore substantially lower than the assurance obtained in an audit engagement.
We have exercised professional judgment and have maintained professional skepticism throughout the review, in accordance with Dutch Standard 3810N, ethical requirements and independence requirements.
Our main procedures consisted of: • Performing an external environment analysis and obtaining insight into relevant social themes and issues and the characteristics of the organization; • Evaluating the appropriateness of the reporting policy and its consistent application, including the evaluation of the results of the stakeholders’ dialogue and the reasonableness of management’s estimates; • Evaluating the design and implementation of the reporting systems and processes related to the Sustainability Information; • Inquiry of management and relevant staff at corporate and business division level responsible for the sustainability strategy, policies and performance; • Inquiry of relevant staff responsible for providing the information in the Report, carrying out internal control procedures on the data and consolidating the data in the Sustainability Information; • An analytical review of the data and trends submitted for consolidation at corporate level.
Ernst & Young Accountants LLP signed by drs. R.J. Bleijs RA
The financial statements for 2016, which the Executive Board has submitted to the Supervisory Board, cover the period from 1 January 2016 to 31 December 2016. The Executive Board met at least twice weekly in 2016 for consultations. The following routine topics were addressed in the meetings of the Executive Board in 2016: • Customers and complaint reports; • Employees and development, contacts with Works
The Executive Board also regularly addresses issues related to the network of advisors that a.s.r. prefers to work with on a regular basis. It is crucial that we provide appropriate and timely services to them and actively request their feedback if we want to improve the processes underlying our services to them on a continual basis.
Market, strategy and business The Executive Board reviews business with the different business lines every quarter. These reviews consist of in-depth discussions of market developments and developments in results (both financial and non-financial), such as budgets, premium income, costs and interestrate developments. Based on its strategy, a.s.r. decided in 2015 to create a general pension fund (Dutch: APF), and to establish as well as establishing a fiduciary asset management business. This was further discussed and developed in 2016. The general pension fund ‘Het nederlandse pensioenfonds’ was granted authorization to operate by the Dutch Central Bank (DNB) on 30 September 2016. The Efteling amusement park was the first customer of ‘Het nederlandse pensioenfonds’. Various players, including the DNB, feel that consolidation in the Dutch insurance market is a must and an inevitable fact of life. Given its robust capital position and efficient operations, a.s.r. is perfectly positioned to consider potential consolidation opportunities provided that they are in line with its risk appetite and meet other requirements with respect to capital, risk and returns.
The Executive Board discussed and approved the strategic acquisitions that were made in 2016. a.s.r. announced the acquisition of Corins and SuperGarant last year. The acquisition of Corins helps a.s.r. to strengthen its position in the commercial P&C insurance market. Corins has been successful as an underwriting agency in the Dutch co-insurance market since 2003. The acquisition of SuperGarant strengthens a.s.r.’s position as market leader in the income protection insurance market. In its 30 years of operating as an intermediary and underwriting agent, SuperGarant has developed into an insurance specialist with a focus on P&C and income protection insurance for the retail market and a provider of related absenteeism and occupational health and safety services.
Low interest rates affect investment returns. In addition, the contraction in the life portfolio is a general phenomenon in the market. The Executive Board devoted a great deal of time to discussing the future developments of a.s.r.’s operating result and the following issues/dilemmas: • Growth of market share and improvement of margins; • Cost savings; • Targeted acquisitions; • Innovation and potential new markets (or sub-markets).
The Executive Board also regularly discussed various developments in the Dutch insurance market, also with the Supervisory Board, especially the consolidation of the Dutch insurance market in the light of the (first) bid by Nationale Nederlanden Group for Delta Lloyd in October 2016. Some potential acquisitions were executed, and some were not. Every year the Executive Board and the Supervisory Board also have an off-site strategy meeting.
Developments in premium income/cost ratio In the Executive Board’s opinion, costs should be viewed in relation to premium income and earnings. Acquisitions, for instance, may come with acceptable cost increases – and increases in premium income – and costs incurred to raise our level of professionalism that can be ‘recouped’ can also tie in with the envisaged cost development. Costs can also be made more flexible, for instance by using SaaS solutions. The insurance market is fiercely competitive. To stay relevant, a.s.r. not only needs to be able to offer its customers attractive prices, but also needs to provide attractive service levels. After all, insurance is all about creating a safety net for unforeseen circumstances. For this reason, the Executive Board considers it of great importance that a.s.r. continues to offer high-quality products and services in the future.
Solvency a.s.r.’s risk appetite, which is based on Solvency II and a prudent approach to risk management, has been transposed into requirements for solvency, liquidity and returns; solvency takes priority over profit and profit takes priority over premium income. For this reason, a.s.r. performs an in-depth Own Risk and Solvency Assessment (ORSA) every year, in which context various scenarios are defined and extrapolated, including scenarios with lower interest rates. Separately, a.s.r. frequently analyzes the impact of potential changes in the level of UFR on the Solvency II ratio and uses this analysis in decisions regarding exposure to market risks. a.s.r.’s risk appetite was also an important criterion in the Executive Board’s tactical and strategic decision-making in 2016. Solvency levels remained acceptable and more than adequate in 2016 thanks to the organization’s prompt and adequate response to external developments based on the chosen risk appetite and the associated risk-mitigating measures.
HR a.s.r.’s employees are the driving force of the organization. They help customers through unexpected events and difficult times, and work to improve products and processes every day. By responding to customers quickly and giving them the right answers, putting themselves in the customer’s shoes and offering them products and solutions that they actually need, our people make an important contribution to turning a.s.r. into the socially relevant insurer that we want to be.
One of the topics the Executive Board discussed in 2016 was employee engagement based on the engagement score. The engagement tool has been reviewed and this year the Executive Board decided to introduce a wider culture survey. This survey measures an organization’s success by looking at various dimensions. The scan identifies a number of cultural aspects that have been shown to affect the success of an organization. We will use this scan to measure the mission, commitment and ability to adapt The scan was carried out for the first time in January 2017.
The Executive Board also places special focus on the development and succession of senior management. One of the ways of doing this is the annual senior management survey, in which the individual members of the senior management team are first discussed within the Executive Board and then jointly with the Supervisory Board. The discussions focus on personal growth, combined with mobility within a.s.r. In 2016, one managing director took on a new role, two left a.s.r. and two were recruited externally.
Works Council is very open and constructive. The Works Council is informed of many issues at an early stage, allowing it to use its influence on the decision-making process in an effective manner. The Executive Board very much appreciates these constructive and open discussions, and the time and energy that the Works Council spends on issues that are impactful for a.s.r. Key themes that were discussed with the Works Council in 2016 were a.s.r.’s privatization and potential IPO, various acquisitions and legal mergers. In 2015, the board and the council discussed a survey of employee preferences for different fringe benefits. The outcome of this survey was the basis for a further dialogue with the Works Council on the simplification and modernization of the pay and benefits package, as well as the collective employment agreement. The strategy of a.s.r. and innovation and digitalization were among other issues discussed with the Works Council in 2016.
CSR and sustainability The Executive Board is keenly aware of a.s.r.’s role in society and the sustainable and ethical choices that come with this. The organization is committed to forging sustainable relationships with our customers and advisors (the intermediary channel) every day. To achieve this, we are continuously working to improve our services and offer sustainable insurance products. The Executive Board’s non-financial targets are described in chapter 2.5. Our key driver is to be a socially relevant insurance company. This also encompasses our investment policy and our insurance and banking products, as well as the procedures for selecting social projects in which we can participate. Environmental issues came to the fore in various discussions about sustainability. The environment was a factor in decisions we took in relation to the renovation of the head office at Archimedeslaan. This was reflected in the building being awarded the BREEAM Excellent label. The re-opening of the head office took place in June 2016. It has also been decided to take measures to further reduce the carbon emissions caused by our lease car fleet and our investments.
The insurers have agreed that they will also publish the figures for mobilization of customers with unit-linked insurances that they report to the AFM. a.s.r. does this on its website asrnederland.nl. a.s.r. prioritizes quality. This means that we strive to talk to all our customers and be truly convinced that they understand the situation and that they make well-founded decisions. We are adjusting our communication approach by means of intensive customer research and listening to our customers during multiple contact instances. This increases the effectiveness and quality of our service and advice. a.s.r. also works closely with intermediaries in this regard, as they can give expert advice based on the customer’s personal financial position.
Innovation and digitalization a.s.r. will continue to invest in innovation and digitalization to further enhance our customer processes and move with the times, and to reflect changing customer behaviour and identify and respond to latent customer needs. Innovation and digital disruption can present both opportunities and potential threats. a.s.r. aims to make use of its scale in the coming years, as it is large enough to be able to invest and have an impact, but also small enough to be agile and adaptable. The Executive Board has explicitly chosen to continue to develop and innovate the existing business as we move forward and to do so in a sound manner, while at same time experimenting in a transformational or disruptive manner for the long term. This will put us in a much better position to adapt to developments and enable us to respond quickly to game-changers or even initiate these ourselves.
The Executive Board accordingly decided to implement a number of organizational changes in early 2017, including the formation of a separate Innovation and Digitalization business division to be led by a senior manager.
IPO Since a.s.r. was nationalized in 2008, all our people have worked hard to build a financially solid and socially relevant insurance company that would be ready to return to the private sector at some point in time. The commercial drive, capital position and profitability of the different a.s.r. business lines and of a.s.r. as a whole are developing well and a.s.r. was one of the best-positioned insurers in the Dutch market in 2016. a.s.r. is well on its way to becoming the ‘other insurer’ that treats customers fairly and helps them by taking action. The accomplishments over the past few years show that a.s.r. was ready for privatization. In November 2015, Dutch Finance Minister Jeroen Dijsselbloem submitted his plan to the Dutch Parliament. In this plan he announced his intention to sell a.s.r. and to ask a.s.r. and its shareholder NLFI to start preparing for an IPO in the first half of 2016. The IPO took place on 10 June 2016 (see chapter 4.1). The IPO had no impact on the service provision to our customers. We will continue on the path we have chosen by demonstrating every day that we are committed to building an insurance company that helps people and that works continuously to develop sustainable relationships with its customers.
Intro d uctio n 3.2 Business environment 3.2.1 Macro developments in the Netherlands
Economy The Dutch economy continues to improve steadily. Gross domestic product (GDP) rose by 2.1% in 2016. Despite the impact of economic imbalances across the Eurozone, many of the main economic drivers, including consumption, corporate investments, government spending and exports, contributed to the stable economic performance of the Netherlands in recent periods. The Dutch economy grew by 2.3% in Q4 2016 compared to the same quarter in 2015.
House prices reached a record high in August 2008. Subsequently, they fell to a low in June 2013. Since then, residential property prices have shown an upward trend. House prices are 12.0% below the record level of August 2008 and 12.0% higher than the low point in June 2013. The average price level of owner-occupied houses in August 2016 was the same as in June 2005.
Labour market improves further The number of jobs held by employees and self-employed rose by 53,000 in Q4 2016. The number of new job vacancies for employees increased by nearly 46,000 and by 7,000 for the self-employed, while unemployment fell by approximately 8,000 per month. In Q4 2016, the average number of jobs stood at 10.1 million jobs. The number of jobs has now grown for 12 quarters in a row. Since Q1 2014, a total of approximately 306,000 new jobs have been created. For the first time since early 2012, unemployment has fallen below 500,000. Year-on-year, unemployment is now nearly 100,000 lower, but still 100,000 higher than shortly before the onset of the recession in August 2008, when unemployment reached the lowest level in the recent years (310,000).
Financial sector The Dutch financial sector is large (measured by GWP) compared to other EU countries. During the 2008 financial crisis, key banks and insurers were nationalised or received state aid, but the process of re-privatisation has started. As a result of the financial crisis, regulators, politicans and the general public are focusing increasingly on transparency, customer care, simpler products and moderate remuneration in the financial sector. As of 1 January 2016, Solvency II regulations came into force after many years of preparation. The Solvency II regime comprises requirements for insurance companies. The introduction of the new regime is meant to harmonize the European insurance market, increase the protection of policyholders and improve risk awareness in both the governance and management of insurance companies. Solvency II sets more sophisticated solvency requirements and will form an integral part of the risk management of insurance companies.
Intro d uctio n include (a) intermediaries (advisors, mandated brokers and actuarial consulting firms), (b) the distribution networks of banks (‘Bancassurance’), (c) direct sales, (d) collective insurance partners, such as sports federations and travel agents) and (e) other channels such as post offices and retailers.
In all markets except health insurance, intermediaries account for most of the commercial business line volumes and a significant portion of the retail line volumes. The typical (‘traditional’) intermediary is a small business with a physical office and limited or no online presence. Some of the larger intermediaries also operate as mandated brokers and have branded insurance products.
For key trends in the insurance industry, please see chapter 2.2.
The Dutch non-life insurance market (including health insurance) was the fourth largest non-life insurance market in Europe in 2015 measured by GWP, behind Germany, the United Kingdom and France.
Market The overall P&C market measured by GWP is € 10.6 billion. Between 2011 and 2015, the Dutch P&C market declined with 2% CAGR, primarily as a result of the economic downturn (lower insured sums), increased transparency and increased pressure on premiums. The outlook for 2017 is fairly stable with limited growth expected in the mid-term, in line with GDP development. Growth potential is somewhat hampered by the (already) high penetration for most product groups and limited room for premium increases due to fierce competition in the market.
The P&C insurance market is competitive, with the top six insurers having a combined market share of approximately 66% and few foreign market participants. In recent years new, specialized market participants and brands have entered the retail P&C segment, often as subsidiaries of larger insurers.
Distribution In the Dutch P&C insurance market, most products are distributed via advisors, authorized agents and through direct distribution. The distribution channel mix varies for retail and commercial market segments. In terms of new production, the direct channel has become increasingly important in the retail market segment (47% direct, 30% via advisors, 16% via Bancassurance and 6% via other), in particular for the sale of less complex products. In terms of the portfolio size, the direct channel is not growing (but remains stable at around 20% of the portfolio), mainly as a result of the high churn rate in the direct channel. In the commercial market segment (especially SMEs, which represent the majority of the P&C volume), intermediaries remain dominant, as the commercial market generally requires more complex and customised products.
The disability market is mature and concentrated, with the top three market participants controlling 63% of the market in 2015.
Intro d uctio n a.s.r. has a leading position in the disability market with the brand De Amersfoortse. The six largest market participants all provide the full product range (disability self-employed, sickness leave and Group disability WIA/WGA).
Distribution Most products in the disability insurance market are distributed through intermediaries. For the product categories sickness leave and Group disability, there is a requirement for customers to obtain advice, given the relatively complex products offered. With respect to selfemployed disability, there is an option for sophisticated clients to buy disability products via an execution-only structure directly from an insurer, without any advisory service.
Health is a highly regulated market. The Dutch healthcare system distinguishes two types of insurance: basic and supplementary coverage. All Dutch residents are required to have basic health insurance coverage, although coverage is free for minors. Basic coverage is the same across insurers as coverage is government driven. Consumers are free to decide whether they purchase supplementary coverage. Supplementary coverage, which has higher margins than basic insurance, is often offered in packages and varies by insurer. Insurers are required to accept all Dutch residents for basic coverage.
A government-run system of risk equalisation enables the acceptance obligation and provides insurers with compensation for excessive costs resulting from their customer base.
Market In 2015, 13.4 million adults in the Netherlands paid for basic coverage. In the same year, 84% of adult Dutch residents paid for supplementary coverage. The CAGR in terms of GWP of the health insurance market in the Netherlands was 2% between 2011 and 2015. The average combined ratio of Dutch health insurers calculated in accordance with DNB methodology amounted to 98.1% in 2014 and 99.1% in 2015.
Distribution Consumers have two options to take out health insurance: individually or through a collectively agreed scheme.
Products are sold, for the most part, via healthcare collectives with employers, customer groups and unions, which together represent approximately 6.5 million insured (65% of the collective health insurance market). Health insurance products for employers making arrangements for their employees are distributed through intermediaries and the direct channel. Health insurance products in the retail segment are primarily distributed through the direct channel (including aggregators).
The Dutch life insurance market was the 12th largest life insurance market in Europe in 2015 measured by GWP, accounting for 2% of the European life insurance market. The Netherlands has the 12th highest life GWP per capita in Europe, excluding premiums paid into non-commercial pension funds/schemes. The GWP of the life insurance market in the Netherlands amounted to € 14,7 billion in 2015, and the life insurance market represented 20% of the total Dutch insurance market. Total assets of life insurers amounted to € 385 billion at 31 December 2015. The CAGR of the Dutch life insurance market in terms of GWP was -9% between 2011 and 2015. With a 12% market share in 2015, a.s.r. was the sixth largest insurer in the life insurance market.
Group life is mainly pensions. The Dutch pension system consists of four pillars: (a) a mandatory state pension scheme (‘Pillar 1’), (b) employer-based pension schemes (‘Pillar 2’), (c) voluntary pension facilities with fiscal benefits (‘Pillar 3’) and (d) voluntary pension facilities without fiscal benefits (‘Pillar 4’). Insurance companies only offer products from Pillars II, III and IV.
Market Pillar 2 consists of employer-based pension schemes. In 2015, Dutch insurance companies generated € 6.8 billion measured by GWP. IORP’s accounted for the remaining market share. GWP in the group life market has grown between 2011 and 2015, mainly due to the transfer of assets from smaller and liquidated pension funds to commercial insurance companies. These assets are incorporated in GWP as single premiums, which have shown a strong increase between 2013 and 2015. Recurring unit-linked premiums have decreased due to changes in regulation and the success of IORPs.
Distribution Group life products are mainly distributed through the intermediary channel, in particular by a limited number of intermediaries. The pension intermediary market is consolidating. Actuarial intermediary firms, auditors and branded specialists (e.g. Willis Towers Watson, Aon, Mercer) are the main channels for corporate clients, while the SME market provides most of the clients for small insurance advisory firms.
The combined market of the top six providers of individual life insurance measured by GWP was approximately 77% in 2015.
Distribution In the Netherlands, individual life insurance products are sold through intermediaries (including advisors), Bancassurance, direct and other channels. The intermediary channel is the main distribution channel for individual life products and accounted for approximately 55% of life insurance GWP in 2015. The number of intermediaries has declined following the introduction of a ban on commissions for intermediaries.
Market Approximately 70% of the adult Dutch population (35 years and older) has funeral insurance and average premium levels vary from € 5 to € 15 per month. Of this 70%, approximately 50% are considered to be underinsured as a result of non-indexing. New business levels are low, mainly as a result of lower appetite for this product among younger generations (only 46% of the people younger than 35 has a funeral insurance), the intermediary commission ban (incentive for sale removed) and cost for advice is high in comparison to monthly premium level. Funeral insurance is characterised by low premium levels, predictable cash flows and relatively stable portfolios.
The Dutch investment management market stood at more than € 1,700 billion AuM as of September 2015. These assets are mainly managed by three types of parties: (a) in-house asset managers of sector pension funds, (b) foreign and domestic asset managers, and (c) insurers. In general, the business model in the Dutch investment management market is shifting from distribution of investment products towards the actual management of assets.
Products Discretionary mandates represented approximately 85% (approximately € 400 billion of AuM) of the Dutch investment management industry at 31 December 2013, while investment funds represented 15% (approximately € 70 billion of AuM). In addition to discretionary mandates and investment funds, intermediary and fiduciary services for institutional customers are a third product category within the Dutch investment management market. Fiduciary management is an approach to investment management that involves an asset owner, such as a pension fund, appointing a third party to manage its assets on an integral basis.
Distribution The customer categories of the Dutch market serviced by the investment management industry consist of institutional investors and retail customers. For investment funds, customers also include institutional investors and retail customers. Institutional investors include insurance companies, pension funds, banks and others. Dutch pension funds are among the largest pension funds in the world, investing worldwide and applying a wide range of modern investment techniques. Retail banking is the dominant distribution channel for investment funds, representing around 80% of Dutch fund assets.The other 20% is distributed amongst insurance companies, private banks and brokers.
Dutch Retail Savings Market The Dutch retail savings market was € 340 billion as at 30 November 2015. About 78% of Dutch people have savings. This is the highest percentage in Europe. Dutch residents increased the amount of their savings by € 4.5 billion in 2015. There are two types of savings accounts: (i) with agreed maturity and (ii) redeemable at notice. The savings redeemable at notice is the largest group of savings (around 85% of the market in November 2015).
Dutch Residential Mortgage Market Outstanding mortgage loans as a percentage of GDP in the Netherlands stood at 94.4% in 2015, making the Netherlands a country with one of the highest mortgage debt to income ratios. Traditionally, the Dutch residential mortgage market consists of different types of mortgage loans, including annuity mortgage loans, linear mortgage loans, (bank) savings mortgage loans, investment mortgage loans and interest-only mortgage loans.
To improve stability in the Dutch residential mortgage market and to decrease private household debts, the Dutch government decided that as of 1 January 2013, interest on new mortgage loans is only tax deductible provided the loan’s principal is fully repaid within 30 years, by way of annuities or linear repayment.
Profile The Non-life segment consists of non-life insurance entities and their subsidiaries. These non-life insurance entities offer non-life insurance contracts, including policies insuring risks related to motor vehicles, fire, travel and leisure, liability, legal assistance, occupational disability and medical expenses. The most significant entities of the Non-life segment are ASR Basis Ziektekostenverzekeringen N.V. and ASR Schadeverzekering N.V. In October 2016 Europeesche Verzekering Maatschappij N.V. and N.V. Amersfoortse Algemene Verzekering Maatschappij were merged to form ASR Schadeverzekering N.V.
a.s.r. strives to leverage its deep understanding of the Dutch non-life markets to apply risk-based pricing to achieve profitable growth in line with GDP growth. a.s.r. aims to strengthen its presence in non-life markets by improving connectivity with the intermediary channel, forward integration with service providers and by actively promoting its products through its own direct business, Ditzo.
General a.s.r. was the third largest general provider of P&C insurance products in the Netherlands in 2015 as measured by GWP, with a market share of 8.8% (8.5% in 2014). a.s.r. offers a broad range of P&C insurance products under the brands a.s.r., Ditzo and Europeesche Verzekeringen.
Products a.s.r.’s broad P&C insurance product range offering can be divided into the following policy categories: • Motor a.s.r.’s motor policies for retail and commercial customers provide third-party liability coverage for motor vehicles and commercial fleets, including property damage and bodily injury, as well as coverage for theft, fire and collision damage; • Fire a.s.r.’s fire policies for retail and commercial customers provide coverage for a variety of property risks including fire, storm and burglary. Private coverage is provided on both a single-risk and multi-risk basis, with multi-risk policies providing coverage either for loss or damage to dwellings and damage to personal goods; • Travel and Leisure a.s.r. offers travel insurance policies for retail customers and is a market leader in the travel and leisure market in the Netherlands; • Other a.s.r. also offers other non-life insurance products such as transport (only goods in transit), liability, agricultural and construction motorized vehicles, construction all risk and assistance.
SME customers and families often seek advisory support and are served by advisors and/or mandated brokers. In the Dutch market, aggregators are frequently used for orientation and act as mandated brokers.
a.s.r. has a strong position in the intermediary channel (in 2015, a.s.r. was the market leader with a 24% market share in retail P&C and had the largest market share of 14% in commercial P&C as measured by GWP. The a.s.r. brand is a.s.r.’s P&C brand for intermediaries, and a.s.r.-branded products are also sold under brand names of mandated brokers (including aggregators) with a high average duration of customer relationships and high average customer retention.
Travel and leisure insurance is sold under the brands Europeesche Verzekeringen and a.s.r. via the same channels as a.s.r.-branded P&C products; Europeesche Verzekeringen products are also sold by travel agents. Individual customers looking for direct online purchase and online services are best served via Ditzo. Ditzo had 77,116 P&C customers in 2016.
Strategy On the P&C insurance front, a.s.r. endeavours to leverage its existing strengths and to achieve a combined ratio below 98%. The P&C business is expected to grow in line with GDP development.
Investing in SaaS solutions a.s.r. is implementing an SaaS solution for the P&C business. We believe that this SaaS solution will improve the robustness of our P&C systems and reduce the fixed cost base of the P&C business, while decreasing costs overall. An SaaS solution is also expected to lead to an improvement in connectivity with intermediaries and customers through the creation of service concepts such as customer portals.
Commercial insurance In 2016, a.s.r. acquired Corins to improve its position in the commercial mid-sized P&C insurance market. Historically, commercial insurance products have not been a priority for a.s.r. With the acquisition of Corins, an underwriting agency operating in the co-insurance market, a.s.r. aims to achieve selective and controlled growth in this subsegment of the P&C market, in particular through sales of commercial insurance products to mid-sized corporates, while continuing to apply underwriting discipline and the a.s.r.’s ‘value over volume’ strategy even in this subsegment.
Products a.s.r.’s disability business line comprises two primary categories: Self-employed (including self-employed and retail customers) and group disability. For both product categories, in addition to insurance products, a.s.r. offers the services of in-house medical advisors, re-integration managers, vocational experts and external parties offering reintegration, health and safety services, combined with skilled claim handlers, for all policyholders to assist with their reintegration. In Group disability, a.s.r. also has a joint venture with another insurer called ‘Keerpunt’ (a workplace reintegration services provider), in addition to its own inhouse specialists.
• Self-employed a.s.r. provides disability coverage to self-employed individuals for loss of income due to disability. In the event of disability, customers are provided with a payment until recovery, death or in the event of permanent disability up to advanced age or the retirement age. a.s.r. offers self-employed disability products for all professions. Individual employees can insure themselves for disability protection, for instance for mortgage payment protection and supplementary wage protection (WIA excess) in addition to that provided under social legislation, i.e. income protection against disability for employees whose disability risk is not insured by their employers; • Group disability (sickness leave and long-term disability) a.s.r. provides employers with two categories of products: (i) sickness leave disability products, which cover the first two years of employers’ mandatory salary payments in the event of disability of employees (SME market), and (ii) long-term group disability products that offer coverage until retirement age depending on the coverage (SME market and corporate market). With the BeZaVa Act coming in force, a.s.r. has launched a new 12-year proposition.
Other 1 1 a.s.r. also offers products related to sickness leave and group disability via mandated brokers. Due to the importance of this distribution channel, a.s.r. presents these sales as a part of a separate product category (‘Other’).
New product a.s.r. has launched the 12-year proposition for SMEs under the De Amersfoortse brand. This is an insurance which takes care of the employer’s liability for sickness leave, followed by WIA liability for both permanent employees and temporary employees for a period of 12 years. After those 12 years, the responsibility for benefit payments to a sick employee transfers to public insurance (UWV).
General a.s.r. was the eighth largest provider of health insurance products in the Dutch market in 2015 as measured by GWP, with a market share of 1.5%. a.s.r. offers health insurance products under the brands Ditzo and De Amersfoortse.
Products a.s.r.’s health business line comprises two primary categories: • Basic health insurance a.s.r. offers basic health insurance coverage, the terms are mandated by law; • Supplementary health insurance a.s.r. offers a range of health insurance products covering risks and expenses not covered by the Dutch basic health insurance scheme, including physiotherapy, restorative dental care, spectacles, maternity care, medical assistance abroad and orthodontics.
Research & Development In 2016 Health started the ‘Health Academy’ with the aim of improving knowledge and understanding of all aspects of the health insurance industry. It also serves as one of the building blocks for maintaining and/or improving the overall consistency and performance of our products and services. The ‘Health Academy’ offers several courses that all employees follow. The courses are aimed at facilitating improved understanding of the sector, better products and services, risk management and follow-up of regulatory requirements.
Distribution The distribution mix of Health consists of the direct distribution channel under the Ditzo brand, focused on individual customers, while distribution under the De Amersfoortse brand is effected through the use of intermediaries and is mainly focused on self-employed and SME customers.
Intro d uctio n capital in the Health division without any capital injection from the Group.
Maintain brand appreciation a.s.r. aims to take advantage of the high degree of customer contact to offer the highest levels of customer service enabling it to maintain and, where possible, improve the brand appreciation of both Ditzo and De Amersfoortse. Health insurance is a product with a high degree of customer interaction. a.s.r. is convinced that the customer’s perception of Ditzo Health and De Amersfoortse as measured by NPS leads to increased appreciation of a.s.r.’s overall brands and customer service.
Profile The Life segment comprises all life insurance entities and their subsidiaries. These entities offer insurance policies that involve asset-building, asset reduction, asset protection, term life insurance and funeral expenses for consumers and business owners. These operations are being conducted by life entity ASR Levensverzekering N.V. (‘a.s.r. Leven’) and, since 2015, by De Eendragt and AXENT. In the Life segment, De Eendragt Pensioen N.V. (1 July) and AXENT Nabestaandenzorg N.V. (1 October) were merged into ASR Levensverzekering N.V.
Within the Pensions product line, a.s.r. offers product solutions for pillars 2, 3 and 4, consisting of defined contribution products (werknemerspensioen) and defined benefits (insured solutions and the general pension fund (het nederlandse pensioenfonds).
In addition, a.s.r. selectively offers pension funds the option of selling their DB pension liabilities to a.s.r., within pre-determined capital and return thresholds through customized contracts. This allows companies to remove pension liabilities from their balance sheets and decrease future balance sheet volatility. a.s.r. effectuated € 195 million in 2016 through the transfer of the AstraZeneca pensions.
• Defined contributions: a.s.r. provides pension products based on defined contribution with recurring premiums, in which benefits are based on investment returns on specified funds or are guaranteed pensions. DC schemes are characterized by a pre-defined contribution by employers, providing them with a high degree of certainty. With respect to products where benefits are based on investment returns, both market and insurance risks are borne by the customers. DC products are ‘capital-light’, with a small percentage of a.s.r.’s total capital attributable to DC products.
Distribution Distribution of pension products to SMEs and other corporate customers under the De Amersfoortse and a.s.r. brands takes place only via advisors. a.s.r. utilizes smaller local advisors, actuarial offices and larger national pension advisors.
Preserve value and enhance cost coverage in existing defined benefits book a.s.r. has an explicit focus on the preservation of value in its existing DB pension book. The company believes that cost control is crucial to managing its existing DB portfolio. a.s.r. is the first Dutch pension insurer to outsource the back-office functions of its existing portfolio, enabling cost reduction and increasing the amount of variable costs relative to fixed costs. a.s.r. aims to increase the customer service level in the existing book to protect brand value. This increase in service level is included in the BPO contract with Infosys, explicitly covering timelines, quality and completeness of customer services and communication with participants. This will also be facilitated via digital communication. The migration of six legacy back-office administrative functions was completed at the end of 2015. The migration of two additional systems might enable further reduction of the cost base, i.e. the migration and decommissioning of the existing book and legacy ICT systems of De Amersfoortse and the existing book and legacy ICT systems of De Eendragt acquired in 2015.
a.s.r. looks to cover its costs through retention, entering into selective new businesses and acquisitions (e.g. De Eendragt) and the pursuit of pension fund buyouts (e.g. Chevron, AstraZeneca) to reduce the cost per policy. Retention, acquisitions and buyouts are planned only if projections shows that ROE targets will be met. The achievement of these targets is managed and monitored by a multidisciplinary team (Pensions, Risk Management and Financial Markets).
Gain market share in capital light pension solutions In the pension market there is a shift towards capital light products. a.s.r. believes that it is well positioned
Intro d uctio n to gain market share in this segment with APF, DC and IORP propositions, through high service delivery, cost effectiveness and execution power, while meeting its pricing policy. The IT back-office system for capital-light pension products consists of SaaS solutions and is low cost. It primarily consists of variable costs. Because of the low costs, a.s.r. believes that it can offer attractive prices to the market, benefiting from a strong solvency position and socially responsible investment policy. Furthermore, a.s.r. believes that for each of its capital-light pension products, a.s.r. offers a high level of services, including, in certain cases, self-service and dedicated mid-office teams.
Strategy execution in 2016 In line with the formulated strategy a.s.r. has been successful within a changing environment with regulatory changes, low interest rates and a continuously changing pension market. a.s.r. has been able to deliver the milestones needed.
Preserve value and enhance cost coverage in existing defined benefits book The outsourcing to Infosys was launched in 2015 and proved its success in 2016 by delivering controlled processes, significant improvements in operation times and variable costs within budget. To continue to build on this success, the related IT systems will be made part of the outsourcing programme to ensure more sustainable continuity. This will reduce maintenance expenses and will further enhance management focus.
The migration of the acquired company De Eendragt is well underway we expect to complete the integration in 2017, a year earlier than planned. Part of the integration strategy is the retention of De Eendragt customers by offering them existing a.s.r. products. Customers chose a.s.r.’s new capital-light products in 80% of the cases. The migration of the active participants of De Amersfoortse’s legacy systems were migrated to WnP in 2016. The existing inactive portfolio will be migrated in the coming years, which will further reduce maintenance expenses and future costs due to regulatory changes. a.s.r. pensions has a proven track record in migrating legacy systems, with six legacy systems already migrated and closed down. a.s.r. is continuing to reduce complexity in the existing portfolio by offering more basic products to our customers and closing the more complex products. DB contracts are accepted or renewed using a strictly controlled process.
Gain market share in capital-light pension solutions The launch of the APF, het nederlandse pensioenfonds, in 2016 was another step in the strengthening of our strategy, by giving new and existing customers the option of an alternative defined benefit product. Het nederlandse pensioenfonds welcomed its first customers, De Efteling and DAS, both well-established names in the Netherlands, in early 2017.
a.s.r. has continued to develop its modern DC proposition and it will continue to be competitive in the DC market.
a.s.r. has welcomed 425 new customers with € 20 million new premiums, stepping up growth in this market. a.s.r. is further strengthening and focusing its sales force on new capital-light products. The 99.5% retention rate of the a.s.r. DC proposition was well above expectations in 2016. The NPS is likewise increasing, and the STP percentage is well above 80%. All contributing to a continuously improving competitive position in both the SME and corporate markets.
Products a.s.r.’s individual life product line primarily consists of an in-force book of individual life portfolios. The active product range of the individual life product line is limited and consists mainly of sales of its term life product or sales of immediate annuities to customers whose traditional life savings products are maturing. Customers with expiring policies and customers who would like to switch prior to expiry are either offered an insurance product, including more transparent unit-linked products or a bank saving product, suited to new customers. a.s.r. has ended the active sale of unit-linked and universal life capital policies.
a.s.r.’s remaining in-force service book in the individual life insurance portfolio, in addition to the categories listed above, consists of the following products: • Pension-related endowments a.s.r.’s savings pension-related life insurance products are traditional individual savings plans with a single premium payment and benefits based on a guaranteed interest rate and include non-guaranteed profit-sharing;
Unit-linked/Universal life portfolio In July 2015, the Dutch Ministry of Finance published an Order in Council (Algemene Maatregel van Bestuur), effectively making the guidelines regarding the mobilization of customers legislation. In line with the Order in Council, a.s.r. and its intermediaries are continuing to actively approach individual unit-linked policyholders to inform them of the prospects of the relevant policy for its remaining term. Partially as a result of a.s.r.’s active efforts to reach out to policyholders since 2010, a.s.r. had reduced the number of its outstanding active unit-linked policies from approximately 1.1 million at year-end 2008 to around 230,000 policies with recurring premiums at year-end 2016. The AFM has reported that the ’recovery advice‘ provided by a.s.r. to mobilize customers is of good quality.
Strategy The strategy of individual life is based on maximum retention of the current value of the individual life book and a cost effective operation model. In order to achieve this, a.s.r. has two primary strategic initiatives: Optimize customer satisfaction To maximize the value of the individual life book, a.s.r.’s strategy is to maximize customer satisfaction. a.s.r. believes that maintaining customer satisfaction is crucial for the efficient management of how customers behave when their existing policy expires, which can extend profitable cash flows. To maximize the provision of personalized service, a.s.r. intends to increase the services it offers to its customers. When an individual life policy expires, in collaboration with a.s.r. Bank, a.s.r. continues to offer solutions suited to individual customer needs, whether through a life insurance product or a bank saving product (either tax incentivized or basic internet savings). Of the expiring individual life policies, the retention ratio of customers with respect to a bank or individual life product was 25% in 2016. Focusing on customer satisfaction, a.s.r. also continues to strive to make its services more accessible and easier to use for its customers.
General a.s.r. acquired three blocks of funeral business (de Facultatieve and AXENT were acquired in 2012 and 2015 respectively, and the insurance portfolio of NIVO was acquired in 2016) and realized significant cost synergies from these acquisitions in recent years. In addition, a.s.r. intends to shift remaining policies previously issued under the a.s.r. brand to the Ardanta book (the majority of 3.5 million policies were transferred in 2011). The final portfolio of 13,000 funeral policies from the Individual Life department is scheduled for conversion in the first quarter of 2017. a.s.r. is the only active major mainstream insurance company in the funeral insurance business in the Netherlands and its primary competitors are also funeral service providers. a.s.r. offers funeral insurance products under the Ardanta brand. a.s.r. administered 6.5 million policies (including 2.2 million of policies of AXENT and 300,000 of policies of NIVO) in 2016.
Cost effectiveness Minimizing the cost base is crucial in order to maximize the value of the portfolio. a.s.r.’s strategy is to maintain a lean funeral organization, located in Enschede, and a low-cost IT system that already services over six million policies. a.s.r. believes that the cost per policy of its funeral business is one of the lowest in the market. a.s.r. aims to continue to focus on maintaining the low cost base of its funeral portfolio while maintaining its good customer service. In the coming year, a.s.r. intends to migrate NIVO and De Amersfoortse to this low-cost platform to achieve anticipated cost synergies.
Unlocking the value of acquired books a.s.r. has a strong track record of successfully acquiring and integrating blocks of business. In the past, a.s.r. has integrated various funeral portfolios into its own operations and IT systems. a.s.r. has acquired three large blocks of funeral business (de Facultatieve, AXENT and NIVO) since 2012. Two of these are already fully integrated into a.s.r.’s low-cost IT systems that include a low percentage of variable costs. a.s.r. believes that capital synergies have already been unlocked and the asset portfolio has been re-risked based on a.s.r.’s strong capital base and risk management framework. By adding blocks of business, a.s.r. believes that it will be able to realize substantial cost synergies by leveraging its existing lowcost base and gaining capital synergies through the natural hedge of mortality risks versus longevity risks, as well as by leveraging its skill in managing liability-driven investments.
Products The main categories of products offered by a.s.r. Bank include the following: • Immediate annuities a.s.r. Bank’s immediate annuities are fiscal savings products involving the investment of a lump sum to provide the customer with fixed payments per month, quarter, half-year or year. The lump sum is the result of a pension savings scheme that is tax deductable, provided that the savings are paid into a fund that can
Intro d uctio n only be withdrawn as an annuity. The payments that the customer receives are taxed at progressive Dutch personal income tax rates of up to 52%; • Deferred annuities a.s.r. Bank’s deferred annuities are fiscal savings products for pension savings schemes. The Dutch government grants tax deduction for the savings, provided that savings are ultimately paid into a fund that can only be withdrawn as an annuity. Tax deduction in the Netherlands is only allowed if, without additional savings, the pension income is set to be less than 70% of the customer’s current income; • Savings products a.s.r. Bank offers savings accounts with a variable interest rates, and term deposits with a term of one to ten years and a fixed interest rate; and
• Retail investments a.s.r. Bank conducts, on an execution-only basis, orders for the purchase and sale of the investments offered by various asset managers. These are primarily linked to mortgages.
In 2016, a.s.r. Bank added Extra Pensioen Beleggen, a taxdriven retirement to its product line with. This product is distributed exclusively through intermediaries.
Products a.s.r. is active in the retail mortgage market. Mortgage loans are issued by a.s.r. Leven, which is a part of the Life segment. The mortgage portfolio is therefore owned by the Life segment and Bank. Mortgages are distributed only via the intermediary channel. ASR Hypotheken (ASRH) provides mortgage loan services such as acceptance, credit analysis and arrears management in respect of a.s.r.’s residential mortgage portfolio, which includes annuity mortgages, linear mortgages, interest-only mortgages and bank annuity mortgages. All other operations related to the mortgage portfolio are conducted by Dutch mortgage service provider Stater N.V. (part of ABN AMRO Group N.V.) on the basis of a contract entered into between Stater N.V. and a.s.r. Leven.
a.s.r. offers mortgages to customers to diversify and optimize a.s.r.’s asset mix. a.s.r. plans to continue its strategy of originating a substantial amount of mortgages every year to align its assets with the long-term liabilities of some of its insurance operations. Furthermore, since arranging a mortgage is a life event for a customer, a.s.r. aims to stay active within this market to further improve its brand recognition and potentially capitalize on crossselling opportunities.
Asset Management a.s.r.’s asset management business comprises two organizational units: a.s.r. Group Asset Management (‘a.s.r. GAM’) and a.s.r. Real Estate Investment Management (‘a.s.r. REIM’).
• Mutual funds for retail customers a.s.r. GAM manages a number of mutual funds that offer customers either a tailored solution (via balanced funds) or exposure to a specific asset class.
a.s.r. GAM expanded its customer portfolio and increased its AuM with the acquisition of BNG Vermogensbeheer in January 2016. BNG Vermogensbeheer was already a leading asset manager focused on the public sector, with a customer portfolio valued at nearly € 5 billion. BNG Vermogensbeheer had a diverse customer portfolio, largerly made up of lower-tier local authorities, health
The total AuM managed by a.s.r. REIM amounted to € 4.2 billion as at 31 December 2015 and € 4.0 billion as at 31 December 2014, with € 2.9 billion and € 3.0 billion respectively managed for a.s.r.’s own account, and € 1.3 billion and € 1.0 billion respectively for third parties.
a.s.r. owns the largest private land portfolio in the Netherlands, comprising a total of 35,566 hectares. As at 31 December 2016 ASR Property Fund had a total of € 0.5 billion in AuM (69% of which was managed for unitlinked policy holders of a.s.r.), ASR Dutch Prime Retail Fund had € 1.3 billion in AuM (60% of which was managed for third parties), ASR Dutch Core Residential Fund € 1.0 billion (23% of which was managed for third parties) and ASR Dutch Mobility Office Fund had € 0.2 billion in AuM (0% of which was managed for third parties).
Strategy While the focus of a.s.r.’s asset management activities has historically been limited to servicing the assets of the insurance segments, a.s.r. aims to enhance its asset management capabilities and expand third-party assets under management, leveraging the track record of a.s.r.’s real estate asset management activities in the management of assets for third parties.
For 2017 a.s.r. REIM aims to grow its assets under management, both for a.s.r.’s own account as for third parties, by acquiring properties, portfolios, funds and or management contracts. Obtaining an expanded AIFMD licence in October 2016 will help a.s.r. REIM to expand its fiduciary asset management activities by expanding the international real estate portfolio managed for a.s.r. and its partners and customers. These steps will increase the diversification potential for a.s.r., ASR Property Fund N.V. and a.s.r.’s partners and customers.
a.s.r. REIM also aims to further expand its CSR policy and aims to obtain GRESB Green Stars for its managed real estate investment funds.
Profile The Distribution and Services segment includes the activities related to the distribution of insurance contracts and intermediary services and is carried out by PoliService B.V., VKG, Boval, Corins and SuperGarant. In 2015 a.s.r. signed a commitment for the sale of SOS International which was completed on 25 January 2016. The SOS International business is primarily providing 24/7 worldwide travel assistance.
VKG VKG is a full service provider and a mandated broker to a number of Dutch insurance companies, including a.s.r.’s P&C insurance business. As at 31 December 2016, VKG acted as service provider and as a mandated broker for 24 financial institutions and distributes products from 94 insurers, banks and other credit institutions through VKG’s relationships with intermediaries. VKG also offers access to the insurance exchange and mortgages. Based on these associations, VKG provides administration and consulting services to advisors in respect of their commercial and back-office operations. As at 31 December 2016, VKG had agreements with approximately 3,000 advisors in the Netherlands, 428 of which have fully outsourced their administrative functions to VKG.
Corins Corins has been successful as an underwriting agency in the Dutch co-insurance market since 2003. The company services over 60 brokers. Corins will continue to represent the insurers it currently does business with. The acquisition of Corins is in line with a.s.r.’s strategy expand its business in the Dutch commercial P&C insurance market through organic growth and selective acquisitions. The co-insurance activities of a.s.r. and Corins are perfectly complementary and the acquisition fits well within a.s.r.’s investment guidelines.
SuperGarant In its 30 years of operating as an intermediary and underwriting agent, SuperGarant has developed into an insurance specialist with a focus on P&C and income protection insurance for the retail market and a provider of related absenteeism and occupational health and safety services. SuperGarant works in close collaboration with SME sector associations and has a direct line of contact with franchise and purchasing organizations.
Operating expenses associated with ordinary activities -549 -538 2.0% Provision for restructuring expenses -17 -30 -43.3%
Profit/(loss) for the year attributable to holders of equity instruments 659 620 6.3%
New business was higher in both the Non-life and the Life segments. In the Non-life segment, new business rose to € 220 million, 5.8% higher than in 2015, while the Non-life combined ratio remained strong at 95.6%. The largest increases in sales were in the occupational disability business and in the P&C business. In the Life segment, new business (measured in Annualized Premium Equivalents APE) came in at € 152 million, a € 60 million increase on 2015. This growth was predominately related to the transfer of the NIVO funeral insurance portfolio (APE: € 52 million) and renewals of existing pension contracts (€ 11 million), especially in Q4 2016. In line with the strategy to focus on the defined contribution (DC) pension business, the level of new DC production nearly doubled compared to 2015 thanks to the Werknemers Pensioen proposition.
Operating expenses fell to € 569 million from € 575 million (-1.0%). Excluding the impact of non-ordinary items, operating expenses increased to € 549 million (2015: € 538 million). This increase was the result of a.s.r.’s acquisitions (De Eendragt, AXENT, Dutch ID, BNG Vermogensbeheer, SuperGarant, Corins and the portfolio transfer of NIVO), which increased the regular cost basis by € 13 million. Excluding this impact, operating expenses were down by € 2 million. The measures taken to reduce regular costs and to create a more flexible cost base are on target.
The number of internal FTEs decreased by 189 (5.2%) to 3,461 FTEs as at 31 December 2016 (end 2015: 3,650 FTEs). Acquisitions in 2016 (SuperGarant, Corins and BNG asset management) added 50 FTEs. Adjusted for the number of internal FTEs of businesses sold in 2016 (a.s.r. Vastgoed Ontwikkeling and SOS International 161 FTEs in total), the decrease would have been 28 FTEs.
2 Solvency II ratio at the beginning of 2016 (‘day-one 2016’).
Operating return on equity remained strong at 14.1% (2015: 14.4%), exceeding the target of ‘up to 12%’. IFRSbased return on equity stood at 17.0% (2015: 17.8%). The addition of profit for the year, partly offset by the dividend, discretionary interest payments and a negative impact from IAS 19-related actuarial gains and losses due to a decrease in the discount rate, led to an overall positive effect on equity. Earnings per share were up, with operating result per share increasing to € 2.77 from € 2.46 (+12.6%).
Organic capital creation: 301 million 2016 after dividend 2016 before dividend
The increase in the solvency ratio in 2016 can be explained as follows: • Operational capital generation: increase in Eligible Own
Funds (EOF) of € 242 million caused by realized organic growth that is equal to the unwinding of the current existing portfolio (excluding the net capital release) plus value-added new business (impact solvency ratio: +7%).
• Technical movement: decrease in EOF of € -110 million due to the unwind of the UFR effect on the life insurance portfolio. Also the equity charge increased which was caused by the runoff of the transitional measure. Total impact on the solvency ratio equals -4%.
• Dividend 2016: decrease in EOF of € 187 million is due to the proposed dividend that will be distributed to shareholders in 2017.
Medium-term targets During the IPO process and a.s.r.’s subsequent listing on Euronext, the a.s.r. management communicated a number of medium-term targets. In 2016, a.s.r. delivered on its promises by exceeding its medium-term financial targets.
Dividend for 2016 Management proposes to distribute a cash dividend of € 187 million for the full year 2016; this is a € 17 million increase compared to last year. The proposed dividend also exceeds the guidance given at IPO, which involved a discretionary dividend for 2016 of € 175 million. The increase in dividend is driven by strong operating results and reflects management’s confidence in the performance of the business.
To enable future dividend distributions, a.s.r. seeks to attain a cash position at holding level of at least € 350 million. At year end, the cash position at holding level was € 354 million.
Combined ratio - P&C (a.s.r. Schade, Ditzo and Europeesche Verzekeringen) 98.5% 98.5% 0.0%-p
The combined ratio stood at 95.6% (2015: 95.0%) and remained strong, absorbing hail and water damage claims. The cost ratio further improved by 0.6 percentage points to 8.3%, the commission ratio increased slightly and the claims ratio increased. Excluding the impact of hail and
Gross written premiums in the Non-life segment increased to € 2,433 million from € 2,350 million (+3.5%). This increase was largely related to the P&C motor business and due to an increase in premiums in the mandated brokers distribution channel. The occupational disability business also contributed to the growth as a result of the slight economic recovery and fewer bankruptcies, which led to higher employment levels and higher wages. Despite the growth in new policies at Ditzo, Health insurance business premiums declined by 4% due to the equalization system.
New business in the Non-life segment increased by 5.8% to € 220 million and was driven by continued growth in sales of Vernieuwd Voordeelpakket (P&C), mainly via the intermediary channel (up 9% from 2015). Growth of new business included the higher contribution from the Doorgaanverzekering (occupational disability and Health) insurance product. This product enables business owners to combine health insurance with occupational disability, and was launched successfully at the end of 2015.
Operating expenses improved by 1.4% to € 204 million thanks to continuing focus on cost efficiency. The provision for restructuring expenses fell by € 9 million to € -6 million, primarily in the P&C business. In the first half of 2016, the Europeesche Verzekeringen business was further integrated with the transfer from Amsterdam to the a.s.r. office in Utrecht.
• The operating result increased by € 110 million to € 551 million as a result of acquisitions and the positive effect of higher gains on swaptions; • Gross written premiums increased by 10.1% to € 2,013 million also due to the acquisitions; • Operating expenses were down 1%, absorbing the additional cost of the acquired businesses and integration costs; • Profit for the year declined to € 492 million due to a high level of realized capital gains on equity investments in 2015.
Profit/(loss) for the year attributable to holders of equity instruments 492 560 -12.1%
The Operating result amounted to € 551 million, up from € 441 million last year. The increase was mainly due to higher gains on swaps and swaptions (€ 73 million) and the contribution of an additional € 22 million from acquisitions
The successful integration of 2.4 million AXENT policies led to benefits in terms of capital, diversification and
Profit/(loss) for the year attributable to holders of equity instruments 5 8 -37.5%
a.s.r. Bank offers savings and investment products to retail customers; several of these products are tax-efficient. Savings deposits increased by € 212 million, rising to € 1,386 million from € 1,174 million (+18%), despite the low interest rate on savings. The growth was partly due to a net inflow in the annuity savings account and to the Extra Pensioen Uitkering (Extra Pension Benefit) product. This retail investment product serves as a supplement to state or company pension plans.
At € 6.2 billion, assets under management in investment funds at ASR Nederland Beleggingsbeheer (ANB) were fairly stable (year-end 2015: € 6.3 billion).
The Real Estate Investment Management business (‘a.s.r. REIM’) manages a well-diversified real estate portfolio consisting of rural, retail, residential and office investments in the Netherlands. The ASR Dutch Mobility Office Fund was launched in late in 2016. This fund offers institutional investors the opportunity to invest in highquality offices near mobility hubs. a.s.r. REIM’s assets under management increased by 10% to € 4,638 million (2015: € 4,210 million) thanks to revaluations and the acquisition of the offices portfolio of Basisfonds Stationslocaties C.V. from Dutch Railways (NS).
1 The Banking and Asset Management segment consists of all the banking activities and the activities related to asset management, including investment property management. These activities include ASR Bank N.V., ASR Vastgoed Vermogensbeheer B.V., ASR Nederland
Beleggingsbeheer N.V. and ASR Hypotheken B.V. ASR Vermogensbeheer B.V. (formerly BNG Vermogensbeheer B.V.) has also been added to this segment with effect from 20 May 2016.
(in € million) 2016 2015 Delta - of which associated with ordinary activities - - -
The Distribution and Services segment made a greater contribution to the operating result in 2016. Following the acquisitions of VKG and Dutch ID (2015), SuperGarant (distribution of occupational disability) and Corins (distribution and underwriting of commercial P&C), this segment has gained substance in line with a.s.r.’s strategic objectives. The acquisitions fit into a.s.r.’s strategy of creating value through controlled growth in the non-life portfolio by using the enhanced distribution channel and simultaneously increasing premium income.
1 This segment includes the financial intermediary business of Poliservice B.V., Van Kampen Groep Holding B.V. and Dutch ID B.V. (with effect from 19 November 2015). The activities of B.V. Nederlandse Hulpverleningsorganisatie SOS International were classified as discontinued operations. B.V. Nederlandse Hulpverleningsorganisatie SOS International was sold in the first quarter of 2016. The activities of SuperGarant
Verzekeringen, SuperGarant Zorg (closing date: 1 September) and Corins (closing date: 3 October) have been included in this segment as from the respective closing dates.
Profit/(loss) for the year attributable to holders of equity instruments 2 - -
The € 14 million decline in the operating result to a loss of € 102 million from a loss of € 88 million was primarily due to the strengthening of a.s.r.’s capital structure in 2015. a.s.r. issued € 500 million in subordinated Tier 2 notes in the third quarter of 2015. The related interest component led to a € 17 million increase in interest expenses in 2016. Furthermore, a.s.r.’s own pension scheme (IAS 19), influenced by a higher discount rate, resulted in a higher interest accrual (up € 9 million) and contributed to the decline.
The Real Estate Development segment consists of property development activities and is divided into continuing operations and discontinued operations. The 2015 comparative figures are in line with the current split of property development activities into discontinued and continuing operations. a.s.r. no longer defines real estate development as part of its core business, which is why this business is in run-off. The results from this business are not included in the operating result.
The notes to the financial statements contain a detailed description of the risk management system, the risk profile and quantitative and qualitative information related to the identified risks including the own risk and solvency assessment Risk Management System (see chapter 5.8).
Risk management in 2016 a.s.r. manages the risk profile of a.s.r., its associates and its business lines to ensure that the risk profile remains within the risk appetite and the underlying risk tolerances and risk limits. The risk appetite is defined for financial and non-financial risks, and describes the level of risk that a.s.r. is willing to accept. The risk appetite statements were updated by the Executive Board and approved by the Supervisory Board in 2016. The risk profile is discussed in the risk committees on a quarterly basis. The nonfinancial risk profile is reported to the Non-Financial Risk Committee (NFRC) and the financial risk profile is reported to the Financial Risk Committee (FRC). The integrated risk profile is reported to the a.s.r. Risk Committee. In the event of breaches, the committees are mandated to decide on corrective actions. This is how the risk governance structure ensures that the risk profile is monitored effectively and timely action is taken when needed.
a.s.r. has adopted a combined top-down (strategic risk analysis) and bottom-up (control risk self-assessments) approach to identify the major risks to which a.s.r. is exposed. Output from the strategic risk analysis and control risk self-assessments provides insight into the overall risk profile of a.s.r. and the risk profiles of the underlying legal entities. The main risks are translated into ‘risk priorities’ at group level and are monitored throughout the year in the a.s.r. Risk Committee.
Based on the output of the ORSA, a.s.r. draws conclusions regarding its capital adequacy. Furthermore, riskmitigating measures are identified as part of the ORSA process and integrated into the relevant risk management cycles. Risk management cycles are embedded in day-today business to structurally measure, analyze, monitor and evaluate the identified risks against the risk appetite.
To gain reasonable assurance regarding the accuracy of model outcomes in accordance with Solvency II technical standards, a.s.r. applies model validation and other mitigating measures. The primary scope of model validation consists of best-estimate and solvency capital requirement models.
In Q1 2015, a.s.r. Bank reported an incident regarding a breach of minimum capital requirements in 2015 due to an error in the valuation techniques. After detecting the error, the bank promptly corrected this and informed the Dutch National Bank (DNB). DNB published its decision to impose a fine of € 350,000 on the bank on 23 May 2016. Since then, a.s.r. Bank has taken adequate measures to prevent such incidents.
In 2016, a.s.r. made efforts to further improve the effectiveness of its operational risk control framework by taking a more risk-based approach. The operational risk policies were updated to support this approach, by putting focus on the identification, analysis and management of key risks. The management of the business lines evaluated their key risks and controls according to these policies. Also, to improve insights into financial reporting risk, a.s.r. launched initiatives to enhance efficiency to create integrated, automated and real-time insights into the effectiveness of the risk management systems. In 2017, a.s.r. will continue to focus on finding opportunities to improve the management of operational risks.
Risk priorities The Executive Board defines a.s.r.’s risk priorities annually based on the strategic risk analysis and bottom-up control risk self-assessments of the legal entities. The actual status of the risk priorities and progress on the defined actions is reported to the a.s.r. Risk Committee on a quarterly basis. The most important risk priorities are described below.
a.s.r. will adjust its product portfolio and distribution channels as quickly and efficiently as possible to meet the changing needs of customers and to achieve the planned cost reductions as premiums fall.
In a joint effort with advisers, a.s.r. approaches customers to encourage them to spring into action. a.s.r. reminds customers of the financial status of their unit-linked policies and notifies them of any options to change or terminate their policies. By conducting in-depth customer surveys and listening to customers at various moments of interaction, we adjust the way we communicate. That results in a higher level of effectiveness and quality of service and advice. In 2016, a.s.r. also joined the digital Unit-linked Policies Recovery Advisory Desk (Loket Hersteladvies Beleggingsverzekeringen), an initiative of the Dutch Association of Insurers, which gives customers free and independent advice on their options for changing their unit-linked policies.
Insecurities in financial market and interest rate developments Unforeseen political developments and/or macroeconomic developments combined with decreased market liquidity due to the limited ability of the banks to provide funding, pose the threat that financial markets become volatile and that this could, in turn, lead to a deterioration in a.s.r.’s solvency.
Solvency II regulation may be intensified (e.g. with regards to mortgages, government bonds, UFR), or a difference in interpretation may exist between a.s.r. and regulators, which could have a negative impact on a.s.r.’s solvency position or create volatility in same. This is due to the fact that the Solvency II regulation has not been fully defined and there are still a few issues up for discussion.
a.s.r. has organizational measures in place to ensure regulatory compliance. Representatives take place in industry- wide commissions that discuss and advisce on upcoming rules and regulations. Internal committees monitor the implementation of new rules and regulation. The availability of capacity is monitored continuously to have sufficient resources to process all regulations in a timely manner.
The focus is on prevention, detection and timely intervention to prevent incidents or mitigate impact of information security risk. a.s.r. has IT controls in place that are regularly tested in order to secure effectiveness. Also sessions are helt within the organization to create awareness amongst employees of how to work with confidential information. a.s.r. cooperates with other organizations to monitor the developments in cybercrime and to take adequate and timely measures when required.
Risk appetite Statement ASR Nederland N.V. 2016 1 ASR Nederland N.V. is now and in the long term a socially desirable organization. Where the governance of ASR
Nederland N.V. is established in a way that paramount importance is given to the customer’s interests and that the interests of all stakeholders are carefully and sustainably considered.
2 ASR Nederland N.V. only has solid and understandable products. The proposition is cost-efficient, useful, safe and reliable for customers, the intermediary as well as for ASR Nederland N.V.
5 ASR Nederland N.V. exclusively does business with partners who comply to the appointing- and procurement policy of
ASR Nederland N.V. In the case of outsourcing, ASR Nederland N.V. verifiably complies to the outsourcing policy and a sound operational management is ensured.
7 ASR Nederland N.V. has a minimum ECAP-ratio (degree of certainty 99.5%) of 130%.
10 ASR Nederland N.V. (Group) has at least a single A-rating according to the S&P Capital model as applied by a.s.r.
12 ASR Nederland N.V. has a maximum double leverage of 135%.
13 ASR Nederland N.V. can clear at least € 1 billion liquidities in a one month period, taking the contractual cash flows and a worst case liquidity scenario (redemption of insurance products, withdrawal of savings, collateral) into account.
14 ASR Nederland N.V.’s activities result in a risk-adjusted return on risk-adjusted capital (RARORAC) larger than the periodically recalibrated limit.
The a.s.r. Compliance Officer reports directly to the CEO. In addition, the a.s.r. Compliance Officer is formally required to report to the chairman of the Audit & Risk Committee to safeguard the independent position of the compliance function and enables it to operate autonomously. The a.s.r. Compliance Officer is entitled to escalate critical compliance matters to the highest organizational level or the Supervisory Board.
Responsibilities and duties The mission of the compliance function is to enhance and ensure controlled and sound business operations and to safeguard a.s.r.’s reputation.
Intro d uctio n derived from them (‘rules’) by providing advice and devising policy; • Monitoring compliance with rules. The compliance function prepares a detailed list and performs an assessment of the compliance risks and how they are managed, taking a.s.r.’s objectives and the rules as a basis. As part of this, it makes use of a compliance risk and monitoring framework; • Managing compliance risks by developing adequate compliance risk management, including auditing and, if necessary, making arrangements related to management and actions to be taken; • Raising a greater sense of awareness in order to promote a culture of integrity; • Coordinating contacts with regulators in order to maintain effective relationships with them.
The compliance charter sets out the responsibilities, duties and governance of the compliance function at ASR Nederland N.V. The a.s.r. Compliance Officer ensures that the charter is approved by the a.s.r. Risk Committee and the Audit & Risk Committee. The compliance charter was updated and approved in 2016.
Reporting The compliance function reports quarterly on compliance matters and progress made on the relevant actions at Group level, supervised entity level and at division level. The quarterly report at division level is discussed with the responsible management and scheduled for discussion by the Business Risk Committee.
In 2016, a.s.r. strengthened its corporate governance ahead of the initial public offering (IPO). The a.s.r. Articles of Association have been amended and the Supervisory Board Rules and Executive Board Rules have been updated. a.s.r. has also entered into a Relationship Agreement with NLFI, and has adopted the Policy on fair disclosure and bilateral dialogue with shareholders. Furthermore, a.s.r. has implemented a defence mechanism in the form of a preference shares foundation.
On September 2011, the Dutch State transferred all of the shares to NLFI in exchange for depositary receipts for those shares. NLFI is responsible for managing the shares and exercising all rights associated with these shares under Dutch Law, including voting rights. Since the date of nationalization, the Dutch Minister of Finance has indicated that the investment was intended to be temporary and that the Group was to be returned to the market as soon as reasonably possible. In November 2015, NLFI and the Dutch Minister of Finance concluded that all conditions for the privatization of the Group had been met. In the following parliamentary debate in January 2016, the Dutch Parliament agreed to the exit strategy proposed by the Dutch Minister of Finance based on the advice of NLFI, after which the Dutch Minister of Finance formally asked NLFI and a.s.r. to start the sale process through an IPO.
NLFI The Dutch State holds an interest in a.s.r. through NLFI. NLFI is responsible for managing these shares and exercising all rights associated with these shares, including voting rights. In view of NLFI’s position as the owner of a majority or a substantial part of the shares for a period of time after the IPO, certain arrangements have been agreed in a Relationship Agreement, which replaced an earlier memorandum of understanding between NLFI and a.s.r. The Relationship Agreement, except for a few specific clauses, will terminate if and when NLFI directly or indirectly holds less than 10% of the shares. The Relationship Agreement contains arrangements with respect to: • a.s.r.’s corporate governance; • Defence measures; • Dividend; • The orderly disposition of shares by NLFI after the IPO; and • The exchange of information.
Anti-takeover measures a.s.r. and ASR Continuity Foundation (Stichting Continuïteit ASR Nederland) (the ‘Foundation’) have concluded an agreement under which the Foundation can acquire preference shares. This call option on preference shares is
Intro d uctio n currently a measure that could be considered a potential protection of a.s.r. against acts that are, in the opinion of the Foundation, actually contrary to the interests of a.s.r., its business and its stakeholders. The Foundation is entitled to exercise the option on preference shares in such a way that the number of preference shares acquired under the call option will never exceed the total number of shares that form the issued capital of a.s.r. at the time of exercise of the call option, less the number of preference shares already held by the Foundation at that time (if any) and minus one. Among other things, in the event of exercise of the option on the preference shares by the Foundation, the Executive Board and the Supervisory Board will be given the opportunity to determine their position with respect to, for example, the announcement of a public offer for shares in the capital of a.s.r. or the legitimate expectation that such a public offer will be announced without agreement on the offer having been reached with a.s.r. or the offer being supported by a.s.r., or an activist a.s.r. shareholder (or group of activist a.s.r. shareholders acting in concert) directly or indirectly representing at least 25% of the ordinary shares forming part of the issued share capital of a.s.r. (in each case to the extent this is actually contrary to the aforementioned interests of a.s.r., its business and its stakeholders). The Boards will then be able to examine and implement alternatives. The Foundation has an independent board. (For more information please see chapter 7).
Composition According to a.s.r.’s articles of association, the Supervisory Board should consist of at least three members. The Supervisory Board currently consists of four members. The Supervisory Board has drawn up a profile for its size and composition, taking into account the nature of a.s.r.’s business, its activities and the desired expertise and background of its members. The full profile of the Supervisory Board is available on asrnl.com, as Annex A of the Rules of procedure: Supervisory Board of ASR Nederland N.V.
After the departure of Margot Scheltema in September 2015, Herman Hintzen was appointed as a supervisory director on 1 January 2016. Herman Hintzen has a background in the financial services sector. There were no further changes to the composition of the Supervisory Board in 2016.
Education and evaluation The Supervisory Board performs an annual selfassessment. A self-assessment with external guidance is carried out every three years. The self-assessment for 2016 was internal. The assessment was based on written input from the Supervisory Board and the Executive Board and an oral elaboration by all members of the Supervisory Board and the CEO. The following aspects were assessed: • Composition of the Supervisory Board: strengths and weaknesses; • Effectiveness of the Supervisory Board processes: information-gathering, decision-making and focus on core themes; • Advisory role to the Executive Board on important subjects; • Role of employer: strengths and weaknesses.
The overall impression that emerged from this selfassessment was positive. In 2017 the self-assessment will be performed with external guidance.
Independence and conflicts of interest In 2009, Cor van den Bos announced that his role as Chairman of the Supervisory Board of CED might cause a conflict of interest if CED-related issues were to be discussed by the Supervisory Board. For this reason, no information relating to the intended sale of SOS International was shared with him and the matter was discussed in his absence. On 26 January 2016 a.s.r. announced that it had sold SOS International to CED.
C. (Kick) van der Pol Chair of the Supervisory Board Member of the Selection & Appointment Committee and the Remuneration Committee
C.H. (Cor) van den Bos Vice-Chair of the Supervisory Board Chair of the Audit & Risk Committee
Cor van den Bos (1952) is a Dutch national and served on the Executive Board of SNS REAAL N.V. until August 2008, where he was responsible for all insurance operations. Cor van den Bos is the Chair of the Supervisory Board of CED, a claims-processing manager, and of Noordwijkse Woningstichting, a housing corporation. He is also ViceChairman and a Non-Executive Member of the Board at the investment firm Kardan N.V.
Education and evaluation The members of the Executive Board took individual courses in 2016 as part of their continuing education (CE). In addition, much attention was devoted to knowledgebuilding in the areas of investment and asset management, and to potentially interesting developments, including the impact of the low level of interest rates and hedging policy.
There was also a session together with the Supervisory Board about the risks and challenges of global warming for the insurance industry.
Structure The managing and supervisory bodies of the supervised entities of a.s.r. met at least four times in 2016. The supervised entities are ASR Levensverzekering N.V., ASR Schadeverzekering N.V., N.V. Amersfoortse Algemene Verzekering Maatschappij, Europeesche Verzekering Maatschappij N.V., ASR Basis Ziektekostenverzekeringen N.V., ASR Aanvullende Ziektekostenverzekeringen N.V., De Eendragt Pensioen N.V., AXENT NabestaandenZorg N.V. and ASR Bank N.V. The standing agenda items included the financial (quarterly) results and the compliance, risk and audit reports. Other topics of discussion were entity-specific issues, including the impact of the changing markets for various entities.
The managing and supervisory directors of ASR Levensverzekering N.V., ASR Schadeverzekering N.V., N.V. Amersfoortse Algemene Verzekering Maatschappij, Europeesche Verzekering Maatschappij N.V., De Eendragt Pensioen N.V. and AXENT NabestaandenZorg N.V. are the same as those of ASR Nederland N.V. This is not the case where the other three entities are concerned (ASR Basis Ziektekostenverzekeringen N.V, ASR Aanvullende Ziektekostenverzekeringen N.V. and ASR Bank N.V.).
In October 2016, Europeesche Verzekering Maatschappij N.V. and N.V. Amersfoortse Algemene Verzekering Maatschappij were merged into ASR Schadeverzekering N.V. De Eendragt Pensioenen N.V. was merged into ASR Levensverzekering N.V. in July 2016 and AXENT NabestaandenZorg N.V. were merged into ASR Levensverzekering N.V. in October 2016. As a result of these mergers and integrations, the number of legal entities (OTSOs) has decreased.
J.P.M. (Jos) Baeten (CEO) Jos Baeten (1958) is a Dutch national and is the Chair of the Executive Board and Chief Executive Officer (CEO). His areas of responsibility are Human Resources, Corporate Communications, Strategy, Corporate Social Responsibility, Audit, Integrity and Legal.
Jos Baeten was appointed as CEO of a.s.r. on 26 January 2009. Current term of office: 2017 – 2021
Additional positions Currently, Jos Baeten is a member of the Executive Board of the Dutch Association of Insurers (Verbond van Verzekeraars) and Chairman of the Supervisory Board of Stichting Theater Rotterdam. In addition, he is also member of the General Administrative Board of VNO-NCW.
Chris Figee earned a degree (with honours) in Financial Economics from the University of Groningen and is an EFFAS Certified Investment Analyst. He also studied Risk Management at Stanford University. Chris Figee started his career at Aegon, where he held various positions, including that of Senior Portfolio Manager. In 1999 he moved to McKinsey, where he rose to the role of partner in 2006. After ten years at McKinsey, he joined Achmea as Director of Group Strategy & Performance Management in 2009. He also served as a member of the Achmea Group Committee. Chris Figee’s last position at Achmea was Director of Group Finance.
Chris Figee was appointed as a member of the Executive Board on 1 May 2014. Current term of office: 2014 – 2018
K.T.V. (Karin) Bergstein Karin Bergstein (1967) is a Dutch national. Her areas of responsibility as of 1 March 2017 are Innovation and Digitalization, Information Technology and Change, and the product lines Pensions, Individual life, Banking and Funeral.
Karin Bergstein studied medical biology at Utrecht University (Masters in 1991) and in 1998 earned an MBA from Nyenrode University and the University of Rochester in the United States. She started her career in 1991 at ING Bank, where she held various positions until 2010. Her last position was that of Director of Products & Processes, which gained her a seat on the Executive Board of ING Bank Nederland. Prior to that she served as CEO of ING Car Lease International from 2003 until 2009.
Karin Bergstein was appointed as a member of the Executive Board of a.s.r. on 1 September 2011. Current term of office: 2015 – 2019
M.H. (Michel) Verwoest Michel Verwoest (1968) is a Dutch national. His areas of responsibility as of 1 March 2017 are the product lines P&C, Occupational Disability Insurance, Health Insurance, Services and the a.s.r.’s distribution companies.
Michel Verwoest studied marketing at TiasNimbas Business School in Tilburg and business administration at IBO Business School, and held several executive positions at ING Group between 1997 and 2012. At ING, he served as CEO of RVS Insurance and was in charge of the Individual Life business. His last position in the insurance business of ING Group was a managing board member of Nationale Nederlanden Services.
Dutch Corporate Governance Code As of the listing on Euronext Amsterdam, a.s.r. is required to adhere to the Dutch Corporate Governance Code. a.s.r. complies with all relevant principles and best practices of the Dutch Corporate Governance Code, apart from the deviations and nuances described below. Additionally, in the Corporate Governance section of its website a.s.r. publishes a detailed comply or explain list that also specifies which principles or best practices are not applicable to a.s.r.
a.s.r. applies principle II.3, best practice provisions II.3.2 – II.3.4, principle III.6 and best practice provisions III.6.1 – III.6.3, which deal with actual and apparent conflicts of interest. However, a.s.r. makes an exception with respect to conflicts of interest that are exclusively the result of the identical composition of the Executive Boards and Supervisory Boards of a.s.r. and some of its subsidiaries. In this case, the Group’s policy on conflicts of interest applies. Principle III.8 and best practice provisions III.8.1 – III.8.4 do not apply because a.s.r. has a two-tier board. Due to his previous work for UBS, principle III.2.2 applies to Herman Hintzen, therefore he is not an independent Supervisory Board member in 2016.
Since a.s.r. has not issued any depositary receipts, principle IV.2 and best practice provisions IV.2.1 – IV2.8 do not apply. However, in order to create a defence against a hostile takeover, a.s.r. has established the Stichting Continuïteit ASR Nederland. This Foundation may prevent, discourage or delay a change of control by acquiring and holding preferred shares. For as long as NLFI holds more than one-third of the shares in a.s.r., the Foundation requires the prior consent of NLFI to do so.
a.s.r. applies principle IV.3, which deals with equal and simultaneous provision of information to shareholders, on the understanding however that a.s.r. will observe the Relationship Agreement with NLFI. In this respect, reference is made to the policy on fair disclosure and bilateral dialogue and the Relationship Agreement which can be found on asrnl.com.
Dutch Banking Code Banks authorized to operate in the Netherlands are been subject to the Dutch Banking Code (latest version 1 January 2015). This Code, which was drafted by the Dutch Banking Association, contains principles for governance and governance oversight, risk management, audit and remuneration policy. ASR Bank N.V. is governed by this Code.
Details on how ASR Bank N.V. meets the Dutch Banking Code can be found in its Annual Report that is available online at asrnl.com.
With respect to insurance companies, apart from the Executive and Supervisory Board members, persons with a management position directly below the Executive Board who are responsible for persons that may have a significant influence on the risk profile of the insurance company, are also required to take the oath, as are certain other employees. This includes persons that may (independently) significantly influence the risk profile of the undertaking as well as those persons that are or may be involved in the provision of financial services.
Kick van der Pol Annet Aris Cor van den Bos Herman Hintzen
Supervisory Board 9/12 ¹ 12/12 12/12 11/12 Audit & Risk Committee - 7/8 7/8 8/8
Contacts with the Works Council Three Supervisory Board members attended a routine consultative meeting of the Works Council. The supervisory directors have great admiration for the approach taken by the Works Council to major developments affecting a.s.r., such as the IPO. Considering the interests of both a.s.r. as a whole and those of its employees, the Works Council prepares thoroughly for the wide range of issues it is presented with, discusses these in a constructive dialogue with the Executive Board, and issues well-balanced and considered opinions and recommendations.
Contacts with external regulators and auditors The Supervisory Board consulted periodically with the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). The independent external auditor attended the Supervisory Board meetings at which the annual and interim financial results were discussed. During these meetings, the auditor elaborated on the audit reports and answered specific questions.
At year-end, the Supervisory Board, upon the recommendation of the Audit & Risk Committee, approved the multi-year budget 2017-2019.
IPO An important topic on the Supervisory Board’s agenda was the IPO, which result in the listing on 10 June 2016. The Executive Board regularly briefed the Supervisory Board on the progress of the preparatory activities during regular planned meetings and several conference calls. In preparation for the amendments to the Articles of Association associated with the IPO, the Supervisory Board
Risk management and solvency At the end of the year, the Supervisory Board approved the risk appetite for both a.s.r. and the supervised entities. a.s.r.’s risk appetite is based on the Solvency II regime and a prudent approach to risk management, translated into standards for solvency, liquidity and achievable returns.
Strategy and M&A The Supervisory Board regularly discussed market developments and the approach to potential acquisitions with the Executive Board. The Supervisory Board was informed on various issues in this regard, including the acquisitions of Corins and SuperGarant, and the formation of a general pension fund (APF). De Eendragt Pensioen N.V. and AXENT NabestaandenZorg N.V. were acquired in 2015 and merged into ASR Levensverzekering N.V. on 1 July 2016 and 1 October 2016 respectively.
In September 2016, the Supervisory Board had an off-site strategy meeting with the Executive Board to discuss the potential consolidation of the insurance sector and a.s.r.’s possible role in this process. The business strategy and market developments were also discussed. As a result of the aforementioned acquisitions, the structure of the Group and the manner these acquisitions, being separate entities, were addressed. These entities should make a good transition to a.s.r. policies and reporting standards. The Supervisory Board also appreciates the way acquisitions are evaluated one year after they are finalized.
N.V. Amersfoortse Algemene Verzekering Maatschappij and Europeesche Verzekering Maatschappij N.V. merged into ASR Schadeverzekering N.V on 15 October 2016. The legal structure of a.s.r. is described in chapter 5.5.1.
Treating Customers Fairly (TCF) and CSR Each quarter, the Supervisory Board considered the theme of Treating Customers Fairly on the basis of various reports, including the a.s.r. TCF Dashboard. The TCF Dashboard sets out developments and results with respect to TCF and of the best practices shared and lessons learned in this regard across the organization. The Supervisory Board believes that a.s.r. goes to great lengths to deliver a good TCF performance.
At the beginning of the year the Supervisory Board and the Executive Board discussed the completion of the renovation of the head office. The Supervisory Board is very pleased with the results of this project and appreciates the achievements of the team that made this happen. The project progressed as planned and was within budget. The renovated head office gives new energy to employees and helps them to work on a flexible basis. The renovated head office also makes a social contribution, thanks to its energy efficiency rating A and its BREEAM Excellent label.
The Supervisory Board also discussed the social plan ‘The Other Plan’. The Supervisory Board values this plan as future proof due to its focus on personal growth and movement (‘from employment to employment’).
Audit & Risk Committee The Audit & Risk Committee has three members, Cor van den Bos (Chair), Annet Aris and Herman Hintzen. In 2016, the Committee held eight meetings that were also attended by the CFO, the Director of Group Risk Management, the Director of Group Accounting, Reporting & Control, the Director of Finance & Risk, the Director of Compliance, the Director of Audit and the independent external auditor. The standing agenda items included the financial (quarterly) results and the audit, compliance and quarterly risk reports. In addition, the Committee addressed issues specific to the supervised entities, including the impact of changing market conditions and the report related to Solvency II matters (including the Agreed Upon Procedures Solvency II).
The Audit & Risk Committee specifically focused on the effectiveness of the audit, compliance and risk management functions within a.s.r. The Committee discussed and approved the annual plan for 2017 of the Compliance department and the Risk Management and Actuarial Functions. The Internal Audit Charter, the Compliance Charter and the charters for the Risk Management Function and the Actuarial Function were also adopted in 2016. The Committee also approved the audit plans for 2016 of both internal audit and the independent external auditor.
During the year, the Committee met on two occasions outside meetings with the Audit, Compliance and Risk Management Functions in their role of countervailing powers. The Chair of the Committee had a one-on-one meeting with each of the directors of Audit, Compliance and Group Risk Management and had three meetings with the External Auditor Ernst & Young.
The Solvency II regime came into effect on 1 January 2016. The outcomes of the SCR calculations and the ORSA were accordingly discussed by the Committee. The UFR effect within the Solvency II framework was highlighted in particular. At the end of the year, the Audit & Risk Committee also discussed the risk appetite for 2017, which is based on a detailed risk assessment. This year as well, the assessment started from the Solvency II regime for both a.s.r. and the supervised entities. The Committee periodically tested the status of the risk appetite during the year, using such tools as the Integrated Risk Dashboard and the status report on the management of risk priorities. The a.s.r. risk appetite is based on a prudent approach to risk management and translated into requirements for solvency, liquidity and returns; solvency takes priority over profit and profit takes priority over premium income. The risk appetite for 2017 was approved by the Supervisory Board. As part of the risk appetite, the Committee discussed the solvency targets for 2016.
Selection, Appointment & Remuneration Committee As of the IPO, the Selection, Appointment & Remuneration Committee was split in the Selection & Appointment Committee and the Remuneration Committee. The members of both committees are Annet Aris (chair) and Kick van der Pol. The 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 for both committees.
The Remuneration Committee discussed the implementation of the remuneration policy for our subsidiaries. The Remuneration Committee instructed Korn Ferry on the outlines and reference groups for a benchmark of the remuneration for the Executive Board.
The principles followed for drafting, adopting, applying and enforcing the Group Remuneration Policy are described below. 1. HR policy: a. The remuneration policy strikes a balance between trust in intrinsic motivation on the one hand and agreement on clear targets and assessment of performance on those targets on the other; b. The total pay-and-benefits package enables the company to compete in the labour market and to attract and retain competent people.
2. Sound remuneration policy: a. The remuneration policy, including the pension policy, ties in with the corporate strategy and with the company’s objectives, values and long-term interests. Any changes in strategy, objectives, values and longterm interests are taken into account when updating the remuneration policy; b. The remuneration policy is ethical, sound and sustainable, in line with the company’s risk appetite, risk management strategy and risk profile, contributes to robust and effective risk management, and does not encourage a greater risk appetite than is acceptable to the business; c. The remuneration policy has been designed in such a way that allowance is made for the internal workings of the company, its subsidiaries and group companies, and for the nature, scale and complexity of the risks attached to the business; d. The remuneration policy does not restrict the company’s scope to maintain and strengthen its robust regulatory capital, solvency margin or own funds.
3. Protection of customers and safeguarding integrity and long-term enterprise value: a. The remuneration policy encourages employees to act in accordance with the company’s long-term interests; b. The remuneration policy has been designed in such a way that consumers, clients or members are treated with due care; c. Performances delivered by employees and by the company itself are measured on the basis of both financial and non-financial indicators; d. The remuneration policy does not encourage employees to take excessive risks; e. The remuneration policy seeks to prevent conflicts of interest; f. The company does not apply constructions or methods that facilitate the evasion of the remuneration policy or the relevant legislation and regulations; g. Employees are expected not to make use of personal hedging strategies or of any insurance policies linked to remuneration and liability to undermine the risk management effects embedded in their remuneration schemes.
4. Transparency: a. The design, governance and methodology of the remuneration policy are clear, transparent and applicable to all employees.
Intro d uctio n in their rules of procedure, which are included in two appendices to the Rules of Procedure of the Supervisory Board; • The Remuneration Committee provides the Supervisory Board with support and advice in relation to its duties and responsibilities regarding remuneration policy and remuneration practices. Decisions taken by the Supervisory Board in this area are prepared by the Remuneration Committee; • Without prejudice to the duties of the Remuneration Committee, the ARC Committee examines whether the incentives created by the remuneration system take account of risk, capital, liquidity and the probability and staggering of profit forecasts, for the purpose of supporting the introduction of sound remuneration policy and practices. The ARC Committee also provides input for the selection of identified staff; • The Executive Board has decision-making powers and responsibilities relating to the remuneration policy in respect of all employees, with the exception of the Executive Board itself and the Supervisory Board. The Executive Board also decides on the individual remuneration of senior managers (SMs, job levels 22-23); • Control functions (also known as key functions) are departments that are responsible for the control and supervision of operations as well as the risks arising from those operations, and in doing so operate independently from the rest of the organization. They advise and support the Executive Board and Supervisory Board, and report directly to the Executive Board and Supervisory Board on compliance with applicable legislation and regulations and internal codes. Employees in control functions are defined as senior and/or managerial employees working in the compliance, audit, risk management and actuarial functions. The compliance, audit and risk management functions also play an active role in the context of the remuneration policies and practices relating to other groups of employees; • The human resources function is very closely involved with the implementation of the remuneration policy. It also coordinates the preparation and evaluation of the remuneration policy and suggests what the policy should look like. In keeping with the control functions, the human resources function provides input for the ex-ante and ex-post risk adjustments of variable remuneration; • The control functions and the human resources function collaborate actively on a regular basis. They share information and provide input for each other’s activities in the area of the remuneration policy.
Remuneration groups Except where stated otherwise, the regulations contained in the remuneration policy apply to all employees who work under the responsibility of the Group. The specific groups mentioned are: • Identified staff; • Employees in control functions (key functions); • Policymakers; • Senior managers subject to the Dutch Financial
Other employees The fixed pay awarded to employees consists of a fixed gross monthly salary, a fixed allowance (as a result of the conversion of variable pay for those employed at a.s.r. on 1 July 2014), 8% holiday allowance and a year-end bonus. The level of fixed pay depends on the weight attributed to an employee’s role, the related salary group and the employee’s general performance rating (assessment of deliverables and agreements on appropriate conduct). Fixed pay is adjusted for structural wage developments in accordance with the CBA for back-office positions in the insurance industry. The objectives pursued as part of how employees perform their duties are extrapolated from a.s.r.’s strategic targets. a.s.r.’s strategy is based on helping by taking action. This is reflected in KPIs relating to such issues as a customer dashboard, the Customer-Oriented Insurance Quality Mark and the Net Promoter Score. These KPIs form the basis of inspiring individual targets.
This group is also subject to a claw-back mechanism, a fairness clause and a penalty scheme, meaning that the Supervisory Board can claw back any variable pay already awarded if it was determined and awarded based on incorrect information.
At a.s.r., the following specific variable remuneration schemes may apply to groups of employees: • Target-related remuneration for front-office positions: employees may be entitled to variable remuneration under the CBA job classification and pay structure for front-office positions at a.s.r.; • Variable remuneration at ASR Vastgoed Vermogensbeheer B.V. and ASR Vastgoed Ontwikkeling N.V.: As a transitional measure, a variable remuneration scheme applies to a small group of employees working at ASR Vastgoed Vermogensbeheer B.V. and ASR Vastgoed Ontwikkeling N.V. who are not identified staff; • Incidental bonuses: A variable remuneration scheme in which a small amount of remuneration is linked to specific performance that goes beyond their job description applies to employees who come within the scope of the ASR Remuneration Policy but are not identified staff.
In accordance with the Group Remuneration Policy, a.s.r. applies the ex-ante and ex-post risk adjustment to variable remuneration. • Ex-ante risk adjustment
The human resources function (HR Director) applies the ex-ante risk adjustment, based on input received from the control functions; • Penalty Following a proposal from the Remuneration Committee and based on input from the human resources function and the control functions, the Supervisory Board decides whether the penalty is to be applied; • Claw-back Following a proposal from the Remuneration Committee and based on input from the human resources function and the control functions, the Supervisory Board decides whether the claw-back clause is to be applied.
Pension The principal features of the pension scheme were as follows in 2016: • Average-pay pension plan; • Retirement age: 67 years; • Accrual rate for old-age pension: 1.875% for all salary groups; • Pensionable salary: fixed annual salary on 1 January of any year (capped at € 101,519 gross, this is offset by a contribution for the accrual of a net pay pension); • Partner’s pension: 70% of projected old-age pension; • Orphan’s pension: 14% of projected old-age pension; • Employee contribution: 6% of pensionable earnings; • Flexible elements: early retirement, deferred retirement, exchange, high/low, part-time; • a.s.r. does not allow for the award of discretionary pensions.
Pre-pension allowance As a result of statutory pre-pension regulations, a.s.r. removed all pre-pension elements from its pension plans in 2006. Employees who joined a.s.r. before 1 January 2006 were initially compensated for this removal through optimization of their accrual rate and the state pension offset. Where such compensation was inadequate, the employees were awarded a pre-pension allowance, the amount of which varied based on their age and the original pension commitment. The pre-pension allowance for employees who joined a.s.r. after 1 January 2006 was 1% of their pensionable salary.
Once every three years, an independent consultancy is hired to perform a market comparison (remuneration benchmark).
We form a useful counterweight At year-end 2015, it was announced that the Dutch Minister of Finance had asked NLFI and a.s.r. to prepare for an IPO with a view to potentially floating a.s.r. in the first half of 2016. The year 2016 is now behind us and a.s.r. is listed on the stock exchange. The IPO became a fact on 10 June 2016. This was a milestone for a.s.r.
Customer interests obviously also played an important role in that regard. Now that a.s.r. is a listed company, the continuation and further development of its position in society still need to take centre-stage in its strategy. In the eyes of the Works Council, a.s.r.’s return to the private market should not result in a change in this strategy.
General The employee representation bodies (i.e. the Works Council and/or its subcommittees) held various consultative meetings with executives in 2016. In addition, 11 scheduled meetings took place between the Executive Committee of the Works Council, the CEO, the HR Director and the Company Secretary. Ad hoc meetings were held if the situation so warranted. In addition, tripartite meetings between the Executive Committee of the Works Council, the CEO, the HR Director and two members of the Supervisory Board are held where needed. In 2016, the Works Council received a total of eight requests for a formal opinion and four requests for consent.
Introduction 121 5.1.1 General information 121 5.1.2 Statement of compliance 122
Consolidated financial statements 123 5.2.1 Consolidated balance sheet 123 5.2.2 Consolidated income statement 124 5.2.3 Consolidated statement of comprehensive income 126 5.2.4 Consolidated statement of changes in equity 127 5.2.5 Consolidated statement of cash flows 128
Accounting policies 130 5.3.1 Changes in accounting estimates 130 5.3.2 Other changes 130 5.3.3 Changes in EU endorsed published IFRS
Standards and interpretations effective in 2016 130 5.3.4 New standards, interpretations of existing standards or amendments, not yet effective in 2016 131 5.3.5 Key accounting policies 132 5.3.6 Other accounting policies 143
Risk profile 211 5.8.1 Risk management system including the own risk and solvency assessment Risk Management System 212 5.8.2 Insurance risk 222 5.8.3 Market risk 230 5.8.4 Counterparty default risk 241 5.8.5 Liquidity risk 244 5.8.6 Operational risk 245 5.8.7 Strategic Risk Management 246
Capital management 248 5.9.1 Capital Management Objectives 249 5.9.2 Solvency Capital Requirement and Minimum Capital 250 5.9.3 Dividend policy and capital actions 250
a.s.r. is a public limited company under Dutch law having its registered office located at Archimedeslaan 10, 3584 BA in Utrecht, the Netherlands. a.s.r. has chosen the Netherlands as ‘country of origin’ (land van herkomst) for the issued share capital and corporate bonds which are listed on Euronext Amsterdam. As of 10 June 2016 a.s.r. is listed on Euronext Amsterdam (Ticker: ASR NL).
The financial statements for 2016 were approved by the Supervisory Board on 28 March 2017 and will be presented to the Annual General Meeting of Shareholders for adoption on 31 May 2017. The Executive Board released the financial statements for publication on 29 March 2017.
The consolidated financial statements of a.s.r. have been prepared in accordance with the International Financial Reporting Standards (IFRS) – including the International Accounting Standards (IAS) and Interpretations – as adopted by the European Union (EU), and with the financial reporting requirements included in Title 9, Book 2 of the Dutch Civil Code, where applicable.
The numbers following the line items refer to the relevant chapters in the notes. The comparative figures for 2015 have been restated (see chapter 5.3.2 and 5.4.5).
There are no diluting effects applicable on the earnings per share.
Income tax on items that will not be reclassified to profit or loss 91 -54
Unrealized change in value of available-for-sale financial assets 5.5.5 404 -877
Total items that may be reclassified subsequently to profit and loss 33 -55
U nr ea liz ed g ai ns an d lo ss es
Discretionary interest on other equity instruments - - - - -45 -45 - - -45
In March 2016, NLFI in its capacity as the sole shareholder issued a resolution that the company’s articles of association will be amended to, inter alia, split the ordinary shares in the company’s capital, into a higher number of ordinary shares, without impacting the amount of the company’s total equity (see chapter 5.5.8.1).
The table below represents the cash flows from continuing and discontinued operations. Cash flows related to discontinued operations are included in chapter 5.4.6. a.s.r. believes that this disclosure is relevant for users of financial statements to fully understanding of the cash flow and the relationship with other statements.
Cash generated from operating activities Profit before tax 1 859 773
Adjustments on non-cash items included in profit: Revaluation through profit and loss -124 -150
Retained share of profit of associates and joint ventures 15 -3
Net increase / (decrease) in liabilities arising from insurance contracts 1,572 -24
Net increase / (decrease) in liabilities arising from insurance contracts on behalf of policyholders -69 144
Cash flows from investing activities Investments in associates and joint ventures - -7
Cash flows from investing activities -39 -293 1 Profit before tax includes results from continuing operations of € 838 million (2015: € 806 million) as well as results from discontinued operations of € 21 million (after tax € 17 million), for 2015 € -33 million (after tax € -26 million).
Cash flows from financing activities Issue of subordinated liabilities - 498
Further details on cash flows from operating activities Interest received 1,341 1,555
Total cash and cash equivalents Cash and cash equivalents from continuing operations 3,581 2,629
Cash and cash equivalents classified as Assets held for sale - 3
Intro d uctio n 5.3 Accounting policies 5.3.1 Changes in accounting estimates as of 1 January 2016 a.s.r. has made a change in accounting estimate in relation to the Liability Adequacy Test (LAT) of its insurance liabilities. Until and including 2015 a.s.r.’s accounting policy was to use the DNB-LAT (Solvency I) for assessing whether its insurance liabilities were adequate (with exception in respect of surrender value floor). As of 1 January 2016 the Solvency II regime applies to a.s.r. The DNB-LAT test is therefore no longer required. Under Solvency II the insurance liabilities are determined based on a best estimate and a risk margin using the Euro Swap curve, including a credit risk adjustment, with Ultimate Forward Rate (UFR) and a volatility adjustment. Also unrecognized gains and losses from relevant assets that are not carried at fair value in the balance sheet are taken into account to the extent these assets are allocated to cover the insurance liabilities. This valuation of the insurance liability consistent with Solvency II is therefore used in the IFRS-LAT. The calculations under Solvency II to determine the insurance liability correspond in substance with the Solvency I test, therefore this change is classified as a change in accounting estimate. The transition to using Solvency II as the basis for the IFRS-LAT will enhance the comparability between the Solvency II reporting and IFRS reporting as from 2016 onwards.
Intro d uctio n 5.3.4 New standards, interpretations of existing standards or amendments to standards, not yet effective in 2016
• IFRS 9 Financial Instruments (2018). • IFRS 15 Revenue from Contracts with Customers (2018).
Amended IFRS 4 Insurance contracts This standard becomes effective as of 1 January 2018, subject to endorsement by the EU. The IFRS 4 amendments permit insurer to apply a temporary exemption from applying IFRS 9 for predominant insurance entities or to use overlay approach, until the implementation of IFRS 17 (New accounting standard for Insurance contracts) or at the latest 1 January 2021.
Based on the amended IFRS 4 and the a.s.r. 2015 Annual report, a.s.r. meets the criteria of a predominant insurer as the percentage of the total carrying amount of its liabilities connected with insurance relative activities to the total carrying amount of all its liabilities is greater than 90 %. As a result a.s.r. is expected to apply the temporary exemption from applying IFRS 9 until IFRS 17 (New accounting standard for Insurance contracts) is implemented. The implementation of amended IFRS 4, if and when endorsed by the EU, is not expected to have a significant impact on the consolidated financial statements of a.s.r.
IFRS 9 Financial Instruments IFRS 9 ‘Financial Instruments’ was issued by the IASB in July 2014. IFRS 9 replaces most of the current IAS 39 ‘Financial Instruments: Recognition and Measurement’, and includes requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. IFRS 9 is effective in 2018. However as mentioned above a.s.r. is expected to apply the temporary exemption from applying IFRS 9 for predominant insurance entities as permitted by the amended IFRS 4. The IFRS 4 amendment postpones the implementation of IFRS 9 until the effective date of the expected insurance contracts standard (1 January 2021).
A. Estimates and assumptions The preparation of the financial statements requires a.s.r. to make estimates, assumptions and judgements in applying accounting policies that have an effect on the reported amounts in the financial statements. These relate primarily to the following: • The fair value and impairments of unlisted financial instruments (see accounting policy B and E); • The estimated useful life, residual value and fair value of property, plant and equipment, investment property, and intangible assets (see accounting policy C, D and T); • The measurement of liabilities arising from insurance contracts (see accounting policy I); • Actuarial assumptions used for measuring employee benefit obligations (see chapter 5.5.11); • When forming provisions, the required estimate of existing obligations arising from past events; • The recoverable amount of impaired assets (see accounting policy B, E and G).
Fair value hierarchy The following three hierarchical levels are used to determine the fair value of financial instruments and non-financial instruments when accounting for assets and liabilities at fair value and disclosing the comparative fair value of assets and liabilities: Level 1. Fair value based on quoted prices in an active market Level 1 includes assets and liabilities whose value is determined by quoted (unadjusted) prices in the primary active market for identical assets or liabilities.
A financial instrument is quoted in an active market if: • Quoted prices are readily and regularly available (from an exchange, dealer, broker, sector organization, third party pricing service, or a regulatory body); and • These prices represent actual and regularly occurring transactions on an arm’s length basis.
I. Financial instruments: unlisted fixed-interest preference shares and interest rate contracts This category includes unlisted fixed-interest preference shares and interest rate contracts. The valuation techniques for financial instruments use present value calculations and in the case of derivatives, include forward pricing and swap models. The observable market data contains yield curves based on company ratings and characteristics of the unlisted fixed-interest preference shares.
• Offices – based on reference transaction and DCF method (including buildings for own use); • Other – based on reference transaction and DCF method; • Under construction – based on both DCF and income capitalization method.
DCF method Under the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset’s life including an exit or terminal value. This method involves the projection of a series of cash flows on the investment property dependent on the duration of the lease contracts.
For the categories residential, offices and other in applying the DCF method, the significant inputs are the discount rate and market rental value. These inputs are verified with the following market observable data (that are adjusted to reflect the state and condition, location, development potential etc. of the specific property): • Market rent per square meter for renewals and their respective re-letting rates; • The 10 year discount rate as published by the Dutch Central Bank.
Goodwill has an indefinite useful life and is not amortized. a.s.r. performs an impairment test annually, 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 carrying value is determined as the net asset value including goodwill. The methodologies applied to arrive at the best estimate of the recoverable amount involves two steps.
D. Investment property Investment property is property held to earn rent or for capital appreciation or both. Property interests held under operating leases are classified and accounted for as investment property. In some cases, a.s.r. is the owner-occupier of some investment properties. If owner-occupied properties cannot be sold separately, they are treated as investment property only if a.s.r. holds an insignificant portion for use in the supply of services or for administrative purposes. Property held for own uses (owner-occupied) is recognized within property, plant and equipment.
Investment property is primarily recognized using the fair value model. After initial recognition, a.s.r. remeasures all of its investment property (see accounting policy B) whereby any gain or loss arising from a change in the fair value of the specific investment property is recognized in the income statement under fair value gains and losses.
Borrowing costs directly attributable to the acquisition or development of an asset are capitalized and are part of the cost of that asset. Borrowing costs are capitalized when the following conditions are met: • Expenditures for the asset and borrowing costs are incurred; and • Activities are undertaken that are necessary to prepare an asset for its intended use.
E. Investments When a.s.r. becomes party to a financial asset contract, the related assets are classified into one of the following categories: • Financial assets at fair value through profit and loss; • Loans and receivables; • Financial assets available for sale.
Loans and receivables are measured at fair value plus transaction costs on initial recognition They are subsequently measured at amortized cost based on the effective interest rate method, less impairment losses where deemed necessary (see also accounting policy G). Loans and receivables are accounted for separately under financial assets.
H. Derivatives and hedge accounting Derivatives are primarily used by a.s.r. for hedging interest rate and exchange rate risks, for hedging future transactions and the exposure to market risks.
Only cash flow hedge accounting is applied to a limited extent in relation to property development activities. Cash flow hedge accounting ended in 2016.
Liabilities arising from life insurance contracts Future obligations in respect of policy benefits for life insurance contracts are calculated based on a net premium method (the present value of future obligations less the present value of future net premiums) using the same principles as for calculating the premium at inception of the insurance contract. A provision for future administrative expenses is recognized for contracts whose future premium payment period is shorter than the future maturity of the insurance policy, or for which no more premiums are paid. A provision is recognized for part of longevity risk associated with life insurance contracts (e.g. group life and annuity contracts), a.s.r. manages the longevity risk exposure in combination with the mortality risk exposure. No addition to the provision for longevity risk is recognized if the outcome of the LAT (see below) indicates that the total amount of the provision is adequate.
The related adjustment to the insurance liability is recognized in OCI 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 profit and loss are recognized in the income statement with a corresponding adjustment for shadow accounting in the income statement under ‘Net insurance claims and benefits’.
IFRS Liability Adequacy Test Non-life The Liability Adequacy Test (LAT) is performed at each reporting date to assess the adequacy of insurance liabilities for Non-life and as of 2016 insurance liabilities for the LAT are calculated in accordance with Solvency II (see chapter 5.3.1).
In unit-linked contracts, the best estimate equals the fund value of the contract less the net present value of future margins on mortality and expense. Where unit-linked contracts with a guaranteed minimum benefit on expiration are concerned, the best estimate is increased by a TVOG, i.e. the value of that guarantee in accordance with the BlackScholes model.
Risk margin The risk margin is determined for each homogeneous risk group using the CoC method. For life a CoC rate of 6% (2015: 5%) is used. a.s.r. uses the latest standard Solvency II model, to quantify the risks. The risks that are incorporated in the risk margin are: mortality, longevity, disability, lapse, catastrophe, expense and operational risk. A projection of expected future risks is made and all these risks are projected into the future. The total risk for every future year is determined based on correlations between the risks described in the Solvency II standard model. The projected total risk for every year is multiplied by a cost of capital charge and discounted at the balance sheet date.
Other long-term employee benefits Plans that offer benefits for long-service leave, but do not qualify as a post-employment benefit plan, such as jubilee benefits, are measured at present value using the projected unit credit method and changes are recognized directly in the income statement.
Any impairment is restricted to the carrying amount of the non-current assets within the scope of IFRS 5 measurement requirements. The comparative consolidated income statement and consolidated statement of comprehensive income have been restated to show the discontinued operations separately from the continuing operations.
N. Basis for consolidation - subsidiaries The consolidated financial statements include the financial statements of ASR Nederland N.V. and its subsidiaries. Subsidiaries are those entities over which a.s.r. has control. Control exists when a.s.r. is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power
Intro d uctio n over the subsidiary. This is the case if more than half of the voting rights may be exercised or if a.s.r. has control in any other manner. Subsidiaries are fully consolidated from the date on which control is acquired by a.s.r. Subsidiaries are deconsolidated when control ceases to exist.
Non-controlling interests are initially stated at their proportionate share in the fair value of the net assets on the acquisition date and are subsequently adjusted for the non-controlling interest in changes in the subsidiary’s equity.
Intragroup transactions Intragroup balances and transactions between consolidated group companies are eliminated. Gains and losses on transactions between a.s.r. and associates and joint ventures are eliminated to the extent of a.s.r.’s interest in these entities.
O. Product classification Insurance contracts are defined as contracts under which a.s.r. accepts significant insurance risk from policyholders by agreeing to compensate policyholders if a specified uncertain future event adversely affects the policyholder. These contracts are considered insurance contracts throughout the remaining term to maturity, irrespective of when the insured event occurs. In addition, these contracts can also transfer financial risk.
Life insurance contracts Life insurance contracts (in cash) include savings-linked mortgages, annuities, term insurance policies, savings contracts and funeral insurance contracts. In addition to non-participating life insurance contracts, the insurance portfolio also includes: • Individual and group participating contracts; • Individual contracts with discretionary participation features (see accounting policy I); • Group contracts with segregated pools with return on investment guarantees.
Intersegment transactions or transfers are conducted at arm’s length conditions. For detailed information per segment, see chapter 5.4, ‘Group structure and segment information’.
T. Property, plant and equipment Property held for own use Property for own use comprises of land and office buildings and is measured at fair value (revaluation model) based on annual valuations, conducted by external, independent valuators with adequate professional expertise and experience in the specific location and categories of properties.
After initial recognition, property for own use is valued at fair value based on the methodology used to determine the fair value of the investment property (see accounting policy B). The purpose of a valuation is to determine the value for which the asset would be transferred between willing parties in a transaction at arm’s length.
Increase in the fair value exceeding the cost price is added to the revaluation reserve in shareholders’ equity, less deferred taxes. Decreases in the fair value that offset previous increases of the same asset, are charged against the revaluation reserve. The revaluation reserve cannot be negative. All other decreases in fair value are accounted for in the income statement. Increases that reverse a revaluation decrease on the same asset previously recognized in net result are recognized in the income statement.
Upon the sale of a property, the part of the revaluation reserve related to the sold property, within equity, is transferred to ‘other reserves’ and is not reclassified to the income statement. Therefore annually a transfer is also made from the revaluation reserve related to ‘other reserves’ in line with the depreciation recognized in the income statement for the revalued portion.
Equipment is depreciated over its useful life, which is determined individually (usually between three and five years). Repair and maintenance costs are charged to the income statement in the period in which they are incurred. Expenses incurred after the acquisition of an asset are capitalized if it is probable that the future economic benefits will flow to a.s.r. and the cost of the asset can be measured reliably.
U. Associates and joint ventures Associates Associates are entities over which a.s.r. has significant influence on operating and financial contracts, without having control. Associates are recognized using the equity method of accounting from the date at which a.s.r. acquires significant influence until the date at which such influence ceases. This means that associates are initially recognized at cost, including any goodwill paid. This value is subsequently adjusted to take account of a.s.r.’s share of the associate’s comprehensive income. Comprehensive income is adjusted in accordance with the accounting principles used by a.s.r.
Losses are accounted for until the carrying amount of the investment has reached zero. Further provisions are recognized only to the extent that a.s.r. has incurred legal or constructive obligations concerning these associates.
These interests are recognized using the equity method of accounting as applied to associates. The interests are recognized in the financial statements from the date on which a.s.r. first obtains joint control until the date that this joint control ceases.
If objective evidence of impairment exists, joint ventures are tested for impairment and, if necessary, written down.
Assets arising from reinsurance contracts are recognized under reinsurance contracts, except for current receivables from reinsurers, which are included under loans and receivables.
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 the contract revenue cannot be reliably estimated. Contract revenue is then accounted for upon completion of the development (completed contract method).
X. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, cash collateral and other short-term highly liquid investments with original maturities of three months or less.
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.
Life insurance premiums Life insurance premiums relating to life insurance contracts are recognized as income when received from policyholders. Liabilities arising from insurance contracts are recognized based on estimated future benefits and expenses, and charged to the income statement. These expenses are recorded within ‘technical insurance claims and benefits’. Therefore,
Intro d uctio n in accordance with the matching principle, the profits are realized over the estimated term of the contracts.
Interest income Interest income for all interest-bearing instruments is recognized using the effective interest method, including all transaction costs incurred and share premium/discount. When a receivable is impaired, its carrying amount is reduced to the recoverable amount, i.e. estimated future cash flows discounted at the original effective interest rate of the instrument.
CC. Realized gains and losses Realized gains and losses include proceeds from the disposal of financial assets available for sale, associates and joint ventures and loans and receivables.
FF. Fee and commission income Fee and commission income relates mainly to reinsurance, asset management and distribution and services. These items are generally recognized as income in the period in which the services are performed.
II. Commission expenses This mainly relates to commissions paid. Commission paid to acquire insurance contracts are charged to the income statement, generally within one year.
KK. Income tax expense Income tax is based on profit before tax, after any adjustments for previous periods and changes in deferred tax assets and liabilities using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Income tax is recognized in the period in which the income was earned.
Financial Statements 2016 | 5.4 Group structure and segment information 150
ASR Nederland Beleggings­ beheer N.V. 3 1 Registered non-life insurance companies.
4 In 2016 Europeesche Verzekering Maatschappij N.V. and N.V. Amersfoortse Algemene Verzekering Maatschappij merged with
5 De Eendragt Pensioen N.V. is included as of 17 July 2015 and is merged into ASR Levensverzekering N.V. as of 1 July 2016 with a retrospective effect as of 1 January 2016. Axent Nabestaanden Zorg N.V. is included as of 25 August 2015 and is merged into ASR Levensverzekering N.V.
as of 1 October 2016 with a retrospective effect as of 1 January 2016.
Financial Statements 2016 | 5.4 Group structure and segment information 151
Segment information The operations of a.s.r. have been divided into six operating segments. The main segments are the Non-life segment and Life segment in which all insurance activities are presented. The non-insurance activities are presented as four separate segments being the Banking and Asset Management, Distribution and Services, Holding and Other and Real Estate Development (partially discontinued operations) segment.
Non-insurance activities The non-insurance activities consist of: • The Banking and Asset Management segment involves all banking activities and the activities related to asset management including investment property management. These activities include ASR Bank N.V., ASR Hypotheken B.V., ASR Vastgoed Vermogensbeheer B.V., ASR Nederland Beleggingsbeheer N.V. and ASR Vermogensbeheer B.V. (formerly BNG Vermogensbeheer B.V., as of 20 May 2016); • The Distribution and Services segment includes the activities related to distribution of insurance contracts and includes the financial intermediary business of PoliService B.V., Van Kampen Groep Holding B.V. (as of 22 January 2015), Dutch ID B.V. (as of 19 November 2015), B.V. Nederlandse Hulpverleningsorganisatie SOS International (classified as discontinued operations and as per 25 January 2016 these activities have been sold), SuperGarant Verzekeringen B.V. en SuperGarant Assuradeuren B.V. (as of 1 September 2016) and Corins B.V. (as of 3 October 2016); • The Holding and Other segment consists primarily of the holding activities of ASR Nederland N.V. (including the group related activities), other holding and intermediate holding companies and the activities of ASR Deelnemingen N.V.; • The Real Estate Development segment (continuing and discontinued operations) consists of the activities where property development occurs. These activities are performed in ASR Vastgoed Ontwikkeling N.V. (as per end of April 2016 these activities are sold) and ASR Vastgoed Projecten B.V.
For more detailed disclosure related to the financial performance of the operating segments, we refer to the report of the Executive Board (see chapter 3.4).
Financial Statements 2016 | 5.4 Group structure and segment information 152
Financial Statements 2016 | 5.4 Group structure and segment information 153
The incidentals in 2016 are mainly the past service cost related to the amendment to the a.s.r post-employment benefit plans in segment Holding and Other (see chapter 5.6.6).
Financial Statements 2016 | 5.4 Group structure and segment information 156
Corins In October 2016 ASR Deelnemingen N.V. acquired 100% of the shares of Corins B.V. With this acquisition, a.s.r. strengthens its position in the (large) corporate non-life insurance market. Corins has been successfully operating since 2003 as insurance broker in the Dutch co-insurance market. Over 2015 the company reported a premium income of over € 18 million and serves more than 60 agents. Corins will continue to represent the insurers with which it currently does business. a.s.r. plans to fully integrate the portfolio and activities of Corins into its own operations in due course. Corins is presented in the segment Distribution and Services.
The acquisitions contributed revenue of € 5 million and profit of € 1 million to a.s.r.’s results from the respective acquisition date. If the acquisitions had occurred on 1 January 2016, management estimates that consolidated profit would have been € 2 million.
Goodwill is recognized as the difference between the consideration paid and the fair value of the net assets and liabilities upon acquisition date (see chapter 5.5.1). In accordance with the applicable reporting standards, the final acquisition balance sheet will be drawn up within 12 months of the acquisition. No significant differences compared with the provisional balance sheet are expected for the acquisitions of 2016.
Financial Statements 2016 | 5.4 Group structure and segment information 160
Van Kampen Group Holding B.V. In 2016 the final acquisition balance of Van Kampen Group Holding B.V. was established. No differences with the provisional balance sheet were identified, therefore no retrospective adjustments were made.
Dutch ID B.V. The final acquisition balance sheet of Dutch ID was established in 2016. On a few line items the opening balance sheet was adjusted within the one-year window. Due to recalculation of the fair value of previous acquisitions made by Dutch ID the intangible assets increased by € 11 million, the deferred tax liabilities increased by € 6 million and other liabilities increased by € 3 million on the balance sheet 2015. Furthermore other intangible assets amounting to € 23 million were identified following the finalization of the acquisition. The comparative figures of 2015 have been adjusted accordingly (see chapter 5.3.2).
Over the course of the next two years, a deferred consideration of € 1 million per year, will be paid related to the acquisition of Dutch ID.
At the end of 2015 the real estate development activities were split into two legal entities, ASR Vastgoed Ontwikkeling N.V. and ASR Vastgoed Projecten B.V. The activities undertaken by ASR Vastgoed Ontwikkeling N.V. were considered as discontinued operations and the activities of ASR Vastgoed Projecten B.V. are partially considered as continuing and partially as discontinuing activities. The Executive Board has decided to look for a strategic buyer for the discontinued part and therefore classify a part of its real estate development business as ‘held for sale’. With this in mind, the discontinuing operations are recognized as held for sale in the balance sheet. As a consequence, the financial results of the discontinuing real estate development business are disclosed in condensed form in the income statement. In April 2016 Meijer Realty Partners (MRP) acquired ASR Vastgoed Ontwikkeling N.V. The transfer occurred at the end of April 2016 and as such derecognition took place in Q2 2016. As of 31 December 2016 a part of the ASR Vastgoed Projecten B.V. still remains as discontinued operations.