premium income of € 4.9 billion in 2009. Our close to 4,500 employees are committed to our private and commercial clients in the product markets of group life, individual life, mortgages, non-life, disability and health insurance. We are the largest private real estate owner in the Netherlands.
Our history stretches back to 1720. We serve the market with our brands Ardanta,
We use several distribution channels to deliver our products to our clients, for example the intermediary or broker distribution channel, which accounts for about 80% of our product sales, the direct and the banking channels. From 3 October 2008, ASR Nederland is wholly-owned by the Dutch State.
Our driving force is to help people and businesses to realize their dreams by assuming their financial risks. In that manner, our clients are in a position to achieve things that really matter in their lives. To ensure assurance for our clients based on our professional ability to manage risks. That is our mission, the foundation of our existence. We provide substance to our mission by being client focused, by being efficient and financially solid.
Ditzo Generalist Non-life internet europeesche Verzekeringen specialist Travel and Leisure Multi-channel
Financial solidity 23 Not only today, but also in the future
Distribution 65 Talking about improvement is great, but make sure you do something tangible
PART I STRATEGY 6 1.2 Members of the ASR Nederland N.V. Executive board 8 1.3 Timeline of events in 2009 10 1.4 Our assignment and strategy 17 1.5 Prospects and outlook 19
Europeesche Verzekeringen 45 Ardanta 46 2.6 ASR Vastgoed 48 2.7 Capital management 50 2.8 Risk management 57 2.9 Human resources 60 2.10 Corporate social responsibility 62 2.11 Statement of compliance 69
OTHER INFORMATION 185 Glossary 185 Abbreviations 187 Contact details 188 Publication 188
The management structure has been adapted and the General Management replaced by an Executive board. The number of board members was thus reduced from six to four. After careful deliberations, Theo Pluijter and Jacqueline Rijsdijk are not serving as members of the Executive board. Following a year during which everyone put in maximum effort in the interest of ASR Nederland, it was particularly difficult to make a decision like this. Even more so because Jacqueline made a very important contribution in the past year to the transition of ASR Nederland. in addition, we are happy with Theo’s decision to continue to commit his knowledge and experience in his capacity as director of Corporate Staff Departments. The Executive board would like to express its gratitude to Jacqueline and Theo for their enormous commitment and contribution to the business.
Accommodation During the year under review, the decision was made to concentrate all our activities, except Europeesche Verzekeringen and Ardanta, in a single location in the Utrecht region no later than 2015. The decision of whether to renovate the current head office in Utrecht or construct a new building in the Utrecht region will be made in 2010. by bringing together our activities under one roof, we will reduce our overhead, improve cooperation and establish ASR Nederland as a single company. As part of this exercise, several locations and offices will be closed. The decision therefore has an impact on many of our staff and their families. We are naturally going to do our utter best to accommodate their needs in this process.
For the implementation of our strategy, we have launched a range of different programmes to further reduce overheads and complexity, with client understanding and insight forming the starting point for further improving our services.
Future With effect from 3 October 2008, we are wholly-owned by the Dutch State. The Dutch State has indicated that ASR Nederland will be returned to the private sector in due course. The conditions for this move include the successful disentanglement from Fortis and stabilization of the financial markets. The precise manner and timing of this process are currently being considered.
in addition, he is a board member of the Dutch Association of insurers (Verbond van Verzekeraars) and the Holland Financial Centre, chairman of the Supervisory board of Meetingpoint and chairman of the Supervisory Council of Gemiva-SVG Groep.
Jos baeten studied law at the Erasmus University in Rotterdam. He started his career in 1980 with Stad Rotterdam Verzekeringen, one of the pillars on which ASR Nederland rests, serving as chairman of the board since 1999.
Roel Wijmenga is Chief Financial Officer (CFO) in the Executive board and responsible for Accounting, reporting & control (ARC), Financial markets, Risk management, Solvency ii, Taxes and investor relations. in addition, he is chairman of Federation of Stichting Certificering Federatie Financial Planners (Financial Planners Certification Foundation).
Roel Wijmenga started his career in the insurance sector with AMEV, one of the legal predecessors of ASR Nederland where he served in several positions until 2003. Until June 2008, he was CFO of Eureko/Achmea and, prior to that, he was a member of the board of Directors of Fortis ASR and interpolis.
He studied econometrics and was awarded a Ph.D. at the Erasmus University in Rotterdam.
He had been a member of the board of Directors since 2003. Prior to that, he was General Manager in charge of strategy at Fortis, as well as secretary of the Fortis Executive Committee. He started his career in 1988 in the Corporate banking department of bank Mees & Hope, later known as MeesPierson.
Hans van der Knaap studied business economics at the Erasmus University in Rotterdam.
As member of the Executive board, Roeland van Vledder is responsible for commercial affairs. His area of responsibility includes ASR Verzekeringen, De Amersfoortse, Europeesche Verzekeringen,
Prior to joining ASR Nederland, he was programme director Convergence at iNG Retail banking. His career with iNG bank started in 1983 where, between 2001 and 2004, he was CEO of iNG insurance in belgium. Since 2006, he had been member of the board of Directors of Fortis insurance in the Netherlands.
Following his study in law at the University of Utrecht, Roeland van Vledder was awarded an MbA by the Erasmus University in Rotterdam and the University of Rochester (US).
Finally At the end of 2009, the board of Directors was reorganized as the Executive board, with the membership reduced to four, and with the portfolios defined anew. The structure of the board of Directors goes back to the time that ASR Nederland formed part of Fortis. The current, independent company calls for a new and smaller structure at the top.
Timeline of events in 2009 1.3 Timeline of events in 2009 in 2009, ASR Nederland launched a new logo and a new campaign for ASR Verzekeringen. The next generation of products was introduced and it was announced that the eleven branch locations with a total of fifteen offices will be reduced three locations, in phases. Under our own name, we again signed up as sponsor of the Eredivisieclub Feyenoord (top Dutch football club). in 2009, we were again awarded various prizes as a company with our labels ASR Verzekeringen, De Amersfoortse, Europeesche Verzekeringen, Ardanta, Falcon Leven and Ditzo.
• Launch of M! The new women’s network of ASR Nederland is focused on developing and sharing knowledge among the female professionals in the organization.
• The new ASR logo is introduced and it is an expression of what we stand for: a company with a human face. The face represents the central position of people. The house symbolises safety and protection. The tree stands for life, growth and investment.
• The annual figures for 2008 are presented. Turnover amounts to € 5.8 billion, and the net result is € 640 million negative.
• During the staff meeting, the Management Board presents the new direction of Nederland under the motto ‘personally guaranteed’.
• ASR Nederland becomes the official sponsor of the Rotterdam football club Feyenoord with the ASR Verzekeringen label.
• ASR Nederland introduces the first new generation life product under the name ASR VermogenGarant.
• ASR Nederland signs an agreement with BNP Paribas Personal Finance for funding mortgages.
• ASR Bank is bought back by ASR Nederland from Fortis Bank Nederland.
• Nexus is launched, which is the new ASR young people’s association. The association is a platform for ambitious young ASR professionals under the age of 36.
• ASR Nederland becomes the o cial sponsor of the Rotterdam football club Feyenoord with the ASR Verzekeringen label.
• The subordinated loans are successfully converted. This involves € 650 million in core capital for ASR Nederland.
• ‘Colourful ambitions’ has its launch. This network was established for and by colleagues with a bicultural background.
Achievements We were awarded the following prizes in 2009: Gouden Schilden winner The Gouden Schilden prizes are awarded to individuals and companies that, in the eyes of the jury and consumers, performed excellently in their professional field. At the first Dutch Gouden Schilden, we received three of the twelve Schilden awards. We received a Gouden Schild (gold award) for our non-life service (Ditzo), our communication campaign (Ditzo) and for the best non-life product (ASR Verzekeringen).
The supervisory body requires insurers to provide information to customers about risks, but it is far more important to provide information about the impact should a potential risk occur in practice.
When a consumer wishes to take out a mortgage and doubts whether to fix the interest rate, do not talk to the consumer about the chances of interest rates rising, but whether the consumer would be able to afford the higher interest rate. Consumers are not that clear about the concept of risk, and if financial institutions say the risk is small, but it does occur, the client will blame the financial institution for it. People tend to underestimate risks with a large impact and overestimate risks with a small impact. Think first of WiA (disability) insurance and only then about mobile telephone insurance.
An insurer would therefore be able to assist consumers in determining the impact: What do you want to protect? What do you not want to lose? What kind of lifestyle do you want when you retire? That is the real issue. Consumers can take measures today, to make sure that they can achieve it, later. Then you insure your living standard.’
What must ASR Nederland do to live up to consumer confidence? ‘Put words into deeds; in other words, simply do what we promise, every single time. Clients must always feel that they will not be disappointed when they require our assistance. They must be confident that we will be there as insurer when required. That is what i call our duty to care.
We successfully disentangled from Fortis within one year. For example, in 2009 new labels were introduced, and our balance has shifted. Moreover, the iCT environment is fully under our own control. Corporate activities for ASR Nederland were created, split up and adapted. ASR Nederland is standing on its own feet and has not received any capital injection, guarantees or loans.
Our assignment and strategy if the financial crisis has taught us anything, it is that we have to look for a new balance between the interests of clients, intermediaries, staff and shareholders. Finding this balance starts with regaining consumer confidence.
Strategy Winning back client confidence is essential. Confidence that you as insurer will be there when needed. Founded on this conviction, we changed our strategy and based it on three pillars: • Financially solid.
Financially solid The importance of financial buffers and an understanding of risks was highlighted again by the financial crisis. in 2009, ASR Nederland improved its capital position and reduced its balance sheet risks. The new risk management structure enables better monitoring and management of all the financial and non-financial risks of ASR Nederland as a whole.
This new structure will be elaborated on in 2010 and, together with the iFRS and Solvency ii requirements, forms the framework that will guarantee the financial solidity of ASR Nederland.
Efficient market player ASR Nederland wants to be an insurer that does not waste and that is frugal with its resources. With this in mind, our organization was restructured more efficiently in 2009 and the label and distribution strategy was reframed. in order to substantially reduce our overheads, we are introducing a general cost-cutting programme of €100 million across the organization. in the coming years, we will further improve cost efficiency with a number of focused programmes.
The operational excellence (OpEx) programme puts continuous learning and improvement of the organization centre stage in order to structurally improve efficiency, quality and, thus, the costs of processes. The OpEx programme is implemented in all the business units of ASR Nederland in such a way that it will become an inseparable part of our culture.
The Added-Value Analysis programme aims to reduce overheads of the staff and services departments and strives for insight into the added value of all indirect costs. The purpose of the programme is to further increase efficiency by making choices with respect to activities that supporting departments provide. This should reduce the related costs substantially.
Client focused The basic reason of our existence starts and ends with the trust and confidence clients have in our people, our products and the way in which we work. it will therefore require more understanding from us than before of what our clients really want and need. Calling on our professionalism, we will have to translate that concept to logical products and services.
The client value programme offers us a better understanding of the motives and incentives behind our clients and intermediaries. Understanding clients is the guiding principle for developing new and improving existing products and services. This we do, among other things, by organizing monthly client forums with staff talking to clients. We test our existing products proactively against the wishes and demands of the day by, for instance, submitting our information supply initiatives to client panels and assessing how the message gets across.
in order to measure our progress in regaining consumer confidence, we use the Net Promoter Score. This is an international standard for measuring the extent to which clients act as ambassadors for your brand by actively recommending it.
Strategic objectives We want to further consolidate our position as a top-three player in 2010. We will do that by implementing our strategy and by finding a new balance between the interests of all stakeholders.
With respect to our financial solidity, retaining our current ‘A’ rating is the main priority. Furthermore, we will reduce our risk profile and improve our profitability. To this end and in the context of Solvency ii, we will introduce new financial management variables to respond to the new solvency requirements.
The products and services that we introduce must meet corporate social responsibility criteria with respect to costs, transparency and plain language. This is the only way in which we can regain consumer confidence in the long run.
Financial targets Our long-term financial targets are clear and serve to assure our current and future shareholders about the safety of their investments. Specifically, the targets for 2012 are: • Profitability in the range of 8-12% of total equity. • Capital requirement in line with an ‘A’ rating. • Combined ratio for: - Disability of 92% - Non-life of 98%
margin on new business) • Combined ratio 102.1% • Cost saving programme contribution € 70 million
Strengthening of the equity position Total equity, including the unrealized revaluation of real estate, increased by 69% from €1,757 million to € 2,975 million. Total shareholders’ equity, excluding the unrealized revaluation of real estate, increased in 2009 from € 529 million to € 1,955 million. This is partly due to the result of the revaluation of investments. The restatement of subordinated loans as Tier-1 capital (€ 515 million) and the addition of the net result of € 255 million also contributed towards improving total shareholders ’ equity.
in 2009, the restructuring of subordinated capital (TOPrS) to Tier-1 equity resulted in an incidental capital gain of € 96 million after tax. The corresponding capital is now classified as part of shareholders’ equity, whereas last year it was still accounted for as debt. As a result of the restructuring, part of the net result of €255 million is earmarked for owners of other equity instruments (€ 13 million after tax).
New production in the group life business slowed down significantly. This is due to the group life market virtually grinding to a halt, the lack of collective value transfers and a few large single-premium policies in 2008. in the non-life sector, ASR Nederland maintained its position, gross premium income increased by 3% following rates adjustments, and the contribution made by the direct distribution channel Ditzo.
Gross insurance premiums asr nederland (amounts in € million) 2009 2008 %
1 The group embedded value is equal to the MCEv of the life entities, the IFRS equity of the other entities of ASR Nederland plus the revaluation of property and the test margin of the non-life businesses. Intangible assets, minority interests and hybrid Tier-1 equity were deducted from the IFRS equity.
in order to win back our market share, we implemented a multi funding strategy in 2009 with bNP Paribas Personal Finance as a funder, in addition to Fortis bank Nederland. We also introduced a new product, the WoonGerust mortgage.
Cost-saving programme We launched our cost-saving programme in the first half of 2009. The planned savings will be fully achieved in 2010. The rollout has produced savings right across the organization, enabling normal business operations to run on structurally lower overheads. important programme components include bringing the back offices of ASR Verzekeringen and De Amersfoortse under single management, the integration of Falcon into life and cutting duplicity in corporate staff functions.
in 2009, gross overheads dropped by €70 million compared to the 2009 budget. Compared to 2008, gross overheads fell by €55 million.
The savings achieved on operational overheads were not yet fully visible in 2009 due to a range of one-off costs, such as the disentanglement from Fortis and the reorganization costs in the context of the cost-cutting programme. On balance, the cost-cutting programme in 2009 saved €2 million on operational overheads.
The operating expense for non-life decreased (-4%) as a result of the cost-cutting drive, while operating expenses for life increased (+3%) due to additional expenses for the disentanglement from Fortis and investments required for the cost-cutting programme. Added to this, there is the fact that gross premium income is declining for life, while non-life saw an increase compared to 2008.
if we leave the disentanglement costs out of the picture, the cost-premium ratio for 2008 and 2009 remains virtually unchanged at 14.0%.
Net result The net result of the life business improved considerably in 2009 to €181 million. This is due to an improvement in the technical result and the incidental gain from the TOPrS.
We are also seeing that people are increasingly prepared to take more risks, for example the advance of the so-called ZZP business (self-employed without personnel). A self-employed individual is required to take out more personal insurance than a contracted employee, such as for his pension. With contracted employees, the employer is mostly responsible for this.
in order to live up to our social role, we must first of all be ‘good to our money’. Although ASR weathered the financial crisis well without needing a capital injection, we have still learnt the necessary lessons. We made our balance sheet less susceptible to financial markets in 2009. We fine-tuned our risk management and our financial figures are on track again. This annual report also provides insight into that. Transparency and honesty contribute to confidence.’
To which stakeholders is this solvency important? ‘Clients must be assured that their pension or their claim for damages will be paid out, investors want to be sure that their money is safe and earning a good return, and staff have to be confident that their salaries will be paid out in lesser times. Our policy is therefore focused on maintaining good solvency also in the future.’
What needed to be improved in the solvency at the beginning of 2009? ‘because of the split from Fortis, we were too sensitive to a drop in interest rates. The term of our obligations was much longer than that of our investments. As a result, we were running too high a risk and, in the event of a drop in interest rates, our obligations to clients would increase more than the value of our investments. We resolved this by selling short term bonds and acquiring long term ones, and by making use of derivatives, among other things. At the moment everything is in order, but we are keeping a keen eye on these developments.’
How do you assure clients that ASR is solid? ‘We have to be transparent about it and explain it to our clients. in the past year we announced that financial solidity was one of our spearheads; that is how important it is to us. Even if in the future there is no longer an acute need for solidity to be a separate spearhead, we will continue communication. For instance, we also provide ‘sensitivity analyses’ showing the impact of a drop in interest rates on our solvency position. However, there is room for improvement in our communication towards clients. Another sign that we were and remain healthy: the Dutch State is actually our shareholder, but we never received a capital injection or a loan from the State.’
‘Healthy returns is in the interest of clients, staff and investors’
During the first half of 2009, we reduced the position in shares. During the second half of 2009, our position was carefully and gradually expanded due to the recovery of the financial markets. in the first half of 2009, the interest rate risk profile was reduced by increasing the term of the bond portfolio and by buying swaptions. in 2009, ASR Vastgoed Vermogensbeheer continued to pursue its sales policy introduced earlier.
in the context of the approaching Solvency ii legislation, a Solvency ii project group was set up after gaining independence. The purpose of this project is to be fully prepared for the future Solvency ii legislation and to manage risk more effectively and efficiently.
At the end of 2009, annual Control Risk Self Assessments (CRSAs) took place for the first time in all the business units of ASR Nederland. As part of the process, management assesses the financial and non-financial risks of the relevant business unit. Using this as a basis, the Executive board performs an aggregated CRSA for the whole business.
Technical result in 2009 all product lines made a positive contribution towards the increase in the technical result (before result own account from investment sales) from € -998 million in 2008 to € 117 million in 2009. We saw a cautious recovery in the financial markets in 2009, with the allocated technical investment proceeds jumping from € -2,598 million to € 2,274 million. A significant part of these improvements is for the account and risk of policyholders causing the technical provision to shift in the opposite direction from € 1,169 million to € -1,585 million.
The improvement in the technical result was further boosted by the fact that an addition was made in 2008 in the context of the agreement with the foundations to compensate for investment insurance policies. The underlying technical result remained stable.
Life production has a normalized VANb of € 9 million. Following the lower production level, the cost standard was exceeded. Full attribution of costs incurred for production in 2009 results in a VANb of € -2 million. Various actions are underway to bring production and the associated costs closer in line. The VANb valuation is based on the ECb AAA Government curve.
Banking in mid-2009, banking was split from the life business, in which the banking organization had previously been integrated. The new banking organization includes both mortgages and savings & investments. in line with the ASR strategy, banking developed a strategy to win back the mortgages and savings & investments markets, to add to the ASR Nederland product range and to facilitate the production of life products. The mortgage production in 2009 was far below the level of the previous year due to a stagnating credit market and falling house sales. The market share dropped to 1.8% because ASR Nederland and its funding partner, following the split from Fortis, were not yet in a position to offer a good proposition.
To regain market share, a multi funding strategy was implemented with, next to Fortis bank Nederland, bNP Paribas Personal Finance serving as funder. At the end of 2009, a new mortgage product, the WoonGerust mortgage, was introduced.
Funerals Ardanta, our label in the funeral insurance market, faces increasing price competition, partly due to websites comparing prices. Therefore, during the course of 2009, a new range of products was introduced with sharper pricing. 79% of the production was achieved by intermediaries, 9% of production came from the banking channel, 9% from own payroll service agents and 3% from production in belgium. in the context of regaining consumer confidence, Ardanta took leave in 2009 of a number of intermediaries where there was more emphasis on up-front commission than necessary.
Due to the developments on the stock market, the guarantee provision for investment insurance policies declined in 2009, whereas an addition was still required in 2008.
The market conditions also affect intermediaries and meant an increase in the number of intermediaries going bankrupt in 2009. This in turn means higher risk for insurers. in the event of a bankruptcy (or uncertainty about continuity), there is a higher chance of policies being cancelled within the earn-back time of commission already paid and uncollectibility of the receivables (arising from the reversed commission). in connection with this financial risk, the provision for reverse risk was increased in 2009.
• Recovery of net result to € 76 million (2008: € 6 million)
Net result The net result from non-life business amounted to € 76 million. This is a significant increase compared to the 2008 result of € 6 million, and attributable to the recovery of the financial markets.
The claims ratio of health was positive and dropped by 1.2%p to 92.8%. The health top-up insurance portfolio had a bad year with high claims. The increase in gross premium income and the improved result on health insurance meant an improvement in the claims ratio. in 2010, we have already implemented further measures to reduce the claims incurred.
The motor claims ratio increased by 7.7%p to 71.7% due to a lower result than in preceding years and an increase in the claim frequency due to an increase in the number of windscreen claims, mainly as a result of the severe winter weather at the end of 2009. Following the increase of the claims incurred, we increased our rates for motor insurance and abolished the no-claim benefit. As far as fire and home contents insurances are concerned, the year saw many major claims. This resulted in a claims ratio of 65.2% (+13.8%p). The claims ratio for other non-life came to 49.2% due to an increase in the number of claims in the leisure sector.
Gross premium income Gross premium income in 2009 increased by 2% to € 2,346 million. The impact of the recession is becoming more and more visible, which is reflected in the drop in production to € 275 million in 2009 (2008: € 328 million). We can attribute this decrease primarily to disability and health where, due to the recession, there was a noticeable drop in the number of policies taken out by the self-employed.
Ditzo Generalist Non-life2 internet europeesche Verzekeringen specialist Travel and Leisure Multi-channel 2 The assortment of financial products offered by ditzo will be expanded
• De Amersfoortse: the specialist in income insurance. Distribution takes place exclusively through intermediaries.
in addition to improved efficiency, this centralization also means uniform and effective support services for the operational activities.
A single culture The decision to concentrate all the activities of ASR Nederland – apart from Europeesche Verzekeringen and Ardanta – on one location strengthens the organization as a whole and particularly mutual cooperation. We support this through the culture programme, which is focused on creating a shared and client-oriented culture.
Apart from technical insurance capacities, the commercial and communicative skills of our staff are also decisive for the success of ASR Nederland in the future. These capacities and skills are constantly being developed and nurtured in the entire organization. To this end, we have a knowledge centre at ASR Nederland which offers staff the opportunity to attend customized training courses, coaching and career development guidance.
The degree to which we are accessible to the different distribution channels is a critical success factor.
Business market intermediaries remain the dominant distribution party in the business market. This is because of the complex insurance issues facing entrepreneurs. They have an ongoing need for advice in how to compose their insurance and income products. in the professional (large) business market, a trend has been developing in recent years leading to transparency in terms and conditions and costs. in the rest of the business market, we expect an increase in the value of transparency. Clients, intermediaries and insurers are facing this new reality. The market conditions demand that we adapt our operational management to be able to respond to this trend.
Against this backdrop, we distinguish five major aspects with respect to intermediary distribution: • Intermediaries are increasingly taking on the role of advisor to clients instead of merely marketing the product; • As such, professionally independent intermediaries represent an important value in the chain; • The relationship between insurers and intermediaries is becoming more professional, which requires a clear division of responsibilities; • The client–intermediary–insurer chain operates more efficiently under pressure from transparency and competition. As a result, there is further integration in the chain; • Intermediaries and insurers have to fundamentally review and adapt their business models to the more efficient chain.
Distribution in our opinion, these improvements will produce a stronger intermediary distribution channel. Professional intermediaries remain the most important distribution channel for ASR Nederland.
Banking distribution Most banks have affiliated themselves to one specific insurer (often owned by the bank), but it is not clear, especially in the business segment, whether banks would wish a broader product range than that which their in-house insurer offers. Our focus is to agree to a partnership with banks and to become one of their main preferred suppliers of business insurance policies. The first step in this direction was taken with the partnership with Rabobank. in the private sector, we identify only limited opportunities for distribution through the banking channel. Our aim is to achieve 10% of the production via the banking channel in 2012.
• Growth in market share • Increase in the claims incurred • Most valued operational performance by intermediaries • Introduction of MultiZeker policy as the first next generation non-life product
The P&C product line is offered through the ASR Verzekeringen and Ditzo labels. The overall portfolio consists of diverse non-life insurance products for, among other things, motor, fire, travel and leisure, third party and legal assistance. ASR Verzekeringen concentrates on the intermediary distribution channel and Ditzo on the direct channel over the internet.
Outlook in 2010 we will continue to invest in a more efficient organization, offering products that respond to and fit with the changing market conditions, including products that belong to the next generation with clearer terms and conditions and appropriate cancellation terms. in addition, we are focused on turning around the loss-making components of our portfolio.
We have high expectations of the new flexible iT platform for performance. The system offers better integration with the chain and supports the main production processes. intermediaries, for example, are able to put policies together online, which are then automatically accepted. in addition, standard claims are automatically processed; this considerably cuts down the processing time thus improves our service to our clients.
• Market leader in disability insurance • Increase in intermediary confidence in disability • Disability insurance market under severe pressure on volume and price • Growth in number of health insured people continues • Claims incurred of supplementary health insurance under pressure • Integration of back offices of ASR Verzekeringen and
The target groups for disability and health are mostly self-employed entrepreneurs, managing director and shareholder, employers and employees in small and medium enterprises. because income situations and healthcare needs are a personal matter for everyone, we offer diverse disability and health insurance variants. Part of the product types are services in the field of waiting list intervention, prevention and reintegration. Our own labour specialists and reintegration specialists thus make an essential contribution to the speedy and successful recovery of sick or disabled clients. Our partnership with the reintegration agency, Keerpunt - in which ASR Nederland has a 50% stake - also contributes to this. in order to effectively negotiate waiting lists, sufficient qualitative health care has to be bought. Healthcare purchasing organization Multizorg VRZ, in which ASR Nederland is a shareholder, is responsible for purchasing care for health insurance.
For example, with more efficient processes implemented on the basis of the OpEx programme, the operational performance remains at the desired level. The share of ASR Nederland in the medical expenses market was 1.2% in 2009, which makes it a niche player in this field. in contrast to the major medical expenses insurers that work on a regional basis, ASR Nederland has a wide geographical spread. Since 2007, our health business has grown steadily. The portfolio increased by 8% in 2009, representing the highest growth rate in the entire health insurance market.
in 2009, the result from additional health insurance modules came under pressure. A first series of measures were therefore introduced in 2009 to improve the result. Changes were also made to the products of 2010.
both De Amersfoortse and ASR Verzekeringen can be happy with an increase in intermediary confidence in disability in 2009. in the 2009 iG&H Performance survey, these labels take up positions three and four; in 2008, they were in fourth and seventh position. in the 2009 NVA/NbVA/DAK performance survey, the labels were in fourth and fifth positions, compared to fourth and ninth in 2008.
intermediary confidence in De Amersfoortse in the health insurance market declined slightly. On the other hand, ASR Verzekeringen saw a slight improvement compared to 2008. in the 2009 NVA/NbVA/DAK performance survey, De Amersfoortse is in the third position (second in 2008) and ASR Verzekeringen in fourth position (fifth in 2008).
Moreover, insurers are also confronted with a higher total of claims incurred due to a substantial increase in the number of claims made and a higher disability rate.
The number of policy cancellations increased by 15% to 20% in 2009, with cancellations due to bankruptcies even increasing by 135%.
Healthcare costs are forever on the increase and, according to Statistics Netherlands (CbS), major savings in healthcare are absolutely essential.
Outlook in terms of the disability product line, we are seeing an improvement at operational level due to the effort to digitize the administrative processes between intermediaries and the product lines. This process will continue in 2010. in addition, we will reap the benefits of the simplification of both insurance portfolios by limiting the number of different products available.
• Sharp fall in production • Far-reaching changes in the market due to legislation and regulations • Focus on margin • Introduction of VermogenGarant as first next generation product
Market trends The individual life insurance market is going through drastic changes due to a number of coinciding events. The economic recession and low consumer confidence mean that fewer houses were sold, lower mortgage loans were taken out and, eventually, in other words, less capital was accumulated.
in 2009, the life product line introduced the new VermogenGarant product, which is a combination of a guaranteed capital with a chance of a higher return. This is our response to the call for greater flexibility and transparency. What is unusual about this product is that it is a net product for intermediaries; they are free to negotiate their own fees with clients. in our communication, we see VermogenGarant as the example of a financial product that is easy to understand, and it serves as our guiding principle in further adapting our communication about all other products.
Outlook VermogenGarant is our first move towards achieving our aspiration to remain a top-3 player in the market for private capital accumulation and safeguarding. With our new iT platform, in the future we will be able to introduce new propositions faster and more cost-effective to achieve our ambition.
We will also continue to work on simplifying our organization and improving our services. The most visible outcome of this is that we accommodate the activities of Falcon Leven with ASR Verzekeringen in September 2010.
Finally The programme for change, Marktgerichte Lenigheid (‘lean for the market’) was introduced in 2009 specifically for the individual life product line. One of the aims of the programme is to make our products and systems more flexible.
We have a good position in the pension fund market with ASR Pension Fund Services, which offers administrative and support services in the field of reinsured pension funds.
Market position in 2009, the group life product line successfully maintained its share of 18% in the SME market despite difficult market conditions. Gross premium income was in line with the figures for 2008, laying a firm foundation for our position in the market. Our large enterprises portfolio increased in spite of the fact that we lost a few contracts during renewal negotiations. The group portfolio gross premium income increased by 6.3%.
both in the SME portfolio and in the large enterprise portfolio, new production is under pressure at the moment due to postponement of salary increases and fewer new staff being appointed, among other things. in the SME segment we are also seeing that, due to the pressure of the current economic crisis, companies are reluctant to take out new pension plans.
Market trends in 2009, the group life market was practically tied down. The credit crunch produced more bankruptcies and redundancies, and wages were as good as frozen. The result was an unavoidable but negative development in turnover. On top of that, insufficient coverage produced a low indexation capacity for funds and deposits. in the large enterprise market, we deliberately acted with caution, especially with a view to the low interest rates and the aim to a higher new business margin. Contracts with marginal profitability expectations were avoided, thus accepting a drop in our market share.
We are fully confident that these new services will increase client satisfaction, just as our extra effort to rewrite all our letters and overview statements explaining the different products in client-friendly plain language.
Finally The group life product line operates in a highly competitive market with huge pressure on margins. We will have to continue improving our operating performance in the market in order to maintain our position and to expand it in specific market segments.
Hypotheek (comfortable living mortgage) • Disentanglement from Fortis Bank Nederland • Drafting and implementing multi-funder strategy
The banking product line develops and manages two types of products: mortgages and equity products in the shape of savings and investments. The ASR Verzekeringen label offers mortgages, particularly for buying a house or a practice, through the intermediary distribution channel. ASR Nederland pursues the policy of funding the money required for taking out a mortgage loan from third parties (funders) and, in this way, linking self-financed and self-developed mortgage products to corresponding insurance products from the individual Life product line. Such as life assurance or insurance in respect of death.
Market trends in their search for security in an economic recession, clients increasingly chose saving-, tax driven bank saving- and NHG mortgages. Falling house prices, the fear of unemployment and double housing costs make consumers extra cautious. As a consequence, house sales and also mortgage sales dropped significantly in 2009. The government responded by increasing the NHG guarantee to €350,000 in a bid to offer extra security to both consumers and mortgage lenders. banking responded to this development with the introduction of the WoonGerust Hypotheek.
banks and intermediaries remain our main distribution channels for mortgages. besides, consumers are more likely to orientate themselves in advance as to the different types of mortgages by visiting comparative sites, and a small but growing group actually take out their mortgage over the internet.
The market for capital accumulation and protection is growing rapidly, mainly due to the ever-growing group of people over the age of 45 who have access to more capital. both banks and insurance companies are responding to this. Whereas clients in the past usually automatically went to their bank for saving and investment products and to their broker or insurance company for long-term capital accumulation or protection, this is now clearly changing: providers increasingly offer a total package of financial solutions. With the introduction of tax driven bank savings products, ASR Nederland will actively act in response to this trend.
Outlook 2009 was a year during which the compilation of product lines and the separation from Fortis bank were the main priorities. This process will continue in 2010, and the banking line will further invest in strengthening its market position. We will enter into partnerships with third parties to outsource our iT systems and components of our primary processes, both for mortgages and for savings and investments. Not only do we expect that this will enable us to manage and save costs more effectively. The new set-up also allows us to respond more rapidly to market trends with new products that meet changing client needs. Finally, these systems will also facilitate our distribution through the direct channel Ditzo. We are thus taking the required steps in order to continue to expand our product portfolio in the coming years with a wide selection of banking products for mortgages and capital accumulation and protection. With our new WoonGerust Hypotheek, we expect to win back our declining market share in recent years.
Finally The market in which banking operates is changing rapidly. As an organization, we have taken the necessary steps for adapting our processes and systems to the new demand to respond quickly to changing market trends with products that better meet the needs of our clients. banking embarks on 2010 with a great ambition to continue to renew and to enrich our products and distribution.
‘Meeting Point aims to be a digital hub between insurance companies and the other parties in the chain, such as intermediaries. One intermediary deals with as many as perhaps 20 to 30 different insurance companies. You should see Meeting Point as a sort of department store. Clients and intermediaries can see via the internet what the affiliated insurance companies have on offer. That is easy, until the moment you want to take the next step. Then you’re faced with all sorts of different systems used by the different insurance companies. That is where there is room for improvement, for innovation.
innovation is not only about standardization and maintenance of the software of the different parties, but more about the so-called chain integration. For instance, look at the claim settlement in the case where a client’s garden fence was blown over. Everyone has a mobile telephone with a photo camera. if the client can mail the photo via the internet to the intermediary with the message: ‘Mind taking care of that for me, please’, the latter can immediately inform the carpenter. The chain of people involved in insurance and reporting claims can also work like this. There are clearly many other opportunities.
ASR has set the standard with Cockpit, the digital system for intermediaries. ASR is therefore one of the companies doing well. My vision for the future is that it will become easier and easier to reduce the duplicates that occur in recording information. And that we will have linked even more information, for example, payroll systems. And that clients will have insight into their own process and become more involved. because only greater standardization of processes enables insurers to work on a lower cost base in due time.’
What is the essence of efficiency? ‘With efficiency, you focus 100% on processes and costs. How- ever, you cannot only look at it from the organizations’ perspective. You must especially identify the needs of clients and then build your products and processes on that. in other words, ask clients how we can serve them best. And that you cannot do by sitting behind your desk; you really have to go to the client.’
And yet, they are committing themselves with enthusiasm at the moment. i greatly admire that.’
Where do the insurance advisors fit into the picture of efficient market players? ‘ASR deliberately chooses to work with the intermediary market. We wish to deliver products that appeal to clients at competitive prices and in a process that works without a hitch. Competing with internet providers is only possible if clients continue to appreciate the added value of intermediaries. Clients must be able to say: things run smoothly when i need them, they are there for me. Especially in case of loss, insurance advisors play a pivotal role. We do everything in our power to prepare ourselves as best we could, because that is a precondition for remaining competitive.’
What is your opinion regarding the need for innovation? ‘We must keep on innovating. We must always ask ourselves the question: What do clients think about us? Do our products continue to meet their needs? it must involve an ongoing process of improvement. if certain products or services no longer fully respond to the needs, we must do something about it immediately.’
‘You constantly have to ask yourself: Are our products still up to scratch?’
ASR Nederland is also in the process of further digitizing the business, with a balance being sought between maintaining the existing systems and investing in new systems.
Since its founding in 1920, Europeesche Verzekeringen has grown into the specialist in the insurance of risks that people face while travelling and in their leisure time. Consumers can come to the Amsterdam based insurer for a broad range of products, such as travel, cancellation, business travel and leisure insurance, for for example, boats, motorcycles or caravans.
Market position The impact of the recession is evident in the drop in the number of holiday reservations. The result from the leisure products, in particular, is facing a squeeze. With the introduction of new products, we have made efforts to hold on to our share in this declining market. For example, by responding to the events of insuring the Elfstedentocht with the Uit-inNederland insurance (out in the Netherlands) and transfer insurance (Omboekverzekering), we attracted new clients and, in addition, managed to create attention in the media. With the new golf insurance and wellness insurance products, we once again emphasize our reputation as specialist in the field of leisure.
Market trends The recession put a damper on consumers with an urge to travel. They travelled less and not so far, or spent their holidays at home or in the Netherlands. Still, more providers entered the market also offering continuous travel insurance in their non-life packages. it is striking that the market for leisure insurance is growing, which is mainly due to the increase in the number of people over the age of 50 who are spending more money and time on leisure at home and abroad.
Companies in order to continue to grow. This means that cost savings will go hand-in-hand with investments in electronic modules that make it easier for clients to deal with claims, requests and changes electronically. We also want to bring distribution fees more in line with the added value created for clients. We will continue to work on reducing the complexity of our products, processes and systems. This will be achieved, among other things, by improving processes through the reduction of wastes.
Ardanta, based in Enschede, has been the specialist in funeral insurance for more than forty years now. by taking out this insurance, clients protect their nearest and dearest against the high costs of a funeral or cremation. We offer five different forms of insurance from which clients can choose the insurance that meets their specific needs. Of course, clients are fully entitled to choose the undertaker of their wishes.
Ardanta mainly relies on intermediaries for distribution, but there is a clear increase in the number of applications through the direct channel.
Finally With the changes we implemented in the past year, the expansion abroad and a strengthening of our focus on clients, Ardanta will remain a leading player in 2010 in the field of products and, as such, benefit from the growth in the market.
Our housing portfolio consists of some 8,000 housing units. The portfolio varies, including both detached houses and flats. Most of our housing property is located in the Randstad conurbation. We strive for the best possible quality for our portfolio. in this context, we provide proper maintenance and proper contact with our tenants.
The offices portfolio comprises 300,000m2 and the retail outlet portfolio more than 500,000m2. by maintaining good contact with our tenants and properly maintaining our buildings, we can ensure that our portfolio continues to meet the current demands of retail and office users with respect to premises. Sustainability is a major focus in this context: it promotes client satisfaction and, at the same time, returns.
Market position in 2009, VGM/Locatus appointed ASR Vastgoed Ontwikkeling as Dutch retail developer of the year. This prize is an award for the strategic change in direction started earlier. ASR Vastgoed Ontwikkeling is increasing its focus on urban development and regeneration of older districts, often including major retail component. Striking examples include the completion in 2009 of the regenerated part of the centre of Lelystad and the redevelopment of the Aalmarkt in the historic centre of Leiden, which was added to our portfolio in 2009.
in 2009, we received the international SAS 70 Type-1 certification for ASR Vastgoed Ontwikkeling. This is a highly regarded quality standard for reviewing and monitoring internal processes.
Also in 2009, ASR Vastgoed Vermogensbeheer pursued its sales policy introduced earlier. in addition, there is still a considerable amount of new and redevelopment projects in the pipeline. in the housing segment, sales focused on remnant sales and houses outside the Randstad conurbation. This mainly involves smaller parties in which particularly private investors are interested. in the office segment too, ASR Vermogensbeheer continued to pursue its sales policy of recent years. Sales in the retail outlet segment concerns exclusively those outlets that do not really fit in the portfolio.
Earnings achieved by ASR Vastgoed Vermogensbeheer in 2009 are in line with the applicable benchmark (iPD).
Market trends 2009 was a difficult year for the real estate market in the Netherlands. All the segments, but in particular the office segment, faced a strong decline in demand. Major institutional investors were holding back investments, and banks have become very cautious about extending credits. At the same time, heavy downward adjustments had to be booked in the value of especially offices and homes. Again in 2009, our historically acquired agricultural land portfolio proved its stability in uncertain markets.
The credit crisis also left its mark on ASR Vastgoed Ontwikkeling. Sales and rentals lagged behind expectations, and a number of new projects were postponed. in response to this, the business implemented a cost-cutting drive.
Outlook We are expecting a cautious recovery of the economy in 2010 and 2011. For ASR Vastgoed Vermogensbeheer, the uncertainty on the market means that both tenants and investors are looking for quality, with the location of the property once again being a leading aspect. in addition, sustainability will continue to play an ever-more important role.
Other priorities for ASR Vastgoed Ontwikkeling remain urban development and regeneration, sustainability, area development and service to (institutional) investors.
ASR Nederland has issued shareholders’ equity instruments (hybrid Tier-1 capital) for a total of €515 million, as a consequence of which total shareholders’ equity amounts to €1,955 million. These instruments are listed on Euronext Amsterdam. The minority interest in total shareholders’ equity at year-end 2009 was €51 million.
To calculate solvency, the revaluation of property and other items allowed by legislation are added to total shareholders’ equity, including the equity instruments, and adjusted for capitalized goodwill and VObA, for example. At the end of 2009, the solvency ratio for ASR Levensverzekering N.V. was 277% and for ASR Schadeverzekering N.V. 295%, based on the calculations of the supervisor.
Disentanglement from Fortis Since ASR Nederland has been ‘standing on its own feet’, the capital positions and the market risks should be assessed on a stand-alone basis. One of the consequences of the separation is the created interest rate position which was balanced in the consolidation of Fortis, but which now has to be extended as a stand-alone business within ASR Nederland.
With the aid of government loans, swaps and swaptions, the duration in the investment portfolios was extended during the first six months of 2009. This drastically reduced the risk to interest rate changes resulting from the disentanglement to a very acceptable level. To cover the other market risks, a de-risking policy was pursued in the first instance, ’for 2.7 Capital management
Funding Although the funding requirements of an insurer are traditionally relatively limited, the options of secured and unsecured financing will again be scrutinized in 2010 to enable the best possible access to financial markets. by obtaining a rating in 2009, the first step was taken in expanding our own funding activities. in order to strengthen its liquidity position, ASR Nederland ensured itself at an early stage of facilities in the field of security lending, thus ensuring access to these financial instruments in the longer term.
in 2009, outlook on the rating of virtually the entire Dutch insurance market were put on negative by the different rating agencies. Moreover, the rating of most of the Dutch insurers has dropped from category ‘AA’ to ‘A’.
The second time that i dealt with them, i was again given excellent service. i had just been discharged from hospital and a public transport bus drove into my side. i even got into the local paper. i was momentarily totally confused, and again it was the nice man from the call centre who assured me everything would be OK. i almost burst into tears, so helpful.
For a time, i had no insurance broker, because everything was handled by my then advisor, who was a tax consultant. Nowadays, i do as much as possible myself. i used to own my own business and always kept proper accounts. So i can’t see any problems arising.’
Why Ditzo? ‘When Ditzo started out, our ambition was to become intellectual market leader, to make sense of everything that was not logical. The biggest recognition is that the market will follow in the footsteps of Ditzo. in other words, that was a thumbs up, also towards consumers. We’re not an ephemera, here today, gone tomorrow; we are a serious contender.’
Changing the client experience chain. How do you do that? ‘in everything we do, we talk about what the experience is. Take, for example, a P&C product. What is a client’s experience with a car? That then leads to a discussion about damage: what are you going to do to get rid of the damage? We hear consumers saying: ‘if i submit a claim to an insurer now, it is bound to be resolved in the end, but then i will first have to report and explain in detail, whereas i was going somewhere and my day is now ruined.’ That is what consumers remember. Therefore we have now introduced the collection and delivery service. if there is damage to your car, you phone Ditzo. We drive to your work and pick up the car, leave a rental car, and on the website you can see at which panel beater your car is being fixed.’
And this talking to clients, does it happen on a regular basis? ‘Oh yes, that is our First Monday: every first Monday of the month. The managers have to keep their diaries free for the afternoon and evening. And then we talk to consumers. because if we’re not careful, it becomes difficult. Let us be realistic, we have to be alert and maintain a sharp proposition. For instance, we invite people who have recently taken out a mortgage, or we approach people on the street and ask if they want to cooperate. Listening and learning. Everything can be interpreted differently in reality.’
Winning client appreciation is one of the major objectives of ASR Nederland. To get this appreciation, we need to know something about clients. A lot of research has already gone into clients in the different divisions of ASR Nederland. And yet, there are still many things that we don’t know about our clients or potential clients. A programme has been launched in order to bundle the knowledge we have and to fill in the ‘blind spots’. Using interviews, client forums and questionnaires, we identify what it is that clients really want.
During client forums, staff engage with consumers to submit and test, for example our communication, to see whether people understand it. New products are designed exclusively on the basis of these new insights. Examples of products in the next generation range include the MultiZeker policy and ASR VermogenGarant.
Three lines of defence The basic principle for fulfilling the risk management function of ASR Nederland is the so-called ‘three lines of defence’ model, which contains allocated roles and responsibilities. implementing segregation of duties between the design, the implementation of, and the monitoring of compliance with policies achieves a high degree of risk management. The ‘three lines of defence’ policy means that a distinction is made between three levels of control, which are: • The management of business units is responsible for managing the day-to-day risks on the basis of a proper and effective risk management system. This forms the first line of defence.
ASR Nederland operates in a rapidly changing financial landscape, with new lines drawn in public standards with respect to financial services. in addition, new insights into supervising and regulating financial institutions mean that risk perceptions are changing. in this changing environment, ASR Nederland has identified the following priorities for 2010: • Recent events and developments make it clear that the importance of reputation management is on the increase. The top priority of ASR Nederland is therefore to proactively manage and strengthen the reputation of ASR Nederland and its labels in word and deed.
• With regard to the investment policy, the balance sheet risks were significantly reduced in 2009. Never the less, an active policy will again be pursued in the coming years to continue to reduce the balance sheet sensitivities, to align the investments even better with the obligations, thus also reducing the required buffer capital where possible.
Financial risk 2009 was overshadowed by the need to manage financial risks. The jitters on the financial markets put some serious pressure on the solvency position of ASR Nederland at the beginning of the year, caused by oversensitivity to interest rates following the exit from the Fortis group.
Measures were implemented in the first half of 2009 to minimize these risks, including: • Reducing the interest rate exposure by acquiring long-term government bonds and swaptions.
Should the various scenarios occur simultaneously, it will have a cumulative negative effect on the solvency ratio of 66%. This meant that at year-end 2009, the DNb solvency ratio would come to 166%.
SenSitivity DnB Solvency ratio for market riSk Scenario effect on Solvency
ASR Nederland recognizes provisions for potential claims. To avoid the risk that ASR Nederland can no longer meet its obligations towards policyholders and others, ASR Nederland keeps extra solvency capital.
Non-financial risks The FiRM risk categories include the following non-financial risk categories: environment risk (including reputation risk), operational risk, outsourcing risk, iT risk, integrity risk and legal risk. A number of activities undertaken in the context of these risks are listed below.
At the end of 2009, the annual control risk self-assessments (CRSAs) were performed in all the business units of ASR Nederland. As part of the process, the management identified the major risks (both financial and non-financial) of the business unit on a qualitative basis. Using these results, the Executive board does an aggregated CRSA at a higher level for the whole company, with the Executive board identifying the most important risks facing ASR Nederland (see chapter on Priorities for 2010).
Following the split with Fortis bank Nederland, ASR Nederland set up business Continuity Management. For example, ASR Nederland prepared itself in 2009 for a widespread outbreak of the Mexican flu, and held crisis training courses at various locations in which a crisis was simulated (for example, a major fire).
ASR Nederland has set up a Solvency ii programme which, in the first instance, performed a gap analysis between the current situation and the situation that would comply with Solvency ii requirements. This provided us with insight into the divisions that requires attention from ASR Nederland in the Solvency ii context.
As part of the preparation for Solvency ii, ASR Nederland also took part in the RiSK 2008 quantitative impact study initiated by the Dutch central bank. both the insurance holding company and the different legal entities took part, giving ASR Nederland a better understanding of the divisions that not yet fully comply with the anticipated Solvency ii regulations.
Further steps will be taken in 2010 to be fully prepared for the implementation of Solvency ii.
• Ongoing focus on cultural change • Development of new remuneration policy • Dialogue on next generation work
ASR Nederland offers much room for training and development. We are spending around 5% of total wages on training courses and our career centre enjoys high attendance numbers. We deliberately opt for a horizontal organization with direct communication lines. This offers a greater degree of initiative in actions and communication to both managers and staff. The consequence of this is, for instance, that the coaching skills required of managers are gaining in importance.
• Supporting the culture change. ASR Nederland aspires to be a business that operates with an eye to the market and puts clients centre stage. This means that we are committed to a permanent improvement of our culture. Using culture coaches, training courses and HR activities, we guide and support this envisaged change and embed it into the organization.
The culture programme is an essential pillar in supporting the changes. Launched in 2006, the programme was further elaborated in 2008 with new core values (personal, trustworthy and accessible) carrying an internal motto (‘personally guaranteed’). in 2010, attention will continue to be focused on embedding these core values.
Finally Diversity is an essential prerequisite for successful team processes and healthy operational management. Our special focus in this context is on stimulating diversity in the higher management echelons. The purpose of our diversity policy in particular is to increase the percentage of women in management positions to a minimum of 25% in 2014. We are also very proud about the launch of our Colourful Ambitions network for minority ethnic members of staff to support and to assist them in building a career at ASR Nederland.
• Embedding sustainability in all processes • Transparency of products, conditions and communication • Further development of sustainable products and investments • Proactively promoting policy to all our stakeholders
Corporate social responsibility is all about the ecological, economic and social impact of our operating activities and accounting for it. Corporate social responsibility focuses on activities or investments by the company in the local sphere in which the company operates. We have been able to make a contribution towards this latter aspect in partnership with Fortis Foundation. With effect from 2010, both the policy and its implementation will be put in the hands of ASR Foundation.
Within the parameters of international legislation and regulations, codes of conduct and standards, we must successfully embed sustainability in all our basic processes3. Moreover, we carry a responsibility as insurer and as investor. in recent years, we have been putting a lot of effort into the transparency of our products, improving the transparency of our processes and simplifying the range and presentation of sustainable insurance products, including four sustainable investment funds. in 2009, ASR Nederland published its own social annual report for the first time, covering 2008 in line with the guidelines of the GRi (Global Reporting initiative). The report is a clear reflection of our CSR policy in the field of insurance, asset management, the environment, employership and our social involvement and commitment.
We make extra investments in companies that, within their business sector, achieve the highest score on ESG criteria or that make a sustainable contribution to society. Accordingly, an investment was made in 2009 in the context of sustainability funding in a clean energy fund. Exclusion criteria that we apply include: controversial weapons, nuclear energy, pesticides, alcohol and tobacco, the gaming and sex industry and companies that use animals in laboratory tests.
We use external asset managers in accordance with our investment policy. Since the interpretation and application of SRi criteria will differ for each asset management fund, we accept minor deviations. both with the selection and monitoring of these external asset managers, SRi criteria form part of the overall process: here, too, we invest in managers with a high SRi score and we exercise our influence on the policy of asset managers with respect to corporate responsibility and investments. At the moment, more than 95% of our current external asset management funds are signatories to the United Nations Principles for Responsible investments.
in 2009, we joined VbDO, the Association of investors in Sustainable Development (Vereniging van beleggers voor Duurzame Ontwikkeling). Among other things, we actively participated in the VbDO benchmark for responsible investments by insurers. The benchmark is evidence of the fact that we are pursuing a sustainable investment policy. The conclusions and recommendations referred to in the report have been discussed with VbDO to enable us to continue to improve SRi policy in certain divisions.
Our role as real estate investor Sustainability is a subject in the real estate sector that attracts continues attention and that forms an inseparable component of operational management. in this context, the
opportunities for personal development, career planning and, in the end, room for achieving personal ambitions. We would like the staff of ASR Nederland to mirror our multi-faceted society: we are convinced that that is the only way in which we can really tailor our services to the market needs. We also encourage staff to become involved in various networks to promote their vision and personal growth. A good example of such a network is the Colourful Ambitions network for minority ethnic staff. And, finally, it goes without saying that we put a lot of effort into equality for all our members of staff.
Apart from the fact that all the energy consumed in 2009 was generated with renewable energy sources, we also use the long-term energy storage concept (Lange Termijn Energie Opslag (LTEO)) at our head office in Utrecht. An energy storage system located underground contributes to the heating and cooling of the building.
in 2009, we continued working on the ‘completely digital’ project with the aim of full digital collaboration between ASR Nederland and intermediaries. in addition to process improvements, this project has a sharp focus on paperless working.
ASR Nederland purchases sustainable products, thereby trying to gradually reduce the impact of the goods and services we use on the environment. in future, the sustainability aspects will be taken into account with all new contracts and contract renewals. Furthermore, we insist on the entire production process of goods and services that we purchase respects international human rights.
Finally, we actively pursue a mobility policy to increase accessibility to our offices and reduce CO2 emissions. We have also signed mobility covenants for our offices in Utrecht, Amsterdam and Amersfoort.
Social involvement Despite the economic climate, we like to give something back to society. With our ‘Verzekerd van Jeugdzorg’ (ensuring care for the young), youth welfare work has been a special area of our attention for some years now. in 2009, we structurally engaged with eight nationwide institutions to provide support for young people in the youth service. it mainly concerns raising young people’s awareness about their talents and offering them opportunities to continue to develop themselves. One of the fixtures of the ‘Verzekerd van Jeugdzorg’ programme is the ASR Youth Run. This is a sportive coaching project, with staff of ASR Nederland preparing young people and their carers from twelve youth service institutions for the five or ten kilometre run of the Fortis Marathon in Rotterdam. This gained us the SponsorRing award in 2009.
in partnership with the Fortis Foundation, ASR Nederland performed voluntary work at numerous projects in the Netherlands. in July 2009, for example, the fort on Pampus was tackled by twenty members of staff and given a facelift together with other people. With effect from 2010, ASR Foundation is responsible for the policy and activities in the field of social involvement.
Outlook for 2010 in 2010 also, we will continue to actively monitor the impact of our operations on people, society and the environment. Het Nieuwe Werken (the ‘new way of working’) will be further promoted and publicised. We will also continue to pursue current initiatives with respect to energy, resources and water conservation. An energy efficiency plan has been drawn up for our head office in Utrecht for the period from 20092012. The respect of management, regulations, ethics and codes of conduct will be our priority. The emphasis in our insurance operations will be on regaining the confidence and trust of our clients.
The investment policy pursued by ASR Nederland as asset manager will be publicised more widely in 2010 both within ASR Nederland and outside. Our information in this area will be more accessible to policyholders, advisors, shareholders and the public. Our SRi policy and information about out sustainable funds will therefore be included as a permanent feature in our brochures. in terms of ASR Vastgoed Vermogensbeheer, sustainability criteria for existing property will also be drawn up in 2010.
Talking about improvement is great, but make sure you do something tangible
is there really such a client-friendly product? ‘The MultiZeker policy. This is a product for clients who want security and ease and who do not compare everything on price. We went out to consumers to find out: what does a specific type of client want? Well, they want to be properly insured, and in the event of something happening, the settlement must go smoothly and without a hitch. That’s why it offers the most comprehensive cover. This is not bargain basement product, but regarding content very good. And the more insurance policies you take out with us, the higher the discount, for example.’
How is the relationship with intermediaries changing? ‘ASR Verzekeringen opts for intermediary distribution. Clients do not do direct business with us. Maintaining a good relationship with our intermediaries is very important. if they don’t know our products or us, they are not able to recommend us to clients. What we’re seeing is that business models for intermediaries are changing, and that the fee structures are also changing. The products offered by intermediaries are no longer our only insurance products, but especially their advice and support. And we have to support intermediaries in that. intermediaries will be less inclined to link their loyalty to how much commission they earn, but will ask themselves: what sort of products does the organization offer? Are they good products? Do i get sufficient support? Are the processes in good order? The relationship will become more businesslike, and we must be absolutely aware of that.’
What does ASR plan to do about this in 2009, ASR Verzekeringen organized several meetings with intermediaries to talk about future distribution and the corresponding distribution models.
Since 2007, the account managers of De Amersfoortse have been attending a three-year post-bachelor course in business administration. This enables them to offer intermediaries the kind of support required in the new set-up, and we establish ties with intermediaries by offering them knowledge and skills. ASR Verzekeringen pursues this model.
The Executive board declares that, to the best of its knowledge: 1 the financial statements are a fair presentation of the assets, liabilities, the financial position and the result of the company; 2 the financial report contains no material misstatements, and that the risk management and control systems functioned properly during the year under review; 3 the annual report is a true reflection of the state of affairs as at balance sheet date, developments during the financial year, and that the material risks facing the company have been adequately described.
Until 2008, Cor van den bos served as member of the Executive board of SNS Reaal NV, where he took responsibility for all their insurance operations. in addition, he is the chairman of the Supervisory board of CED, the Noordwijkse Woningstichting and the Stichting Verzekeringswetenschap. He is also a member of the Supervisory board of NibE-SVV and Trust Hoevelaken.
Until 2009, Margot Scheltema served as Financial Director of Shell Netherlands b.V. in this context, she has fulfilled various international management positions with Shell.
The Supervisory board mainly concentrated on the emancipation of ASR Nederland to an independent organization and the restructuring of the organization. An important focus in this was preparing the strategy that rests on three pillars: financial solidity, improving cost efficiency and winning back consumer confidence.
Composition of the Supervisory Board During the year under review, there were some changes to the Supervisory board. Following the recommendation by the Staff Council (OR), Marieke bax joined the Supervisory board on 12 February 2009. Due to a business change in her immediate sphere, Marieke bax recently decided to step down as supervisory director. With effect from 10 March 2010, she is no longer a member of the board. The Supervisory board will await a recommendation by the works council and then nominate a new member for the Supervisory board.
Meeting date KiCK Van deR POL MaRgOt SCHeLteMa COR Van den BOS MaRieKe BaX
Evaluation based on a questionnaire, the chairman of the Supervisory board spoke to each member of the Supervisory board individually about their own performance. The results of these interviews formed the basis of a meeting of the Supervisory board at the end of the year. At this meeting, the board discussed the profile, composition and performance of the Supervisory board. The Supervisory board has been composed in accordance with the principles of the Frijns committee and has been able to perform its tasks with full independence.
The Audit Committee looked at the processes of the Control Risk Self Assessment, and evaluated the follow-up on risk identified in the process. One of the items on the agenda was the programme comprising Solvency ii, iFRS and integrated risk management.
based on the 2010 to 2012 policy plan, the Audit Committee discussed the 2010 budget and the 2010 to 2012 financial outlook. The Audit Committee endorses the importance of three central themes in the policy plan: financial solidity, efficient market player and client-focused services.
information concerning the remuneration policy can be found further on in this report on page 73 of the financial statements.
Topics on the agenda The Supervisory board focused particularly on a number of items in their meeting with the board of Directors.
Strategy / Policy plan The Supervisory board discussed the development and elaboration of the new strategy with the board of Directors. This took place over several meetings. The aspirations of ASR Nederland have been formulated based on market trends and the lessons learnt from the past. The two main driving forces are regaining client confidence and striking a good balance between the interests of clients, staff and shareholder. The board admires and endorses this approach, and is aware of the fact that ASR Nederland is facing a tricky, threefold challenge: winning back client confidence, cutting overheads and posting a healthy return. in this context, the Supervisory board and the Executive board are convinced that ASR Nederland has sufficient scale to implement the strategy with success. The shared conclusion is that the strategy as set out in the 2010 – 2012 policy plan is aligned to a good balance between the interests of all our stakeholders. The Supervisory board approved the policy plan.
Acquisition of ASR Bank and accommodation The board of Directors tabled two important resolutions to the Supervisory board, that approved both of them.
Financial statements and dividend We discussed our financial statements for 2009 with our external auditor, KPMG. The board of Directors submitted their report and the financial statements for 2009 to the Supervisory board. The Supervisory board subsequently approved the financial statements at their meeting on 22 April 2010. KPMG audited the financial statements and issued an unqualified auditor’s report, which is included on page 179 of this report. The Supervisory board confirmed that our external auditor was independent with respect to ASR Nederland. The board tabled the financial statements at the annual General Meeting of Shareholders. The board also recommended adopting the financial statements and discharging the board of Directors from their responsibilities for the policy they pursued and the Supervisory board for their supervision of the board of Director.
The profit appropriation, which has been approved by the Supervisory board, is included on page 182 of this report.
The Supervisory board is concentrating on reshaping the organization to become an insurance company that is highly valued by its clients because of its solidity and continuity.
Finally The Supervisory board would like to take this opportunity to emphatically express its gratitude to the Executive board and all our members of staff for their loyalty, contribution and massive effort they made in what will be remembered as a difficult 2009. We also thank those managers who have left or taken up another position, such as Jacqueline Rijsdijk and Theo Pluijter. And last but not least, a warm word of thanks to Marieke bax who, until stepping down at the beginning of March 2010, showed great commitment in fulfilling her role as supervisory director.
Board of Supervisors Kick van der Pol Cor van den bos Margot Scheltema
Towards on a new remuneration policy in consultation with the Ministry of Finance, a new and sustainable remuneration policy was worked on in 2009. This policy supports the new strategy of ASR Nederland and the documented aspirations.
The aim is to agree on the policy in the first half of 2010 and to implement it.
Remuneration policy 2009 The foundation of the remuneration policy in 2009 is partly based on the former Fortis policy. We will replace the ‘2009 remuneration policy’ with the identified sustainable remuneration policy. The 2009 remuneration structure consisted of four components: The fixed salary component There are three levels within the Executive board: the chairman, the serving members of the board and the new members of the board. The salary of the new members of the Executive board is incremented in steps to the level of the serving members of the board. Should market conditions dictate such, the fixed salary component of the members of the Executive board will be aligned to the applicable market conditions. indexing is in line with the collective labour agreement (cao) conditions for the insurance sector.
The client value and staff engagement target was achieved as planned. Of the financial targets, the projected profit was far exceeded, the cost targets were achieved as planned and gross premium income lagged behind the set target.
Other remuneration elements The members of the Executive board have a chauffer-driven car or a lease car. Their monthly expense allowance is €200 untaxed and €253.75 taxed. They are entitled to staff benefits that apply to all the members of staff of ASR.
February 2009, the bonus upon departure has been maximized to one year’s fixed salary.
• At its own initiative, the Executive Board waived every form of variable remuneration for 2008 (to be paid in 2009).
• Senior management and higher echelon management also did not receive variable remuneration in 2009 (for 2008).
• The elements forming the basis of target-related pay for senior management and higher echelon management in 2009, has been adjusted: individual targets (representing 1/3 part), financial targets of ASR Nederland (representing 1/3 part) and client satisfaction and staff involvement (representing 1/3 part), maximized to 100%.
Management structure ASR Nederland is s statutory two-tier company to which the so-called ‘attenuated’ applies. ASR Nederland is subject to the attenuated regime because the State, as a legal entity according to public law and all the issued capital is for its own account (section 2:155a of the Dutch Civil Code (bW)). This means different rules apply to the appointment and retirement of supervisory directors than apply to companies not under attenuated regime. in addition, certain management decisions referred to in the Dutch Civil Code must be approved by the Supervisory board.
Composition of the Executive Board: Jos baeten (CEO) Roel Wijmenga (CFO) Hans van der Knaap (COO) Roeland van Vledder (CCO)
Articles of Association Articles of Association and rules of business of the Executive board and the Supervisory board can be accessed on our site www.asrnederland.nl. The Articles of Association can also be consulted on the site of the Chamber of Commerce (Kamer van Koophandel) www.kvk.nl (file number 30070695). The Articles of Association are currently being amended to fit better with the new legal structure. This takes place in close consultation between the Dutch State and ASR Nederland.
Rules for the appointment and retirement of managers and supervisory directors The General Meeting of Shareholders (GMS) appoints the members of the Supervisory board upon nomination by the Supervisory board. both the GMS and the works council can nominate people for a supervisory position. The Supervisory board informs them in a timely manner when they can nominate a supervisory director, why, and what kind of profile the person must have.
A member of the Supervisory board can only be dismissed by the Enterprise Section of the Amsterdam Court of Appeal if the member is negligent in his or her duties, because of other serious reasons or because the circumstances have changed drastically. in addition, the AGM can pass a no-confidence vote in the entire Supervisory board, which leads to the summary dismissal of all the supervisory directors. Finally, the Supervisory board can also suspend an individual member of the board.
‘i’ve now been working here for more than 21 years, right from the start of my working life. Through an open application, i started at, at the time, AMEV in their proposal department of Life and Pensions. i still work in Pensions and am now Senior business Expert. The job of my life, as i like to say. The ‘AMEV home’ was a familiar environment. Entire families worked here. And i still enjoy working here, even though there have been some drastic changes in recent times. Especially the reduction in staff numbers caused a lot of concern. You see your colleagues leaving. Personally, i’m not that concerned about my position, but i can see around me that the same does not apply to all my colleagues.
Through our culture change, every member of staff can now make a difference. Every good plan has a chance of being implemented, irrespective of whether it came from a member of staff or a director. What this means for attitude and behaviour is that managers now show themselves on the work floor more frequently and that staff can personally take control of the change. Staff have been given far more recognition.’
by creating a more efficient organization, does it mean asking more of staff? ‘We are creating a more efficient organization if we stop doing certain things. And we have to do it with fewer people. We therefore clearly ask more of our staff. What i see as a positive development is that people are showing exceptional commitment and flexibility. Simply because they enjoy committing more of themselves to their work!’
in conversation with Arja Hilberdink director of Business Support at ASR Nederland
‘Allowing room for initiative, that is our philosophy for working together’
Each year, we measure engagement, also called the commitment, of our staff. in 2009, more than one third of our staff were fully committed to our organization. This rate is too low, and our aim is to increase engagement to 60% in the coming years.
Consolidated balance sheet 84 Consolidated income statement 85 Consolidated statement of comprehensive income 86 Consolidated statement of changes in equity 87 Consolidated cash flow statement 88 1 General information 90 2 Financial accounting principles 90 3 Risk management 105 4 Capital management and solvency 120
Notes to the income statement 160 25 Gross insurance premiums 160 26 Reinsurance premiums 161 27 investment income 161 28 Fee and commission income 163 29 Other income 163 30 Net insurance claims and benefits 165 31 Operational and staff expenses 165 32 Acquisitions costs 166 34 interest expense 167 35 Other expenses 167
Company financial statements 173 41 Company balance sheet 173 42 Company income statement 174 43 Notes to the company balance sheet and income statement 174
Other information 181 Auditor’s report 181 Subsequent events 182 List of main group companies and associates 182 Articles of association stipulations for profit appropriation 184 Result appropriation 184 Glossary 185 Abbreviations 187 2009 CONSOLIdATEd FINANCIAL STATEMENTS ASR NEdERLANd N.v.
Liabilities arising from insurance contracts on behalf of policyholders 18 9,823 8,263 10,633 provisions for employee benefits 19 1,946 1,933 538
Fee and commission income 28 89 120 result of associates and joint ventures 15 27
Net result attributable to holders of other equity instruments 18 tax on result of other equity instruments -5 -
Unrealized change in value of available-for-sale financial assets 1,533 - 2,103
Share of other comprehensive income of associates and joint ventures 28 -26
Net result current financial year - - -640 - - - - -640 - 7 -633
Result carried over from previous financial year - - -889 - - 889 889 - - - -
Net result current financial year - - 255 - - - - 255 - 5 260
Unrealized gains and losses also include shadow accounting. For more detailed notes on the unrealized gains and losses, please refer to chapter 16.2.
Undistributed share in result of associates and joint ventures 3 4
Net increase/decrease in investments related to for account of policy holder contracts -1,321 2,748
ASR Nederland N.V, with its registered office in Utrecht, is a public limited company under Dutch law. its registered office is located at number 10 Archimedeslaan, 3584 bA in Utrecht.
On 29 December 2009, ASR acquired 100% of the shares from Fortis ASR bank N.V. For more information, please refer to chapter 39 ‘business Combinations’.
Pursuant to the options offered by the Netherlands Civil Code, section 362 book 2, ASR prepares its company financial statements in accordance with the same principles used for the consolidated financial statements.
The financial statements for 2009 were approved by the Supervisory board on 22 April 2010 and will be tabled at the General Meeting of Shareholders for adoption. The Executive board released the financial statements for publication on 29 April 2010.
• IAS 23: Borrowing costs (revised), effective from 1 January 2009.
• IAS 32: Financial instrument: presentation and IAS 1: Presentation of the financial statements – puttable financial instruments and obligations upon liquidation, effective from 1 January 2009.
• IAS 39: Financial instruments: recognition and measurement – hedged positions to be taken into account (amended), effective from 1 January 2009.
• IFRIC 13: Loyalty programmes, effective from 1 July 2008. • IFRIC 14, IAS 19: The effect of minimum borrowing requirements and the recognition of an asset with respect to defined benefit plans, effective from 1 January 2009.
• IFRIC 15: Agreements for the construction of property, effective from 1 January 2009.
• IFRIC 16: Hedging net investments in foreign entities, effective from 2009 financial year.
• Improvements to IFRS (May 2008), effective from 2009 financial year. These improvements include a change in iAS 40 concerning property developed for future use as investment property. As a consequence, ASR recognized development projects worth € 140 million under investment property as of 1 January 2009. These were previously accounted for as property, plant and equipment. The change has not led to an adjustment of the comparative figures.
On 10 January 2008, the international Accounting Standards board (iASb) published a revised version of iFRS 3, business combinations, and corresponding revisions to iAS 27, Consolidated financial statements and separate financial statements.
2.3 Changes in presentation ASR has decided to introduce some presentation changes in the 2009 financial statements, in line with the character of ASR as an independent business after the disentanglement from Fortis.
The changes in presentation do not have any effect on the net result, the total result and the shareholders’ equity of ASR.
- The balance sheet items ‘investments available for sale’ and ‘investments at fair value through profit and loss’ included in 2008 have now been joined together under a single item
‘investments’. (in the 2008 financial statements, these items amounted to € 16,291 million and € 410 million respectively).
- The item ‘accrued interest and other liabilities’ (€ 3,563 million in the 2008 financial statements) has been largely reclassified. The pension obligations (2008: € 1,885 million) are stated under a separate item ‘provision for employee benefits’. The item ‘other staff benefits’ (2008: € 108 million) is partly included under the liabilities for employee benefits and partly under the other obligations. The derivatives (2008: € 37 million) are stated separately on the balance sheet. Also the item ‘amounts owed to clients’ (2008: € 59 million) is, together with dues to agents, policyholders and intermediaries (2008: € 481 million) and dues to reinsurers (2008: € 82 million), stated separately on the balance sheet.
- The items ‘interest income’ and ‘dividend and other investment income’ (2008: € 1,632 million) were merged under the item ‘investment income’.
- The item ‘other realized and unrealized gains and losses’ (2008: € 17 million negative) has been split into the items ‘realized gains and losses’ and ‘fair value gains and losses’.
• Presentation of the cash flow statement - Cash flows from the purchasing and selling of investments and investment property are classified under cash flow from operating activities, because these cash flows belong to the core activities of ASR.
Gains and losses on transactions between ASR and associations and joint ventures are eliminated in proportion to ASR’s share.
The most important estimates and assumptions mainly concern: • the recoverable amount in case of impairments; • the fair value of unlisted financial instruments; • the estimated useful life and residual value of property, plant and equipment, investment property, and intangible assets; • the measurement of capitalized deferred acquisition costs; • the measurement of obligations arising from insurance contracts; • actuarial assumptions about the measurement of pension obligations; • when forming provisions, the required estimate of existing obligations arising from events in the past.
The estimates and assumptions with respect to actual facts, actions and events are made to the best of the management’s knowledge. The actual outcomes may eventually differ from the results reported earlier on the basis of estimates and assumptions. A detailed explanation of the estimates and assumptions is included later in the report and in the relevant notes to the consolidated financial statements.
Transactions denominated in foreign currency are initially recognized at the exchange rate on the transaction date. Monetary balance sheet items in foreign currency are translated at the applicable exchange rate as at balance sheet date. Foreign exchange gains and losses arising from the settlement of these transactions and from the translation of monetary items are recognized in the income statement.
For monetary items carried at fair value, by which changes in the value are recognized in the revaluation reserve in equity, the exchange rate differences with respect to the cost price are recognized in the income statement.
Non-monetary items carried at historical cost are translated using the original exchange rate on the transaction date. For non-monetary items carried at fair value, with changes in the fair value are taken to the revaluation reserve in equity, exchange rate differences are recognized directly in shareholders’ equity. For non-monetary items carried at fair value through profit and loss, exchange rate differences are recognized as part of the value changes.
The assets and liabilities of foreign group companies using a different functional currency to the euro are translated at the applicable exchange rate at balance sheet date. The items of the income statements of the relevant group companies are translated using the average daily exchange rates. The exchange rate gains and losses arising from this method are recognized in equity.
2.10 Securities lending if ASR lends out securities, collateral is received in the form of securities or cash. Cash received is recognized on the balance sheet with a liability against it.
Securities lent remain on the balance sheet. Securities received as collateral are not included on the balance sheet.
ASR as lessor in the context of investment property, ASR enters into lease agreements with clients. For these operating leases, the risks associated with the property remains for the account of ASR. Consequently, the investment property remains on the balance sheet of ASR. The principles are explained in more detail in chapter 2.16 ‘investment property’.
2.12 Cash flow statement in the cash flow statement, the cash flows are divided into cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. ASR presents the cash flow from operating activities in accordance with the indirect method.
The cash flow statement includes interest received and paid and dividends received in the cash flow from operating activities. Cash flows from the purchasing and selling of investments and investment property are included net in the cash flow from operating activities. Paid dividends are recognized as cash flow from financing activities.
2.13 Intangible assets intangible assets are included on the balance sheet at cost, decreased with any cumulative amortization and any cumulative impairment losses. The residual value and the estimated useful life of intangible assets are reviewed on each balance sheet date and adjusted where applicable.
Goodwill Acquisitions by ASR are accounted for using the purchase method. Goodwill represents the positive difference between the cost of the acquired group company and the interest of ASR in the fair value of the obtained identifiable assets and liabilities and contingent liabilities as at acquisition date. if the difference is negative (negative goodwill), it is taken directly to the income statement. At the acquisition date, the goodwill is allocated to the cash- generating units that are expected to benefit from the business combination.
in the event of an impairment, ASR first reduces the balance sheet value of the goodwill allocated to the cash-generating unit. This is then followed by the other assets of the unit, pro rata to the balance sheet value of all the assets in the unit.
value Of Business Acquired (vOBA) The value of business acquired represents the difference between the fair value and the balance sheet value of insurance portfolios acquired in the context of a business takeover or that have been taken over from an insurance company. VObA is recognized as an intangible asset and amortized over the term of the current insurance contracts at acquisition date, in conjunction with the corresponding obligations. The value of the VObA is reviewed annually to ascertain whether it has been subject to impairment. This takes into account the results of the annual compulsory adequacy test related to insurance contracts (see chapter 2.28).
Should the balance sheet value of the VObA exceed the difference between the balance sheet value of the obligations arising from insurance contracts and the obligations calculated as part of the adequacy test, an additional write-down is carried out on the VObA to the level where the values are equal.
in the case of life insurance products, the capitalized deferred acquisition costs are amortized on the basis of the expected premiums or the surcharge included in the premium for repaying acquisition costs. This will depend on the type of insurance contract. The expected premiums are estimated on the date of the policy issue. The amortization periods can correspond with the total duration of the premium payments or a shorter period depending on the type of insurance contract.
With respect to the insurance products included in the Non-life business segment, the capitalized deferred acquisition costs are amortized over the period in which the relevant premiums are realized.
if the balance sheet value of the capitalized deferred acquisition costs exceeds the difference between the balance sheet value of the obligations arising from insurance contracts and the obligations calculated in the context of the adequacy test, an additional write-off is performed on the capitalized deferred acquisition costs to the level where the values are equal.
2.15 Property, plant and equipment Property held for own use, buildings under construction and operating assets are recognized at cost, less cumulative depreciation (except for land that is not depreciated) and any cumulative impairment losses.
The cost is the same as the cash paid or the fair value of the consideration paid to acquire the asset.
Operating assets are depreciated over their useful life, which is determined individually (usually between three and five years).
if objective indications give rise thereto, property, plant and equipment are tested for impairment.
investment property is recognized at cost minus cumulative depreciation and possible impairment losses. buildings are depreciated using the straight-line method based on the expected useful life and taking account of the residual value. Land is not depreciated. The residual value for the estimated useful life is determined separately for every main component (component approach) and is assessed at every balance sheet date.
ASR generally lets homes for an indeterminable period. The other investment property is let for defined periods by means of lease agreements that cannot be cancelled in the interim. Certain contracts contain extension options. The rental income is accounted for as investment income in the period to which they relate.
if objective indications give rise to it, investment property is tested for impairment and, if necessary, written down.
Associates investments in associates concern interests in which ASR has significant influence on the operating and financial policy, without having control. Associates are recognized using the equity method from the date at which ASR first has significant influence until the date at which such influence ends. This means that the participating interest is initially recognized at cost, including any goodwill paid. Subsequently this value is adjusted to take account of the share of ASR The result is adjusted in accordance with the accounting principles used by ASR.
Losses are accounted for until the balance sheet value of the investment has reached zero. Further losses are only accounted for to the extent that ASR has legally enforceable or actual obligations concerning these participating interests.
if objective indications give rise thereto, associates are tested for impairment and, if necessary, written down.
Joint ventures Joint ventures concern contractual agreements with ASR and one or more parties entering into a partnership and with strategic financial and operational decisions taken unanimously. These interests are accounted for using the equity method as applied to associates. The interests are recognized in the financial statements from the date on which ASR first obtains joint control until the date of which this joint control ends.
if objective indications give rise thereto, joint ventures are tested for impairment and, if necessary, written down.
Upon first recognition, derivates are stated at fair value at the start of the contract. Subsequent changes in the fair value are taken to the income statement under ‘fair value gains and losses’.
Financial assets or liabilities can contain embedded derivatives. These derivatives embedded in a contract are separated from the basic contract and valued separately if the basic contract is not stated at fair value through profit or loss and if the economic features and risks of the embedded derivative do not closely match those of the basic contract. The measurement of this separated embedded derivative is at fair value through profit or loss.
A hedge is considered effective if the change in the fair value or the cash flows of the hedged position is virtually fully compensated by changes in the fair value or the cash flows of the hedging instruments. Only assets, liabilities, fixed obligations or highly likely expected transactions involving a party from outside ASR are deemed to be hedged positions.
Changes in the fair value of the effective portion of derivatives that have been identified and qualify as cash flow hedges are recognized in shareholders’ equity as an unrealized gain or an unrealized loss. The fair value changes of the ineffective portion are recognized in the income statement.
2.19 Investments The investments of ASR mainly consist of listed fixed income securities and listed shares.
Loans and accounts receivable are accounted for separately and are part of the investments item.
b Financial assets, not being derivative, held to maturity are financial instruments with fixed or determinable payments and a fixed term. At the moment of acquisition, there is the intention and the option to hold these investments until maturity. Upon first time inclusion on the balance sheet, they are measured at fair value plus transaction costs. Subsequently they are valued at amortized cost based on the effective interest rate method, less impairment losses where deemed necessary. None of ASR’s investments fall in this category.
c Financial assets at fair value through profit and loss include:
ASR uses the following three hierarchical levels for determining the fair value of financial instruments: 1 Fair value on the basis of listed prices in an active market; Level 1 includes financial assets and liabilities whose value is entirely or partly determined by quoted prices in an active market. A financial instrument is quoted in an active market if: - quoted prices are available on a continuous basis (obtained from a market, broker, sector organization, providers of financial market information, or a regulatory body); and - these prices represent current and regularly occurring transactions in line with market conditions.
investments in this category primarily consist of shares and bonds listed on a stock market.
2 Fair value on the basis of available market information. Determining the fair value at level 2 is based on valuation methods that refer to observable market variables. These variables include: - quoted prices for similar assets or liabilities in active markets; - input variables other than quoted prices, such as interest rate and yield curves, current risk surcharges for the different sector specific risk factors and other market information.
investments in this category primarily consist of corporate bonds listed on a stock market.
3 valuation not based on available market information. At level 3, the fair value of the assets and liabilities is determined in full or in part by using a valuation method that refers to non-observable market variables. in these situations, there are minimally or non-active markets for the assets or the liabilities. The financial assets and liabilities in this category are assessed individually. The valuation is based on the best estimate by the management. These estimates are based on own information and information that is generally available. The basic principle of fair value determination remains calculating a fair selling value. This category includes, for instance, private equity investments.
Impairment of investments At each balance sheet date, ASR assesses whether there are objective indications of impairment of financial assets available for sale. Financial assets at fair value through profit and loss are not involved in the assessment, because in the valuation and the result incorporation of these assets, any possible impairment losses would already have been evident.
impairment losses are recognized directly to the income statement and represent the difference between the amortized cost and the fair value at balance sheet after deduction of previously recognized impairment losses.
Accounts receivable from clients Accounts receivable from clients primarily concern business loans and mortgage loans.
Accounts receivable from banks Accounts receivable from banks concern business loans, deposits and the savings portion of mortgages insured by ASR.
Trade and other receivables Trade and other receivables concern accounts receivable arising from normal business operations of ASR.
An individual impairment is a fact if there are objective indications ASR will be unable to collect all the amounts due by the counterparty in accordance with the contractual terms and conditions. The amount of the impairment loss is equal to the difference between the balance sheet value and the net realizable value. The net realizable value is the same as the present value of the expected future cash flows, including amounts realized from guarantees and sureties furnished, discounted at the original effective interest rate of the financial asset. Loans and accounts receivable that are individually of lesser importance are assessed collectively in accordance with classification in groups of loans and accounts receivable with comparable risk profiles.
impairment based on the collective approach is determined by applying risk models for similar financial assets, taking account of historical information and regularly updated parameters for uncollectibility.
ibNR is estimated with reference to historical loss patterns. The current economic climate is reflected, and account is also taken of possible higher credit risk based on an analysis of the politicaleconomic situation.
impairment losses are charged to the income statement. if, at a later stage, the impairment losses should decline, and the decline is the result of an event after recognition of the impairment loss, the reduction is added to the result.
This applies to the extent that it is likely that sufficient taxable profits will be available in the future for settling the temporary differences and the deductible losses.
Determining the deferred tax assets is based on the tax rates at which the assets will be realized. Deferred tax assets are reviewed at balance sheet date. Should it no longer be deemed likely that the receivables will not be collected, the net realizable value is reduced.
2.23 Reinsurance contracts Contracts that transfer a considerable insurance risk from ASR to third parties are accounted for as reinsurance contracts, and defined as outgoing reinsurance.
The amounts that can be collected from reinsurers are estimated using a method that is in line with the reinsurance contract and the method for determining the obligations arising from the reinsured insurance contracts.
2.24 Other assets Other assets include accrued investment and interest income, development projects, tax assets and accrued assets.
The development projects consist of property under development commissioned by third parties.
Measurement is at cost including all the direct costs and construction period interest, less invoiced instalments and any impairment losses. if the result can be reliably estimated, it is accounted for on the basis of the progress, using the percentage of completion method. This does not apply if major risks and income associated with the project property have not been transferred by ASR to the client. in that case, the result is accounted for upon completion of the development project (the completed contract method).
2.25 Cash and cash equivalents Cash and cash equivalents include ready cash, cash on demand at banks and other current receivables from banks with a term of less than three months after the date of first withdrawal.
Share capital and premium reserve The share capital stated on the balance sheet consists of issued and fully paid-up share capital on ordinary shares. The premium reserve comprises capital contributed by shareholders to the extent that this exceeds the face value of the shares.
Other equity instruments The amount shown here represents the nominal value of the Tier-1 hybrid instruments issued in 2009, less costs after deduction of taxes directly attributable to the issue.
it further includes: • the share of ASR in the unrealized result of associates and joint ventures (see chapter 2.17); • unrealized results on the effective portion of cash flow hedges after deduction of taxes (see chapter 2.18); • the discretionary profit-share reserve (see chapter 2.28).
Upon first time recognition, subordinated debts are stated at fair value less direct transaction costs. Subsequent valuation is at amortized cost using the effective interest rate method.
General This includes the obligations arising from insurance contracts issued by ASR that transfer significant insurance risks from the policyholder to ASR. in addition, these contracts can also transfer financial risks.
Obligations arising from life insurance contracts The 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 for calculating the premium for the insurance contract. A provision for future administration costs is recognized for contracts whose future premium payment period is shorter than the future maturity of the insurance policy, or for which no premiums are
ASR Nederland 2009 annual report paid anymore. For certain types of individual and group life insurance contracts, additional provisions are formed in connection with longevity risk. This is in case that the original assumptions concerning life expectancy no longer apply. Profit-sharing policies include the additional obligations in terms of any contractual dividends or profit sharing. The obligations are stated after deduction of capitalized interest rate rebates. These interest rate rebates are amortized in accordance with actuarial principles to the degree that the expected surplus interest is achieved.
Obligations arising from non-life insurance contracts The obligations concern a provision for claims payments and current risks, and a provision for unearned premiums. The provision for claims payments and current risks is based on estimates of the claims to be paid and of current risks.
The claims to be paid concern unpaid claims and claim handling costs, and claims already incurred but not yet reported. The estimates are based on individual assessments of the reported claims, on past experiences and estimates of the trend in claim behaviour, social factors, economic factors and applicable legislation. in the process of determining the obligations, the amounts to be recovered from third parties and the expected income from subrogation and insured goods obtain in propriety are taken into account. Loss obligations in respect of occupational disability are carried at net cash value. The recognized provisions are sufficient to cover the cost of claims and claim handling fees. ASR discounts obligations for loss only for claims with determinable and fixed payment terms.
The provision for unearned premiums is equal to the gross unearned premium income less commission paid. The provision is determined on a time proportional basis.
For DPF life insurance contracts, the expected entitlements to discretionary profit sharing are stated in shareholders’ equity. Once a decision has been taken for profit sharing, the profit share is included in the liabilities.
No shadow accounting is applied to: • impairments; • revaluations of subordinated debt instruments of financial institutions that have been subject to impairment.
The present value is increased with a margin for risk and uncertainty. The adequacy of the obligations is assessed at the level of homogenous risk groups (groups of insurance contracts with similar risk profiles). For each homogenous risk group of life insurance contracts, account is taken of the prudential filters required by the Dutch central bank (DNb), such as the surrender threshold for life products.
The liabilities arising from insurance contracts for the account and risk of policyholders mainly concern unit linked contracts. These concern insurance contracts in units. An investment unit is a share in an investment fund that the ASR acquires on behalf of the policyholders using net premiums paid by the policyholders. The benefit upon maturity of the contract is equal to the current value of the investment units of that fund. The current value of an investment unit (unit value) equals the fair value of the investments of the investment fund divided by the number of units.
The liabilities arising from a unit linked contract is the sum of the number of units of the insurance times the current unit value. Account is also taken of liabilities in connection with technical insurance risks (death, occupational disability).
Some of the unit linked contracts carry a minimum guarantee with respect to the amount in benefits at maturity. To cover these guarantees, an additional obligation is recognized on the balance sheet that depends on the current fund value and the level of the guarantee. in determining this obligation, account is taken of the actuarial assumptions of future fund developments and mortality.
The liabilities arising from insurance contracts on behalf of policyholders also include obligations in connection with savings accounts and group pension contracts, with policyholders bearing the investment risk.
Pension liability For its own staff, ASR has a number of defined benefit plans. These are schemes in which staff are awarded a defined pension upon retirement. This pension plan depends on a number of factors, such as salary and number of years’ service. Actuaries calculate the related pension obligations at least once a year. The liability for defined benefit plans is the present value of the pension obligations at balance sheet date, less the fair value of the qualifying investments. This provision is adjusted for unrealized gains and losses with respect to past service years. The pension liabilities are calculated using the projected unit credit method. inherent to this method is the application of actuarial assumptions in the field of discount rates, the rate of increase of future salaries and bonus levels, mortality rates and consumer price index. The assumptions are reviewed and updated annually, based on the available market information. The actuarial assumptions may differ considerably from the actual results due to changes in market conditions, economic trends, mortality trends and other assumptions. Every change in these assumptions can have a considerable impact on the level of the obligations for defined benefit plans and the future pension expenses.
ASR Levensverzekering N.V., an insurance company that is part of the group, is the administrator of the pension plan. The investments held to hedge the pension obligations are held by this company and are therefore not designated as ‘qualifying plan assets’ as referred to in iAS 19.7. in the period prior to 2008, a different regime applied and investments were classified as plan assets.
Other long-term employee benefits Plans that offer benefits for long-time service, but do not qualify as a pension plan, such as jubilees, are measured at present value using the projected unit credit method.
2.31 Provisions Provisions are obligations containing uncertainties about the cost and timing of payments. ASR recognizes provisions in case of legally enforceable or actual obligations in connection with events that occurred in the past, if it is likely that the settlement of the obligation will require an outflow of resources and the obligation can be estimated reliably. Provisions are recognized on the basis of the estimated amounts required to settle the obligations and discounted at the risk-free interest rate.
2.33 Deferred tax liabilities Deferred tax liabilities are recognized on the basis of temporary differences between the balance sheet value of assets and liabilities and their value for tax purposes. The calculation of the deferred tax liabilities is based on assumed tax rates at which the tax is expected to be recognized.
2.34 Due to clients Upon first time recognition, amounts due to clients are stated at fair value including direct transaction costs. Subsequent valuation is at amortized cost.
2.35 Amounts due to banks Upon first time recognition, amounts due to banks are stated at fair value including direct transaction costs. Subsequent valuation is at amortized cost. When required, the difference between the redemption cost and the amortized cost (capital surplus or discount) is recognized over the duration of the debt as interest charges using the effective interest rate method.
Life insurance premiums Life insurance contracts are defined as long-term contracts. The corresponding insurance premiums are accounted for as income when they are due by the policyholders. Obligations in connection with insurance contracts are recognized for the estimated future benefits and expenses and charged to the result. These expenses are included under the line ‘technical insurance claims and benefits’. This means that, in accordance with the matching principle, the profits over the estimated term of the policies are achieved.
2.38 Realized gains and losses The realized gains and losses include the results from the sale of investment property, investments available for sale, associates and joint ventures.
2.40 Result of investments on behalf of policyholders investments for the account and risk of policyholders are measured at fair value through profit and loss. The value changes are recorded in the line ‘result of investments on behalf of policyholders’. This also includes interest income and dividends received for policyholders.
2.42 Technical insurance claims and benefits This item includes changes in the obligations arising from insurance contracts (see chapter 2.28) and the benefits. The expenses associated with contracts on behalf of policyholders concern the changes in the obligations arising from insurance contracts on behalf of policyholders including the benefits charged to the obligations.
2.45 Impairment This item includes the downward value adjustment of assets whose net realizable value is lower than the balance sheet value and the recoverable amount in connection with impairment losses recognized in the past.
2.46 Interest charges interest charges are recognized in the income statement for all the interest-bearing instruments, using the effective interest rate method, and taking into account direct transaction costs.
2.47 Taxes Taxes are based on the result before tax, after any adjustments for previous years, and the changes in deferred tax assets and tax liabilities.
• whose existence depends on the future occurrence of one or more uncertain events without ASR being in a position to apply decisive influence.
3 Risk management 2009 was characterized by a sharp focus on risk management and control. The jitters on the securities, interest rate and bonds markets put severe pressure on the solvency position at the beginning of the year. Measures were implemented to minimize the risks, including: • reducing the interest rate risk by acquiring long-term government bonds and swaptions; • reducing equity exposure; • reinsuring short life risks.
in the second half of 2009, the financial markets recovered with vigour, which again improved the solvency position of ASR. The earlier reduced equity exposure was then expanded again. Since 3 October 2008, ASR Nederland has been wholly owned by the Dutch State. in contrast to a number of other financial institutions, ASR did not receive any capital injection. Moreover, no guarantees or loans have been furnished. As the government indicated right from the start, the aim is to return ASR to the private market.
3.1 Solvency II During 2009, following the demerger from Fortis, ASR independently followed up on preparations for Solvency ii. Solvency ii is the new regulatory framework for European insurance companies, which is expected to be implemented in October 2012. Solvency ii sets solvency requirements that are better aligned to the risks insurers face and will form an integral part of the operational management of insurance companies. Pursuant to Solvency ii, the measurement of investments and obligations is done on the basis of market value.
As part of the process of preparing for Solvency ii, ASR participated in the quantitative RiSk 2008 impact study initiated by DNb. both the insurance holding company and the different legal entities participated and, in doing so, ASR gained a better understanding of the divisions that do not yet fully comply with the anticipated Solvency ii regulations.
3.2 Risk management function The basic principle employed to fulfil the risk management function of ASR is the so-called three-lines-of-defence model, which contains clear responsibilities.
ASR Nederland 2009 annual report by segregation of duties between designing policies, implementing them and compliance with these policies, a high level of risk management is achieved. The three lines of defence implies that a distinction is made between the three levels of management, being: • the management of the business units is responsible for managing the day-to-day risks based on an effective risk management system. This forms the first line of defence; • Risk management and compliance together form the ‘second line of defence’. They are responsible for coordinating strategy, processes and procedures in connection with the risks to which ASR is or can be exposed and for monitoring proper compliance with the risk policy and applicable compliance with legislation and regulations; • the internal audit department (Audit ASR Nederland), the third line of defence, is responsible for independent assessments of the adequacy and effectiveness of the internal control system and the governance system.
Structure of ASR Risk committees During 2009, ASR introduced a new risk committee structure in order tp shape the risk management function in practice. A direct cause is the organizational changes at ASR.
The ASR Executive board bears final responsibility for the risk profile of ASR, and the ASR Risk Committee provides support in this context. The ASR Risk Committee is supported by two important committees, the Financial Risk Committee and the Non-financial Risk Committee. Risks are managed on the basis of risk categories as formulated by the financial institutions’ risk analysis method FiRM of DNb: • the Financial Risk Committee manages the risk profile of ASR
with respect to financial risks, including the market and credit risk (including interest rate risk), liquidity risk and the technical insurance risk; • the Non-financial Risk Committee manages the risk profile of ASR with respect to the non-financial risks, including public risk (also reputation risk), operational risk, outsourcing risk, iT risk, the integrity risk and legal risks.
The business units – the first line of defence – bear particular responsibility for identifying, assessing, monitoring, controlling, managing on the basis of and reporting on the risks and the risk profile of the business unit within the agreed framework. Every business unit has set up a business Risk Committee to assist them in this task.
3.3 Market and credit risk 3.3.1 Market risk ASR is confronted by market risk if the value of the assets does not react the same to changes in the financial markets as the value of the liabilities. The following market risks are distinguished: • interest rate risk; • equity risk; • real estate risk; • foreign currency risk; • credit risk (spread risk).
3.3.1.1 interest rate risk Many insurance products pose an interest rate risk; the value of the products is closely related to the shape and the level of the interest rate curve. The interest rate risk of insurance products is determined by the term, interest rate guarantees and profit sharing. Life products with insurance in money are particularly sensitive to interest rates (see chapter on technical insurance provision).
The interest rate risk is quantified at least once a quarter by means of duration and scenario analysis. Duration is a yardstick for interest rate sensitivity and indicates how much the fair value changes with a small parallel shift in the interest rate curve. The duration of the liabilities is higher than that of the assets; the fair value of shareholders’ equity decreases in the event of an interest rate drop. The duration calculation takes account of interest rate swaps and swaptions.
Due to underlying features, the duration of the life products and the swaptions increases the lower the interest rate is. in addition to duration, another yardstick is required to obtain a fuller picture of the interest rate risk. This is done using scenario analyses, among other things.
During 2009, interest rate risk was reduced by acquiring swaptions, long-term government bonds and interest rate swaps. in addition, the interest rate sensitivity of life obligations was reduced by the higher long-term interest.
SenSitivity of DnB Solvency to change in intereSt rate intereSt rate +1% intereSt rate -1%
Sensitivity of DNb solvency ratio to price changes in the equity portfolio: The impact of price changes of shares on the iFRS result is limited to the value changes of the options and the impairment of shares. With a 10% decline in the price of shares, the effect is € -7 million (2008: € -4 million).
3.3.1.4 Foreign currency risk Foreign currency risk arises if there is no proper matching between the foreign currency exposure of the assets and liabilities. The policy is basically that foreign currency risk is hedged. it is possible to deviate from this policy if the impact of changes in the exchange rates is very small or if an effective hedge is operationally not possible. Exposures can be allowed within a certain corridor to benefit from a change in the value of foreign currency.
The foreign currency position is reported every quarter. The table below shows all the main foreign currency positions, including derivatives. The net exposure in USD at year-end is largely due to securities funds listed in USD.
3.3.1.5 Credit risk ASR is exposed to credit risk to the extent that there are changes in the expectation that a counterparty will default on its contractual obligations. A distinction is made between the following types of assets: - fixed-income investment portfolio - mortgages - loans related to savings mortgages - derivates - reinsurance - loans to intermediaries
The table below shows the pledges and guarantees received as security for financial receivables and agreements: ExchangE ratE risk 2009 aUD BrL gBP trY UsD Zar
ProPerty, Plant and equiPment other Pledges and guarantees excess value oF Pledges relative to imPairments 1 non- guaranteed outstanding amount
Total receivables due from customers 1 The amount of received securities and guarantees that exceeds the actual credit risk (calculated on contract basis)
Total receivables due from customers 2 The amount of received securities and guarantees that exceeds the actual credit risk (calculated on contract basis)
For the management of the investment portfolio, guidelines apply with respect to the maximum deposits per rating class and per debtor that are reported. The aim of this is to avoid concentra2009 Carrying amount of assets
Total receivables due from customers 2,729 19 3 6 28 2008 Carrying amount of assets
The portfolio summaries by sector underline the developments referred to above. Financial institutions, businesses and structured instruments across the board show a very decent increase in value. The active selling policy pursued by the financials and structured instrument is therefore not visible in the figures.
3.3.1.5.5 Reinsurance When placing reinsurance contracts for fire and calamity, ASR requires the counterparty to have at least an ‘A-’ rating; with respect to long-tail business and other sectors, a minimum ‘A’ ating applies. The summary below shows the exposure of reinsurers per rating. The unrated exposure can be traced back to placements with the former internal reinsurer. The total exposure on reinsurers at year-end 2009 was € 545 million.
At year-end 2009, the outstanding amount of loans to intermediaries was € 169 million with a corresponding provision of € 39 million. The loans are secured, usually in the form of an insurance portfolio. Twenty-one percent of the loans are in arrears.
3.3.1.5.7 Subordinated debt instruments of financial institutions To test for the impairment of debt instruments of financial institutions, ASR uses an internal classification system in so-called ‘levels of concern’. The classification in levels of concern is partly based on the events referred to in iAS 39.59 that could lead to impairment.
An increase in the fair value of a fixed-income instrument that has been impaired, does not necessarily lead to the reversal of the impairment loss. For lowering the level of concern from three to a lower level, there must be a change in the situation that prompted the recognition of an impairment loss. in other word, it will be an important, irreversible and objectively identifiable development, in which there can be no reasonable doubt about the collectability of a financial asset.
PeRcentaGe loans < 75% value under foreclosure loans > 75% value under foreclosure
Cash flows 2008 < 1 year 1-5 year 5-10 year 10-20 year > 20 year
ASR Nederland 2009 annual report 3.3.3 Insurance risk The insurance risk concerns all the risks as a result of which the expected future payment obligations cannot be raised by premium and/or investment income due to incorrect and/or incomplete technical assumptions and principles for the development and pricing of the product, leading to insufficient provisions.
ASR offers a complete range of insurance products. The insurance risk is divided into life and non-life risk. The insurance portfolio has a moderate risk profile. The life portfolio is spread across insurance policies covering short life (death) risk and long life risk. The non-life portfolio is represented in almost all the property and casualty, occupational disability and health care sectors.
3.3.3.1 Risk management Every insurance division within ASR forms provisions for future claims arising from these policies and identifies assets for these provisions. This includes estimates and assumptions that could impact the assets, liabilities, equity and the result in the coming year. These estimates are reviewed at each balance sheet date by means of statistical analyses based on internal and external historical data.
Due to potential accuracies that are inherent to the techniques, assumptions and data used for the statistical analyses, the risk that claims can eventually exceed the provisions formed for the insurance contracts cannot be fully eliminated. To avoid the risk of ASR being virtually unable to meet its obligations towards policyholders and others, ASR holds extra solvency equity.
• Extreme events: An extreme event is defined as large-scale damage from a single cause of revolutionary developments in medical science as a result of which life expectancy increases dramatically.
The risks are managed through insight into the risk factors and assessing them. The impact of changes in the parameters becomes visible in the context of valuing the insurance portfolio. With respect to operational parameters, the sensitivity to changes in mortality, chances of expiry and costs are taken into consideration. For ASR as a whole, the sensitivity to mortality is cushioned by the combination of short and long life risk. A good spread across long and short life reduces the mortality risk.
Prices are based on best estimate assumptions of mortality rates, surrenders, costs, actuarial interest, prudent margins and profit
ASR Nederland 2009 annual report margin of the insurer. based on profit capacity calculations, the assumptions are applied to the fair value of the rate, taking into account profit-sharing obligations to clients.
The acceptance of a new insurance policy is assessed on the basis of medical conditions. As far as pensions are concerned, it is not allowed to accept on the basis of medical conditions in which case limits are set for the acceptable risks. These limits are agreed with the reinsurer. Prices are reviewed retrospectively by determining the value of new contracts with reference to the annually agreed best estimate experience (second order) parameters.
3.3.3.4 Non-life insurance risk The technical non-life insurance risk primarily centres on emergencies cover, third-party insurance and occupational disability risk, which is mainly because of the size and the long-term character of non-life products. The insurance risks include a large (negative) difference in relation to the expectations with regard to claim frequency, size of the claim, inflation, handling time, benefit and claim handling costs and biometrical risks (invalidity, convalescence, illness, death). in addition, concentration risk also counts as an insurance risk.
The acceptance policy is agreed locally by each one of the insurance businesses as part of the general insurance risk management system. Specialist acceptance members of staff assess risks and the actual claims history is evaluated. To improve movements in claims and/or ensure that prices are adjusted correctly, the acceptance policy is continually refined with reference to a number of indicators and statistical analyses.
3.3.3.4.2 Handling time The time required for handling and settling claims is an important factor. The settlement of claims that require a long handling time, such in the case of injury or liability, can take years. Regular analyses are made, including ASR’s experiences with similar cases, historical trends, such as the pattern of provisions, the increase in exposure to risk, damage payments, the size of current and not yet settled damage claims, court rulings and economic conditions.
3.3.3.4.4 Occupational disability risk The invalidity risks concerns the uncertainty of claims as a result of higher than expected invalidity rates and levels in the portfolios containing occupational disability, medical expenses and accident insurance products. Then there is the additional uncertainty that fewer people convalesce or die than expected. illness, invalidity and recovering from these are affected by the economic climate, government intervention, progress in medical science and, in particularly, healthcare expenses. The degree of invalidity and recovery is to a large extent influenced by the selection decisions of the policyholders and changes in the standards applied in assessing occupational disability, and influenced by the policy pursued by ASR concerning prevention and rapid diagnosis and treatment. These risks are kept under control by means of regular evaluation of historical claims patterns, expected future developments and price adjustments, obligations and the acceptance policy. ASR also minimizes the occupational disability risk on the basis of acceptance criteria and suitable reinsurance.
The level of retention in the different reinsurance contracts is aligned to the size and the risk profile of the underlying portfolios. This includes taking account of the cost of the reinsurance on the one hand and, on the other, the risk that is kept within the retention.
The overall adequacy of the liabilities arising from insurance contracts as at 31 December 2009 has been confirmed by internal actuaries and certified by external actuaries.
The life insurance portfolio contains individual and group insurance policies. The products are sold as insurance products in cash and insurance products in investment units. With respect to insurance in cash, the investment risk is borne fully by the insurer, and with respect to insurance in investment units, the bulk of the risk is for the account of the policyholder.
ASR Nederland 2009 annual report 3.4.3 Non-life provisions 3.4.3.1 Provision for unearned premium income Generally, the provision for unearned premium income is calculated on the premium for own account, pro rata to the unexpired portion of the premiums payments before deduction of the corresponding provision. The corresponding provision is recognized separately on the balance sheet under ‘Deferred acquisition costs’. A separate provision is formed for insurance contracts with increasing risk over the duration of the contract involving premiums not related to the age of the policyholder. Changes in the provision for unearned premiums are recognized in the income statement, which means that the income is recognized during the same risk period.
3.4.3.2 Provision for payouts still due The provision for payable claims / benefits consists of the estimated amount of the reported, but as yet not settled, claims plus an amount for claims not yet reported or incurred during or before the financial year, using historical information. This implicitly includes a provision for payable external claim handling costs.
The level of provision is calculated for each homogenous product group at a reliability degree of at least 95%. This exceeds the best estimate of the expected future obligations by 15.6%. ASR also holds additional solvency capital in excess of the level of the provisions.
The provision for occupational disability insurance equals the present value of the expected benefits, taking into account the policy terms and conditions and qualifying periods, as well as chances of recovery and death.
insUrance in cash totalindividUal groUp without profit-sharing contractual profit-sharing (and interest margin participation)
life insurance policies with an investment component savings fund insurance total individual group without guaranteed return with guaranteed return
Gross technical provision accident health & income total provision for outstanding amounts provision for premiums
OR&MC is responsible for monitoring the implementation of the operational management policy. As part of the implementation of the operational risk management policy, the OR&MC department also relies on local risk managers responsible for business-specific risk management in the different business units.
business risk concerns the risk of losses due to events that can cause damage to a business operation or due to the business environment, such as changes in the competitive relations or legal or tax changes. The effect is mostly visible through changes in volumes, prices or margins in relation to a fixed cost level. business risk arises externally, but can be mitigated by effective management.
Solvency ii and underlying methods such as Risk Self Assessment and Loss Data Collection; • calculate the economic capital to hedge the operational (event and business) risk for ASR; • ensure that the Operational Risk Framework and its implementation complies with the applicable legislation and regulations such as Solvency ii and the Dutch corporate governance Code (‘Tabaksblat’)
To support an effective and efficient identification and management of operational risks, the following instruments and techniques are used: • collection of loss data; • risk assessments; • significant risk indicators; • equity requirements.
• With regard to investment risk, the balance sheet risks were greatly reduced in 2009. Nevertheless, in the coming years an active policy will be pursued in order to further reduce the balance sheet sensitivities, to align the investments even more closely to the obligations in order to also reduce the required buffer capital where possible.
• IT will become an increasingly important and critical factor in the management of ASR. Therefore, its development and simplification will receive considerable attention. in addition, the logical access security needs further improvement and continuity demands our constant attention due to the ever increasing dependence upon systems.
• ASR distributes its insurance policies primarily through intermediaries. Precisely because of the belief in their added value, ASR will continue to devote itself to healthy, future-proof intermediaries who (again) receive the social recognition that is in line with the role they play.
The results from these risk analyses form the input for the annual procedure that leads to a signed management control statement for each business unit. in this Management Control Statement (MCS), the emphasis lies on the importance of maintaining control by having the management explicitly declare that to the best of its knowledge (and substantiated with a CRSA, for example) a system of internal control is operating within ASR with guarantees for: • efficient and effective processes; • a reliable supply of information; • compliance with laws and regulations; • safeguarding of business objectives; • realization of business objectives.
At the end of each year, the Management Control Statements serve as affirmation of the performance of risk management and internal control systems. The MCS process covers the entire ASR organization. The previously mentioned priorities are considered in the MCS ASR. These top priorities are frequently monitored up to the level of the Executive board.
3.5.1.3 business Continuity Management business Continuity Management (bCM) is the set of activities directed towards guaranteeing the continuity of the company. it provides a framework for building a resilient organization that should be able to effectively respond to threats and is designed to protect the interests of stakeholders, reputation, brand and value-creating activities. in view of the fact that ASR is a financial services organization, the importance of bCM is acknowledged. The ASR bCM policy is based on international regulations and guidelines for best practices, as described by: • The Business Continuity Institute: Good Practice Guidelines
The business Continuity Officer works within the OR&MC department, functionally controlling the local business continuity officers within the various ASR business units.
The ASR information Security Policy (iSP) sets out the organizational structure, its control, the responsibilities and the mandatory guidelines to be followed for information security for ASR and the third parties with which it exchanges information. The iSP is based on international best practices iSO/iEC 27001 and iSO/iEC 17799-2005.
ASR implements the iSP according to the comply-or-explain principle. This requires the accountability of business units by means of a standardized process. Responsibility for designing and implementing information security has been delegated to the information Security & business Continuity board.
ASR considers (corporate) insurance a useful instrument for mitigating operational risks. More specifically, ASR is insured against financial loss caused by fraud, computer crime, corporate liability and personal liability. Entirely in line with established practices in the industry, the following insurance agreements have been concluded with third parties: • corporate liability insurance; • directors’ liability insurance; • fraud insurance.
4.3 Solvency As at 31 December 2009, the DNb solvency and buffer capital of ASR is comprised as follows: Equity (excl. non-controlling interests) 1,904 432
The Liability Adequacy Test under iFRS, for buffer capital purposes, is equal to the outcome of the DNb adequacy test, except for the influences of the commutation value requirement and the prudential filter.
in August 2009, ASR exchanged its outstanding Tier 1 bonds for Tier 1 bonds subject to new conditions and bonds that are comparable with the previous conditions. These bonds have been rated ‘BBB+’ (new bonds) and ‘BBB’ (comparable bonds) by Standard & Poor’s and ‘bbb’ for both bonds by Fitch Ratings. in the consolidated balance sheet, these instruments are part of the shareholders’ equity.
in the following summary, the actual solvency is related to the required solvency as reported to the regulator.
The solvency ratios have improved significantly in 2009. This is mainly due to the recovery of the corporate bonds and, to a lesser extent, to equity price rises and the higher long-term interest rate.
On 20 May 2009, Standard & Poor’s confirmed the ‘A’ rating for ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. with negative outlook. On 5 June 2009, Fitch Ratings reduced the rating for ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. from ‘A+’ to ‘A’ with negative outlook. In addition, Fitch Ratings gave ASR a rating of ‘BBB+’ with the same outlook. In 2009 the expectations of almost the entire Dutch insurance market was given a negative rating by the various agencies. Furthermore, the rating for most Dutch insurers has been adjusted to an ‘A’ level, or confirmed at this level.
5 Segmentation 5.1 General ASR distinguishes the Life and Non-life segments.
The Life and Non-life segments have different levels of profitability and growth opportunities, and also different future prospects and risks.
ASR Nederland 2009 annual report segmented balance sheet as at 31 dec. 2009 life non-life other and eliminations total investments in associates and joint ventures 170 33 - 203 investments on behalf of policyholders 8,684 - 124 8,808 equity attributable to holders of equity instruments 1,825 1,082 -1,003 1,904 liabilities arising from insurance contracts 20,004 3,535 -1,611 21,928 liabilities arising from insurance contracts on behalf of policyholders 9,823 - - 9,823
Property, plant and equipment 40 - - 40 5.2 Segmented balance sheet
balance sheet items are allocated to segments according to the products sold to external customers.
For balance sheet items that cannot be related to products sold to customers, a modified allocation is used that applies to all reported segments.
ASR Nederland 2009 annual report segmented balance sheet as at 31 dec. 2008 life non-life other and eliminations total investments in associates and joint ventures 146 16 - 162 investments on behalf of policyholders 7,487 - - 7,487 equity attributable to holders of equity instruments 1,968 777 -2,313 432 liabilities arising from insurance contracts 19,440 3,289 -1,579 21,150 liabilities arising from insurance contracts on behalf of policyholders 8,263 - - 8,263
ASR Nederland 2009 annual report segmented balance sheet as at 1 jan. 2008 life non-life other and eliminations total investments in associates and joint ventures 175 10 - 185 investments on behalf of policyholders 10,234 - - 10,234 equity attributable to holders of equity instruments 2,526 1,215 -1,479 2,262 liabilities arising from insurance contracts 16,922 3,123 - 20,045 liabilities arising from insurance contracts on behalf of policyholders 10,633 - - 10,633 5.2 segmented balance sheet (continued)
ASR Nederland 2009 annual report segmented income statement 2009 Life non-Life other and eLiminations totaL
fair value gains and losses -74 18 - -56 gain (loss) on behalf of policyholders 1,437 - - 1,437 result of associates and joint ventures 12 3 - 15 insurance claims and benefits recovered from reinsurers 45 150 - 195
Net result for the period 186 103 -29 260 net result attributable to non-controlling interests -5 - - -5
Net result attributable to holders of equity instruments 181 103 -29 255 5.3 Segmented income statement
Gross premiums written 2,375 2,320 change in provision for unearned premiums 14 18
Net earned premiums 2,122 2,065 insurance claims and benefits -1,289 -1,113 change in liabilities arising from insurance contracts -218 -168 fee and commission expense -343 -334 allocated gain (loss) on investments - to technical result 131 -48 allocated gains or losses - to technical result - allocated other income and expense – to technical result -12 -
Technical result – before proceeds (loss) from sales of investments 75 74
Proceeds (loss) from sales of investments -17 -25 non-technical result 34 -39
The intangible assets can be specified as follows: Movements in intangible assets were as follows: Value of business acquired (VOBa) 323 344 363
Total intangible assets 371 407 405 2009 Goodwill VoBA SoftwAre totAl
The expected amortization schedule for future years is shown below: 7 Deferred acquisition costs
Movements in deferred acquisition costs were as follows: The amortization of deferred acquisition costs is included under acquisition costs in the income statement.
cost price transfer to investment property - -140 - -140 cumulative depreciation transfer of investment property - - - impairments
cost price transfer to investment property 9 -11 - -2 cumulative depreciation transfer of investment property - - - as at 31 december 2009 as at 31 december 2009
As a consequence of the revision of iAS 40, the category investment property under development was reclassified from property, plant and equipment to investment property as of 1 January 2009. investment property includes land leased to third parties, homes, offices, shops and car parks. investment property is mainly located in the Netherlands.
At year-end 2009, the fair value of investment property amounted to € 3,486 million (year-end 2008: € 3,381 million). This amount is based on valuations by independent valuators . These valuations are performed annually for the entire portfolio. Nearly all the impairments recognized relate to decreases in the realizable value of houses to below their balance sheet value.
Total investment property 2,157 1,839 1,673 10 Associates and joint ventures
The realized results on the sale of investment properties and the rental revenues are recognized under investment income, which are explained in chapter 27. in 2009, rental income amounted to € 200 million (2008: € 187 million).
The management expenses of the investment property amounted to € 23 million (2008: € 27 million). in 2009 and 2008 there were almost no vacant properties, so that virtually all the management expenses related to investment properties that generated rental income. The management expenses of investment property are included under operating costs.
The purchases mainly relate to the increase of the capital interest in Arboned from 18% to 41%.
Deltafort arboneD other balance sheet value as at 1 January 2009 127 12 23 result of associates 9 2 3
Balance sheet value as at 31 December 2009 151 29 23
Financial assets can be specified as follows: The summary below includes more detailed specification of the types of financial assets held: Investments available for sale 18,048 16,291 15,568 at fair value through profit or loss 304 410 1,475
On behalf Of pOlicy hOlders 31 dec. 2009 31 dec. 2008 fixed-interest securities 731 594 loans and receivables 43 19 cash and cash equivalents 6 185
ASR Nederland 2009 annual report 11.1 Derivatives included in derivatives held for trading are all derivatives for which hedge accounting is not applied. Changes in the fair value of derivatives held for trading are included under the fair value of gains and losses (see chapter 27).
As at year-end 2009, the derivatives can be specified as follows: 31 Dec. 2009 Positive fair value
ASR Nederland 2009 annual report 31 Dec. 2008 Positive fair value
Exchange rate contracts interest rate and exchange rate swaps 17 4 334
On 1 January 2008, the now liquidated Stichting Pensioenfonds Fortis ASR Verzekeringsgroep transferred the fund investments relating to the implementation of the pension scheme to ASR Levensverzekeringen N.V.
Total investments available for sale 18,048 16,291 15,568 11.2 Investments available for sale The investments available for sale are as follows:
11.3 Investments at fair value through profit and loss The investments at fair value through profit and loss are as follows: All investments at fair value through profit or loss are designated as such by ASR upon initial recognition or first time adoption of iFRS.
Debt certificates covered by other assets are mainly synthetic collateralized debt obligations (CDOs). The decreases in 2008 and 2009 were caused mainly by the writing down of the value of the CDOs as a result of changed market conditions caused by the credit crisis.
ASR lends shares and bonds in exchange for a fee, with collateral obtained as security. At the end of 2009, the value of the loaned securities is € 6,136 million with the collateral furnished as security representing a value of € 7,616 million.
The increase in impairments on loans and trade receivables in 2009 mainly relates to the intermediary loans. The fair value of the loans and receivables as at 31 December 2009 was € 6,276 million (2008: € 6,449 million).
ASR Nederland 2009 annual report 11.5 Fair value hierarchy The breakdown of the derivatives and investments at fair value according to the level of fair value hierarchy, as explained in chapter 2.19, is as follows: The corporate bonds listed under level 2 concern unlisted fixed-interest preference shares. The investments included under level 3 concern private equity.
Fa ir v a lu e b a s e d o n q u o t e d p r ic e s in a n a c t iv e m a r k e t
io n n o t m e a s u r e d o n t h e b a s is o
Deferred taxes are formed as the difference between the commercial and fiscal valuation at the current tax rate, taking into account tax exempt components.
Fair value oF Financial assets on the basis oF level 3 measurement method haF aFs in v e st m e n t s a t F
Total as at 31 December 2009 47 31 total revaluations of investments held at year-end 2009 in the income statement for 2009 -6 n/a
DeferreD taxes 31 Dec. 2008 changes recogniseD in profit or loss changes recogniseD
DeferreD taxes 1 Jan. 2008 Changes reCogniseD in profit or loss
15 Cash and cash equivalents due from banks 554 597 368 due from banks falling due within three months 131 57 115
ASR Nederland 2009 annual report 16 Equity 16.1 Share capital ASR’s share capital is as follows: Authorised capital - Ordinary shares; 1,000,000 at a par value of € 500 500 500 500
Subscribed and paid-up capital - Ordinary shares; 200,000 at a par value of € 500 100 100 100
Investments avaIlable for sale revaluatIon of assocIates cash flow hedge reserve dPf comPonent total gross unrealized gains and losses -205 8 -5 16 -186 tax related to shadow accounting -49 - - - -49 gross unrealized gains and losses -1,721 -21 -1 - -1,743 tax related to shadow accounting -226 - - - -226 gross unrealized gains and losses 339 5 -1 43 386 tax related to shadow accounting -67 - - - -67
The Tier 1 instruments do not have a finite life, but can be redeemed by ASR on any coupon due date with effect from: if the hybrid Tier 1 instrument 10% fixed-interest is not redeemed on 26 October 2019, then the interest rate will be changed to 3-month Euribor plus 9.705% and the coupon date will be per quarter with effect from 26 January 2020.
The movement in the other equity instruments is as follows: Position as at 31 December 2009 2008 couPon Date
Hybrid tier 1 instrument 10% fixed interest 382 - annually with effect from 26 october 2010
Hybrid tier 1 instrument 7.25% fixed interest 37 - annually with effect from 30 september 2010
HHybrid Tier 1 insTrumenT 10% fixed inTeresT (amounTs in € 1,000) 2009 2008 balance sheet as at 1 January - Proceeds from issue 386,306 issue costs -4,418 -
Hybrid Tier 1 insTrumenT 7,25% fixed inTeresT (amounTs in € 1,000) 2009 2008 balance sheet as at 1 January - -
in the event of bankruptcy or suspension of payments, the other subordinated liabilities are subordinated to the ordinary liabilities, but come before the holders of the equity instruments.
Profit-sharing, bonuses and discounts granted in the financial year -3 -3
Total liabilities arising from insurance contracts 21,928 21,150 18 Liabilities arising from insurance contracts
Provision for unearned non-life premiums Balance sheet as at 1 January, provision for unearned premiums 532 550 28 33 change in provision for unearned premiums -13 -18 -7 -5
Balance sheet as at 1 January, provision for claims 2,757 2,570 477 460
Balance sheet as at 31 December, provision for claims 3,017 2,757 519 477 claims reported 2,466 2,301
Total provision for claims 3,017 2,757 19 Provisions for employee benefits
Liability for post employment benefits 1,939 1,926 531 other long-term employee benefits 7 7 7
Liabilities arising from insurance contracts on behalf of policyholders 9,823 8,263
The technical provision Life – for the account and risk of policyholders – includes a provision in connection with compensation of the costs of these insurances. At year-end 2009, the liabilities include a so-called guarantee provision for an amount of € 235 million and a transparency provision for an amount of € 569 million (see also the notes in the accounting principles, chapter 2.29).
ASR has a number of defined benefit pension plans for its employees. These plans are financed partly from premiums paid by employees. The benefits under these plans are based on the number of years of service and the salary level. The pension obligations are determined using mortality figures, employee turnover, wage drift and economic assumptions such as inflation, revenues of the plan assets and the discount rate. The discount rate is determined based on the return (zero coupon rate) of high-quality corporate bonds (AA rating) and the duration of the pension liability. besides pension benefits, the costs of the defined benefits plans include personnel concessions for financial products (such as mortgages) which are kept in place after retirement.
Pension Plans other Post-emPloyment benefits expected return on plan assets - - - amortization of unrecognized past service costs 3 3 - -
Depreciation of unrecognised actuarial losses (gains) - 2 2 2 total defined benefits expense
Unrecognized past service cost as at 1 January 24 27 - amortization of unrecognized past service cost -3 -3 - buying and selling of subsidiaries - - - -
Unrecognized actuarial gains (losses)at 1 January 154 87 18 24 actuarial (gains) losses on defined benefit obligation -206 -26 1 -1 actuarial (gains) losses on qualifying assets - 93 - amortization of unrecognized actuarial (gains) losses on defined benefit obligation amortization of unrecognised actuarial (gains) losses on qualifying assets - - - buying and selling of subsidiaries - - - -
Pension Plans other Post-emPloyment benefits liabilities for defined benefits plans at 1 January 1,707 1,637 23 20
Current service costs, employee’s part 10 9 - actuarial losses (gains) on liabilities 247 26 -1 1 buying and selling of subsidiaries - - - -
Experience-based adjustments are the actuarial gains and losses that have arisen due to differences between the actuarial assumptions. The following table provides information about experience-based adjustments with respect to qualifying plan assets and provisions for defined benefit plans.
Pension Plans other Post-emPloyment benefits experienced-based adjustments to qualifying investments, gain (loss)
as % of qualifying investments as at 31 December - - -6.5% -1.7% 3.1% - - - - experienced -based adjustments to defined benefit obligation, loss (gain)
future salary increases (including price inflation) 2.4% 2.6% - future pension increases (including price inflation) 2.2% 2.2% - future mortgage interest (in connection with grantable discounts) - - 4.8% 5.9%
the plan assets are managed by an insurance company which is part of the group. the composition of the non-qualifying assets are stated below: asset category 2009 2008
The assets are generally invested worldwide in shares and bonds. As an employer, ASR is expected to pay the following contributions into these plans in the coming financial year for the purpose of post-employment benefits:
the table below provides an overview of the costs of other long-term personnel remuneration: costs allocated to the financial year 1 1 interest costs - net actuarial loss (gain) recognized immediately - -
The provisions were created for: • fiscal and legal matters; • premature departure of personnel; • assuming the risk of incapacity for work instead of taking out insurance for this with UWV (Employed Persons insurance Administration Agency); • costs incurred for the disentanglement from Fortis.
The provision for legal matters is based on the best possible estimates available at year-end. They take into account the recommendations of legal advisors.
As at year-end 2009, financing comprised: As at year-end 2009, the fair value of financing was € 127 million (2008: € 509 million).
The timing of the outgoing cash flows related to these provisions is uncertain. This is because of the unpredictability of the outcome and the time required for the settlement of disputes.
The provisions include an amount of € 21 million with a term of less than one year.
Financing breaks down into the following maturities: 22 Due to customers
Total due to customers 1.392 622 898 all amounts give the fair value as at the balance sheet date.
There is no significant difference between the balance sheet value of debts to banks and the fair value of these liabilities.
items under ‘Other’ concern collateral received under iSDAs concluded with counterparties. As at year-end 2009, the interest rate payable for the collateral received is 0.35%. There are no specific terms, because terms depend on the development of the value of the underlying instrument in question, which in principle is determined from week to week.
The table below shows the composition of the other liabilities: amounts received in advance 330 341 306
The table below shows the non-recurring and regular insurance premiums: Premiums Life 2009 2008
The table below shows a breakdown of investment income per category: Dividend and other investment income 239 301
The table below shows a breakdown of interest income per category: Interest income on receivables due from credit institutions 50 60
The table below shows a breakdown of realized gains and losses per category: Investment property
The effective interest rate method was used to determine € 1,037 million (2008: € 1,030 million) of the interest income from financial assets not classified as stated at fair value through profit
Other fair value gains and losses - 1 28 Fee and commission income
Other income consists of the following components: Sale revenues from property projects 118 112
All changes in fair value presented here are changes to the so-called ‘clean fair value’. This is the fair value excluding the accrued interest recognized under interest income and expense.
The results of hedging contain the changes to the fair value attributable to the hedged risk. in most cases this concerns the in 2009, the result from the restructuring of the non-cumulative guaranteed Trust Capital Securities and the related issue of new hybrid Tier 1 instruments amounted to € 129 million.
The table below shows the net insurance claims and benefits: Life insurance 2009 2008 changes to insurance liabilities -11 -1,174 claims for account of policy holder contracts -1,560 2,359
Total net insurance claims and benefits -4,154 -1,333 non-Life 2009 2008 changes to provision for payable claims -261 -185
ToTaL Life and non-Life 2009 2008 insurance claims and benefits -5,856 -2,741 share of reinsurers 195 126
The Other item includes travel & subsistence, telephone and personnel training costs.
The personnel establishment at 31 December (in FTEs) was: in 2009, the staff expenses increased to € 323 million (2008: € 330 million), despite the decrease in the number of internal staff members. Salaries decreased on balance due to the decrease in the number of internal employees and the decision taken in 2009
Compared to 2008, commission fees decreased as a consequence of the decrease in new production and the statutory ban on contingent commissions, which led to a decrease in the amount paid out in handling fees to intermediaries.
Due to the credit and financial crises, impairments have been applied to shares, corporate bonds and collateralized debt obligations.
The other interest expenses mainly relate to interest accrued on the amounts recognized under the liabilities for employee benefits.
Tax expense consists of the following components: Tax over current financial year - -196
Impact on deferred taxes resulting from tax rate changes - -
Previously unrecognized tax losses, tax credits and other temporary differences that reduce deferred tax expenses
The table below shows a reconciliation of expected profit taxation with actual profit taxation. The expected profit taxation was determined by relating the result before tax to the tax rate in the Netherlands. in 2009 the rate was 25.5% (2008: 25.5%)
An affiliated party is a party that can exercise influence on the policy of another party, or can exercise significant influence on the financial and business policy of the other party. Parties affiliated with ASR include the Dutch government, associates, joint ventures, members of the Executive board, members of the Supervisory board and immediate family members of the aforementioned persons. These parties further include entities over which the aforementioned persons exercise control or exercise substantial influence and other affiliated entities.
During the financial year there have not been any transactions with members of the Executive board, Supervisory board members or immediate family members of the Executive board or immediate family members of the members of the Supervisory board.
During the normal conduct of business ASR entities may issue business credits, loans or bank guarantees to members of the Executive board, commissioners or to immediate family members of the members of the Executive board or to immediate family members of the members of the Supervisory board.
BAlAnce sheet items with relAted pArties As At 31 decemBer: 2009 2008 2009 2008 2009 2008 2009 2008 debt certificates, subordinated liabilities and other loans 2 - - - - - 2 -
Transactions in the income statement for the financial year insurance premiums, net after reinsurance (earned) - - - - - -16 - -16 operational, administrative and other expenses - 1 - - - 154 - 155
ASR Nederland 2009 annual report 38 Remuneration of the ASR Executive Board and Supervisory Board
Gross amounts in € 1,000 supervisory directors as member of supervisory board as member of a committee total c. van der pol 45 5 50 c.H. van den bos 30 10 40 1 Joined the Supervisory Board on 12 February 2009 and stepped down at her own request on 12 March 2010 in connection with a change in her immediate business situation.
The profit of ASR bank N.V. for the 2009 financial year amounts to € 0.2 million. The total realized income in 2009 amounts to € 60 million.
The value of the acquired assets and liabilities and goodwill paid was: Carrying amounT of aSr Bank n.V. aS aT
Balance of acquired identifiable assets and acquired liabilities 26 26 acquisition price 37
Regarding further claims and legal proceedings against ASR known to the management (and for which, in accordance with the defined principles, no provision has been created), the management is of the opinion, after obtaining professional advice, that the claims have no chance of succeeding, or that ASR can successfully mount a defence against them or that the outcome of the cases is unlikely to result in a significant loss for ASR.
Securities lease ASR is involved in a number of legal proceedings concerning the products of securities lease ‘Groeivermogen’ that have been brought against certain ASR operating companies by individuals or consumer organizations. The claims are based on one or more of the following accusations: • violation of the duty of care; • absence of the second signature required for hire purchase agreements; • absence of a sales licence required under the Financial
Receivables due from group companies 6 1,633 1,829 831 cash and cash equivalents 7 6 2 5
Cumulative depreciation as at 31 December impairments as at 1 January impairments -
The table below contains details of the investments available for sale: EquITy DERIvaTIvEs ToTal InvEsTmEnTs 5 Loans and deposits
Balance sheet value as at 31 December 88 269 6 Receivables from group companies The accounts receivable from group companies are due on demand.
7 Cash and cash equivalents The cash and cash equivalents are stated at nominal value and are fully and freely available to the company.
u lt u n r e a li z e d g a in
e q u it y a t t r ib u ta b le to
S h a r e h o ld e r o t h e r e q u it y in S
Balance sheet as at 31 December 100 962 - 640 - - 10 432 432
ASR Nederland 2009 annual report 9 Subordinated liabilities The table below shows the composition of the subordinated liabilities: Trust capital Securities - 600
10 Liabilities for employee benefits The liability for employee benefits consists of: Refer to chapter 19 for a further explanation of the provision for employee benefits.
The provisions were formed for: • tax and legal matters; • early departure of staff; • occupational disability benefits for own risk; • costs associated with the separation from Fortis.
12 Long-term loans Long-term loans are stated in the table below:
A breakdown of the auditor’s fees is provided below: Examining and auditing the financial statements under the articles of association and other group company audits under the articles of association
Report on the financial statements We have audited the accompanying financial statements 2009 of ASR Nederland N.V., Utrecht. The financial statements consist of the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated statement of financial position as at 31 December 2009 the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information. The company financial statements comprise the company balance sheet as at 31 December 2009, the company profit and loss account for the year then ended and the notes.
Management’s responsibility Management is responsible for the preparation and fair presentation of the financial statements in accordance with international Financial Reporting Standards as adopted by the European Union and with Part 9 of book 2 of the Netherlands Civil Code, and for the preparation of the Executive board report in accordance with Part 9 of book 2 of the Netherlands Civil Code. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Report on other legal and regulatory requirements Pursuant to the legal requirement under 2:393 sub 5 part f of the Netherlands Civil Code, we report, to the extent of our competence, that the Executive board report is consistent with the financial statements as required by 2:391 sub 4 of the Netherlands Civil Code.
registered oFFiCe segment * ‘Het regentenhuys’ Verzekeringen n.V. 100.00 rotterdam non-life * administratie- en adviesbureau voor Belegging en Krediet (a.B.K.) B.V. 100.00 amersfoort non-life * amersfoortse Verzekeringen n.V. 100.00 amersfoort non-life * amstar B.V. 100.00 amersfoort non-life arboned Holding B.V. 41.00 Utrecht life * ardanta n.V. 100.00 enschede life * asam n.V. 100.00 Utrecht non-life * asr aanvullende Ziektekostenverzekeringen n.V. 100.00 amersfoort non-life asr Bank n.V. 100.00 Utrecht other * asr Basis Ziektekostenverzekeringen n.V. 100.00 amersfoort non-life * asr Beleggingsconsortium, maatschappij voor Beleggen en Verzekeren n.V. 100.00 Utrecht life * asr Betalingscentrum B.V. 100.00 Utrecht life * asr deelnemingen n.V. 100.00 rotterdam non-life * asr Financiële dienstverlening B.V. 100.00 rotterdam life * asr Hypotheken B.V. 100.00 Utrecht other * asr levensverzekering n.V. 100.00 Utrecht life asr nederland Beleggingsbeheer n.V. 100.00 Utrecht life asr nederland n.V. 100.00 Utrecht life * asr nederland Vastgoed maatschappij n.V. 95.32 Utrecht life / non-life * asr pension Fund services n.V. 100.00 Utrecht life * asr schadeverzekering n.V. 100.00 Utrecht non-life * asr service maatschappij n.V. 100.00 rotterdam life asr Vastgoed ontwikkeling n.V. 100.00 Utrecht life * asr Vastgoed Vermogensbeheer B.V. 100.00 Utrecht life * asr Verzekeringen n.V. 100.00 Utrecht life * asr Ziektekostenverzekeringen n.V. 100.00 amersfoort non-life * B.V. dordrechtsche landbouwonderneming 100.00 Utrecht life
registered oFFiCe segment * Bewaarmaatschappij asr Vastgoed Winkelfonds B.V. 100.00 Utrecht life * de amersfoortse Beleggingen B.V. 100.00 amersfoort life * de amersfoortse onroerend goed B.V. 100.00 amersfoort life de amersfoortse reinsurance limited 100.00 dublin, ierland life deltafort Beleggingen i B.V. 50.00 amsterdam non-life * detachering & support B.V. 100.00 Zeist life * ditZo B.V. 100.00 Zeist liFe europeesche Verzekering maatschappij n.V. 100.00 amsterdam non-life * Falcon leven n.V. 100.00 Hoofddorp non-life * Falcon Verzekeringen n.V. 100.00 Utrecht life garant 4 2 n.V. 50.50 amersfoort life * interlloyd levensverzekering maatschappij n.V. 100.00 Hoofddorp non-life * n.V. amersfoortse algemene Verzekerings maatschappij 100.00 amersfoort life * n.V. amersfoortse levensverzekering maatschappij 100.00 amersfoort non-life * n.V. maatschappij voor sparen en Beleggen ‘Voorzorg Van 1838’ 100.00 amersfoort life * n.V. polder Jannezand 100.00 Utrecht non-life * n.V. Verzekering maatschappij ‘Johan de Witt’ 100.00 Utrecht life * onderlingehulp Verzekeringen n.V. 100.00 enschede non-life * servicemaatschappij ‘de Hoofdpoort’ n.V. 100.00 rotterdam life * sr-Beheer B.V. 100.00 rotterdam non-life * sycamore 5 B.V 100.00 Utrecht life * sycamore 6 B.V. 100.00 Utrecht life * United reforce i B.V. 100.00 Utrecht life * Van dalen Vastgoed B.V. 100.00 Utrecht non-life * VsB leven n.V. 100.00 Utrecht life
These are contained in article 21 of the articles of association.
3 The general meeting of shareholders is only allowed interim distributions charged to the profit for the financial year to the extent that the conditions set out under subsection 1 regarding an interim financial position as referred to in section 105(4) of Book 2 of the Netherlands Civil Code and, furthermore, that prior permission has been obtained from the Supervisory Board.
4 No profit is distributed to the company with respect to shares obtained by the company in its capital.
In order to strengthen the solvency position, the Management Board will propose to the General Meeting of Shareholders not to distribute any dividend in 2009
Clean fair value The fair value, excluding the unrealized part of the interest to date.
Embedded value The present value of all future cash flows of an existing portfolio.
Goodwill Goodwill represents the positive difference between the fair value of the assets, liabilities and issued equity instruments on the one hand and the interest of ASR in the fair value of the assets, liabilities and provisional liabilities on the other.
impairment The amount by which the carrying amount of an asset exceeds its realizable value. in such cases the carrying amount will be reduced to its fair value via the income statement.
investment contract A life insurance contract that transfers the financial risk, but not a significant insurance risk.
Joint venture Strategic cooperation between two or more parties, which contributes capital and knowledge but where parties continue to operate independently.
Market Capitalization Market value. Market Capitalization equals the number of outstanding shares multiplied by the prevailing price of the share.
Operational lease An agreement that allows the use of a good in return for regular payments, but does not provide for the transfer of title to its ownership. The financial risk remains with the creditor or lessee.
Private equity Securities of companies that are not listed on a stock exchange. The sale of private equity is subject to strict rules. because of the absence of a market an investor must personally find a buyer if he wishes to sell his share in such a company.
Realizable value The realizable value of non-financial assets is determined as the highest of either fair value less selling costs or the value in use.
Subsidiary Subsidiaries are companies in which ASR is able to steer, directly or indirectly, the financial and operational policy in order to obtain benefits from these activities (‘control’).
Euribor Euro inter bank offered rate ibNR incurred but not reported iFRiC international Financial Reporting interpretations Committee iFRS international Financial Reporting Standards
Investor Relations ir@asr.nl Up-to-date-information for investors can be found on www.asrnederland.nl › investor Relations.
Photography bob van der Vlist, Rotterdam (Themes) Wilco van Dijen, Wijk bij Duurstede (Portraits)
This report is a translation of the Dutch Jaarverslag (Annual Report) 2009. in case of conflict between the Dutch and the English report, the Dutch Jaarverslag is leading.