ASR is a new kind of insurance company, an insurer that helps its customers to become more financially aware, and truly understands them through continuous dialogue. An insurer with products and services that provide added value for the customer and with clear communications.
Our policy takes account of the interests of our customers, our employees and a broad group of external stakeholders (business partners, shareholders, regulators, politicians, regional governments, industry associations, trade unions, non-governmental organizations (NGOs) and local communities). This has been embedded in our processes. ASR’s corporate social responsibility and concern for the environment is demonstrated by its compliance with the principles of socially responsible investment (SRI).
Part I ASR at a glance 5 Foreword Jos Baeten The essence of trust 6 1.1 The story of ASR 8
Interview with Karin Bergstein Arranging everything perfectly for the customer 12 1.4 Corporate social responsibility 15 1.5 Human Resources 20
Part IV Report of the Supervisory Board 57 4.1 Members of the Supervisory Board 58 4.2 Report of the Supervisory Board 60
Part VII Other information 165 Independent auditor’s report 166 Events after the reporting date 167 Glossary 170 List of acronyms 172 Contact details 174 Colophon 174
The essence of trust ‘Offering customers peace of mind was the guiding principle for ASR in 2011. Given the economic crisis which deepened in the course of the year, risk management and the solvency drive were central themes for ASR’s Executive Board. Our efforts were focused on maintaining our financial health as we endured the crisis, and we will not change our course as long as the crisis continues. This enables us to guarantee peace of mind for our customers, who need to be sure that we will keep our promises when they need us.’
‘In the first quarter of 2011, ASR’s strategy was refined to sharpen the focus on our priorities as the market changed. The key objectives of the refined strategy are: greater emphasis on customer interests and a sharper focus on the retail insurance market and the small and medium enterprises (SME) segment. We will maintain standard products and a limited product range where possible, ensuring a more transparent offering for customers.
We are generally satisfied when looking back on 2011 and assessing our performance. In a year that was characterized by turbulent economic circumstance ASR realized a profit for the year of € 212 million. Our solvency improved further to 230%, an increase of 9%-points compared to 221% in 2010. We structurally lowered our costs by 6%. The Executive Board
The first results of the refined strategy can already be seen. The most important of which is that we are offering solutions to our unit-linked policyholders. In February 2011, we promised our unit-linked policyholders that we would pay any compensation directly into their policies and that, after having been given the opportunity to take advice paid for by us, they could switch to one of our new asset-building products or cancel their unit-linked policy. One year on, all eligible policyholders have received their compensation payments. They have all also received a letter from us offering them the option to switch to one of our alternative asset-building products, and in many cases we also included illustrative examples to show what the switch would mean for customers.
Our efforts to offer unit-linked policyholders better prospects did not go unnoticed. Our approach can count on increasing levels of appreciation among customers, politicians and even our competitors. In fact, we have noticed that our competitors are interested in our approach and we also feel supported by a letter sent by the Minister of Finance to the House of Representatives on 24 November 2011 regarding a package of additional measures for unit-linked policies. For us this is proof that we are well on our way to becoming that “new kind of insurer”.
A key objective for 2012 will be to improve customer satisfaction, which is currently still too low. The Net Promotor Score (NPS) showed some improvement in the two most recent surveys (winter and summer). I assume that all of the measures taken will contribute to this trend continuing in 2012. In 2011, resolution of the issue of unit-linked contracts was our highest priority. But tackling this issue alone will not gain us a consistently high customer satisfaction rating. To attain that, we will need to improve each day. Improvement is in small things. For 2012, we have asked all senior managers involved in customer contact what their customers’ top 3 frustrations are. And their assignment is to resolve them! The specialists from our Operational Excellence (OpEx) lean programme will be on hand to help. That is how various disciplines work in tandem.
Employee engagement and customer satisfaction go hand in hand. Everything we do in the interests of our employees has an immediate impact on customers. We exist first and foremost to help customers, and we appreciate that they pay us to do so! We believe in fair remuneration that fits the results achieved that we can justify to all stakeholders. The type of employee we need should match our core values and be capable of adapting to new circumstances.’
What ASR wants to be and who ASR wants to serve was determined in 2011 in the corporate story with the title: Consciously working towards a new kind of insurer.
ASR is there for people. The People who trust us to take care of their financial risks and future. And the people who work at ASR and give customers that extra attention that makes the difference, day after day. By engaging with our customers through our products and services in a conscious manner, we strive to become the new kind of human insurer that people have been waiting for.
Although ASR has only held that name since 2008, the organization has a rich history that can be traced back through the brands that make up ASR today – Stad Rotterdam, AMEV and Woudsend Verzekeringen. A successful combination with roots that date back to 1720. With over 2 million customers, ASR is one of the largest insurance companies in the Netherlands. We provide products and services that enable private individuals and small and medium-sized enterprises to cover those risks they are unwilling or unable to bear themselves and that help them achieve their financial goals. While we mainly operate through intermediaries, we are increasingly providing services directly to customers who select this route.
ASR consciously chooses to be a new kind of insurance company. An insurer that helps its customers to become more financially aware. By continuous dialogue with customers so we can truly understand them. And by translating this knowledge to clear and easy-to-understand information, products and services. Hereby we offer customers insight and overview, so that they know where they stand.
Trust in the financial sector has reached a historical low. The era of blind faith is over, and customers want to make 1.1 The story of ASR
well-considered decisions. However, they lack insight when it comes to their financial situation. What risks do they run? What options are available to them? Which decisions are right, given their own unique situation, and what are the consequences of such decisions? The vast majority of people in the Netherlands do not have a clear understanding, for instance, of what kind of mortgage or supplementary pension they have, let alone their status. Moreover, in the Netherlands few people know whether they have insured a risk twice, or whether they are overinsured or underinsured. Such situations are undesirable, and usually arise unintentionally. In addition, more and more people have started to arrange their insurance themselves, which they can do online.
ASR wants its customers to be able to have insight into, and obtain an overview of, their own financial situation at any time. We work actively with independent advisors on an ongoing basis in order to achieve this aim. Such steps include the development of a platform through which we can provide customers with relevant, up-to-date information when they need it. Including via the ‘Mijn ASR’ (My ASR) environment on our website. Customers can use this environment to look into their insurance policies and financial products with ASR, and pass on changes when appropriate. In addition, we are continuing to enter proactively into dialogues with customers in order to check whether their products and services still fit their current situation.
We pay constant attention to our customers. So that we can truly understand them and work with them on developing creative solutions and services that make a difference for the customer. This means that our employees listen actively and help come up with a solution that best suits the customer's specific wishes and situation. For corporate target groups, for instance, we have teams that focus on specific sectors. ASR also approaches customers on its own initiative. For example when an annuity expires or when a mortgage reaches the end of a fixed interest period. But also to highlight the impact of changes in legislation and regulations and their consequences. To this end, ASR creates customer forums, makes active use of social media and provides information.
There is a great deal of information available regarding customers. It is up to ASR to use this information to create truly understandable products, services and communications. So that customers understand where they stand, enabling them to make conscious choices. This means that we need to offer a clear, easy-to-understand product range. That our written and verbal communications need to be consistent, clear and reflect our commitment to the customer. That our processes need to be practical and predictable. That we are transparent regarding our costs and income. And that we demonstrate the consequences of choices that are made. Preferably in the most personal way possible.
‘Bewust ASR’ (‘More Aware. ASR’) is our new slogan. This conveys our belief that things have to change. We are also aware of the role we play in society. We understand the needs of customers and want to enable them to make well-informed decisions when choosing solutions to meet these needs.
ASR has a number of brands that provide services to a broad public. In addition to the ASR brand, we provide services to the market under four other labels, specifically De Amersfoortse, Ditzo, Europeesche Verzekeringen and Ardanta. ASR products and De Amersfoortse products are sold through intermediaries, Ditzo concentrates on direct online distribution and Europeesche Verzekeringen and Ardanta are specialists that use a range of distribution channels.
ASR has traditionally held a strong position in the intermediary distribution channel, particularly among small and mediumsized intermediaries that provide advice, management services and administrative support to self-employed professionals and SMEs. In future, intermediaries will, more than ever before, present themselves as advisors to customers. This is the chief area where intermediaries provide added value. Strengthening ASR’s position with larger and specialized intermediaries is crucial for growth in the commercial market (Non-life, Occupational Disability and Pensions). This calls for much greater focus on and attention for these types of intermediaries by the sales organization and the back-office.
ASR aims to retain its leading position among tied agents. All major banks offer insurance policies aimed at their retail and corporate customers. In the case of retail customers, these are often offered through the bank's ‘preferred supplier’. With regard to their corporate customers, banks need to have a diverse offering. ASR wants to continue to play a prominent role in this segment.
As customers are now consciously arranging more and more matters themselves, direct distribution accounts for a growing share of the insurance market. Through Ditzo, ASR focuses on retail customers who want to take out and manage insurance policies directly.
Arranging everything perfectly for the customer ASR is well-placed to win the battle for the customer in a rapidly changing world. A world in which customers decide for themselves how they want to be helped. With simple, understandable products that provide genuine security. For this reason, ASR is simplifying its organization. ‘We are really going to make the most of ASR’s strength: we’re large enough be counted among the big players, yet still small enough to arrange everything perfectly for the customer’, Karin Bergstein, member of the Executive Board, emphasizes.
The introduction of the Ditzo health insurance policy is important to both Ditzo and ASR. To ensure that the introduction would be successful and that we would reach the planned portfolio volume, I kept a keen eye on a number of key aspects during the product development process.
negative publicity when they go wrong. We are making our own organization simpler so that we can respond more effectively to changes and the needs of our customers.
‘ It is no longer the case that customers automatically choose to use our services’
As far as our products are concerned, we focus on those product lines that can create value for our customers, for the intermediaries we work with, for our shareholders and for ASR employees. Our customers can decide for themselves how they want to be helped, depending on the situation. Sometimes a customer will call us directly, sometime they
Senior Product Manager at Ditzo will arrange matters themselves online, and sometimes they need the services of their advisor. At ASR, we always want to ensure that our customers are able to approach us in a variety of ways at a time that suits them. This is something we are able to do, with great success. This is proven by the rapid progress by Ditzo in offering health insurance.’
The Operational Excellence (OpEx) programme, based on the lean principle, is also part of the ongoing efficiency improvement drive. This programme aims to organize the business in a way that avoids waste and leads to standardization of products and processes along with an increase in Straight Through Processing. All ASR divisions, including shared services such as HR, IT and finance, are involved in the drive to organize ASR according to lean principles.
Elements of ASR’s strategy were refined in early 2011 with the aim of focusing more specifically on priorities under changing market conditions. First and foremost, ASR has chosen to focus primarily on retail customers, self-employed professionals and small and medium-sized enterprises (SMEs) up to 500 employees. Additionally, ASR will adapt its range of products and services to make its standard products transparent and easy-tounderstand with an excellent level of service, such as the MultiZeker polis. Structural cost reductions will be implemented. The organization will also be made more accessible to customers, giving them freedom of choice in distribution channels, i.e. through intermediaries, online or direct. Finally, there will be a stronger focus on operations and non-core activities will eventually be phased out. Mid October the Praktijkvoorziening activities (mortgages for medical professionals) were handed over to Direktbank. With this handover Praktijkvoorziening ceases to exist. The pension management contracts belonging to ASR Pension Fund Services were taken over by AON Hewitt per 1 January 2012.
At the heart of ASR’s strategy is the ambition to become the most accessible insurer in the Netherlands for customers. ASR is convinced that thoughts and actions should be driven by the interests and the experience of customers. Financial robustness and cost-effective operations are essential conditions in this respect. A sound capital base offers security and continuity. Efficient operations are essential if we are to provide good services at competitive prices. Additionally, the strategy must strike the right balance between the interests of all stakeholders: customers, employees, shareholders, distribution partners and society as a whole.
First and foremost, ASR strives for customers to appreciate it as a reliable and transparent insurer that offers good products and services at an adequate price. At the same time, ASR’s Executive Board is certain that, in the long run, continuity and profitability can be safeguarded only if we have concern for the effects of our operations on people, the planet and profit. We believe that what is good for the business in the longer term should be preferred over potential short-term gain. This is the most important guiding principle for ASR’s sustainability policy. Which is why at ASR, we devote a great deal of attention to corporate social responsibility (CSR) and corporate social involvement (CSI).
OpEx and Compliance all contribute to responsible business practices with a focus on customer interests.
New investment funds that are fully compliant with ASR’s SRI policy were introduced again in 2011. ASR also actively offers policyholders the option of switching to new investment products, such as VermogenGarant, VermogenBelegd and the lijfrente opbouwrekening, so that more customer assets are managed in accordance with SRI criteria.
More than 95% of outside asset managers responsible for ASR’s investments have now also signed the UNPRI. ESG aspects are being incorporated into the investment processes of increasing numbers of outside asset managers. Important steps were taken again in 2011 to ensure that these outside investments comply with ASR’s SRI policy, for instance by transferring the asset management of these investments to ASR Financial Markets.
ASR also signed the United Nations Global Compact Principles (UNGC) on 30 December 2011. These ten principles are based on four international conventions: the Universal Declaration of Human Rights, the International Labour Organization Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention against Corruption.
of 30 Dutch insurance companies. The score achieved in 2011 was higher than in 2010, with particular appreciation for the fact that ASR’s SRI policy applies across the spectrum of managed assets. ASR also took part in the focus group established for the purposes for this VBDO insurer survey.
ASR Vastgoed Vermogensbeheer also plays an active role in a number of industry associations to boost sustainability in all aspects of the property business.
CSR is one of the key pillars in the operations of ASR Vastgoed Ontwikkeling, the property development business.
has pulled off an important achievement in CSR in recent years with a clear spill-over effect for the city.
ASR endeavours to place as small a burden on the environment as possible in carrying on its operations. This has been formalized in the ASR environmental policy statement. This addresses the efficient use of resources, energy and water, as well as waste management, mobility and carbon emissions. ASR also wants to continually improve its environmental footprint through environmental management. Prompted in part by sustainability reasons, it was decided in 2010 to renovate the building at Archimedeslaan 10 in Utrecht rather than commissioning the construction of a new head office.
Long-term Agreement on Energy Efficiency 3 The Dutch government has entered into long-term energy efficiency covenants with sectors of industry since 1992. ASR signed the Long-term Agreement on Energy Efficiency 3 (Dutch acronym: MJA3) in 2008. The Agreement sets out national arrangements between the government and the corporate sector about such issues as energy savings, sustainable purchasing, improvements to data centres and procurement of green energy. By signing this Agreement, ASR has expressed the intention to achieve a 30% reduction in energy consumption by 2020 compared to 2005. This will be achieved first of all via a 20% reduction in energy consumption by taking measures to improve energy efficiency and implementing systematic energy assurance measures. In addition, energy use in the chain will be reduced by 10% by encouraging sustainable purchasing, such as purchasing green energy and improving the energy performance of data centres.
An Energy Efficiency Plan is drafted every four years. The Plan for the period 2013-2016, which will be prepared in 2012, will cover the savings expected from the renovation of the head office. Results achieved are reported to the authorities on an annual basis.
Apart from sustainability in property development, ASR Vastgoed Ontwikkeling also seeks to translate its CSR Policy into action in other ways. For instance, ASR Vastgoed Ontwikkeling is a sponsor of a number of real estate training programmes to raise the level of professionalism in the industry, as well as supporting the Utrecht-based Aorta Centre of Architecture, which seeks to raise the profile of architecture. For the past five years, ASR Vastgoed Ontwikkeling has supported the HomePlan foundation, which builds homes for people living in slums in developing countries. This year, an employee of ASR Vastgoed Ontwikkeling travelled with HomePlan at his own expense to build a number of new homes in the slum districts of Mexico City, thereby making a very concrete contribution towards a new future for residents of the slums. ASR Vastgoed Ontwikkeling cooperates with ASR Foundation in its CSR activities.
Sustainable purchasing At ASR, sustainable business practices also entail sustainable purchasing. The guiding principle is that the environmental impact of the goods and services used should be reduced gradually and that international human rights should be respected throughout the production process. Sustainability aspects are considered in the decision-making on all new and amended contracts. Sustainable purchasing practices are reflected in that ASR has used nothing but green power since 2008, and purchases coffee with a fair trade quality mark, FSC-certified paper and energy-efficient equipment. Sustainability criteria are also leading in renovations and social responsibility is an important consideration in purchasing. ASR’s grounds are being kept, for instance, by an organization that employs people with a mental or physical disability.
At ASR, diversity is enhanced in many ways. Employees are encouraged to be active in all manner of networks in order to broaden their horizons and advance their personal growth. One example being the Colourful Ambitions network, the network for ASR employees with a bicultural background. A lot of attention is devoted to the equal treatment of employees, as well as to supporting the divisions in promoting diversity in and around the workplace. We want everyone to feel at home at ASR.
Utrecht Energy Covenant In April 2010, ASR signed a letter of intent to participate in the Utrecht Energy Covenant. The letter of intent applies to the office building at the Archimedeslaan 10 in Utrecht. The Energy Covenant seeks to reduce carbon emissions. It is ASR’s ambition to operate on a carbon-neutral basis by 2030 at the latest.
A reduction in the use of office space, work stations and for example printers will also result in lower energy consumption and carbon emissions. Examples of steps that have already been taken include a reduction in the total number of printers and the introduction of double-sided printing in black-and-white as the standard. The Fully Digital (‘Volledig Digitaal’) project focuses on promoting virtual cooperation between ASR and intermediaries. In order to conserve energy in the building located at Archimedeslaan 10 in Utrecht, a system is being used that takes advantage of the earth’s capacity to store energy (ground source heating and cooling). ASR also encourages recycling of office equipment. Redundant office equipment is donated to the Betuwe Wereldwijd foundation, for instance, which sends it to development projects, particularly in African countries.
ASR has an employee code of conduct containing guidelines for how to interact with each other and how to approach specific situations. The rules that apply to ASR employees include the insider policy, the whistleblowing procedure, the incentive policy and several other codes of ethics.
It is ASR Foundation’s ambition to encourage ASR employees to become involved in the community and to help them support social initiatives. ASR would also like to see joint efforts strengthen the team spirit among employees. Nearly 1,600 colleagues participated in one of the range of activities organized by ASR Foundation in 2011.
A total of 64 incentive plans were submitted in 2011, awarding employees a grant for their active contribution to volunteer work in their immediate surroundings. In addition, over 300 employees took part in a wide range of projects, including the IJsstrijd (an ice-skating event), spinning classes for the Sophia Children’s Hospital, Alpe d’Huzes (a cycling event to benefit cancer research), the National School Breakfast, an old-fashioned ‘laundry day’ at a senior citizens’ home, and accompanying special needs children on a day out. In addition, more than 1,200 ASR employees participated in staff teambuilding activities.
Focus on core values There was a strong focus in 2011 on ASR’s core values of personal, approachable and accountable and true to who we are. The aim was to breathe life into the core values so they can function as the ‘moral backbone’ of everything that employees do. The responsibility of managers in this process is to strike a balance between controlling and offering flexibility. Each of the core values has a corresponding basic behavioural attribute. Ultimately, employees and managers have to partner up to shape the core values. Leadership training focuses on conducting meaningful dialogues, understanding the roles people play within teams and acting accordingly. In 2010 and 2011, more than 400 managers took part in training sessions. The training programme was followed by the entire Executive Board as well as all senior managers, middle managers and team leaders. Furthermore, training was provided to 11 core trainers and 60 leadership facilitators. The Intranet now has a core values corner on which all relevant information is posted. This enables managers, supported by their own people, to engage in dialogues with their teams to discuss the core values and translate these to practical applications.
Focus on cost reductions The continuing focus on efficiency and cost reductions led to a further reduction in the amount of employees in 2011. The number of staff on permanent contracts was down 2%, dropping from 4,333 FTEs at year-end 2010 to 4,264 FTEs at year-end 2011. The headcount of external FTEs fell by 38%, from 596 FTEs in 2010 to 367 FTEs in 2011. 75 ASR employees were made redundant in 2011 under the terms of the Redundancy Plan. A further 120 employees left the organization following the expiry of their fixed-term employment contracts. 126 employees resigned of their own volition while a further 58 left under the terms of a joint settlement. The average length of an employment relationship with ASR stands at 13.3 years.
Talent development Despite the focus on reducing costs, ASR continues to invest in the development of the most talented individuals by offering them a number of programmes. The Talent Development Programme is a special programme that seeks to leverage the talents of recent college graduates recruited to ASR. The Management and Professional Development Programme is targeted at promising employees who have worked at ASR for some time already, and whose participation in the programme will take their development to the next level. Additionally, ASR undertakes a broad range of initiatives that contribute to achieving the objectives formulated in the ‘Talent to the Top’ charter.
ASR’s Management and Professional Development Programme offers participants a personal development programme that is closely linked to the needs of employees and the organization. It includes modules relating to strategy, organization, culture, project management, presentation, coaching and change management. The Programme spans 22 months, with a new group starting each year (2011: 38). The first group
Two programmes have been conceived to contribute to achieving the objectives of women at the top. The ‘Female Leadership’ programme supports the development of women who have the potential to move on to senior positions. The ‘Woman in Balance’ programme helps women make the right development choices, with focus being placed on striking the right balance between work and home life. The underlying principle of these programmes is that diversity within the organization is a prerequisite for good performance.
The New World of Work The New World of Work (NWW) programme offers employees a new kind of physical, virtual and mental working environment, enabling them to find a better balance between their work and home life. A strategic aim of this programme is to give employees the option to work where and when they want. Already more than 1,700 FTEs at ASR are now working according to the New World of Work principles. In tandem with this development, the transition has also been made from 1.2 work stations per FTE to 0.7 work stations per FTE. At the head office in Utrecht, all employees will work according to NWW principles by the end of 2012.
Remuneration policy Negotiations on the new remuneration policy started in August 2010. Members of the trade unions accepted the proposed collective bargaining agreement in early 2011. The new remuneration policy was formally introduced on 1 January 2012.
The new policy sees the profit-sharing bonus and the performance bonus replaced by variable pay. The underlying principle is to have a reward system that ensures a good balance between customer value, employee engagement and financial performance. In line with the remuneration structure that is in place for the Executive Board and senior management, the new remuneration policy is based on three components: customer value, ASR’s financial performance and individual performance.
‘You are the first to hold that precious new life. A great responsibility.’ Karolien van Beek Midwife
portfolio will potentially show less growth as the financial markets recover.
Interest rates dropped sharply in 2011, which affected the value of portfolios. Because investments in countries with the highest ratings such as the Netherlands and Germany are popular, interest rates in those countries are artificially low. We increasingly made use of interest rate swaps and derivative instruments to limit our investments' exposure to interest rate movements and to align them to liability exposures.
From an operational perspective, we started to focus more on returns in the life market in 2011. We took a step back in offering products such as single premium policies and immediate annuities. The combined ratio improved in 2011 thanks to more active/adequate portfolio management and adjustments in premium rates were a necessity. At Pensions, we consciously opted to focus on existing customers who already pay premiums, rather than offering products at non-competitive prices. In addition, we again paid a great deal of attention to cost reductions in 2011. After structural cost cuts in 2009 and 2010, we managed to lower our operating expenses by another 6% in 2011. Cost control will continue to be one of our priorities in 2012 as well.’
The Own Risk & Solvency Assessment (ORSA), which is dictated by Solvency II, has been integrated into the existing process for risk identification. The outcomes of the assessment are key aspects in the decision-making process. The impact of ASR’s strategy and policy on our solvency has become much more transparent as a result.
R.H.A. (Roeland) van Vledder LL.M., who had been a member of the Executive Board of ASR since 1 January 2006, stepped down on 1 January 2012. In 2011, his areas of responsibility on the Executive Board included Marketing & Sales, Europeesche Verzekeringen, Ardanta, Ditzo, Property and Business Support. The other three members of the Executive Board have taken on his duties for the time being.
Baeten studied law at Erasmus University Rotterdam. He started his career in 1980 when he joined Stad Rotterdam Verzekeringen, one of the pillars that make up ASR. He was appointed CEO of Stad Rotterdam in 1999. He then joined the Board of Directors of Fortis ASR Verzekeringsgroep, becoming Chairman of the Board of De Amersfoortse Verzekeringen in June 2003. In 2005, he was appointed Chairman of the Board of Directors of Fortis ASR Verzekeringsgroep. Jos Baeten has served as Chairman of the ASR Executive Board and CEO since January 2009.
Roel Wijmenga has been responsible for Accounting, Reporting & Control (ARC), Compliance, Financial Markets, Risk Management and Integrity & Operational Risk Management on the Executive Board since early 2009.
Wijmenga studied econometrics and earned a Ph.D. in economics from Erasmus University Rotterdam. He started his career in insurance at AMEV, one of ASR’s legal predecessors, where he held several positions until 2003. He went on to become a member of Interpolis Board of Directors, and served as CFO and member of the Eureko/Achmea Executive Board.
Additional positions Roel Wijmenga is Chairman of Stichting Certificering Federatie Financieel Planners, a foundation for the certification of financial planners, and a member of the Board of Stichting DSI, a foundation for the promotion and monitoring of the integrity and reliability of financial services providers and compliance professionals. He also serves on the Financial & Economic Committee of the Dutch Association of Insurers.
• Profit for the year at € 212 million (2010: € 317 million) • DNB solvency improved to 230% (2010: 221%) • Gross insurance premiums decreased to € 4,511 million - Gross insurance premiums from Life segment decreased by 14% to € 2,166 million, due primarily to lower single premiums - Gross insurance premiums from Non-life segment up 5%, rising to € 2,427 million
• Combined ratio in Non-life segment improved by 1.4%-points to 98.9% (2010: 100.3%)
Total workforce (in FTEs) 4,631 4,929 1 Elimination of premium related to ASR’s benefit plans administered by ASR Levensverzekering N.V.
2 Profit for the year attributable to holders of equity instruments. 3 DNB solvency and buffer capital are calculated based on equity under IFRS, taking into account additions such as revaluation of the property portfolio and hybrid equity instruments and the elimination of the ASR pension plans. Buffer capital includes an immediate surrender rate based on best estimate rather than the 100% surrender value floor prescribed by DNB.
Operating expenses ASR’s operating expenses amounted to € 633 million in 2011, a decrease of 6% compared to 2010. This decrease was the result of the ongoing focus on efficiency. Efficiency improvements in 2011 were achieved in part through the integration of Falcon into ASR, staff cuts, regular cost reductions in the Non-life segment and a drop in accommodation expenses following the closure of a number of office buildings. The cost-premium ratio in the insurance business showed an improvement on 2010, from 12.7% to 11.8%. In the Life segment, the cost-premium ratio improved from 13.6% to 12.8% thanks to a further reduction in operating expenses at Individual Life. The expense ratio in the Non-life segment decreased from 11.9% to 11.0% due to cost reductions and an increase in net premiums.
It was already decided earlier to scale down the portfolio of office space. Investments in offices saw a sharp drop in the year under review. The strategy for residential properties centres on rejuvenation of the portfolio at stable to slightly dropping investment volumes.
The best products and the best advisors for our customers ASR has a long tradition of supplying solid products, along with the advice of customer friendly and professional intermediaries. At the same time ASR has dynamically adapts to changes in markets, customer needs and distribution. Customer interest always come first. ASR has worked together with intermediairies for a long time, and will continue to do so, because we believe that professional advice matters to the majority of customers – now and in the future.
‘Within our product lines we are already seeing opportunities in the market to further improve our products and services. In this process we are actively listening to the wishes of customers, and our intermediairies,’ says Jolanda Hillebrand-Tijhuis, Director of Intermediairy Distribution ASR.
‘More and more we notice that customers are seeking to contact insurers in various ways, sometimes even directly. For example, our Customer Contact Centre is noticing a substantial increase in the number of phone calls from customers.
The professional intermediaries that ASR collaborates with stand out from the crowd with their advice, which adds true value to the process. We are seeing more and more intermediaries choosing to specialize in a certain area, and work together. They are busy adapting their earnings models in anticipation of the ban on commissions. For ASR this means differentiating how we work together with our distribution partners. It is vital that ASR and our partners manage to work together well in this time of transition. If necessary, we will support those advisors we collaborate with, both actively and customized to their business, so that they can continue to excel and offer advice that is of real value. In short, both for ASR and for intermediaries customer interests will continue to be in the lead.’
The ‘Vol Vertrouwen Ondernemen’ programme (Confident entrepreneurship ) actively offers support to our intermediairies towards becoming more professional.
• Gross insurance premiums down 14% to € 2,166 million (2010: € 2,514 million), partly due to focus on returns
New Life insurance contracts sold (APE) 121 196 4 Including € 82 million in premiums to the ASR pension plan (2010: € 86 million).
Gross insurance premiums Gross insurance premiums in the Life segment decreased compared to 2010, dropping by € 348 million to € 2,166 million (-14%), as a result of decreases in Individual-life single premiums and regular premiums. New Life insurance contracts sold (APE) decreased to € 121 million (-38%), due primarily to fewer new single premiums. This was a result of the preference of return over premiums.
insurance business is that nearly all communication to customers, such as policy conditions, brochures and the Ardanta website, have been rewritten in easy-to-understand language (B1).
Communication to customers regarding pensions was improved also in 2011. The initial letter that ASR sends to its new pension customers is now accompanied by a cover letter explaining the pension scheme. This allows customers to view at a glance what information is contained in the initial letter and how to check this information.
In 2011, ASR and Brand New Day took the initiative to establish a joint Institution of Occupational Retirement Provision (IORP) to offer customers more options in building their pension. This IORP was licensed by the Dutch Central Bank (DNB) in December 2011. The choice to enter into a joint venture was prompted by ASR’s need to remain at the vanguard, also in the pension market. Brand New Day uses its name and offers the product. ASR exclusively bears the risk for the insurance policies for which the IORP acts as intermediary.
The market for funeral insurance also continued to be under pressure in 2011. The Dutch funeral insurance market has a high penetration rate and is greatly saturated. New lifelong funeral insurance policies, for instance, showed a 13% drop on average in regular premiums in the year under review. This drop was considerably lower, however, than the 30% decrease in 2010.
ASR’s strategy is based on three pillars: customer interests, financial robustness and efficiency. In the Life segment, many steps were taken in 2011 to make progress on each of these three pillars.
Conditions in the funeral insurance market will continue to be tough in 2012 because of the economic situation. In 2012, Ardanta will develop a single overview for each customer in all its funeral insurance policies within the combined funeral portfolio, including a value overview, ‘acceptgiro’ (pre-filled standardized payment order) and contact history. This will not only create efficiencies for Ardanta, but, more importantly, it will help Ardanta to communicate its expertise more clearly towards its customers.
As part of the refined strategy, at 1 January 2012, ASR transferred the management of the administration of pension funds as part of the APFS department to Aon Hewitt, thereby discontinuing a non-core activity.
• Increase in profit for the year, up 39% at € 145 million (2010: € 104 million)
• Operating expenses fall 3% to € 251 million (2010: € 260 million)
• I mprovement in combined ratio, down to 98.9% (2010: 100.3%)
The Non-life segment comprises of a wide range of non-life contracts that insure risks related to motor vehicles, fire damage, travel and leisure, liability, legal expenses, occupational disability and medical expenses, among other things. These products are offered under the ASR, De Amersfoortse, Europeesche Verzekeringen and Ditzo labels. ASR offers motor vehicle, fire, liability and other insurance policies through the intermediary channel. Europeesche Verzekeringen offers a variety of travel and leisure insurance products through the intermediary, travel and direct channels. De Amersfoortse
Profit for the year attributable to holders of equity instruments 145 104
The non-life market was dominated by price competition in 2011. Combined with the economic crisis, this gave rise to difficult market conditions.
Existing market players and new entrants offered occupational disability products with very low premiums in an effort to gain or increase market share. As a consequence, the occupational disability insurance market is becoming fiercely competitive. Although De Amersfoortse decided that it would not compete on prices to any great extent, it managed to maintain its leading position in the occupational disability insurance market, holding a market share of around 22% in 2011. Owing to the economic downturn, there has been an increase in the number of claims made under occupational disability insurance policies as well as the periods covered by such claims. More and more self-employed persons are opting not to take out occupational disability insurance. Over half of them do not currently have any occupational disability insurance. Given this, the challenge to the market is to launch affordable products that offer clear and transparent coverage. In 2011, a new fee for individual occupational disability insurance was introduced that also applies to the existing portfolio. With regard to sick leave insurance, premiums for new insurance contracts were increased in October 2011. In addition, in 2011 policies were made cancellable with immediate effect following the end of the initial three-year policy period.
Owing to the rising costs of health care and the economic crisis, policyholders are increasingly opting for higher policy excesses and/or less comprehensive supplementary insurance packages when taking out health insurance. The health insurance market is a premium-driven market that is dominated by a number of major players and in which there are a growing number of possibilities for directly taking out health insurance online. At the end of 2011, ASR entered the online market for health insurance under the Ditzo label, a move which proved successful.
Gross insurance premiums In 2011, gross insurance premiums in the Non-life segment increased 5% to € 2,427 million (2010: € 2,310 million). This increase was attributable to the health insurance, occupational disability insurance and other non-life businesses (motor, fire and liability insurance), with pricing adjustments playing a key role. Gross insurance premiums from other non-life insurance contracts were up 6% compared with 2010. Measures were taken in 2011 to improve the returns on motor insurance by increasing premiums. There was also an increase in gross insurance premiums from fire insurance, due to organic growth.
In the second half of 2011 a new package of non-life insurance products for retail clients was launched for a group of advisors. This package contains a number of innovative options for customers, such as clear contract terms and conditions, a free choice of insurance coverage and an annual portfolio check-up. In 2012, a start was made on the remainder of the roll-out of the package.
Customers have been able to submit claims to ASR directly as of mid-2011. They are also able to submit motor insurance claims by mobile phone, using a special app that was developed by an independent foundation and is supported by intermediaries. This is another way in which ASR is travel and leisure sector was affected by the ongoing economic crisis. As a result, the frequency of holidays rose to a limited extent only, just like in 2010. In addition, consumers spent more time using their own boats, caravans and other possessions for leisure purposes. As a consequence, the risk of damage, and hence claims, increased. The Netherlands had poor weather in the summer of 2011, which led to an increase in last-minute holiday bookings, for which few people took out cancellation insurance. In addition, consumers postponed purchases of expensive items for recreational use to an increasing extent.
ASR’s strategy is founded on three pillars: customer interests, financial robustness and efficiency. In 2011, the Non-life segment took various measures with the aim of making headway with each of these pillars.
Efficiency In 2011, the other non-life business focused on enhancing the quality of employees who have frequent contact with customers and on increasing returns. The ways in which returns were to be increased did not just include higher premiums, but also improvements to the quality of the portfolio. To this end, portfolio reviews were conducted, the policy on acceptance was tightened up, and further structural cost savings were implemented where possible, among other measures.
The Ditzo distribution channel proved to be a success in 2011, particularly for Health. Ditzo’s health insurance campaign contributed to the increase in the number of insurance contracts sold in the fourth quarter of 2011.
Profit for the year The profit for the year of the Other segment decreased by € 5 million in 2011, from € -63 million to € -68 million. The primary causes were incidental in nature, including impairment losses at ASR Vastgoed Ontwikkeling.
There is a funding gap in the Netherlands, between € 630 billion in mortgages and € 300 billion in savings deposits. Most Dutch banks are experiencing a funding gap. ASR Bank does not have this problem: the funds it holds in savings deposits are higher than the amount of mortgages granted. The strain on interbank loans had an adverse effect on market conditions for ASR Vastgoed Ontwikkeling. The uncertain economic times and the euro crisis also have an impact on property development.
ASR Bank introduced a new product in 2011 that meets the needs of customers for transparency, clarity and a low fee structure. ASR Bank’s first bank savings product is the ASR lijfrente opbouwrekening annuity account. The product was received well in the market and resulted in an increase in savings deposits. The WelThuis Spaarhypotheek, a savingslinked mortgage that was introduced earlier, the demand savings account and the two- and three-year deposits also developed favourably.
ASR Bank made progress in terms of efficiency by migrating to new and self-run systems following the split-off of ASR Bank from the legacy Fortis environment, which now belongs to ABN AMRO.
ASR is committed to maintaining a robust capital base that contributes to corporate targets. This means that the effective execution of the capital policy, as part of ASR’s risk management structure, is a vital task and takes up an important position at ASR. Capital management comprises all activities that focus on controlling, managing and monitoring any available and required solvency.
ASR’s capital policy ensures prudent monitoring and control of its solvency ratios. Solvency is monitored and controlled on an ongoing basis, both at ASR level and at licensee level.
ASR’s capital position is governed by various rules and limits that were instituted to absorb losses and to guarantee financial robustness. Compliance with the rules is monitored and enforced by regulators as well as via internal management models.
Supervision of insurers has changed drastically over the past few years. In addition to supervision under the Solvency I framework, the outlines of the rules and regulations of the Solvency II regime are becoming clear. ASR has already made huge steps to meet the requirements of Solvency II.
In addition to capital management under Solvency II, which is the standard model for European insurers, ASR has also developed its own methodology. This methodology quantifies the integral risk in terms of economic capital (ECAP). The methodology is a departure from the Solvency II standard model in that it uses self-developed methods for measuring a limited number of risks. These methods are a better fit for the specific risks that ASR incurs, and provide a more complete understanding of these risks and the capital required to mitigate them. This method was fleshed out and refined in 2011 based on regulatory developments.
During the transitional period towards the introduction of Solvency II, ASR will not only control its capital position based on the regulatory framework of Solvency I, but also use the additional criteria of Solvency II and the S&P capital ratio.
The Solvency II requirements and the self-developed ECAP method have now been cascaded throughout the organization and integrated into the risk management structure. They guarantee that ASR’s robust financial position is transparent in terms of market value.
As an insurer, ASR has a relatively limited need for funding. Because it turns out that the access to and cost of funding channels can change over time, ASR nevertheless strives for a broad spectrum of funding options. In order to secure its access to the money and capital markets, and to minimize finance costs.
ASR uses several distribution channels to fulfil its funding needs on the money and capital markets. ASR raises both secured and unsecured financing.
In terms of secured financing, ASR has options for securities lending. In addition, ASR has set up a repo infrastructure, allowing it to raise finance in exchange for securities. These types of finance offer ASR a robust range of funding options at attractive fees. They provide ample comfort so that ASR has the option of meeting its limited funding needs appropriately and with the necessary flexibility.
On 16 November 2011, Standard & Poor’s confirmed its ‘A’ rating with a negative outlook for ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. On 9 December 2011, Fitch Ratings confirmed its rating of ‘A-’ with a stable outlook for ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. its ‘BBB’ rating with a stable outlook for ASR Nederland N.V. was also confirmed.
To view the rating reports, please log on to the ASR website: www.asrnl.com.
FSR a negative 20 May 2009 iFS a- Stable 16 december 2010 aSR Schadeverzekering n.V.
FSR a negative 20 May 2009 iFS a- Stable 16 december 2010 aSR nederland n.V. long-term idR
The risk reporting process sped up in 2011, and the auditability of risk reports increased. There was also a further improvement in the reliability of reports on solvency capital requirements (Solvency II) and Economic Capital (ECAP).
There were a number of developments in 2011 that had an impact on ASR’s financial risk profile. Risk management measures were taken, and these helped to keep the financial risk profile within the relevant bounds (risk appetite).
Exposure to government bonds issued by peripheral European countries continued to fall, and stood at € 13 million, down € 151 million compared with 2010. Exposure to French government bonds was reduced to € 257 million (down € 1,232 million). Exposure in Belgium was also cut to € 2 million, a € 188 million drop.
ASR uses the ECB AAA curve to value liabilities when calculating DNB solvency and the adequacy test provision. This yield curve includes the Netherlands, Germany, France and Austria. The overall ECB AAA curve continued to fall in 2011, despite being buoyed up by the higher interest rate on French government bonds. If France’s rating is downgraded, the curve will fall further. This would affect solvency adversely.
ASR periodically conducts tests to check whether the technical provisions are sufficient to cover insurance liabilities. These provisions were adequate at year-end 2011.
In 2011, the annual Control Risk Self-Assessment (CRSA) was integrated into the Own Risk Solvency Assessment (ORSA). The CRSA is a risk identification methodology used by all divisions to identify risks that pose a threat to the achievement of targets. A qualitative assessment is also made of the risk and the required risk management measures. As part of the ORSA, the impact of the risks identified in the CRSA on the capital requirements of ASR and individual divisions was estimated. ASR expects to continue this process in 2012 with the ongoing integration of the ORSA with the long-term budget. ASR will participate in DNB’s ORSA dress rehearsal in 2012.
Also in 2011, additional attention was devoted to the availability, integrity and confidentiality of information. Awareness of this issue increased, and risk management measures continued to be implemented. Extra attention will continue to be given to this issue, given the importance for continuity of ASR’s operations. With regard to information security, in 2012 the emphasis will be on demonstrating the use of risk management measures and ensuring even greater awareness of issues related to information security.
Solvency II is the new regulatory framework for European insurers and will take effect on 1 January 2013. The Solvency II requirements support ASR in its efforts to make further improvements to risk management. ASR will implement Solvency II in full by year-end 2012.
The Solvency II framework is based on three pillars. Pillar 1 consists of quantitative solvency requirements, Pillar 2 of governance and internal control requirements, and Pillar 3 of disclosure requirements. Solvency II creates a new set of regulatory requirements and a solvency framework based on market-consistent valuation. The solvency requirements will better reflect the risks that insurance companies incur.
ASR’s earnings model has come under pressure owing to radical changes in its main distribution channel (intermediaries), the development of bank products (including bank savings products), the cost level and the abolition of kickbacks with effect from 1 January 2013. The Dutch insurance market is saturated and fiercely competitive, and margins are slim. ASR has given top priority to ensuring the earnings model is ready for the future.
The IT infrastructure is a key factor in ASR’s operations. ASR is looking to continue to replace outdated systems in 2012. This will ensure that in future ASR will continue to comply with legislation and regulations, report reliable information promptly, and be able to adapt quickly to changing circumstances. Improving the IT infrastructure is therefore vital in order for the realization of the strategy.
The Dutch State became the sole shareholder in ASR Nederland N.V. on 3 October 2008. On 29 September 2011, the Dutch State transferred all shares in ASR Nederland N.V. to NL Financial Investments (NLFI) in exchange for depositary receipts for the shares.
ASR Nederland N.V. is a two-tier company. It is subject to the partial two-tier regime because the State, in its capacity as a legal person under public law, has provided the entire issued capital for its own account (Section 155a, Book 2 of the Netherlands Civil Code). As a result, the rules for appointing and removing supervisory directors are different from those in effect at companies not subject to the partial two-tier regime. In addition, specific executive decisions mentioned in the law are subject to Supervisory Board approval.
The Executive Board is responsible for the day-to-day conduct of business at ASR as a whole, plots the company strategy and formulates policy. To discharge its duties, the Executive Board takes decisions, which are submitted to the Supervisory Board or the Annual General Meeting of Shareholders (AGM) for approval where required.
The Supervisory Board has every power the law confers upon a Supervisory Board of a two-tier company subject to the partial regime. The Supervisory Board’s main duties and responsibilities are supervising the policies pursued by the Executive Board, overseeing the general conduct of affairs at the company and its affiliated entities, and advising the Executive Board.
The members of the Supervisory Board per 1 January 2012 are: Kick van der Pol, Ph.D. (Chairman) Annet Aris, MSc Cor van den Bos, MSc Margot Scheltema, MSc
If the nomination is subject to an enhanced right of recommendation as stipulated in Article 17(7) of the Articles of Association, the Supervisory Board notifies the AGM and the Works Council of this enhanced right as well. By virtue of the enhanced right of recommendation, one-third of the members of the Supervisory Board is appointed after having been nominated by the Works Council, unless the Supervisory Board raises objections because it expects the recommended 3.1 Corporate Governance
person to be unsuitable for the job of supervisory director or because the Supervisory Board will not be properly balanced if the Works Council’s candidate is appointed. The enhanced right of recommendation applied to the appointment of one of the members of the Supervisory Board.
The Dutch Corporate Governance Code does not apply to ASR Nederland N.V. because its shares or the depositary receipts for its shares have not been admitted to an official listing on a stock exchange or similar system. Although ASR Nederland N.V. is under no obligation to do so, it endeavours to comply with the Code where possible.
For an overview of how ASR Nederland N.V. applies the Dutch Corporate Governance Code, please visit the corporate website (www.asrnl.com) to view the Corporate Governance Statement.
The remuneration policy is in accordance with the Restrained Remuneration Policy, the Dutch Corporate Governance Code and the Governance Principles for Insurers.
How competitive the total remuneration is in the market is judged via comparison with a relevant reference group. The remuneration policy presumes that the average level of the total remuneration is just under the median of the target group relevant to ASR. In 2011, the remuneration of the Executive Board was well under the median.
‘Limitation of liability of the Dutch Central Bank (DNB) and the Financial Markets Oversight Board (AFM) and Bonus Ban for Companies with State Aid Act’ (Wet aansprakelijkheidsbeperking DNB en AFM en bonusverbod staats- gesteunde ondernemingen). In accordance with this bill, the members of the Executive Board will not receive any variable remuneration as long as the bill applies to ASR. This law applies with a retroactive effect for 2011.
No variable remuneration was conferred on the Executive Board over 2011 in line with the Dutch Limitation of liability of the DNB and AFM and Bonus Ban for Companies with State Aid Act.
• Pension The Executive Board’s pension commitment is a standard career average scheme with a growth rate of 2.25%. This includes a personal contribution of 6% of the pensionable earnings.
We want to create a dialogue between people in the organization. To grow mutual trust and to increase our people’s engagement with the organization. Managers and employees need to ratchet up the debate on topics such as: what do we stand for as a team, what is expected of us, what do we achieve and what don’t we achieve, and why is that? People are different and everyone has their own role in the team. That’s how you work together to realize our core values. Being personal, approachable and accountable and true to who we are means truly communicating with each other.
Core values provide moral compass ASR wants to be known as a company that seeks to fundamentally change the nature of customer relations. The key word here is trust. The idea is that an intensive process of cultural change will provide ASR employees with the tools they need to consciously behave in the spirit of ASR’s core values: personal, approachable and accountable and true to who we are.
In 2011, we put our plans into action. More than 400 managers were trained in this way of thinking, support structures were put into place by recruiting 60 coaches from our own ranks, and a “core values corner” was set up on the Intranet. Teams are now getting involved and we are monitoring managers regarding how they apply the plans in practice. If we achieve a situation where we consciously live by our core values, making things personal, and being approachable and accountable and true to who we are, that’s when we can also use these values in our customer contacts. A process such as this needs to start from within, but in the end we’re doing it for our customers.
‘ A process such as this needs to start from within’
Niels Schotanus is a Talent Manager at ASR. His job is to recruit, develop and retain talented people for the organization. It is his responsibility to ensure the new core values become a reality within the organization, in particular by encouraging conduct among employees that is in keeping with those values.
As an insurance company, our challenge is to win back the trust of our customers. It starts with our own people because they are the first point of contact for customers. We want our core values to be a daily reality for our staff. We want them to be close to customers by thinking like the customer and taking a personal approach. They should be business-like, but also empathize with the customer and show understanding. Employees should be free to be themselves and be held accountable for their work and their conduct. It takes courage to do that.
‘With a visual impairment you need to trust your guide dog with your life.’ Jan Achterberg
Chairman of the Supervisory Board, Member of the Selection, Appointment & Remuneration Committee
Cor van den Bos served on the Executive Board of SNS Reaal N.V. until August 2008; in this position, he was responsible for all insurance operations. He is the Chairman of the Supervisory Board of CED, a claims-processing manager, and of Noordwijkse Woningstichting, a housing corporation, and was Chairman of the Board of Stichting Verzekeringswetenschap, an institute for insurance science up to January 2012. He also sits on the Supervisory Boards of NIBE-SVV, a knowledge institute and publisher for the Dutch banking, insurance and investment industry, and Trust Hoevelaken.
Until 2009, Margot Scheltema served as the CFO of Shell Nederland B.V., prior to which she held several international management positions at Shell since 1986. She is a supervisory director of Triodos Bank, Schiphol Group, TNT Express and Warmtebedrijf Rotterdam (district heating). She is also a member of the Supervisory Boards of the Rijksmuseum and ECN (Energy Centre Netherlands), has a seat on the Financial Reporting Committee of the Netherlands Authority for the Financial Markets (AFM), and serves as an external member of the Audit Committee of ABP, a pension fund.
The financial statements for 2011 were discussed with KPMG, the independent external auditor. The Executive Board submitted the Report of the Executive Board and the financial statements for 2011 to the Supervisory Board. The Supervisory Board went on to approve the financial statements in its meeting of 29 March 2012.
The Supervisory Board submitted the financial statements for adoption to the Annual General Meeting of Shareholders (AGM). The Supervisory Board also proposed to adopt the financial statements and to discharge the members of the Executive Board and the Supervisory Board for their management and supervision respectively. For details on profit appropriation, which was approved by the Supervisory Board, see page 169 of this report.
In response to financial and economic developments, the Executive Board, in the first quarter of the year under review, decided to refine ASR’s strategy in a number of specific areas, including distribution, asset-building and pensions. A sharper focus was placed on target groups as well. The refined strategy was discussed with the Supervisory Board. Prior to the discussion, the supervisory directors attended a number 4.2 Report of the Supervisory Board
The rules of procedure for the Supervisory Board were amended to meet the requirements of the Governance Principles. Furthermore, a decision was taken to formally strengthen the position of Risk Management. As a result, the Audit Committee was remodeled to the Audit & Risk Committee (ARC). Financial and non-financial risk reports are
As part of the Policy Plan, the Audit & Risk Committee talked about the Budget 2012 and the Financial Forecast 20132016. The Investment Plan, which is driven by the requirements of QIS5/Solvency II, was also addressed extensively. In the Committee’s opinion, ASR strengthened its financial basis further in 2011 and responded promptly to the difficult financial and economic climate, particularly in the eurozone. Solvency levels are robust and interest rate exposures, for instance, are well under control. Further cost cuts were implemented. Although the Committee is pleased with those results, it also feels that further steps are required for ASR to maintain its competitive edge going forward. The risk priorities for 2012 were discussed at year-end 2011.
The Committee believes that ASR undertakes relatively many projects involving normal operations in the different divisions. At the same time, new rules and regulations, and various change initiatives to become a more customer- orientated and cost-efficient service provider already make great demands on available capacity. The Committee endorses the need for improving ASR’s operational performance and sets great store by strict discipline in managing and implementing such improvements.
In its first meetings in 2011, the Committee focused mainly on the implementation of the Regulations on Restrained Remuneration Policy. After having solicited the advice of the Selection, Appointment & Remuneration Committee, the Supervisory Board adopted the remuneration policy (including the list of staff to which it applies) based on the Regulations submitted to the ARC; the directors of Risk Management and Integrity & Operational Risk Management have become permanent members of the new ARC. As part of strengthening the position of Risk Management, the risk appetite is discussed by the Supervisory Board and subject to its approval.
The Dutch Central Bank (DNB) reviewed the design and effectiveness of ASR’s governance structure in the year under review. The Supervisory Board discussed the findings of the review with the Executive Board. Following up on the findings, talks are ongoing with DNB about the implications of the findings and the implementation of the recommendations.
Every quarter ASR’s financial performance was the focal point of meetings. The Committee discussed the financial results for the full year based on the annual report, the financial statements and the actuary’s report. The Committee issued a positive report to the Supervisory Board.
The Audit & Risk Committee also addressed other issues. Such as the audit plans for 2012 of both Internal Audit and the independent external auditor, approving them in the process. The Committee also approved the Compliance Plan
The Chair of the Selection, Appointment & Remuneration Committee consistently reported to the Supervisory Board any topics discussed and provided the Supervisory Board with written reports of the Committee’s deliberations, findings and recommendations.
The Audit & Risk Committee, whose members are Cor van den Bos (Chairman) and Margot Scheltema, met six times. Its meetings were attended by the CFO, the independent external auditor, and the directors of Audit, Risk Management, Integrity & Operational Risk Management, and Accounting, Reporting & Control.
The Supervisory Board had ten meetings with the Executive Board during the year under review. Six were regular meetings and four were ad hoc meetings to discuss the specifics of unit-linked policies and the acquisition of Paerel. All meetings but one ad hoc meeting were attended by all members of the Supervisory Board. In April 2011, the Supervisory Board met twice without the Executive Board being present. These meetings covered the variable pay to be awarded to the Executive Board. In addition to formal meetings, two information sessions were organized for the supervisory directors, educating them thoroughly, ahead of the decision-
The Supervisory Board would like to express its appreciation for the efforts undertaken by the members of the Executive Board and all ASR-employees. Again in 2011, they dedicated their expertise and efforts to aid ASR’s continued development into a sustainable and customer-oriented insurer.
The consolidated and company financial statements 2011 of ASR Nederland N.V. as well as part I, II and III of the Annual Report have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and with Part 9, Book 2 of the Netherlands Civil Code.
All amounts quoted in the tables contained in these financial statements are in millions of euros, unless otherwise indicated.
Table of contents Consolidated financial statements 72 Consolidated balance sheet 72 Consolidated income statement 73 Consolidated statement of comprehensive income 74 Consolidated statement of changes in equity 75 Consolidated statement of cash flows 76 1 General information 78 2 Accounting policies 78 3 Risk management 91 4 Capital and liquidity management 109 5 Segment information 111
Other notes 153 37 Related party transactions 153 38 Remuneration of the Executive Board and Supervisory Board 154 40 Contingent liabilities 156
Company financial statements 158 41 Company balance sheet 158 42 Company income statement 158 43 Notes to the company financial statements 159
The current presentation differs from last year’s presentation in some respects. Where applicable, the comparative figures have been restated (see chapter 2.3). The numbers following the line items refer to the relevant chapters in the notes.
Attributable to: - Holders of other equity instruments 45 53 - tax on interest of other equity instruments -11 -14
The current presentation differs from last year’s presentation in some respects. Where applicable, the comparative figures have been restated. The numbers following the line items refer to the relevant chapters in the notes.
Share of other comprehensive income of associates and joint ventures -4 -7
Attributable to: - Holders of other equity instruments 45 53 - Tax on interest of other equity instruments -11 -14
Total comprehensive income attributable to holders of equity instruments -43 606
In the first half of 2010, ASR acquired a non-controlling interest at its fair value of € 72 million. Other amounting to € 506 million (2010: € 202 million) consist primarily of retained earnings. Unrealized gains and losses include shadow accounting adjustments (see chapter 2.29). For more detailed information on the unrealized gains and losses, see chapter 16.2.
Net increase/decrease in amounts due from and to banks 1,719 -979
ASR Nederland N.V., having its registered office in Utrecht, the Netherlands, is a public limited company under Dutch law. Its registered office is located at Archimedeslaan 10, 3584 BA in Utrecht. The Dutch Government has been ASR’s sole shareholder since 3 October 2008. Effective 29 September 2011 the Dutch Government transferred its shares in ASR Nederland N.V. to the Stichting Administratiekantoor Beheer Financiële instellingen NLFI in exchange for certificates in the shares of ASR Nederland N.V.
ASR Nederland N.V. and its group companies (‘ASR’ or ‘the Group’) have a total of 4,631employees (2010: 4,929). The number of internal employees decreased in 2011 by 2% to 4,264 (FTEs) (2010: 4,333 FTEs).
ASR is a leading insurance company in the Netherlands. It sells insurance products under the following labels: ASR, De Amersfoortse, Ardanta, Europeesche Verzekeringen and Ditzo.
2.2 Changes in accounting policies The accounting policies for the financial statements for 2011 are consistent with the principles applied to the financial statements for 2010.
Although new or amended standards become effective on the date specified by IFRS, they may allow companies to adopt them early.
Subsidiaries The consolidated financial statements include the financial statements of ASR Nederland N.V. and its subsidiaries. Subsidiaries are those entities over which ASR has direct or indirect power to govern the financial and operating policies (‘control’). This is the case if more than half of the voting rights may be exercised or if ASR has control in any other manner. Subsidiaries are fully consolidated from the date on which control is acquired by ASR. Subsidiaries are deconsolidated when control ceases to exist.
Joint ventures Joint ventures are accounted for using the equity method of accounting. They are recognized from the date that ASR first obtains joint control until the moment that this control ceases.
2.5 Estimates and assumptions The preparation of the financial statements requires ASR to make estimates and assumptions that have an effect on the reported amounts in the financial statements.
The estimates and assumptions are based on management’s best knowledge of current facts, actions and events. The actual outcomes may ultimately differ from the results reported earlier on the basis of estimates and assumptions. A detailed explanation of the estimates and assumptions is given below and in the relevant notes to the consolidated financial statements.
Translation differences on non-monetary balance sheet items measured at fair value, with fair value changes through profit and loss, are recognized in the income statement. For non-monetary balance sheet items measured at fair value, with fair value changes recognized within equity, exchange rate differences are recorded in equity.
2.8 Segment information At organizational level, ASR’s operations have been divided into operating segments. These segments are: Life, Non-life and Other. The life and non-life segment comprises all the respective life and non-life insurance entities and their subsidiaries. The segment Other comprises the non insurance related operations, such as ASR Bank, ASR Hypotheken, SOS International, Ditzo (distribution channel) and several holding companies, including ASR Nederland N.V.
2.9 Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the balance sheet only when there is a legally enforceable right or contractual right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. The net carrying amounts of financial assets are recognized after deduction of any impairment losses.
ASR as the lessee ASR primarily enters into operating leases for property and operating assets. Payments under such contracts are recognized in the income statement. When an operating lease is terminated before the end of the lease term, any payments due to the lessor in the form of penalties are charged to the income statement in the period in which the agreement is terminated. Any payments received from the lessor in connection with operating lease transactions are deducted from the lease instalments in the period to which they relate.
If a lease agreement transfers substantially all the risks and rewards incidental to ownership to ASR, the agreement is accounted for as a finance lease and the related asset is recognized in the balance sheet. At the inception of the lease term, the asset is recognized at the fair value of the leased asset or, if lower, the present value of the minimum lease instalments due. The present value is determined on the basis of the interest rate implicit in the lease. The leased asset is depreciated over the shorter of the lease term and its expected useful life.
Financial lease obligations are recognized as liabilities at amortized cost based on the effective interest rate method.
In the event of an impairment, ASR first reduces the carrying amount of the goodwill allocated to the cash-generating unit. After that, the carrying amount of the other assets included in the unit is reduced pro rata to the carrying amount of all the assets in the unit.
Value Of Business Acquired (VOBA) The value of business acquired (VOBA) represents the difference between the fair value and the carrying amount of insurance portfolios that have been acquired, either directly from another insurer or through the acquisition of a subsidiary. VOBA is recognized as an intangible asset with a finite useful life and amortized over the term of the current insurance contracts at acquisition date, in conjunction with the corresponding obligations. With regard to VOBA, allowance is made for the outcome of the annual compulsory liability adequacy test for insurance contracts (see chapter 2.29).
If objective evidence of impairment exists, property, plant and equipment are tested for impairment.
2.17 Investment property Investment property is property held to earn rentals or for capital appreciation or both. In some cases, ASR is the owner-occupier of some investment property. If owner-occupied properties cannot be sold separately, they are treated as investment property only if ASR holds an insignificant portion for use in the supply of services or for administrative purposes. Property held for own uses is recognised within property plant and equipment.
ASR generally lets residential property for an indefinite period. Other investment property is let for defined periods under leases that cannot be terminated early. Some contracts contain renewal options. Rentals are accounted for as investment income in the period to which they relate.
The table below shows the maximum life of components: Max period in use: Property under development for future use as investment property is recognized as investment property. Valuation is at cost, including any directly attributable expenditure, less any impairment losses.
Fair value of investment property The fair value of property for own use and investment property is disclosed in the financial statements. Fair value is the most probable price for which the property could be exchanged at reporting date in an arm’s length transaction between knowledgeable, willing parties. It is ASR’s policy that fair value of ASR‘s real estate shall be estimated annually (or in the case of rural, updated annually) by independent valuators. The following methods of determining fair value are used by the independent valuators annually: • Direct Comparables - on an active market for similar properties (like residential homes): current and recent prices, adjusted to reflect differences in lease contract, operating costs, vacancy, nature, condition, location, and other factors that might influence the fair value of the property and any changes in economic conditions since the date of the transactions that occurred at those prices (use comparables); • Indirect Comparables - on an active market for non-similar properties (like offices): current market rents, capitalised with market capitalisation rates1 for comparable properties, and adjusted to reflect differences in lease contracts, operating costs and vacancy; • Income Approach- on an inactive market for non-similar properties: discounted cash flow projections based on reliable estimates of future cash flows.
2.18 Associates and joint ventures Associates Associates are entities over which ASR has significant influence on operating and financial contracts, without having control. Associates are recognized using the equity method of accounting from the date at which ASR acquires significant influence until the date at which such influence ceases. This means that associates are initially recognized at cost, including any goodwill paid. This value is subsequently adjusted to take account of ASR’s share of the associate’s comprehensive income. Comprehensive income is adjusted in accordance with the accounting principles used by ASR.
Joint ventures Joint ventures are contractual arrangements whereby ASR and one or more parties undertake an economic activity that is subject to joint control. Joint control exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control.
These interests are recognized using the equity method of accounting as applied to associates. The interests are recognized in the financial statements from the date on which ASR first obtains joint control until the date that this joint control ceases.
2.19 Investments When ASR becomes party to a financial asset contract, the related assets are classified into one of the following categories: a. financial assets at fair value through profit and loss; b. loans and receivables; c. financial assets available for sale.
Re b Loans and receivables are measured at fair value plus transaction costs at initial recognition. They are subsequently measured at amortized cost based on the effective interest rate method, less impairment losses where deemed necessary (see also chapter 2.21).
Re c Financial assets available for sale are financial assets that are not accounted for as financial assets at fair value through profit and loss, or as loans and receivables. At initial recognition, financial assets available for sale are measured at fair value (including transaction costs). They are subsequently measured at fair value, including any unrealized fair value changes in equity, taking into account any deferred tax liabilities. Financial assets available for sale include equities (ordinary and preference shares), bonds, other fixed-income securities, unit trusts, variable-income securities and interests in investment pools.
Impairment of financial assets At each balance sheet date, ASR assesses whether objective evidence exists of impairment of financial assets. Financial assets at fair value through profit and loss are not subject to impairment testing, because the fair value of these assets reflects any impairment losses.
In the case of equity investments available for sale, a significant or prolonged decline in the fair value of the security below its cost is objective evidence of impairment. There is a significant or prolonged decline if the fair value: • has dropped 25% or more below cost; or • has dropped below cost for an uninterrupted period of twelve months or longer.
Fair value hierarchy ASR uses the following three hierarchical levels to determine the fair value of financial instruments: 1. Fair value on the basis of quoted prices in an active market Level 1 includes financial assets and liabilities whose value is determined by quoted (unadjusted) prices in an active market for identical assets or liabilities. A financial instrument is quoted in an active market if:
• quoted prices are readily and regularly available (from an exchange, dealer, broker, sector organization, third party pricing service, or a regulatory body); and
Assets in this category primarily consist of bonds and equities listed in active markets.
3. Fair value on the basis of (significant) observable market inputs
This category mainly consists of private equity investments. The main non-observable market input is the net asset value.
2.21 Loans and receivables Loans and receivables are measured at amortized cost based on the effective interest rate method, less impairment losses where deemed necessary.
Trade and other receivables Trade and other receivables are receivable arising from ASR’s normal business operations.
Impairment of loans and receivables At each balance sheet date, ASR assesses whether objective evidence of impairment exists of the financial assets classified as loans and receivables.
2.22 Derivatives and hedge accounting ASR uses derivatives primarily for hedging interest rate and exchange rate risks, and for hedging future transactions and the exposure to market risks.
Financial assets or liabilities may contain embedded derivatives. These embedded derivatives are separated from the host contract and recognized separately if the hybrid (combined) contract is not measured at fair value within changes in fair value recognized through profit and loss, and if the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract. The separate embedded derivatives are measured at fair value through profit and loss.
Hedge accounting Hedge accounting means that, on the date that a derivative is agreed, ASR designates the contract as: • a hedge of the fair value of a recognized asset or liability or of a firm commitment (fair value hedge); or • a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge).
2.23 Deferred tax assets Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of: • temporary differences between the carrying amount of an asset or liability and its tax base; and • carry-forward of unused tax losses.
This applies to the extent that it is probable that sufficient taxable profits will be available against which the temporary differences and the deductions can be utilized. Deferred tax assets are measured at the tax rates that are expected to apply to the period when the asset is realized. Deferred tax assets are assessed at the balance sheet date. If it is probable that the receivables can no longer be recovered, its recoverable amount is reduced.
At each reporting date, ASR assesses whether objective evidence of impairment exists. If a reinsurance asset is impaired, its carrying amount is reduced to its recoverable amount.
Reserve for unrealized gains and losses This reserve consists of: • unrealized gains and losses from financial assets available for sale net of tax and taking account of adjustments due to shadow accounting (see chapter 2.29); • ASR’s share of unrealized gains and losses of associates and joint ventures (see chapter 2.18); • unrealized gains and losses on the effective portion of cash flow hedges net of tax (see chapter 2.22); • reserve for discretionary participation features (see chapter 2.29).
2.28 Subordinated debts At initial recognition, subordinated debts are stated at fair value net of transaction costs incurred. Subsequent measurement is at amortized cost using the effective interest rate method.
Additional provisions are generally recognized for realized gains or losses on financial assets allocated to: • insurance contracts with participation features; • non-participating insurance contracts if and to the extent that the current interest rate is lower than the interest rate that was used in the pricing principles at inception of the insurance contract.
These financial assets include fixed-income financial assets available for sale, specific financial assets designated at fair value through profit and loss, and specific derivatives designated as held for trading (swaptions and interest rate swaps).
Loss obligations in respect of occupational disability are discounted. The recognized provisions are sufficient to cover the cost of claims and claims handling fees. ASR discounts obligations for losses only for claims with determinable and fixed payment terms.
Obligations to insurers where ASR qualifies as the reinsurer, and with no significant insurance risk being transferred to ASR, are recognized as debts to policyholders.
In unit-linked contracts, the best estimate equals the fund value of the contract less the net present value of future margins on mortality and expense. Where unit-linked contracts with
Liability Adequacy Test non-life The LAT is performed at each reporting date to asses the adequacy of insurance liabilities for non life. Where the P&C and P&C like business is concerned, the LAT is performed using statistical analyses. Any identified losses are used as a basis for estimating future claims arising from an insurance contract from the portfolio on the balance sheet date. This is the best estimate. An appropriate risk margin is added, which is a function of the claims volatility. The total of best estimate and risk margin is compared to the technical provision recorded in the balance sheet.
The LAT for the disability portfolio is comparable to the LAT for the life portfolio.
The total of best estimate and risk margin for non life as a whole, is compared to the technical provision recorded in the balance sheet. If there is a deficiency, the insurance liabilities are increased to adequate levels.
Liabilities arising from insurance contracts for the account and risk of policyholders mainly concern unit-linked contracts. An investment unit is a share in an investment fund that ASR acquires on behalf of the policyholders using net premiums paid by the policyholders. The gain upon maturity of the contract is equal to the current value of the investment units of that fund. The current value of an investment unit (unit value) reflects the fair value of the financial assets contained within
Liabilities arising from insurance contracts on behalf of policyholders also include obligations in connection with savings pools and group pension contracts, with policyholders bearing the investment risk. Liabilities also include a provision for compensating the costs of these contracts as agreed in 2008 with consumer organizations and additional compensation related to the unit-linked insurance contracts. This provision equals the present value (based on an interest rate of 4%) of the agreed amounts of compensation (upon maturity), with expenses incurred in prior periods fully provided for. In addition, estimates of additional expenses, such as overheads for administering the compensation scheme, compensation for hardship and surrender, are also taken into account.
Pension obligations ASR operates a number of defined benefit plans for own staff. These are schemes under which staff are awarded pension benefits upon retirement, usually dependent on one or more factors, such as years of service and compensation. The defined benefit obligation is calculated annually by internal actuaries.
Past-service costs are recognized directly in the income statement, unless the changes to the post-employment benefit plan are conditional on the employees remaining in service for a specified period of time (the vesting period).
Other long-term employee benefits Plans that offer benefits for long-service leave, but do not qualify as a post-employment benefit plan, such as jubilee benefits, are measured at present value using the projected unit credit method.
Other post-retirements obligations ASR offers post-employment benefit plans, such an arrangement for mortgage loans at favourable interest rates. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology that is similar to that for defined benefit plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to income over the expected remaining working lives of the related employees.
2.32 Provisions Provisions are obligations containing uncertainties about the amount and timing of the future expenditure required in settlement. ASR recognizes provisions when it has a present legal or constructive obligation as a result of past events, if it is more likely than not that an outflow of resources will be required to settle the obligation, and if the obligation can be estimated reliably.
2.34 Deferred tax liabilities Deferred tax liabilities are recognized on the basis of temporary differences between the carrying amount of an asset and a liability and its tax base. Deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled.
2.35 Due to customers At initial recognition, amounts due to customers are stated at fair value, net of transaction costs incurred. Subsequent valuation is at amortized cost using the effective interest rate method.
Non-life insurance premiums Non-life insurance premiums are accounted for in the period in which they are earned. As indicated in chapter 2.29, invoiced but not yet earned premiums are included under liabilities arising from insurance contracts.
2.38 Investment income Investment income is primarily comprised of interest income, dividends on equities and rentals from investment property.
Interest income Interest income for all interest-bearing instruments is recognized using the effective interest rate method, including all transaction costs incurred and share premium/discount. When a receivable is impaired, its carrying amount is reduced to the recoverable amount, i.e. estimated future cash flows discounted at the original effective interest rate of the instrument.
With respect to financial assets available for sale, realized gains or losses are comprised of : • the proceeds from the sale or disposal of an asset or liability less the amortized cost of the asset or liability sold, • impairment losses previously recognized and • hedge accounting adjustments.
2.42 Fee and commission income Fee and commission income relates mainly to reinsurance, asset management and other services. These are generally recognized as income in the period in which the services are performed.
• whose existence depends on the future occurrence of one or more uncertain events not wholly within ASR’s control.
The essence of ASR is to take over the risks of from our policyholders. ASR’s objective is to achieve customer satisfaction, but also to strike the right balance between risk and return. Risk management helps to achieve these objectives.
Strategic risk • In 2011, ASR executed a Control Risk Self-Assessment (CRSA).
The required capital is estimated at group and business unit level.
3.2 Enterprise Risk Management framework ERM enables ASR to understand the interrelationships between risks and the company’s strategic targets.
The ASR ERM framework is based on the ERM model of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The framework comprises the following elements of risk management: The types of risks ASR is exposed to are grouped into five categories: market risk, counterparty default risk, insurance risk, strategic risk and operational risk. ASR has defined its risk appetite and monitors how the risk profile keeps in step. The risk environment requires continual monitoring and assessment in an integrated manner in order to understand and manage the complex risk interactions across the organization.
3.1 Key risk developments in 2011 The focus of Risk Management in 2011 was to further improve the control environment within ASR and to adopt value management. This led to the following developments in risk management within ASR: General • The risk appetite was defined. The risk appetite is used for risk steering in the risk committee structure. Strategic decisions are being made taking into account the risk appetite.
• ASR’s Economic Capital model was further developed in 2011; it forms an integral and essential part of the steering mechanism for value management.
Risk governance • The risk committees have shown their value during the euro crisis. The meeting frequency of the risk committees, i.e. the Financial Risk Committee (FRC) and Capital, Liquidity and Funding Committee (CKLFC), increases when triggers are hit or threatened to be hit.
• Following the plan to scale down the investment portfolio to reduce risk on a step-by-step basis. ASR decided to further lower exposures in Portugal, Ireland, Italy, Greece, Spain, and France and in financial institutions to an acceptable risk level.
Counterparty default risk • The reduction in exposures in Portugal, Ireland, Italy,
Insurance risk – Non-Life • Important yardsticks for the profitability of the non-life insurance business are the loss ratio and the combined ratio. A highly competitive market put pressure on premiums and hence on the combined ratio. In this competitive market, ASR’s combined ratio developed positively in 2011.
ASR Enterprise Risk Management Framework objective The primary objective of the ERM framework is to protect ASR’s shareholder and other stakeholders from events that hinder the sustainable achievement of performance targets. Furthermore, the objective is to support the group in achieving the right balance between risk and return.
Strategy ASR’s risk strategy supports the company’s overall strategy. The primary objective of risk management is to support ASR in achieving the required balance between risk and return, while remaining financially solid. ASR’s risk preferences and limits are derived from the risk strategy. The strategy also describes solvency targets. ASR actively manages risks so that they stay within the defined limits.
3.3.1 Risk management organization In 2011, the structure of the risk management function is further optimized. The Group Risk Management department is responsible for ERM. Group Integrity is responsible for compliance risks and investigation. In addition, risk management duties have been embedded in the business lines. In general, risks are now managed by the business lines on the basis of group policies and guidelines. When required or where efficiency gains may be realized, risk management is executed at group level. Group Risk Management defines risk policies for ASR, securing a consistent approach to the management of risks across the organization.
These risk policies define ASR’s risk preferences and set out risk management standards for the group’s operations. Risk Strategy & Policy develops guidelines for the further implementation of ASR’s ERM approach. This department works in close dialogue with the other risk departments.
Risk Management is responsible for ERM. The department consists of the following sub-departments: • Risk Strategy & Policy • Insurance Risk & Value Management (IR&VM) • Asset & Liability Management (ALM) • Business Process Support Risk (BPS Risk)
Business Process Support Risk BPS Risk is the Information management department within Risk Management and the link between Risk Management and ICT. The department arranges and administrates processes and facilitates Risk Management by providing access to the systems and high quality data. BPS Risk also guides Risk Management by the development of new systems and processes or changes in existing systems.
Group Integrity Group Integrity is responsible for managing compliance risks. Group Integrity has two sub-departments: • Compliance • Investigation
Compliance Its main objective is to support the Executive Board in managing compliance risks for ASR and its subsidiaries. Through its compliance function, ASR aims to stimulate integrity among the members of the Executive Board, its managers and its employees. This helps to maintain ASR’s good reputation and reliability.
Compliance is responsible for preparing policies and advising on policy implementation and compliance with laws, regulations and ethical rules. Compliance is also responsible for assessing the adequacy and operating effectiveness of key controls within the business lines and ensuring compliance with laws, regulations and ethical rules through risk-based compliance monitoring.
3.3.2 Risk committee structure The risk committees manage the risks and returns that impact the achievement of ASR’s strategic objectives. ASR uses the risk committees to consistently monitor whether the risk profile continues to be in step with the risk preferences. When triggers are hit due, for instance, to an increase in stock market volatility, a downgrade of corporates and governments, or low interest rates, ASR increases the meeting frequency of the risk committees.
The ASR Risk Committee receives information from the Financial Risk Committee and the Non-Financial Risk Committee. These committees have the mandates to manage and control ASR’s risk profile in line with the risk preferences and limits.
The Chairman of the FRC is ASR’s CFO and representatives of various key financial departments are members of the Committee, including ASR’s COO (NFRC liaison). The FRC is supported by the Capital, Liquidity & Funding Committee (CLFC).
Capital, Liquidity & Funding Committee The CLFC prepares and assesses the technical analysis of capital, liquidity and funding positions, rating policy and rating model reporting, and treasury activities. The Chairman of the CLFC is the Director of Financial Markets; other members of this sub-committee are key representatives of various financial and risk departments.
Business Risk Committee The business lines manage and control their risk profile via the Business Risk Committee (BRC). The BRC monitors that the risk profile remains within the risk preferences defined by the business line. The BRC reports to the FRC and the NFRC. The Chairman of the BRC is the director of the business line and the BRC has key officers as its members.
3.3.3 Central Investment Committee In addition to the risk committee structure, the Central Investment Committee (CIC) monitors tactical decisions and the execution of ASR’s investment policy. It takes major investment decisions within the boundaries of the strategic asset allocation as agreed in the FRC. The CIC bears responsibility in particular for investment decisions exceeding the limits set for the investment department. The CIC is chaired by an Executive Board member, not being the CFO, and reports directly to the Executive Board. This is how the CIC’s independence of strategic decision-making and the CFO is guaranteed.
3.4 Risk management classification As mentioned above, ASR develops policies for each of the principal risks that it is exposed to. These policies, which are updated annually, describe the risk definition, the risk limits and the risk mitigation techniques. ASR recognizes five main risk categories1, which are described below. The FIRM risks defined by DNB are used as the basis of ASR’s risk classification.
Market risk The risk of changes in values caused by market prices or volatility of market prices differing from their expected values. AsR distinguishes the following types of market risk: - interest rate risk - equity risk; - property risk; - currency risk; - spread risk; - concentration risk.
3.5 Market risk Market risk arises from changes in the level or the volatility of market prices. Exposure to market risk is measured by the impact of movements in financial variables such as equity prices, interest rates and property prices. ASR distinguishes several types of market risk, which are discussed in this section: • interest rate risk; • equity risk; • property risk; • currency risk; • spread risk; • concentration risk.
Market risk reports are submitted to the FRC on at least a monthly basis. Key reports on market risk are the strategic asset mix report, the economic capital report, the interest rate risk report and the report on sensitivity of regulatory solvency to major market risks. A summary of sensitivities to market risks of the regulatory solvency, total equity and profit for the year are presented in the tables below.
Sensitivities of regulatory solvency ratio to market risks are as follows: Compared to 2010, the sensitivity to equities decreased due to a drop in exposure to equities. The sensitivity to interest decreased as a result of to the purchase of long-term swaps and swaptions.
Sensitivities of total equity and profit for the year to market risk are as follows: The most important sensitivities of the profit of the year are the sensitivities to equities -20% and property -10%. Both sensitivities are related to impairments. The sensitivity of the profit of the year to equities +20% is negative to a decrease in the put options. The impact of the sensitivity of total equity to interest +1% is relatively high due to a value decrease in fixed income investments, swaps and swaptions, while this is only partially shadow accounted. The impact of the sensitivity of total equity to interest -1% is low due to the opposite effect.
The duration of assets increased due to the purchase of long-term swaps and swaptions. Moreover, as a result of the drop in the yield curve, the duration of both assets and liabilities increased. The duration-gap decreased from 4.0 to 3.3.
The fair value of equities and similar investments was € 1,231 million at year-end 2011 (2010: € 2,142 million). The decrease in exposure to equities is due to disposals and unfavourable developments in equity prices.
The equities are diversified across the Netherlands (including participating interests) and other European countries. A limited part of the portfolio consists of investments in the Pacific private equity and hedge funds.
and the tax exemption of the participating interests and lower volatility of hedge funds are taken into account when calculating sensitivities. Compared to 2010, sensitivities decreased due to a drop in exposure to equities.
Sensitivity of regulatory solvency to changes in equity prices: 3.5.3 Property risk The property risk is dependent on the total exposure to property. In order to gain an adequate understanding of the actual property risk, ASR has made a number of adjustments for risk purposes to the IFRS classification. In addition, revaluations to the carrying amount have been included (€ 1,151 million). The fair value of property and property-related assets was € 3,169 million at year-end 2011 (2010: € 3,767 million), including property for own use. During 2011, there was a de-risking policy as a consequence of the revised strategic asset mix. The exposure dropped due to the resulting disposal of property. The property is diversified over the rural, residential, office and retail sectors in the Netherlands. The allocation to offices limited (10%) and 3% concerns offices for own use.
The sensitivity of regulatory solvency to changes in property value is monitored on a monthly basis. The sensitivity decreased due to a drop in exposure to property. Sensitivity of regulatory solvency to changes in property prices: Because of a lower volatility, rural property is shocked with -7.5%.
Other 13% Change in property priCes 2011 in % 2010 in %
Assets in scope of spread risk are by definition not in scope of counterparty default risk (see chapter 3.6).
The following tables provide a detailed breakdown of fixed-income exposure by rating class, sector, country of risk and level of subordination for the financial sector. The table includes all bonds, fixed income funds and loans which have spread risk according to our risk models. The share of the investment-grade assets in the portfolio remained constant compared to year-end 2010. Changes in rating distribution within the investment-grade portfolio are attributable to both market factors and the implementation of the investment policy. Loans to intermediaries are included in the non-rated category.
The weight of financial institutions in the bond portfolios dropped due to further reductions in our exposure to this sector as well as lower market values. Investments in government bonds increased considerably, as most of the cash flows throughout the year were used to buy government bonds with a high rating.
The non-rated category corporates includes loans issued to intermediaries. ASR applies stringent application and approval procedures to these loans. Following an intermediary’s application, its credit rating is determined based on an internal risk-rating model. The loan application is then submitted for approval to the Credit Committee.
At year-end 2011, the outstanding amount of loans to intermediaries was € 126 million (2010: € 152 million); accumulated impairment losses amounted to € 31 million (2010: € 35 million). The loans are generally secured by collateralizing an insurance portfolio. In total, 18% (2010: 14%) of the loans were in arrears.
2011 Government Financial institutions corporates structured instruments exposure percentaGe exposure percentaGe exposure percentaGe exposure percentaGe 2010 Government Financial institutions corporates structured instruments exposure percentaGe exposure percentaGe exposure percentaGe exposure percentaGe amount percentage amount percentage
3.6.3 Reinsurance When entering into reinsurance contracts for fire and catastrophe, ASR requires the counterparty to have at least an ‘A-’ rating. With respect to long-tail business and other sectors, an ‘A’ rating applies as a minimum.
The figure below hereafter shows the exposure to reinsurers per rating. The total exposure on reinsurers at year-end 2011 was € 462 million (2010: € 427 million).
An accumulated impairment loss for receivables of € 36 million was recognized in 2011 (2010: € 37 million).
3.6.5 Cash The current account amounted to € 1,773 million in 2011 (2010: € 511 million). The rating of all counterparties is single A.
In addition, an amount of € 800 million is on secured deposits maturing within three months.
3.5.6 Concentration risk In order to avoid concentrations in a single obligor, ASR has set limits on maximum exposure. The limits apply to the total investment portfolio. The CLFC monitors concentration risk on a quarterly basis. Per 2011 all exposures are within the limits.
Generally, ASR’s mortgage portfolio is secured by collateralizing the linked life insurance contracts. ASR does generally not grant interest-only mortgages.
3.6.2 Derivatives The credit risk attached to the market value of derivative contracts between ASR and a counterparty is normally hedged using a Credit Support Annex (CSA), one of the four parts of an International Swaps and Derivatives Association (ISDA) contract. In the CSA’s is defined that cash collateral is transferred between the parties to mitigate credit risk.
The risk exposure is mitigated by diversification across a comprehensive range of insurance products. Insurance risk is divided into life and non-life risk. The life portfolio is a well-diversified portfolio consisting of products with either mortality risk or longevity risk. The non-life portfolio is represented across the property and casualty, occupational disability and healthcare sectors. The overall insurance portfolio has a moderate risk profile.
The variability of risk is further restricted by careful selection and acceptance criteria, as well as underwriting guidelines and reinsurance arrangements. The risks are periodically assessed for each of the insurance segments. If and where required, actions are initiated to adjust the risk profile in line with guidelines agreed at group level.
Inaccuracies in the techniques applied, assumptions made and data used for the statistical analyses are possible. This may expose ASR to the risk that claims may exceed the available insurance provisions formed to meet the obligations under the insurance contracts. ASR holds strong solvency buffer to cover this risk and to ensure the solidity of ASR. The solvency-position of ASR is determined en monitored continuously in order to asses if ASR meets the regulator requirements.
Life insurance risk A life insurance product provides an entitlement to a benefit at the time of death of the insured and/or a benefit at a predetermined moment/interval if the insured is alive at that time. The uncertainties related to a life insurance contract have to do with the moment of death of the insured (mortality, longevity and catastrophe risk), the lapse rate (the possibility that a contract lapses), and the future development of expenses associated with the policy. A specific feature of life insurance contracts is that they usually last for many years. This feature increases the uncertainties with respect to life contracts. The risk that investment income is not sufficient is regarded as market risk (see chapter 3.5).
• Longevity risk: the risk of a structural increase in the insured’s life expectancy that leads to an increase in expectations of future annuity and pensions benefits.
• Lapse risk: the risk of losses due to policyholders exercising their rights, if any, to surrender their contracts.
• Expense risk: the risk of losses due to a change in the level, development or volatility of company expenses.
Pricing is based on profit capacity calculations. The necessary price to cover the risks is calculated. The quantification of risks is based on best estimate assumptions of mortality rates, surrenders, expenses and interest rates.
The mortality risk is limited due to the policy for periodically updating mortality tables. Reinsurance arrangements have been put in place to cover the volatility risk of large losses that might arise from single events that have been insured for a large amount. Most of ASR’s mortality risk is offset by the opposite risk (i.e. longevity risk) in other parts of the life insurance portfolio.
Longevity risk For contracts that guarantee benefits during the lifetime of a policyholder, longevity risk is mainly a trend risk. The adequacy of insurance liabilities is measured using information gathered from the most recent published mortality table of the Dutch Actuarial Association published in 2010. This recent table contains the latest available data on mortality trends for the Dutch population.
After deduction of capitalized acquisition costs if applicable, the provision for each life insurance contract at least equals the surrender value or the paid-up value of the contract. As a result, the financial statements do not recognize any direct loss from lapses.
Although a lapse does not lead to a direct loss in the income statement, due to the surrender value requirement underlying the provision, a lapse might lead to a loss of future profits. These effects of lapse risk are monitored in the current Solvency II-based risk frameworks, as are other life risks.
Expense risk Product features ensure that there is no risk on commission fees. Expense risk is therefore restricted to administrative expenses. Projections are made of future administrative expenses and the expected future income from contracts to cover expenses. This prospective analysis of administrative expenses are the base for managing and controlling expense risk.
Reinsurance ASR enters into reinsurance contracts to minimize insurance risks. Reinsurance may be in place for a separate contract or for all or part of the portfolio.
To limit risk concentration, reinsurance contracts are placed with different reinsurance companies. ASR has the following retentions for life insurance: Insurance liabilities
Accident & Health: • Disability: disability coverage in the portfolio includes both individual coverage for self-employed persons and (semi-)group coverage for employees. The latter group also qualifies for occupational disability cover (WIA).
• Health insurance: health insurance contracts cover medical expenses incurred by physicians and hospitals, and other medical expenses. Basic coverage (“Basisverzekering”) is mandatory for all residents of the Netherlands and offers limited coverage as stipulated by the Dutch government. Additional coverage (“Aanvullende verzekering”) is sold for a higher level of medical care.
Combined ratio In 2011, the combined ratio decreased to 98.9% (2010: 100.3%). The lower combined ratio was driven by a drop in claims ratio to 70.9% (2010: 73.0%) and lower costs.
Discretionary profit-sharing 1,858 - 1,858 2011 IndIvIdual group savIng fund Insurance
Due to a decrease in claims and the harmonization of provisions arising from further integration efforts within ASR, the claims ratio improved by 2.1%-points. The commissions ratio increased primary due to a commission rebate in 2010 and other related expenses decreased in line with the continued cost saving. In total this lead to an improvement in the combined ratio by 1.4%-points.
Managing non-life insurance risk Insurance risk is the risk that future insurance claims and benefits cannot be covered by premium and/or investment income, or that insurance liabilities and results are threatened because the assumptions, used in the development and premium-setting of a product, are not realistic. ASR manages non-life insurance risk by monitoring claims frequency, the size of claims, inflation, handling time, benefit and claims handling costs, and biometrical risks (invalidity, convalescence, illness, death). In addition, concentration risk also qualifies as an insurance risk.
Occupational morbidity risk Morbidity risk is the risk associated with the uncertainty of claims as a result of higher than expected disability rates and levels in portfolios containing occupational morbidity, medical expenses and accident insurance products. An additional uncertainty is that recovery or mortality rates might be lower than expected.
Concentration risk ASR’s risk exposure on its non-life portfolio is geographically almost entirely spread over the Netherlands. Concentration of insurance risks is particularly prevalent in the fire risk portfolio (i.e. home and content, with storm risk forming the most important factor). Storm risk is managed by means of suitable reinsurance (see also ‘Reinsurance’).
Provision for unearned premium income Generally, the provision for unearned premium income is calculated based on the premium for own account, proportionate to the unexpired portion of the premium payments before deduction of the corresponding provision. A separate provision is formed for insurance contracts with increasing risk over the duration of the contract where premiums not related to the age of the policyholder are concerned. Changes in the provision for unearned premiums are recognized through profit and loss, which means that the income is recognized during the same risk period. Harmonization of provisions arising from further integration efforts within ASR were realized in 2011.
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.
The results of ASR’s basic health insurance (“Basisverzekering”) include an estimate related to the expected settlement because of equalization (“vereveningsmethodiek”). The estimate is made by internal actuaries per years based on the latest updated health information for the Netherlands. ASR monitors at the end of the first quarter, if the right assumptions are used. The final settlement is recognized three years after the end of the financial year.
Reinsurance When deemed necessary, ASR’s insurance businesses agree on reinsurance contracts for non-life portfolios to minimize insurance risks. Reinsurance can be taken out for each separate contract (per risk) or for the entire portfolio (per event). The latter applies if the risk with respect to individual policyholders is actually within the underwriting limits, with an unacceptable risk of a possible accumulation of claims (disaster risks) due to human actions or a natural disaster. In the Netherlands, extreme weather conditions form the largest disaster risk. This applies to storms in particular.
3.8 Strategic and operational risk ASR defines strategic risk as the risk that ASR will not achieve its targets because of failure to respond adequately to market developments. Due to the current pressure on the Dutch insurance market, it is extremely important to identify strategic issues and to take the right actions.
Operational risk is the risk of losses resulting from inadequate or failed internal processes, person and systems, or from external events (including legal risk). The main areas where operational risk (related to DNB’s FIRM risks) is incurred are IT, outsourcing, integrity, legal issues and operations.
The CRSA/MCS process uncovers ASR’s principal risk priorities for 2012. Any progress on the mitigating actions is reported to, and monitored by, ASR RC.
ProPerTy & casualTy accidenT & healTh ToTal unearned premium provison 309 244 553
4 Capital and liquidity management 4.1 Capital management 4.1.1 Capital management objectives ASR is committed to maintaining a strong capital position so as to be a robust insurer for its policyholders and other shareholders. The objective is to maintain a solvency level that is well above the regulator’s minimum requirement (Solvency I). Stress tests are performed for principal risks. An additional objective is to achieve a combination of a capital position and risk profile that is at least in line with an ‘A’ rating.
3.10 Solvency II Solvency II is the regulatory framework for European insurance companies, which is expected to be implemented in 2014. In 2011, the deadline of expected implementation was changed from 1 January 2013 to 1 January 2014. Solvency II sets solvency requirements that are better aligned to the risks incurred by insurers and will form an integral part of the operations management of insurance companies. Solvency II will have great impact on the insurance market. In accordance with Solvency II, assets and liabilities are measured on the basis of fair market value.
ASR has set up a group-wide Solvency II programme. In 2009, a gap analysis was performed under this programme. ASR started resolving any identified gaps in 2010. This process continued in 2011. The progress made in resolving these gaps helps ASR to become Solvency II-compliant, which is monitored in the Solvency II programme.
In 2010, there was a strong focus on Pillar I activities. The focus in 2011 was primarily on Pillar II. The quality, integrity and reliability of data were further improved in 2011. The ORSA process was is executed for the second time within ASR and integration with the Multi-Year Budget was improved. In addition, the effectiveness of the risk governance structure was stepped up. ASR’s risk management function has been designed to comply with the Solvency II requirements. This means that ASR uses an integrated approach to identify, measure, monitor, report and control all the risks it is exposed to on an individual and aggregate level, including any interdependencies (e.g. risk dashboard).
The table below shows a reconciliation between equity, regulatory solvency and buffer capital.
4.2 Rating Standard & Poor’s confirmed the ‘A’ rating with a negative outlook of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. on 16 November 2011.
aSR levensverzekering n.V. FSR a negative 20 May 2009 long term idR BBB+ Stable 16 december 2010 aSR levensverzekering n.V. ccR a negative 20 May 2009 iFS a- Stable 16 december 2010 aSR Schadeverzekering n.V. FSR a negative 20 May 2009 long term idR BBB+ Stable 16 december 2010 aSR Schadeverzekering n.V. ccR a negative 20 May 2009 iFS a- Stable 16 december 2010 aSR nederland n.V. long term idR BBB Stable 16 december 2010
• ASR Vastgoed Ontwikkeling N.V.; • Ditzo B.V.; • B.V. Nederlandse Hulpverleningsorganisatie-SOS
Segment information has been prepared in accordance with the accounting principles used for the preparation of ASR’s consolidated financial statements (as described in chapter 2).
The operating profits of the segments are assessed on the basis of the segments’ income statements.
4.4 Liquidity management ASR needs to be able to meet its obligations towards policyholders and other creditors at all times. Unexpected cash outflows could occur as result of a lapse in the insurance portfolio, withdrawals of savings, or payments related to the CSA of derivatives. Unexpected cash outflows can be covered by cash and cash equivalents (€ 2,573 million), liquid government bonds (€ 9,008 million), and other bonds and shares.
Deferred acquisition costs 360 87 - - 447 Property, plant and equipment 70 3 59 - 132 investments on behalf of policyholders 9,491 - - - 9,491 equity attributable to holders of equity instruments 2,266 837 -657 - 2,446
Retained gains or losses on the sale of investments relate to the realized total revaluation of investment property and financial assets available for sale, to the extent that these cannot be allocated to the different life and non-life products. These gains or losses are recorded in profit or loss.
Change in provision for unearned premiums - -18 - - -18 fair value gains and losses -16 -4 -8 - -28 result on investments on behalf of policyholders 775 - - - 775
Net insurance claims and benefits -3,681 -2,762 change in liabilities arising from insurance contracts 1,415 -986 fee and commission expense -157 -126
Technical result (underwriting) -277 -1,368 allocated gain (loss) on investments - to technical result 360 1,764 allocated gains or losses - to technical result 118 58 allocated other income and expense – to technical result -51 43
Gross premiums written 2,353 2,328 change in provision for unearned premiums 74 -18 Gross insurance premiums 2,427 2,310
Technical result (underwriting) 268 245 allocated gain (loss) on investments - to technical result 100 135 allocated gains or losses - to technical result - allocated other income and expense – to technical result -7 -7 operating expenses -251 -260
• Commission ratio: net commissions charged to the year, expressed as a percentage of net earned premiums.
expenses technical result fire and other property damage 336 329 -203 -102 -42 -9
expenses technical result fire and other property damage 329 311 -199 -94 -40 -15
Intangible assets can be broken down as follows: The amortization periods for the intangible assets are specified in chapter 2.14. Amortization charges related to VOBA are included in net claims and benefits; software amortization is included in operating expenses.
As explained in chapter 2.14, goodwill is tested for impairment at least once a year.
Amortization schedule for Value of Business Acquired (VOBA) VOBA mainly relates to the acquisition of Stad Rotterdam. At year-end 2011, the average remaining amortization period of VOBA was 15 years.
Depreciation of property, plant and equipment is recorded in operating expenses. Impairments amounting to € 16 million have been recognized as a result of the decommissioning of assets following the transfer of building to investment property and the renovation of buildings for own use.
Cost price as at 1 January 2011 224 147 371 transferred to investment property -46 2 -44
In 2011, ASR transferred investment property to the ASR Dutch Prime Retail Fund and in December 2011 the first tranche was disposed of to institutional investors. As a result the investment property amounting to € 532 million which is held buy the Fund is governed under the fund agreement.
Deltafort Beleggingen I B.V. - joint venture 139 144 365 Holding B.V. - associate (previously Arboned Holding B.V.) 24 24
Share of profit/(loss) 7 - 1 8 2011 INTEREST TOTAL ASSETS TOTAL LIABILITIES TOTAL INCOME PROFIT/(LOSS)
The abbreviated financial statement information disclosed in the tables below is based on the most recent financial information available from the associates and joint ventures.
In 2011, loans to associates and joint ventures amounted to € 61 million (2010: € 83 million). These loans are classified as loans and receivables.
At fair value through profit and loss (chapter 11.2) 8,581 9,491
Revaluation through profit and loss 194 29 revaluation recognized in equity -85 699
Impairment of investments available for sale The table below shows a breakdown of impairments a breakdown of impairments of investments available for sale: The increase in translation differences and other adjustments relates mainly to exchange rate differences on investments available for sale. Impairments recognized on government bonds have been based on the existing impairment policy.
Carrying amount at 31 December 87 8,581 8,668 11.2 Investments at fair value through profit and loss Investments at fair value through profit and loss can be broken down as follows: A further breakdown of the investments at fair value through profit and loss and investments on behalf of policyholders is included in the fair value hierarchy tables (see chapters 11.5. and 11.6 respectively). All investments at fair value through profit and loss are designated as such by ASR upon initial recognition.
11.3 Loans and receivables Loans and receivables can be broken down as follows: Included in Due from banks is an amount of € 1,961 million (2010: € 1,908 million) related to savings-linked mortgage loans.
Impairment of loans and receivables The table below shows a breakdown of impairments of loans and receivables: The increase in impairments on loans and receivables in 2011 related mainly to mortgage loans. The fair value of the loans and receivables as at 31 December 2011 was € 7,592 million (2010: € 6,604 million). The fair value of the loans and receivables is based on the discounted cash flow method. It is obtained by calculating the present value based on expected future cash flows and assuming an interest
At year-end 2011, the derivatives can be broken down as follows: 31 December 2011 Positive fair value Negative fair value NotioNal amouNt
Included in the cash and cash equivalents is € 1,716 million (2010 € 0 million) related to the cash collateral received on derivative instruments. This debt to repay the cash collateral is included in the amount due to banks (chapter 23).
11.5 Fair value hierarchy – Investments and derivatives The breakdown of derivatives and financial assets at fair value in accordance with the level of fair value hierarchy, as explained in chapter 2.19, is as follows: Fa ir v a lu e b a se D
The breakdown of the Investments on behalf of policyholders in accordance with the level of fair value hierarchy, as explained in chapter 2.19, is as follows: Fa ir v a lu e b a se D
Investments on behalf of policyholders, at fair value through profit and loss
Changes reCognized in oCi other 31 deC. 2011 financial assets held for trading -57 -306 - - -363
Changes reCognized in oCi other 31 deC. 2010 financial assets held for trading -8 -49 - - -57
Movements in insurance claims and benefits recovered from reinsurers classified as insurance liabilities can be broken down as follows: At year-end 2011, reinsurance contracts can be broken down as follows: Changes in provision for unearned premiums -6 -6
Authorized capital: - Ordinary shares; 1,000,000 at a par value of eUR 500 500 500
Subscribed and paid-up capital: - Ordinary shares; 200,000 at a par value of EUR 500 100 100 14 Other assets
The table below shows the composition of other assets: Interest expenses incurred related to property developments amounting to € 5 million was capitalized in 2011 (2010: € 6 million) and included in property developments.
All cash and cash equivalents are freely available to the Group.
Included in the amount due from banks is € 1,716 million (2010 € 451 million) related to the cash collateral received on derivative instruments and securities lending. This debt to repay the cash collateral is included in the amount due to banks (chapter 23).
16 Equity 16.1 Share capital ASR’s share capital can be broken down as follows: The Dutch Government has been ASR’s sole shareholder since 3 October 2008. Effective 29 September 2011 the Dutch Government transferred its shares in ASR Nederland N.V. to the Stichting Administratiekantoor Beheer Financiële instellingen NLFI in exchange for certificates in the shares of ASR Nederland N.V. There were no other changes in share capital during the financial year.
16.2 Unrealized gains and losses recorded in equity * Includes shadow accounting on segregated investment pools
ASR enters into life insurance contracts that, in addition to offering a guaranteed element, also give policyholders a right to additional benefits (see chapter 2.29). Expected claims for additional benefits under these insurance contracts with discretionary participation features (DPF) are included in the DPF reserve. This reserve is recognized as a component of the unrealized gains and losses recorded in equity.
16.3 Other equity instruments ASR has issued hybrid Tier 1 instruments that are classified as equity instruments. These issues were part of a financial restructuring in June 2009.
The Tier 1 instruments bear discretionary interest and have no maturity date, but can be redeemed at the option of ASR on any coupon due date with effect from: If the hybrid Tier 1 instrument at 10% fixed interest is not redeemed on 26 October 2019, the interest rate will be changed to 3-month Euribor plus 9.705%, with a quarterly coupon date with effect from 26 January 2020.
Investments avaIlable for sale revaluatIon of assocIates cash flow hedge reserve dPf comPonent total gross unrealized gains and losses 419 -3 -3 3 416 tax related to shadow accounting 88 - - - 88 gross unrealized gains and losses 499 1 -4 8 504 tax related to shadow accounting 34 - - - 34
Hybrid Tier 1 instrument 7.25% fixed interest 37 37 Annually with effect from 30 September 2010
The tier 1 instruments are classified as equity as there is no requirement to settle the obligation in cash or another financial asset or to exchange financial assets or financial liabilities under conditions that are potentially unfavourable for ASR. Discretionary interest payments are adjusted against equity upon payment.
Subordinated debt can be broken down as follows: The repayments of the private loans by ASR of € 20 million are due on 20 March 2012. The average interest rate on the subordinated loans is 6.6% (2010: 6.6%).
The fair value of the subordinated loans as at 31 December 2011 was € 21 million (2010: € 20 million).
18 Insurance liabilities 18.1 Liabilities arising from insurance contracts ASR’s insurance contracts with retained exposure can be broken down as follows: Changes in liabilities arising from life insurance contracts can be broken down as follows: At year-end 2011, the liabilities included a guarantee provision for a carrying amount of € 106 million (2010: € 107 million).
Provision for unearned premiums as at 31 December 507 536 42 15
Provision for claims changes in provision for claims 1,688 1,523 -106 -217 changes in shadow accounting through equity 117 - - -
Provision for claims as at 31 December 3,249 2,999 421 410
Non-life insurance contracts as at 31 December 3,756 3,535 463 425
claim liabilities prior years 251 other claim liabilities 159 shadow accounting 117
The costs of post-employment and other long-term employee benefits are as follows: The costs relate to all members of the ASR post-employment benefit plan.
ASR operates a number of defined benefit post-employment benefit plans for its employees. These plans are financed partly from contributions paid by employees. The benefits under these plans are dependent on factors such as years of service and compensation. Pension obligations are determined using mortality tables, the rate of employee turnover, wage drift and economic assumptions such as inflation, income from 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 obligation. Besides pension benefits, the costs of the defined benefits plans include personnel arrangements for financial products (such as mortgages), which remain in place after retirement.
Unrecognized actuarial gains (losses) at 1 January -202 -93 16 17
Actuarial (gains) losses on defined benefit obligation -116 -95 -3 2 actuarial (gains) losses on qualifying assets - - - -
Unrecognized actuarial gains (losses) at 31 December -256 -202 12 16
The principal actuarial assumptions at year end were as follows: The portfolio of global investments (non-qualifying assets) held by ASR Levensverzekering N.V. to cover the employee benefit expense can be broken down as follows: As a financier of the post-employment benefit plans, ASR has drawn up general guidelines for asset allocation based on criteria such as geographical location and ratings. To ensure that the investment strategy remains in line with the structure of pension obligation, ASR regularly performs Asset Liability Management (ALM) studies. Assets are allocated based on these guidelines and on the outcomes of these studies.
Service cost and other costs of post-employment benefits have been broken down in the table below: Pension Plans other Post-emPloyment benefits experience adjustments to qualifying investments, gain (loss)
Pension Plans other Post-emPloyment benefits expected return on plan assets - - - -
Future mortgage interest (in connection with grantable discounts) - - 3.8% 4.5%
Pension Plans with defined benefits other Post-emPloyment benefits expected contributions for next year 80 2
Usages in course of year -10 -14 the outcome and the time required for the settlement of disputes. The provisions for staff redundancies are based on arrangements agreed in the Collective Bargaining.
As an employer, ASR is expected to pay the following contributions towards the post-employment benefits in the coming financial year: 19.2 Other long-term employee benefits Other long-term employee benefits consist of the employer’s share of liabilities arising from long-service benefits. The table below shows the changes in these liabilities: The underlying assumptions are as follows: 20 Provisions
The provision for legal issues is based on best estimates available at year end, making allowance for expert legal opinions. The timing of the outflow of resources related to these provisions is uncertain because of the unpredictability of
Other debts comprises primarily cash collateral received under ISDAs concluded with counterparties, which is included in the cash and cash equivalents. The average interest rate payable for the collateral received in 2011 is 0.871% (Eonia) (2010: 0.438%.). There are no specific terms and conditions, because they are dependent on the development of the value of the underlying instrument.
Reinsurance premiums can be summarized as follows: 27 Investment income 27.1 Total investment income The table below shows a breakdown of investment income per category: The table below breaks down interest income per category: The effective interest rate method has been applied to an amount of € 979 million of the interest income from financial assets not classified as stated at fair value through profit and loss (2010: € 1,024 million).
For the purpose of hedging interest rate risk on the portfolio (macro hedging), the initial difference between the fair value and the carrying amount of the hedged item is amortized based on allocation of the hedging relationship over the remaining term of the hedged item.
Financial assets at fair value through profit or loss 10 27
Changes in liabilities arising from insurance contracts on behalf of policyholders 1,294 -665
Total fee and commission income 82 127 28 Fee and commission income
Other income can be broken down as follows: 30 Net insurance claims and benefits
Operating expenses can be broken down as follows: Other operating expenses include travel and subsistence, telephone and personnel training expenses.
The distribution of ASR’s workforce was as follows at 31 December: As a result of continuing cost-cutting programmes, the ‘total work force’ decreased by 298 to 4,631 (2010: 4,929). The ‘total work force’ consists of the number of internal and external FTEs. The number of internal FTEs decreased by 2% to 4,264 (2010: 4,333 FTE) and the number of external FTEs decreased by 38% to 367 (2010: 596 FTE). Operating expenses are allocated to the life and non-life segments. However, in the presentation of the ASR’s workforce per segment, employees, administrative expenses and overheads have not been allocated to segments.
The table below is a summary of impairments: Due to the credit and financial crises, impairments have been applied to equities, mortgage loans. Further impairments related to goodwill, VOBA and property, plant & equipment and collateralized debt obligations.
The table below is a breakdown of the interest expense: Recognized in deferred acquisition costs 9 14
Reversal of impairments on bonds as a result of disposal 165 157
The income tax expense can be broken down as follows: The table below shows a reconciliation of the expected income tax expense with the actual income tax expense. The expected income tax expense was determined by linking up profit before tax to the tax rate in the Netherlands. In 2011, this rate was 25.0% (2010: 25.5%). The enacted tax rate for 2012 will be 25.0%.
The remuneration and combined share ownership of the members of the Executive Board are described in chapter 38 (Remuneration of the ASR Executive Board and Supervisory Board).
In the normal conduct of business, ASR entities may issue business credits, loans or bank guarantees to members of the Executive Board and the Supervisory Board or to these persons’ immediate family members.
The table below shows the financial scope of ASR’s related party transactions: • associates; • joint ventures; • other related parties.
Mortgage loans to the Executive Board can be broken down as follows: Amounts in euros x 1,000 outstAnDinG AverAGe interest % settlement
Amounts in euros x 1,000 supervisory directors As A supervisory director As A committee member totAl As A supervisory director As A committee member totAl * Term of service at ASR ended on 10 March 2010.
¹This includes pension and VPL. * Term of service as executive director ended on 31 December 2011.
Term of service at ASR ends on 30 June 2012. The termination benefit will be determined in 2012 in accordance with the Dutch Corporate Governance Code (article II.2.8) and contractual obligations.
** Joined ASR on 1 September 2011 and the Executive Board on 15 September 2011. Contractually agreed, she will grow to the remuneration level of the other ordinary board members (not CEO) within a maximum period of two years.
*** Term of service as executive director ended on 15 September 2011 and became chairman of ASR Bank.
At io n b en ef it s lo n g -t er m vA
l, in c lu d in g lo n g -t er m vA
Following the acquisition of Paerel Leven N.V., ASR recognized an amount of € 4 million in goodwill in addition to the carrying amount of the shareholders’ equity. This goodwill has been fully impaired on acquisition given the limited future benefits expected to be realized with the acquisition.
* Term of service as executive director ended on 01 March 2010. ** Term of service at ASR ended on 1 September 2010. The termination benefit is determined in accordance with the Dutch Corporate Governance Code (article II.2.8) and contractual obligations.
Carrying amount of Paerel leven n.v. as at fair value of Paerel leven n.v. as at
The effect of the acquisitions on the cash flows of ASR is as follows: 40 Contingent liabilities
Claims and disputes ASR is a respondent in a number of claims, disputes and legal proceedings arising from the normal conduct of business.
ASR forms provisions for such occurrences if, in management’s opinion and after consultation with its legal advisers, ASR is likely to have to make payments and the payable amount can be estimated with sufficient reliability (see chapters 18 ‘Insurance liabilities’ and 20, ‘Provisions’).
The value of the acquired assets and liabilities and goodwill are as follows:
Investment obligations and guarantees Where property developments are concerned, ASR Vastgoed Vermogensbeheer has assumed investment obligations for an amount of € 350 million (2010: € 316 million) and has issued guarantees to third parties for a total amount of € 330 million. ASR has issued guarantees to third parties for a total amount of € 325 million (2010: € 325 million) for real estate development projects and the acquisition of property. Those guarantees were issued by principals for the execution of projects for the benefit of clients.
Lease commitments The table below breaks down the commitments for non-cancellable operating leases as at 31 December: Other commitments have been entered into primarily for service and ICT contract related to an amounting of € 48 million.
Later than 1 year and no later than 5 years 8 9
General The consolidated financial statements of ASR for 2011 have been prepared in accordance with IFRS – including the International Accounting Standards (IAS) and Interpretations – as accepted within the European Union. In accordance with Section 362(8), Book 2 of the Netherlands Civil Code, the ASR Executive Board has decided to apply the same accounting policies to the consolidated financial statements as to the company financial statements. This has been the practice since 2005.
The loans to group companies consist primarily of deposits with group companies of € 577 million repayable within one year and loans of € 74 million with a maturity term of longer than 3 years and an average interest rate of 5.2%.
Profit carried over from previous financial year 317 -317 - -
Share capital can be broken down as follows: Other equity instruments The other equity instruments relate to four different hybrid Tier 1 instruments that are classified as equity (see chapter 16.3).
8 Subordinated debt The table below shows the composition of subordinated debt: The private loans of € 20 million mature on 20 March 2012. The average interest rate on the subordinated loans is 6.6% (2010: 6.6%)(see chapter 17).
12 Other liabilities Other liabilities include tax payable amounting to € 97 million (2010: € 37 million).
A breakdown of these fees is provided below: Utrecht, the Netherlands, 29 March 2012
To the Executive Board and Supervisory Board of ASR Nederland N.V.
Report on the financial statements We have audited the accompanying financial statements 2011 of ASR Nederland N.V., Utrecht. The financial statements include the consolidated fi nancial statements and the company financial statements. The consolidated financial statements comprise the consolidated balance sheet as at 31 December 2011, the consolidated income statement, the consolidated statements of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes, comprising a summary of the signifi cant accounting policies and other explanatory information. The company financial statements comprise the company balance sheet as at 31 December 2011, the company income statement for the year then ended and the notes, comprising a summary of the accounting policies and other explanatory information.
Report on other legal and regulatory requirements Pursuant to the legal requirements under Section 2:393 sub 5 at e and f of the Netherlands Civil Code, we have no deficiencies to report as a result of our examination whether the annual report part I, II, III and V, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and if the information as required under Section 2:392 sub 1 at b - h has been annexed. Further, we report that the annual report part I, II, III and V, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Netherlands Civil Code.
There have been no material events after the balance sheet date that would require adjustment to the consolidated financial statements of ASR as at 31 December 2011.
1 These are companies for which a statement of joint and several liability under Section 403, Book 2 of the Netherlands Civil Code has been issued. 2 Registered insurance companies. 3 Other DNB registered companies
Company name equity interest rate of Control seat segment asr levensverzekering n.V.¹,² 100,00 100,00 utrecht life
Brand new Day premiepensioeninstelling n.V. 50,00 50,00 utrecht life asr nederland Vastgoed maatschappij n.V.¹ 100,00 100,00 utrecht life / non-life
‘Het regentenhuys’ Verzekeringen n.V.¹ 100,00 100,00 rotterdam non-life administratie- en adviesbureau voor Belegging en Krediet (a.B.K.) B.V.¹ 100,00 100,00 amersfoort non-life amersfoortse Verzekeringen n.V.¹ 100,00 100,00 amersfoort non-life asr aanvullende Ziektekostenverzekeringen n.V.¹,² 100,00 100,00 amersfoort non-life asr Basis Ziektekostenverzekeringen n.V.¹,² 100,00 100,00 amersfoort non-life asr schadeverzekering n.V.¹,² 100,00 100,00 utrecht non-life asr Ziektekostenverzekeringen n.V.¹,² 100,00 100,00 amersfoort non-life europeesche Verzekering maatschappij n.V.² 100,00 100,00 amsterdam non-life garant 4 2 n.V. 50,50 50,50 amersfoort non-life n.V. amersfoortse algemene Verzekerings maatschappij¹,² 100,00 100,00 amersfoort non-life 365 Holding B.V. (previously arboned Holding B.V.) 41,00 41,00 utrecht other asam n.V.¹ 100,00 100,00 utrecht other asr Bank n.V.³ 100,00 100,00 utrecht other asr Betalingscentrum B.V.¹ 100,00 100,00 utrecht other asr Deelnemingen n.V.¹ 100,00 100,00 rotterdam other asr Hypotheken B.V.¹ 100,00 100,00 utrecht other asr nederland Beleggingsbeheer n.V.³ 100,00 100,00 utrecht other asr nederland n.V. 100,00 100,00 utrecht other asr pension fund services n.V.¹ 100,00 100,00 utrecht other asr service maatschappij n.V.¹ 100,00 100,00 rotterdam other asr Vastgoed ontwikkeling n.V. 100,00 100,00 utrecht other asr Vastgoed Vermogensbeheer B.V.¹ 100,00 100,00 utrecht other asr Verzekeringen n.V.¹ 100,00 100,00 utrecht other
The list of equity interests required under Sections 379 and 414, Book 2 of the Netherlands Civil Code has been filed with the Trade Register of the Chamber of Commerce in Utrecht.
2 Annually the annual general meeting of shareholder determines either on the recommendation of the management board and with the approval of the supervisory board or on its own initiative, which part of the profit will be retained or distributed.
4 The annual general meeting of shareholders may either on the recommendation of the management board and with the approval of the supervisory board or on its own initiative pay an interim dividend distribution subject to the conditions set out under paragraph 1 above as evidenced by an interim statement of assets and liabilities as referred to in Section 105 paragraph 4, Book 2 of the Civil Code.
6 When calculating the profit, the shares held by the Company on which pursuant to paragraph 5 no distribution to the Company is made shall be disregarded.
7 The claim of the shareholder for payment shall be barred after five years have elapsed.
Amortized cost The amount at which the financial asset or the financial liability is measured at initial recognition minus principal repayments, plus or minus the accumulated amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction for impairment or uncollectibility.
Cash flow hedge A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.
Discounted cash flow method A valuation technique whereby expected future cash flows are discounted at a rate that expresses the time value of money and a risk premium that reflects the extra return that investors demand in order to be compensated for the risk that the cash flows might not materialize.
Finance lease A lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred.
Joint venture A contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.
Private equity An asset class consisting of equity securities of companies that are not publicly traded on a stock exchange. Transfer of private equity is strictly regulated. In the absence of a marketplace, any investor looking to sell their stake in a private company personally has to find a buyer.
Investor Relations ir@asr.nl Up-to-date-information for investors can be found on www.asrnederland.nl > Investor Relations
Trade Register of the Chamber of Commerce in Utrecht no. 30070695