Our art collection now boasts hundreds of objects representing the themes human, day-to-day life and nature.
Contents 1.1 At a glance 10 1.2 Key figures 12 1.3 Message from the CEO 15 1.4 Value creation model 17 1.5 Reporting segments 18 2 Operating environment 21 2.1 Trends and developments 22 2.3 Material topics 29 3.1 The story of a.s.r. 36 3.2 Strategic targets 41 4 Long term value creation 47 4.4 Sustainable management 62 4.5 Role in society 67 4.6 Sustainable investor 69 4.7 Overview Sustainable Development Goals 74 5 Business performance 77 5.1 Group and segment information 78 5.2 Risk management 99 5.4 Statements Executive Board 107 5.5 Assurance report of the independent auditor 108 6.1 Corporate governance 112 6.2 Report of the Supervisory Board 123 6.3 Remuneration report 129 6.4 Employee participation 133 7.2 Consolidated financial statements 142 7.3 Accounting policies 149 7.4 Group structure and segment information 172 7.5 Notes to the consolidated balance sheet 185 7.6 Notes to the consolidated income statement 213 7.7 Other notes 220 7.8 Risk management 239 7.9 Capital management 271 7.10 Company financial statements 275 8 Other information 283 8.1 Report on the audit of the financial statements 2018 included in the annual report 284 8.2 Provisions of the Articles of Association regarding profit appropriation 294 9 Report of Stichting Continuïteit ASR Nederland 297 9.1 Report of Stichting Continuïteit ASR Nederland 298
The financial statements for 2018 as included in this annual report are on the agenda for adoption at the Annual General Meeting of shareholders of 22 May 2019.
Over € 1 billion raised for a.s.r.’s mortgage fund 26 June a.s.r. signs the Spitsbergen
Management Employees 100% of the assets under management by Group Asset Management are compliant with a.s.r. SRI policy
Object Silver scale-model of De Oude Hoofdpoort (1879) Made by C. Koops
F in a n cia l sta te m e n ts 2
‘2018 was a good year for a.s.r., in which we either met or exceeded all the targets we set ourselves when the IPO was announced in 2016. It was our first full year of operating as an independent listed company and also the year in which we were included in the Euronext AEX index. In addition to posting sound financial results, we also performed well in non-financial terms, demonstrating that sustainable business and profitable growth can go well together.’
‘We show that sustainable business and profitable growth can go well together’
Improving our service and focusing on our customers, including through the offer of new innovative products, remained high on the agenda in 2018. We were the first in the Netherlands to successfully introduce a 40-year mortgage, for example. In Non-life, we saw an increase in customer interest for our ‘Vernieuwde Voordeel Pakket’. In 2018, sales of this successful non-life product rose by 25% to more than 70,000. Our ‘Doorgaan’ proposition, a combined disability and health insurance product, was also popular, with over 52,000 self employed and small business entrepreneurs having taken it out. Our disability and health insurance businesses are highly committed to the sustainable deployability of employees and self employed individuals and small business entrepreneurs. We have seen growing interest in our ‘Langer mee AOV’ scheme, which provides affordable and accessible cover for physically demanding professions that are difficult or expensive to insure. I am particularly proud to be able to announce an exclusive partnership with Discovery for our disability insurance and health insurance customers. Together, we will this year be launching a.s.r. vitality, a concept that can help our customers to live healthier and have more vital lives. We will also increase our focus on raising awareness and prevention, and we have developed integrated solutions as part of our disability and health care packages aimed at prevention, occupational reintegration and claims processing.
In Pensions the new ‘WerknemersPensioen’ premiums rose by 65% to more than € 85 million and the related assets rose to approximately € 675 million. a.s.r. WerknemersPensioen puts it comfortably in third place on the Dutch market for new DC pension transactions. Funeral insurance also had a good year. GWP rose by € 19 million and the entire funeral insurance portfolio of Generali Nederland was integrated into a.s.r. For individual life policies, this integration will be completed in 2019. Our ability to successfully complete acquisitions within the specified deadlines and budgets shows evidence of our effectiveness.
a.s.r. also posted good results for 2018 in the other segments. Third party assets under management (AuM) rose by € 1.7 billion to € 16.0 billion (2017: € 14.3 billion) for a.s.r. asset management and a.s.r. real estate jointly. The ‘ASR Mortgage fund’ grew by € 1.3 billion and now manages a total of € 2.3 billion in committed external assets. Our activities in the Distribution and Services segment, which generates fee-based income, also reported good progress. Asset Management and Distribution and Services together added € 41 million to the operating result, which represents approximately 1 %-point in organic capital growth in 2018.
which is based in Heerlen, employs approximately 300 staff. Loyalis sells disability insurance and supplementary pension cover. Following the acquisition, Loyalis’ disability insurance business will continue to trade under its own name from its offices in Heerlen, while the life and pension insurance businesses will be integrated into a.s.r. This process is due for completion in mid-2020.
In 2018, to further improve our service to our customers, we took additional measures in the form of a transformation programme in IT&C to respond more effectively to future developments. The Innovation & Digital (I&D) team, which was set up in 2017, will play a key role in this. The partnership between I&D and the lines of business have not yet generated the result we were hoping for. This will be an important focus for 2019. In 2018, we also revised our goals for a.s.r. bank. This ultimately led us to decide in the second half of the year to qualify a.s.r. bank as ‘non-core’ and to more explicitly consider what future scenarios there might be for the bank. In Non-life, we were confronted by higher than usual claims and the impact of a severe winter storm. These are events we cannot influence but whose effects we can significantly limit through risk acceptance, information to policyholders and prevention. In 2018, we gave considerable attention to the vitality of our employees. Here too, awareness and prevention were two of the instruments we used. Although absenteeism has decreased, we have not achieved our goal in this area. We will maintain our efforts on behalf of the health and vitality of our employees in 2019.
Throughout the year, a.s.r. was given recognition for its activities in many different areas. We consolidated our number 1 position as a sustainable investor in the Dutch Fair Insurance Guide. By conducting a sharper investment policy on labour laws, gender equility and transparency, a.s.r. improved its score compared with 2017 and ended the year above other insurers. Recently, investment company RobecoSAM announced that a.s.r. had been included in the 2019 Sustainability Yearbook as the biggest climber up in the DJSI ranking in the insurance industry worldwide. We received less positive recognition for the commercial related to the campaign we launched to reflect our social engagement, with viewers of a Dutch TV consumer programme voting our commercial as the ‘most irritating’ of the year. We will take this on board when preparing the campaign for 2019, in the knowledge that it will probably never be possible to win-over everyone with any single commercial.
I am delighted that we have reached a negotiating outcome with the trade unions on behalf of our employees, in which we have agreed to increase staff salaries by 3% in 2019 and another 3% in March 2020, and that we have also concluded numerous agreements to continue working with the unions on a future-proof package of working conditions for a.s.r.’s employees.
We are especially proud of the high scores awarded to us by our customers, measured through the NPS. Our NPS has risen steadily in recent years, leading in 2018 to an increase from +40 to +42. We will continue to make every effort to further improve our service to them and to match our products even more closely to their wishes throughout 2019.
The results we posted in 2018 could not have been achieved without the support of our investors and customers or the dedication and hard work of our employees. I would therefore like to take this opportunity to thank them all for the confidence they have placed in a.s.r. throughout the year.
The value creation model shows how a.s.r.’s inputs are transformed within its businesses into value (outputs and outcomes) that benefits the company and its stakeholders.
Ou r core values Solid fi nan cial fram e w o rk claims manage men tunderwriting and
Manufactured capital • Customers • GWP • Investment returns • Organic Capital Creation
Social and relationship capital • Intermediaries • Other business partners • Memberships • Trade unions • Company alumni 4.1 Customers • Customer satisfaction
(NPS) • Claims and benefits paid • Customer trust and loyalty • Transparant products and services • Integrity • Solvency 4.2 Investors • Dividend • Organic Capital
Denison Scan • Sustainable employability • Highly skilled workforce • Filling 30% of vacancies by internal candidates 4.4 Sustainable management • Tax paid in NL • Paid to suppliers • % carbon neutral in
Consists of • Mortgages • Asset Management • Real Estate • Bank (non-core) a.s.r. does not consider banking activities to be a part of its core business
P&C • Motor • Fire • Liability • Travel and leisure • Other
Customers • Retail customers • Small- and medium-sized enterprises (SMEs) • Large corporate clients and their employees • Self-employed individuals
Customers • Institutional investors • Pension funds, insurance companies, local and regional authorities and parties in the social playing field
Financial performance (€m) Gross written premiums € 1,566 Operating expenses € -185 Operating result € 664 Profit/(loss) for the year attributable to holders of equity instruments € 569 Cost/premium ratio (APE) 11.1% New business (APE) € 119
Financial performance (€m) Assets under management for third parties € 16,000 Operating expenses € -78 Operating result € 16 Profit/(loss) for the year attributable to holders of equity instruments € -26
Consists of Primarily the holding activities of a.s.r. (including the Group-related activities), other holding and intermediate holding companies and the activities of ASR Deelnemingen N.V.
Financial performance (€m) Total income € 79 Operating expenses € -51 Operating result € 25 Profit/(loss) for the year attributable to holders of equity instruments € 19
Financial performance (€m) Operating expenses € -4 Operating result Profit /(loss) for the year attributable to holders of equity instruments € 27
‘This portrait of Johan de Witt by Jan de Baen was painted in the second half of the 17th century. De Witt was councillor pensionary of the Dutch Republic, but what many people don’t know is that he’s also seen as the first actuary and laid the foundations for pension calculations. A clever man, in other words. This portrait hangs in our meeting room, next to that of his brother Cornelis. Every time I see them I realise how lucky we are to have these works of art. Sometimes you feel as if you’re in a museum.’
• Volatile financial markets • Low(er) interest rates for longer • Reduced risk premiums • Value chain integration
• Climate change 2.1 Trends and developments 1 It should be noted that this is not an exhaustive list, nor does the order in which the trends are presented indicate their relative importance.
Big data generates a vast amount of information that can be used for a range of purposes such as customised solutions, risk pricing, improvement of retention rates, prevention, lead generation and fraud detection. In order for big data to have an impact it has to be transformed into big relevance. Health-related technology can contribute to a longer, healthier life. Predicting and determining factors influencing people’s health are increasingly measurable as a result of wearables, which give customers and insurance companies, where possible and desired, more information that could help them move from cure to prevention.
Opportunities and threats • Customers are becoming comfortable with exploring opportunities with non-traditional ‘start-up’ companies in the financial sector; • Technology can improve customer experience; • Talent for digital work is required for developing solutions and is difficult to attract. In-house development of this kind of talent is key; • Through technology, customers or alternative platforms can offer services themselves without, or with less, help from traditional parties; • New technologies are creating new types of risk for which customers seek cover; • Balance between advanced service opportunities and privacy of customers and employees; • Technological developments could disrupt traditional insurance models.
To enabIe a high volume of parallel dialogues, a.s.r. has in-depth customer knowledge and is able to handle a lot of data. Changes to the digital infrastructure are vital in this process.
Additionally, a.s.r. is developing more personalised chatbots to suit preferences of younger target groups, to take away any thresholds that might keep them from gathering information about insurance policies and assess what is relevant to them.
Chatbot For more than 2 years, a.s.r. has been using a chatbot as a main conversational interface on its website. With the interface, a.s.r. was seen as a first mover in the Netherlands and is therefore often used as an example for other businesses. Many steps have been made to optimise the ‘first time fix’, which stands for helping a customer at once. Smart technology is used to ‘scan and read’ the current telephone conversations a.s.r. has and to analyse questions customers have. These data are very useful for improving the chatbot and the content a.s.r. has on its website. By using a conversation interface as the main contact point with customers, a.s.r. is flexible since it can adapt very fast. As a result, a.s.r. manages to enhance the value of its website every day.
Disruption The Netherlands has one of the highest self-employed labour ratios compared to other developed economies. This group, often young entrepreneurs, inherently take more risks and are less likely to take longer term decisions into consideration, such as financial planning. Beside this, the Dutch Government is stepping back in providing social security. As a result of both trends, a growing number of self employed individuals is uninsured. a.s.r. started several initiatives to experiment with ways to reach this group of self-employed individuals. By doing this, a.s.r.
tries to raise awareness of the risks these people run and to enable them to take action, with financial planning and risk assessment tools.
Corporate Social Responsibility (CSR) is becoming an essential aspect for organisations. Environmental, Social and Governance (ESG) policies are increasingly taken into account by investors and also customers consider sustainability an important criterion in their purchasing decisions. In addition, the millennials generation, in general, is expected to switch employers more often than former generations of employees. Millennials do display loyalty, particularly when employers demonstrate a strong sense of societal purpose in addition to financial success.
Fewer people spend their entire working life with the same employer. Jobs are continuously being created and evolve or disappear over time. This process also invokes many job switches, including from permanent contracts to flexible or fixed-term contracts, from having an employer to being a self-employed individual and vice versa. The trend is towards fewer permanent employees, more employees with flexible contracts and more self-employed individuals. Employees seem to attach greater value to a good work-life balance that suits them at any stage in their life.
Climate change poses financial challenges and opportunities. Organisations are impacted by the effects of climate change (such as storms, hail and flooding), climate policies and new technologies as well as the impact of the transition to a climate neutral economy. Climate change alters the risk profile of insurers as it becomes more difficult to predict how related events and claims patterns will potentially change over time. Preventive measures will become more relevant.
Opportunities and threats • By supporting the health of customers and employees, they can live and work longer, while claims in
a.s.r. is well equipped to benefit from the macro trends that are driving demand for services pertaining to sustainable employability. a.s.r. is the owner of an evolving disability platform in which it leverages unique skills in distribution, in added services to assist employees and the increasing group of self-employed individuals, in claims prevention and in actual disability treatment and reintegration services. a.s.r. serves customers throughout the value chain and receives customer data from all of those angles. As a result, a.s.r. can use these data to improve customer services and grow profitably in each single part of the value chain and in disability underwriting performance and can introduce enhanced product solutions e.g. ‘Langer mee AOV’.
a.s.r. intends to be a good steward of nature and the environment by reducing waste and limiting negative impacts of its activities. a.s.r. places special focus on its carbon footprint directly and indirectly through investment activities and is a leader in the Dutch market in ESG investing.
Additionally, a.s.r. explores opportunities to further reduce the carbon footprint of its investment portfolio in line with the Paris Agreement. a.s.r. measures and evaluates the results of its efforts, with the final goal of supporting the global energy transition. See chapter 4.6 Sustainable investor for details about measures taken by a.s.r. as a responsible investor with regard to the risks of climate change and the energy transition.
On the other hand, government is withdrawing from certain markets, be it disability insurance and related services or building up sufficient capital for retirement. The individualisation of society has also reached the insurance sector. Analysing customer data allows for more individualised services and insurance products. Also, the solidarity principle within the pension framework in the Netherlands may be reformed to a more individualised approach.
Opportunities and threats • Increased levels of regulation, forcing a shift from entrepreneurship to a ‘de facto’ implementation of publicly established regulations; • Solvency II and an increased scrutiny of the capitalisation of insurance companies may speed up consolidation in the Netherlands and enhance the opportunity-set for possible acquisitions for a.s.r.; • The introduction of IFRS 17 will impact the way in which long-term contracts are handled and lead to additional reporting costs; • New and increased levels of regulation, for instance in the field of Pensions, Disability and Health, may impact existing business models; • A juridification of society with specific political, regulatory and public attention to unit-linked life insurance policies. Current and/or future legal proceedings (e.g. of unit-linked life insurance products) brought upon a.s.r. could be applied to or be relevant for other insurance products; • Privacy regulation that was implemented in 2018.
a.s.r.’s answers a.s.r. recognises the need for clear and sound regulation, as this will help to build and maintain trust in the financial sector. a.s.r. seeks to keep a local level playing field between vested insurance companies and new entries like fintech and insuretech. Customers’ ability to insure against the risks they face should ideally not be constraint by new regulations.
Customers Customers entrust their financial assets to a.s.r., they need to be confident that their funds are skillfully managed and that a.s.r. will fulfil its long-term commitments. They also want it to be done in a socially responsible, relevant and ethical way. Product requirements, perceptions and social standards are constantly evolving, and a.s.r. is committed to anticipating and create new solutions for customers in this changing context.
Employees Employees want a professional working environment which offers them control over their own career choices and to enhance their attractiveness on the labour market. They also want to be proud of the company they work for. Personal development, pride and sustainable employability (within and eventually after a.s.r.) translates into employee engagement. All this makes a positive contribution to the interests of a.s.r. and its stakeholders.
Sustainable management a.s.r. seeks to minimise its impact on nature and the environment. One aspect of this is the effi cient use of resources, energy and water. a.s.r. is actively getting to grips with waste management, mobility, energy reduction and carbon emissions. a.s.r. has the ambition to reduce its emissions by 2% annually and to remain ‘climate neutral’ in terms of its direct footprint of the headquarters.
a.s.r. imposes additional requirements on its suppliers in the areas of the environment, human rights and working conditions. These requirements are part of the procurement contracts.
a.s.r. does not do business with partners involved in crime or other socially undesirable acts such as money laundering, fraud or the fi nancing of terrorism. a.s.r. has a Customer Due Dilligence (CDD) policy that requires screening before a contract is signed. The contract management policy also stipulates that a screening is carried out periodically. If, in the opinion of a.s.r., there is reason to doubt the integrity of a supplier, appropriate measures are taken.
R e le v a n ce to s ta k e h o ld e rs
Degree of customer satisfaction in terms of quality and availability of services, comprehensible communication and customer focus.
Complying with applicable laws and regulations, ethical standards and the internal standards to which they give rise. Meeting the (justified) expectations of stakeholders and putting the customer’s interests first.
IT security/Privacy a.s.r.’s protection against, and response to, attack, theft or damage to infrastructure, hardware, software or information (customer data), as well as the potential disruption or misdirection of the services it provides through managing people, processes and technology.
Compliance with constantly evolving national and international laws and regulations and the resulting requirements imposed by regulators.
Investing with due regard for ethical standards, policies and procedures, in line with the interests of a.s.r. stakeholders, in which the integration of ESG criteria is key. This includes respect for fundamental human rights, employment rights, the environment and adequate corporate governance.
Encouraging employees to develop themselves with the aim of maintaining and/or increasing their opportunities on the internal and external labour market.
Helping employees to remain mentally and physically fit and vital at work so that they can continue to add value to a.s.r. and its shareholders.
Energy/Climate neutral operations a.s.r.’s own efforts to help mitigate the impact and risks of climate change. 4.4
Encouraging environmental and social standards in a.s.r.’s supply chain as well as assessing the positive and negative impact of suppliers on society.
Various technological innovations will have a significant impact on the scope and position of insurers in the value chain.
• The impact and risks of climate change and energy transition on a.s.r.’s customers, intermediaries, products and services; • Trends in society are encouraging the development of new products and services and/or altering the procedures adopted by insurance companies, e.g. individualisation and rising life expectancy.
The insurance industry has operated in a low interest rate environment for many years.
‘I’d never especially noticed Marjan Teeuwen’s work before. It wasn’t until I went on a guided tour of the building and it was pointed out by our curator that I realised how unusual it was. In fact, I was so fascinated by it that I went in search of more information about the artist. In the end, I even bought one of her works. So it’s no exaggeration to say I’ve been inspired by the art here at a.s.r.!’
Our history goes back almost 300 years. a.s.r. is deeply rooted in Dutch society and we go to great lengths to understand the needs and wishes of our customers. We are committed to delivering our services clearly and transparently, to understanding and fulfilling our customers’ needs and we will continue to innovate and develop new services. Using our expertise, we meet customers’ needs in a service-oriented way. Customers’ trust is essential to a.s.r., and we value independent third-party advice to customers, as reflected in our strong position in the intermediary channel.
All of this can only be achieved with motivated and engaged employees. Having a talented, qualified and healthy workforce is key for a.s.r. in achieving its business targets. Our work is guided by our core values: I’m helpful, I think ahead and I act decisively. These values underlie our day-to-day conduct.
We are only satisfied if: • Our customers get value for the premiums they pay for and customers and their financial advisors believe that a.s.r. provides the right level of service and offers the right products and services at the right price; • Our employees develop their skills continuously; • Our shareholders are given attractive returns; and • Sustainability is included in a.s.r.’s day-to-day business.
The four strategic principles described in chapter 3.1.1 Strategic principles are the value drivers in a.s.r.’s business portfolio. On an ongoing basis, a.s.r. reviews its business portfolio for its contribution to profits, as well as its growth outlook.
Given the profit contribution and growth outlook of the businesses, a.s.r. divides its portfolio into four categories: I Activities that provide stable cash flows and generate value with relatively strong growth potential; II Activities that offer business enhancement opportunities, typically capital-light; III Businesses that represent robust and predictable back books and contribute to profitability; IV Non-core activities which will eventually be divested.
Business domains in Non-life with growth potential This business domains focus on non-life insurance. Within the non-life domains, a.s.r. focusses on continued growth of P&C insurance and disability insurance, both organically and inorganically. Selected distribution and service companies have been acquired in recent years to facilitate this growth and to enable a.s.r. to become an even more service-orientated company. a.s.r.’s knowledge of the end-customer has increased as a result. a.s.r. believes this is key to adapt to all the trends that are stated above.
The basis for creating value and growing profitably in P&C lies in the following unique selling points: • a.s.r.’s insurance craftsmanship, by which a.s.r. means its underwriting skills – risk selection and pricing, claims management and cost-effective operations; • a.s.r.’s leading position in the intermediary channel and with in-house distributors; • a.s.r.’s know-how in maintaining a superior combined ratio (COR) while growing organically; • a.s.r.’s know-how in integrating and optimising the portfolios a.s.r. has acquired. a.s.r.’s IT systems and platforms can onboard more business.
Robust and predictable service books Life premiums account for less than 40% of total premiums. But the existing books contribute to the operating result and capital generation is expected to remain substantial in the medium-term/long-term. The robustly capitalised books that a.s.r. manages as service books are traditional DB pensions, individual life and a large funeral book. Those books are not closed for new business. However, production has reduced over time due to (amongst other things), the low interest rate environment and the ban on commissions.
The foundation of its operations lies in multiple aspects, given that a.s.r. has gained extensive experience and expertise in: • Liability-driven investment management solutions based on its own insurance liabilities; • Niche asset classes such as in Dutch mortgages; • Unique proposition in real estate; • ESG-related asset management solutions; • And, more recently, capital light pension solutions which provide an opportunity to capture AuM.
Non-core businesses a.s.r. considers banking activities for consumers no longer a core activity and is held for sale. Real estate development has been classified as non-core since 2015 and has recently reduced in size substantially. A segment of Leidsche Rijn Centrum continues to be part of a.s.r.’s investment portfolio as the last part of real estate development.
The section above, about a.s.r.’s portfolio, describes how a.s.r. manages the value from existing business as well as its pursuit of profitable growth in selective areas. Importantly, a.s.r. will maintain its financial discipline. First and foremost, a.s.r.’s disciplined approach to manage the business is what defines it, and this has proven to be successful.
Opportunities to consolidate in-market will be looked at and expansions of the product and services portfolio are to be considered. However, this will at all times be evaluated against strict financial criteria, such as an ambitious ‘risk adjusted’ minimum hurdle rate of 12% return on investment and various other financial and non-financial criteria to comply with the way in which a.s.r. does business and that are in line with its culture.
The Solvency II ratio (after proposed dividend) increased by 1% point to 197% (year-end 2017: 196%) and was well above the target of ‘safely above 160%’. During the planned period (2016-2018), the Solvency II ratio remained well above the target of safely above 160%.
The operating return on equity stood at 14.2% and was well above the target of ‘up to 12%’.
Organic capital creation (OCC) is a recently introduced target. a.s.r. aims for OCC to rise from € 372 million in 2018 to at least € 430 million by 2021. This target is based on a.s.r.’s position as at 10 October 2018. As such, it excludes the impact from any future acquisition (including the acquisition of Loyalis, which was announced on 4 December 2018) and assumes the 2018 excess investment returns and increasing forward rates.
2 In general, a.s.r. does not expect to pay cash dividends if the Solvency II ratio (calculated in accordance with the standard formula) falls below 140%.
Importantly, the COR target goes hand in hand with a.s.r.’s non-life growth target. It is a.s.r.’s ambition to grow organically by 3%-5% per annum while remaining within the stated COR range. In pursuit of growth, a.s.r. will not forfeit its core discipline of value over volume.
a.s.r.’s fee generating businesses are growing in terms of absolute and relative contributions to operating results. a.s.r. aims to achieve more than € 40 million of operating result for the two segments of Distribution and Services and Asset Management, excluding banking activities. a.s.r. expects to increase this number by 5% thereafter.
The second non-financial target relates to a.s.r.’s investment portfolio, specifically to measuring the carbon footprint and the level of impact investment a.s.r. commits to for the next three years. a.s.r. explores opportunities to further reduce the carbon footprint of its investment portfolio in line with the Paris Agreement on climate change. In addition, a.s.r. measures and evaluates the results of its efforts, with the final goal of supporting the global energy transition. a.s.r. already measures the carbon footprint for both sovereigns and corporates (equity and credits) for its own account. Real estate and mortgages are to be included. The objective is to regularly measure 95% of a.s.r.’s entire investment portfolio for own account and internally managed by 2021. In addition, a.s.r. aims for a total amount of € 1.2 billion in impact investing for own account by 2021. This can be done in line with a.s.r.’s return requirements. a.s.r. defines impact investing as a sustainable contribution to society, for instance, through waste recycling, renewable energy (solar and wind), social enterprises or contributing to health improvements.
To conclude, a.s.r. stimulates its employees to help local society and communities by allocating part of their time to offer help to individuals and/or groups with financial issues. a.s.r. provides financial courses to children, helps families to improve their financial planning and assists communities in more general terms.
a.s.r. aims for an annual growth of 5% compared to the base year 2018 by participating in activities of a.s.r. foundation.
Targets for the 2019-2021 period1 1 Targets are based on the assumption of normal market, environmental and economic conditions and no material regulatory changes and on stand-alone basis.
‘Meeting customer needs’ is one of a.s.r.’s strategic principles. In everything a.s.r. does, the focus is on its customers. a.s.r. continually seeks to improve its service to customers. Customers must experience that a.s.r.’s processes run smoothly and enable a logical customer journey.
a.s.r. seeks to improve its processes on an ongoing basis, to better help customers and develop sustainable insurance products with long-term value. One of the ways in which a.s.r. does this is by making information accessible and understandable. For example, by investing in new easy-to-acces IT platforms. Customers are increasingly asking for clear, comprehensible information so as to make a well-informed, and suitable choice when purchasing insurance products and services. In order to monitor and where necessary improve its performance, a.s.r. carries out various customer and intermediary surveys. Two of these are the NPS and the Customer Interest Central Dashboard of AFM (the Dutch Authority for the Financial Markets).
‘Langer mee AOV’ The ‘Langer Mee AOV’ disability insurance is an affordable product developed for self-employed persons with a (physically) demanding profession which runs until the retirement age. The ‘Langer Mee AOV’ is a sustainable solution in terms of being and staying healthy by making timely adjustments to the professional’s tasks, training courses or the business which enable self-employed individuals to continue their profession until they retire.
Financial scope and flexibility with the 40-year WelThuis Starters mortgage On 24 May 2018, a.s.r. was the first in the mortgage market to introduce a mortgage with a term of up to 40 years. This mortgage is aimed at starters on the housing market. Due to increasing house prices, starters are borrowing more and more when buying their first home. But borrowing more means higher monthly costs, resulting in less financial room. This generation needs to work longer due to the increase of the pension age. Why, then, not take more time to repay the mortgage, thus significantly reducing the monthly costs? Instead of the regular term of 30 years, the WelThuis Starters mortgage can be repaid in a maximum of 40 years. This offers starters extra financial scope in the build-up phase of their life (marriage, children, start of career). This mortgage is subject to the same borrowing conditions that apply to other mortgages. Is the financial scope no longer needed? At a.s.r. you can repay 15% of the original loan each year free of charge. In this way, this mortgage offers both flexibility and financial scope.
NPS targets. The NPS per business line is presented in chapter 1.5 Reporting segments.
The Customer Interests Central Dashboard (Dutch abbreviation: KBC) of AFM makes clear to what degree the sector puts customer interests first in its products and services. This is done on the basis of various research modules. The modules which in 2018 were part of the Customer Interests Central Dashboard concerned ‘Risk premiums mortgages’, ‘Code of conduct professional insurance policies’, and ‘Claims handling’. The table below shows a.s.r.’s scores. The scores are compared to the average score of all businesses surveyed.
Code of conduct professional insurance policies In this module, AFM investigated to what extent insurers used a feasible planning in order to meet the new standards of the Insurance Distribution Directive (IDD). The picture that emerged showed how insurers meet the current applicable statutory standards, i.e. to what extent they have a feasible planning in place to meet the new standards of the IDD that came into force on 1 October 2018. a.s.r. had a score of 3.0, slightly below the average of 3.4.
Consumer trust in a.s.r. showed a declining trend from April 2018 to July 2018, followed by a period of recovery while confidence has remained stable since October 2018.
The decrease between April and July is largely due to a market effect. This appears to relate to the associations people have with the various campaign subjects used in this period: • Following the campaign flight in May (with as subject personal advice, in which the focus was on customised advice through intermediaries), people spontaneously associated a.s.r. in particular with the qualifications ‘reliable’, ‘honest’ and ‘sustainable’. Specifically, ‘reliable’ and ‘honest’ are associated with trust.
• In the period from mid-May to mid-June, the subject of the campaign was ‘Human effort’, the message being that a.s.r. is always ready to help when you really need it. People considered this subject substantively somewhat less interesting, as expressed in the spontaneous associations such as ‘insurance’, ‘household effects’ and ‘bank’ that a.s.r. received as general feedback.
• Because the subject of ‘Human effort’ had less appeal, a.s.r. decided to replace this by its commercials from 2017 on SRI policy, resulting in consumers spontaneously associating a.s.r. again with the qualifications ‘reliable’ and ‘sustainable’.
In sum, there has been a market effect that explains in particular the downward trend up until July. And the campaign subjects even enhanced this effect a little. Both the ‘lowest point’ of July and the ‘peak’ in October. After October, the trust remained relatively stable.
Reputation survey RepTrak a.s.r.’s reputation was measured via the RepTrak model of the Reputation Institute. The survey was conducted among three target groups: the general public, SMEs, and intermediaries. In addition to the overall reputation, the model focuses on the drivers of reputation (including governance, products and services and social responsibility), as well as the consequences of reputation (for example recommendations, willingness to buy products and services, and readiness to work for the company). The Reputation Institute has developed a Traffic light Score System which can be used to interpret the scores of the RepTrak. The colour labels of the Traffic light Score System are based on the normative data collected by the Reputation Institute from more than 35 multi-market surveys for businesses over the last ten years.
The figures below show the number of complaints settled and the percentage of the complaints handled which have been settled fully, partly or not fully and unclear to the complainer. Most complaints arise in relation to movements of a diverse nature (53%) and on the payment of claims (22%).
Since the start of the new training plan, complaints officers have participated in new training courses, for example in the field of customer experience, but also in personal development. The aim is to bring the complaints handling to a higher level to increase customer satisfaction. With this new training plan, all complaints officers are continually up-to-date as far as customers’ needs and how to address these is concerned.
Dividend a.s.r. strives to pay a dividend that supports sustainable long-term value for its shareholders. This year’s annual dividend will be based on a pay-out ratio of 45% to 55% of net operating result distributable to shareholders (i.e. net of hybrid costs), while taking into account the aim to offer a stable to slowly growing dividend per share at least at the level of last year. a.s.r. strives to pay a dividend that supports sustainable long-term value for its shareholders. This year’s annual dividend will be based on a pay-out ratio of 45% to 55% of net operating result distributable to shareholders (i.e. net of hybrid costs), while taking into account the aim to offer a stable to slowly growing dividend per share at least at the level of last year. For the 2018 financial year, a.s.r. proposes to pay a total dividend of € 1.74 per share, which is paid as an interim dividend of € 0.65 per share and a final dividend of € 1.09 per share. The total dividend represents an increase of 6.7% compared to last year (2017: € 1.63 per share). The dividend increase reflects a.s.r.’s continued strong operational and financial performance throughout 2018.
In 2018, a.s.r. introduced an interim dividend, set at 40% of total dividend for last year. The interim dividend falls within the dividend policy and is conditional on adequate results and solvency.
To support its ability to pay out cash dividends, a.s.r. holds cash at the holding to cover operating holding costs and hybrid expenses for the next 12 months, and cash to pay the definitive and interim dividends on its interim results and annual results.
Since the IPO on 10 June 2016 a total cash amount of € 917 million has been returned to shareholders (including the proposed final dividend over 2018). This amount includes € 255 million of share buy-backs in 2017 during the sell down process by NLFI. The current number of shares outstanding is 141 million shares (31 December 2017: 141 million shares).
Shareholders a.s.r.’s shares are held by an international and diversified shareholder base. As at year-end 2018 and based on public filings and company information, investors in the US and the UK represent the majority of a.s.r.’s shareholders, owning approximately 60% of the shares outstanding. The remainder is primarily held by investors in the Netherlands, Germany, Norway and the rest of Europe. Approximately 1% of the shares are held by retail shareholders in the Netherlands.
In 2018, a.s.r.’s management continued to actively seek dialogue with its investor base and potential investors. In addition to holding conference calls and in-house meetings with investors, management took part in international roadshows and conferences. The main topics, in addition to financial and operational business progress, were consolidations in the Dutch market, Solvency II and organic capital creation, capital allocation, investment returns, the composition of the investment portfolio and financial flexibility.
Shares and share price performance a.s.r.’s shares are listed on Euronext Amsterdam (symbol: ASRNL, ISIN: NL0011872643). Following the IPO on 10 June 2016, a.s.r. was included in the AMX index (Amsterdam Midcap Index) on 19 September 2016. Since 19 March 2018, a.s.r. has been included in the AEX index (Amsterdam Exchange Index).
The share continued to deliver a strong performance in relative terms. In absolute terms, compared to the beginning of the year, the share price was more or less stable (increased with 0.8%) at the end of 2018.
Closing price as at 31 December € 34.58 € 34.31 € 22.60
Market cap as at 31 December (million) € 4,876 € 5,043 € 3,390
More information on a.s.r.’s bonds and ratings can be found on the website: www.asrnl.com
Employees are an important factor in successfully implementing a.s.r.’s strategy and creating long term value. As described in chapter 3.1 The story of a.s.r., customers and wider society benefit from the service, expertise, positive attitude and social commitment of its employees.
The scan was completed by 70% (2017: 69%) of the employees. Overall a.s.r. scores were better than last year, with an improvement in almost all areas. The average scores show that employees know what a.s.r. strives to achieve. Scores for engagement were high, which means there is plenty of energy in the organisation. A clear increase was also visible in core values and conduct, with more people observing the code of conduct.
During the annual employee review, the performance and potential of all a.s.r. employees is discussed. The review is carried out by the line manager, the HR advisor and at least one other manager in the same business line, based on the ‘4 eyes’ principle. The results of the employee review are discussed individually with each employee and are used for strategic employee planning, succession planning, mobility and recruitment, as well as the targeted implementation of the development programmes.
The ‘In Beweging’ (‘In Motion’) initiative encourages employees to continuously develop themselves in order to improve their employability (inside or outside a.s.r.) and vitality, and avoid (future) redundancies. ‘In Motion’ is intended for all employees, with specific attention for those affected by a reorganisation. The resources used in this context are career guidance, workshops and ‘In Motion’ cafes on employability and a new vitality programme, which offers boxing lessons, workshops on mindfulness and stress reduction, lunch hikes, dietary advice, etc.
The health and wellbeing of its people directly impacts on a.s.r.’s business success. a.s.r. provides a range of initiatives that create a productive and health-promoting workplace and enable employees to prioritise health and avoid stress.
To promote an optimal ergonomic workplace, a.s.r. has put in place instructions based on the Working Conditions Act in order to avoid workplace-related health complaints. Guidelines for installing desks, chairs and screens are available on a special intranet site. The site also includes instructions on the correct use of a mouse and keyboard. Lastly, advice is given on how to alternate work, adopt a relaxed working posture, and other tips relating to working conditions. If an employee develops complaints despite all the preventive measures taken, a workplace survey can be requested to identify any necessary workplace adjustments.
Recruitment a.s.r. is regularly seeking new employees who have the capacity to learn and develop, are agile, have the right knowledge and skills and feel attracted to ‘the story of a.s.r.’.
Labour Participation Act. In 2018, a.s.r. had 29 employees with an occupational disability.
In 2018, a.s.r. was the first insurer to achieve the aspiring status on the Performance Ladder for Social Business (PSO). This measurement instrument and quality mark from TNO reflects the degree of social entrepreneurship achieved. Organisations are placed higher up the ladder (there are four performance levels) the more people they employ with a vulnerable employment status and through working with other PSO-certified organisations.
In February 2019 a.s.r. and the trade unions reached an agreement on the continuation of ‘De Andere Cao’ which includes a structural salary rise of 3% at 1 march 2019 and 1 march 2020 and a continuing dialogue about a future-proof employment conditions package for the employees of a.s.r. Negotiations with the trade unions on the pension scheme will continue in 2019.
In three phases, the aim is to encourage employees to work at an early stage on increasing their value on the job market and thus take more control of their own career opportunities. The sooner they start working on their development, the larger the training and development budget a.s.r. will provide them with.
The continuation of ‘Het Andere Plan’ was agreed between a.s.r. and the unions in 2018. The training and development (sustainable employability) budgets and the financial safety net employees receive when they have to leave the company due to reorganisations will remain unchanged in 2019. After this, the financial safety net will decrease and the personal budget for sustainable employability will go up. The agreements are in force up to and including 2021.
Remuneration Every three years, an independent consultant is hired to perform a market comparison (remuneration benchmark). The a.s.r. remuneration policy starts from the principle that the average level of total remuneration should be the median of the peer group. The relevant peer group for a.s.r. employees (excluding the Executive Board of ASR Nederland N.V. and Asset Management) is the general market.
In line with the remuneration policy, the remuneration of a.s.r. employees consists solely of a fixed payment. In 2018, a.s.r. also had two types of variable remuneration for specific groups of employees, a variable remuneration for ASR Vastgoed Vermogensbeheer and ASR Vastgoed Projecten and ‘Boter-bij-de-vis’, a variable remuneration scheme with a small remuneration linked to specific, additional performances.
a.s.r. also has several other special forms of variable remuneration, such as retention allowances, a welcome
At a.s.r., jobs are weighted regardless of gender. Men and women with comparable work experience, achievements and potential are given equal pay.
For the complete a.s.r. remuneration policy and the Remuneration Disclosure, see: www.asrnl.com.
The table below shows the difference in years of service between men and women. This difference has remained virtually constant over the past 3 years and varies between 3 and 3.5 years.
The a.s.r. code of conduct sets out the required attitude and behaviour of a.s.r.’s employees. The aim of the code of conduct is to protect a.s.r.’s reputation through the integrity and professional conduct of all its employees. For more information about the a.s.r. code of conduct, see www.asrnl.com.
a.s.r. continuously emphasises the importance of the a.s.r. code of conduct and underlying policies and rules, and invests in awareness-raising. In 2018, a.s.r. took various initiatives to further improve knowledge on integrityrelated subjects. a.s.r. employees keep their knowledge up to date through training, presentation and dialogue, but also, for example, through ‘gamification’. By answering relevant questions each day, employees can refresh their knowledge of the code of conduct. Initiatives of this kind are being organised at employee, management, department and a.s.r. level.
a.s.r. had a fraud policy at group level and division level. This policy provides in identifying and detecting fraud during the processes of acceptance and claims handling. a.s.r. investigates signals of unethical behaviour, including corruption and fraud, from employees, intermediaries and suppliers. Should integrity be compromised, including through corruption and/or fraud, a.s.r. will take appropriate measures, with due regard for the applicable laws, regulations and sector-based protocols. The risk of corruption has been discussed in more detail in various policy documents, including in relation to anti-corruption policy and an incentive policy. a.s.r. operates a zero tolerance policy, and uses the definition formulated by the DNB: ‘The risk of corruption is the risk of financial
Under the whistleblower scheme, employees and third parties, including former employees, clients and other contracting parties, can report alleged malpractice anonymously, freely and without feeling threatened.
a.s.r. has a central Integrity department which monitors the sound and controlled business operations, including reputational risks, of a.s.r. The framework for monitoring and review is based on the rules, regulations and standards of a.s.r. itself, including the a.s.r. code of conduct. In the first half of 2018, the Compliance department monitored compliance with the CDD regulation. The Compliance department participates in a.s.r.’s CDD project (CD optimisation). In order to guarantee sound and controlled business operations, a.s.r. has taken a number of control measures in preventing, recognisind and defying unethical behaviour including combatting corruption.
a.s.r. has the ambition to reduce its emissions by 2% annually and to remain ‘climate neutral’ in terms of the direct footprint of its head office. To achieve this, a.s.r. constantly strives to reduce emissions. The remaining emissions are compensated with Gold Standard certificates.
Scope 3 Business travel ex-cluding lease car fleet 4.0 322 4.1 317 4.1 303 1 Out of scope: Scopes 1 and 2 do not include the emission savings achieved by integrating the Generali Nederland accommodation into head office. The estimated reduction is 747 tonnes of CO2 equivalent.
(2017: 2,248 tonnes). The reduction was realised by reduced fuel consumption of lease cars.
Scope 3: Emissions resulting from mobility • In 2018, the Scope 3 emissions increased to 5,727 tonnes of CO2 equivalent compared to 2017 (5,338 tonnes); • Business travel (air) and business travel non-lease cars emissions stabilised at 322 tonnes (2017: 317 tonnes); • Commuter travel emissions increased to 5,229 tonnes (2017: 4,851 tonnes). The total number of kilometres for commuting travel increased by 6% compared to 2017. The increase has three major causes: - A growing workforce (2018: 3,683 FTEs, 2017: 3,493 FTEs), mainly due to the acquisition of Generali Nederland, which resulted in more employees traveling between home and work; - An increase in commuter travel as a result of a decrease in the number of homeworkers (due to increased agile working); - On average, there was a slight increase in the commuter distances of employees. This was influenced by a centralisation of the accommodation of the acquired company Generali Nederland.
Activities in 2018: - a.s.r. purchased 20 electric shared bicycles to discourage car use; - a.s.r. made available 4 electric shared cars as part of its participation in the Amber Mobility project. • Waste emissions increased to 177 tonnes (2017: 170 tonnes) because of the growth of the workforce.
As part of its mission, a.s.r. intends to fulfil the following roles within society: An insurer that customers can depend on; a stable financial institution; a people-focused employer; and a valuable member of society.
2 Most of a.s.r. (strategic) suppliers are Dutch service providers. Human rights and labour condition issues are therefore of less relevance.
Being a valuable participant in society is also reflected in a.s.r.’s tax policy, in which a.s.r. aims to be a socially responsible taxpayer based on professionally implemented tax compliance. a.s.r.’s position is that it acts in accordance with the spirit of the law and that no ‘tax havens’ and such like are used, while a.s.r. does not adopt any aggressive positions for tax purposes. In optimising the tax burden (‘tax planning’), business considerations (including at arm’s length considerations) are always leading.
The Tax department plays a central part in a.s.r.’s tax function and, therefore, plays an important part in embedding the tax strategy in the organisation’s day-to-day activities. Tax is responsible for the establishment, maintenance and testing of the Tax Control Framework, which is part of a.s.r.’s overall Management
Tax burden and payment of taxes In countries in which a.s.r. is active, a.s.r. pays taxes on profits realised by the economic activities in those countries, in accordance with the OECD guidelines for multinational companies.
a.s.r. operates almost exclusively in the Netherlands, which means that almost all tax payments are made to the Dutch tax authorities.
A total of € 521 million in corporate income tax was paid in 2015. In 2017, € 238 million in corporate income tax paid in 2015 was refunded. For a balanced picture, the refund has not been included in this overview.
Number of employees Number of employees in FTEs, all of them employed in the Netherlands. 3,683 3,493 a.s.r. as an investor and taxes
Direct investments For investments (equities and corporate bonds) in companies, a.s.r. makes use of ESG research conducted by research firm Vigeo Eiris. The assessments of companies also pertain to tax criteria, in particular on the basis of (inter)national guidelines, to mitigate any ESG risks in investment portfolios with regard to tax havens, offshore financial centres and such like. More information on this can be found on a.s.r.’s website: www.asrnl.com.
a.s.r. has a preference for regulated funds in the EU because of the relevant expertise for institutional investors combined with a responsible and transparent tax policy. In addition, a.s.r. can invest in funds offered from other OECD countries, provided their legislation and regulations are comparable to those in the EU, and the fair-share principle is met. a.s.r. avoids investments in countries that have a reputational risk as far as tax is concerned, a legally weaker position or insufficient regulations and/or transparency. For more information on this topic: www.asrnl.com.
• Asset management a.s.r. formalised an SRI policy in 2007. Human and labour rights are essential criteria for a.s.r. in its assessments of countries and companies, both to avoid controversial practices and risks and to identify best practices and opportunities. As a consequence, a.s.r. favours companies that perform well in their policies on and implementation of human rights, for example, conducting on-going human rights due diligence studies, setting targets to promote diversity, respecting the right to privacy or promoting collective bargaining. At the same time, a.s.r. excludes investments in companies if they are complicit in systematic and/or gross violations of human or labour rights, including child labour, forced labour or severe controversies in the supply chain. Countries that score low in the Freedom of the World Index (civil rights) are excluded.
• Own operations Having a talented, qualified and healthy workforce is key for a.s.r. in achieving its business objectives. That is why a.s.r. is committed to attracting, retaining and inspiring the best people, offering them extensive scope for training and development, and facilitating a sound work/life balance. Potential issues that may provide risks or opportunities for employees include development/vitality and diversity/inclusivity. A new Works Council term was introduced in the summer of 2018, aiming to increase the Works Council’s and the Business Unit Committees’ visibility and thus increase accessibility for employees to mitigate potential risks.
A specific risk relates to the privacy of a.s.r.’s customers, where relationships with and knowledge of intermediaries and other partners play vital parts. A potential risk relates to complaints regarding breaches of customer privacy or loss of customer data. On 25 May 2018, amended legislation on data protection, the GDPR became active. Owing to efforts that were initiated in 2017, policies, governance and a plan of approach were implemented across
a.s.r.’s operations in order to comply with the stricter requirements. More details on the policies and approach to act as a sustainable employer can be found on www.asrnl.com.
To this end, a.s.r. develops different initiatives to create practical time and space for dialogue about dilemmas and to promote more ethical awareness of the moral dimensions of its business. By organising Dilemma workshops about corporate ethical issues, a.s.r. helps employees and decision-makers throughout the organisation to navigate the ethical playing field of their daily practice, employing insights from different ethical theories and methods, signalling and classifying stakeholders involved and carefully weighing the interests that may be affected by a.s.r.’s decisions. Dilemma sessions are also hosted for different business lines to reflect on and discuss typical (or more complex) dilemmas they face and to create practical ethical guidance tailored to these circumstances.
Two examples of dilemmas that occur in a.s.r.’s business: Healthcare innovation Some of the dilemmas a.s.r. faces pose difficult questions about its policies and daily business in different areas. For example, should a.s.r. health focus on the best possible quality of healthcare by investing in innovative developments that may help prevent certain rare illnesses for a small future client base that may need such expensive treatments? Regarding this dilemma, the uncertainty about potential customers and their healthcare needs has prompted a.s.r. health to focus primarily on the solidarity between its current customers, to aim for swift and easy access to healthcare and to emphasise efficiency and cost-reduction measures by providing good service and good quality healthcare to customers who need healthcare at an affordable price.
As a financial service provider, a.s.r. believes it is important that people have financial continuity in their lives and that they are able to take sensible risks and make informed financial choices, in such a way that they have their finances in order in the short and long term – in other words, that they are financially self-reliant. Some people do not find this easy, and need help. a.s.r. has therefore initiated projects that help people make informed financial choices. Being able to read and being numerically literate, being able to manage money and keep proper financial records are all part of this. The aim is to prevent people from getting into debt, or to help them get out of debt.
In 2018, a.s.r. issued, as one of the first Dutch insurers, non-financial targets including one on contributing to society: from 2019 onwards, a.s.r. aims for an annual growth of 5% compared to the base year 2018 by participating in activities of a.s.r. foundation.
Foundations a.s.r. is committed to conserving cultural and social heritage, which is why it is involved in a number of nation-wide and local foundations. Its local ties mostly stem from the past presence of an a.s.r. division in a city or town.
Stad Rotterdam anno 1720 Foundation The Stad Rotterdam anno 1720 Foundation supports projects in the Rotterdam region with regard to education, socio-cultural development, social work and care. For more information: www.stsr1720.nl/.
Ambachtsheerlijkheid Cromstrijen Foundation The country estate Ambachtsheerlijkheid Cromstrijen, located in the province of Zuid-Holland, dates back to the year 1492. The Foundation preserves the estate’s social and cultural heritage, for example via a unique archive regarding the region. For more information: www.stichtingambachtsheerlijkheidcromstrijen.nl.
Carel Nengerman Foundation The city and province of Utrecht are key for the Carel Nengerman Foundation. The fund supports cultural and nature-related projects that are organised in the city and in the province. For more information: www.carelnengermanfonds.nl.
100% compliance with own SRI policy a.s.r. safeguarded the full compliance of a.s.r.’s SRI policy following a three-step process: internal teams (investment departments), compliance process (Risk) and an independent assurance by an external party (Forum
Increased transparency: publication of a.s.r. carbon footprint for the investment portfolio In 2018, a.s.r. started publishing the carbon footprint of its investment portfolio in quarterly updates on the a.s.r. website www.asrnl.com.
Sustainable and responsible investing a.s.r. is aware of the importance of and the responsibility expected from its role as investor; both as asset owner and as asset manager. Therefore sustainability is an essential part of a.s.r. investment beliefs. For a.s.r., the integration of ESG factors in the management of its investments contributes directly to the reduction of risks (both financial and reputational risks) and has a positive effect on its long-term performance.
The a.s.r. SRI policy has been integrated into the internal investment practice by: Exclusion criteria for countries and companies a.s.r. pursues a strict exclusion policy based on controversial activities that a.s.r. applies to internally managed portfolios, both for countries and companies. In 2018 this policy was expanded to strengthen the environmental criteria for countries related to SDG environmental performance as published by the Sustainable Development Solutions Network (SDSN) and the Bertelsmann Stiftung: exclusion of countries scoring less than 50 points on average for SDG7 (Affordable and Clean Energy), 13 (Climate Action), 14 (Life Below Water) and 15 (Life on Land). By using the SDG Index, which integrates the outcomes of the previously used Environmental Performance Index, the environmental assessment has been expanded and aligned with the SDGs. By the end of 2018, 232 of the screened companies had been excluded due to: involvement in human rights
violations (6), labor rights violations (2), environmental violations (13), armaments (100), tobacco (15), gambling (44), coal (47), tar sands & shale oil (4) and nuclear energy-related activities (9). With regard to investments in sovereign debt, a.s.r. has excluded 81 countries that are poor performers in the annual Freedom in the World report, have a low ranking on the Corruption Perceptions Index or on the Environmental SDGs.
Engagement a.s.r. recognises three types of engagement I. Engagement for the purpose of influencing: this type of engagement is used to move companies towards better sustainable practices. In 2018, the issues addressed included the following: - Global Compact breaches via a.s.r.’s partnership with Robeco: the updated list of companies under engagement and their status can be found on www.asrnl.com.
- Fur and exotic leather via collaborative engagement: The use of real fur and exotic leather is getting increasingly negative attention and major luxury brands have declared to step out of the fur business. Together with 2 peer investors, a.s.r. has engaged with 4 luxury brands concerning their steps towards phasing out fur.
II. Engagement for the purpose of monitoring: Sustainability is a standard topic on a.s.r.’s agenda during its meetings with companies from its investment portfolio. Additionally, a.s.r. has been in dialogue with other players in the investment landscape, such as funds and index providers, to actively encourage a further ESG integration for their role in the investment chain.
Impact investing In the investment process, a.s.r. pays special attention to impact investing to make a sustainable contribution to society, for instance, through waste recycling, renewable energy (solar and wind), social enterprises or contributing to health improvements. In 2018, a.s.r. set the target of increasing impact investments for its own account at € 300 million per year to € 1.2 billion of impact investments in 2021. By the end of 2018, a.s.r. exposure to listed and non-listed impact investments addressing specific environmental or societal needs stood at over € 300 million.
Climate change and energy transition Since 2016 a.s.r. has integrated climate change and energy transition as an explicit theme/driver within its strategic asset allocation and has taken measures to implement its commitment across the investment portfolio. a.s.r. has analysed and identified risks for the investment portfolio both bottom-up: taking into account stranded assets and changing business models in the mining and energy sectors, as top-down in its strategic asset allocation.
Pilot with Ortec finance In order to be prepared for future possible climate scenarios and related risks and to help a.s.r. work towards setting Science Based Targets in line with the Paris Agreement, AVB has engaged with Ortec Finance, other financial institutions and academia to integrate top down climate scenario analyses in its strategic asset allocation. The integration of these scenarios will enable a.s.r. to make better investment decisions for allocations to asset classes, regions and sectors, and therefore to construct a more climate resilient investment portfolio.
Linking scientific climate data to ALM/SAA tooling is a novel approach to mapping potential climate impacts on investment performance. It will enable us to report forward-looking, scenario-based disclosure along the lines of the framework set out by the TCFD.
Research of sustainable soil label On 1 June 2018, coalition partners a.s.r. real estate, Vitens and Rabobank signed a letter of intent on the development of a dynamic soil index. The index has been designed to provide farmers with a better insight into the fertility of their soil. Across the Netherlands, numerous initiatives have been taken to improve soil condition. On 20 September 2018, many representatives of these initiatives met to exchange their views on sustainable soil management and, more specifically, how to exchange experiences and data regarding soil improvement measures.
asbestos-safe by 2020, the goal for 2018 was to conduct an asbestos screening and perform asbestos abatement procedures at no less than 55% of at-risk holdings. This result includes the Jutte estate, which has been included in the population of buildings since 2018.
The ASR DCRF objective for the period up to 2018 was to obtain these certifications for at least 11% of its portfolio. At the end of 2018, a fourth complex was certified. Consequently 11.6% of ASR DCRF’s portfolio was certified.
ASR DPRF objective is to obtain BREEAM-In Use certification for all wholly owned shopping centres. The objective for 2018 was to certify one wholly owned district shopping centre. Last year, shopping centre Terwijde Utrecht obtained a BREEAM-In Use certification.
Please find more detailed information about responsible investments in Annex A Facts and figures.
SDG Role Impact and contribution a.s.r. foundation provides support in the financial education of children and young people (reading and teaching) and for households with (a risk of) problematic debts. Employees spent 4,263 hours via the foundation (286 visits) on financial self-reliance projects and activities.
a.s.r. has integrated climate change and energy transition as an explicit theme/driver within its strategic asset allocation. a.s.r. exposure to listed and non-listed impact investments addressing specific environmental or societal needs, including renewable energy (solar and wind power), stood at over a.s.r. pays attention to its own direct carbon footprint and has set itself the goal of remaining climate neutral in terms of the direct footprint of its headquarters.
joined the PLWF, in which it and other Dutch financial institutions launched 27 engagement trajectories with textile and footwear companies to pay living wages in their supply chain.
a.s.r. complies with the 10 principles of the ethical manifesto to ensure that customers are financially self-sufficient and still gain access to insurance services in case payment arrears and problems arise.
a.s.r. disability contributes to income and work by focusing on prevention of unemployment due to sickness or disability. a.s.r. offers the services of in-house medical advisors, occupational reintegration managers, vocational experts and external parties offering reintegration, health and safety services, combined with skilled claims handlers, for all policyholders, to assist with their occupational reintegration.
a.s.r. strives to pay a dividend that supports sustainable long-term value for its shareholders. This year’s annual dividend will be based on a pay-out ratio of 45% to 55% of net operating result distributable to shareholders (i.e. net of hybrid costs), while taking into account the aim to offer a stable to slowly growing dividend per share at least at the level of last year. For the 2018 financial year, a.s.r. proposes to pay a total dividend of € 1.74 per share, which is paid as an interim dividend of € 0.65 per share and a final dividend of € 1.09 per share.
As an investor in real estate, a.s.r. plays a role in working towards a more sustainable built environment based on the key goal of the Paris agreement for 2050, in which the built environment must be
a.s.r. increased its transparency by means of quarterly updates on the carbon footprint of its investment portfolio on www.asrnl.com. Its strategic target is to measure 95% of the carbon footprint by 2021.
5.1 Group and segment performance 5.1.1 Financial and business performance for 2018
Profit/(loss) for the year attributable to holders of equity instruments 655 906 -27.7%
2 Comparative figures have been adjusted, mainly related to the discontinued classification of a.s.r. bank. The impact on profit before tax amounts € -2 million, on operating expenses € -14 million and on operating result € -1 million.
Basic earnings per share on IFRS basis (€) 4.33 6.03 -28.2%
(in € millions, unless stated otherwise) 31 December 2018 31 December 2017 Delta
Operating expenses increased € 31 million to € 601 million as a result of the additional operating expenses of Generali Nederland (€ 48 million). Excluding the cost base from Generali Nederland operating expenses declined by € 17 million. The operating expenses associated with ordinary activities, which are part of the operating result, were € 567 million (2017: € 546 million), when excluding the addition of Generali Nederland (impact € 38 million) a decrease of € 17 million. This reduction is due to the completion of projects, efficiency improvements and rationalisation of IT- processes owing to migrations of portfolios to a single a.s.r. platform. In Asset Management, operating expenses increased € 1 million due to higher personnel and license fees, which supports the increasing third party asset base. The operating expenses of a.s.r. bank were excluded as these activities have been classified as discontinued operations.
The number of internal FTEs (including redundancies) increased by 190 (or 5.4%) to 3,683 FTEs at 31 December 2018 (31 December 2017: 3,493 FTEs) due to the acquisition of Generali Nederland (285 internal FTEs). The number of Generali Nederland employees declined as a result of employees who opted for the social plan, staff reductions or internal vacancies fulfilled by former Generali Nederland employees. The largest decline in the number of internal employees was in the individual life business reflecting the decline of the portfolio.
The solvency II-ratio per 2018 is 197% (2017: 196%) and before the (proposed) dividend amounts 204%. Main factors impacting the SII ratio include the acquisition of Generali Nederland (-9%-point), lower interest rates, the decrease of the UFR to 4.05%, widening of credit spreads and the dividend. The forthcoming tax reduction has been fully incorporated (-6%-point in the LAC DT factor). These effects were more than compensated by, amongst others, organic capital creation, widening of the VA and reduction of market risk.
The Non-life segment consists of P&C, Disability and Health. The main legal entities of the Non-life segment are ASR Schadeverzekering N.V.,
Profit/(loss) for the year attributable to holders of equity instruments 132 190 -30.6%
Operating result decreased € 27 million from € 172 million to € 145 million. This decrease was primarily the result of the January storm (€ -30 million) while the first half year of 2017 was exceptionally strong with a favourable level of claims at P&C with no calamities. Disability showed overall a solid performance. For sickness leave, 2018 was a challenging year as claims rose considerably. Individual disability performed strongly thereby offsetting the impact from sickness leave. Pricing of sickness leave has been raised and will see further adjustments in 2019 in response to recent experience.
GWP rose € 435 million to € 3,014 million. This was driven by organic growth in all product lines: P&C up € 77 million, Health up € 24 million and Disability up € 20 million. Generali Nederland Non-life amounted to € 314 million (P&C € 277 million and Disability € 37 million). In the P&C
business the number of ‘Vernieuwd Voordeel Pakket’ (a product that combines several insurance coverages) sold continued to increase to over 70,000, up 25% compared to 2017. The growth in the disability business mainly came through the distribution channel mandated agents, amongst which SuperGarant, for sickness leave and collective occupational disability insurance products. Growth in Health was driven by higher premium income per customer which more than compensated the decline in the number of policyholders in 2018.
With a market share of 12.1% in 2017 (10.9% in 2016), a.s.r. was the third largest general provider of P&C insurance products in the Netherlands¹, as measured by GWP. a.s.r. offers a broad range of P&C insurance products under the brands a.s.r., Ditzo and Europeesche Verzekeringen.
Strategy and achievements On the P&C insurance front, a.s.r. endeavours to leverage its existing strengths and to achieve a COR of > 97%. The P&C business is expected to grow in line with gross domestic product (GDP) development. While leveraging existing strengths and distinctive profitability, a.s.r. aims to further develop its expertise in pricing, underwriting and claims handling and excellent service, which it believes are its key drivers for sustainable value creation.
The acquisition of Generali Nederland P&C and the agreement and right to acquire the Avéro Achmea portfolio into a.s.r. further strengthened a.s.r.’s position. In co-insurance in particular, its market position doubled after the acquisition of Generali Nederland. The Generali Nederland non-life organisation was integrated into the P&C organisation in 2018 and the conversion of the different Generali Nederland non-life portfolios has now started. P&C expects to complete the portfolio conversions in 2019.
Product development P&C has added the product specifications of De Europeesche to its retail product proposition, Vernieuwd Voordeel Pakket (VVP). Its customers can now enjoy the best product specifications of a.s.r. and Europeesche through the VVP proposition. P&C will discontinue the stand-alone Europeesche products in the intermediary channel at the beginning of 2019. This is part of P&C’s product rationalisation strategy. Various policy terms & conditions are also being rationalised. This makes the product range simple and clear for both customers and distribution partners.
All repair companies engaged by P&C in the event of fire damage have complied with the Sustainable Repairs quality mark since 2017. These companies work in construction, glass repair, reconditioning, electronics, interior restoration, flooring and painting. Repair companies that are entitled to display the quality mark are assessed for their sustainability and ability to satisfy strict requirements. P&C is one of the initiators of Sustainable Repairs and fulfils a chairmanship role on the Body of Experts.
Outlook for 2019 In 2019, a.s.r. plans to go live with the SME product portfolio on the new platform. a.s.r. will convert the retail portfolios to the new platform, complete the Generali Nederland portfolio conversions and the De Europeesche portfolio conversion. It also plans to complete the integration of the De Europeesche organisation into P&C and Ditzo. This will help improve the service to customers and reduce operating costs.
Ditzo Ditzo is an independent business within the P&C segment. Its aim is to empower consumers to make their own decisions when insuring their goods and lives through the provision of insurance products, services, decision support tools, excellent customer service and direct online distribution.
In 2018 Ditzo successfully implemented a revised product portfolio and migrated the portfolio to the administration platform with a non-automated conversion ratio of almost nil. To increase the share of the portfolio, the Ditzo Voordeelpakket was introduced, which combines a discount with more value-added services. The discount is based on the number of products (health and non-life) per customer.
Products • Disability self-employed: - Products for self-employed persons to protect against loss of income in the event of sickness or disability; - Products for employees to protect the payment of fixed expenses in the event of sickness or disability and to cover loss of income above the wage limit (WIA - Dutch Work and Income (Capacity for Work Act) supplementary insurance) in the event of disability.
• Group disability: - Products for employers to cover their own WGA risk carrier status; - Products for the benefit of employees (taken out by employers) to cover loss of income due to the inability to (fully) perform work as a result of disability as defined by the WIA.
• Group disability (employer and its employees): - Sickness leave (short term, 2 years): Employers are - in the event of sickness leave of the employee - responsible for continued payment of salary to the employee for up to two years. The employer can insure this risk on the private market which is done by most SMEs in practice.
Strategy and achievements a.s.r. has a strong position in the disability insurance market and through its brand De Amersfoortse, is well positioned to capture profitable growth opportunities. In December 2018, it announced that it had concluded an agreement with APG to acquire insurer Loyalis from APG. The acquisition will increase a.s.r.’s market share in disability to over 28%. a.s.r. also has a significant position in the intermediary distribution channel. Through its disability product line, it aims to meet the targeted COR of < 93%. a.s.r. believes that enhancing its offering on pricing and underwriting, and the deployment of dedicated multidisciplinary teams, are key to sustainable value creation.
2 Source: DNB - At the moment of writing, the market share figures for 2018 are unknown.
Due to the importance of this distribution channel, a.s.r. presents these sales as part of a separate product category (‘Other’).
Digitisation and innovation • a.s.r. assists the intermediary channel with e-based underwriting systems and online channels to provide online product offerings; • Disability has begun a pilot project to enhance visibility and potential relevance, especially for young customers. The ‘Always On’ project focuses primarily on digital communication via a mobile device; • a.s.r. claims the domain of sustainable employability by stimulating cooperation of its participations in the sphere of prevention, claims management and reintegration.
Insurers are obliged to accept all Dutch residents for basic coverage. A government-run system of risk equalisation makes this possible and provides insurers with compensation for excessive costs resulting from their customer base. The government is constantly seeking to improve the system of risk equalisation in order to give every insurer the same starting position.
Strategy and achievements In line with a.s.r.’s mission statement of ‘helping by doing’, its health strategy to help customers get better and healthier has been underpinned by the introduction of relevant products and services. a.s.r. health is also run as an ‘independent’ division within the Group, and supports other business lines and brands with opportunities for cross-selling and brand appreciation. Health is aiming for further digitisation and innovation.
and products to customers that may help them improve their health. In 2018, it ran a pilot project consisting of an online platform giving customers insight into their health and supporting their efforts to improve their own health (such as through more exercise, less alcohol, better sleep patterns). Based on the lessons learned, a.s.r. is looking to incorporate this kind of service into its daily customerservicing business.
Product development and innovation a.s.r. continues to provide high quality products and services to its customers. Last year, it further automated its claims payment process, leading to faster payments to customers and less re-working. A knock-on effect is increased efficiency, which in turn enhances the affordability of the products.
Together with Ditzo, a.s.r. introduced ‘Pechvogel Plus’, a product that adds accident insurance to the a.s.r. health product range. a.s.r. can thus now give its customers the full range of health care insurance products. Another product that was introduced was the ‘Ditzo Voordeelpakket’, which gives customers a discount if they buy more than one Ditzo insurance product, such as health care insurance and car insurance. Customers can thus profit from the economies of scale that a.s.r. generates when a customer takes out more than one Ditzo product.
For De Amersfoortse, a.s.r. experimented with a digital health platform. This is an app to help improve customers’ health by providing a single platform for all their health trackers. a.s.r. also added challenges and goals to encourage customers to adopt an active lifestyle. It is now looking to implement this service and the lessons gained from the pilot project in its regular product range.
(e.g. a major challenge to bring the sustainability of buildings into line with government targets).
a.s.r. health devised a plan to help health care institutions reduce their CO2 emissions by increasing the sustainability of their real estate. To do so, a third party sustainability scan was carried out to provide insight into possible improvements in a multi-year planning schedule. a.s.r. health has been working with a.s.r. asset management as a possible partner to fund the necessary building improvements in a cost-neutral way. This is currently in the pre-pilot phase.
health is opening face-to-face discussions with the top 25 health suppliers a.s.r. contracts directly.
Overall sustainability and CO2 reduction initiatives are standard subjects on the agenda of a.s.r. health’s quarterly meetings with its top 25 suppliers.
Further development of the GoedBezig health promotion app (pilot project and beyond).
The Life segment comprises the life insurance entities Pensions, Individual life and Funeral. The segment offers insurance policies that involve asset-building, immediate (pension) annuities, asset protection, term life insurance and funeral expenses for consumers and business owners.
Technical result (including costs) declined slightly (€ -7 million). The lower cost coverage in individual life as a consequence of declining portfolio were compensated by the cost coverage of Generali Nederland and by regular cost savings.
The increase in GWP at Funeral is mainly related to the acquisition of the PC Hooft Uitvaart portfolio, which was transferred to Funeral on 1 October 2018. Underlying the Funeral portfolio decreased slightly due to (un-)natural surrenders.
Operating expenses increased € 1 million to € 185 million. Excluding Generali Nederland (€ 15 million) the operating expenses decreased with € 14 million as a result of the continued execution of migration programs and the phasing out of IT-systems (‘product- and systemrationalisation ’). In addition, project- and integration related costs decreased this year.
The size of operating expenses related to the premiums (measured in APE) remained relatively unchanged resulting in a fairly stable cost-premium ratio of 11.1% (2017: 11.0%). Life operating expenses expressed in basis points of the basic life provision amounted to 56 bps (2017: 58bps).
Profit before tax was € 569 million (2017: € 731 million). Last year’s profit before tax included a higher level of realised capital gains in indirect (incidental) investment 1 DNB – at the moment of writing, the market share figures for 2018 are unknown.
Pensions a.s.r. is a major provider of pension insurance products in the Netherlands under the brand a.s.r. Pensions has a joint venture with Brand New Day for an IORP (Institution of Occupational Retirement Provision). The current customer base of the pensions business comprises approximately 25,000 companies and 645,000 participants.
Cost control The programme to migrate and integrate the Generali Nederland book to the existing a.s.r. platform is on track (completion scheduled for 2020) while the same services will be offered to customers and the market position improved. Pensions has already brought these plans forward from Q4 2020 to Q1 2020. The migration of inactive participants from the old legacy system of ‘De Amersfoortse’ was completed in 2018, contributing to further cost reduction and variabilisation.
Sustainability Social initiatives were introduced to improve financial awareness among consumers through the ‘www.Ikdenkvooruit.nl’ platform. In line with its core values, Pensions involved its employees in interactive sessions in order to enhance levels of engagement. Employees also took part in panels to improve communication with participants.
Individual life a.s.r. is one of the largest providers of individual life insurance products in the Netherlands, measured by GWP.
Market The premium volume in the individual life market has declined in recent years due to low interest rates and tax reforms. This decline is expected to continue over the coming years. With effect from 1 January 2018, a.s.r. has only offered term life insurance products, all other products having become a closed service book.
a.s.r. is well positioned to become the consolidator in the Dutch service books market. With the acquisition of Generali Nederland, a.s.r. added an ‘external block of business’ for the first time. The book will be migrated to the Software as a Service (SaaS) platform in the same way as the other individual life service book.
Lower cost base and shift to variable costs In order to preserve the value of the individual life book, a.s.r. aims to simplify its organisation and shift its cost base from fixed costs to more variable costs. In order to reduce costs and introduce variabilisation, a.s.r. is simplifying processes and rationalising and migrating the service book to a SaaS platform. a.s.r. intends to maintain this strategy, analysing books on an individual basis to find the most appropriate and value-enhancing solution while minimising operational costs and complexity. The migration programme is on track. Six books containing 515,000 policies have now been successfully migrated (three in 2018) and two books are planned for 2019, including the recently acquired Generali Nederland life book which will be migrated to the same cost-efficient SaaS platform.
Digitisation and innovation In 2018, processes were improved through automation and partly through robotics. The quality of the processes improved and a small reduction in FTEs was achieved.
Rationalisation of the individual life book also led to sustainability and to a significant decrease in product features and investment funds.
Market The market is characterised by consolidation. Due to the low interest rate environment, funeral insurance premiums have gone up in recent years. The distinctive selling point of Ardanta is its ‘free choice’ with regard to the delivery
of funeral services, and as a result it has a unique and cherished market position.
Digitisation and innovation Ardanta is committed to increasing digital process support. Thanks to improved customer portals and service & contact pages, customers and intermediaries experience an increasing digital ease of use. Printed output has also significantly reduced.
In 2018, 25% (€ 0.7 million) of new business came from the online channel. The accessibility of the website for users with an audio-visual disability was also improved, and work to further enhance digital ease of use will continue.
Profit/(loss) for the year attributable to holders of equity instruments -26 5 -
Operating result of the Banking and Asset Management segment increased by € 11 million to € 16 million (2017: € 6 million). The increase is mainly explained by higher external fee income from the ASR Mortgage Fund due to strong inflow of third party assets, and higher assets in the ESG-funds. The real estate funds benefited from higher fee income (€ 4 million) and lower operating expenses (€ 2 million) relative to the prior year caused by costs for setting up the funds.
The share of AuM for third parties increased by € 1.7 billion to € 16.0 billion. The increase is driven by inflow in ASR Mortgage Fund (€ 1.3 billion), the ESG-Funds (€ 0.3 billion) and external inflow at real estate funds (€ 0.2 billion).The ESG-Funds, with strict sustainability criteria, were introduced in 2018 in addition to the existing real estate funds.
Payment arrears of more than 90 days on the WelThuis portfolio amount to as little as 0.10% (2017: 0.21%). Credit losses amount to 0.80 basis points (2017: 0.44 basis points). The arrears and credit losses remain well below our limits and are supported this year by favourable economic conditions.
On 20 March 2019, a.s.r. bank and Achmea Bank N.V. (Achmea Bank) agreed that Achmea Bank will acquire the savings and mortgage portfolios of a.s.r. bank in an asset/ liability transaction. For more information, please see chapter 7.4.6 Discontinued operations and assets held for sale and related liabilities.
ASR Levensverzekering N.V. provides mortgage loan services such as acceptance, arrears management and recovery, and reporting for mortgages recognised on a.s.r.’s balance sheet. It also provides these services for a.s.r. mortgage fund management activities.
All other operations with respect to the mortgage portfolio are conducted by Stater N.V., a mortgage service provider and wholly-owned subsidiary of ABN AMRO Group N.V., based on a contract concluded between Stater N.V. and Life.
Strategy and achievements a.s.r.’s investments are aimed at long-term value creation: in its investment activities, AVB takes into account the fact that the present generation has inherited the earth and hopes to pass it on to the next. Sustainable investment is of crucial importance. AVB applies the same strict criteria when investing on behalf of its customers as it does when investing for itself.
AVB is also offering asset management solutions for the successful ASR-defined contribution pension proposition, based on the same Index Plus approach to investment.
Outlook for 2019 In 2019, AVB will continue to serve its clients through a combination of integrated solutions and individual asset classes such as fixed income, equities, mortgages and LDI (LDI is a more integrated proposition). As part of a.s.r.’s ESG strategy, the focus will be on impact investing and measuring the carbon footprint of the investment portfolio.
a.s.r. real estate a.s.r. real estate has been investing in property for more than 125 years, through investing in direct and indirect real estate and by managing real estate funds. Its substantial retail, residential and offices portfolios are open to institutional investors who are looking for stable capital growth, enabling them to participate in its funds (ASR DPRF: € 1.6 billion, ASR DCRF: € 1.3 billion and ASR DMOF: € 0.3 billion) or outsource their national and international real estate investment management to a.s.r. a.s.r. real estate manages the Netherlands’ largest private portfolio of rural real estate (€ 1.5 billion) on behalf of a.s.r.
At year-end, the real estate portfolio totalled € 5.0 billion (2017: € 5 billion): a.s.r. € 4.1 billion and institutional investors € 1.7 billion.
Product development In partnership with a national organisation representing the interests of entrepreneurs working in the green sector, a.s.r. real estate has developed a product for ambitious young farmers as a response to the overall succession challenge caused by the ageing agricultural population. The key to this scheme is for farmers to gradually increase their equity stake. At the start, a much smaller equity is required to invest in the land, leaving farmers with more working capital to grow their businesses.
Digitisation and innovation a.s.r. real estate has launched the Digital Business Programme, which aims to digitise communication with its customers and business partners. An example is the Digital Rental Process project, in which new rental housing is automatically allocated using an allocation module, lease contracts are digitally signed and the initial rent is paid online. An associated app was introduced in 2018, which allows a.s.r. real estate to record, sign and forward the inspection of objects on-site. A large number of Business Intelligence dashboards have also been operationalised.
Nederland and ZZP Verzekeringen as at 1 July 2018), Corins B.V. and, as at 5 February 2018, ANAC Verzekeringen B.V., ANAC, All-Finance Nederland Advies-Combinatie B.V. and Stoutenburgh Adviesgroep B.V.
Profit/(loss) for the year attributable to holders of equity instruments 19 12 60.3%
During 2018 the Distribution and Services segment incorporated the distribution and service activities of Generali Nederland. As at 1 May 2018, Generali Nederland’s co-insurance activities were transferred to Corins. SuperGarant expanded its activities in the second half of 2018 (as from 1 July) with the acquisition of ZZP Nederland and ZZP Verzekeringen. a.s.r. strengthened its footprint in the distribution landscape by adding these distribution and services activities, as well as due to the growth in the distribution businesses acquired in earlier years.
Operating result of the Distribution and Services segment increased by € 8 million to € 25 million, reflecting the growth of activities in this fee-based segment. The growth of fee income exceeded higher operating expenses (€ 7 million). SuperGarant and especially Dutch ID showed an higher result due to growth of services portfolio, transfers and premium increases. In addition, the acquisitions (Generali Nederland distribution activities and ZZP), contributed to the growth of operating result.
Market Developments during 2018 in the aforementioned distribution business show that the distribution landscape remains fluid. Developments that were previously observed, such as the growth of service providers and mandated broker businesses and the ongoing consolidation of intermediaries, are still prevalent in the distribution landscape.
The overall trend is for larger distribution businesses to gain market share on the strength of both organic and inorganic growth; the top 50 companies in the distribution field are increasing their power within the overall distribution landscape. Hybrid distribution models of insurance products also remain in place and the independent advisory channel gained some market share in one or two subsidiary markets last year.
With its own distribution businesses, a.s.r. is well positioned for these developments as well as for supporting the independent advisory channel.
Strategy and achievements Following the acquisition of Generali Nederland in 2018, the distribution and services activities of Generali Nederland have now been added to a.s.r.’s distribution and services segment. These activities consist of ANAC and Stoutenburgh Adviesgroep and, from 1 May of 2018, Generali Nederland’s co-insurance activities were transferred to Corins. SuperGarant acquired ZZP Nederland in 2018.
a.s.r. also believes that these acquisitions provide learning and innovation opportunities by giving it the ability to develop and test new product ideas with direct input from the distribution and customer sides. The integrated chain approach enables a.s.r. to accelerate the implementation and marketing of innovations and new products, allowing it to innovate quickly and implement its learning throughout the rest of the organisation.
VKG VKG is a full-service provider and a mandated broker to a number of Dutch insurance companies, including a.s.r.’s P&C insurance business. As at 31 December 2018, VKG acted as service provider and mandated broker to 21 financial institutions, and distributes products from 110 insurers, banks and other credit institutions through VKG’s relationships with intermediaries. VKG also provides access to the insurance exchange and mortgages. Based on these associations, VKG offers administration and consulting services to intermediaries for their commercial and back-office operations. As at 31 December 2018, VKG had agreements with approximately 3,000 intermediaries in the Netherlands, 500 of whom have fully outsourced their administrative process to VKG.
As at 31 December 2018, Dutch ID acted as an intermediary for insurance products and provided mandated brokerage services for some of the products and business lines offered by insurance companies. Based on these associations, Dutch ID provides administration services as a service provider to other intermediaries in the field of their commercial and back-office operations. It also offers these services to insurers, as well as consulting and other services, such as claims management, risk management, prevention, reintegration and leasing. Dutch ID focuses primarily on the agricultural, transport, overhaul and civil construction sectors. It has ties with business associations in the agricultural (LTO) and transport (EVO) sectors.
Profit/(loss) for the year attributable to holders of equity instruments 27 12 126.7%
a.s.r. does not regard Real Estate Development activities as part of its core business and its result is excluded from the operating result.
In the fourth quarter, a real estate entity (LRC city center in Utrecht), which consists of a shopping center and a parking garage, was transferred to the investment portfolio of the Life segment. A previously formed loss provision was therefore released into the result. With this transaction all properties in LRC were sold from ASR Vastgoed Projecten B.V. perspective. As a result the profit for the year increased € 15 million to € 27 million (2017: € 12 million).
The remaining total exposure on the balance sheet has been further reduced and amounts to € 28 million (2017: € 65 million).
Risk management is an integral part of a.s.r.’s day-to-day business operations. a.s.r. applies an integrated approach to managing risks, ensuring that strategic objectives are met. Value is created by striking the right balance between risk, return and capital, whilst ensuring that obligations to stakeholders are met. The Risk Management Function (RMF) supports and advises a.s.r. in identifying, measuring and managing risks, and ensures that adequate and immediate action is taken in the event of developments in the risk profile.
Risk Committee Structure a.s.r. has established a structure of risk committees with the objective of monitoring the risk profile for a.s.r. group, its legal entities and its business lines in order to ensure that it remains within the risk appetite and the underlying risk tolerances and risk limits. When triggers are hit or likely to be hit, risk committees make decisions regarding measures to be taken, i.e. risk-mitigating measures or measures regarding governance, such as the frequency of their meetings. For each of the risk committees, a statute is drawn up in which the tasks, composition and responsibilities of the committee are defined.
Risk appetite a.s.r. is exposed to a number of risks, including strategic risks, market risks, counterparty default risks, liquidity risks, underwriting risks (Life and Non-life) and operational risks. The RMF monitors a.s.r.’s risk profile and its legal entities in order to ensure that it stays within the risk appetite.
The risk appetite is defined as the level and type of risk a.s.r. is willing to bear in order to meet its strategic, tactical and operational objectives. The risk appetite is formulated to give direction to the management of the (strategic) risks. The risk appetite contains a number of qualitative and quantitative risk appetite statements and is defined for both financial risks (FR) and non-financial risks (NFR). The statements highlight the organisation’s risk preferences and limits and are viewed as key elements for the realisation of a.s.r.’s strategy.
In 2018, to ensure alignment with the a.s.r. strategy, the risk appetite statements and limits were evaluated and updated by the Executive Board and approved by the Supervisory Board.
ASR Nederland N.V. is a socially responsible organisation which ensures that all stakeholders’ interests are met in a balanced and sustainable way.
3 ASR Nederland N.V. complies with current laws, regulations and ethical (and inherently internal) norms.
7 ASR Nederland N.V. has a maximum financial leverage ratio of 40%.
12 ASR Nederland N.V. has a maximum COR of 99%. FR
Strategic risk management Strategic risk management aims to identify and manage the key risks that could affect a.s.r.’s strategic objectives. Key elements of strategic risk management are Strategic Risk Analysis (SRA) and Own Risk and Solvency Assessment (ORSA).
a.s.r. has adopted a combined top-down and bottom-up approach (SRA) to identify major risks to which it may be exposed. Output from the SRA, in combination with the risk appetite statements, provides an insight into the overall risk profile of a.s.r. and the risk profiles of the underlying legal entities. The main risks are translated into ‘risk priorities’ (including emerging risks) at group level and are monitored throughout the year by the a.s.r. Risk Committee.
Management of financial risks a.s.r. strives for an optimum trade-off between capital, risk and return. Steering on capital, risk and return is done by decision-making throughout the entire product cycle from PARP (Product Approval & Review Process) to the payment of benefits and claims. At a more strategic level, decisionmaking takes place through balance sheet management. A robust solvency position takes precedence over profit, premium income and direct investment income. Risk tolerance levels and limits are disclosed in the financial risk appetite statements (financial RAS) and are monitored by the FRC. The FRC evaluates financial risk positions against the RAS on a monthly basis. Where appropriate, a.s.r. takes additional mitigating measures.
In 2018, the AF performed its regulatory tasks by assessing the adequacy of the Solvency II technical provisions, giving an opinion on reinsurance and underwriting, and contributing to the Risk Management RMF. The AF report on these topics was discussed by the Executive Board, Risk Committee and Audit & Risk Committee. See the Financial Statements (chapter 7.8 Risk management) for further information on a.s.r.’s management of financial risks.
Management of non-financial risks Non-financial risk appetite statements are in place to manage the risk profile within the limits determined by the Executive Board and approved by the Supervisory Board. The Non-Financial Risk Committee (NFRC) monitors and discusses on a quarterly basis whether non-financial risks are adequately managed. Should the risk profile exceed the risk appetite, the NFRC will decide on steps to be taken. On a quarterly basis, the risk profile and internal control performance of each business is discussed with senior management in the business risk committees and the NFRC.
In order to enhance the uniformity, efficiency and effectiveness of the risk and control cycle, a.s.r. additionally purchased and rolled out the Governance and Risk Compliance (GRC) tool (‘Cerrix’). In 2019, a.s.r. will improve the functionality of the tool continuously with new modules to strengthen the alignment with the ORM policies. a.s.r. will continue to look for opportunities to improve the management of its operational risks in 2019.
In 2018, a.s.r. took various steps to enhance the measurement and reporting of data quality for financial reporting purposes and to mitigate end-user computing
risks. A project to address these items started at the beginning of 2018 and is expected to be completed in 2019.
Emerging risks in 2018 are as follows: • Climate change; • Climate transition (2019); • Longevity risk.
To determine the risk degrees , a.s.r. uses a risk scale based on likelihood and impact (Level of Concern). For the risk priorities, the risk degree is determined on a quarterly basis by the a.s.r. Risk Committee. The table below shows the risk degree as at Q4 2018.
a.s.r. takes further measures to mitigate net risks outside the risk appetite boundaries so they fall within the risk boundaries. The measures for each risk priority are described in the text below.
It is important to meet customers’ needs, taking into account changing customer demand. New generations buy (insurance) products more frequently through digital, direct distribution channels. The societal role of companies is becoming increasingly important. CSR is a growing criterion that customers take into account when buying a service or product.
a.s.r. continually monitors and assesses its product portfolio and distribution channels for relevant alterations in order to meet the changing needs of customers and achieve planned cost reductions as premiums fall. For example, it actively monitors the market to examine potential acquisitions or mergers. Other mitigating measures include the (further) roll-out of capital-light initiatives (such as third party asset management, distribution businesses and a focus on pension DC).
Legal proceedings a.s.r. is the subject of a number of legal proceedings initiated by individual unit-linked policyholders, represented in most cases by claims organisations. Future legal proceedings regarding unit-linked life insurance policies could be brought against a.s.r. by consumers individually, by consumer organisations acting on their behalf or in the form of a class action. There is also ongoing lobbying by consumer protection organisations to gain sustained media attention for unit-linked life insurance policies. These organisations argue, amongst other things, that consumers were not paid sufficient compensation under the compensation scheme.
a.s.r. is currently subject to two collective actions. In June 2016, Woekerpolis.nl initiated a collective action, requesting the district court Midden-Nederland to declare that a.s.r. has sold products in the market which are defective in various respects (e.g. on transparency regarding cost charges and other product characteristics, and included risks for which the insurer failed to warn, such as considerable stock depreciations, the inability to realise the projected final policy value, unrealistic capital projections due to difference in geometric versus arithmetic returns and on general terms and conditions regarding costs that Woekerpolis.nl considers unfair). Also, in March 2017, the Consumentenbond started a collective action against a.s.r. This collective action is based on grounds similar to the collective procedure that was initiated by Woekerpolis.nl. In both collective procedures, a.s.r. has rejected all the claims. The collective procedure of Consumentenbond is currently pending at the district court Midden-Nederland. In a decision of 6 February 2019 the district court Midden-Nederland rejected all claims of Woekerpolis.nl and concluded that the products sold by a.s.r. cannot be considered as defective. Only with regard to the claim on administrative costs that are calculated under specific circumstances in a specific Spaarplan product, the district court decided this to be unlawful as no defence was put forward.
Impact of supervision, laws and regulations Due to growing political and regulatory pressure, there is the risk that: • a.s.r.’s reputation will suffer if new requirements are not complied with in time; • Available resources will largely be utilised to align the organisation with new legislation, leaving fewer resources to spend on core customer processes; • Processes will become less efficient and pressure on the workforce will increase; • a.s.r. will have administrative fines or sanctions imposed on it for failure to comply with requirements (on time).
a.s.r. constantly monitors changing laws and regulations and assesses their impact and the corresponding actions required (in conjunction with Compliance and Legal). The availability of capacity is also continuously monitored to ensure that there are sufficient resources to process all regulations in a timely manner. a.s.r. has a multidisciplinary legislation and regulation committee to help the various businesses signal and adopt legislative amendments in good time. The committee reports to the NFRC.
In May 2017, the International Accounting Standards Board (IASB) published IFRS 17, the new IFRS standard for insurance contracts that will replace the existing IFRS 4 standard. IFRS 17 is expected to be effective from 1 January 2022, subject to endorsement by the EU, given the decision taken by the IASB in November 2018 to postpone the implementation of IFRS 17 and IFRS 9 by one year. IFRS 17 is designed to facilitate comparability between insurers and to increase transparency in relation to risks, contingencies, losses and embedded options in insurance contracts. IFRS 9 Financial Instruments was published in July 2014 and has had a major impact on the processing of financial instruments (investments). Like IFRS 17, IFRS 9 is expected to be applied by a.s.r. Group from 1 January 2022 in order to maintain cohesion between the two standards and guard against IFRS 9 being implemented twice. The postponement is not available to ASR Bank N.V., which therefore began applying IFRS 9 as from 1 January 2018. In 2017, a.s.r. launched an internal programme to prepare for the implementation of IFRS 17 and IFRS 9 throughout the Group. The IFRS 17 and IFRS 9 programmes will have a major impact on the Group’s primary financial processing and reporting and could have a significant effect on its capital, financial statements and related KPIs. Finance, risk, audit and the business have all been given attention in the programmes due to the need to develop an integrated vision. For more information, see chapter 7.3.3 New standards, interpretations of existing standards or amendments to standards not yet effective in 2018.
Information (cyber) security risk Information (cyber) security risks continued to increase in the wake of progressive digitisation. In order to prevent cybercrime attacks and information security breaches, a.s.r. is fully aware of the potential threats posed to the organisation. a.s.r. is at risk from new technological developments requiring different and increased expertise and other mitigating measures. The risk of confidential information becoming available to third parties, intentionally or unintentionally, is a risk that both a.s.r. and its customers face, and is a risk that could ultimately lead to significant reputational damage. All of a.s.r.’s employees are therefore expected to be fully aware of the risks associated with handling confidential information regarding a.s.r.’s customers, employees, financial information and strategy, and are asked to do their utmost to protect a.s.r.’s assets.
The use of, and dependence on, IT systems is substantial for both a.s.r. and its customers. Cybercrime could therefore have a major impact on a.s.r.’s security and continuity. The attempted cybercrime attacks a.s.r. experienced in 2018, which included phishing, malware and ransomware attacks, have become well-known and widespread phenomenons.
Climate change (emerging risk) Insurers need to increasingly take climate change risks into account. Due to climate change, claims ratios might increase. Currently, it is a challenge to estimate the likelihood of extreme weather. In the long term, it is a challenge to estimate the effects of climate change whereby climate change risks may be underestimated. For details about climate change risk and a.s.r.’s measures see chapter 2.1 Trends and developments.
Climate transition (emerging risk 2019) The transition to a climate-neutral economy is part of a.s.r.’s risk priorities for 2019. The transition entails uncertainties, changes and risks. The extent and impact of the risks depend on, amongst other things, the pace of the climate transition, government policies, technological developments and changing consumer behaviour. An abrupt climate transition may have a major impact on the economy, business models and financial stability. For details about a.s.r.’s measures relating to this risk, see chapter 2.1 Trends and developments.
Longevity risk (emerging risk) Recent mortality tables (2018) of the Dutch Association of Actuaries (AG) indicate that the life expectancy of the Dutch population has not improved significantly. Nevertheless, it should not be ruled out that the life expectancy of a.s.r.’s policyholders could improve significantly compared to current mortality tables due to relatively sudden (medical and/or technological) developments in health care. Certain improvements could ultimately result in a lower solvability for a.s.r. For details about a.s.r.’s measures relating to this risk, see chapter 2.1 Trends and developments.
The quarterly report at Group level and supervised entity level is presented to and discussed with the a.s.r. Risk Committee and submitted to the Audit & Risk Committee. The report is shared and discussed with the DNB, the AFM and the external auditor.
As required by Section 5:25c paragraph 2(c) of the Dutch Financial Supervision Act, the Executive Board declares that, to the best of its knowledge: I. The financial statements provide a true and fair view of the assets, liabilities, financial positions and earnings of a.s.r. and the enterprises included in the consolidation taken as a whole; II. The management report provides a fair view of the position at the balance sheet date and developments during the year under review and the enterprises included in the consolidation taken as a whole, together with a description of the principal risks confronting a.s.r.
Based on our procedures performed nothing has come to our attention that causes us to believe that the sustainability information does not present, in all material respects, a reliable and adequate view of: • The policy and business operations with regard to sustainability • The thereto related events and achievements for the year 2018 in accordance with the reporting criteria as included in the section Reporting criteria.
We are independent of a.s.r. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. This includes that we do not perform any activities that could result in a conflict of interest with our independent assurance engagement. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
Reporting criteria The sustainability information needs to be read and understood together with the reporting criteria. a.s.r. is solely responsible for selecting and applying these reporting criteria, taking into account applicable law and regulations related to reporting.
Limitations to the scope of our review The sustainability information includes prospective information such as ambitions, strategy, plans, expectations and estimates and risk assessments. Inherent to prospective information, the actual future results are uncertain. We do not provide any assurance on the assumptions and achievability of prospective information in the sustainability information.
Responsibilities of the Executive Board and the Supervisory Board for the sustainability information The Executive Board is responsible for the preparation of reliable and adequate sustainability information in accordance with the reporting criteria as included in the section Reporting criteria, including the identification of stakeholders and the definition of material matters. The choices made by the Executive Board regarding the scope
The Executive Board is also responsible for such internal control as the management board determines is necessary to enable the preparation of the sustainability information that is free from material misstatement, whether due to fraud or errors.
The Supervisory Board is responsible for overseeing the reporting process of a.s.r.
We have exercised professional judgement and have maintained professional skepticism throughout the review performed by a multi-disciplinary team, in accordance with the Dutch assurance standards, ethical requirements and independence requirements.
Our review included amongst others: • Performing an analysis of the external environment and obtaining an understanding of relevant social themes and issues, and the characteristics of the company; • Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the sustainability information. This includes the evaluation of the results of the stakeholders’ dialogue and the reasonableness of estimates made by the management board; • Obtaining an understanding of the reporting processes for the sustainability information, including obtaining a general understanding of internal control relevant to our review; • Identifying areas of the sustainability information with a higher risk of misleading or unbalanced information or material misstatements, whether due to fraud or errors. Designing and performing further assurance procedures aimed at determining the plausibility of the sustainability information responsive to this risk analysis. These further review procedures consisted amongst others of: - Interviewing relevant staff at corporate and business level responsible for the sustainability strategy, policy and results; - Interviewing relevant staff responsible for providing the information for, carrying out internal control procedures on, and consolidating the data in the sustainability information; - Obtaining assurance information that the sustainability information reconciles with underlying records of the company; - Reviewing, on a limited test basis, relevant internal and external documentation; - Performing an analytical review of the data and trends; • Reconciling the relevant financial information with the financial statements.
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‘My work in the Innovation & Digital department regularly brings me into contact with innovations and improvements. This ‘ancestor’ of the calculator dates from the end of the 19th century but was still being used up to the mid-20th century. They nicknamed it the ‘plusje’. It’s an intriguing object, with all those buttons. Looking at it makes me realise just how fast technology is moving right now. I wonder how much of our own existing technology we’ll still be using 50 years from now.’
A personal union exists between ASR Nederland N.V., ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. through cross-membership of the Executive Board and the Supervisory Board. ASR Basis Ziektekostenverzekeringen N.V., ASR Aanvullende Ziektekostenverzekeringen N.V. and ASR Bank N.V. have their own Executive Boards. The Supervisory Boards of these entities consist of a combination of members of the Executive Board and members of the Supervisory Board of ASR Nederland N.V. ASR Vermogensbeheer N.V. and ASR Vastgoed Vermogensbeheer B.V. are two AIFMD-licensed AIFMs. These entities have their own Executive Boards.
Contacts with shareholders are currently conducted entirely in line with the Policy on fair disclosure and on the basis of bilateral dialogue with shareholders (with the exception of the Relationship Agreement). The Policy on fair disclosure and bilateral dialogue with shareholders is published on www.asrnl.com. The Group’s Disclosure Committee supervises compliance with laws and regulations in relation to the disclosure of price-sensitive information.
Certain resolutions of the Executive Board require the approval of the Supervisory Board and/or the AGM. These resolutions are outlined in the a.s.r. articles of association and the Rules of Procedure of the Executive Board. Both can be viewed at www.asrnl.com.
Composition of the Executive Board The articles of association specify that the Executive Board must consist of a minimum of two members, including at least a CEO and CFO. Only candidates found to meet the ‘fit and proper test’ under the Dutch Financial Supervision Act are eligible for appointment. The Supervisory Board appoints the members of the Executive Board and may suspend or dismiss any Executive Board member at any time. The Supervisory Board notifies the AGM of proposed appointments. At the AGM in 2018, the Supervisory Board discussed the reappointment of Chris Figee as CFO; the Supervisory Board subsequently reappointed Chris Figee for an additional four-year term. During 2018, the composition of the Executive Board remained unchanged, consisting of four members under the chairmanship of Jos Baeten. Following the change in the management structure, Karin Bergstein and Michel Verwoest resigned as Executive Board members with effect from 1 February 2019. The selection procedure for a new member of the Executive Board has begun and the nomination of the candidate will be notified as soon as possible. In anticipation of this candidate, the portfolio is temporarily divided between Jos Baeten and Chris Figee.
Diversity a.s.r. is committed to an inclusive culture. In 2017, the Supervisory Board adopted a formal diversity policy. a.s.r. uses the following definition for diversity: a balanced composition of the workforce, based on age, gender, cultural or social origin, competences, views and working styles. In 2018, the Executive Board consisted of one woman and three men. The current composition of the Executive Board does not meet the gender target of having at least 30% women amongst the members of the Executive Board. a.s.r. will continue to strive for an adequate and balanced composition of the Executive Board in future appointments, by taking into account its diversity policy and all relevant selection criteria such as executive experience, experience in finance and experience in the political and social environment. A female candidate is being sought to fill the vacancy within the Executive Board.
Permanent education and evaluation A self-evaluation session was held after the results of a 360º feedback questionnaire had been received. This gave the Executive Board feedback from members of the Supervisory Board, senior management, members of the Works Council and each other. The questionnaire specifically focused on leadership themes from ‘the story of a.s.r.’: dilemmas, dialogue, clear frameworks and actions. The outcome of the questionnaire was discussed within the Executive Board under the guidance of an expert/ consultant representing the supplier of the 360º tooling, to further interpret the results. The overall impression that emerged from this self-assessment was positive. Positive points included the open and interested attitude of the Executive Board, its complementarity on tactical and strategic level and its decisiveness/execution power. Recommendations include openly discussing dilemmas with senior management and providing more feedback on attitudes and behaviour.
The Supervisory Board will continue to maintain contact with the members of the Executive Board as its primary role. As is already common practice, relevant senior managers will join Supervisory Board meetings depending on what is on the agenda. The Supervisory Board supervises the functioning of the BEC as a whole and the relationship between the Executive Board and the BEC. The performance of the senior managers is also discussed between the Executive and Supervisory Boards in the context of the review of senior management and succession planning.
In 2018, Jos Baeten was responsible for Human Resources, Corporate Communications, Strategy, Risk management of the investment funds managed by ASR Vermogensbeheer N.V., Corporate Social Responsibility, Audit, Legal Affairs & Integrity.
Jos Baeten studied law at Erasmus University Rotterdam and began his career in 1980 when he joined Stad Rotterdam Verzekeringen N.V., one of a.s.r.’s main predecessors. In 2005, Jos Baeten was appointed Chairman of the Board of Directors of Fortis ASR Verzekeringsgroep N.V.
In 2018, Chris Figee was responsible for Group Accounting, Reporting & Control, Business Finance & Risk, Group Asset Management, Real Estate Investment Management, Real Estate Projects, Group Balance Sheet Management and Group Risk Management.
As of 1 February 2019, Chris Figee is responsible for Finance, Group Accounting, Reporting & Control, Group Balance Sheet Management, Group Asset Management and a.s.r. real estate.
Karin Bergstein has been responsible for Innovation & Digital, Information Technology and Change, and the product lines Pensions, Individual life, Banking and Mortgages and Funeral.
Michel Verwoest has been responsible for the product lines P&C, Disability, Health and Services and for a.s.r.’s distribution companies.
The Supervisory Board has three roles: the supervisory role, the advisory role and the employer’s role for the Executive Board. The Supervisory Board supervises the policy pursued by the Executive Board and the general course of affairs at a.s.r. and its group entities. Specific powers are vested in the Supervisory Board, including approving certain Executive Board decisions.
Name Date of initial appointment Date of reappointment End of current term of appointment¹
In line with the Dutch Corporate Governance Code, Supervisory Board members are appointed by shareholders for a four-year term. Supervisory Board members can be reappointed for one additional four-year term and then subsequently reappointed for a period of two years. Reappointments following an eight-year period must be justified in the Supervisory Board report. Supervisory Board members retire no later than by the AGM of Shareholders immediately following the end of their term of appointment.
In accordance with Section 2:158 of the Dutch Civil Code, the Works Council started their search for a candidate in 2018. An announcement will be made once there is clarity about the outcome.
1. Supervisory Board members are reappointed or must resign no later than the next AGM held after this date.
G e n e ra l b u si n e ss m an ag e m e n t
Kick van der Pol 12-2008 9 1949 M • • • • •
Permanent education and evaluation The Supervisory Board is responsible for assessing the quality of its own performance. It therefore performs an annual self-assessment and discussion of its own performance and that of its committees and members. A self-assessment with external supervision is carried out every three years. The self-assessment for 2018 was carried out with internal guidance. The assessment was based on written and oral input from the Supervisory Board, the Executive Board, the Company Secretary and several senior managers. The following aspects were assessed: • Composition and functioning of the Supervisory Board
The outcome of the assessment was discussed by the members of the Supervisory Board and the Company Secretary. They concluded that interrelationships were good, interaction was sufficient and there was an open dialogue (including in difficult cases). The quality of the Supervisory Board was also seen as good, and must, it was felt, continue to be safeguarded following the forthcoming changes in the composition of the Supervisory Board. Time must then be taken to get to know each other well on a personal level. Attention must also be paid to the design of the relationship with the BEC. It was recommended that certain reports be linked and that more time be devoted to succession management and planning.
In 2018, two continuing education (CE) sessions were organised for Supervisory Board members, members of the Executive Board and senior managers. The first session was a follow-up to the explanation of IFRS 17, the new accounting standard for insurance contracts, led by Group Accounting, Reporting & Control. The new regulations will impact the external reporting on insurance contracts in the future. The implementation of IFRS 17 within a.s.r. is a major project. The second session focused on increasing digitisation in the insurance industry. Furthermore, a knowledge session led by an external expert on governance and board leadership was held. At this session, the Supervisory and Executive Boards were given an update on long-term value creation in line with the Dutch Corporate Governance Code and discussed this in relation to a.s.r. The Supervisory Board of ASR Bank N.V. took part in various sessions on cyber risks and IFRS 9. Individual members were given updates and presentations on various topics in view of their supervisory directorships at several Dutch and foreign enterprises and institutions.
Annet Aris had a 17-year career at McKinsey as a management consultant, including 9 years as a partner in the fi rm. She currently holds supervisory directorships at several Dutch and foreign enterprises and institutions. She is a member of the Supervisory Board of ASML N.V., Randstad Holding N.V. and Coöperatieve Rabobank U.A. (from 12 December 2018) in the Netherlands, She is also a member of the Supervisory Board of Jungheinrich AG in Germany and Thomas Cook PLC in London (until 2 February 2019). Annet Aris is Senior Affi liate of (digital) strategy at INSEAD international business school (Fontainebleau, France). Annet Aris is a Supervisory Board member recommended by the Works Council.
Sonja Barendregt was a partner at PwC, specialising in the fi nancial services sector, until 1 July 2017. She was also chair of PwC’s International Pension Group, a member of PwC’s European Strategic Diversity Council, chair of the Pension Funds Industry Group, chair of the Investment Management Industry Group and a member of the European Investment Management Leadership Team. Sonja Barendregt has been a member of the Supervisory Board of Volksbank since 2017 and chair of the Audit Committee. She is also an accountancy examinations expert at the Erasmus School of Accounting & Assurance. In April 2018, Sonja Barendregt was appointed as a member of the Supervisory Board and chairperson of the Audit & Risk Committee of Robeco Institutional Asset Management B.V.
Articles of Association and rules of procedure The current Articles of Association (dated 9 June 2016) have been published on a.s.r.’s corporate website: www.asrnl.com. The Supervisory and Executive Board rules are also available on a.s.r.’s corporate website. These rules were most recently amended and adopted in 2017 in response to the revised Dutch Corporate Governance Code.
Decision on disclosure of non-financial information and Decision on disclosure of diversity policy a.s.r. also wants to be transparent about non-financial information in its Management Report. Since the reporting year 2017, the relevant legal requirements have been tightened up for large companies of public interest. Such organisations, which include a.s.r., are now expected to clarify how they deal with environmental, social and personnel issues, respect for human rights and the fight against corruption and bribery in their business operations and value chain. Large listed companies must also provide insight into their policy on diversity in relation to the Executive and Supervisory Boards. Annex G states where the information requirements specified by the new legislation can be found in the annual report.
Attendance record of the members of the Supervisory Board (plenary sessions and committee meetings)
Highlights a.s.r. began 2018 with the closing of Generali Nederland. This acquisition is in line with a.s.r.’s strategy of combining organic growth and growth through targeted acquisitions and its commitment to deploy capital for sustainable value creation. Following the completion of this acquisition, a.s.r. began integrating the activities of Generali Nederland into its own operations which is likely to be completed by 2020 at the latest. The Supervisory Board wishes to express its appreciation for the way in which the Executive Board and all the employees involved have shown great commitment and confidence in effecting this process.
As mentioned in chapter 6.1.2 Executive Board, a.s.r. decided to change its management structure. There has been ongoing discussion in recent years concerning the strategic direction of the company, and it was eventually concluded that in order to successfully implement the strategy and achieve the goals a.s.r. has set itself in the future, the management structure had to be adjusted. Several meetings were held with the Supervisory Board, members of the Executive Board and the regulator, DNB, to discuss the design of this new management structure. This has resulted in a change of the composition and size of the Executive Board and the creation of a BEC as from 1 February 2019. The creation of the BEC, guarantees more direct involvement by the senior managers of the product lines in further strengthening a.s.r.’s innovative power. It will also enable a.s.r. to act decisively with regard to potential inorganic opportunities. The COO positions disappeared as a result, and Karin Bergstein and Michel Verwoest have agreed to stand down from the Executive Board as from 1 February 2019. The Supervisory Board wishes to express its appreciation to them both for their key role in a.s.r.’s recent transition, since which a number of successful acquisitions have been made, a.s.r. has become more agile and efficient, and it has improved its cost control. Customer and employee satisfaction have also both risen. a.s.r. has consequently become an organisation which serves as an example to many. Karin Bergstein and Michel Verwoest both made very important contributions to this development. The Supervisory Board has begun the search for a new Executive Board member. The nominee will be announced as soon as there is full clarity on this.
1 Where a Supervisory Board member stood down from a Committee or was appointed during the year, only meetings held during his/her tenure are taken into account.
At the end of the year, a.s.r. announced its intention to acquire insurer Loyalis N.V. from APG. At the beginning of 2019, an application for a declaration of no-objection (DNO) was submitted to the DNB. With this acquisition, a.s.r. will broaden and strengthen its market position in the field of disability insurance and enhance its leading role as a provider of overall solutions for sustainable employability. The Supervisory Board supports the management in continuing the commercial cooperation with APG in the field of disability insurance and sustainable employability for many years to come. After a broad consideration of interests, it was decided to do so with the Loyalis brand and from Heerlen. The life and pensions activities of Loyalis are expected to be integrated into a.s.r. in 2020. The Supervisory Board has every confidence in the successful outcome of this acquisition.
Capital Markets Day; • Legal, regulatory and compliance issues, including the relationship with the Dutch regulators; • Tax policy and developments.
Financial performance The Supervisory Board discussed the financial performance each quarter, covering standing issues such as developments in the combined ratios, long-term cost development and premium developments. The Supervisory Board was satisfied with a.s.r.’s financial performance in 2018.
As part of their audit process, EY issued a management letter in November 2018 and a 2018 Audit report in March 2019 to the Executive and Supervisory Boards. In the management letter, EY recognises the continuous focus a.s.r. places on preparing the company for the future. EY also states that in general, the internal control processes (three lines of defense) work well. The Supervisory Board was pleased with these conclusions. There are a few items which require further attention, and the Supervisory Board will monitor this.
2. Improvement of the risk control framework for the WerknemersPensioen (WnP) platform. When introducing the WnP platform, the primary focus was on creating volume and optimising client experience. Now that the WnP platform is more mature, these remaining items will be given the highest priority.
Throughout the year, the Supervisory Board regularly discussed the organisation and culture of a.s.r. with the Executive Board. a.s.r.’s new in-house CLA became effective on 1 January 2018. In 2017, a.s.r. had redefined its core values and competencies in chapter 3.1 The story of a.s.r.’ This was given a prominent place in the new CLA. The Supervisory Board hereby compliments the Executive Board on the enormous progress that has been made in this area, which has clearly contributed to employees’ understanding of the strategic direction a.s.r. is moving in.
Contacts with the Works Council All the Supervisory Board members attended one or more routine consultative meetings of the Works Council. In addition to these routine meetings, the Works Council maintains regular contact with Annet Aris, the Works Council-appointed Supervisory Board member. The Supervisory Board also greatly appreciates its bilateral dialogues with the Works Council, on several occasions together with one or more members of the Executive Board.
Contacts with external regulators and auditors The Supervisory Board periodically consulted with the DNB and the AFM. The independent external auditor, EY, attended the Supervisory Board meetings at which the annual and interim financial results were discussed. During these meetings, the auditor elaborated on the audit reports and answered specific questions.
The Supervisory Board has three committees that discuss specific issues and prepare items on which the full Supervisory Board takes decisions. The chairperson of each committee reports on the main points of discussion and the resulting recommendations are discussed in the subsequent Supervisory Board meeting. The minutes of the committee meetings are available to the members of the Supervisory Board.
The Audit & Risk Committee comprises three Supervisory Board members. The composition of the Committee is such as to represent the specific business know-how, financial, accounting and actuarial expertise relating to the activities of a.s.r. Sonja Barendregt succeeded Annet Aris, who stepped down as a member of the Audit & Risk Committee. The Audit & Risk Committee is grateful for the many valuable contributions made by Ms Aris to the committee’s discussions.
long-term costs. In the last couple of years, a.s.r. has been successful in managing its costs in line with the lower cost coverage from the life business.
a.s.r.’s solvency position was reviewed and discussed each quarter. Specific attention was paid to the UFR effect within the Solvency II framework and to a.s.r.’s view on a more economic UFR scenario. The Audit & Risk Committee discussed the risk scenarios and the outcomes of the ORSA.
In all risk scenarios, the solvency ratio remained – sometimes after specific management actions – within the boundaries set by a.s.r., demonstrating the robustness of a.s.r.’s solvency and the effectiveness of certain management actions. The future solvency ratio projections include the gradual decrease of the UFR as prescribed by EIOPA.
The Audit & Risk Committee periodically monitored the status of the risk appetite during the year through a.s.r.’s Integrated Risk Dashboard and the status report on the management of risk priorities. The Committee was informed of the outlines of the reinsurance programme.
At the end of 2018, the multi-year budget for 2019-2021, the investment plan for 2019 and the balance sheet plan for 2018 and subsequent years were discussed. The multi-year budget was subsequently approved by the Supervisory Board. Finally, the Audit & Risk Committee prepared a rotation of the external auditor, in order to safeguard stability during the transition fase of the implementation of IFRS 9 and 17. It is expected that a proposal for this will be made at the upcoming AGM on 22 May 2019.
Remuneration Committee In 2018, the composition of the Remuneration Committee was as follows: • Annet Aris (Chair) • Kick van der Pol
The Remuneration Committee advises the Supervisory Board on, among other things, remuneration policy for the Executive Board and the terms and conditions of employment of the Executive Board, and reviews the remuneration of senior management.
The Remuneration Committee met eight times in 2018. Its meetings were also attended by the CEO (except when issues relating to the Executive Board were discussed) and the Human Resources Director, who also acts as Secretary. The Committee solicits support and advice from departments such as Group Risk Management, Compliance, Audit and Human Resources. Where needed, it calls in the expertise of independent legal and pay & benefit experts.
Extensive analyses have been made and all stakeholder groups have been consulted on possible amendments of the remuneration policy for the Executive Board. In evaluating the remuneration policy, the Committee carefully took into account the opinions of all stakeholders, confidence in and the market position of a.s.r., and a.s.r.’s ability to attract and retain high-performing employees. The Committee proposed a revised remuneration policy to the Supervisory Board. The Supervisory Board will ask the shareholders to vote on the proposed remuneration policy as from 1 January 2020 for the Executive Board at the AGM in May 2019. The Supervisory Board is aware of the different opinions of the various stakeholders on remuneration. The Supervisory Board believes that the proposal strongly supports the long-term interest of a.s.r. and strikes a good balance between the different interests of stakeholders and offers an effective remuneration to the Executive Board.
Appreciation The Supervisory Board wishes to thank all the employees of a.s.r. (both permanent and contract staff) for their dedication to a.s.r., especially for their efforts with regard to all aspects of ‘the story of a.s.r’. All our employees have worked collectively to achieve a.s.r.’s mission by helping customers to share risks and build up capital for the future. Together, we are building an insurance company that is both valuable and sustainable. The Supervisory Board also wishes to express its gratitude to the members of the Executive Board and the senior management for their impressive leadership of a.s.r. which has given a.s.r. a good position in the market. The Supervisory Board greatly appreciated the ongoing and constructive open dialogue and cooperation with the Executive Board.
Kick van der Pol (Chairman) Annet Aris Sonja Barendregt Cor van den Bos Herman Hintzen
Introduction a.s.r. was nationalised in 2008 and from then on, the Dutch State was sole owner of all a.s.r. shares. As a state-owned financial institution, a.s.r. placed considerable constraints on the remuneration of the Executive Board. This was formalised in 2011 by a special act governing state-owned financial institutions which prohibited variable payments and increased fixed payments (Articles 1:128 and 1:129 of the Dutch Financial Supervision Act (Wft) and the corresponding transitional provisions). a.s.r.’s remuneration policy was therefore effectively put on hold and the remuneration of the Executive Board was fixed for many years. In 2016, a.s.r. was re-listed on the stock exchange and on 14 September 2017 became fully independent from the Dutch State. As a result, the freeze of the Executive Board’s remuneration by act no longer applied. The Supervisory Board has responded by deciding to reinstate and apply the existing remuneration policy, which includes a periodic benchmark comparison.
Every three years, an independent consultant performs a market comparison (remuneration benchmark). The 2017 benchmark analysis showed that the salaries of the Executive Board were substantially below the median of the relevant benchmarks. In line with the remuneration policy, which takes into account the principles of the Dutch Corporate Governance Code, a.s.r.’s Supervisory Board decided to gradually increase the individual remuneration of the members of the Executive Board and reduce the gap with the peer group. Since this decision falls within the scope of the current remuneration policy, it was decided to act and implement the first level of the increase as of 1 January 2018. The increase will be effected in multiple stages over time, but no later than by 1 January 2020. The resulting level for 2020 is still significantly below the benchmark median.
Prioritising caution over speed, the Supervisory Board announced at the beginning of 2018 that it would assess and evaluate the remuneration policy for the Executive Board during the course of the year. This included holding extensive consultations with various stakeholders including shareholders, clients and staff. These consultations took place in 2018, as mentioned in the report of from the Remuneration Committee. The Supervisory Board will submit the revised remuneration policy for the Executive Board to the 2019 AGM for a shareholder vote.
The performance of each Executive Board member is reviewed annually, based on a set of financial and non-financial targets determined by the Supervisory Board. The targets for 2018 can be summarised as follows: • Financial: realisation of the multi-year budget within the established risk appetite; • Customer: creating a recognisable positioning of a.s.r.
These goals are supplemented with specific strategic priorities for each board member, such as the integration of Generali Nederland, preparations for the implementation of IFRS 17 and a sustainable strategy for the distribution companies.
Severance pay The following conditions apply to severance pay for policymakers (including members of the Executive Board). • The maximum severance pay is 100% of the fixed annual remuneration; • Severance pay is not awarded in the event of failure on the part of the company; • Severance pay that can be classified as variable is not awarded to a.s.r.’s policymakers or to banks and insurers that are part of the Group.
Remuneration of current and former Executive Board members The remuneration of Executive Board members is in line with the remuneration policy.
Highest pay ratio and the median salary a.s.r. is transparent about the remuneration of the Executive Board. Not only in terms of actual amounts, but in accordance with the Corporate Governance Code also in comparison with the median of the remuneration of all staff.
When the remuneration of the Executive Board is compared to the remuneration of all executive directors of all AEX-listed companies, two conclusions can be drawn: 1. The remuneration of a.s.r.’s CEO is among the lowest compared with the CEO remuneration of all AEX companies.
Pensions The calculation of annual pension expenses is based on the total pension rights granted during a term of service at a.s.r. pension costs include: • Pensions based on a maximum pensionable salary cap
All components of the remuneration of the Executive Board are included in the base used for calculating the pension benefits.
Participation in a.s.r. shares In addition to the remuneration policy, Executive Board members have committed themselves to taking a percentage of their remuneration in a.s.r. shares, at their discretion. Each member has signed an individual agreement for the commitment to purchase these shares. The cumulative investment in a.s.r. shares will reach a minimum of 50% of annual gross salary for the CEO and a minimum of 25% of annual gross salary for the other members. At year-end 2018, the (former) members of the Executive Board hold the following number of shares: • Jos Baeten 1,037 • Chris Figee 253 • Karin Bergstein 1,037 • Michel Verwoest 338 1 The fixed employee salary of the two ordinary board members is similar and amounts to € 498,000 in 2018. Variations arise as a result of the fiscal treatment of lease cars depending on the price and private use of the car and personnel interest rate discount related to mortgages. The fixed employee salary for the CEO amount to € 642,000 and for the CFO amount to € 505,000 in 2018.
2 The amount received as a committee member of the Selection & Appointment Committee and the Remuneration Committee and as a member of the Supervisory Board of ASR Basis/Aanvullende Ziektekostenverzekeringen N.V. During 2018 Annet Aris stepped down as a member of the Audit & Risk Committee.
The Board of employees (Raad van medewerkers; RvM) is new in a.s.r.’s employee representation structure. This council is made up of representatives from the various Business Unit Committees plus the entire Works Council. Members of the Executive Board also took part in the meetings of the Employee Council so as to keep in touch with matters considered relevant by employees. It shows that the cooperation between the Business Unit Committees, the Works Council and directors takes place in an accessible and transparent manner.
Employee participation as of 1 March 2018 - The Other Works Council
Board member, Ms Sonja Barendregt; • The change as of 1 February 2019 of the management structure of a.s.r.; • Talks with representatives of the trade unions; • The integration of the corporate services departments of Generali Nederland. From June 2018, the Generali Nederland employees will be working in Utrecht and will also be represented by the Works Council; • Evaluation of the remuneration policy of the Executive Board; • Evaluation meetings on the new CLA, which came into force on 1 January 2018, with employees, also attended by representatives of the unions and the Works Council.
The full Works Council was invited to and present at the AGM in May 2018. Below follows an overview of the formal consultations of the Works Council and a member of the Executive Board and the Supervisory Board in 2018. The Works Council also held informal meetings with a member of the Executive Board or one of the Supervisory Board members.
Regular Works Council meetings with a member of the Executive board
Ad hoc meetings Works Council with a member of the Executive board
Regular Works Council meetings with a member of the Executive board and members of the
‘I love this poster, which was made for the Maatschappij van Assurantie Discontering en Beleening der Stad Rotterdam. I enjoy looking at all these old official documents with their curlicues and majestic fonts. Walking through the a.s.r. building, you keep coming across unusual objects from the company’s past. Our history stretches back nearly 300 years, and it defines who we are.’
7 Financial statements 7.1.1 General information 140 7.1.2 Statement of compliance 141 7.2 Consolidated financial statements 142 7.2.1 Consolidated balance sheet 142 7.2.2 Consolidated income statement 143 7.2.3 Consolidated statement of comprehensive income 145 7.2.4 Consolidated statement of changes in equity 146 7.2.5 Consolidated statement of cash flows 147 7.3 Accounting policies 149 7.3.1 Changes in comparative figures 149 7.3.2 Changes in EU endorsed published
IFRS Standards and interpretations effective in 2018 151 7.3.3 New standards, interpretations of existing standards or amendments to standards, not yet effective in 2018 151 7.3.4 Key accounting policies 153 7.3.5 Other accounting policies 165 7.4 Group structure and segment information 172 7.4.1 Group structure 172 7.4.2 Segmented balance sheet 174 7.4.3 Segmented income statement and operating result 176 7.4.4 Non-life ratios 180 7.4.6 Discontinued operations and assets held for sale and related liabilities 183 7.5 Notes to consolidated balance sheet 185 7.5.1 Intangible assets 185 7.5.2 Property and equipment 186 7.5.3 Investment property 187 7.5.4 Associates and joint ventures 188 7.5.6 Investments on behalf of policyholders 191 7.5.7 Loans and receivables 192 7.5.9 Deferred taxes 194 7.5.10 Other assets 196 7.5.11 Cash and cash equivalents 196 7.5.13 Subordinated liabilities 200 7.5.14 Insurance liabilities 200 7.5.15 Employee benefits 204 7.5.18 Due to customers 211 7.5.19 Due to banks 211 7.5.20 Other liabilities 212 7.6 Notes to consolidated income statement 213 7.6.1 Gross insurance premiums 213 7.6.2 Investment income 214 7.6.3 Realised gains and losses 215 7.6.4 Fair value gains and losses 215 7.6.5 Fee and commission income 216 7.6.6 Other income 216 7.6.7 Net insurance claims and benefits 216 7.6.8 Operating expenses 217 7.6.10 Interest expense 218 7.6.11 Other expenses 218 7.6.12 Income tax expense 219 7.7 Other Notes 220 7.7.1 Fair value of assets and liabilities 220 7.7.2 Offsetting of financial assets and liabilities 229 7.7.3 Fair value of financial assets categorised into two groups based on business model and SPPI test results 229 7.7.4 Related party transactions 232 7.7.5 Remuneration of Supervisory Board and
Executive Board 233 7.7.6 Contingent liabilities and assets 235 7.7.7 Events after the balance sheet date 237 7.7.8 List of principal group companies and associates 238 7.7.9 Profit appropriation 238
Own Risk and Solvency Assessment Risk Management System 239 7.8.2 Insurance risk 249 7.8.3 Market risk 257 7.8.4 Counterparty default risk 265 7.8.5 Liquidity risk 267 7.8.6 Operational risk 268 7.8.7 Strategic risk management 268 7.9 Capital management 271 7.9.1 Capital management objectives 272 7.9.2 Solvency ratio and a.s.r. ratings 273 7.9.3 Dividend and capital actions 274 7.10 Company financial statements 275 7.10.1 Company balance sheet 275 7.10.2 Company income statement 276 7.10.3 Notes to the company financial statements 276
ASR Nederland N.V. (a.s.r.) is one of the top three insurance companies in the Netherlands. a.s.r. offers insurance, pension and mortgages to consumers and SMEs. a.s.r. is also active as a fiduciary asset manager.
a.s.r. is listed on Euronext Amsterdam and is included in the AEX index. a.s.r. has a total of 3,683 internal FTE’s (31 December 2017: 3,493).
Financial statements 2018 | 7.1 Introduction 141 7.1.2 Statement of compliance
Financial statements 2018 | 7.2 Consolidated financial statements 142 7.2 Consolidated financial statements 7.2.1 Consolidated balance sheet
Attributable to: Profit attributable to non-controlling interests 2 2 - Shareholders of the parent 610 872 - Holders of other equity instruments 59 45 - Tax on interest of other equity instruments -15 -11
1 Comparative figures for 2017 have been restated, mainly related to the discontinued classification of a.s.r. bank (see chapter 7.3.1).
Income tax on items that will not be reclassified to profit or loss -15 -28
Total items that will not be reclassified to profit or loss 46 83
Unrealised change in value of available for sale assets -429 126
Shadow accounting allows a recognised but unrealised gain or loss on an asset to be transferred to liabilities arising from insurance contracts (see accounting policy I, chapter 7.3.4).
Unrealised gains and losses include shadow accounting adjustments (see accounting policy I, chapter 7.3.4). For more detailed information on the unrealised gains and losses, please see chapter 7.5.12.2.
In June 2017 a.s.r. repurchased 3,000,000 of its own shares offered by NLFI ( at a price of € 29.00 and in September 2017 a.s.r. repurchased another 3,000,000 of its own shares offered by NLFI at a price of € 33.75.
Financial statements 2018 | 7.2 Consolidated financial statements 147 7.2.5 Consolidated statement of cash flows
The table below represents the cash flows from continuing and discontinued operations combined. Cash flows related to discontinued operations are included in chapter 7.4.6. if applicable.
Changes in operating assets and liabilities: Net (increase) / decrease in investment property -225 60
Net (increase) / decrease in investments on behalf of policyholders 573 61
Net (increase) / decrease in amounts due from and to customers -269 -266
Net (increase) / decrease in trade and other receivables 76 -126
Net increase / (decrease) in liabilities arising from insurance contracts on behalf of policyholders -256 -124
Net (increase) / decrease in other operating assets and liabilities 157 -70
Cash flows from investing activities: Investments in associates and joint ventures - -5
Financial statements 2018 | 7.3 Accounting policies 149 7.3 Accounting policies 7.3.1 Changes in comparative figure
In line with IFRS accounting requirements the comparative figures in the consolidated balance sheet have not been restated.
Share of profit/(loss) of associates and joint ventures 14 - 14
Attributable to: Profit attributable to non-controlling interests 2 - 2 - Shareholders of the parent 872 - 872 - Holders of other equity instruments 45 - 45 - Tax on interest of other equity instruments -11 - -11
Financial statements 2018 | 7.3 Accounting policies 151 7.3.2 Changes in EU endorsed published IFRS standards and interpretations effective in 2018
IFRS 17 Insurance Contracts IFRS 17 Insurance Contracts was issued by the IASB in May 2017 and will replace IFRS 4 Insurance Contracts. The standard is expected to be effective from 1 January 2022, subject to endorsement by the EU, given the decision taken by the IASB in November 2018 to delay the implementation of IFRS 17 and IFRS 9 by one year. IFRS 17 is expected to increase comparability by requiring all insurance contracts to be accounted for in a consistent manner. Insurance obligations will be accounted for using current values – instead of using tariff rates (‘tariefgrondslagen’) as is currently the a.s.r. accounting policy (see accounting policy I and J).
Financial statements 2018 | 7.3 Accounting policies 152 model, the variable fee approach for contracts with a direct participating feature and the premium allocation approach which is a simplified version of the general model and can be used mainly for short-duration contracts.
The general model measures insurance liabilities by taking the present value of future cash flows adding a risk adjustment (RA) (fulfilment value or PVFCF) and then a contractual service margin (CSM). The CSM represents the unearned profits of insurance contracts and will change the recognition of revenue in each reporting period for insurance companies. Under current a.s.r.’s accounting policy, revenue for insurance contracts is recognised when premiums are earned or received. Under IFRS 17, the Insurance contract revenue depicts the insurance coverage and other services provided arising from the group of insurance contracts at an amount that reflects the consideration to which a.s.r. expects to be entitled in exchange for those services. Revenue includes the release of the CSM and RA in profit or loss over the coverage period. Insurance service result is a new income statement line item which is effectively a net result on non-financial risks of all Insurance contracts. Current economic and non-economic (e.g. actuarial) assumptions are used in remeasuring the fulfilment value at each reporting period.
Board papers and IASB Transition Resource Group papers); • The identified workstreams have continued to implement their projects focusing on the requirements to implement
At this moment, given the complexity and options available in IFRS 17, it is too early to quantify the actual impact on IFRS equity and profit for the year. However, a.s.r. expects IFRS 17 to have significant changes to its accounting policies and impact on shareholders’ equity, net result, presentation and disclosure.
Classification and measurement The classification and measurement of financial assets under IFRS 9 will depend on a.s.r.’s business model and the instrument’s contractual cash flow characteristics. These may result in financial assets being recognised at amortised cost, at fair value through other comprehensive income (equity) or at fair value through profit or loss. In many instances, the classification and measurement under IFRS 9 will be similar to IAS 39, although certain differences will arise. The
a.s.r. has concluded the implementation of IFRS 9 for ASR Bank N.V. including the classification and measurement of the financial instruments. The impact of the implementation of IFRS 9 for ASR Bank N.V. related to a.s.r. as a whole is marginal.
A. Estimates and assumptions The preparation of the financial statements requires a.s.r. to make estimates, assumptions and judgements in applying accounting policies that have an effect on the reported amounts in the financial statements. These relate primarily to the following: • The fair value and impairments of unlisted financial instruments (see accounting policy B and E); • The estimated useful life, residual value and fair value of property and equipment, investment property, and intangible assets (see accounting policy C, D and T); • The measurement of liabilities arising from insurance contracts (see accounting policy I); • Actuarial assumptions used for measuring employee benefit obligations (see chapter 7.5.15); • When forming provisions, the required estimate of existing obligations arising from past events; • The recoverable amount of impaired assets (see accounting policy B, E and G).
II. Financial instruments: Loans and receivables (excluding mortgage loans) 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 rate curve used in the market that includes an additional spread based on the risk profile of the counterparty.
Valuation techniques are used to the extent that observable inputs are not available. The basic principle of fair value measurement is still to determine a fair, arm’s length price. Unobservable inputs therefore reflect management’s 1 Not measured at fair value on the balance sheet and for which the fair value is disclosed.
I. Financial instruments: private equity investments and real estate equity funds third parties The main non-observable market input for private equity investments and real estate equity funds third parties is the net asset value of the investment as published by the private equity company (or partner) and real estate equity funds respectively.
The following valuation methods are available for the calculation of fair value by the external professional appraisers for investment property, including real estate equity funds associates, and buildings for own use: Reference transactions Independent professional appraisers use transactions in comparable properties as a reference for determining the fair value of the property. The reference transactions of comparable objects are generally based on observable data consisting of the land register ‘Kadaster’ and the rural land price monitor as published by the Dutch government 'grondprijsmonitor' in an active property market and in some instances accompanied by own use information.
Financial statements 2018 | 7.3 Accounting policies 156 as gross rental income less vacancy (apart from the rural category), non-recoverable expenses, collection losses, lease incentives, maintenance costs, agent and commission costs and other operating and management expenses. The series of periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.
Goodwill has an indefinite useful life and is not amortised. a.s.r. performs an impairment test annually, or more frequently if events or circumstances warrant so, to ascertain whether goodwill has been subject to impairment. As part of this, the
Financial statements 2018 | 7.3 Accounting policies 157 carrying amount of the cash-generating unit to which the goodwill has been allocated is compared with its recoverable amount. The recoverable amount is the higher of a cash-generating unit’s fair value less costs to sell and value in use. The carrying value is determined as the net asset value including goodwill. The methodologies applied to arrive at the best estimate of the recoverable amount involves two steps.
In the first step of the impairment test, the best estimate of the recoverable amount of the CGU to which goodwill is allocated is determined separately based on Price to Earnings or Price to EBITDA ratios. The ratio(s) used per CGU depends on the characteristics of the entity in question. The main assumptions in this valuation are the multiples for the aforementioned ratios. These are developed internally but are either derived from or corroborated against market information that is related to observable transactions in the market for comparable businesses.
Value of Business Acquired 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 recognised as an intangible asset with a finite useful life and amortised over the term of the current insurance contracts at acquisition date, in conjunction with the corresponding obligations. With regard to VOBA, allowance is made for the outcome of the annual compulsory Liability Adequacy Test (LAT) for insurance contracts (see accounting policy I). Amortisation charges related to VOBA are included in net claims and benefits. The negative VOBA is amortised based on the weighted average term of the acquired insurance contracts at acquisition date Negative VOBA, or an additional provision, is recognised and presented under the Liabilities arising from insurance contracts.
D. Investment property Investment property is property held to earn rent or for capital appreciation or both. Property interests held under operating leases are classified and accounted for as investment property. In some cases, a.s.r. is the owner-occupier of investment properties. If owner-occupied properties cannot be sold separately, they are treated as investment property only if a.s.r. holds an insignificant portion for use in the supply of services or for administrative purposes. Property held for own uses (owner-occupied) is recognised within property and equipment.
The following categories of investment property are recognised by a.s.r. based primarily on the techniques used in determining the fair value of the investment property: • Retail; • Residential; • Rural; • Offices; • Other (consisting primarily of parking); • Investment property under development.
Borrowing costs are no longer capitalised when the asset is ready for use or sale. If the development of assets is interrupted for a longer period, capitalisation of borrowing costs is suspended. If the construction is completed in stages and each part of an asset can be used separately, the borrowing costs for each part that reaches completion are no longer capitalised.
The classification of the financial assets is determined at initial recognition. The classification depends on the purpose for which the investments were acquired. For detailed information on the fair value of the financial assets please see accounting policy B.
Financial assets available for sale Financial assets available for sale are financial assets that are not accounted for as financial assets at fair value through profit or loss, or as loans and receivables. On initial recognition, financial assets available for sale are measured at fair value (including transaction costs). They are subsequently measured at fair value, including any unrealised fair value changes in equity and impairments, taking into account any deferred tax liabilities. Financial assets available for sale
G. Loans and receivables Loans and receivables are measured at fair value plus transaction costs on initial recognition. They are subsequently measured at amortised cost based on the effective interest rate method, less impairment losses if deemed necessary.
Impairment based on the collective approach is determined by applying risk models for similar financial assets, taking account of historical information and regularly updated parameters for default.
Only assets, liabilities, firm commitments or highly probable forecast transactions involving a party external to a.s.r. can be designated as hedged items.
Liabilities arising from life insurance contracts Future obligations in respect of policy benefits for life insurance contracts are calculated based on a net premium method (the present value of future obligations less the present value of future net premiums) using the same principles as for calculating the premium at inception of the insurance contract. A provision for future administrative expenses is recognised for contracts whose future premium payment period is shorter than the future maturity of the insurance policy, or for which no more premiums are paid. A provision is recognised for part of longevity risk associated with life insurance contracts (e.g. group life and annuity contracts), a.s.r. manages the longevity risk exposure in combination with the mortality risk exposure. No addition to the provision for longevity risk is recognised if the outcome of the LAT (see section ‘IFRS Liability Adequacy Test Life’ later in this chapter) indicates that the total amount of the provision is adequate.
Participating contracts include additional obligations relating to contractual dividends or profit-sharing and are stated net of capitalised interest rate rebates. These interest rate rebates are amortised in accordance with actuarial principles to the extent that the expected surplus interest is realised.
Shadow accounting The Group’s insurance accounting policies include the application of shadow accounting which is a specialised accounting treatment commonly utilised in insurance accounting and is permitted under IFRS. The purpose of shadow accounting is to help reduce potential accounting mismatches which can occur when related assets and liabilities: • Are measured on a different basis; or • Have changes in their measurements recorded in different IFRS performance statements (Income Statement or OCI). Under shadow accounting, adjustments are made to the insurance liability to reflect the unrealised gains or losses from the financial instruments backing these insurance liabilities. For non-participating features only adjustments are made to the insurance liability to reflect the unrealised gains from the financial instruments backing these insurance liabilities.
Shadow accounting is applied to unrealised value changes in fixed-income financial assets available for sale, specific financial assets designated at fair value through profit or loss, and specific derivatives (i.e. swaptions and interest rate and inflation rate swaps) that are backing the liabilities arising from insurance contracts.
The related adjustment to the insurance liability is recognised in OCI if, and only if, the unrealised gains or losses are recognised in other comprehensive income. Unrealised gains and losses on assets at fair value through profit or loss are recognised in the income statement with a corresponding adjustment for shadow accounting in the income statement under ‘Net insurance claims and benefits’.
No shadow accounting is applied to: • Impairments; • Revaluations of debt instrument that have been subject to impairment.
Best estimate The best estimate of an insurance contract is the net present value of the projected cash flows of benefits and expenses, less the net present value of premiums. These cash flows are estimated using realistic, 'best estimate', assumptions in relation to mortality, longevity, lapse rate, expense and inflation. The best estimate assumptions regarding mortality and longevity include recent trend assumptions for life expectancy in the Netherlands, as provided by the Dutch Actuarial Association. The best estimate includes the intrinsic value and the time value of options and guarantees (TVOG: Time Value of Financial Options and Guarantees) and is calculated using stochastic techniques.
J. Liabilities arising from insurance contracts on behalf of policyholders Liabilities arising from insurance contracts for the account and risk of policyholders mainly concern unit-linked contracts. An investment unit is a share in an investment fund that a.s.r. acquires on behalf of the policyholders using net premiums paid by the policyholders. The gain upon maturity of the contract is equal to the current value of the investment units of the fund in question. The current value of an investment unit (unit value) reflects the fair value of the financial assets held by a.s.r.’s investment funds divided by the number of units.
ASR Levensverzekering N.V. administers most of the post-employment benefit plans and hold the investments that are intended to cover the employee benefit obligation. These investments do not qualify as plan assets in the consolidated financial statements under IFRS.
a.s.r. also has a defined contribution plan for a limited number of employees due to acquisitions in the past. For defined contribution plans, a.s.r. pays contributions to privately administered pension insurance plans on a contractual basis. a.s.r. has no further payment obligations once the contributions have been paid. The contributions are recognised as operating expenses in the profit or loss account during the period the services are rendered. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Other post-retirements obligations a.s.r. offers post-employment benefit plans, such as arrangement for mortgage loans at a discount (fixed amount, reference date December 2017). 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.
L. Discontinued operations and assets and liabilities held for sale Classification as held for sale occurs when the carrying amount will be recovered principally through a sale transaction rather than through continuing use. This is only the case when the sale is highly probable: • The disposal group or group of assets is available for immediate sale in its present condition; • a.s.r. is committed to a plan to sell these assets and has an active programme to locate a buyer; • The sale is expected to occur within one year from the date of classification as held for sale.
Q. Transaction date and settlement date All purchases and sales of financial instruments, which have to be settled in accordance with standard market conventions, are recognised at the transaction date, which is the date on which a.s.r. becomes party to the contractual stipulations of the instrument. Any purchases and sales other than those requiring delivery within the time frame established by regulations or market conventions are accounted for as forward transactions until the time of settlement. For details on these transactions, see accounting policy H ‘Derivatives and hedge accounting’.
S. Statement of cash flows The statement of cash flows classifies cash flows by operating activities, investing activities and financing activities. Cash flows denominated in foreign currencies are converted at the exchange rates applicable on the transaction date.
Equipment Equipment is recognised at cost, less accumulated depreciation and/or any accumulated impairment losses. Cost corresponds with the cash paid or the fair value of the consideration given to acquire the asset. The accounting policy for equipment is unchanged.
Losses are accounted for until the carrying amount of the investment has reached zero. Further provisions are recognised only to the extent that a.s.r. has incurred legal or constructive obligations concerning these associates.
Revenue is primarily accounted for on property development at the moment the property is sold. This is a performance obligation satisfied at a point in time. The point in time is the moment a customer obtains control of the promised asset.
Reserve for unrealised gains and losses This reserve consists of: • Unrealised gains and losses from assets available for sale net of tax and taking account of adjustments due to shadow accounting (see accounting policy I); • The share of unrealised gains and losses of associates and joint ventures held by a.s.r. (see accounting policy U); • Unrealised gains and losses on the effective portion of cash flow hedges net of tax (see accounting policy H); • Unrealised change in value of property for own use (see accounting policy T); • Reserve for discretionary participation features (see accounting policy I); • Reserve for exchange rate differences arising from assets available for sale.
Actuarial gains and losses Actuarial gains and losses result from the post-employment benefit pension plans (see accounting policy K).
Interest income Interest income for all interest-bearing instruments is recognised using the effective interest method, including all transaction costs incurred and share premium/discount. When a receivable is impaired, its carrying amount is reduced to the recoverable amount, i.e. estimated future cash flows discounted at the original effective interest rate of the instrument.
Any unrealised gains and losses previously recorded in equity (the difference between the carrying amount and amortised cost) are recognised in the income statement.
FF. Fee and commission income Determining the revenue to be recognised from fee and commission income relating to contracts with customers is based on a 5-step model: Step 1 – Identifying the contract Step 2 – Identify the performance obligation Step 3 – Determining the transaction price Step 4 – Allocating the transaction price to performance obligations Step 5 – Recognising revenue when the performance obligation is satisfied.
A contract with a customer generally explicitly states the goods or services that a.s.r. promises to transfer to a customer. The transaction price is the amount of consideration to which a.s.r. expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. a.s.r. allocates the transaction price to each performance obligation in an amount that depicts the amount of consideration to which a.s.r. expects to be entitled in exchange for transferring the promised goods or services to the customer.
a.s.r. satisfies its performance obligation by transferring control of a good or service over time and as a result recognises revenue over time. a.s.r. determined that the output method is the best method in measuring progress of the related services because the selected measure reflects best the services for which control has transferred to the customer. a.s.r. recognises revenue on the basis of the time elapsed relative to the total term of performing the service.
GG. Insurance claims and benefits This item includes changes in liabilities arising from insurance contracts (see accounting policy I) and the related benefits. Expenses associated with contracts on behalf of policyholders relate to changes in liabilities arising from insurance contracts on behalf of policyholders, including the benefits charged to the liabilities.
HH. Operating expenses This item relates to expenses associated with a.s.r.’s operations that are directly attributable to the reporting period, such as marketing costs, ICT expenses, consulting fees, business accommodation expenses, cost of temporary staff, and depreciation charges.
Financial statements 2018 | 7.4 Group structure and segment information 172 7.4 Group structure and segment information 7.4.1 Group structure
(as part of ASR Deelnemingen N.V.) • PoliService B.V.³ • ASR Vastgoed
Vermogensbeheer B.V.³ • ASR Vastgoed Projecten B.V. • Van Kampen Groep Holding
B.V.³ • Van Kampen Geld B.V.³ • As part of Dutch ID B.V.: Felison Assuradeuren B.V.³ and Boval Assurantiën B.V.³
• As part of Certitudo Investments: Supergarant Verzekeringen B.V.³ and ZZP Nederland Verzekeringen B.V.³
Financial statements 2018 | 7.4 Group structure and segment information 173
• The Real Estate Development segment consists of the activities where property development occurs and includes ASR Vastgoed Projecten B.V.
The eliminations applied in the reconciliation of the segment information to the consolidated balance sheet and the consolidated income statement are separately presented in chapter 7.4.2 and 7.4.3.
The segments are assessed on their operating result, which is based on the profit before tax adjusted for: • Investment related income: income for own account of an incidental nature (for example realised capital gains and losses, impairment losses or reversals and (un)realised changes of investments held at fair value; • Incidentals insurance segments: incidental items relating to changes in methods, changes in accounting policies, accounting/administrative actions or changes not related to the performance of underlying insurance portfolios and revaluation of insurance liabilities; • Incidentals other segments: incidental items relating to changes in methods, accounting/administrative actions or changes not related to the underlying performance of the other segments; and
Financial statements 2018 | 7.4 Group structure and segment information 176 7.4.3 Segmented income statement and operating result
Fair value gains and losses 26 42 - - 1 - -9 60
The incidentals in 2018 are mainly related to the a.s.r. post-employment benefit plans, Generali Nederland integration costs and project implementation regulatory costs for a.o. project IFRS17/9 in segment Holding and Other (see chapter 7.6.8) and to the run-off activities in segment Real Estate Development.
Fair value gains and losses 15 -4 - - - - 3 13
The increase in claims, commission and expenses is also due to the acquisition of Generali Nederland (see chapter 7.4.5).
Acquisitions 2018 Generali Nederland On 6 February 2018, ASR Nederland N.V. announced the completion of its acquisition of Generali Nederland N.V. (hereafter Generali Nederland) by acquiring all issued and outstanding shares for a total consideration of € 153 million paid in cash. The increase of € 8 million in the consideration paid, as compared to the provisional consideration reported in the interim report 2018, is the result of an increase in value of Generali Nederland related to reinsurance contracts settled with Generali Nederland.
From 1 June 2018 Generali Nederland staff has moved to a.s.r. locations. The Generali Nederland products are being rebranded into a.s.r. or one of a.s.r.’s labels.
In December 2018, a.s.r. established the final acquisition balance sheet of Generali Nederland, in accordance with IFRS 3 business combinations, within 12 months of the closing date. The balance sheet is based on fair value using the following techniques and assumptions: • Financial assets and liabilities (including investments and loans and receivable) were remeasured to fair value at the closing date.
• The intangible assets recognised relate to client relationships for the property and casualty and income business. The valuation technique used to measure the fair value is based on the multi-period Excess Earnings Method (Meem) approach.
Final acquisition date fair values of the assets and liabilities acquired
In € millions Acquisition date balance sheet based on fair value
The goodwill recognised of € 45 million is not tax deductible and relates to the expected synergies by sharing office space, IT systems and know-how for the life and non-life business. The goodwill is allocated to the cash generating units Life (€ 32 million) and Non-Life (€ 13 million).
The a.s.r. Solvency II ratio decreased by 9%-points as a result of the acquisition.
The consolidated statement of comprehensive income of a.s.r. for the first year includes € 423 million revenue and approximately € 20 million profit after tax relating to Generali Nederland. The revenue and profit or loss of the combined entity for the current period as though the acquisition date for the business combinations of Generali Nederland had been as of the beginning of the annual reporting period would have been similar to the amounts presented above. The acquisition related costs recognised as expense amount to € 3 million, and included in line item other expenses in the income statement.
Other acquisitions In July 2018, Certitudo Investments B.V. acquired 100% of the shares of two Distribution and Services entities. As a result, an amount of € 9.4 million is recognised as goodwill.
First Investments In December 2017, ASR Vermogensbeheer N.V. acquired 100% of the shares of First Investments B.V. No differences with the provisional balance sheet were identified, therefore no retrospective adjustments were made.
On 20 March 2019, ASR Bank N.V. (a.s.r. bank) and Achmea Bank N.V. (Achmea Bank) agreed that Achmea Bank will acquire the savings and mortgage portfolios of a.s.r. bank in an asset / liability transaction. For more information, please see chapter 7.7.7.
a.s.r. bank is measured at the lower of its carrying amount and fair value less costs to sell (non-recurring fair value measurement). Any excess of the carrying amount of a.s.r. bank (in total) over the fair value less costs to sell (in total) is recognised as an impairment. a.s.r. has presented in a single amount (after tax) the profit or loss from discontinued operations (including the impairment) in relation to a.s.r. bank. The profit or loss from a.s.r. bank in relation to the 2017 income statement has been restated.
Changes in composition of the group 54 - 3 57 7
Goodwill For the purpose of impairment testing, goodwill is allocated to the cash-generating units (CGU) of the relevant operating segment. As a result of acquisitions during 2018, disclosed as changes in the composition of the group (see chapter 7.4.5) the amount of goodwill increased by € 54 million (2017: € 7 million).
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 186
Segment Life The activities of Generali Life (€ 32 million goodwill) have been fully integrated in a.s.r. life. The goodwill impairment test was conducted at the segment Life level as CGU. The result of the goodwill impairment test, using the multiples methodology, shows an excess recoverable value over the book value. As a result, a second step was not necessary and there is no significant exposure of goodwill impairment for sensitivities in the underlying assumptions. No goodwill impairment was recognised.
Segment Banking and Asset Management The goodwill is related to Asset Management, as such the impairment test was conducted at the segment Banking and Asset Management level as CGU. The result of the goodwill impairment test, using the multiples methodology, shows an excess recoverable value over the book value. As a result, a second step was not necessary and there is no significant exposure of goodwill impairment for sensitivities in the underlying assumptions. No goodwill impairment was recognised.
The second step as described above in the CGU’s of the segment Distribution and Services indicate that there is an excess of recoverable amount over the book value of all CGU’s to which goodwill has been allocated (buffer).
The fair value of land and buildings for own use based on the external valuations is disclosed in chapter 7.7.1.3.
Due to their nature property and equipment consist mainly of assets expected to be recovered after more than twelve months after the balance sheet date.
Changes in value of investments, realised/unrealised gains and losses: - Fair value gains and losses 46 65
In 2018, following the completion of the property development of a shopping center and parking garage, ASR Vastgoed Projecten B.V. sold the shopping center and parking garage to ASR Utrecht Real Estate Investments Netherlands B.V. (AUREIN), a group company which resulted in a reclassification from ‘other assets’ to investment property in the a.s.r. consolidated financial statements. Purchases in 2018 mainly relates to acquisitions of rural real estate (€ 112 million), commercial real estate (€ 57 million) and offices (€ 7 million).
The changes in the composition of the group concerns an asset acquisition of agricultural land by means of a purchase of the shares in agricultural real estate entities.
Rental income is recognised as investment income. For details, see chapter 7.6.2. In 2018, rentals amounted to € 50 million (2017: € 54 million). The decrease is due to the fact that rental income (€ 6.4 million) from DMOF was recorded as ‘rentals from investment property’ until May 2017. Until this moment a.s.r. had control over DMOF. Direct operating expenses arising from investment property amounted to € 14 million (2017: € 12 million). Given the overall low vacancy rate, virtually all direct operating expenses relate to investment properties generating rental income. Direct operating expenses of investment property are classified as operating expenses.
Due to their nature Investment property consist mainly of assets expected to be recovered after more than twelve months after the balance sheet date.
Associates and joint ventures ranging between 10% and 50% 67 45
Due to their nature Associates and joint ventures consist mainly of assets expected to be recovered after more than twelve months after the balance sheet date.
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 189
The interest in the mortgage equity funds consist only of ASR Mortgage Fund.
In 2018, loans to associates and joint ventures amounted to € 0.3 million (2017: € 3 million). These loans are classified as related party transactions (see chapter 7.7.4).
The equities consist primarily of listed equities and investment in investment funds (incl. open ended investment funds).
In 2018, government bonds increased to € 11,773 million (2017: € 10,409 million) primarily due to the acquisition of Generali Nederland. Equities declined to the amount of € 2,822 million (2017: € 3,223 million) due to de-risking and the development of the stock-market. The increase in real estate equity funds is primarily related to positive revaluations. For the real estate equity funds and mortgage equity funds for which a.s.r. has significant influence, being ASR DMOF, ASR DPRF and ASR DCRF and ASR mortgage fund, the exemption of IAS 28 was used, thereby measuring the investments at fair value through profit or loss and presenting them as a separate category within the investments at fair value through profit or loss. For a breakdown of the real estate equity funds ASR DMOF, ASR DPRF and ASR DCRF, and ASR mortgage funds please see section 7.5.4.
Changes in the composition of the group 2,448 a. s.r. has equities and bonds that have been transferred, but do not qualify for derecognition amounting to € 5,174 million
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 191
(2017: € 5,491 million). The majority of these investments are part of a securities lending programme whereby the investments are lent in exchange for a fee with collateral obtained as a security. The collateral furnished as security representing a fair value of € 6,188 million (2017: € 7,073 million) consists of mortgage loans and corporate and government bonds. Please see accounting policy R about securities lending. Changes in the composition of the group relates to the assets acquired through the acquisition of Generali Nederland (see chapter 7.4.5).
The increase in impairments through profit or loss are mainly related to equities as a result of declining share prices in 2018. The reversal of impairments through profit or loss are mainly related to the disposal of collateral debt obligations which were impaired in 2008. There is a high degree of uncertainty about the repayment of the remaining collateral debt obligations.
Total investments on behalf of policyholders at fair value through profit or loss 7,771 7,684
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 192
Transfer between investments on behalf of policyholders and investments 5 -32
Changes in the composition of the group relates to the acquisition of Generali Nederland (see chapter 7.4.5).
The decrease of € 1,102 million (2017: € 6,711 million) in mortgage loans is a result of the classification as ‘held for sale’ of a.s.r. bank (see chapter 7.4.6.).
The claim related to cash collateral paid on derivative instruments, included in total due from credit institutions, amounts to € 15 million (2017: € 33 million).
An amount of € 10,350 million (2017: € 11,407 million) of the Loans and receivables is expected to be recovered after twelve months after reporting date.
The derivatives do not include the derivatives on behalf of policyholders (2018: € 6 million, 2017: € 4 million).
Deferred tax assets and liabilities are expected to be recovered, to a large extent, more than twelve months after reporting date.
Financial assets held for trading -588 115 - - - -473
Liabilities arising from insurance contracts 2,151 -430 -107 - 7 1,621
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 196 7.5.10 Other assets
In 2018, the decrease in the property developments is mainly caused by the transfer of the shopping center LRC from ASR Vastgoed Projecten B.V. to AUREIN as well as sales of property developments to external parties. AUREIN classified the shopping center LRC as part of its investment property portfolio. For more information, see chapter 7.5.3.
The claim related to cash collateral paid on derivative instruments is included in the amount loans and receivables (see chapter 7.5.7). Debt related to cash collateral received on derivatives instruments is included in the amount due to banks (see chapter 7.5.19).
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 197 7.5.12 Equity
Ordinary shares: - Authorised capital; par value of € 0.16 350 56 350 56
In June 2017 a.s.r. repurchased 3,000,000 of its own shares offered by NLFI at a price of € 29.00. In September 2017 a.s.r. repurchased another 3,000,000 of its own shares offered by NLFI at a price of € 33.75. In the Annual General Meeting of Shareholders on 31 May 2018 the resolution was adopted to cancel these shares. The cancellation has been effected on 13 August 2018 (see chapter 7.5.12.4).
Total unrealised gains and losses recorded in equity 567 19 586
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 198 7.5.12.4 Treasury shares The amount of treasury shares held in 2018 of nil (2017: € 188 million) is the result of a resolution by the Annual General Meeting of Shareholders held on 31 May 2018 to cancel 6,000,000 own shares repurchased in June and September 2017 (see chapter 7.5.12.1). The repurchased shares were canceled in August 2018 leading to a decrease of € 1 million in share capital, a decrease of € 42 million in share premium reserve and a decrease of € 145 million in retained earnings.