Part VII Other information 205 7.1 Independent auditor’s report 206 7.2 Events after the balance sheet date 210 7.3 List of principal group companies and associates 210 7.4 Other equity interests 211 7.5 Provisions of the Articles of Association regarding profit appropriation 211 7.6 Profit appropriation 211 7.7 Dutch Insurance Code 212 7.9 GRI index table 231 7.10 List of acronyms 241 Contact details and publication 242 2013 annual report
a.s.r.’s operations are structured into the product lines Non-Life, Life, Pensions, Banking, Occupational Disability and Health, the entities Europeesche Verzekeringen and Ardanta, and a number of support services and departments. Each of these divisions has its own Management Team, whose chair reports to a member of the Executive Board.
a.s.r.’s legal structure comprises a number of holdings and subsidiaries. An overview of the main legal entities is shown in a table on page 145 of the financial statements.
Important initiatives in 2013 that a.s.r. used to make clear what Helping by taking action stands for: • The FeyBlij campaign. a.s.r. donated six months of shirt sponsorship with Feyenoord football club to Rotterdam Zoo Blijdorp. The campaign was backed up by a TV advert featuring former football player Giovanni van Bronckhorst and the sale of more than 100,000 of Olli stuffed animals in 2013. Part of the proceeds of the sales went to Rotterdam Zoo. a.s.r. did not take any earnings from these sales. The Olli TV advert won the Gouden Loeki television award, which is an award chosen by the Dutch public for the best and most unique TV advert of 2013. The campaign was also nominated for the SponsorRing and the Financial Marketing Award.
Employees • The a.s.r. Executive and Supervisory Board, as well as senior management team members took their professional oath.
CSR • BREEAM sustainability certificate presented for the design of the renovated Archimedeslaan building. • a.s.r. took third place in the sustainable development top 10 of the Eerlijke verzekeringswijzer
(Fair Insurance Guide). • For the third consecutive year, a.s.r. achieved third place in the study by the Dutch Association of
Claims ratio 78.3% 73.4% Commission ratio 15.8% 16.7% Expense ratio 10.5% 9.1%1
31a.s.r. 2013 annual report Report of the Executive Board 2.1.3 Life segment
• The results before tax improved by € 24 million to € -113 million (2012: € -137 million). • Operating expenses down to € 108 million (2012: € 138 million) • Sales of new WelThuis mortgages up to € 1,411 million (2012: € 839 million).
Net results -96 -25 Net results attributable to non-controlling interests 5 7
Over the past few years, a.s.r. has pursued an investment policy of de-risking. The exposure to financials and real estate has been drastically reduced, for instance. The main goal of this policy is to protect solvency against the backdrop of economic uncertainties in the wake of the credit and euro crises. Thanks to this policy, the solvency position has been robust for years. In 2013, the investment policy was characterized by stability in the risk profile of the entire portfolio. There have, however, been a few shifts in the portfolio. Put briefly, the share of mortgages has increased while the share of government bonds has fallen. Another shift was that from real estate to equities.
Type of market risk Scenario 2013 2012 2013 2012 incl. UFR incl. UFR excl. UFR excl. UFR
In accordance with the Dutch Corporate Governance Code and a.s.r.’s SRI policy, a voting policy (www.asr.nl/EN/about-asr) has been developed for a.s.r. to fulfil its role as an institutional investor. This voting policy is applied to all internally managed and exchange-traded equities. Voting accountability offers insight into the exercise of a.s.r.’s voting rights at shareholder meetings of its associates.
In September 2013, the Fair Insurance Guide (Eerlijke Verzekeringswijzer) was published for the first time; it is an initiative of Friends of the Earth Netherlands (Milieudefensie), the Dutch Society for the Protection of Animals (Dierenbescherming), Pax for Peace, Oxfam Novib, Amnesty International and the FNV labour organization. The aim of the Fair Insurance Guide (FIG) is to encourage insurers to make their investment policy sustainable and to optimize practical implementation. It includes a
a.s.r. is a member of GRESB, the Global Real Estate Sustainability Benchmark, and in 2013, a.s.r. progressed from Green Starter to Green Talker status. a.s.r. vastgoed vermogensbeheer is also a player in several industry associations to put sustainability on the map.
The SAR Committee and the Supervisory Board not only fulfilled their formal role in approving a.s.r.-wide targets, but they also actively offered feedback and suggestions at an early stage to pinpoint customer targets (in particular) as accurately as possible.
No weaknesses were identified during the annual audit of the remuneration policy. Governance, compliance and the effectiveness of the remuneration policy are described properly. In accordance with the remuneration policy, the Committee sought the advice of the internal control functions Risk Management, Compliance, Audit and Human Resources. The chair of the SAR Committee gave an account of the issues discussed to the Supervisory Board and submitted written reports to the Supervisory Board in a timely manner.
Composition of the Executive Board and Supervisory Board All members of the Executive Board and Supervisory Board are Dutch nationals.
Until 2009, Margot Scheltema served as the Finance Director of Shell Nederland B.V., prior to which she held several international management positions at Shell since 1985. She is a Supervisory Director at Triodos Bank, Schiphol Group, TNT Express, Lonza Group of Basel, Switzerland, and Warmtebedrijf Rotterdam, a heat management company. She is also member of the Supervisory Board of the Rijksmuseum. Margot serves as a council member of the Enterprise Chamber of the Amsterdam Court of Appeal and chairs the Monitoring Committee of the Code of the Pension Funds. She is also a member of the World Press Photo Supervisory Council and the treasurer of Genootschap Onze Taal, a society dedicated to the Dutch language.
73a.s.r. 2013 annual report Report of the Supervisory Board of the evaluation was first discussed in the Supervisory Board before being tabled in a meeting between the Supervisory Board and the Executive Board. The overall impression of the Supervisory Board’s performance is good; the supervisory directors work well as a team and their relationship with the Executive Board is open and professional. The fact that the Supervisory Board is small makes it easier to respond quickly to developments. The Audit & Risk Committee is effective; the process surrounding preparations by the Selection, Appointment & Remuneration Committee will be improved. Although the supervisory directors are careful to pool information from the two committees, it still proves to be difficult to involve all supervisory directors in specific committee issues.
Partial two-tier regime ASR Nederland N.V. is a two-tier company, subject to the so-called ‘partial regime’ because the State, in its capacity as a legal person under public law, has provided the entire issued capital for its own account (Section 155a, Book 2 of the Netherlands Civil Code). As a result, the rules for appointing and removing supervisory directors are different from those in effect at companies not subject to the partial two-tier regime. In addition, specific executive decisions mentioned in the law are subject to Supervisory Board approval.
Professional oath The members of the Executive Board, the Supervisory Board and all directors of ASR Nederland N.V. took the professional oath early in 2013. By taking this oath, they promised to treat customers fairly, act with integrity and observe all relevant laws, rules, regulations and codes of conduct so as to help increase trust in the financial sector. With effect from 1 January 2013, all decision-makers working in the financial sector have been under the obligation to take this oath in accordance with the Dutch Oath or Affirmation (Financial Sector) Regulation.
Target-related pay for front-office staff In addition to a basic and variable pay component, front-office staff are also awarded target-related pay, which is determined by their individual score on quantitative and qualitative targets. The employee and their manager agree on these targets annually and it is established the following year whether these targets have been achieved. The target-related pay is a percentage of the annual basic pay awarded to the employee. Depending on the position, the target-related pay for a performance ‘at target’ will amount to 20%, 24% or 30% of the basic pay. The maximum level is 40%, 48% or 60%.
Total other comprehensive income for the year, after tax 197 205
Net increase (decrease) in liabilities arising from insurance contracts on behalf of policyholders 32 -276 Net (increase) decrease in other operating assets and liabilities 187 -104
90a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
ASR Nederland N.V. and its group companies (‘a.s.r.’ or ‘the group’) have a total of 3,789 FTE’s internal employees (2012: 4,088) and is a leading insurance company in the Netherlands. In 2013 a.s.r. sold insurance products under the following labels: a.s.r, De Amersfoortse, Europeesche Verzekeringen, Ditzo and Ardanta.
• Annual Improvements to IFRSs 2009-2011 Cycle. The Annual Improvements is a collection of nonurgent amendments to IFRSs, in response to issues addressed during the 2009–2011 cycle.
• IFRS 12 Disclosure of Interests in Other Entities: Improvements to the disclosure of a reporting entity’s interests in other entities. The standard sets out disclosure requirements for reporting entities that have an interest in a subsidiary, joint venture, associate or unconsolidated structured entity.
Level 2. Fair value based on observable market data Determining the fair value at Level 2 is based on valuation techniques that use inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is derived from prices of identical or similar assets and liabilities). These observable inputs are obtained from a broker or third party pricing service and include: • quoted prices in active markets for similar (not identical) assets or liabilities; • quoted prices for identical or similar assets or liabilities in inactive markets; • input variables other than quoted prices observable for the asset or liability. These include interestrates and yield curves observable at customary intervals, volatility, early redemptions spreads, loss ratio, credit risks and default percentages.
The external professional appraisers, appraise the value of the property using the reference transaction in combination with the following valuation methods to ensure the appropriate valuation of the property: • DCF method; • income capitalization method.
Cash flows from operating activities are reported using the indirect method. Cash flows from operating activities include operating profit before taxation, adjustments for gains and losses that did not result in income and payments in the same financial year, adjustments for movements in provisions, and accrued and deferred items.
Losses are accounted for until the carrying amount of the investment has reached zero. Further losses are recognized only to the extent that a.s.r. has incurred legal or constructive obligations concerning these associates.
Impairment based on the collective approach is determined by applying risk models for similar financial assets, taking account of historical information and regularly updated parameters for uncollectibility.
At the inception of the hedge, a.s.r. documents the risk management objective and strategy for undertaking the hedge, as well as the relationship between the hedging instrument, the hedged item, and the method for assessing the effectiveness of the hedging transaction. It is also confirmed that the hedge is expected to be effective throughout the hedging period.
(see chapter 2.27); • the share of unrealized gains and losses of associates and joint ventures held by a.s.r.
Liabilities arising from life insurance contracts Future obligations in respect of policy benefits for life insurance contracts are calculated based on
2.30 Investment income income primarily comprises interest of interest income, dividends on equities and rentals from investment property.
Investments on behalf of policyholders are measured at fair value through profit and loss. Any changes in value are recognized in result on investments on behalf of policyholders. This also includes interest income and dividends received on investments on behalf of policyholders.
Risk management is an integral part of our daily business activities. a.s.r applies an integrated approach in managing risks, ensuring that our strategic goals (customer interests, financial solidity and efficiency of processes) are maintained. This integrated approach ensures that value will be created by identifying the right balance between risk and return, while ensuring that all obligations towards our stakeholders are met. Risk management enables a.s.r. to identify, measure and manage risks in order to take prompt action in the event of changes in a.s.r’s risk profile.
• a.s.r. participated in the ‘Theoretic Solvency Criteria’ (TSC) assessment of DNB in 2013. • The quality and reliability of data were further improved in 2013. This contributes to reliable management information and facilitates decision-making. a.s.r. will continue to focus on improvements in data quality.
Risk appetite is defined at both group level and at legal entity level (OTSO -‘Onder Toezicht Staande Onderneming’) for financial and non-financial risks. The risk appetite is set by the Executive Board and approved by the Supervisory Board.
Objectives of the risk appetite: • Important steering instrument in daily business.
Since 30 June 2012 the regulator prescribes applying the Ultimate Forward Rate (UFR) on the discounting curve, whereby the forward interest-rates converge to a level of 4.2%. Since this is an assumption, a.s.r. also evaluates its solvency position without applying the UFR to the discounting curve. For maturities in excess of 30 years this curve is extrapolated since the available market data is not sufficient. a.s.r moved to a more realistic and more stable extrapolation method in 2013. As a result of this, there is less difference between the discounting curve including UFR and excluding UFR.
125a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
USD AUD CAD DKK SEK ZAR USD AUD CAD DKK SEK ZAR
A combination of changes in tactical positioning and rising interest-rates resulted in changes in the geographical breakdown of the government bond portfolio. The most visible change is an increase in the exposure to Belgian and German government bonds at the expense of Dutch and French sovereigns. The exposure in the Periphery category is in Spanish sovereign debt. The category other includes investments in Australian, Scandinavian, Canadian and investment-grade Emerging Markets sovereigns.
The parameters of the internal risk-rating model are regularly adjusted in response to market conditions as well as new legislation. The ban on commissions regarding so-called ‘complex’ insurance products, will most likely have a minor impact on the rating of the loan portfolio issued to intermediaries due to the aforementioned internal risk-rating model. The group has already anticipated on the ban on commissions and has therefore granted fewer loans as a result of restrictions
3.6.2 Life insurance portfolio The life insurance portfolio of a.s.r. is diverse. The portfolio can be divided into two main product
Regulatory solvency available excl UFR 3,693 3,644 Regulatory solvency required 1,563 1,574 Regulatory solvency ratio excl UFR 236% 231%
The solvency ratio including UFR as reported to the regulator decreased from 293% to 268%.
The following table shows the contractual cash flows of assets and liabilities (excluding investments on behalf of policyholders and insurance contracts on behalf of policyholders). For liabilities arising from insurance contracts, expected lapses and mortality risk are taken into account. Profit sharing cashflow of insurance contracts is not taken into account, as well as equities, property and swaptions.
The group distinguishes between the Non-Life, Life and Other segments. The Non-Life segment is comprised of non-life insurance entities and their subsidiaries. These non-life insurance entities offer non-life insurance contracts. Insurance entities are entities that accept the transfer of insurance risks from policyholders. The Life segment comprises all life insurance entities and their subsidiaries. These life insurance entities offer financial products such as life insurance contracts and life insurance contracts on behalf of policyholders. The Non-Life and Life segments have different levels of profitability and growth opportunities, as well as a different outlook and risk profile. See chapter 7.3 for a list of principal group companies and associates in the relevant segments
Deferred tax liabilities - - - - - Due to customers 25 483 986 -79 1,415
In line with market developments gross written premiums declined 12% to € 1,666 million and attributable to a decrease in single premiums sold and a decrease in regular premiums. Sales of new insurance contracts were influenced by the introduction of the commission ban as of 1 January 2013 for complex financial products, such as life insurance policies, which impacted sales of new insurance contracts. The level of lapses and early surrenders at individual life insurances were, after the high level in previous year, back at historical ‘normal’ level. The decrease of single premiums (-28%) is due to the the preference of value over volume as a result of which a less competitive premium was utilized.
At 1 January 1 282 2 285 Acquisitions 5 - 1 6 Amortization - -18 -1 -19 Impairments -3 - - -3
Movements in deferred acquisition costs (DAC) can be broken down as follows: Capitalized acquisition costs - 1
N o t m e as u re d o n t h e b as is o f o b se rv ab le m ar ke t d at a
The impairment on associates and joint ventures in 2013 concerns primarily an impairment on ArboNed Holding B.V. (previously called 365 Holding B.V.).
Revaluation through profit and loss 1 8 704 860 705 868
167a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
Investments at fair value through profit and loss loans and receivables
All cash and cash equivalents are freely available, except cash related to cash collateral which is managed segregated from other cash equivalents. Included in the cash components is € 677 million (2012: € 1.882 million) related to cash collateral received on derivative instruments and securities lending and € 168 million (2012: € 72 million) related to cash collateral given. Debt related to cash collateral on derivatives instruments is included in the amount due to banks (chapter 21). Interest expenses on cash collateral is standardized in the ISDA/CSA’s and based on EONIA.
174a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
15.5 Non-controlling interests Movements in non-controlling interests can be broken down as follows: Share of total comprehensive income -5 -7 Payments - - Acquisition of non-controlling interests - -2
16 Insurance liabilities 16.1 Liabilities arising from insurance contracts Insurance contracts with retained exposure can be broken down as follows: Gross Of which reinsurance
Current service cost, contributions by employee 9 10 - - Benefits -77 -84 -3 -2 defIned benefIT oblIGATIon AT 31 decembeR 2,405 2,517 15 21
Active members account for 23% of the DBO and 41% of the DBO relates to members currently receiving pension benefits.
Amounts owed to banks comprises primarily cash collateral received under ISDAs concluded with counterparties, which is included in the cash and cash equivalents. There is no significant difference between the carrying amount of € 677 million (2012: € 1,882 million) due to banks and the fair value of these liabilities (see chapter 23).
186a.s.r. 2013 annual report 2013 consolidated financial statements ASR Nederland N.V.
ToTAl ReAlIzed GAInS And loSSeS 486 285 25.3 Fair value gains and losses Fair value gains and losses per category can be broken down as follows: Financial assets at fair value through profit and loss -21 50 Other fair value gains and losses 1 - Additions to Insurance liabilities due to shadow accounting (chapter 16.1) 1,323 -153
Claims paid -1,705 -1,580 Change in provision for outstanding claims -217 -386 Amortization of VOBA (Chapter 6) -1 -1 Insurance claims and benefits -1,923 -1,967
Included in the costs associated with sale of development property is an amount of € 63 million (2012: € 64 million) related to provisions recognized for possible future loss related to land and property development projects held as other assets.
Debt to group companies 135 359 Deposits due to group companies 47 582 debTS To GRouP comPAnIeS 182 941
2. Annually the annual general meeting of shareholder determines either on the recommendation of the management board and with the approval of the supervisory board or on its own initiative, which part of the profit will be retained or distributed.
2.1.8 The chair of the Supervisory Board shall ensure that a programme of continuing education is in place for the members of the Supervisory Board, aimed at maintaining and, where necessary, enhancing members’ skills and expertise. This programme shall at least cover relevant developments regarding the insurer and the financial sector, corporate governance in general and that of the financial sector in particular, the duty of care to customers, integrity, risk management, financial reporting and audits. All members shall take part in the programme and satisfy the continuing education requirements.
• A transparent policy, the structure and methods of which should be applicable to all layers of management and to employees subject to the collective bargaining agreement.
The Supervisory Board approves the senior management’s individual target scores as proposed by the Executive Board, as well as the scores on the financial results and customer satisfaction aspects. Together, these three components determine the scale of the variable remuneration to be awarded. Each year, the Executive Board sets the variable remuneration and checks it against the ‘normal distribution’.
The pay of all a.s.r.’s employees has a fixed and a variable component. One-third of the variable component depends on the achievement of individual targets set for a calendar year and two-thirds on the company’s performance, as measured by the financial results (1/3) and customer satisfaction (1/3). This excludes employees in so-called control functions (Audit, Risk, Compliance and the Director of Human Resources. To assure the independence of employees in these positions, their variable pay does not depend on commercial results. Their variable pay only depends on the individual results component. At the beginning of each calendar year, employees and their managers agree on individual targets that need to be achieved during that year. These are recorded in an assessment and individual target form. The employee and their manager evaluate the progress made on these targets at least once a year. The targets need to reflect a clear focus on the long-term, sustainable interests of all stakeholders.
The variable annual pay of Executive Board members does not exceed 80% of their fixed income. In accordance with the Act on the limitation of liability for DNB and AFM and the bonus prohibition for state-aided enterprises, the members of the Executive Board of a.s.r. are not awarded any variable pay as long as a.s.r. falls under the scope of the Act. Other a.s.r. employees also have their variable pay capped: senior management at 60%, higher management at 40% and sales and back-office staff at 18%.
Fair value hedge A hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment, on an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss.