Chapter 3 - Corporate Social Responsibility 3.1 Sustainable business practices 54 3.1.1 a.s.r. as an insurer 54 3.1.2 a.s.r. as an employer 57 3.1.3 a.s.r. as an investor 62 3.1.4 a.s.r. and the environment 68
Chapter 6 - Financial Statements Consolidated financial statements 98 Company financial statements 212
a.s.r. is confident that it can prove its right to exist by thinking in terms of customer interests and perception. This is something that all employees work towards each day. And it is the employees that give the service of a.s.r. a face and determine its quality, which a.s.r.’s products and services must match. Clarity and simplicity combined with efficient business processes and a robust financial position are essential. Customers may rest assured that their risks are covered by an insurer that operates sensibly and avoids waste, but also listens to them and puts itself in its customers’ shoes.
Operating expenses, Non-life and Life segment -393 -439 Operating expenses, Other segment (including eliminations) -148 -108 Total operating expenses -541 -547 - Of which from ordinary activities 1 -499 -535
The occupational disability insurance business managed to shore up its position as market leader despite difficult conditions. The introduction of a new occupational disability insurance policy for selfemployed persons clearly meets a need for the target group: adequate two- or five-year cover for the risk of occupational disability at a fair price.
Earnings were affected in both 2014 and 2013 by a number of incidental items that resulted in a € 6 million increase in profit for 2014 overall.
In the Life segment, profit for the year fell by € 109 million, dropping from € 367 million to € 258 million. Disregarding incidental expense items, including an impairment of VOBA, earnings were up to a limited extent in 2014 thanks to higher investment returns and lower operating expenses. The impairment needed to be recognized on VOBA given the structural market developments in the life portfolios containing unit-linked policies.
Claims ratio 70.0% 78.3% Commission ratio 15.5% 15.8% Expense ratio 9.4% 10.5% Combined ratio, Non-life 94.9% 104.6%
a.s.r. is seeing a shift in distribution mix at Ardanta: nearly four in ten policies are now taken out online, which is double the figure for 2013. The doodgaanendoorgaan.nl website, which offers practical information about funeral arrangements, welcomed over 250,000 visitors in 2014, who awarded it a rating of 7.7.
The regulator has based the current supervisory framework for capital policy and management on the Solvency I regime. The regulator will switch to the Solvency II regime as of 1 January 2016. a.s.r. has already prepared its structure and processes for the introduction of this new regulatory regime. The Solvency II regime requires a different methodology for measuring and managing available and required capital. a.s.r. regularly measures and manages its available and required capital under Solvency II; this process is an integral part of managing the capital position of a.s.r. as a whole.
The ultimate forward rate (UFR), as prescribed by the regulator, starts from the assumption that the curve used to discount the insurance liabilities will converge to a level of 4.2% between year 20 and year 60. From year 20, the difference between the economic curve (as observed in the capital market) and the curve inclusive of UFR will visibly increase. Given the current extremely low interest rates, the difference between the curve exclusive of UFR and the curve inclusive of UFR has grown exceedingly large.
• a.s.r. participated in the stress test 2014. The stress test is an assessment by the European Supervisor (EIOPA) to test the resilience of insurance companies regarding market risks under a combination of historical and hypothetical scenarios.
• a.s.r. has developed mature scenario analyses and stress testing techniques, such as the ORSA, Recovery Planning and Strategic Asset Allocation studies. These techniques measure the impact of external or internal identified risks and threats to a.s.r.’s solvency position. The 2014 ORSA results and the recovery plan for 2014 have again demonstrated the strong position of a.s.r. in terms of capitalization and a.s.r.’s ability to carry out our strategy, even in situations of increased financial stress.
Changes to performance appraisal methodology and policy: HR is working on new performance appraisal methodology. Now that the financial incentive of variable pay has been dropped, a.s.r. needs a performance appraisal system that: • focuses on competencies, development, deliverables and behaviour; • offers options for linking personal targets more explicitly to corporate targets; • accommodates more interaction to make it easier to hold each other accountable.
In September 2014, the Fair Insurance Guide (FIG) published the third report on the sustainability of the Dutch insurance sector. The FIG is an initiative of Friends of the Earth Netherlands (Milieudefensie), the Dutch Society for the Protection of Animals (Dierenbescherming), PAX, Oxfam Novib, Amnesty International and the FNV trade union. The guide benchmarks the sustainability aspects of the ten largest life insurance companies in the Netherlands. In the latest two guides (www.eerlijkeverzekeringswijzer.nl), a.s.r. received the highest total score among all surveyed insurers and was praised for its policy on weapons, human rights and labour rights. The aim of FIG is to encourage insurers to make their investment policy more sustainable and to optimize sustainability policy implementation. This has resulted in a number of useful suggestions that a.s.r. followed up in 2014.
• The agricultural land is leased out on long-term leases to agricultural businesses that produce soil-bound foods and green base materials.
The design of the renovated building on Archimedeslaan was awarded the BREEAM ‘Excellent’ certificate. The next step is that the ‘real’ certificate is obtained. a.s.r. is targeting the BREEAM ‘Excellent’ certificate, with energy performance rating A, for this as well.
Recycling Plastic cups from vending machines have been collected since 2014. a.s.r. takes part in the return programme of Stichting Disposables Benelux (SDB), which collects and recycles the cups. SDB encourages recycling in usable consumer products, such DVD boxes, flower pots or planters, as well as car dashboards.
a.s.r. foundation The a.s.r. foundation plays an important role in sharing knowledge and motivating and facilitating employees to increase their commitment to the community. Improving financial literacy in the Netherlands is one of a.s.r. foundation’s key priorities.
In 2014, the Committee talked about large-scale impactful IT and other projects for the implementation of new-generation platforms (credit management & collections and disbursements, occupational disability insurance, non-life and life insurance) in relation to the underlying cost reductions. The Committee named as priorities in 2014 the importance of completing large projects on schedule within a complex IT environment and continually changing rules and regulations. On the recommendation of the Committee, the Supervisory Board talked about how a.s.r. can keep the cost/ premium ratio low on a sustainable basis and what plans will be developed and carried out in that context starting next year.
Education and evaluation The members of the Executive Board took individual courses in 2014 as part of their continuing education (CE). In addition, a lot of attention was devoted to accumulating knowledge of new distribution and business models, including practical methods for applying them to the insurance business. All the members of the Executive Board went on a working visit to a multinational organization, where they learned how innovative ways of collecting customer data can be used to develop appropriate customer propositions and to create a sustainable risk management model.
A.P. (Annet) Aris (born 1958) Chair of the Selection, Appointment & Remuneration Committee
Composition of the Supervisory Board The composition of the Supervisory Board is such that each supervisory director should have the skills to assess the main aspects of the overall policy and that the Supervisory Board as a whole meets the profile thanks to a combination of the experience, expertise and independence of the individual supervisory directors.
Realized gains and losses 6.24 497 486 Fair value gains and losses 6.24 533 348 Result on investments on behalf of policyholders 858 783 Fee and commission income 6.25 35 45
U nr ea liz ed g ai ns a nd lo ss es
103a.s.r. 2014 annual report 2014 consolidated financial statements ASR Nederland N.V.
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.
Shadow accounting is applied to unrealized value changes in fixed-income financial assets available for sale, specific financial assets designated at fair value through profit and loss, and specific derivatives designated as held for trading (swaptions and interest-rate swaps).
The liability in respect of defined benefit plans is the present value of the defined benefit obligation at the balance sheet date, less the fair value of the plan assets. ASR Levensverzekering N.V., an insurance company and a group entity, is the administrator of the post-employment benefit plans. ASR Levensverzekering N.V. holds the investments that are intended to cover the employee benefit obligation. However they do not qualify as plan assets in the consolidated financial statements under IFRS.
O. Segment information At organizational level, a.s.r.’s operations have been divided into operating segments. These segments are: Non-life, Life and Other. The Non-life and Life segment comprises all the respective non-life and life insurance entities and their subsidiaries. The segment Other comprises the non-insurance related operations, such as a.s.r. Bank, a.s.r. Hypotheken, a.s.r. Vastgoed Ontwikkeling, SOS International, and several holding companies, including ASR Nederland N.V.
Value & Return: Adequate profit takes priority over turnover Value creation by efficient allocation of capital resulting in realizing value and return objectives. This will safeguard the efficiency of business operations and continuity of a.s.r. in the long term.
Various separate risk appetite statements have been formulated for these five pillars. These risk appetite statements are further translated into boundaries (risk tolerances, limits and targets) in order to make sure that material risks are managed in accordance with our predefined risk profile. Risk limits are formulated in line with a.s.r. ambition levels, regulatory requirements and S&P requirements. Breaches need to be reported and addressed immediately in accordance to our risk policies. Risk appetite statements ensure that risk considerations are being addressed in strategic decision making processes. Our risk profile is monitored by a.s.r.’s risk committees on a quarterly basis. With the update of the risk appetite statements in 2014, a.s.r. made another step in steering on Solvency II. The most important limits for financial solidity are set on the solvency ratio according to the internal model (ECAP), the standard model of Solvency II (SCR) and the current regulatory solvency (Solvency I). These limits are formulated at group and legal entity level. Per year end 2014 a.s.r. has sufficient capital to meet the limits as formulated in the a.s.r. risk appetite.
• The second line challenges the first line and supports the first line to achieve its business objectives in accordance with the risk appetite. The second line has sufficient countervailing power to prevent risk concentrations and other forms of excessive risk taking. It is responsible for developing risk policies and for monitoring the compliance with these policies and the broader risk management framework in the first line. The second line of defence is formed at group level and includes both Group Risk Management and the Integrity department.
130a.s.r. 2014 annual report 2014 consolidated financial statements ASR Nederland N.V.
Insurance risk Insurance risk is the risk that future insurance claims and benefits cannot be covered by premium and/or investment income, or that insurance liabilities and results are incorrectly determined, because costs, claims and benefits differ from the assumptions used in the development and premium-setting of a product. Two different major types of insurance risk are distinguished, non-life (including health) and life. Pension risk incurred on the employee benefits is categorized as an insurance risk.
Sensitivity of regulatory solvency to changes in property prices: Change in property prices 31 December 2014 Percentage 31 December 2013 Percentage
Fixed-income investments Spread risk is managed on a portfolio basis within limits and risk budgets established by the relevant risk committees.
Redemptions are responsible for the decrease in the market value of the Structured Entities. Most redemptions took place in ABS and CDO portfolios. The market value of the remaining structured products portfolio increased in the course of 2014 due to tightening credit spreads.
143a.s.r. 2014 annual report 2014 consolidated financial statements ASR Nederland N.V.
The table above shows the exposure to reinsurers per rating. The total exposure to reinsurers at year-end 2014 was € 418 million (2013: € 407 million).
Property & Casualty: • Motor vehicle third-party liability: motor vehicle liability is a third-party liability insurance that covers bodily injury, medical care and/or loss of income following a road traffic accident, as well as damage caused to another vehicle; Fire and other damage to property: fire insurance offers policyholders financial protection against damage to their property and material consequences of interruption of operations as a result of the damage sustained; • Other liability: this involves third-party liability insurance for both private individuals and businesses.
149a.s.r. 2014 annual report 2014 consolidated financial statements ASR Nederland N.V.
Group Risk Management participates in the product approval committee. Group Risk Management evaluates if risks in newly developed products are sufficiently addressed. New products need to be developed in a way that they are cost efficient, reliable, useful and secure. New products also need to have a strategic fit with a.s.r.’s mission to be a solid and trustful insurer. Group Risk Management advises about the risks of existing products, as requested by the PARP as a result of product reviews.
• In 2014, a.s.r. implemented the preparatory phase Quantitative Reporting Templates as well as the narrative report. In 2015 a.s.r. will report according to the preparatory phase requirements for a.s.r. and relevant legal entities.
Standard & Poor’s confirmed the single A rating of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. on 15 August 2014.
Intersegment transactions are conducted at arm’s length conditions. In general, cost related to centralized services are allocated to the segments based on the utilization of these services. The operating profits of the segments are assessed on the basis of the segments’ income statements.
158a.s.r. 2014 annual report 2014 consolidated financial statements ASR Nederland N.V.
Change in provision for unearned premiums -4 - - - -4
Investments at fair value through profit and loss Debt certificates covered by other assets - - - -
172a.s.r. 2014 annual report 2014 consolidated financial statements ASR Nederland N.V.
Intangible assets can be broken down as follows: Value Of Business Acquired (VOBA) 132 244 Other intangible assets 4 6
Goodwill For the purposes of impairment testing, goodwill is allocated to the cash-generating units of the relevant operating segment. The goodwill as at 31 December 2014 relates to ASR Nederland Vastgoed Maatschappij N.V. and B.V. Nederlandse Hulpverleningsorganisatie-SOS International in the segment Life and Other respectively.
Investment property with a cost price less accumulated depreciation and impairment of € 924 million (2013: € 909 million) is held by the ASR Dutch Prime Retail Fund and ASR Dutch Core Residential Fund which are governed under fund agreements.
Deferred taxes are formed for differences between the carrying amount of assets and liabilities and their tax base at the enacted tax rate, taking into account tax-exempt components. The enacted and current tax rate of 25.0% (2013: 25.0%) is applied when calculating deferred tax.
185a.s.r. 2014 annual report 2014 consolidated financial statements ASR Nederland N.V.
Provision for claims (including IBNR) as at 31 December 4,152 3,826 409 402
6.16.2 Claims development table, non-life The table below is a ten-year summary of movements in cumulative benefits in connection with the non-life portfolio for the period from 2005 to 2014.
The underlying assumptions are as follows: Actuarial year-end assumptions 31 December 2014 31 December 2013
Individual Non-recurring premiums written 116 104 Periodic premiums written 452 471 Individual total 568 575
6.24.2 Realized gains and losses The table below shows a breakdown of realized gains and losses per category: Investment property
207a.s.r. 2014 annual report 2014 consolidated financial statements ASR Nederland N.V.
Debts to group companies 6.40.3.12 29 182 Due to banks 6.40.3.13 250 -
215a.s.r. 2014 annual report 2014 consolidated financial statements ASR Nederland N.V.
Our opinion We have audited the accompanying financial statements 2014 of ASR Nederland N.V. (the Company), based in Utrecht. The financial statements include the consolidated financial statements and the company financial statements.
In relation to shadow accounting also the impact on the provisioning for Employee benefits is of importance. In the financial statements, the Company is accounting for Employee benefits based on IAS19 as disclosed in note 6.2.2.L. The underlying pension contract for own employees is administrated by ASR Levensverzekering N.V. This contract does not qualify as a plan asset according to IAS19, because ASR Levensverzekering N.V. is a consolidated group company. Due to the overlay interest hedging strategy of the Company, the swaps and swaptions are not specifically allocated to the pension contract for own employees. Therefore the results from the swaps and swaptions as a whole are accounted for in Liabilities arising from insurance contracts, based on the shadow accounting policy of the Company, whereas the impact of declining interest rates on the provisioning for Employee benefits is part of actuarial gains and losses that are recognized in equity (see note 6.17.1).
The Supervisory Board’s regulations, its general profile and a short CV of each member have been posted on the corporate website (www.asrnl.com).
2.1.10 In addition to the Supervisory Board’s annual self-assessment, the Supervisory Board’s performance shall be assessed once every three years under independent guidance. This shall include an evaluation of individual members’ commitment, the culture within the Supervisory Board as a whole and the relationship between the Supervisory and Executive Boards.
The Supervisory Board’s regulations stipulate that the Board should conduct an annual assessment of its performance and that this assessment is to take place under the guidance of an external party every three years. In 2014, this assessment was performed under external guidance, using feedback questionnaires and interviews. The findings were first discussed within the Supervisory Board and subsequently with the Executive Board.
The regulations governing the Audit & Risk Committee stipulate that this Committee is to be composed in such a way as to ensure the availability of sufficient knowledge and/or experience of the financial and technical aspects of risk management, financial reporting, internal control and auditing to enable adequate supervision in these matters.
a.s.r.’s risk appetite is reviewed by the Executive Board on an annual basis (or in the event of major adjustments) and submitted for approval to the Supervisory Board. Each year, the Executive Board determines the risk-related priorities for a.s.r on the basis of a company-wide risk assessment. The riskrelated priorities are approved by the Audit & Risk Committee.
4.2 The Supervisory Board shall supervise the risk management policy pursued by the Executive Board. To that end, the Supervisory Board shall discuss the insurer’s risk profile and assess, at a strategic level, whether the overall capital allocation and liquidity requirement are in agreement with the approved risk appetite. The Supervisory Board shall be assisted in the discharge of these supervisory duties by a Risk Management Committee formed from among its members.
Dutch Minimum Wage and Minimum Holiday Allowance Act and equal treatment rules.
6.2.2 The Supervisory Board shall discuss the highest variable remuneration on an annual basis. The Supervisory Board shall oversee the Executive Board in the performance of its duty to ensure that all variable remuneration offered by the insurer is in line with the remuneration policy adopted by insurer and, particularly, that it satisfies the principles set down in this section. The Supervisory Board shall also discuss any material retention, exit and joining packages and ensures that these comply with the remuneration policy adopted by the insurer and are not excessive.
Remuneration is an instrument specifically designed to help achieve the strategy, business targets and ambitions a.s.r. has formulated. Annual performance targets are set for individual objectives, financial performance and customer satisfaction (both at group and entity level) in order to create a focus on the long-term interests of all stakeholders. In addition, variable pay is structured in line with the provisions of the Third Capital Requirements Directive and its transposition into the Regulation on Sound Remuneration Policies (Dutch acronym: RBB). This means that a material share (i.e. 50%) of variable pay is awarded conditionally in the form of cash and non-cash instruments. The conditional variable pay is deferred for three years; a reappraisal is performed at the end of the three-year period, after which the cash part is paid out. The non-cash component is subject to an additional retention period of two years.
Fully Chapter 1.2 1.2 Description of key impacts, risks and opportunities.
Fully KPMG will audit the entire annual report to establish that it is compatible with the financial statements. They will specifically issue an independent auditor’s report on the financial statements. KPMG will also perform specific checks of figures and reconciliations, and rule out any inconsistencies with the true and fair view of the financial statements. In addition, they will verify whether the report of the Executive Board complies with the relevant statutory provisions. The disclosures in the CSR chapter and the GRI-index have not been audited.
4. Governance, Commitments and Engagements 4.1 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight.
Fully Chapter 3.1.2 Policy on incidents Incentives policy Customer Due Diligence Duty of care Anti-corruption Charter Policy for additional positions a.s.r. code of conduct Integrity statement Whistle-blowing procedure Rules governing price-sensitive information and private investment transactions (insider rules).
Fully The selection of stakeholders was made by defining groups that have a direct or indirect stake in the organization.
4.16 Approaches to stakeholder engagement, including frequency of engagement by type and stakeholder group.
EC1COMM Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community
Fully No fines or sanctions were imposed in 2014 for noncompliance with environmental laws and regulations.
LA1 Total workforce by employment type, employment contract, and region, broken down by gender.
LA5 Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements.
HR4 Total number of incidents of discrimination and corrective actions taken.
HR10 Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments.
Dutch Association of Health Insurers • Member of the Board – Petra van Holst, Managing Director of health insurance business
Consult about the a.s.r. collectively agreed job classification system and remuneration structure and about the industry-wide CBA
Educate advisers about income protection-related issues, culminating in CE course exam
Swill/organic waste In 2014, a.s.r. separated substantial amounts of swill and organic waste from its residual waste. All of this waste was converted into biogas, making this waste flow entirely green.