Founded on this conviction, we changed our strategy and based it on three closely linked pillars: • Financially solid: We offer clients and investors a healthy long-term return, and do not run risks that could be detrimental to the interests of clients.
Drs. J.P. (Jacqueline) Rijsdijk and drs. T. (Theo) Pluijter are not members of the new Executive board. Theo Pluijter will be in charge of a number of ASR corporate staff departments, activities and programmes in his capacity of director of Corporate Departments. Jacqueline Rijsdijk expressed her wish to continue her career outside ASR Nederland.
Going back to the essence of our existence: to offer certainty in situations that could be uncertain to clients. To help people and business realize their dreams by assuming their financial risks, which they personally cannot shoulder because the impact is too great.’
Pursuing this strategy, ASR Nederland is working on consumer confidence and is offering the security to protect their interests.
The dramatic changes in the market are also forcing us to take a critical look at our current product range. With our complexity-reduction programme, we aim to introduce a simple and cutting-edge range of products within 1.4 Our assignment and strategy
‘Only when insurers can prove financial solidity, can the foundation of trust be made’
The optimistic mood on the stock markets and the decision to reduce the risks in the investment portfolio led to a positive development in the return on investment and valuations. This compensated for the sharp increase in the claims incurred in the past year.
The operating costs dropped by 4% to € 316 million compared to the previous year, and commission expenses remained at the same level as last year. The cost-savings programme had a positive effect on both the costs for claims handling and for management.
in 2009, the electronic processing of claims for medical expenses increased strongly. in addition to reducing the number of external staff, it had a positive impact on the overheads. Furthermore, we saw to it that client satisfaction improved considerably by communicating in plain Dutch (b1 language) and by stricter complaints procedures. Claims from top-up insurance policies remain high (combined ratio of 115.1%). We therefore introduced new claim restriction measures for 2010 with which we expect to improve the result on top-up policies. With an increase in the number of policyholders of 8%, the health business did considerably better than the market (3%) in 2009.
AsR Verzekeringen Generalist individual life, Non-life, Group life and Mortgages intermediaires
• Ditzo: the insurer with a growing range of financial products. Distribution takes places exclusively over the internet.
in 2009, the claims incurred by the sector increased due to a larger number of road accident claims and several major fires. ASR Nederland has taken different measures to lower the combined ratio. For example, motor insurance premiums were increased, the no-claims benefit was abolished and portfolio management was tightened. The relatively sharp increase in the number of major fires has prompted more detailed investigations by means of site re-inspection and additional focus on the quality of the acceptance policy.
Since mid-2009, integration into a single product line for disability, and the previously independent back offices of De Amersfoortse and ASR Verzekeringen are now under one management. This has established a major precondition for implementing further cost savings. it has led to reduction of some 10% in the staffing of the disability product line compared to 2008.
Apart from that, the organization has changed from business lines to product lines that share back offices. in addition, the support services departments of the different business units were merged. Programmes have also been launched that focus on establishing the added value of all the indirect costs of the support services and to reduce the large diversity of products. The aim is to implement substantial cost savings.
• Best travel insurer 2009 • Focus on the field of travel and leisure insurance
Capital position and policy The total equity of ASR Nederland comprizes total equity attributable to shareholders, other shareholders’ equity instruments and minority interests. Total equity attributable to shareholders at year-end 2009 amounted to €1,389 million.
During the first six months, ASR Nederland took measures to restructure a number of Tier-1 loans with a principal of €650 million in total. Hybrid Tier-1 instruments issued directly by ASR Nederland and guaranteed by ASR Levensverzekering N.V replaced the loans, which had been structured based on a US model.
Staying on our toes with client experience, that’s what it’s all about
• An increase in legislation and regulation, including the requirements imposed by Solvency ii, iFRS and pensions legislation, demands a huge effort from ASR Nederland to comply with these on time.
As far as risk management efforts in 2009 are concerned, ASR Nederland distinguishes itself with its line of risk committees, financial and non-financial risks.
in addition, reinsurance and other risk mitigating measures were also used in 2009 to reduce, limit or to spread the negative impact of volatility as an alternative to the required capital. For example, the insurance risk was mitigated in the first half of 2009 by reinsuring 50% of the current life risk. Given the improved solvency position, this was brought back to reinsuring 10% of the current life risk at the start of 2010. The reinsurance contract offers the necessary flexibility to increase the level of reinsurance at the request of ASR Nederland.
Executive Board Jos baeten Roel Wijmenga Hans van der Knaap Roeland van Vledder 2.11 Statement of compliance
The chair of the Audit Committee presented a verbal report covering the main issues to the Supervisory board at every subsequent meeting of the board. in addition, the Audit Committee submitted written reports to the Supervisory board of its considerations, findings and recommendations.
Future The Supervisory board is very much aware of the fact that 2009 has been a remarkable year in many aspects, with financial institutions still having to deal with the turbulent after-shocks of 2008. A year in which the recession’s impact became noticeable on a global scale. The demerger with Fortis and the required changes in strategy and organization provided ASR Nederland with an extra challenge. As a supervisory body, the board not only sees it as its task but as its duty to support the Executive board wherever it can. And it does this with full independence and taking account of the organization’s stakeholders.
Annual target-based remuneration The chairman enjoys an on-target remuneration of 50%, the serving members of the Executive board 40-45% and new members of the Executive board 30% of the fixed salary component. The maximum is set at twice the on target percentage. The variable component is linked to achieving targets set for 2009.
• New members of the Executive Board follow a ‘catching-up’ scenario, following the same remuneration level as the sitting members of the Executive board. The variable component level will also be adjusted.
Unrealized gains (losses) on investments at fair value through profit or loss -14 340
2 Financial accounting principles 2.1 General The consolidated financial statements of ASR are prepared in accordance with international Financial Reporting Standards (iFRS) – including the international Accounting Standards (iAS) and interpretations – as adopted and endorsed for use within the European Union (EU).
The following changes in the EU approved iFRS standards and iFRiC interpretations were applied for the first time in the 2009 financial year and had no material effect on the result and equity of ASR: • IFRS 2: Share-based payments: The vesting conditions and conditions for cancellations, effective from 1 January 2009.
- The description of a number of items in the income statement has been changed.
Goodwill is not amortized. ASR performs an annual impairment test, or more frequently if events or circumstances give rise to it, to ascertain whether the goodwill has been subject to impairment.
Capitalization is ended when the asset is ready for use or sale. if the development of the assets is interrupted for a longer period, capitalization is suspended. if the construction is completed in different phases and each part can be used separately, capitalization is ended for each part reaching completion.
Impairment of loans and accounts receivable At each balance sheet date, ASR assesses whether there are objective indications of impairment of the financial assets included under loans and accounts receivable.
2.22 Deferred tax assets Deferred tax assets are recognized on the basis of: • temporary differences between the balance sheet value of the assets and liabilities and their value for tax purposes; and • available carried forward tax loss possibilities.
An impairment test is performed at every balance sheet date on the assets from reinsurance contracts. if there has been an impairment, the balance sheet value is reduced to the estimated net realizable value.
Life insurance contracts with a discretionary participation feature (DPF) These concern life insurance contracts where the policyholder, in addition to guaranteed benefits, is also entitled to additional benefits: • that probably form a considerable portion of the total contractual benefits; • whose level or timing is contractually determined by ASR; and • that are contractually based on: - the return on a specific pool of contracts or a specific type of contract; - realized and/or unrealized investment results of a specific pool of assets held by ASR; or - the result of ASR, a fund or another entity that issues the contract.
Shadow accounting in some of the financial instruments held by ASR, the realized returns on investments have a direct effect on the valuation of (part of) the obligations arising from the insurance contracts. ASR applies shadow accounting to the unrealized value changes of fixed-income financial assets available for sale and of synthetic CDOs, swaptions and interest rate swaps. This means that the relevant unrealized value changes are treated the same as realized value changes and attributed to the liabilities in connection with insurance contracts. These value changes will therefore not be a part of equity or the result. Shadow accounting is applied to the extent that the previously identified investments are related to the valuation of liabilities arising from profit-sharing insurance contracts. With respect to non-profit-sharing insurance contracts, shadowaccounting is applied if and to the extent that the current interest rate is lower than the actuarial interest rate, which forms the basis for calculating liabilities arising from insurance contracts.
Differences between the expected and the actual outcomes of the actuarial assumptions are not recognized in the income statement. This is the case if the total cumulative changes exceed the corridor of 10% of the obligation arising from the plan. The part that falls outside the corridor is recognized or charged to the income statement over the expected average remaining number of years of service of the participants.
The past service costs are recognized directly in the income statement. This does not happen if the changes in a pension plan depend on the number of employees that remain in service for a certain period, known as the vesting period.
2.39 Fair value gains and losses The fair value gains and losses include realized and unrealized changes in the value of financial assets at fair value through profit and loss of derivatives. With respect to derivatives, this is based on the fair value excluding accrued interest (clean fair value).
ASR set up a group-wide Solvency ii programme centre which first performed a gap analysis covering the current situation and the requirements to comply with the Solvency ii requirements. This, too, gave us a better understanding of the divisions on which ASR has to concentrate on in the context of Solvency ii. Further steps have been taken in 2010 to prepare for the implementation of Solvency ii.
The fair value of shares in similar investments was € 1,811 million at year-end 2009 (2008: € 1,306 million). On the one hand, the increase is due to the positive price development, on the other, because shares were acquired on balance. in fact, more shares were sold during the first half of 2009, but in view of the improved solvency ratio, the equity portfolio was expanded in the second half of 2009.
The shares are spread across Europe and the Netherlands (including 5% participating interests). A limited portion of the shares concerns pacific, private equity and hedge funds.
3.3.1.3 Real estate risk The real estate risk depends on the total exposure to property. in order to obtain proper insight into the actual property risk, a number of adjustments were made in comparison to the iFRS classification of property for own account and the revaluation of property (€ 1,398 million) is included. The fair value of property and similar investments was € 3,936 million at year-end 2009 (2008: € 3,963 million).
The property is divided into the sectors countryside, homes, offices and retail outlets in the Netherlands.
ASR does not provide redemption-free mortgages and, in addition to the compulsory life insurance, part of the loans is covered by insurance policies.
ASR Nederland 2009 annual report 3.3.1.5.6 Loans to intermediaries ASR is cautious in extending loans to intermediaries. Upon application, the credit rating of intermediaries is estimated on the basis of an internal risk-rating model. Following strict criteria, the credit committee decides whether to approve the loan.
Reinsurance and other risk mitigating measures are employed to reduce and contain the volatility of the results, or to spread the negative impact on the value as an alternative for the capital requirement.
3.3.3.3 Life insurance risks A life insurance product provides entitlement to a benefit upon the death of a policyholder and/or a benefit upon the policyholder remaining alive.
Life insurance risk in relation to the best estimate assumptions arises from volatility, uncertainty and/or extreme events. • Volatility: The random fluctuations in annual mortality rates in relation to the modelled trend.
3.3.3.4.5 Concentration of risk The risk that the non-life portfolio of ASR is exposed to is geographically almost fully concentrated in the Netherlands. Concentration of insurance risks is particularly prevalent in the fire risk portfolio (home, contents, etc., with storm risk forming the most important factor). Storm risk is managed by means of suitable reinsurance (see also 3.3.3.6 ‘Reinsurance’).
For the WiA Eigen Rekening (work and income Own Account) portfolio, a provision for current risks is for the items concluded in 2009 and last until 31 December 2009. This provision is based on the difference between the commercially and actuarially required premiums.
‘Other and eliminations’ includes the figures of the parent company, ASR bank N.V., a fully consolidated group company as of 29 December 2009, as well as the eliminations applied in the reconciliation of the segment information with the consolidated balance sheet and the consolidated income statement.
The result for the group’s own account on the sale of investments relates to the total realized revaluation of real estate investments and investments available for sale to the extent that these cannot be allocated to the different life and non-life products. These results are therefore added to ASR’s result.
Claims ratio: the cost of claims, net of reinsurance in non-life, excluding the internal costs of handling non-life claims, expressed as a percentage of the net earned premiums. Expense ratio: expenses, including internal costs of handling non-life claims, plus net commissions charged to the year, less internal investment costs, expressed as a percentage of the net earned premiums. Combined ratio: the sum of the claims and operating ratio. These ratios are used only by non-life insurance companies. As a consequence of an increase in the claims, the claims ratio increased by 8.9%. As a result, the combined ratio increased to 102.1%.
Investments on behalf of policyholders at fair value through profit or loss 8,808 7,487 10,234
The fair value of private equity is based on measurement methods, with use being made of an estimate of future cash flows, net asset values and other information that is not based on directly observable market data.
Changes reCogniseD in oCi other 31 DeC. 2008 financial assets held for trading -23 -15 - - -38
The dutch Government became ASR’s sole shareholder on 3 October 2008. no further share capital changes occurred during the financial year.
if it had been permitted to consider the non-qualifying investments as plan assets, the pension expense would have come to € 39 million.
The tables below provide further information about gross provisions, qualifying plan assets and the amounts recognized in the statement of the balance sheet for pensions and other post-employment benefits.
Costs of post employment benefits and other long term employee benefits are: Post employment benefits pensions - 123 -113
ASR Nederland 2009 annual report 19.2 Other long-term employee benefits The other long-term employee benefits consist of the employer’s provisions arising from long-service disbursements. The table below provides an overview of the costs of other long-term employee benefits.
The dividend and other investment income per category is as follows: Dividend on equities 29 107
Insurance claims and benefits -1,658 -1,388 share of reinsurers 151 106
On 29 December 2009, ASR Nederland N.V. acquired 100% of the shares of Fortis ASR bank N.V. from Fortis bank (Nederland) N.V. for an amount of € 37 million in cash. Following the purchase, the name of Fortis ASR bank N.V. was changed to ASR bank N.V. ASR has full control of ASR bank N.V.
The figures of ASR bank N.V. are consolidated with effect from 29 December 2009. ASR bank N.V. makes virtually no contribution to ASR’s 2009 net profit during the period from 29 December 2009 to 31 December 2009.
ASR invoked Section 2:402 of the Netherlands Civil Code to prepare the income statement, which makes it possible to suffice with an abridged income statement. Unless stated otherwise, all amounts presented in these financial statements are in millions of euros.
Amortized cost price The amount at which the financial asset or the financial liability is stated in the balance sheet at the time of first recognition. This amount is less repayments on the principal, plus or minus the accumulated depreciation determined via the effective interest method of the difference between that first amount and the repayment amount, and less any write-downs on account of impairments or uncollectability.
Value in use The value in use is the present value of estimated future cash flows stemming from an asset or a combination of assets, which may be obtained within the scope of the business operations.