A Facts and figures 302 B About this report 309 C Glossary 310 D Abbreviations 314 E Materiality analysis and stakeholder dialogue 316 F GRI Content Index 318 G EU Directive: disclosure on non-financial information and diversity information 323
To ensure that a.s.r. continues to operate decisively, including in a subsequent phase, we announced at the end of 2018 that we would change our management structure. This was effected on 1 February 2019 through the appointment of a Business Executive Committee (BEC) to encourage more direct involvement of the senior managers of the product lines. As a result of this decision, Michel Verwoest and Karin Bergstein relinquished their positions as Executive Board members with effect from 1 February. We are indebted to them for their hard work and dedication over the years and for their contribution in helping to make a.s.r. what it is today. 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.
Creation • (Hybrid) coupons • Shareholder return 4.3 Employees • 30% women in senior positions • Paid salaries and wages • Top 30% in international
Real Estate • Direct and indirect real estate investments on behalf of a.s.r.’s own account and for institutional investors
Consists of a.s.r. does not consider Real Estate Development activities to be a part of its core business
Financial performance (€m) Operating expenses € -60 Operating result € -108 Profit/(loss) before tax € -127 Profit/(loss) for the year attributable to holders of equity instruments € -68
• Withdrawing government • From collective to individual arrangements • Higher capital requirements • Rising retirement age
2018 turned out to be a transitory year for the world economy. Overall, economic growth was quite similar to 2017, but growth prospects worsened towards the end of the year as the initial positive impact of fiscal stimuli in the United States (US) on economic growth dissipated gradually. At the same time, the focus on downside political risk (US-China trade war, ‘Brexit’) became ever prominent. Inflationary pressures remained relatively subdued, partly due to a sharp decrease in the oil price. Central banks continued reducing their monetary expansion of the past years, with the Federal Reserve in the US continuing on its path of raising interest rates at regular intervals and the European Central Bank (ECB) gradually winding down its programme of ‘quantitative easing’.
In 2018, a.s.r. was successful, number 3 in the market, in the ‘capital-light’ DC market. The DC proposition offers attractive life cycle strategies, leveraging on the capabilities of AVB, with a.s.r.’s ESG policy integrated in the entire investment process.
2.2 Stakeholders a.s.r.’s main stakeholders are its customers, investors, employees and society at large. a.s.r. is in permanent dialogue with these stakeholders concerning its priorities, objectives and policy. A context in which customers play a key role. Long-term relationships with its customers enables a.s.r. to create long-term value for all stakeholders.
In addition to the material topics mentioned above, the following trends, which are identified and explained in chapter 2.1 Trends and development, are of great importance in determining, influencing and realising the strategy of a.s.r.
Institutional investors such as insurance companies are looking for assets that generate an adequate yield for their investment portfolios.
Maintaining its disciplined approach to cost efficiency is key to not return to past mistakes of the industry and to maintain profitable and sustainable business models.
Following the approval of the Annual General Meeting (AGM) on 22 May 2019, the final dividend will be payable with effect from 29 May 2019. The a.s.r. shares will trade ex-dividend on 24 May 2019.
Group non-financial targets a.s.r. aspires to become increasingly relevant to customers and society and as such has identified a set of non-financial targets which a.s.r. also presented at its CMD.
Starting price as at 1 January € 34.31 € 22.60 NA
Development and vitality a.s.r. considers the promotion of personal leadership and agility of its employees to be crucial in order to cope with the changes taking place within a.s.r. and in its environment. a.s.r. consequently invests in development and vitality. In order to enhance professional knowledge and skills, employees are offered job-related education and training courses. Moreover, all employees can rely on career coaching and can choose from a wide range of workshops on sustainable employability. In 2018, several groups of employees were also offered tailor-made (development) programmes.
In 2018, Periodic Medical Examinations (PMEs) were carried out in several business lines. A PME identifies the vitality and health, work-life balance and potential health risks of employees. It was offered on a voluntary basis and aimed to make employees more aware of the interaction of work and health.
‘Het Andere Plan’ a.s.r. operates ‘Het Andere Plan’ as a way of providing the best possible support and guidance for employees during a reorganisation. This centres on guidance from work to work with an emphasis on the development and sustainable employability of employees
Note: The numbers of the Executive Board are including CEO’s compensation. Excluding CEO’s compensation Male average hourly wage of the
Scope 1: Emissions resulting from fuel consumption a.s.r. achieved a Scope 1 reduction of (70) tonnes of CO2 equivalent in 2018 compared to 2017: • Fuel usage emissions increased slightly to 88 tonnes
Relationship with the Dutch tax authorities In January 2013, the Executive Board and the Dutch tax authority signed the Horizontal Monitoring covenant. The covenant sets out how a.s.r. and the Dutch tax authority engage with each other: with mutual trust and in an open and transparent manner. By signing the covenant, a.s.r. undertook to develop and maintain a system of internal management, together with internal and external controls with regard to taxation; the Tax Control Framework.
• At home – Encouragement Plan An individual Encouragement Plan has been put in place to encourage volunteering in colleagues’ private environments. A financial contribution plan can receive up to € 500 from a.s.r. foundation. If an idea is only about receiving a financial contribution, the proposal will be rejected.
- Living wages via the PLWF: the PLWF is a collaboration initiative among 8 financial institutions to engage listed companies in the garment, agri-food and retail sector on addressing living wage issues in their supply chain. In 2018, a.s.r. joined the platform, targeting 42 companies, and actively contributed to the engagement of 7 of the companies and developed a sound methodology for the newly added food-agri and retail sectors.
Rural real estate portfolio asbestos-safe a.s.r. real estate seeks to minimize the presence of asbestos in its existing Dutch real estate investments. To achieve this, the entire portfolio of retail, office and residential properties has been made asbestos-safe. Some buildings in the rural real estate portfolio may still contain asbestos. In order to make its rural real estate portfolio fully
1 Including 285 FTEs due to the acquisition of Generali Nederland.
Market Many insurers with similar products are active in the non-life market, especially in the retail non-life insurance market. The non-life market in general has been loss-making in recent years. Losses in the market led to premium increases and strict portfolio management by insurers. Consolidation by other insurers has also affected a.s.r.’s position in the Dutch market. Insurers distribute their insurance policies through intermediaries (approximately 80% of the market volume) and directly (approximately 20% of the market volume). In the retail market, online distribution has become more important. This mainly involves simple products such as car insurance. Consumers increasingly use the internet to orientate themselves and to compare and purchase products. Customers who buy insurance online usually switch insurers more frequently. The introduction of social media and WhatsApp have caused customers’ service needs to change. In the SME market, intermediaries are maintaining their dominant position, especially due to the more complex products involved.
Sustainability P&C has a number of CSR initiatives. These focus on three pillars: prevention, safety and sustainability. P&C’s goals in this regard are to: • Be recognised by customers, intermediaries and employees for its contribution to prevention and sustainability; • Advise and communicate on how to prevent damage; • Make the customer’s environment more secure; • Promote sustainable recovery and repair in the event of damage.
Sustainability De Amersfoortse’s ‘Doorgaan’ policy is an integrated disability and health insurance scheme whose customer benefits include lower premiums and supplementary services in the form of early preventive care, reducing the chance of (long-term) disability and encouraging sustainable employability. This is carried out by dedicated ‘doorgaanexperts’ through an efficient and effective approach (one stop shop for disability and health) aimed at minimising the length of absence.
Outlook for 2019 a.s.r. is not expecting any major changes in the social system. The emphasis will continue to be on improving accessibility and increasing insurance levels of the self-employed, focusing on young self-employed people and further improving service reintegration. a.s.r. needs to be vigilant on sickness leave levels. The acquisition of Loyalis is expected to take place in the first half of 2019. Loyalis will be an excellent addition to a.s.r.’s portfolio and is expected to strengthen its market position and provide an excellent basis for further growth.
Products Health markets two product types: basic insurance and supplementary insurance. Basic insurance provides cover in accordance with legal guidelines. Supplementary insurance covers specific risks that are not covered by basic insurance, such as the costs of dentistry, physiotherapy, orthodontics and medical support abroad.
Pensions implemented the legal uniform calculation method (URM) to make it easier for participants to understand their pensions and the terms of the GDPR.
a.s.r.’s footprint in the distribution landscape gives it forward integration in the insurance chain and improved insights into intermediary and customer needs, which it believes will enable it to adjust its product portfolio and/ or distribution mix and hence align its product range more closely with customer needs.
Dutch ID (Boval and Felison) Dutch ID is an intermediary, service provider and mandated broker to a.s.r.’s disability and P&C insurance businesses, as well as to other insurance companies operating in the Dutch non-life insurance market.
ASR Nederland N.V. assesses the amount of dividend payments against the current and expected solvency ratio and economic outlook. Dividend payments are in line with the conditions laid down in the capital and dividend policy of ASR Nederland N.V.
In 2018, a.s.r. took steps to further improve the effectiveness of the RMF. The Operational Risk Management (ORM) policy including underlying procedures was updated towards a more risk-based approach. Tasks and responsibilities of the first and second line of defense (including the role of assessor by the RMF) were tightened in the ORM policy and underlying procedures.
Risk priorities a.s.r.’s risk priorities and emerging risks are defined annually by the Executive Board, based on the Strategic Risk Analysis (top-down and bottom-up approach). The latest status of the risk priorities and progress on the steps defined are reported to the a.s.r. Risk Committee on a quarterly basis.
Positioning and structure of the Compliance Function The Compliance Function is a centralised function which is headed by the a.s.r. Compliance Officer for both a.s.r. and the supervised entities. The Compliance Function, the second line of defence, is considered a key function in line with the Solvency II regulation. The CEO bears ultimate responsibility for the Compliance Function and the a.s.r. Compliance Officer has direct access to him. The a.s.r. Compliance Officer also has an escalation line to the Chairman of the a.s.r. Audit & Risk Committee and/or the Chairman of the Supervisory Board in order to safeguard the independent position of the Compliance Function and enables it to operate autonomously. The a.s.r. Compliance Officer is entitled to upscale critical compliance matters to the highest organisational level or to the Supervisory Board.
IV. The report states those material risks and uncertainties that are relevant to the expectation of the company’s continuity for the period of twelve months after the preparation of the report (see chapter 2.1 Trends and developments, 3. Strategy and 7. Financial statements).
Basis for our conclusion We have performed our review of the sustainability information in accordance with Dutch law, including Dutch Standard 3810N, ‘Assurance-opdrachten inzake maatschappelijke verslagen’ (Assurance engagements relating to sustainability reports), which is a specific Dutch Standard that is based on the International Standard on Assurance Engagements (ISAE) 3000, ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’. Our responsibilities under this standard are further described in the section Our responsibilities for the review of the sustainability information of our report.
Legal structure ASR Nederland N.V. is the Group’s holding company. The supervised entities (OTSOs) within the Group are
The Business Executive Committee In 2018, a new management structure was created in close consultation between the CEO and the Supervisory Board in order to deliver on the next steps in implementing the recently announced strategy and objectives. On 19 November 2018, a.s.r. announced that as of 1 February 2019, it would change its management structure. Effective from this date, a.s.r.’s Executive Board will consist of three members: the CEO, the CFO, and a member to be appointed. A Business Executive
The composition of the Supervisory Board is such that each member has the skills to assess the main aspects of overall policy and that the Board as a whole matches the desired profile due to a combination of experience, expertise and the independence of the individual members. The diversity of its members ensures the complementary profile of the Supervisory Board. a.s.r. will continue to strive for an adequate and balanced composition of the Board in any future appointments by taking into account the diversity policy and all relevant selection criteria such as executive experience, experience in finance and experience in the political and social environment.
Name D at e o f in it ia l a p p o in tm e n t
(strengths and points for improvement); • Effectiveness of processes (information-gathering and decision-making); • Advisory role; • Role as an employer.
Dutch Banking Code ASR Bank N.V. is subject to the Dutch Banking Code (latest version 1 January 2015). This Code, which was drafted by the Dutch Banking Association, contains principles for governance and governance oversight, risk management, audit and remuneration policy. ASR Bank N.V. is governed by this Code. Details on how ASR Bank N.V. complies with the Dutch Banking Code can be found in its Annual Report, which is available at www.asrnl.com.
The three committees are: • The Audit & Risk Committee; • The Remuneration Committee; • The Selection & Appointment Committee.
After each financial quarter, the Committee discussed the financial results based on detailed financial, risk, compliance and internal and external audit reports and analyses. Progress on the recommendations of the internal and external auditor was monitored. The full 2018 reporting year was discussed in the first quarter of 2019 based on the (quarterly) internal finance report, the press release, the Annual Report, the financial statements, the Board Report and the actuarial report. The discussion of the actuarial report was also attended by the Actuarial
In accordance with the remuneration law ‘Wet aansprakelijkheidsbeperking DNB en AFM en bonusverbod staatsgesteunde ondernemingen’, issued by the Dutch government, no variable remuneration has been paid to the Executive Board members for the period from the 2011 a.s.r. financial year to the 2016 a.s.r. financial year. In 2017, the rise in short-term variable employee benefits was due to the one-off variable payment in December to all employees. In 2017, the fixed employee benefits of board members only increased with the annual CLA index. In 2018, the fixed employee benefits of board members increased as a result of the first step towards the target salaries announced at the beginning of 2018.
C. Intangible assets Intangible assets are carried at cost, less any accumulated amortisation and impairment losses. The residual value and the estimated useful life of intangible assets are assessed on each balance sheet date and adjusted where applicable.
Cash flow hedge accounting was primarily used for property development activities and ended in 2016.
Also unrecognised gains and losses from relevant assets that are not carried at fair value in the balance sheet are taken into account to the extent these assets are allocated to cover the insurance liabilities. The various elements of the Liability Adequacy Test are further discussed below.
Financial statements 2018 | 7.4 Group structure and segment information 177 2018 Non-life Life
Adjustments: - Compensation capital gains (Disability) -1 13 - Interest accrual on provisions (Disability) 66 64 - Prudence margin (Health) -2 -1
Financial statements 2018 | 7.4 Group structure and segment information 181
Generali Nederland focuses on non-life and life insurance contracts in the Dutch market. Generali Nederland N.V. has been renamed to ASR Utrecht N.V. and legally merged into ASR Nederland N.V. during the first half year. Furthermore, Generali life and Generali non-life legally merged into ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. respectively during the first half year of 2018. In preparation of these mergers Generali life and Generali non-life were sold to ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. respectively.
• Liabilities arising from insurance contracts were remeasured to fair value as defined in IFRS; this resulted in a significant increase predominately resulting from applying a different market consistent discount rate assumption and risk adjustment using a cost of capital approach at the closing date.
The increase in goodwill of € 13 million between the final balance sheet and the provisional balance sheet as presented in the a.s.r. interim report 2018 mainly relates to an addition to the non-life insurance liability and a change in the consideration paid.
The deferred tax asset is mainly caused by additions which have been made to the liabilities arising from insurance contracts and have already been recognised in the income tax expense. The deferred tax asset is not as a result of prior year tax loss.
In 2018, changes in the compositions of the group mainly relates to the acquisition of Generali Nederland and the technical provisions and investments involved (see chapter 7.4.5).
All cash and cash equivalents are freely available, except cash related to cash collateral which is managed separately from other cash equivalents. The cash components include € 2,512 million (2017: € 2,166 million) related to cash collateral received on derivative instruments.
Financial statements 2018 | 7.5 Notes to the consolidated balance sheet 201
Experience adjustments are actuarial gains and losses that have arisen due to differences between actuarial assumptions. The following table provides information about experience adjustments with respect to qualifying plan assets and the defined benefit obligation: Experience adjustments
7.5.19 Due to banks The amounts due to banks increased from € 2,254 million to € 2,686 million primarily as a result of the increase in liability recognised for cash collateral received under ISDAs (International Swaps and Derivatives Association) and CCAs (Client Clearing Agreement) concluded with counterparties (see chapter 7.5.11). There is no significant difference between the carrying amount and the fair value of these liabilities (see chapter 7.7.1.2).
The average interest rate for the cash collateral received in 2018 is -0.36% (EONIA) (2017: -0.35%). There are no specific terms and conditions, because these depend on the development of the value of the underlying instrument.
An amount of € 33 million (2017: € 38 million) of the other liabilities is expected to be settled more than twelve months after reporting date.
Tax expense on P&L from ordinary activities of discontinued operations 1 -
The adjustment of listed investments funds and asset backed securities from level 1 to level 2 (€ 287 million) is due to the lower level of liquidity of these funds.
4 The amount received as a member of the Audit & Risk Committee (€ 10,000 per annum, amount received: € 8,000) since May 2018.
Supervisory Board. This payment concerned 60% of the gross monthly salary of December 2017. The remaining 40% will be paid in 2020. It has been agreed with DNB to qualify this payment as a one-off variable payment.
Three lines of defence The risk governance structure is based on the ‘three lines of defence’ model. The ‘three lines of defence’ model consists of three defence lines with different responsibilities with respect to the ownership of controlling risks. The model below provides insight in the organisation of the three lines of defence within a.s.r.
Financial statements 2018 | 7.8 Risk management 250 total equity, or on the profit for these years, because a.s.r. still passed the IFRS Liability Adequacy Test (LAT). While the sensitivities result in a decrease of the surplus in the Liability Adequacy Test, the outcome is still positive.
The required capital for market risk concentrations is due to short term deposits received as collateral for the interest rate derivatives.
Assets that are in scope of spread risk are, by definition, not in scope of counterparty default risk and vice versa. The Solvency II regime makes a distinction between two types of exposures: • Type 1: These counterparties generally have a rating (reinsurance, derivatives, current account balances, deposits with ceding companies and issued guarantee (letter of credit). The exposures are not diversified; • Type 2: These counterparties are normally unrated (receivables from intermediaries and policyholders, mortgages with private individuals or SMEs). The exposures are generally diversified.
The share of profit/(loss) in subsidiaries is non-taxable as a result of the participation exemption under Dutch tax law.
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other information | 8.1 Report on the audit of the financial statements 2018 included in the annual report 284
We have also taken misstatements into account and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.
We tested the internal controls regarding the accounting of the (un)realised results on the fixed income investments, interest derivatives and inflation rate swaps. Furthermore, we tested the application of shadow accounting by inspecting the reconciliations between (un)realised results on swaps and swaptions and the related shadow accounting adjustment in the liabilities arising from insurance contracts.
The fair value disclosures of investments in note 7.7.1. meet the requirements of EU-IFRS.
In addition, ASR Nederland N.V. is required to make certain IFRS 3 disclosures related to the acquisition in its 2018 financial statements. Refer to note 7.4.5.
In addition, IFRS 5 requires certain specific disclosures. Refer to Note 7.4.6.
ASR Bank N.V.; • Validating the fair value less cost to sell; • Recalculating the impairment.
The held for sale disclosure of ASR Bank N.V. in note 7.4.6. meets the requirements of EU-IFRS.
Other non-prohibited services provided In addition to the statutory audit of the financial statements of ASR Nederland N.V. and its subsidiaries, we provided the following services: • Regulatory reporting: We issued auditor’s reports on selected regulatory reporting templates of ASR Nederland N.V., and of its subsidiaries, to the Dutch Central Bank (DNB); • Corporate responsibility reporting: We issued an assurance report on ASR Nederland N.V.’s corporate responsibility reporting included in the annual report; • We issued audit reports on the financial information of ASR Nederland N.V.’s financial intermediary business; • We issued assurance reports in respect of the administration and internal control of ASR Vermogensbeheer, ASR Real Estate, ASR Mortgages and ASR Pensions; We issued an assurance report with regard to ASR Vermogensbeheer GIPS verification, and we issued assurance reports on the cost price models for financial products prepared by ASR Nederland N.V.’s insurance subsidiaries; • We issued reports of factual findings on statements prepared by ASR Nederland N.V. to meet contractual obligations with its customers.
Our responsibilities for the audit of the financial statements Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. In this respect we also submit an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.
Other information | 8.1 Report on the audit of the financial statements 2018 included in the annual report 292
Pay ratio of the annual total compensation for the highest paid individual and the median annual total compensation for all employees 10.80 9.05 9.15
Process Relevant topics and boundaries for this report were selected on the basis of a materiality analysis involving both internal and external stakeholders. The process is described in chapters 2.2 and 2.3 (Stakeholders and Material topics). The information in the Management report is based on reports from the business lines and the results of questionnaires and interviews. For the preparation of the annual report, a Working Group (WG), a Steering Group (SG) and a Review Group (RG) have been set up to guide the process and review the contents of the texts. The following disciplines are represented in the WG: Group Accounting, Reporting & Control, Group Balance Sheet Management, Investor Relations, Corporate Communications (including CSR), Human Resources, Group Risk Management, and the Company Secretary. The Annual Report SG agrees on the different tasks, roles and responsibilities relating to the preparation of the annual report. The SG represents the CEO, Director Group Accounting, Reporting & Control and Director Corporate Communications. Before work started on gathering information and writing the annual report, the SG and the WG decided on the structure and key messages of the report. The WG then translated these guidelines into drafts, which were reviewed by a committee of members from the WG, SG and RG. During the reporting process, the RG delivered feedback on the draft annual report. The RG is represented by directors. The draft texts of the annual report are discussed in the respective meetings of the Executive Board, the Supervisory Board and the
Discounted cash flow method A valuation technique whereby expected future cash flows are discounted at a rate that expresses the time value of
Lease car fuel consumption Fuel consumption is expressed in liter (petrol, diesel, electricity and GHC).
Sustainable products/services To develop sustainable products and services and encourage customers to positively and actively opt for them. The focus is on initiatives in the areas of safety (around the home, in traffic, at work, etc.), prevention (of care and disability) and sustainable asset-building.
Stakeholder dialogue outcomes One of the main take-aways was that the majority of the stakeholder expects a.s.r. to have its core focus and activities on the benefits of the customers on both the short and long-term, based on the concept of solidarity. Key issue mentioned to cover these aspects was customer satisfaction.
Suppliers • Consultation at strategic (2-4 times per year), tactical (monthly)
Management Approach 2018 Disclosure on management approach Ch. 4.3 (p. 56-59)
New suppliers that were screened using environmental criteria 414-1 Supplier Social Assessment