avatar ASR Nederland N.V. Finance, Insurance, And Real Estate

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    2013 annual report


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    a.s.r. Archimedeslaan 10 P.O. Box 2072 3500 HB Utrecht www.asr.nl


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    a.s.r. 1 2013 annual report 2013 annual report Contents Part I Part V a.s.r. at a glance 5 Report of the Supervisory Board 63 1.1 Profile and key figures 6 5.1 Report of the Supervisory Board 64 1.2 Message from the CEO 10 5.1.1 Financial statements and profit appropriation 64 1.3 Highlights of 2013 12 5.1.2 Issues addressed by the committees 67 1.4 Strategy and positioning 15 5.1.3 Management and supervision 69 1.5 Brand policy and distribution model 16 5.1.4 Corporate governance 74 5.1.5 Remuneration policy 76 5.1.6 Final word from the Supervisory Board 79 Part II Report of the Executive Board 19 2.1 Financial performance 20 Part VI 2.1.1 ASR Nederland N.V. 20 Financial Statements 81 2.1.2 Non-life segment 26 Consolidated financial statements 84 2.1.3 Life segment 31 Notes to the consolidated balance sheet 155 2.1.4 Other segment 35 Notes to the consolidated income statement 186 2.1.5 Investments 37 Other notes 194 2.2 Capital management 39 Company financial statements 198 2.3 Risk management 42 Part VII Part III Other information 205 Corporate Social Responsibility 47 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 Part IV 7.4 Other equity interests 211 Executive Board Responsibility Statement 59 7.5 Provisions of the Articles of Association regarding profit appropriation 211 7.6 Profit appropriation 211 7.7 Dutch Insurance Code 212 7.8 Glossary 227 7.9 GRI index table 231 7.10 List of acronyms 241 Contact details and publication 242


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    a.s.r. 3 2013 annual report Introduction This Annual Report spans the period from 1 January 2013 to 31 December 2013. Where the data in this report does not match the 2012 annual report, this is indicated in the text. The Annual Report is based on factual information from internal sources, financial information provided by Accounting, Reporting & Control, Risk Management, Human Resources, Legal, Compliance and Business Support, and information from the Supervisory Board. The provided quantitative and qualitative information concerns a.s.r. as a whole, except where explicitly stated that information applies to one specific business unit or a division of the organization. This Annual Report has been prepared based on the G3.1 sustainability reporting guidelines of the Global Reporting Initiative (GRI) as well. These guidelines are a leading benchmark for sustainability reporting. a.s.r.’s sustainability report is governed by level C of the G3.1 guidelines. Part VII of this Annual Report contains a GRI index table, indicating where in the Annual Report the reader can find GRI disclosures. Also, additional information is provided that has not been included in the Annual Report itself. The information contained in the GRI index table has not been audited.


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    a.s.r. 4 2013 annual report


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    a.s.r. 5 2013 annual report a.s.r. at a glance Part I a.s.r. at a glance


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    a.s.r. 6 2013 annual report a.s.r. at a glance 1.1 Profile and key figures Gross written premiums Breakdown of premium income Non-Life 61% Life 39% € 3,923 (2012: € 4,290 million) mln (2012: Non-Life 58%; Life 42%) Operating expenses Net results € 547 (2012: € 587 million) mln € 281 (2012: € 316 million) mln Cost-premium ratio (Insurance business) Dividend proposal 10.9% (2012: 10.2%) € 99 (2012: 88 million) mln


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    a.s.r. 7 2013 annual report a.s.r. at a glance DNB solvency including UFR Return on equity 268% (2012: 293%) 10.6% (2012: 14.1%)1 1 After restatement for IAS19R Headcount (FTE) at year-end 2013 3,789 1,401 2,388 Combined ratio (Non-Life) 96.5% (excluding WGA-ER loss item) (2012: 99.2% (including additional WGA-ER loss item) 104.6% (including extra WGA-ER loss item)


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    a.s.r. 8 2013 annual report a.s.r. at a glance ASR Nederland N.V., hereinafter referred to as a.s.r., is the Dutch insurance company for all types of insurance. Via the a.s.r., De Amersfoortse and Ditzo brands, and specialist labels such as Europeesche Verzekeringen and Ardanta, a.s.r. offers a wide range of financial products covering P/C, life and income insurance, group and individual pensions, health insurance, travel and leisure insurance, and funeral insurance. With the exception of a number of funeral portfolios in Germany and Belgium, a.s.r. operates in the Dutch market. Besides insurance products, the a.s.r. product range includes savings and investment products and bank savings products. In addition, a.s.r. invests in real estate development and management. Having generated € 3,923 million in gross premium income in 2013 and servicing some 2 million customers, a.s.r. is the fifth largest insurance company in the Netherlands. The Dutch State has been the sole shareholder of a.s.r. since 3 October 2008. In 2011, the Dutch State transferred all a.s.r. shares to NL Financial Investments (NLFI) in exchange for depositary receipts for the shares. a.s.r. chooses to be that ‘other’ insurance company. The insurer that helps people by taking action and by launching new, easy-to-understand products and adapts existing products based on customer feedback. a.s.r. wants to offer security to people living in uncertainty by offering financial continuity in their lives and allowing them to take calculated risks. It is a.s.r.’s priority to treat customers fairly. Customers can choose to take out insurance from intermediaries or through direct channels. a.s.r.’s core values of being personal, approachable, individual and authentic are reflected in everything we do. a.s.r. wants to give customers good reason to choose its products. But most of all: a.s.r. wants to show customers that they have made the right choice when they call upon their insurer. Customers are insured against risks they cannot bear themselves. a.s.r. is responsible with the insurance premiums and funds entrusted to it. A person insuring their pension with a.s.r., for instance, should be able to trust that their policy will yield pension benefits in 30 years’ time. a.s.r.’s main office is located at the Archimedeslaan in Utrecht, the Netherlands. Other branches in the Netherlands are located in Amersfoort, Amsterdam and Enschede, and at the Pythagoraslaan in Utrecht. Thanks to the New World of Work, a.s.r.’s nearly 3,800 employees can choose their own time and place of work. In its policies, a.s.r. takes account of the interests of customers, employees and a broad group of external stakeholders (business partners, shareholders, regulators, politicians, regional governments, industry associations, trade unions, non-governmental organizations (NGOs) and local communities). a.s.r.’s corporate social responsibility and concern for the environment are demonstrated by its compliance with the ESG principles of socially responsible investment (see Part III, Corporate Social Responsibility). Organizational structure a.s.r. is managed by the Executive Board (www.asr.nl/EN/about-asr). The Executive Board bears full responsibility for the three reporting segments: Non-Life, Life and Other. The Non-Life segment comprises all types of non-life insurance policies that a.s.r. offers to consumers and business owners. These policies insure risks related to motor vehicles, fire, travel and leisure, liability, legal assistance, occupational disability and medical expenses. The policies are offered under the following labels: a.s.r., De Amersfoortse, Europeesche Verzekeringen and Ditzo, both via the intermediary and the direct channels. The Life segment comprises all insurance policies that involve asset-building, asset reduction, asset protection, funeral expenses, and term life insurance for consumers and business owners. Products are


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    a.s.r. 9 2013 annual report a.s.r. at a glance offered under the a.s.r., De Amersfoortse and Ardanta labels. The vast majority of these policies are distributed via the intermediary channel. Funeral insurance, immediate annuities, term life insurance and pension insurance can also be taken out online. The Other segment comprises the banking business, ASR Vastgoed Ontwikkeling N.V. (property development), SOS International (emergency assistance) and the holding companies. The Banking business develops mortgages and savings-linked and unit-linked products that are administrated and managed by ASR Hypotheken B.V. and ASR Bank N.V. ASR Vastgoed Ontwikkeling N.V., which is one of the largest retail, residential and area developers in the Netherlands, focusing on developing combined-use residential and retail spaces in complex urban environments. On 1 January 2013, Ditzo was transferred from the Other segment to the Non-Life segment. 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.


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    a.s.r. 10 2013 annual report a.s.r. at a glance 1.2 Message from the CEO In 2013 we made significant progress, which makes who we want to be crystal clear: a sustainable, robust and future-proof insurer that is seen to put continuity and certainty for its customers first. We have noticed that customers and other stakeholders appreciate the course we have taken. We are an insurer that helps by taking action, and we play a role that benefits society. A further structural reduction in costs, the introduction of new, simplified products and improved customer service all contribute to this. The motto for our customer service is ‘first time right’. Stable earnings and prudent capital adequacy also contribute to our ambition of offering our customers certainty. In 2013, the insurers once again faced a challenging market. Margins continued to come under pressure, consumer spending fell and businesses closed down. For customers, price is increasingly important in their choice of insurance products. a.s.r. is focusing on the long term by offering fair and transparent products that allow customers to cover risks responsibly. Our strict cost discipline helped us to reduce our costs to an even lower level in 2013, allowing us to offer our customers attractively priced products. We will also further tighten our focus on risk assessment and claims management. Our deliberate choice of value over volume has led to lower premium income in some market segments. Helping by taking action as an expression of who we aspire to become, resulted in three interesting initiatives in 2013 to underline our commitment to society. Following the start of the FeyBlij campaign early in the year in support of Rotterdam Zoo Blijdorp, we supported a number of independent advisors by facilitating their local media campaigns. Ditzo concluded 2013 by donating part of its media budget for Ditzo healthcare insurance through a social media campaign to the Netherlands Cancer Institute. The dedicated website developed by Ditzo (kijkkankerdewerelduit.nl) attracted almost four million page views. The accompanying YouTube movie was viewed around 1.1 million times. Thanks to all the ‘likes’, a total of one million euros was donated to the Netherlands Cancer Institute. That money is now being put towards cancer research. a.s.r. posted a profit of € 281 million for 2013. This is our fifth year in profit in a row since gaining our independence in 2008. Solvency remains strong at 268%. Disregarding the additional WGA-ER charge item, the ratio between premium income and claims (the combined ratio) improved in the Non-Life segment. However, our deliberate choice of value over volume led to lower premium income (4%) in the Non-Life segment. At the same time, we note that our updated Voordeelpakket (non-life discount package) has been appreciated by consumers since its introduction. In the Life business, a.s.r. also prefers value over volume. By working more efficiently and adjusting the organization to this choice, costs will be decreased even further. In the mortgage market, we are seeing that the WelThuis Hypotheek mortgage meets customers’ need for a transparent, comprehensible product. In the savings market, too, a.s.r.’s bank savings products meet the changing wishes of customers. a.s.r. added a new product to the defined contributions market with the introduction of its Werknemers Pensioen (Employee Pension) product. This is an accessible product that focuses on employees and provides all information online. In a market characterized by stiff competition, we have managed to retain our position as market leader in occupational disability


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    a.s.r. 11 2013 annual report a.s.r. at a glance insurance. Adequate action on prevention and return-to-work has proved to be a valuable trump. In health insurance, we have seen a considerable increase in the number of customers in the past year. Our Europeesche Verzekeringen and Ardanta labels put in a good performance in the year under review. An important moment in 2013 was the letter sent by the responsible minister to the Dutch Parliament in August, marking a key development in a.s.r.’s position with the Dutch State as the sole shareholder. There are two options on the table for the privatization of a.s.r.: an IPO or a merger with an insurer already active in the Dutch market. a.s.r. is preparing itself for either scenario. It is clear in any case that a.s.r. is in good business health, has good prospects and is ready to return to private ownership. Significantly for a.s.r., we made progress in several senses with the transition of the business. A tangible example is formed by the first phase of the renovation of our main offices at the Archimedeslaan in Utrecht. The project is progressing well and on schedule, which meant that the first employees moved into the new wing at the start of 2014. Our choice for renovation and centralization creates a considerable cost saving and will strengthen our teamwork. We are proud to have been awarded the BREEAM Excellent certification, the highest standard of sustainability for existing buildings. Throughout 2013, a.s.r. continued to be a business in transition in a market in transition. The only constant factor in the years ahead will be the need to adjust to changing circumstances. This means that, over the coming years, we will continue to work hard in line with our strategy, allowing consumers and businesses to insure risks at the right price or to entrust their asset building to us. This will place great demands on the adaptability of our employees, especially if there are changes to the organization that may have an impact on their personal situation. I am proud of how our employees have dealt with this and continue to devote all their energy to helping customers as well as possible. We are able to ensure continuity thanks to the dedication of our people. Continuity for our customers. Continuity in our path to a sustainable business with the right balance between costs, premium income, return and solvency. Continuity in our strategy and positioning. This is our assurance of a healthy future. I have complete faith that we will be successful in achieving this! Jos Baeten Chief Executive Officer of a.s.r. ‘We have noticed that customers and other stakeholders appreciate the course we have taken.’


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    a.s.r. 12 2013 annual report a.s.r. at a glance 1.3 Highlights of 2013 The central theme throughout 2013 was highlighting our strategy: the introduction of new products for customers, our positioning, an ongoing focus on efficiency improvements, further cost reductions, the action needed to meet the requirements – where known – of Solvency II, preparations for the introduction of SEPA, and also the renovation of the offices at the Archimedeslaan in Utrecht. Financial robustness, good levels of solvency and retention of Standard & Poor’s A rating were key financial objectives in 2013. Preparing for the return to private ownership was also relevant in 2013, but that does not change a.s.r.’s course towards becoming a flat and transparent organization with clear products and a mindset to helping customers based on ‘first time right’. All financial developments at a.s.r. are described in Part II. Notable new products that a.s.r. brought to market in 2013 included: • Lijfrente spaarrekening (annuity-linked savings account). This is a bank savings product offered by a.s.r. whereby the customer fully manages and consults the account online. The deposits benefit from a tax break. The lijfrente spaarrekening is the successor of the lijfrente opbouwrekening. • Voordeelpakket (non-life insurance package). The updated Voordeelpakket is a complete package of non-life insurance policies. This package offers customers a selection of policies that are appropriate to their circumstances at different times of their lives, including advice from an advisor. Customers also benefit from a discount if they take out several policies within the package. • Werknemers Pensioen (pension plan). In this plan, employees decide for themselves how they want to save for their pension, either by investing or with a 100% guaranteed pension benefit. The Werknemers Pensioen plan is transparent and the costs are clear. It is clear in this product what the employer pays and what costs have to be contributed by the employee. • Doodgaanendoorgaan.nl (online funeral insurance). The doodgaanendoorgaan.nl website offers practical advice on arrangements that need to be made for a funeral. Customers can also take out funeral insurance on the website. • BeterDichtbij (health insurance policy). The BeterDichtbij health insurance policy is an a.s.r. initiative in cooperation with an association of 42 regional hospitals (Samenwerkende Algemene Ziekenhuizen). In its initial review, the Dutch Consumers’ Association gave the insurance a four out of five stars rating. 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.


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    a.s.r. 13 2013 annual report a.s.r. at a glance • De Amersfoortse campaign. This TV campaign was not just intended to position business owners and De Amersfoortse; a.s.r. also supports business owners via a crowd funding platform where they can pitch their ideas that are still in need of an investment. De Amersfoortse and a.s.r. will also be investing in these ideas. Preparations for this crowd funding platform took place in 2013. It will launch in 2014. • Kijk kanker de wereld uit (Rid the world of cancer campaign). Rather than spending money on media adverts for Ditzo’s healthcare insurance, a.s.r. instead decided to give the money to cancer research. More than one million viewers watched and shared the video featuring John de Wolf on the dedicated website kijkkankerdewerelduit.nl and on social media. Anyone viewing, sharing or liking the video helped raise money for the Netherlands Cancer Institute. The maximum € 1 million available was achieved within four days. • Advisor campaign. This campaign, which built on the a.s.r. branding campaign, helped around 50 independent advisors raise their profile in their own region. The campaign included regional radio adverts and outdoor advertising posters. Three other highlights of 2013: 1. Minister of Finance Jeroen Dijsselbloem chooses two-track approach to a.s.r. privatization In August the Minister of Finance, Jeroen Dijsselbloem, informed the Dutch Parliament of his views on how to return a.s.r. to private ownership. There are two options on the table for the sale of a.s.r.: an IPO or a merger with an insurer already active in the Dutch market. The Executive Board sent all employees a message by email stating that this specifically means that, in the coming period, a.s.r. will make (further) preparations for an IPO, and that options to merge (‘consolidate’) with another insurer active in the Netherlands will be seriously studied. 2. a.s.r. said farewell to Feyenoord After 22 years as main sponsor of Feyenoord football club, it was time for a.s.r. to bid Feyenoord farewell in May. Before the final match of the season, a.s.r.’s Chief Executive Officer, Jos Baeten, addressed a full stadium from the centre spot to thank the club and the fans. Club Chairman, Eric Gudde, had a word of thanks for a.s.r.: ‘a.s.r. has been a sponsor that has always stood behind Feyenoord, in good times and in bad. Loyalty has been key. It is part of this club and part of the supporters of this club.’ 3. Renovation taking shape In 2013, the first phase of the renovation of the Archimedeslaan main offices was nearing completion, with the first group of colleagues due to move into the renovated part of the building in early 2014. The renovation of the building is unique in more ways than one. Not only does the new space meet the most stringent environmental and sustainability standards (BREEAM Excellent rating) and offer opportunities for the New World of Work (NWW), but it is the largest renovation project ever in the Netherlands where employees have been able to remain in the building during the renovation works.


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    a.s.r. 14 2013 annual report a.s.r. at a glance Awards, prizes and other honours in 2013 In the development of a.s.r. towards becoming a customer-oriented and transparent insurer, any awards and prizes are a recognition of the positive changes within a.s.r. A selection of prizes awarded to a.s.r. in 2013 or awards which were announced in 2013: Customer focus • Product comparison website Moneyview awarded a.s.r. five stars for a number of products in 2013. This is the highest score possible. Five stars were awarded to a.s.r.’s legal assistance insurance in the product rating category. a.s.r.’s lijfrente spaarrekening (annuity-linked savings account) was given five stars in the price category. The De Amersfoortse’s occupational disability insurance was given five stars in the flexibility category. • The Dutch Consumers’ Association was enthusiastic about the vehicle personal injury insurance offered by a.s.r. The test panel gave this insurance product a score of 9, the highest score in comparison with other products. • The Dutch Consumers’ Association recommended taking out healthcare insurance with Ditzo based on price, the cover provided and the terms and conditions. The recommendation was based on the first healthcare auction that the Association had organized. • Customer-Oriented Insurance Quality Mark awarded to a.s.r. • Ditzo, De Amersfoortse and Europeesche Verzekeringen kept their Customer-Oriented Insurance Quality Mark. • Europeesche Verzekeringen won the Best Travel Insurance Award 2012, presented in 2013. • Ditzo won the Customer Centric DNA Awards, an award for the most customer-oriented insurer. • Ditzo took first place in the Preferenso Service Award 2012, presented in 2013. • Customer service colleagues took fifth place in the National CQ test television programme. • SOS International won the IAG Innovation Award 2013 with the INFO Tag. Employees • The a.s.r. Executive and Supervisory Board, as well as senior management team members took their professional oath. • a.s.r. received an honourable mention in the report by the Monitoring Talent to the Top committee, in which Dutch businesses commit themselves to appointing more women in senior positions (see Part III). • a.s.r. vastgoed ontwikkeling is the most sought-after employer in the construction sector. • Highest score for employee engagement in 2013 since 2008 (for more details, see Part III). 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). 1 • For the third consecutive year, a.s.r. achieved third place in the study by the Dutch Association of 2 3 Investors for Sustainable Development (VDBO) (www.vbdo.nl). • a.s.r. took third place in the Sustainable Working Award. Efficiency • a.s.r. took first place for Facility Services in the Netherlands Facility Cost Index.


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    a.s.r. 15 2013 annual report a.s.r. at a glance 1.4 Strategy and positioning a.s.r. offers people certainty in uncertain situations. a.s.r. achieves this by ensuring financial continuity in people’s lives and by allowing them to take out insurance for risks that they are unable to carry alone, and to help customers grow their assets for the future. Everyone at a.s.r. works each day according to the guiding principle that they can help make the insurance business better. Using alternative business models and starting from an alternative mindset, they revert back to the roots of insurance, i.e. helping people, and back to the philosophy that working together provides certainty to all. Insurance is the essence, and providing certainty is a.s.r.’s reason for being. Helping by taking action. The legal predecessors of a.s.r. have put service in insurance on the map in the Netherlands. Our history goes back to 1720, and sharing risk was the founding principle. This still holds true for a.s.r. today. 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. a.s.r.’s products and service must match these. 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 that also listens to them and puts itself in its customers’ shoes. All a.s.r. employees share the responsibility for fulfilling customers’ wishes, and customer trust is an important part of this ambition. Trust goes further than the customer alone. It applies equally to successful cooperation with intermediaries by offering employees an inspiring and interesting working environment, and by giving the shareholder the prospect of attractive returns based on responsible risk. Customers tell a.s.r. that they want transparent products, clear communication and personal service. a.s.r. has made meeting these needs its number one priority, and activities and targets are assessed against customer interests. New products are presented to customer panels and their feedback is incorporated into the product development process. Ultimately, this is reflected in the appreciation rating that customers give a.s.r. in terms of the Net Promoter Score (NPS). Part of a.s.r.’s strategy is to prevent waste by a continuous drive to improve efficiency in line with the motto of ‘first time right’ and to lower costs by standardizing processes and products and by increasing the degree of Straight Through Processing. One aspect of efficiency involves the outsourcing of work to specialist partners. a.s.r. has chosen to introduce outsourcing in controlled stages.


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    a.s.r. 16 2013 annual report a.s.r. at a glance 1.5 Brand policy and distribution model With the a.s.r., De Amersfoortse, Ditzo, Europeesche Verzekeringen and Ardanta brands, a.s.r. offers a wide range of financial products covering life insurance, non-life insurance, income protection insurance, group and individual pension insurance, health insurance, travel and leisure insurance, and funeral insurance. a.s.r. a.s.r. is the label for private individuals. Its key values are: helping people by taking action and avoiding waste. Life and non-life insurance policies, mortgages and savings and investment products are primarily sold through the intermediary channel. The a.s.r. label also includes insurance for corporate clients. In addition, a.s.r. manages and develops real estate. a.s.r. embraces a hybrid distribution model, which has been designed to allow customers to manage their insurance themselves and solicit advice when they need it. Customers can always contact a.s.r. about easily resolvable or administrative issues, for instance by calling or sending an email, or they can ask an intermediary for tailored advice. a.s.r. also puts customers’ interests first in developing insurance packages. These are based on customers’ life events, such as buying a house or children leaving home. This makes insurance personal and lays the foundation for different pricing methods. Ditzo Ditzo is the online provider of non-life and health insurance policies for people who like to manage their insurance themselves. Customers can take out household contents insurance, third-party liability insurance, residential premises insurance, travel and motor vehicle insurance, and health insurance online.


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    a.s.r. 17 2013 annual report a.s.r. at a glance De Amersfoortse Over the coming years, De Amersfoortse will focus more and more on becoming the number one insurance label for business owners. Pension insurance was added to the portfolio of income protection and health insurance in 2013. De Amersfoortse’s priorities are offering peace of mind, now and in the future, advice from a trusted advisor and convenience through online management and services. With this proposition, De Amersfoortse is transforming from an income protection insurer to the insurance company for business owners in the Netherlands. De Amersfoortse’s products and services are sold exclusively through intermediaries. From 2013 onwards, income insurance will only be sold via the De Amersfoortse brand, based on profiles from corporate clients. This means business owners will receive a competitive proposition when taking out disability or income protection insurance. Ardanta Ardanta is a specialist in funeral insurance. Although it collaborates mainly with independent intermediaries, products are sold in partnership with undertakers as well. In addition, Ardanta has launched a website called www.doodgaanendoorgaan.nl (Dutch only), which educates customers well in advance about funeral arrangements and related issues. Europeesche Verzekeringen Europeesche Verzekeringen specializes in travel and leisure insurance. Its product offering ranges from multi-trip travel insurance and classic car insurance to hobby and wedding insurance. Europeesche Verzekeringen sells insurance policies through the intermediary channel and through specialist partners to offer tailor-made policies to its customers, which not only include travel companies, health insurers and insurance agents, but also federations, clubs and associations, such as the Dutch Ski Federation.


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    a.s.r. 18 2013 annual report a.s.r. at a glance


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    a.s.r. 19 2013 annual report Report of the Executive Board Part II Report of the Executive Board


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    a.s.r. 20 2013 annual report Report of the Executive Board 2.1 Financial performance 2.1.1 ASR Nederland N.V. • Net results 2013 at € 281 million - Non-Life segment: healthy margin (excluding WGA-ER charges) at a combined ratio of 96.5% - Life segment: better performance thanks to cost reduction and higher investment returns - Other segment: better performance in Banking business and scale-down of risks in real estate development • Operating expenses down another € 40 million, i.e. 7%, dropping from € 587 million to € 547 million • Gross premiums written down 9% to € 3,923 million (2012: € 4,290 million) due to market developments and focus on profitability • DNB solvency ratio robust at 268% (year-end 2012: 293%) a.s.r. key figures (in millions of euros) 2013 2012 Gross premiums written, Non-Life 2,392 2,487 Gross premiums written, Life 1,666 1,891 Eliminations -135 -88 Total gross premiums written 3,923 4,290 Operating expenses, Life and Non-Life -439 -449 Operating expenses, Other -108 -138 Total operating expenses -547 -587 Provision for restructuring expenses -24 -30 Reported for 2012, before change in accounting policies under IAS19R1 Net results, Non-Life (including additional WGA-ER charges) 59 Net results Life 275 Net results Other -79 Net results 255 After change in accounting policies under IAS19R Net results, Non-Life 5 59 Net results Life 367 275 Net results Other -91 -18 Net results 281 316 Cost-premium ratio, insurance business 10.9% 10.2% 1 In 2013, a change in accounting policies was implemented in relation to the recognition of the a.s.r. pension plan (IAS19R), as a result of which the comparative figures for 2012 of the Other segment were restated. This also affected the consolidated figures for 2012. This change has an accounting effect on the net results, operating expenses and total equity, as well as on return on equity.


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    a.s.r. 21 2013 annual report Report of the Executive Board 31 December 2013 31 December 2012 Total equity (including revaluation of real estate) 3,799 3,537 Total equity (IFRS) 3,015 2,663 Return on equity (IFRS) 10.6% 14.1% DNB solvency ratio 268% 293% Total number of internal FTE 3,789 4,088 Notes to a.s.r. key figures • Ditzo has been integrated into the Non-Life segment as of 1 January 2013. The effect of this shift on the cost-premium ratio of the insurance business in 2012 was 0.3%-point (from 10.2% to 10.5%). On a comparable basis, the cost-premium ratio for the insurance business saw a 0.4%-point increase, rising to 10.9%, despite implemented cost-saving measures. Developments in 2013 The insurance market continued to pose challenges in 2013 due to a fall in consumer spending, lagging economic growth and a rising number of insolvencies. Against this backdrop, a.s.r. managed to further improve its performance in 2013. Margins in the Non-Life segment are sound. Disregarding the additional expense item for Partial Incapacity Policy excess insurance (WGA-ER), all P/C divisions contributed profits. In order to continue the robust performance of the P/C business, increased attention was placed in 2013 on managing claims, mainly by focusing on portfolio management and improving returns, with good results. Consequently, premium income from the other P/C business was weighed down. The market share of the Occupational Disability business was strengthened, and a.s.r. became a permanent player in the Health Insurance market thanks in particular to the success of Ditzo. The performance of the Life segment improved significantly, which was attributable to lower costs and higher investment returns. The traditional Individual Life business remains an area for concern because it continues to contract. Since interest-rates remain low, a.s.r. has chosen value over volume in the pensions market; the priority is to retain existing customers. This has proven to be successful. The Banking business is developing well. It has doubled its share of the mortgage market thanks to the WelThuis mortgage and the a.s.r. online savings account. As a result, a.s.r. was the sixth largest mortgage lender in the Netherlands at year-end 2013. What’s more, a.s.r. is now the second largest mortgage lender amongst insurers. In 2013, a.s.r. again took a number of steps to improve its efficiency and reduce costs; that has resulted in a better performance of the divisions. Thanks to stringent capital and risk management, the solvency ratio remained robust at 268%. a.s.r. sets great store by customer excellence and this is beginning to yield dividends. The Net Promoter Score is the highest since the first measurement in 2009. This means that more customers than ever before are recommending a.s.r. to their family, friends, colleagues or business partners. Among insurers, a.s.r. is ranked fourth based on the Net Promoter Score. New products such as the Voordeelpakket (non-life insurance discount package) and Werknemers Pensioen (Employee Pension) received a warm welcome from both intermediaries and customers. a.s.r. works hard to win back customer trust. On one hand by showing our commitment to society through ‘help’ campaigns, on the other by improving customer services. In this context, we set up Customer Contact Centres in the divisions in 2013 so as to more easily draw upon existing expertise and to improve customer service.


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    a.s.r. 22 2013 annual report Report of the Executive Board a.s.r.’s performance and results are due to employees’ efforts. While the market changes continually and a.s.r. is adapting, employees continue to focus on improving customer service and earning back customer trust. Thanks to the commitment of all employees, a.s.r. is able to guarantee continuity for customers and create a meaningful future for a.s.r., all stakeholders and society at large. Financial results in 2013 Gross premiums written Compared to 2012, premium income was down 9% to € 3,923 million (2012: € 4,290 million). The decline relates to both the Non-Life segment (-4%) and the Life segment (-12%). The fall in premium income in the Non-Life segment to € 2,392 million (2012: € 2,487 million) manifested itself in nearly all product groups; it relates to the choice of value over volume as well as to a market that is in decline in some respects. Higher product sales were neutralized by a greater number of policy cancellations as a result of the focus on profitability and business closures by self- employed persons. In the Fire & Property business, risks were reassessed, which led to the cancellation of some policies; as a result, a.s.r. was less affected by large fires in 2013. The total Health Insurance portfolio continued to grow, predominantly due to a successful Ditzo campaign. AMOUNTS € MILLION 5 2013 2012 4 ↓ 9% 3 2 ↓ 4% ↓ 1 12% 0 Total gross Non-life Life SEGMENT premiums written Gross premiums written in the Life segment were down 12%, falling from € 1,891 million to € 1,666 million. This drop was mainly attributable to lower income from regular premium policies. The volume of policy surrenders in the Individual Life business was halved in 2013 after the peak in 2012; it has now returned to ‘normal’ levels from a historical perspective. Focus on profitability also led to a further decline in immediate annuities/single premium policies. Premium income from the Pensions business fell by 6%. The new Werknemers Pensioen (Employee Pension) was introduced in late 2013. The first contracts have now been signed and the number of calls for tenders is rising. Premium income from the Funeral Insurance business was virtually stable, despite a declining market, thanks in part, to the acquisition of de Facultatieve. Operating expenses a.s.r. again structurally lowered its operating expenses; a 7% fall to € 547 million was achieved in 2013. In addition to focusing on cost reduction, a.s.r. continues to make targeted investments, for instance by introducing a new pension product, improving our services (such as the new website launched by Ardanta), by streamlining our processes and systems, and introducing a new IT system for administrating occupational disability.


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    a.s.r. 23 2013 annual report Report of the Executive Board In addition to this decline, operating expenses have become more flexible in 2013 so that they can be adapted to the volume of the insurance portfolio. In the Life business, various support services have been outsourced. Also, the Health Insurance business makes use of third-party IT systems. Headcount The headcount of internal employees fell from 4,088 FTE to 3,789 FTE in 2013. The largest group of employees who left (266) came under the scope of the Redundancy Plan. Another 78 employees left a.s.r. at their own request, 59 employees reached the end of their temporary contracts and 70 employees agreed to consensual termination of their employment contracts. On average, employees stay with a.s.r. for 14.8 years. Breakdown of employee base: 31 December 2012: 2,605 men - 1,612 women 31 December 2013: 2,430 men - 1,443 women Net results The net results 2013 amounted to € 281 million. This amount reflects the higher profitability of the Non-Life segment, which was more than cancelled out by the additional WGA-ER charges (€ 137 million). Disregarding this additional provision, the net results of the Non-Life segment showed strong improvement by rising to € 142 million at a combined ratio of 96.5%. In the Life segment, the net results increased from € 275 million to € 367 million due to higher investment returns and lower operating expenses. In addition, several impairment losses recognized in previous years were reversed, following the tentative recovery of the financial markets. The Other segment recognized a one-off tax benefit of € 90 million in 2012. The accounting policies of IAS19R also affected this segment (€ +61 million), because this segment includes the a.s.r. pension plan. Disregarding the tax benefit and the effect of IAS19R accounting policies, earnings in this segment rose by € 78 million, primarily due to lower operating expenses, a better performance of the Banking business and fewer incidental impairments. The risks incurred by the Property Development business were further scaled down, thereby reducing losses.


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    a.s.r. 24 2013 annual report Report of the Executive Board


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    a.s.r. 25 2013 annual report Report of the Executive Board Outlook for 2014 The Dutch State has been the sole shareholder of a.s.r. since October 2008. In September 2011, all shares in a.s.r. were transferred to Stichting Administratiekantoor Beheer Financiële Instellingen (NL Financial Investments or NLFI), a trust office. a.s.r. has never received state aid. a.s.r. has the ambition to return to the private market. a.s.r. is large and robust enough to operate as an independent insurer in the Dutch market. It will become clear in 2014 how and when a.s.r. will return to the private market. a.s.r. is ready for it, as Minister of Finance Dijsselbloem announced in his letter to the Dutch House of Representatives in August 2013. Irrespective of what the privatization will look like, a.s.r. will continue to focus on its chosen strategy. This means that, over the coming years, a.s.r. will carry on adapting its organization so as to allow consumers and businesses to insure risks at the right price or to entrust their asset building to a.s.r. In addition to offering good prices, a.s.r. believes strongly in investing in long-term relationships with customers and intermediaries by offering high-quality and transparent products and services that truly meet customer needs. The role of the intermediary channel will continue to be vital. The development of a crowd funding platform for business owners who hold policies with De Amersfoortse is a precursor to other a.s.r. initiatives to create customer loyalty and improve customer service. The online platform (www.doorgaan.nl; in Dutch) allows business owners, who have difficulty securing traditional finance, to look for funding for their ideas. De Amersfoortse will create campaigns for business owners and call upon others to help them launch or continue their business. Social media offer more and more direct opportunities to reach customers, who tend to form groups and communities, and join forces. Organizational changes that will be implemented in the near future focus on capitalizing on the resulting demand and offering appropriate services. Obviously, maintaining a robust solvency ratio will continue to play a fundamental role in a.s.r.’s operations in the future. a.s.r. is engaged in a dialogue with the Works Council and the trade unions to talk about adjustments to the conditions of employment. a.s.r. wants to be a sustainable and future-proof Dutch business by offering easy-to-understand and transparent products as well as keeping costs low. With this in mind, a.s.r. has chosen to reduce the costs associated with its conditions of employment, starting from the principle that all employees should receive pay and benefits that are not necessarily better than those offered by other Dutch businesses, but that are appealing to both current employees and new colleagues. On 1 May 2014 Chris Figee (41) will join the Executive Board as CFO. He will succeed Roel Wijmenga, who is leaving a.s.r. after 5 years. Chris (H.C.) Figee was previously employed as Director Group Finance at Achmea. In the past he worked for Aegon and McKinsey. Roel Wijmenga joined a.s.r. early 2009, just when the company became independent. a.s.r. will start using the Next Generation Financial Services (NGFS) payments system in 2014, thereby satisfying the requirements of the European SEPA (Single Euro Payments Area) rules that came into effect in February 2014. Until NGFS becomes operational, a.s.r. will work in partnership with Equens to satisfy the SEPA requirements. The renovation of the a.s.r. head office at Archimedeslaan in Utrecht will enter phase two in 2014. The first renovated part of the building was completed in March 2014. It houses about 1,600 people who now work in a new, sustainable environment based on the principles of the New World of Work. Their new workplace fully meets the present-day occupational health and safety standards. The renovation of the whole building is scheduled to be completed in 2015. As a result, a.s.r. will ultimately save € 20 million in operating expenses annually.


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    a.s.r. 26 2013 annual report Report of the Executive Board 2.1.2 Non-Life segment • Net results in Non-Life segment dominated by additional WGA-ER charges • Net results disregarding WGA-ER charges at € 142 million - Better performance in all product lines, except for Occupational Disability Insurance business - Taking account of additional WGA-ER charges, net results down € 59 million to € 5 million • Combined ratio disregarding additional WGA-ER charges at 96.5% (including WGA-ER charges: 104.6%) • Operating expenses down 1% to € 240 million on comparable basis, despite investments in claims management and process optimization • Gross premiums written down 4% to € 2,392 million (2012: € 2,487 million) Key figures of Non-Life segment (in millions of euros) 2013 2012 Gross premiums written 2,392 2,487 Operating expenses -240 -2261 Provision for restructuring expenses -11 -18 Results before taxes 2 72 Income tax expense 3 -13 Net results 5 59 New Non-Life insurance contracts sold 217 303 Claims ratio 78.3% 73.4% Commission ratio 15.8% 16.7% Expense ratio 10.5% 9.1%1 Combined ratio (including additional WGA-ER charges) 104.6% 99.2% 1 Ditzo has been integrated into the Non-Life segment since 2013. The cost-premium ratio for 2012 on a comparable basis was 9.8%. Operating expenses for 2012 were € 243 million on a comparable basis. Profile The Non-Life segment comprises all types of P/C insurance policies that a.s.r. offers to consumers and businesses. These policies insure risks related to motor vehicles, fire, travel and leisure, liability, legal assistance, occupational disability and medical expenses. The policies are offered under the following labels: a.s.r., De Amersfoortse, Europeesche Verzekeringen and Ditzo, both via the intermediary and the direct channels. Market developments The market for traditional P/C insurance (motor, fire, liability, etc.) was under pressure in 2013. Competition on pricing remained fierce in the reporting period. The autumn storms resulted in more and higher claims for motor vehicles and fire insurance. The persistent economic crisis led to an increase in the number of business closures and reduced the financial scope of businesses, which affected the Occupational Disability business. The overall occupational disability market contracted slightly as a result. Against all expectations, fewer people switched health insurance providers in 2013. The switching percentage for the time being is 5.7%. Consumers not only took out fewer supplementary policies, but they also cut down on coverage. In addition, they tended to prefer a higher policy excess, thereby reducing their premiums. Through Ditzo and De Amersfoortse, a.s.r. solidified its position in the health insurance market with more than 300,000 customers.


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    a.s.r. 27 2013 annual report Report of the Executive Board The falling trend in holidays continued on into 2013. The winter season showed a 6% decline, which was only barely compensated by disappointing summer bookings. Spending while on holiday was lower too. Consumers waited longer to purchase or replace recreational items and they spent more time using their own caravans, boats and other recreational items. This increases the chances of claims. Overall, the ongoing drop in disposable income and the rising unemployment rate accounted for a 4% fall. Financial results Net results Earnings in the Non-Life segment were dominated by the sector-wide losses on WGA-ER. These losses amounted to € 137 million for a.s.r. in 2013. Disregarding this additional WGA-ER charge, the net results in the Non-Life segment was up 13%, reaching € 142 million, with a robust combined ratio of 96.5%. All product lines improved their performance. The measures taken to reduce claims and actively manage portfolios have improved the performance in the Motor and Fire product groups. On the other hand, autumn storms resulted in additional claims for a.s.r. amounting to approximately € 22 million after tax in total. The number of large claims in the Commercial Fire Insurance business declined thanks, in part, to the pursued prevention policy and the reassessment of risks. This goes against the overall picture in the Netherlands where a record number of 148 large fires occurred in 2013 (figures by the NIVRE). The net results from the Health Insurance business also increased in 2013. In line with Dutch market developments, the scale of partially fit and new claims was also higher than expected for a.s.r. In 2013, this resulted in an additional WGA-ER charge of € 137 million after tax (2012: € 67 million) due to an increase in the number of prior-year incapacity claims and an over- representation of the partially fit in the WGA population. Additional measures have already been taken to manage and provide insight into claims development on an ongoing basis. Stricter guidelines for accepting new policyholders, more in-depth and verifiable claims processing, and the introduction of a new premium model geared to the employer’s risk profile will contribute vastly to the performance in this area. In addition, more focus is being placed on helping employees return to work once they have suffered an incapacity. Arrangements have now been made between the Dutch Association of Insurers and the Employee Insurance Agency (UWV) about reassessments and transfer of information, which will help to improve claims management and assessment of incapacity. Partly for that reason, a.s.r. will continue to play a role in this market. Apart from the WGA-ER charge, a.s.r.’s Occupational Disability Insurance business is sound. a.s.r. not only leads the market measured in premium income, but also in prevention and return to work initiatives. Operating expenses On a comparable basis, operating expenses fell by € 3 million to € 240 million and the cost-premium ratio rose from 9.8% to 10.5%. This increase was due to a decrease in premium income. Due to investments in strategic projects, including a new IT system for the Occupational Disability Insurance business in the autumn of 2013, operating expenses in the Non-Life segment did not decline as sharply. In the long run, this new IT system is meant to structurally lower costs by reducing the number of manual actions, thereby increasing efficiency and quality, and freeing up time for advising customers. This unites cost awareness and customer focus in one initiative. Gross premiums written a.s.r. chooses value over volume. Because of that choice in particular, gross premiums written in the Non-Life segment were down 4% to € 2,392 million (2012: € 2,487 million). Premium income was up in the Health Insurance and Group Occupational Disability Insurance businesses. The Health Insurance portfolio grew for the second year in a row (+8%), with customers mainly taking out policies online via Ditzo. However, in keeping with market developments, there was


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    a.s.r. 28 2013 annual report Report of the Executive Board also an increase in the number of policyholders cancelling their supplementary insurance or opting for a more limited health insurance package at a lower premium. The volume of the occupational disability insurance market declined further in the reporting period as a result of the economic crisis. a.s.r. saw a limited increase in its premium income in this market segment and managed to strengthen its position of market leader. Surrenders in the portfolio for individual occupational disability insurance policies increased as a result of a premium adjustment and business closures. Profitability-improving measures and the reassessment of risks in the Motor Insurance and Fire & Property businesses resulted in a decline in premium income. On the other hand, the net results and the combined ratio improved. 2013 saw the introduction of the Vernieuwd Voordeelpakket, an improved and customer-oriented package combining Non-Life products. This package was received well by consumers. Achievements in 2013 a.s.r. attaches great value to treating customers fairly. The complaints management process was greatly improved in 2013, not just a.s.r.-wide but also within the Non-Life segment, for instance by setting up Customer Contact Centres and using webcare. Thanks to these efforts, a.s.r. was awarded the Keurmerk Klantgericht Verzekeren (Customer-Oriented Insurance Quality Mark) in 2013. The updated Voordeelpakket, a comprehensive P/C insurance package, was introduced in 2013. With advise from an intermediary, this package offers customers a selection of policies that are appropriate to their circumstances at different times of their lives. The underwriting performance of all product lines improved in 2013 (exclusive of WGA-ER). a.s.r. only sells occupational disability insurance under the De Amersfoortse label, which initiated a transformation in 2013 from being an income protection insurer to an insurance company for business owners. De Amersfoortse helps business owners to harness and protect their own labour capacity and that of their employees, with a view to providing income security and business continuity. The Next Generation Group Occupational Disability Platform (in Dutch: NGA Collectief) was launched in order to improve the online service offering and pass on synergy benefits with the Health Insurance and Pensions businesses to customers. After the roll-out, three existing obsolete systems will gradually be phased out. Besides providing benefits to customers, this offers a substantial cost reduction, particularly where management and maintenance are concerned. In addition to these new group insurance products, De Amersfoortse is developing a service package focusing on prevention and return to work. Examples of prevention initiatives are a health questionnaire (De Gezondheidsenquête) and a business profile (Het OndernemerProfiel). The former is a vitality screening of the business owner and the latter a vitality screening of the business and of how the business owner manages it. An example of return-to-work services is the introduction of a return- to-work assistant or manager. With its products and services, De Amersfoortse targets self-employed business owners and SMEs with a headcount of up to 250. In the reporting period, the Occupational Disability business focused heavily on claims management, both where individual and group policies were concerned. In addition, holders of individual policies were more actively approached, in which process customers with expiring policies were offered renewal policies in an attempt to retain them. a.s.r. has led the market for income protection insurance for many years. This position was strengthened in 2013. The increasing need among customers to take out insurance policies online is reflected in the successful introduction of health insurance by Ditzo, which was able not only to donate € 1 million to the Netherlands Cancer Institute with the ‘help’ campaign in 2013, but also to welcome about 51,000 new customers with effect from 1 January 2014.


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    a.s.r. 29 2013 annual report Report of the Executive Board Outlook for 2014 The P/C market is not expected to show growth in volumes in 2014. a.s.r. does, however, predict a further shift towards products that can be purchased directly via online platforms. By improving its websites, and smartphone and tablet applications such as Ditzo’s, a.s.r. increases the options for customers to select the distribution channel of their choice. Many of a.s.r.’s customers receive their services and advice from intermediaries, who also increasingly use online applications (offered via service providers). By partnering up with intermediaries and service providers, new customers are being drawn in and existing customers receive excellent services. The occupational disability market is likely to recover in 2014 because of the economic outlook. The first signs of recovery emerged around the turn of the year; with this, the recession in the Netherlands seems to be over. a.s.r. is cautiously optimistic about developments in the year to come where business start-ups and business terminations are concerned. These developments affect sales of new insurance policies and organic growth. Business terminations and insolvencies also put pressure on uncontrollable policy cancellations. In 2014, the Occupational Disability business is also expected to suffer from an increase in claims. Overall, the business will concentrate on improving returns through cost efficiencies, premium adjustments and claims management. De Amersfoortse’s integrated product propositions will be broadened, linking them explicitly to health and pension insurance. a.s.r. is also committed to further improvements to the service offering in the areas of prevention and return to work. By doing so, we will make full use of the expertise and strengths available at De Amersfoortse. With respect to health insurance, expectations are that basic coverage will continue to be stripped down and that customers will increasingly opt for low basic premiums and a higher policy excess. In the travel and leisure market, the drop in holiday bookings and (replacement) purchases of recreational items is expected to persist in 2014, which will have a direct effect on travel and leisure insurance.


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    a.s.r. 30 2013 annual report Report of the Executive Board


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    a.s.r. 31 2013 annual report Report of the Executive Board 2.1.3 Life segment • Strong increase in net results to € 367 million (2012: € 275 million) • Operating expenses down 11% to € 199 million (2012: € 223 million) • Gross premiums written down 12% to € 1,666 million (2012: € 1,891 million) • New life insurance contracts sold (APE) down to € 65 million (2012: € 87 million). Introduction of new Werknemers Pensioen (Employee Pension) in Q4 Key figures of Life segment (in millions of euros) 2013 2012 Regular premiums written 1,421 1,552 Single premiums 245 339 Gross insurance premiums 1,666 1,891 Operating expenses -199 -223 Provision for restructuring expenses -10 -7 Results before taxes 471 350 Income tax expense -104 -75 Net results 367 275 Cost-premium ratio 11.6% 12.0% New life insurance contracts sold (APE) 65 87 Profile The Life segment comprises all insurance policies that involve asset-building, asset reduction, asset protection, term life insurance and funeral expenses for consumers and business owners. These operations are being conducted by ASR Levensverzekering N.V. Products are offered under the a.s.r., De Amersfoortse and Ardanta labels. The vast majority of these policies are distributed via intermediaries, but funeral insurance, immediate annuities and pension insurance can also be taken out online. Market developments The Individual Life insurance market is contracting due to the increasing popularity of bank savings products and further cuts in tax facilities. This market is declining fast and will continue to do so. Consumers increasingly opt for bank savings products to accumulate capital. They are looking for easy-to-understand, transparent and cost-efficient products. Insurance companies are responding to their needs by offering basic products at competitive prices and implementing structural cost reductions. Competition is fierce and margins are under pressure. In the Pensions business, the shift from defined benefit (DB) plans to defined contribution (DC) plans is permanent, as is the shift to a more individual approach to pension insurance. Pension products are developing into simple, low-cost products for which service charges and asset management fees are due only; margins on these products will be low for providers. One example of such a low- cost, transparent pension product is the a.s.r. Werknemers Pensioen (Employee Pension), which was introduced in Q4 2013. The market for funeral insurance is saturated. Achieving growth is a tall order. The ban on commissions is one of the reasons for the 30% to 40% drop in sales of new policies by intermediaries. Service, with a focus on what the customer actually needs rather than promoting products, is the only way for an insurance company to distinguish itself from the competition and truly add value. Customers are showing hybrid behaviour. They use multiple channels and needs are different in each customer segment.


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    a.s.r. 32 2013 annual report Report of the Executive Board Financial results Net results The net results increased by € 92 million from € 275 million to € 367 million. The improvement is due to a reduction in operating expenses. Investment returns also increased, partly due to the second and third placement of the Dutch Prime Retail Fund and the sale of a share of the residential real estate portfolio. Operating expenses In 2013, operating expenses decreased by € 24 million, reaching € 199 million (2012: € 223 million) and the cost-premium ratio improved by 0.4%-point to 11.6%. Operating expenses therefore declined faster than premium income, which was realized by a reduction in internal FTE, outsourcing activities and lower marketing expenses, among other factors. Gross premiums written In the Life segment, gross premiums written declined from € 1,891 million to € 1,666 million, a 12% decrease. The decline is in line with the market and attributable to a 28% decrease in new single premiums sold and an 8% decrease in regular premiums. This decline is due, in part, to the ban on commissions in the life insurance business that was introduced early in 2013, next to the falling demand for life insurance products and the choice of value over volume. Since 2013, consumers have been required to pay separately for advisory and intermediary services relating to complex financial products, such as life insurance policies. The decline is also due to the deliberate choice of value over volume, as a result of which the Individual Life product group offered immediate annuity/single premium products at less competitive prices and volumes progressively declined. Premium income in the Pensions business was under pressure and fell by 6%. Most of the existing pension contracts remained in effect thanks to an active retention policy. Late 2013, De Amersfoortse introduced the Werknemers Pensioen (Employee Pension). With this new pension proposition, a.s.r. offers a pension product that is transparent and offers freedom of choice, for both employees and employers. Employees can decide for themselves how much risk they are willing to take. Costs are always low and the policy is fully web-based. The Institution for Occupational Retirement Provision (IORP), a joint venture between a.s.r. and Brand New Day, continued to grow in 2013. The combination of a clear product, low costs and excellent service appeals to customers. In a competitive market, more than 500 businesses have now signed a pension contract for more than 7,500 members in total. The number of new calls for tenders continues to increase. Despite difficult market conditions, in the Funeral Insurance business gross premiums written declined to a limited extent (-1%), mainly as a result of the portfolio acquired from de Facultatieve on 1 May 2013. Sales of new policies are under pressure in the funeral insurance market. This is partly due to the ban on commissions that came into effect on 1 January 2013 and independent brokers’ reserve to discuss advisory and management costs with customers. In Q4, Ardanta started providing practical information to customers and others about aspects surrounding a death in the family and funeral arrangements. For instance, via the website Doodgaanendoorgaan.nl, which has been well received in the market and judging from the large number of visitors, clearly meets consumers’ needs. Achievements in 2013 2012 saw the completion of the programme to compensate unit-linked policy holders in the Individual Life business. In dialogue with the Netherlands Authority for the Financial Markets (AFM), 40,000 customers were approached in 2013 and educated about the value growth in their policy; they were encouraged to make a conscious decision about their future insurance plans. This group of customers will be broadened in 2014. Also in 2013, a start was made with automatically switching customers to a next generation of low-cost mixed funds at no charge. A letter on this topic was sent to 120,000 customers. Over 98% of these customers ultimately approved the switch.


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    a.s.r. 33 2013 annual report Report of the Executive Board By offering customers a new product, a.s.r. can retain their capital when life insurance policies expire and reach payout. The Direct Ingaande Lijfrente (immediate annuity product) proved to meet a need. In this regard, a.s.r. works in close collaboration with intermediaries to retain customers and offer them appropriate products. Thanks to this active targeting of customers, savings deposits held by a.s.r. Bank rose by nearly € 30 million over a short period of time. What is more, customers have said that they appreciate this supportive approach. The new Life Contact Centre provides much improved customer service with 40% fewer people. In order to guarantee service continuity and bring about further structural cost reductions, the Life business has outsourced some of its activities. This also helps to make costs more flexible. The entire portfolio, including 40 employees, is involved in this process. Further initiatives will be taken in 2014 to make structural cost reductions. The business was awarded the Keurmerk Klantgericht Verzekeren (Customer-Oriented Insurance Quality Mark) and the integration of the Paerel organization into the life business was completed. In the Pensions business, a deliberate choice was made for value over volume. Focus was on continuing existing contracts and this strategy was successful. The Werknemers Pensioen (Employee Pension), a defined contribution product offered by De Amersfoortse, was introduced in Q4 2013. As a result, the pensions portfolio is again complete and up-to-date. Ardanta focuses on existing customers in particular; it provides support to customers who are dealing with a death in the family and have to make funeral arrangements. Consequently, there are now two online channels that account for 15% of premium income. Ardanta launched a website by the name of doodgaanendoorgaan.nl (in Dutch) in 2013. This website educates customers about the practical aspects of funeral arrangements. There is also an option to take out funeral insurance via the website. More than 80,000 visitors have been welcomed to the website since its launch. In addition, a front office was set up to answer any questions customers may have when taking out insurance. Costs, lapses and early surrenders were brought under further control in 2013; in addition, costs were made more flexible, which has resulted in positive net results. The successful acquisition of de Facultatieve insurance portfolio confirms the belief that Ardanta is a strong portfolio consolidator. Outlook for 2014 Expectations are that the individual life portfolio will show a further decline. The market for mortgage- linked asset-building products will also keep shrinking as a result of a shift to other mortgage types, such as straight-line mortgages and annuity mortgages. Customer retention, further cost cuts and cost flexibility will stay the main priorities in this contracting life market to be able to add value on a sustainable basis. Structural complexity reductions and creating customer loyalty by offering simplicity and convenience, for instance by increasing self-activation and electronic data exchanges, give direction to further developments in a.s.r.’s service provision. The importance of statutory old-age pension as a basic pension provision is waning because of the rise in life expectancy and increasing ageing. Tax-efficient facilities for top-up pension are being curbed and the percentage of gross salary that can be used for tax-facilitated pension savings will be reduced. Because of more stringent rules, it is likely that a rising number of small pension funds will be prepared to transfer their plan assets and administration to insurance companies because they lack the scale to bear the increasing costs. Within the Pensions business, the shift from defined benefit to defined contribution plans is expected to continue. The same goes for the shift towards a more individual approach to pensions. Pension products are developing into simple, low-cost products for which service charges and asset management fees are due only; margins on these products will be low for providers.


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    a.s.r. 34 2013 annual report Report of the Executive Board


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    a.s.r. 35 2013 annual report Report of the Executive Board 2.1.4 Other 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). Key figures of Other segment, including eliminations (in millions of euros) 2013 20121 Operating expenses -108 -138 Provision for restructuring expenses -3 -5 Results before taxes -113 -137 Income tax expense 17 112 Net results -96 -25 Net results attributable to non-controlling interests 5 7 Net results -91 -18 Net results (reported in 2012) - -79 1 In 2013, a change in accounting policies was implemented in relation to the recognition of the a.s.r. pension plan (IAS19R), as a result of which the comparative figures for 2012 of the Other segment were restated. This also affected the consolidated figures for 2012. This change has an accounting effect on the net results, expenses and total equity, as well as impacting return on equity. Profile The Other segment comprises the non-insurance business, i.e. the banking operations (a.s.r. Bank and a.s.r. Hypotheken (mortgages)), SOS International (emergency desk), a.s.r. vastgoed ontwikkeling (real estate development) and holding companies. In addition, the Other segment is used to recognize certain holding-related expenses. The Ditzo distribution channel was integrated into the Non-Life segment early in 2013; it no longer falls under the Other segment. Developments in Other segment In 2012, a one-off tax credit of € 90 million was recognized in this segment as part of a prior-year tax settlement. Disregarding this tax credit and the impact of IAS19R, the net results in the Other segment increased from € -169 million to € -91 million. The increase was due, among other things, to a better performance by the Banking business, the scaling down of risks and lower losses at a.s.r. vastgoed ontwikkeling (property development). The net results also improved as a result of fewer impairment losses on associates and private loans. In addition, interest paid was lower on an incidental basis including interest accrual on the pension entitlements of a.s.r. employees. The net results from the Banking business increased thanks to a higher interest margin, lower operating expenses and an increase in sales of new WelThuis mortgages. In 2013, sales of new mortgages amounted to € 1,411 million (2012: € 839 million), nearly doubling a.s.r.’s market share to 4.0% (2012: 2.2%). This makes a.s.r. the sixth largest mortgage lender in the Netherlands. a.s.r. Bank saw its portfolio of savings deposits rise by 10%, reaching € 889 million (2012: € 808 million) due to deposits into the lijfrente opbouwrekening annuity account. An online savings account was introduced in the autumn. Compared to 2012, a.s.r. vastgoed ontwikkeling had less of a negative impact on the results. This was due, in particular, to fewer impairment losses on land holdings and future construction projects. The strategy to reduce risks in this portfolio was again pursued in 2013. The completion of the IJDock development in Amsterdam marked a milestone in Q4 2013. a.s.r. built a hotel, shops and offices on this peninsula, most of which have now been sold.


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    a.s.r. 36 2013 annual report Report of the Executive Board Operating expenses At a.s.r. Bank and in the Mortgage business, a drop in IT and marketing expenses and the reduction in external FTE resulted in lower operating expenses. Together with the effect of Ditzo’s transfer from the Other segment to the Non-Life segment, operating expenses for the Other segment were lower, amounting to € 108 million (2012: € 138 million). Banking Consumers are showing renewed interest in developing their asset position and income protection at a later age (including pension benefits). a.s.r. is seeing rising demand for low-risk asset products in combination with a preference for protection under the Dutch deposit guarantee scheme. More and more customers consider asset-building and reduction through savings products as a viable alternative to life insurance policies. Examples include tax-facilitated products such as annuity accounts and asset reduction accounts. That is why a.s.r. Bank introduced two new products in 2013: • the online annuity savings account (online lijfrente spaarrekening) for structured capital growth in the future; • the online savings account (online direct internet spaarrekening) for instant access savings and deposits. These new products have been successful since their launch. As a result, customer deposits have shown a 10% rise, reaching € 889 million. Property development In keeping with the strategy of the past few years, a.s.r. vastgoed ontwikkeling (property development) took important steps to reduce risk exposures in its portfolio. Developments have been scaled down, phased out and reduced. The property exposure (balance sheet position plus completion obligations) of the Property Development business was lowered by 25% in 2013; in line with this, total assets, pipeline revenue, the scale of the organization and internal financing were all scaled back in 2013. Outlook for 2014 a.s.r. Bank will actively continue to roll out online savings products. On the investment front, preparations are in full swing to be able to offer a.s.r. mixed funds with efficient cost ratios to customers in 2014. A new fee structure will be introduced in 2014, based on which investors will be provided a better understanding of the fees associated with holding an account and conducting transactions. The Banking business has now taken steps in developing medium-term and long-term sustainability targets for selecting investments. The sustainability targets will apply to the a.s.r. house funds (for customers) and to portfolio investments alike. The performance of the property development business will depend on the situation on the retail and residential property markets in the coming year as well. Going forward, property developments will primarily be undertaken in city centres. For this reason, a.s.r. vastgoed ontwikkeling, the Property Development business, has strengthened its strategic focus and expertise in the areas of complex urban development and redevelopment.


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    a.s.r. 37 2013 annual report Report of the Executive Board 2.1.5 Investments 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. Assets (€ million, fair value) December 2013 December 2012 Fixed-income securities 18,791 21,425 Equities 2,059 1,735 Real estate 2,742 2,994 Mortgages/other loans 4,909 3,709 Other 228 213 Total investments 28,729 30,077 Investments on behalf of policyholders 8,049 8,217 Other assets 6,688 7,345 Total assets a.s.r. 43,466 45,639 Adjustment of fair value versus carrying amount (real estate & loans) -1,035 -1,156 TOTAL ASSETS a.s.r. 42,431 44,483 Nearly 75% of the government bond portfolio of € 9.6 billion has been invested in Dutch and German sovereign bonds. In the course of 2013, the exposure to German government bonds was increased at the expense of Dutch debt instruments. At € 36 million, the exposure to government bonds of peripheral eurozone countries remained highly limited. The exposure to financials was reduced by 16%, from € 5.5 billion to € 4.6 billion, in the reporting period. Senior and subordinated bonds, as well as covered bonds were scaled back through exchanges and sales. The fall in exposure to financials was due, in part, to the reclassification of a number of specific bonds from ‘bonds issued by financial’ to ‘government bonds’. The exposure to non-financials was virtually unchanged (+2% at € 3.4 billion). The total fixed-income portfolio was reduced from € 21.4 billion to € 18.8 billion. This drop was attributable to higher interest-rates and an increase in the mortgage portfolio. In 2013, the mortgage portfolio showed a 35% rise, from € 3.5 billion to € 4.8 billion. The interest-rate risk on assets versus liabilities is actively hedged via an overlay portfolio. The equity portfolio rose from € 1.7 billion to € 2.1 billion, i.e. 19%, thanks to rising share prices and purchases of Dutch and European equities. This limited increase following purchases is in keeping with the policy of selective re-risking. The real estate portfolio showed an 8% fall from nearly € 3.0 billion to just over € 2.7 billion, primarily as a result of disposals. These steps have clearly benefited a.s.r.’s robust solvency position and reduced the sensitivity of the balance sheet to market risks over the past few years.


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    a.s.r. 38 2013 annual report Report of the Executive Board 1% 1% 2013 2012 12% 17% Fixed income 66% 71% 10% Equities 7% 6% 9% Real estate 9% 10% 6% Mortgages/loans 17% 12% 7% 66% 71% Other 1% 1% Breakdown of investment Breakdown of investment portfolio at year-end 2013 portfolio at year-end 2012 Property management a.s.r. vastgoed vermogensbeheer, the Property Development business, invests and manages retail and residential properties, and agricultural land. a.s.r. vastgoed vermogensbeheer seeks stable development of the value of real estate for users, investors and society at large, through active fund, asset and property management. By creating property funds, a.s.r. wants to increase the flexibility of its investment property portfolio without affecting the portfolio’s critical mass that has taken more than a century to build. Boasting funds and in-house asset and property management specialists, a.s.r. vastgoed vermogensbeheer has a lot of experience and a good reputation in the Dutch property market. Some non-strategic residential investment properties were sold in 2013. This sale was in keeping with a.s.r. vastgoed vermogensbeheer’s strategy to concentrate the residential portfolio in the strongest economic regions and to rejuvenate the portfolio. a.s.r. vastgoed vermogensbeheer issued second and third placements of the ASR Dutch Prime Retail Fund in 2013. As a result, the total share of the fund that has been placed since its creation now stands at over € 500 million. The ASR Dutch Prime Retail Fund plans a fourth placement in 2014. The ASR Dutch Core Residential Fund was created on 1 January 2013. This fund comprises of a portfolio of apartments and single-family homes in the Netherlands with a fair market value of approximately € 750 million. In addition, the value of the pipeline of development and redevelopment projects to be completed in the next few years amounts to some € 75 million.


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    a.s.r. 39 2013 annual report Report of the Executive Board 2.2 Capital management Capital policy a.s.r. is committed to maintaining a robust capital base that forms a solid foundation for achieving its corporate targets. The a.s.r. capital policy ensures prudent monitoring and control of its solvency ratios, both at group and divisional level. This makes the effective execution of the capital policy a core task for risk management and one of the priorities of a.s.r. Capital management comprises all activities that focus on controlling, managing and monitoring any available and required solvency. The capital position is governed by various rules and limits that were instituted to absorb losses and to guarantee financial robustness. Compliance with the rules is monitored and enforced by internal management and control models. In doing so, a.s.r. seeks to optimize its capital position within the parameters set by regulators and stakeholders, actively monitor capital risks and meet the agreed limits. One of the priorities in this regard is satisfying the capital requirement that is needed to be awarded an A rating at a.s.r. level. The Solvency I rules that are enforced by the regulator form the current regulatory framework. In addition to supervision under Solvency I, the rules and regulations of the Solvency II regime are becoming increasingly clear. Although the effective date for Solvency II has been delayed, this has not stopped a.s.r. from preparing its organization and processes for the introduction of this regime. In mid-2013, the regulator also introduced the theoretical solvency criterion (TSC), which is used to extrapolate a number of risk scenarios in accordance with Solvency II principles ahead of the introduction of Solvency II. The Solvency II rules require a different methodology for measuring and managing available and required capital. a.s.r. has incorporated this method into its management approach and further tweaked its practical application. 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. In addition to capital management under Solvency II, which is the standard model for European insurers, a.s.r. has also developed its own methodology. This methodology quantifies the integral risk in terms of economic capital (ECAP). The methodology is different from the Solvency II standard model in that it uses self-developed techniques for calculating a limited number of risks. These techniques are a better fit for the specific risks that a.s.r. incurs, and provide a more complete understanding of these risks and the capital that is required to mitigate them. Besides the models mentioned above, this method also forms part of overall capital management. In addition to the Solvency II requirements, the self-developed ECAP method has been cascaded through the organization and integrated into the risk management structure. This system guarantees the transparency of the robust financial position that a.s.r. holds in terms of market value. The Treasury department is responsible for capital management in the Financial Markets department. As part of the capital management procedures, Treasury is accountable to the a.s.r. risk committee structure that was set up for this purpose. This guarantees its independent position and the segregation of duties, and is in keeping with the a.s.r. governance structure. Capital and solvency Equity, including changes in the value of real estate, was up 7%, rising from € 3,537 million to € 3,799 million. This increase was mainly attributable to the net results and increases in gains on unrealized changes in the value of equities and fixed-income securities. The fair market value of investment property exceeded its carrying amount by € 784 million, a € 90 million fall on 2012. Disregarding these changes in value, equity increased by 13% to reach € 3,015 million. DNB solvency (exclusive of the UFR) stood at 268% at year-end 2013 (year-end 2012: 293%). This high solvency ratio is a reflection of a.s.r.’s stable foundation. In accordance with regulatory requirements, the UFR has been applied since June 2012. Disregarding the UFR, the solvency ratio was virtually stable at 236% (2012: 231%).


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    a.s.r. 40 2013 annual report Report of the Executive Board The sensitivity of the solvency ratio (inclusive of the UFR) to the relevant stress scenarios was unchanged from year-end 2012 (-64%). The sensitivity to fluctuations in share prices grew to a limited extent due to higher exposures to equities as a result of purchases and price increases. Solvency has become less sensitive to changes in spreads. The sensitivity to decreases in the value of real estate dropped to a limited extent (from -15% to -13%), primarily due to sales. Effect of market risk on solvency ratio Type of market risk Scenario 2013 2012 2013 2012 incl. UFR incl. UFR excl. UFR excl. UFR Equities -20% -21% -19% -21% -19% Interest-rate1 +1%/-1% -20% -18% -17% -32% Credit spread 0.75% -23% -25% -23% -25% Real estate -10% -13% -15% -13% -15% Total before diversification -77% -77% -74% -90% Diversification 13% 13% 12% 16% Total after diversification -64% -64% -62% -74% 1 For the regulatory solvency ratio including UFR the interest-rate shock +1% has a negative impact. For the regulatory solvency ratio excluding UFR the effect is adverse, the interest-rate shock -1% has a negative impact IAS 19 revised for accounting for employee pensions came into force on 1 January 2013. As a result of this standard, an amount of € 363 million has been added to the provision for employee pensions with effect from 1 January 2013. Equity, exclusive of changes in the value of real estate, was down from € 2,935 million to € 2,663 million as of that date. IAS 19 revised does not impact the DNB solvency ratio. Funding As an insurer, a.s.r. has a relatively limited need for funding. From this perspective and from the viewpoint of risk management, a.s.r. relies on the money and capital markets to a minimal extent. This is in keeping with the prudent policy and financial robustness that a.s.r. pursues. As access to, and costs associated with, funding channels can range over time, a.s.r. seeks to create a balanced spectrum of funding options. a.s.r. has currently achieved this by keeping its programmes up-to-date both in terms of secured and unsecured financing, so as to ensure access to the money and capital markets, and minimize funding costs. a.s.r. has more than adequate scope for meeting its minimal funding requirements where appropriate and with the necessary flexibility. a.s.r. did not raise any additional external financing in 2013. The available financing facilities had not been used at year-end 2013. The relatively limited funding needs, in combination with the options for raising secured financing, result in ample liquid assets for a.s.r. at this time to carry out its operations. Dividend The Executive Board plans to distribute € 99 million in dividend on ordinary shares, a 12% increase on 2012. Similar to last year, this represents 40% of the net results attributable to shareholders.


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    a.s.r. 41 2013 annual report Report of the Executive Board Ratings a.s.r. wants to achieve a capital position that merits an A rating from Standard & Poor’s. On 23 August 2012, Standard & Poor’s confirmed the A rating of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. It changed its outlook from negative to stable. These ratings were reconfirmed on 19 June 2013. The Standard & Poor’s ratings were as follows at year-end 2013: Standard & Poor’s ratings Type Rating Outlook Date ASR Levensverzekering N.V. CCR A Stable 23 August 2012 ASR Levensverzekering N.V. FSR A Stable 23 August 2012 ASR Schadeverzekering N.V. CCR A Stable 23 August 2012 ASR Schadeverzekering N.V. FSR A Stable 23 August 2012 For Standard & Poor’s rating, please log on to the a.s.r. website: www.asr.nl/EN/about-asr


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    a.s.r. 42 2013 annual report Report of the Executive Board 2.3 Risk management 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. is exposed to the following types of risks: market risk, counterparty default risk, insurance risk, strategic risk and operational risk. The risk appetite is established at both group and legal entity level and includes limits for executing the strategy. The risk environment requires continuous integrated monitoring and assessment of risks in order to understand and manage complex risk interactions across the organization. The notes to the financial statements contain a detailed description of risk governance, the risk profile and the related trends in 2013 (see page 113). Risk management in 2013 The objective of the risk committees is to manage the risk profile for a.s.r. group and its product lines and to ensure that the risk profile remains within the risk appetite and the underlying risk tolerances and risk limits. When triggers are hit due, for instance, to an increase in stock market volatility, a downgrade of corporate and government fixed income investments, or low interest-rates, a.s.r. increases the meeting frequency of the risk committees. The risk appetite describes the level of risk a.s.r. is prepared to take. In 2013, the risk appetite has been further refined. Statements at group level have been enhanced, statements at legal entity level (OTSO - Onder Toezicht Staande Onderneming) have been developed and risk tolerances, limits and targets have been set for all statements. Risks are actively managed to ensure that the risks will stay within the defined limits. The risk appetite is defined for financial and non-financial risks. The risk appetite is defined by the Executive Board and endorsed by the Supervisory Board. a.s.r. conducts an own risk and solvency assessment (ORSA) annually, or more often when required by significant changes in the risk profile. The ORSA is a tool for risk and capital management. In this assessment, strategic risks are transposed into scenarios. For these scenarios the impact on the balance sheet, the solvency position and the income statement is simulated. Management actions are defined in order to mitigate the effect of the scenarios. In 2013 the ORSA was performed at both group and legal entity level. a.s.r. participated voluntary in the pilot exercise of DNB for recovery plans in 2013. The goal of the recovery plan is to ensure that a.s.r. has effective plans in place to deal with potential severe financial stress resulting from a wide range of different causes of various circumstances. The recovery plan should enable a.s.r. to significantly reduce the likelihood of failure in such extreme scenarios. The recovery plan will ensure that a.s.r. is better prepared for crisis situations. In 2014, the recovery plan will be further embedded in the organization. a.s.r. continued to improve its system of internal control. The enterprise wide internal control framework has largely been implemented in the product lines. Operational risks have been identified and assessed and controls are determined and tested from an Enterprise Risk Management perspective. The full implementation of the internal control framework will be finalized in 2014. In 2013, a.s.r. participated in the Long Term Guarantee Assessment (LTGA) and the ‘Theoretic Solvency Criteria’ (TSC) assessment of DNB. The LTGA is an assessment of the European Supervisor (EIOPA) to test the impact of the market consistent approach on long term guarantee products.


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    a.s.r. 43 2013 annual report Report of the Executive Board Management of financial risks in 2013 A robust solvency position takes priority over profit, premium income and direct investment income. The Financial Risk Committee assesses the solvency position and the financial risk profile on a monthly basis. Action is taken where appropriate to ensure that the financial risk profile stays within the parameters that have been defined in the a.s.r. risk appetite. In 2013, the exposure to market risk changed slightly. The exposure to equities increased gradually as a result of positive revaluations and investments. The hedge of the interest-rate risk was improved over the maturity buckets by restructuring the portfolio of swaps and swaptions. However, this did not impact the sensitivity to a parallel shift of the yield curve. The exposure to (subordinated) financials was selectively reduced. The fall in real estate exposure is in line with the investment policy and was due mainly to the sale of property. Starting from Q2 2012, DNB has prescribed the application of the UFR to the yield curve used to discount insurance liabilities, meaning that the yield curve at maturities of more than 20 years gradually approaches a level of 4.2%, which signifies an increase. This represents a considerable boost of the solvency position for a.s.r. For the sake of prudence, the solvency position is also assessed exclusive of the UFR. For the purposes of regulatory solvency and the liability adequacy test, a.s.r. was given permission by the regulator to use the ECB AAA government bond curve for discounting insurance liabilities. In July 2013, France faced a downgrade from rating agency Fitch and lost its triple A status. As a consequence, French government bonds were no longer included in the ECB AAA government bond curve, causing the curve for discounting liabilities to drop and leading to a 20% fall in the regulatory solvency ratio. The permission to use the ECB AAA government bond curve was withdrawn in September 2013 at a.s.r.’s request. Since September, insurance liabilities have been discounted using the swap curve as provided by DNB. The effect of this switch to a new discounting curve is a more stable solvency ratio because much of the interest-rate risk is hedged via an overlay of interest-rate swaps. This ties in better with the valuation of the insurance liabilities. In September 2013, the impact of this switch on the regulatory solvency ratio was estimated at -5%. a.s.r. periodically assesses whether the technical provisions are sufficient to cover insurance liabilities. These provisions were adequate at year-end 2013. The underlying assumptions for assessing the provision are periodically adjusted to economic and non-economic developments. As a result of the increase in life expectancy, the mortality table used for assessing the provision was updated in 2012. Management of non-financial risks in 2013 The Non-Financial Risk Committee (NFRC) is mandated by the Executive Board to decide on non- financial risk policies (the Chairman of the NFRC is the COO of the SME insurance market (member of the Executive Board)). The NFRC monitors that non-financial risks are adequately managed, determines non-financial risk limits at group level and monitors that the risk profile stays within the agreed risk limits. If the risk profile exceeds the limits, the NFRC takes mitigating actions. The NFRC reports to the a.s.r. Risk Committee. The non-financial risk dashboard was further aligned in 2013 to the risk appetite. The non-financial risk dashboard contains key risk indicators. The non-financial risk dashboard is a tool for business units to assess and identify key risks. Furthermore the non-financial risk dashboard gives insight in the risk profile of the business units. A Control Risk Self-Assessment (CRSA) is conducted annually at all a.s.r. business lines and staff departments. Key risks threatening the achievement of the organization’s strategic objectives are taken into account in the CRSA. Following this assessment, every department writes a report outlining all identified key risks and the actions that need to be taken to mitigate these risks. These mitigating actions need to be implemented within a one-year timeframe. This report and the mitigating actions are authorized by the management teams of the business units and the Executive Board. Senior Management annually signs their Management in Control Statement (MCS) which is based on the CRSA. Progress made on the mitigating actions as defined in the CRSA, is monitored on a quarterly basis in the Business Risk Committees and reported to the Non-Financial Risk Committee.


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    a.s.r. 44 2013 annual report Report of the Executive Board a.s.r. continued to improve its system of internal control. The enterprise wide internal control framework has largely been implemented in the product lines. Operational risks have been identified and assessed and controls are determined and tested from an Enterprise Risk Management perspective. Where needed, plans were devised to further increase their effectiveness. Risk Management will keep monitoring the effectiveness of the controls. Major risks for 2014 The risk priorities of a.s.r. are defined annually by the Executive Board. Defining risk priorities is a bottom-up process. Risk priorities are based, for instance, on the Control Risk Self Assessments of the business units. Risk Management reports the actual status of the risk priorities and progress of the defined actions in the a.s.r. Risk Committee on a quarterly basis. The risk priorities defined for 2014 are described below. Fundamental changes in the insurance market a. Changes in distribution channel and customer behaviour require a.s.r. to adapt The diminishing insurance market, changes in customer behaviour and the distribution channel require a.s.r to adapt. In addition, the current market is characterized by fierce competition and a growing focus on price by customers, decreasing margins and premium income. b. Discrepancy between developments in cost- and sales volumes Premium income is under pressure as a result of the current economic situation and changing legislation. This pressure can manifest itself in an increase in non-life policy cancellations, loss of retention in the life business and a drop in sales of new insurance contracts. At the same time, the new organizational requirements for insurance companies limit the scalability of departments. It is an increasing challenge to match the planned cost reductions with the decrease in premium income. Uncertain financial markets and economic climate The economic climate remains uncertain and forms an unabated high risk for the development of premium and realization of investment returns. Although the risk of unrest in the financial markets remains high, the situation has improved compared to last year. a.s.r. will be vigilant about any developments and has adequate risk control and monitoring in place. Increased claim culture of society This risk may manifest itself as a result of an increasing legalization of society and the uncertainty of the current legal disputes of other insurance companies. Court rulings and decisions by arbitration boards may have an industry-wide impact, as well as triggering widespread media attention and evoking negative sentiments among policy holders. This potentially increases the reputation risk for a.s.r. The current transparency dossier has largely been finalized. Although firm compensation agreements have been made with the foundations to compensate policy holders, the risk of new claims is ever-present. Information security risk Due to technological developments such as cloud computing, bring your own device, social media and online distribution, further integration of a.s.r. data with the environment is necessary. This requires a.s.r. to constantly stay on top of these developments to anticipate on future cyber-attacks and information security risks and to prevent confidential (financial) information or (client) information is unintentionally available for others. A high level of awareness regarding the use of confidential information and the safeguarding of assets of the company, employees and customer data, is of great importance. Impact of supervision, laws and regulations The Dutch insurance market is characterized by a strong increase of regulation. New laws and regulations are introduced rapidly. The increasing pressure from politics and supervisors could have the following implications:


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    a.s.r. 45 2013 annual report Report of the Executive Board • a.s.r. might suffer reputational damage if it is not able to implement new requirements promptly. • A substantial part of available capacity is spent implementing new requirements, shifting focus away from the core activities of a.s.r., which are undertaken in the interest of customers. • Processes will become less efficient and work pressure will increase. • Fines and legal action will be imposed on a.s.r. if it is unable to implement new requirements promptly. Solvency II Solvency II is the regulatory framework for European insurance companies that will replace the current Solvency I regime. The introduction of the new regime is intended to harmonize the European insurance market, increase protection of policyholders and improve risk awareness in both the governance and management of insurance companies. Solvency II sets more sophisticated solvency requirements and will form an integral part of the risk management of insurance companies. In December 2013, the Council of the EU adopted the Solvency II Directive scheduling the application date of the Solvency II Directive for 1 January 2016. In anticipation of the implementation date of 1 January 2016 EIOPA has published Preparatory Guidelines, in particular regarding Pillar 2 topics such as System of Governance and Forward Looking Assessment of Own Risks and Pillar 3 Reporting guidelines. DNB has adopted these guidelines which apply to Dutch insurance companies as of 1 January 2014. Solvency II at a.s.r. in 2014 With the introduction of the Preparatory Guidelines and the application date set at 1 January 2016, a.s.r. will continue with the preparations for Solvency II readiness. Priority will be given to implementation of all Preparatory Guidelines to ensure that Solvency II requirements will be implemented in 2016. With another two years to go a.s.r. expects to be ready for the application of the Solvency II Directive as of 1 January 2016. Highlights in 2013 • Solvency II implementation is on track. • ORSA has been further developed and is structurally embedded in the business. The ORSA at group level has been performed for the third time. The ORSA was also carried out at legal entity level in 2013. The ORSA at group and legal entity level will be carried out at least once a year. • Actions taken in 2012 regarding data management were continued in 2013 and a.s.r. decided to develop EIOPA’s Quantitative Reporting Templates (QRT) with regard to data management in order to comply with Solvency II. • a.s.r. performed the first test run of the QRT’s in Q4 2013. • a.s.r. participated in the Long Term Guarantee Assessment (LTGA), organized by EIOPA in 2013. The LTGA assesses the so-called LTG package – a series of selected regulatory measures aimed at ensuring an appropriate supervisory treatment of long-term guarantee products, also under volatile market conditions. Six LTG measures are covered by this assessment, tested in different combinations through a series of 13 quantitative scenarios and tailored qualitative questions. The LTGA technical specifications were adapted by a.s.r. in 2013. The LTGA was carried out for several legal entities. • ASR Levensverzekering N.V. participated in the Theoretic Solvency Criteria (TSC) assessment organized by DNB (known as Solvency 1,5) in 2013. The TSC is a criterion in addition to current legislation which aims to improve current supervision to become more risk based and forward looking. The outcome of the TSC could indicate whether DNB might be requested to issue a statement of no objection for a specific type of capital extraction.


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    a.s.r. 46 2013 annual report Report of the Executive Board


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    a.s.r. 47 2013 annual report Corporate Social Responsibility (CSR) Part III Corporate Social Responsibility (CSR)


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    a.s.r. 48 2013 annual report Corporate Social Responsibility (CSR) 3 Sustainable business practices a.s.r. takes account of sustainability in its business operations wherever possible. This is in keeping with the role that a.s.r. wants to play in society as a responsible insurer. a.s.r. has identified five areas of priority within its sustainability policy. These areas are insurance, people, investment, environment and society. The principles and objectives of our sustainability policy are established through dialogue with all stakeholders. a.s.r. maintains close contact with a broad group of external stakeholders, including customers, regulators (AFM and DNB), a.s.r.’s shareholder, politicians and ministers, trade bodies and NGOs. 1 Sustainable insurance company a.s.r’s key task is to offer people certainty in uncertain situations. Financial robustness is inextricably linked to this and is therefore the number one priority. a.s.r. creates insurance products that meet customers’ needs and have been tested by a customer panel or a selection of customers. Market surveys and customer panels are just two instruments that a.s.r. uses to find out about its customers’ needs. Ensure that customers can access and understand information is a continual effort. In addition to the customer information improvement plan, which lists all the steps that a.s.r. is making to improve the findability and intelligibility of information, and the approval and review process for new and existing products (PARP – product approval and review process), a.s.r. also achieves this by customer panels. Assurance is provided on the one hand by improving style guides and training courses in B1/ Customer-friendly information. On the other hand, a.s.r.’s core values and the various codes of conduct ensure sustainability in attitude and conduct in this area. In 2013, a.s.r. developed a number of new well-aligned products. Furthermore, a.s.r. has received a number of awards and recommendations, illustrating that a.s.r. is on the right track (see 1.3). Customer focus The standards of the Customer-Oriented Insurance Quality Mark help a.s.r. to test the level of service provided. In 2013, the Quality Mark was either awarded to, or retained by, the De Amersfoortse, Ditzo and Europeesche Verzekeringen labels despite the more stringent standards. Ardanta met 15 of the 17 standards, but nevertheless failed to retain the quality mark. Worthy of a special mention is the fact that a.s.r. met the requirements of the quality mark for the aspect of Personal Injury, achieving a maximum score of 100%. Professional oath The members of the Executive Board, the Supervisory Board and all divisional and department heads 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 laws, rules, regulations and codes of conduct so as to increase trust in the financial sector.

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