avatar ASR Nederland N.V. Finance, Insurance, And Real Estate
  • Location: UTRECHT 
  • Founded: 1971-04-11
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    annual report 2014


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    a.s.r. Archimedeslaan 10 P.O. Box 2072 3500 HB Utrecht www.asrnl.com


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    a.s.r. 3 2014 annual report 2014 annual report Contents Chapter 1 - a.s.r. at a glance Chapter 6 - Financial Statements 1.1 Profile and key figures 8 Consolidated financial statements 98 1.2 Message from the CEO 12 Company financial statements 212 1.3 Highlights of 2014 15 1.4 Strategy and positioning 19 1.5 Brand policy and distribution model 20 Chapter 7 - Other information 7.1 Independent auditor’s report 220 7.2 Events after the balance sheet date 225 Chapter 2 - Report of the Executive Board 7.3 Other equity interests 225 2.1 Themes in 2014 24 7.4 Provisions of the Articles of Association regarding 2.2 Financial Performance 29 profit appropriation 225 2.2.1 ASR Nederland N.V. 29 7.5 Profit appropriation 226 2.2.2 Non-life segment 33 7.6 Glossary 226 2.2.3 Life segment 37 7.7 List of acronyms 230 2.2.4 Other 41 2.2.5 Investments 43 2.3 Capital management 45 Appendix 1 – Governance principles 231 2.4 Risk management 48 Appendix 2 – GRI-index 250 Contact details and publication 286 Chapter 3 - Corporate Social Responsibility 3.1 Sustainable business practices 54 3.1.1 a.s.r. as an insurer 54 3.1.2 a.s.r. as an employer 57 3.1.3 a.s.r. as an investor 62 3.1.4 a.s.r. and the environment 68 3.1.5 a.s.r. and society 72 3.1.6 Reporting 74 Chapter 4 - Executive Board Responsibility Statement 4.1 Executive Board Responsibility Statement 77 Chapter 5 - Report of the Supervisory Board 5.1 Report of the Supervisory Board 80 5.1.1 Financial statements and profit appropriation 80 5.1.2 Issues addressed by committees 83 5.1.3 Management and supervision 85 5.1.4 Corporate governance 90 5.1.5 Remuneration policy 92 5.1.6 Closing remark from the Supervisory Board 95


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    a.s.r. 5 2014 annual report Introduction Introduction This Annual Report covers the period from 1 January 2014 to 31 December 2014. Where the data in this report does not match the 2013 Annual Report, this is indicated in the text. The Annual Report is based on factual information from internal sources. The provided quantitative and qualitative information concerns a.s.r. as a whole, except where stated that information applies to one specific business unit or a division of 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 leading benchmark for sustainability reporting. a.s.r.’s sustainability report is prepared according to the level B of the G3.1 guidelines. Appendix 2 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. 7 2014 annual report a.s.r. at a glance Chapter 1 a.s.r. at a glance


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    a.s.r. 8 2014 annual report a.s.r. at a glance 1.1 Profile and key figures Gross written premiums Breakdown of premium income Non-life 62% Life 38% € 3,787 (2013: € 3,923 million) mln (2013: Non-life 61%; Life 39%) Operating expenses Profit for the year € 541 (2013: € 547 million) mln € 381 (2013: € 281 million) mln Cost-premium ratio (Insurance business) Dividend proposal 9.8% (2013: 10.9%) € 138,9 (2013: 98,9 million) mln


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    a.s.r. 9 2014 annual report a.s.r. at a glance DNB solvency including UFR Return on equity 285% (2013: 268%) 12.4% (2013: 10.6%) Headcount at year-end 2014 3,893 1,530 2,363 Combined ratio (Non-life) 94.9% (2013: 104.6% (including additional WGA-ER loss item)


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    a.s.r. 10 2014 annual report a.s.r. at a glance ASR Nederland N.V. and its subsidiaries, hereinafter jointly referred to as a.s.r., together form 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 non-life, life and income protection insurance, group and individual pensions, health insurance, travel and leisure insurance, and funeral insurance. Except for a number of funeral portfolios in Belgium, a.s.r. has a presence in the Dutch market only. Besides insurance products, the a.s.r. product range includes savings, bank savings and investment products. In addition, a.s.r. invests in real estate and in property development. Having generated € 3,787 million in gross written premiums in 2014 and servicing some estimated 1,7 million customers (a.s.r, De Amersfoortse and Ditzo), a.s.r. is the fourth largest insurance company in the Netherlands. a.s.r. offers people certainty in uncertain circumstances. 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 or unwilling to carry alone, and by helping customers grow their assets for the future. a.s.r. is confident that it can prove its right to exist by thinking in terms of customer interests and perception. This is something that all employees work towards each day. And it is the employees that give the service of a.s.r. a face and determine its quality, which a.s.r.’s products and services must match. Clarity and simplicity combined with efficient business processes and a robust financial position are essential. Customers may rest assured that their risks are covered by an insurer that operates sensibly and avoids waste, but also listens to them and puts itself in its customers’ shoes. In its policies, a.s.r. takes account of the interests of its customers and 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 main office is located at Archimedeslaan 10 in Utrecht, the Netherlands. Other branches in the Netherlands are located in Amersfoort, Amsterdam and Enschede, and at Pythagoraslaan in Utrecht. Thanks to the New World of Work, a.s.r.’s nearly 3,893 employees have been given the opportunity to choose their own time and place of work. Organizational structure a.s.r. is managed by an Executive Board that 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 businesses. These policies insure risks related to the home, household contents, buildings and motor vehicles, travel and leisure, liability, legal assistance, occupational disability and medical expenses. The policies are offered under the following labels: a.s.r., De Amersfoortse, Ditzo and Europeesche Verzekeringen, through both the intermediary and the direct channels. The Life segment comprises all insurance policies that involve asset-building, asset reduction, asset protection, term life insurance for consumers and business owners, and funeral expenses. Products are 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, a.s.r. vastgoed ontwikkeling (real estate development), a.s.r. vastgoed vermogensbeheer (real estate investment management), SOS International (emergency assistance) and the holding companies. The banking business develops mortgages and savings and investment products. Financial Markets and the real estate investment management business manage an investment portfolio worth more than € 40 billion for a.s.r., policyholders and institutional investors. They invest these assets in a responsible manner so that a.s.r. can meet its obligations at any given time.


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    a.s.r. 11 2014 annual report a.s.r. at a glance The investment portfolio is broadly diversified and consists of holdings in equities, government and corporate bonds, mortgages and real estate. This type of risk diversification and the pursuit of an integrated investment policy that is geared to insurance liabilities allow a.s.r. to maintain its robust financial position and guarantee the obligations towards its customers. a.s.r.’s operations are structured into the product lines non-life, life, pensions, banking, occupational disability, health, funeral, travel and leisure, real estate development, corporate departments and support services. Each of these divisions has its own Management Team, whose chair reports to a member of the Executive Board. In terms of legal structure, a.s.r. consists of the parent company ASR Nederland N.V. and a number of operating companies and the service companies. An overview of the main legal entities is shown on page 156 and 157 of the financial statement.


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    a.s.r. 12 2014 annual report a.s.r. at a glance 1.2 Message from the CEO Sustainable footing 2014 was a good year for a.s.r. in many respects, a year in which we have been able to focus even more on embedding the principle of treating customers fairly in our business practices. The outlines of our future as a sustainable insurance company, which demonstrates visibly that it has defined continuity and security for customers as its main priorities, are becoming increasingly clear. Not only are our products becoming easier to understand and better tailored to customer requirements, but our robust financial position also contributes to the trust that our customers have in us. Looking at the insurance market, not much has changed over the past few years. Margins continue to be under pressure and the life portfolio is contracting. In addition to trust in the product and the insurer, pricing is becoming more and more important for consumers in their shopping behaviour. It is for this reason that a.s.r. has gone to great lengths over recent years to offer consumers value for money. Our business continues to be built on a robust foundation. This is reflected in our profit for the year of € 381 million, a 36% increase on 2013. Our guiding principle is that we choose value over volume, which has resulted in a sound margin on premium income and a robust solvency ratio. a.s.r.’s DNB Solvency I ratio continues to be strong, rising to 285% at year-end 2014. Return on equity stood at 12.4%. Based on this solid performance, we will submit a motion to the Annual General Meeting of Shareholders for a dividend distribution of € 138.9 million to our shareholder. All segments of the business are developing well. Premium income from Non-life was virtually stable; this segment’s combined ratio is structurally below 100% for all product lines. We are pleased that the Vernieuwde Voordeelpakket, a package of non-life policies for private individuals, is a favourite among consumers. Sales of this package have increased significantly over the past year. The occupational disability insurance business managed to shore up its position as market leader despite difficult conditions. The introduction of a new occupational disability insurance policy for self-employed persons clearly meets a need for the target group: adequate cover for the risk of occupational disability at a fair price. We managed to improve our position in the pension market. The new Werknemers Pensioen (Employee Pension) meets a need in this market. 700 employers opted for this employee pension contract in 2014. We are also doing well at retaining existing customers. The buy-out of Stichting Chevron Pensioenfonds (the Chevron pension fund), which involved € 370 million in plan assets, put a perfect close to the year and represented a success for our pension business. The life insurance market, which is contracting, continues to demand our attention. We are adapting the organizational structure of our life business to developments in this market. As a result, we eventually plan to let go of half our people in this business. This has been a difficult decision, but it needed to be taken to have our costs keep pace with the rate of contraction in this portfolio. Total costs will drop if we maintain the current price level for each policy. Unit-linked policies continued to be a priority in the life business in 2014. We have now reached nearly 90% of our unit-linked policyholders. In the last quarter of 2014, we managed to catch up considerably


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    a.s.r. 13 2014 annual report a.s.r. at a glance and make contact with a specific group of 35,000 customers who hold non-accruing or low-accruing unit-linked policies. At year-end 2014, we had reached more than 80% of this customer group. A relatively small group of 6,000 customers now remains; we are committed to trying to rally them into action. With a view to strengthening our balance sheet and capital position even more, we issued a hybrid bond loan of € 500 million in 2014. a.s.r. now not only amply meets the solvency II requirements, but this loan has also helped to optimize our capital structure and created the conditions for reducing our interest expense. The interest that investors showed in subscribing for the loan tells us that the market has faith in a.s.r. The success of the ASR Dutch Prime Retail Fund was another financial milestone. After a fourth placement in 2014, the Fund’s total externally placed assets rose to over € 530 million. A fifth placement was undertaken early in 2015. The renovation of the a.s.r. building is in full swing. The entire building will have been renovated by the end of 2015. By that time, virtually all a.s.r. employees will have a workstation at Archimedeslaan 10 in Utrecht. This inspiring workplace will undoubtedly contribute to the provision of even better customer services. We are now entering the last phase of the renovation. Sustainability was the most important criterion in the award for Best Office Building in the Netherlands in 2014 received by a.s.r. Our sustainable investment policy earned us the highest rating awarded by the Fair Insurance Guide twice in 2014. In a survey conducted by the Dutch Association of Investors for Sustainable Development (VBDO), a.s.r. achieved a top three position for the fourth year in a row. Development and sustainable employability also form the pillars of our HR policy. Although we are now offering a less generous pay-and benefits package, we are in fact stepping up our investments in employee training and development. We can look back at two successful support campaigns. The online platform doorgaan.nl welcomed dozens of business owners with great business ideas, which we not only facilitated with crowdfunding, but also provided financial support to (to some of this business ideas). Over 2,000 investors raised more than € 500,000 in project finance. This helped various businesses to get their venture off to a successful start. Andere Spelen (Alternative Games) is an a.s.r. initiative that was launched in 2014. Its aim is to encourage more children to participate in physical exercise by introducing them to lesser known sports. In this context, a large event was organized in Utrecht in November. a.s.r. is on its way towards an autonomous and healthy future. We made great strides in that respect in 2014 too. All things considered, I look back on the past year with a sense of contentment. The process of exploring a potential merger with VIVAT/REAAL has also left positive memories. After due deliberation and thorough investigation, we ultimately decided not to submit a final bid. In dialogue with NLFI, our shareholder, we will now continue to prepare for our privatization. The privatization process will start as soon as the Minister of Finance has informed the Dutch Parliament on his decision and after it has been discussed with the Parliament. We are confident about this process, not least because of the great interest that many investors have shown in a.s.r. But there is a lot more to do of course, in 2015 too. We are proud of, and thankful for, our employees’ tremendous commitment to our customers and the professionalism they exhibit on a daily basis. We are also happy to see a rise in our employee satisfaction rating. We will continue to invest in the personal development and professional competence of our people. After all, we need motivated and qualified employees to help ensure the future of our organization. We will continue to safeguard our financial health by looking after our solvency levels, increasing cost flexibility and reducing costs where we can. And we will keep embracing our mission to improve our customer services every single day. What we want is for our customers to have a positive experience. We want them to share in the good feeling about a.s.r. that exists among our employees and everyone who believes in our organization. Jos Baeten Chief Executive Officer


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    a.s.r. 15 2014 annual report a.s.r. at a glance 1.3 Highlights of 2014 In 2014, a.s.r. continued the new strategy it initiated in 2012 of being a socially minded and accepted insurance company offering easy-to-understand products at a fair price. This cannot be achieved without a robust financial base and cost-effective operations and the overall goal of providing excellent customer service. Issues affecting a.s.r. in 2014 a.s.r. focused heavily on treating customers fairly in 2014. In the Non-life segment, dedicated customer desks were set up through which customers contacting a.s.r. are served more swiftly and more effectively. The pricing of car insurance in the Vernieuwde Voordeel Pakket discount package was improved. SMEs were offered better prices on their fire and third-party liability policies, and discounts were granted on motor vehicles insurance for vans. The occupational disability business launched a new product especially designed for self-employed persons, featuring a limited life and an attractive premium. In 2014, the funeral expenses business introduced webcam consultations to make it more convenient for people who are interested in taking out funeral expenses insurance to talk to an adviser when and where it suits them. a.s.r. spent a lot of energy encouraging unit-linked policyholders to come forward in 2014 too, focusing in particular on the most vulnerable group of customers who hold non-accruing policies. At year- end 2014, a.s.r. had managed to reach over 80% of all customers holding a non-accruing policy and encouraged them to come forward. Although a.s.r. will continue trying to reach all affected customers, this is proving to be a challenge. Despite all efforts, the last group is increasingly difficult to reach and spur into action. a.s.r.’s transition is also reflected in the sustainable renovation of the office building located at Archimedeslaan in Utrecht. Two highlights were celebrated in 2014. The first renovated part of the building where the employees’ workstations are located was put into use and the new conference centre opened its doors at the end of the year. As a result, a.s.r. now has over 1,000 new-generation workstations that meet every requirement of the New World of Work, as well as a multifunctional conference centre with 11 conference rooms seating between eight and 250 persons. The second stage of the renovation was completed early in 2015; this included the new cafeteria and the semi- public space with a bar and brasserie, which will be opened up to the public. The fact that the building was named 2014’s best office building in the Netherlands shows that the renovation did not just make an impression on a.s.r.’s visitors, employees and neighbours. The judges of Intermediair.nl ruled that the a.s.r. building is unique in that it is perfectly in line with the organization’s philosophy of transparency, sustainability and austerity. Lastly, there were political developments involving a.s.r.’s imminent privatization with a view to the sales process of VIVAT/REAAL (formerly Reaal), another nationalized insurance company. Early in 2014, Dutch Finance Minister Dijsselbloem proposed to postpone a.s.r.’s privatization and offer a.s.r. the opportunity to submit a bid for SNS Reaal’s insurance operations. He did so in a letter to the Dutch Parliament, in which he wrote that the idea is to refloat a.s.r., especially now that NLFI, the shareholder, has issued a recommendation stating that a.s.r. is ready to be privatized. At the same time, Minister Dijsselbloem suggested postponing a.s.r.’s privatization because he felt that the


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    a.s.r. 16 2014 annual report a.s.r. at a glance time was not right. In his reasoning, he referred to the IPO of other businesses, including Nationale Nederlanden, and his belief that a.s.r. should have a chance to bid for VIVAT/REAAL. To this end, the Minister allowed a.s.r. to attract external investors that could help to facilitate a potential bid for VIVAT/REAAL because he argued that a merger between a.s.r. and VIVAT/REAAL should be effected without financial back-up from the government. Minister Dijsselbloem’s plan received support in a parliamentary debate. The process to sell VIVAT/REAAL was initiated and a.s.r. started to seriously explore whether or not to submit a bid. There turned out to be great interest from investors. a.s.r. spoke to about 30 international players that wanted to explore a potential joint bid for VIVAT/REAAL. Together with a consortium of selected investors, a.s.r. thoroughly reviewed the options for submitting a bid. Based on the findings, it was ultimately decided in February 2015 not to submit a final bid. In dialogue with the shareholder NFLI, a.s.r. will now continue to prepare for a future in private hands and decide on a time schedule leading up to the privatization. Financial milestones Sound and sustainable results The figures for 2014 reflect the positive developments in the results achieved by a.s.r. The combined ratio in the Non-life business stayed below 100% throughout 2014 for all product lines. Profit for the year was up from 2013. The solvency ratio continued to be robust in 2014. The occupational disability and non-life businesses managed to grow their market share and customers continued to be satisfied with a.s.r.’s products and services in 2014, as reflected in a stable NPS. Buy-outs and contracts in the Pensions business a.s.r. will start to underwrite the pension liabilities of Stichting Chevron Pensioenfonds as of 1 January 2015. The pension assets to be transferred within the scope of this buy-out are worth € 370 million. The existing pension entitlements of more than 1,800 members, who are employees and former employees of the Dutch operations of US oil company Chevron, will be administrated by a.s.r. pensions with effect from 1 January. In addition, the pensions business signed a large number of contracts in 2014, for instance with GDF Suez E&P Nederland, the largest new customer in 2014. Natural gas extractor GDF Suez E&P Nederland signed a contract worth € 5.5 million in premiums per year. Acquisition of Van Kampen Groep a.s.r. announced in December that it was to acquire all shares in Van Kampen Groep (VKG), based in Hoorn, as of 1 January 2015. VKG keeps records for more than 3,000 financial advisers in the Netherlands and works in partnership with over 150 financial institutions. It has 161 people on its payroll. ASR Dutch Prime Retail Fund a.s.r. vastgoed vermogensbeheer, the real estate investment management business, completed the fourth placement of the ASR Dutch Prime Retail Fund. Aviva Investors Global Real Estate Multi- Manager invested over € 25 million, which brought the total capital raised since December 2011 to over € 530 million. At year-end 2014, a.s.r. still had a share of 56% in the fund. Balance sheet optimization a.s.r. raised € 500 million in new capital on the financial markets through a hybrid bond loan. By doing so, a.s.r. took an important and successful step towards further optimizing the balance sheet, particularly with a view to Solvency II. Most of the subscriptions for the loan are from Dutch and German long-term investors. The loan also attracted great interest from the UK, France and Switzerland. Credit rating Standard & Poor’s confirmed a.s.r.’s A rating for its core insurance companies and awarded a BBB+ rating to the holding company (ASR Nederland N.V.). All ratings have a stable outlook.


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    a.s.r. 17 2014 annual report a.s.r. at a glance Campaigning and marketing milestones Below is a list of key initiatives that show how the a.s.r. brands help customers and what ‘helping by taking action’ actually means: • Doorgaan.nl. Doorgaan.nl is a crowdfunding platform for businesses asking the public to join De Amersfoortse in investing in them. The number of projects financed in 2014 was 13, about half of the initial number. The website attracted more than 500,000 unique visitors in 2014 and 2,000 investors came forward. The crowd and De Amersfoortse together invested some € 500,000 in the featured businesses. • Andere Spelen. This is an initiative to get children to lead more active lives. Rather than supporting large sports such as football or field hockey, this programme showcases smaller, relatively unknown sports in particular, including bossaball, frisbeeing, fierljeppen (jumping a body of water using a pole), sword-fighting and wall-climbing. A large event featuring these sports was organized in Utrecht on 9 November. The highly successful, sold-out event enabled more than 10,000 visitors to familiarize themselves with various alternative sports. • Samenheldenbouwen.nl. Ardanta launched a special website allowing customers to check whether their funeral expenses policy is still adequate. Ardanta donated € 1 to the Dutch Heart Foundation for every policy checked. Ardanta wants to use this campaign to educate visitors about the value of their funeral insurance and to save lives at the same time. In addition to the donation to charity, customers who have checked their policy also receive an offer to sign up for a free resuscitation workshop. Ardanta had donated € 23,500 to the Dutch Heart Foundation by the end of the year. • Zorgmee. Zorgmee, which translates as ‘care too’, is the name of Ditzo’s relief campaign. The campaign (see www.ditzo.nl/zorgmee) draws attention to helping people who need the most care. Ditzo customers who want to help others can choose to increase their monthly health insurance premiums. Ditzo doubles the amount of the increase and invests the money to benefit three target groups, i.e. young people, families and the elderly. The decision on how the money is spent is taken in dialogue with specialists and customers. Other highlights of 2014 1. The amended employment conditions were formalized in a collective bargaining agreement. One of the new features is that variable pay has been eliminated for all employees as of 1 July 2014. With effect from 1 January 2015, there will be no more employee discounts on new mortgages and the pension scheme will be adjusted. For more details, see page 59. 2. The pensions business is set to outsource some of its processes to Infosys. This means that 87 colleagues will be transferring to Infosys, which specializes in administrating and improving knowledge-intensive processes. The purpose of this outsourcing is to reduce costs on a structural basis and to improve the quality of the administrative processes. It will also help to make costs more predictable and flexible. 3. Chris (H.C.) Figee (41) joined the a.s.r. Executive Board in the role of CFO on 1 May. He succeeded Roel Wijmenga, who left a.s.r. after five years. Chris (H.C) Figee’s previously worked at Achmea, where he served as Director of Group Finance. Earlier in his career, Chris Figee held positions at Aegon and McKinsey. 4. a.s.r. vastgoed ontwikkeling is ambitious. De Nieuwe Haagsche Passage in The Hague was completed in September. a.s.r. vastgoed ontwikkeling will develop about 200 homes near Utrecht central station. In Leidsche Rijn, near Utrecht, a.s.r. vastgoed ontwikkeling and Vesteda Project Development are developing an area with about 150 stores, hospitality outlets and commercial services, 10,000 m² of office space and more than 700 apartments. A multi-storey car park with 2,000 parking spaces will also be built. The work got off to a start in June.


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    a.s.r. 18 2014 annual report a.s.r. at a glance 5. In April, an international delegation of mayors, city planners, architects and city councillors from 11 cities in Central and Eastern Europe visited a.s.r. to learn about a.s.r.’s sustainable bicycle policy. The visit was part of a training programme concerning mobility, sponsored by the European Union. Awards, prizes and other honours in 2014 In the process of a.s.r.’s development into a customer-oriented and transparent insurer, any awards and prizes received are recognition of the positive changes within the business. What follows is a selection of awards, prizes and other honours given to a.s.r. in 2014 or announced in 2014: • a.s.r.’s liability insurance policy for private persons (Dutch acronym: AVP) received high ratings in the MoneyView comparison shopping test. Having been awarded five stars for ‘Quality’, the policy was referred to as unique in the market. • MoneyView also gave the maximum of five stars to a.s.r.’s Lijfrente Spaarrekening (annuity savings account) and Extra Pensioen Uitkering (extra pension benefits). These products were regarded highly because of their pricing. • MoneyView continued to rate De Amersfoortse’s occupational disability insurance as a five-star policy on account of its flexibility. • a.s.r. managed to retain the Customer-Oriented Insurance Quality Mark after undergoing a new audit. The Dutch Insurance Review Agency was positive about a.s.r.’s focus on customer interests, accessibility, expertise and quality. • As shown in the 2013 survey on Treating Customers Fairly that was published by the AFM in August, a.s.r. scored 3.6 out of 5 on customer focus in its services, products and processes, which is slightly better than average. This score is an improvement upon last year (3.3) and higher than the average in the financial sector (3.5). • The Ditzo Kijk kanker de wereld uit (Fighting Cancer) campaign, which was initiated in 2013, received various awards: - SAN Accent. The campaign received the only communication industry award for and by advertisers. - Echo Award. Ditzo received this international award for the best marketing campaigns in the world, which is presented annually by the Direct Marketing Association. - Online Video Award 2014. The Marketingfacts platform named the Kijk kanker de wereld uit video the most strikingly effective Dutch video of the decade. - Esprix Awards. Ditzo won both a silver and a bronze award at this annual marketing awards ceremony. • a.s.r.’s sustainable investment policy earned the highest rating awarded by the Fair Insurance Guide twice in 2014. a.s.r. does better than others in this survey, particularly when it comes to increasing the sustainability of investments. In the annual VBDO (Dutch Association of Investors for Sustainable Development) survey, a.s.r. achieved a top three position for the fourth year in a row. • Elsevier magazine again named a.s.r. vastgoed ontwikkeling as one of the best employers in the Netherlands. The real estate development business was awarded the highest score in the construction sector.


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    a.s.r. 19 2014 annual report a.s.r. at a glance 1.4 Strategy and positioning a.s.r. offers people certainty in uncertain circumstances. 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 or unwilling to carry alone, and by helping customers grow their assets for the future. Customer trust is an important part of a.s.r.’s ambition. But trust goes further than the customer alone. It applies equally to successful cooperation with intermediaries, to offering employees an inspiring and interesting working environment, and to giving the shareholder the prospect of attractive returns based on responsible risk. a.s.r. chooses to be an all-round insurance company with products and services that are primarily designed for the Dutch market. The Dutch insurance market is saturated and fiercely competitive. In this market, a.s.r. has opted for value over volume; we want to achieve cost reductions by preventing waste through continuous efficiency improvements under the motto ‘first time right’. a.s.r. has deliberately chosen a multi-line model, offering a comprehensive range of insurance products to customers. In doing so, a.s.r. focuses on standardizing processes and products, increasing the level of Straight Through Processing and, where appropriate, outsourcing services to specialist partners. a.s.r. has chosen to introduce outsourcing in controlled stages. a.s.r. is confident that it can prove its right to exist by thinking in terms of customer interests and customer perception. This is something that all employees work towards each day. And it is our employees, with their professionalism and customer focus, who give the service of a.s.r. a face and determine its quality. a.s.r.’s products and services are at the base. Clarity and simplicity combined with efficient business processes and a robust financial position are essential. Customers can rest assured that their risks are covered by an insurer that operates sensibly and avoids waste, listens to them and puts itself in their shoes. Customers tell us that they want transparent products, clear communication and personalized service. a.s.r. has made it its top priority to meet these needs. This means that activities and objectives are assessed for whether or not they benefit our customers. New products are presented to customer panels and their feedback is incorporated into the product development process. Ultimately, we should see this reflected in the appreciation rating that customers give a.s.r. in terms of the Net Promoter Score (NPS). Everyone at a.s.r. works each day according to the guiding principle that they can help make the insurance business better for customers. They use alternative business models and start from an alternative mindset. Back to the roots of insurance: helping people. Back to the mindset that collaboration provides certainty for all. Insurance is the essence and providing certainty is a.s.r.’s reason for being. Helping people 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. It still is for a.s.r. today.


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    a.s.r. 20 2014 annual report a.s.r. at a glance 1.5 Brand policy and distribution model Featuring the a.s.r., De Amersfoortse, Ditzo, Europeesche Verzekeringen and Ardanta brands, a.s.r. offers a wide range of financial products: life insurance, non-life insurance, income protection insurance, group and individual pension products, health insurance, travel and leisure insurance, and funeral insurance. a.s.r. a.s.r. is the primary label for private individuals. Its core value is helping people by taking action. Life and non-life insurance policies, mortgages and savings and investment products are primarily sold through the intermediary channel, but customers can also approach a.s.r. directly if they want. This hybrid model has been designed to allow customers to make their own arrangements and solicit advice when they need it. Customers can always contact a.s.r., for instance by calling or sending an email about easily resolvable or administrative issues, or one of our intermediaries to ask for more personal and tailored advice. a.s.r. puts customers’ interests first in developing insurance packages too. They 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. The a.s.r. label also comprises commercial lines. In addition, a.s.r. operates and develops real estate. De Amersfoortse De Amersfoortse is the brand for business owners. Its portfolio comprises income protection, health and pension insurance. De Amersfoortse’s priorities are offering peace of mind, now and in the future, advice from a trusted adviser and convenience through online management and services. De Amersfoortse’s products and services are sold through intermediaries only. Income protection insurance is sold exclusively via De Amersfoortse on the basis of business owners. Business owners are made a competitive offer when they are accepted for occupational disability and income protection insurance. De Amersfoortse also offers health insurance to private individuals.


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    a.s.r. 21 2014 annual report a.s.r. at a glance Ditzo Ditzo is the online provider of non-life and health insurance policies for people who like to arrange things online. Customers can take out household contents insurance, third-party liability insurance, residential premises insurance, travel and car insurance, and health insurance online. Ditzo is good at questioning things that do not seem logical and taking action to rectify them. Over the past few years, Ditzo has actively contributed to the public debate about healthcare in the Netherlands and invested in research by undertaking such initiatives as ‘Kijk kanker de wereld uit’ (Fighting Cancer) in 2013 and ‘Zorgmee’ (Care Too). Ardanta Ardanta is a specialist in funeral insurance. It mainly offers its products through independent insurance intermediaries. In addition, Ardanta has launched a website by the name of www.doodgaanendoorgaan.nl (in Dutch), which educates customers well in advance about funeral arrangements and related issues. Europeesche Verzekeringen Europeesche Verzekeringen specializes in travel and leisure insurance. Europeesche Verzekeringen sells insurance policies through the intermediary channel and through specialist partners, which not only include tour operators, health insurers and insurance agents, but also federations, clubs and associations, such as the Dutch Ski Federation.


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    a.s.r. 22 2014 annual report a.s.r. at a glance This page has intentionally been left blank.


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    a.s.r. 23 2014 annual report Report of the Executive Board Chapter 2 Report of the Executive Board


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    a.s.r. 24 2014 annual report Report of the Executive Board 2.1 Themes in 2014 The Executive Board met at least weekly in 2014 for consultation. The following themes were given priority in the meetings of the Executive Board in 2014: Routine topics Specific issues • Customers • Treating Customers Fairly and AFM survey • Employees and development • MH17 air disaster • Contacts with Works Council • HR and talent development • Commercial development and premium income • Less generous pay-and-benefits package • Developments in premium income/cost ratio • Amendment and harmonization of pension plan • Risk management and risk appetite • Unit-linked policies • Own risk and solvency assessment (ORSA) • Acquisition of Van Kampen Groep • Strategy, including future exit to private market • Team dynamics in Executive Board (including new CFO) • Financial performance (quarterly, interim and annual results) • Privatization and VIVAT/REAAL • Solvency • Solvency II • Contacts with regulators • Renovation of Archimedeslaan offices • Contacts with shareholder • Investment plan • Dividend proposal • Sustainability and role in society • Multi-year budget • Integrity reports • Audit reports • Governance • Complaint reports • ICT-projects In addition to recurring topics, the Executive Board also discussed a number of specific themes in its routine meetings in 2014, as well as scheduling many extra meetings to address these specific themes. A number of routine topics and additional themes are highlighted below. Treating Customers Fairly and AFM survey Helping customers is what lies at the heart of our business. Everyone at a.s.r. knows this and puts this principle into practice every day. Treating Customers Fairly (TCF) frequently comes up during internal sessions and is often covered in internal communications. Various reports, including the TCF Dashboard, complaint reports and the Net Promoter Score, are used to gain an understanding of developments in, and the performance on, TCF on a regular basis. A lot of attention is also paid to knowledge development by sharing and discussing best practices. The TCF Dashboard, which is defined annually by the Netherlands Authority for the Financial Markets (AFM), yields highly useful information that helps to further improve a.s.r.’s customer focus. This survey by the regulator annually benchmarks the extent to which Dutch financial institutions focus on customer interests in their products, services and processes. a.s.r. achieved a score of 3.6 out of 5 for 2013 on the Dashboard (2012: 3.3), higher than the average in the financial sector (3.5). a.s.r. scored well above average on claims handling, complaints management and customer contacts in particular. Nonetheless, the Executive Board will keep a sharp focus on TCF while a.s.r. is continuously working to increase its customer focus. MH17 air disaster The crash of Malaysia Airlines flight 17 on 17 July killed all of its 298 passengers and crew. Some


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    a.s.r. 25 2014 annual report Report of the Executive Board passengers had taken out policies with a.s.r., De Amersfoortse, Ditzo, Europeesche Verzekeringen and Ardanta. Immediately after hearing about the crash, the Executive Board decided that a.s.r. would not invoke the war clause. In dialogue with the Dutch Association of Insurers, the rest of the sector decided to do the same. a.s.r. formed a special team right after the air disaster; the team did all it could to help surviving relatives cope with the financial implications efficiently and make the necessary arrangements. Given the special circumstances of the crash, the Executive Board discussed on a regular basis how a.s.r. could be of as much assistance as possible to the surviving relatives. HR and talent development a.s.r.’s employees are the driving force of the organization. They are helping customers deal with unexpected and sometimes difficult circumstances, working every day to improve products and processes, dealing with customer queries quickly and efficiently, and thinking about and working towards the socially relevant insurer that a.s.r. aspires to be. The Executive Board discussed the talent development programme on various occasions in 2014. The Executive Board considers it is important that all employees and the group of trainees in particular are offered opportunities for investing in their own expertise and professionalism. In this context, it was decided in 2014 to launch the In Motion (in beweging) programme to increase our people’s mobility. We want our policy to be unambiguous and transparent, and we took up the challenge in 2014 to find a system that strikes the right balance between trust in the intrinsic motivation of all a.s.r. employees on the one hand and clear performance targets and employee appraisals on these targets the other. The Executive Board believes that a.s.r. can only be a sustainable organization and a socially relevant insurer if we employ the right motivated people; the focus should be on professional skills and financial incentives should not be leading. For this reason, we decided in 2014 to change our pay-and-benefits package and eliminate variable pay for nearly the entire staff base and converted, in line with an agreement with the trade unions, the variable part for a smaller fixed allowance. We are confident that a.s.r.’s pay-and benefits package is a good offering overall that will enable us to attract and retain good people. Adjustment of pay-and-benefits package a.s.r. wants to offer fair remuneration; it has chosen to benchmark its remuneration against the second quartile of the average remuneration level in the Netherlands across all industries (i.e. not just the financial sector). In the context of bringing the remuneration in line with the market, the Executive Board worked on amending the pay-and-benefits package; the amendments included eliminating variable pay and the mortgage interest discount on new mortgages (the latter with effect from 1 January 2015), and amending the pension plan. With these changes, a.s.r. has scaled back its pay-and-benefits package from about 15% above average to the median of this benchmark group over the past few years. The members of Executive Board have not been entitled to variable pay since 2011. This was motivated by the statutory provisions governing the bonus prohibition for state-aided enterprises. Now that variable pay has been eliminated, performance appraisals will take on a different dimension for nearly all employees. Together with HR, the Executive Board has fleshed out how to conduct a performance appraisal interview and how to set targets effectively. Improving and maintaining the integrity and robustness of a.s.r. is key to the new remuneration policy, which was introduced in 2014, and the focus is squarely on the long-term interests of all our stakeholders. The aim of the remuneration policy is to motivate employees to work for the interests of customers and other stakeholders within the parameters of the duty of care. The Executive Board also focuses specifically on the development of senior management. One of the ways of doing so is the annual senior management survey, in which context the individual members of senior management are first discussed within the Executive Board and then jointly with the Supervisory Board. The discussions focus on personal growth, combined with new opportunities within a.s.r. As part of this policy, three managing directors took on new roles in 2014, two left a.s.r. and one was recruited externally. In 2014, the outcomes of the survey were discussed with all senior managers in their respective discipline. Based on these outcomes, a special training programme was developed for each target group. The simplified set-up of the survey offers greater transparency and a greater focus on development and mobility.


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    a.s.r. 26 2014 annual report Report of the Executive Board Unit-linked policies Unit-linked policies are a recurring theme in Executive Board meetings; while the discussion is also about the financial impact of the issue, much more attention is devoted to investigating and offering alternatives to unit-linked policyholders. Since a.s.r. was one of the first insurance companies in 2011 to actively offer alternatives to customers in addition to what had been agreed with the lobby groups, we have now made contact with 90% of our unit-linked policyholders and made arrangements with them. This issue was foremost in the minds of the members of the Executive Board and the relevant senior managers in 2014 too. As a result, arrangements had also been made at year-end 2014 with more than 80% of customers holding so-called non-accruing policies. These achievements are in line with the targets for 2014, but it remains our goal to contact all customers. In 2015 too, our efforts will continue to be focused on finding solutions for the small group of customers that are proving very difficult to contact. At the same time, the Executive Board has concerns about the fact that, in the debate about unit-linked policies, the fee issue does not seldom get mixed up with the discussion on (expected) investment returns. Unit-linked policies are the subject of a broad public debate that does not only involve insurance companies and customers. That is why we value the dialogue with, and the constructive input of, all stakeholders, including politicians, regulators, lobby groups and the media. In 2014, a.s.r. met with politicians and journalists, for instance, and working visits were organized to share with stakeholders what efforts a.s.r. is undertaking in this respect. Privatization and VIVAT/REAAL The potential consolidation of the insurance sector and a.s.r.’s possible role in it was a high-priority item for the Executive Board in 2014. The Executive Board discussed the option of a.s.r. being admitted to the bidding process for VIVAT/REAAL. The Dutch Minister of Finance decided in June 2014 to temporarily postpone a.s.r.’s privatization process to allow a.s.r. to take part in the bidding for VIVAT/REAAL. A potential bid was subject to the condition of external funding. The Executive Board discussed this issue in a large number of routine and additional meetings, which – in close consultation with NLFI – led to the selection of a number of reputable national and international investors to help fund a potential binding bid for VIVAT/REAAL. After having issued a non-binding bid, a.s.r. was admitted to the next stage of the process, which involved conducting a due diligence review and interviewing VIVAT/REAAL managers and experts. Based on the findings, the Executive Board decided in 2015 not to issue a final bid for VIVAT/REAAL because it would not tie in with a.s.r.’s predefined criteria. A lot of time and energy went into this process in 2014 and we saw great interest on the part of potential investors. The Executive Board is confident that prudent and well-substantiated arguments in every stage of this process have contributed to the robustness and soundness of a.s.r. as an organization and to its strategy, and that this is clear to internal and external stakeholders alike. The Executive Board is very grateful to the shareholder for offering a.s.r. the opportunity in 2014 to take part in the bidding process for VIVAT/REAAL. The Executive Board looked extensively at a.s.r.’s potential return to private hands in 2014. The Executive Board knows what the Dutch State’s views are on this issue. As NLFI established in May 2014, a.s.r. has been successful at building a track record where its ability to deliver is concerned. As a result, NLFI feels that a.s.r. is ready for an IPO (as one of the possible privatization options). At the same time, NLFI concluded, based on a number of general market conditions and more structural issues in the Dutch insurance market, that mid-2014 was not an opportune time for a.s.r. to be privatized. After we had decided not to issue a binding bid for VIVAT/REAAL, we went back to preparing for the privatization in dialogue with the shareholder NLFI. The privatization process will start as soon as the Minister of Finance has taken a decision and informed the Dutch Parliament of the time schedule and procedure leading up to a.s.r.’s return to private hands. We are confident about this process, not least because of the great interest that many investors have shown in a.s.r. Solvency II a.s.r. sets great store by robustness because it clearly tells the stakeholders that a.s.r. will be able to fulfil its obligations at any time, even in the more distant future. Robustness is one of the three strategic pillars that a.s.r.’s risk appetite is founded on. The Executive Board updated the risk appetite in 2014, which marked the next step towards compliance with the Solvency II requirements. Risk limits


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    a.s.r. 27 2014 annual report Report of the Executive Board are formulated in line with S&P requirements, regulatory requirements and a.s.r. ambition levels. At year-end 2014, a.s.r. had adequate capital to meet the limits formulated in the a.s.r. risk appetite. Solvency levels remain acceptable and more than adequate thanks to the organization’s prompt and adequate response to external developments based on the chosen risk appetite and the associated risk-mitigating measures. The risk appetite was again an important criterion for the Executive Board in making both tactical and strategic decisions in 2014. Team dynamics in Executive Board (including new CFO) The composition of the Executive Board changed with the appointment of Chris Figee as our new CFO on 1 May 2014. The Executive Board explicitly discussed the resulting change in our a.s.r.’s dynamics on a number of occasions in 2014. Individual profiles of Executive Board members were prepared with the help of an external agency, as were team profiles of the ‘old’ and the ‘new’ team. The impact on team dynamics was discussed in the presence of both former CFO Roel Wijmenga and new CFO Chris Figee. The Executive Board regularly holds separate meetings to assess team dynamics, as well as effectiveness and decisiveness. Developments in premium income/cost ratio In order to secure the sustainable provision of insurance and banking products and high-quality services, total costs need to be managed, especially against the backdrop of contracting and highly changeable markets in terms of volume and well as fiercely competitive pricing. A survey conducted by the Dutch Central Bank (DNB) in 2014 only served to confirm this picture of the Dutch insurance market. The Executive Board is seeking to make costs more flexible and to reduce them on a structural basis, while continuously working to improve service quality. To that end, the Executive Board has decided to use IT solutions (software as a service or SAAS) at low and variable costs for the back-office processes of new pension and health insurance propositions, to outsource some of the back-office processes of the existing pension portfolio and to migrate some of the back-office processes of the life portfolio to a SAAS solution. The insurance market is fiercely competitive. Cutting costs is not enough; to stay relevant, a.s.r. not only needs to be able to offer its customers attractive prices, but also provide attractive service levels, both now and going forward. After all, insurance is all about creating a safety net for unforeseen circumstances. The Executive Board considers it of great importance that a.s.r.’s product and service offering remains of high quality in the future. Works Council The Executive Board values its relationship with the Works Council, which is characterized by great openness. The Works Council is informed of many issues at an early stage, allowing it to use its influence on the decision-making process in an effective manner. The Executive Board is highly appreciative of the constructive and open discussions, and of the time and energy that the Works Council spends on issues that are impactful for a.s.r. Key themes that were discussed with the Works Council in 2014 included the amendment of the pay-and-benefits package and the process of studying a potential bid for VIVAT/REAAL. Governance, shareholder and supervision The governance structure of some supervised entities has changed with effect from 1 January 2014. The executive and supervisory bodies of the supervised entities met at least four times in 2014. The seven relevant supervised entities are ASR Levensverzekering N.V., ASR Schadeverzekering N.V., N.V. Amersfoortse Algemene Verzekering Maatschappij, Europeesche Verzekering Maatschappij N.V., ASR Basis Ziektekostenverzekeringen N.V., ASR Aanvullende Ziektekostenverzekeringen N.V. and ASR Bank N.V. The standing agenda items included the financial (quarterly) results and the audit, compliance and risk reports. Other topics of discussion were entity-specific issues, including the impact of the changing markets for various entities. The executives and non-executives of the first four entities are the same as those of ASR Nederland N.V. This is not the case for the other three entities.


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    a.s.r. 28 2014 annual report Report of the Executive Board With effect from 29 September 2011, the shareholder has been represented by Stichting Administratiekantoor Beheer Financiële Instellingen (NLFI), a trust office. a.s.r. was in frequent contact with NLFI in 2014, which was intensified by our admission to the bidding process for VIVAT/REAAL. a.s.r. attaches great value to a good relationship with the supervisory authorities. It is in frequent contact with both AFM and the Dutch Central Bank (DNB). Outside of the routine contacts, the Executive Board discussed the arguments in the bidding process for VIVAT/REAAL with DNB in 2014 and information was provided in a number of sessions within the scope of the DNB survey of the viability of the insurance sector. a.s.r. was in frequent contact with AFM about the status of offering solutions to unit-linked policyholders. The Executive Board also considers it important that the entire organization complies with the principles defined in the Dutch Banking Code and the Governance Principles (Dutch Insurance Code). Strategic acquisition of Van Kampen Groep The Executive Board monitors developments in the market with great interest and is open to strategic acquisitions and consolidation opportunities. In this context, agreement was reached in December 2014 on the acquisition of 100% of the shares in Van Kampen Groep Holding B.V., based in Hoorn, as of 1 January 2015. Van Kampen Groep runs the back office of about 3,000 affiliated intermediaries. a.s.r.’s investment will allow Van Kampen Groep to broaden its service offering and fund its strong growth. a.s.r. sees the acquisition as an investment in the strategically important intermediary distribution channel. Closing remark from the Executive Board The Executive Board is grateful to all employees for their unrelenting commitment to helping customers every single day and to making a.s.r. the valued and socially relevant insurance company that it aspires to be. The Executive Board also wants to express its appreciation to the Supervisory Board and the shareholder for their constructive input. The sessions and discussions about such issues as a.s.r.’s planned privatization and the opportunity to bid for VIVAT/REAAL were intensive and of great added value for our business. But most of all we owe a debt of gratitude to our customers who have chosen our products and services. Helping them is our reason for being. And they help us to develop a.s.r. into the socially relevant insurance company that we want to be. Utrecht, the Netherlands, 2 April 2015 The Executive Board Jos Baeten Karin Bergstein Chris Figee Michel Verwoest


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    a.s.r. 29 2014 annual report Report of the Executive Board 2.2 Financial performance 2.2.1 ASR Nederland N.V. • Increase in profit for the year to € 381 million (2013: € 281 million). - Non-life segment: improvement in combined ratio to 94.9% thanks to policy aimed at claims prevention and control. - Life segment: lower profit for the year due to incidental expense items despite stable performance. - Other segment: improvement in earnings because of de-risking in real estate development business. • Operating expenses from ordinary activities down 7%, dropping from € 535 million to € 499 million. Operating expenses (including additional non-recurring expense items) down to € 541 million (2013: € 547 million). • Gross written premiums down 3% to € 3,787 million (2013: € 3,923 million) due, in particular, to contraction of life portfolio. • DNB solvency I ratio continually robust at 285% (2013: 268%). a.s.r. key figures (€ million) 2014 2013 Gross written premiums, Non-life segment 2,359 2,392 Gross written premiums, Life segment 1,543 1,666 Elimination of own pension contract -115 -135 Total gross written premiums 3,787 3,923 Operating expenses, Non-life and Life segment -393 -439 Operating expenses, Other segment (including eliminations) -148 -108 Total operating expenses -541 -547 - Of which from ordinary activities 1 -499 -535 Provision for restructuring expenses -29 -24 Profit/(loss) for the year, Non-life segment 148 52 Profit/(loss) for the year, Life segment 258 367 Profit/(loss) for the year, Other segment (including eliminations) -25 -91 Profit/(loss) for the year 381 281 2 Cost-premium ratio, insurance business 9.8% 10.9% Return on equity (IFRS) 12.4% 10.6% 1 Operating expenses from ordinary activities comprise total operating expenses exclusive of incidental items such as costs associated with preparing for the privatization of a.s.r. and investments in growth and strategic projects. 2 In 2013, this included the additional WGA-ER expense item of € 137 million.


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    a.s.r. 30 2014 annual report Report of the Executive Board 31 December 2014 31 December 2013 Total equity (including revaluation of real estate) 3,833 1 3,799 Total equity (IFRS) 3,027 3,015 DNB solvency I ratio 285% 268% Total number of internal FTEs 3,513 3,789 1 The unrealized revaluation of real estate included in total equity amounted to € 806 million at year-end 2014 and to € 784 million at year-end 2013. Developments in 2014 The insurance market is saturated; it has been fiercely competitive for a number of years and 2014 was no exception. Although consumer spending continues to fall, consumers are slightly more positive about insurance services than they have been for a long time. Insurance companies developed a greater focus on online services in 2014 and put more effort into approaching customers through social media channels. Premium income from the Non-life segment was virtually stable; this segment’s combined ratio was structurally below 100% for all product lines. The Vernieuwde Voordeelpakket, a package of non-life policies for private individuals, is a favourite among consumers. Sales of this package have increased significantly. In the commercial market, the number of large claims fell as a result of the policy a.s.r. has pursued over recent years. The occupational disability insurance business managed to shore up its position as market leader despite difficult conditions. The introduction of a new occupational disability insurance policy for self- employed persons clearly meets a need for the target group: adequate two- or five-year cover for the risk of occupational disability at a fair price. The life insurance market, which is contracting, continues to demand attention. The organizational structure of the life business is being adapted to developments in this market. One of the implications is that 50% of jobs in the life business will eventually be lost. This has been a difficult decision, but it needed to be taken to have our costs keep pace with the rate of contraction in this portfolio. a.s.r. managed to improve its position in the pension market, where the new Werknemers Pensioen (Employee Pension) meets a need. 700 employers opted for this employee pension contract in 2014. a.s.r. is also doing well at retaining existing customers too. The buy-out of Stichting Chevron Pensioenfonds (the Chevron pension fund), which involved € 370 million in plan assets, put a perfect close to the year and represented a success for the pension business. Unit-linked policies continued to be a priority in the life business in 2014. a.s.r. has reached nearly 90% of its unit-linked policyholders. In the last quarter of 2014, a.s.r. managed to catch up considerably and make contact with the specific group of customers who hold non-accruing of low-accruing unit-linked policies. At year-end 2014, more than 80% of these customers had been contacted. With a view to strengthening the balance sheet and capital position even more, a.s.r. issued a hybrid bond loan of € 500 million in 2014. a.s.r. is now not only well on its way to meeting the Solvency II requirements, but this loan has also helped to optimize the capital structure and created the conditions for reducing the interest expense. The success of the ASR Dutch Prime Retail Fund was another financial milestone. After a fourth placement in 2014, the Fund’s total externally placed assets rose to over € 530 million. The HR policy, in which development and sustainable employability have been defined as priorities, was fine-tuned in 2014. A less generous pay-and-benefits package was introduced in 2014, which included eliminating variable pay for most employees with effect from 1 July. The pension plan was amended as well. These measures were taken in combination with a step-up in investments in employee training and development.


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    a.s.r. 31 2014 annual report Report of the Executive Board Financial performance in 2014 Profit for the year Profit for 2014 stood at € 381 million (2013: € 281 million), which reflects the fact that a.s.r. had a good year in 2014. This increase was mostly attributable to a drop in operating expenses from ordinary activities and an improvement in underwriting result achieved in the Non-life segment. Earnings were affected in both 2014 and 2013 by a number of incidental items that resulted in a € 6 million increase in profit for 2014 overall. In the Non-life segment, profit for the year soared from € 5 million in 2013 to € 148 million, thanks to better claims prevention and claims handling procedures, lower operating expenses and the incidental WGA-ER expense item in 2013. The combined ratio improved from 104.6% in 2013 to 94.9% in 2014. The skills and expertise of our people and our employee leaning and development programme are clearly bearing fruit. In the Life segment, profit for the year fell by € 109 million, dropping from € 367 million to € 258 million. Disregarding incidental expense items, including an impairment of VOBA, earnings were up to a limited extent in 2014 thanks to higher investment returns and lower operating expenses. The impairment needed to be recognized on VOBA given the structural market developments in the life portfolios containing unit-linked policies. In the Other segment, the loss for 2013 of € 91 million was reduced to a loss for 2014 (including eliminations) of € 25 million, an improvement by € 66 million. The improved performance was attributable in particular to an improvement in earnings from the real estate development business, other incidental income items and higher investment income. The increase was partially cancelled out by higher operating expenses. Operating expenses Total operating expenses continued to fall in 2014, landing at € 541 million. The drop was brought about despite various investments in growth and strategic projects as well as higher costs associated with preparing for a.s.r.’s privatization. Operating expenses from ordinary activities fell by 7%, dropping from € 535 million to € 499 million. This cost reduction was achieved thanks to continuous focus on efficiency, causing the number of FTEs to drop. The base of internal staff dropped from 3,789 FTEs in 2013 to 3,513 FTEs, a 7% fall. Gross written premiums Premium income was down 3% from 2013, falling to € 3,787 million (2013: € 3,923 million). This fall was mainly observed in the Life segment, which dropped by 7%. Besides being attributable to market developments, the fall was also caused by the impact of previously introduced measures in the motor vehicles, fire and other P&C portfolio in order to improve returns. The occupational disability and health insurance portfolios showed limited growth. Solvency and total equity The DNB solvency I ratio continued to be robust, rising from 268% at year-end 2013 to 285% at 31 December 2014. Based on the standard model, the Solvency II ratio (SCR), which was calculated using the parameters known to date, was circa 175%. The final required parameters will be adopted at European level in 2015 and 2016, which is why the Solvency II ratio at year-end 2014 was somewhat uncertain. At 0.4%, the rate of growth in IFRS-based equity was limited, rising from € 3,015 million at 31 December 2013 to € 3,027 million at year-end 2014. Making allowance for the unrealized revaluation of investment property of € 806 million (2013: € 784 million), total equity stood at € 3,833 million (2013: € 3,799 million). The € 34 million rise in total equity was due to various items. Routine movements included the addition of profit for the year of € 381 million and movements in unrealized revaluations. These positive effects were largely cancelled out by unrealized actuarial gains and losses. The lower discount rate for the a.s.r. pension contract (IAS19) reduced total equity by € 527 million in 2014. In addition, the dividend of


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    a.s.r. 32 2014 annual report Report of the Executive Board € 99 million that was promised for 2013 was distributed in 2014. Finally, a.s.r. issued a new Tier 2 hybrid loan of € 500 million in the second half of the year in the context of the capital optimization drive. Of the original hybrid Tier 1 capital of € 515 million, € 209 million remained at year-end 2014. Outlook for 2015 a.s.r. has the ambition to return to the private market. The Dutch State has been a.s.r.’s sole shareholder since 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. never received state aid. In mid-2014, Dutch Finance Minister Dijsselbloem decided to postpone the dual-track approach to a.s.r.’s privatization in order to allow a.s.r. to explore whether or not to submit a bid for VIVAT/REAAL. Together with a consortium of investors, which had been formed for the purpose of funding a potential bid, a.s.r. thoroughly investigated every aspect of a possible bid. Based on the findings of this investigation, it was ultimately decided in February 2015 not to submit a bid for VIVAT/REAAL. a.s.r. has always taken the view that opportunities for consolidation within the Dutch insurance market need to be seriously considered. At the same time, a.s.r. is confident that it is perfectly capable of executing its strategy on its own. In dialogue with NLFI, the shareholder, a.s.r. will now continue to prepare for its privatization. Over the coming period, a.s.r. will consult with the shareholder to decide on a time schedule leading up to the privatization within the parameters of the dual-track approach that the Finance Minister shared with Parliament earlier. The guiding principle in this process remains that, in the interest of all stakeholders, a.s.r. will continue on the same path in terms of strategy, positioning, corporate culture and business practices, and that a.s.r. will build itself up for a successful return to private hands, in whatever form.


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    a.s.r. 33 2014 annual report Report of the Executive Board 2.2.2 Non-life segment • Increase in profit for the year to € 148 million (2013: € 5 million). • Combined ratio at 94.9% (2013: 104.6%). • Gross written premiums virtually stable at € 2,359 million (2013: € 2,392 million). • Operating expenses down 10% to € 215 million (2013: € 240 million). Key figures, Non-life segment (€ million) 2014 2013 Gross written premiums 2,359 2,392 Operating expenses -215 -240 Provision for restructuring expenses -14 -11 Profit before tax 193 2 Income tax expense -45 3 Profit for the year 148 51 Claims ratio 70.0% 78.3% Commission ratio 15.5% 15.8% Expense ratio 9.4% 10.5% Combined ratio, Non-life 94.9% 104.6% 1 Including the additional WGA-ER expense item of € 137 million. 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, Ditzo and Europeesche Verzekeringen, via both the intermediary and the direct channels. Market developments Although there are signs of economic recovery, the non-life business is still faced with increased levels of insolvencies and/or policy cancellations. In the Non-life segment, the motor vehicles, fire and other P&C insurance portfolio was virtually stable. The occupational disability insurance business continues to suffer the consequences of the economic crisis, which has led to a fall in spending power for employers and self-employed persons. New policies sold are primarily comprised of renewals. Health insurance policies are increasingly being taken out online. Customers mainly opt for relatively cheap policies and a high deductible. Coverage is more limited for top-up health insurance, resulting in lower premiums per policy. In the health insurance market, 6.8% of insured persons switched to a different insurance company in 2014. The travel insurance business is on a downward slope. Financial performance Profit for the year Profit for 2014 stood at € 148 million (2013: € 5 million). Profit for the year improved for all product lines, thanks in part to a proactive claims prevention policy and a reduction in operating expenses. Combined ratio The combined ratio improved to 94.9% (2013: 104.6%). The combined ratio is below 100% in all product lines. The active claims prevention policy, including measures aimed at controlling claims and proactive portfolio management, brought about further increases in the underwriting result in 2014, particularly in the occupational disability, motor vehicles, fire and other P&C insurance portfolio.


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    a.s.r. 34 2014 annual report Report of the Executive Board The combined ratio in the occupational disability insurance business improved to 91.4% (2013: 118.0%), which was attributable mainly to the great expertise of our people in pricing risks, as well as in acceptance, prevention and reintegration, and claims handling. The combined ratio in the health insurance business was stable at 98.9% (2013: 98.8%). Similar to previous years, the health insurance business did not distribute any dividend to ASR Nederland N.V. in 2014. Instead, earnings were used to limit premium increases for customers in 2015. The combined ratio in the motor vehicles, fire and other P&C insurance portfolio dropped to 95.0% (2013: 98.9%). Thanks, in part, to the prevention policy and risk reassessments, the average amount of large – or top – claims was down on last year. The number of top claims was the same as the relatively low number filed in 2013. The mild weather in the first few months of 2014 contributed to the reduction in claims compared with last year. Operating expenses Operating expenses fell to € 215 million (2013: € 240 million). This decrease was the result of our continuous focus on costs. The expense ratio improved to 9.4% (2013: 10.5%) as a result. Gross written premiums Gross written premiums stood at € 2,359 million (2013: € 2,392 million). This slight drop mainly stems from active portfolio management and tighter acceptance procedures. Overall, the number of new policies was up in all non-life portfolios, particularly because of a lower rate of policy cancellations. The motor vehicles, fire and other P&C insurance portfolio saw the largest rise in premium income thanks to better pricing and the introduction of revamped products. Gross written premiums rose in the occupational disability insurance market, in which a.s.r.’s De Amersfoortse label has led the market for years. The increase was mostly the result of single premium and regular premium hikes. Despite the fact that we took measures to improve returns earlier, customers also recognize and appreciate our clear focus on treating them fairly. Gross written premiums also increased in the health insurance business thanks to the Ditzo online sales channel. Developments in sales of top-up health insurance policies reflect that customers are increasingly opting for policies with lower coverage at lower prices. In the motor vehicles, fire and other P&C insurance portfolio, gross written premiums were down from last year as a result of measures designed to improve returns. The decision to focus on value creation has led to a higher underwriting result and a better combined ratio. Thanks, in part, to improved pricing and revamped products, more new policies were sold in the motor vehicles, fire and other P&C insurance portfolio. After the introduction of a new pricing strategy for car insurance in mid-June, the number of applications for car insurance increased by nearly 50% in the second half of 2014, compared with the first six months of the year. In a contracting recreation insurance market, Europeesche Verzekeringen, a.s.r.’s travel and leisure insurance business, was named Best Travel Insurance Company in 2014. Developments in 2014 Sales volumes of non-life products for private individuals were up thanks to the success of the Vernieuwde Voordeel Pakket (VVP) a private non-life insurance discount product that was introduced in 2013. The pricing of car insurance in the VVP discount package was improved. SMEs were offered better prices on their fire and third-party liability policies, and discounts were granted on motor vehicles insurance for vans. The intermediary portal for commercial P&C products (fire, traffic and liability) was improved. a.s.r. has offered home owners the option of extending their home contents and liability cover to include letting cover since 2009. This cover was further broadened in 2014 and marketed more explicitly now that consumers are increasingly listing their homes as vacation rentals. The occupational disability insurance market has become fiercely competitive and is highly price- driven; new policies in this market are mainly comprised of renewals. a.s.r. sees opportunities in this


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    a.s.r. 35 2014 annual report Report of the Executive Board market by increasing accessibility to occupational disability insurance for self-employed persons with a new product especially developed for them. The product is reasonably priced and has a limited maximum indemnity period of two or five years. As part of the drive to reduce partial occupational disability claims (WGA-ER), great efforts were made in 2014 to improve the collaboration with the Social Security Benefits Administration Agency (UWV), particularly where information exchange was concerned. a.s.r. consulted with this agency directly and through the Dutch Association of Insurers; these consultations resulted in a greater level of mutual understanding and more constructive teamwork. A lot was invested in 2014 in creating the capacity to process the mandatory pooling of fixed and flexible partial occupational disability risks (WGA-ER) as of 1 January 2016. This broadening of the market demands great flexibility from insurers, especially because they hardly have any experience with insuring flexi-workers and the information about the sickness and occupational disability risk associated with this group is sketchy and unreliable. This makes the development of an accurate premium model for this group a challenging exercise. The Dutch Minister of Social Affairs & Employment has decided to postpone the introduction of this section of the new absenteeism and occupational disability law by one year; it will now take effect on 1 January 2017. Health insurance policies are increasingly being taken out online. To reduce their premiums, consumers tend to choose a higher deductible and a less generous care package with no or little top-up insurance. a.s.r. managed to grow its total health insurance portfolio in this market too; Ditzo achieved growth for the third consecutive year. Rather than producing TV and radio commercials, the strategy chosen in 2013 was continued by opting for a different approach and focusing on ‘helping by taking action’ with the Zorgmee (Care Too) campaign. Ditzo believes that everyone has the right to affordable healthcare and should be able to choose their preferred healthcare provider. To achieve this, Ditzo offers consumers the option to not only arrange for their own healthcare, but to care for others as well. Ditzo customers – and other insurers’ policyholders too – can opt to pay a monthly contribution that goes towards specific care initiatives for young people, families and the elderly. The money is paid to providers offering concrete solutions in the way of prevention and follow-up, to benefit groups that are in danger of being left out as a result of the changes in the healthcare system over the year to come. Ditzo doubles the amount contributed and reports on how the money is spent. In addition, the health insurance business wants to market itself more explicitly as a healthcare business rather than as a provider of health insurance alone. It aims to achieve this by engaging in more dialogue than ever with healthcare providers, consumers and special-interest groups as well as by taking initiatives such as Care Too. The combined ratio in the Non-life segment improved to 94.9% (2013: 104.6%). The combined ratio is below 100% in all product lines. The active claims prevention policy, including measures aimed at controlling claims and proactive portfolio management, brought about further increases in the underwriting result for 2014. This caused the underwriting results to rise, particularly in the occupational disability insurance business and in the motor vehicles, fire and other P&C portfolio. The combined ratio in the occupational disability insurance business improved to 91.4% (2013: 118.0%). This was mainly attributable to the high level of expertise of our people in the areas of risk selection, acceptance, prevention and reintegration, and claims handling. The combined ratio in the health insurance business was stable at 98.9% (2013: 98.8%). Similar to previous years, the health insurance business did not distribute any dividend to ASR Nederland N.V. in 2014. Instead, earnings were used to limit premium increases for customers in 2015. The combined ratio in the motor vehicles, fire and other P&C insurance portfolio decreased to 95.0% (2013: 98.9%). The improvement in earnings was mainly attributable to the high level of expertise of our people in the areas of portfolio management, acceptance and claims handling. Thanks, in part, to the prevention policy and risk reassessments, the average amount of large – or top – claims was down on last year. The number of top claims was the same as the relatively low number filed in 2013. The mild weather in the first few months of 2014 contributed to the reduction in claims compared with last year. Outlook for 2015 In the Netherlands, the economic outlook for 2015 is slightly better than for 2014. Consumers will remain critical of investments and businesses will weigh their options for self-insurance. The market


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    a.s.r. 36 2014 annual report Report of the Executive Board for non-life products for private individuals will continue to be characterized by comparison shopping, which will force us to create adequate premium volumes by offering standardized products at competitive prices. Our home contents and buildings insurance will be updated in 2015 to include cover for solar panels and charging stations for electric cars. We will also overhaul our legal assistance insurance. The occupational disability business wants to keep the combined ratio in check in 2015 too by seeking quicker and more frequent contact with business owners and self-employed persons who report an occupational disability. This will reduce the period of absenteeism. De Amersfoortse will continue to host the doorgaan.nl platform in 2015. In 2014, 2,000 interested parties jointly invested € 500,000 in 13 different business ideas. De Amersfoortse contributed € 50,000 itself. In the health insurance business, the focus in 2015 will be on further improvements in customer services; the positioning of Ditzo as the consumer label and of De Amersfoortse as the insurance company for business owners will be fleshed out further. Both labels go by the principle that their customers should have the right to choose their preferred healthcare provider. At present, there is a lack of focus on sustainability in contracting care. The health insurance business is considering this issue and exploring its options for prioritizing sustainability aspects in contracting care. The Contracted Care 2020 policy paper will be prepared in 2015. This policy paper will be written in collaboration with healthcare providers and will have due regard for mutual interests and objectives. In the travel and leisure market, the decrease in holiday bookings and replacement purchases of recreational items will continue, which will have a direct effect on the travel and leisure insurance business. Customer services will increasingly be provided by colleagues with a personal preference for the product line they are in.


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    a.s.r. 37 2014 annual report Report of the Executive Board 2.2.3 Life segment • Fall in profit for the year down to € 258 million (2013: € 367 million). • Operating expenses down 11% to € 178 million (2013: € 199 million). • Gross written premiums down 7% to € 1,543 million in line with market developments (2013: € 1,666 million). • New production (APE) up to € 140 million (2013: € 65 million). Key figures, Life segment (€ million) 2014 2013 Regular written premiums 1,308 1,421 Single premiums 235 245 Gross insurance premiums 1,543 1,666 Operating expenses -178 -199 Provision for restructuring expenses -12 -10 Profit/(loss) before tax 318 471 Income tax expense -59 -104 Profit/(loss) for the year 259 367 Profit/(loss) for the year attributable to non-controlling interests -1 - Profit/(loss) for the year 258 367 Cost-premium ratio 10.7% 11.6% New production (APE) 140 65 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 market for life insurance continues to contract; there is a shift from unit-linked policies and asset-building and asset reduction products to tax-efficient banking products, in which life insurers have only a limited role to play. Developments in the mortgage market have also slowed down the term life insurance business. More and more providers looking to grow their earnings and market share are starting to focus on this market, as a result of which it is increasingly being squeezed. The surrender rate of unit-linked policies dropped after the peak in 2012; it has now returned to same level as before 2011. Income from single premiums saw a limited increase in individual immediate annuities, which was attributable in particular to a successful pilot project for online sales allowing customers to purchase a product directly and without having to seek advice. The Dutch funeral insurance market is contracting. Ardanta has invested in new distribution channels since 2013. Although there is a trend towards customers taking out policies online, intermediaries still have an important role to play. In this market, the two distribution channels mix well and actually reinforce each other.


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    a.s.r. 38 2014 annual report Report of the Executive Board Financial performance Profit for the year In the Life segment, profit for the year fell from € 367 million to € 258 million due, in particular, to incidental expense items, including an impairment loss of € 70 million after tax on the VOBA of previously acquired unit-linked insurance portfolios. Disregarding incidental expense items, earnings showed a limited increase thanks to higher investment income. Furthermore, cost reductions helped to cancel out the lower contribution to profit for the year as a result of portfolio contraction. The underwriting result was stable. Operating expenses Operating expenses were down 11%, falling by € 21 million to € 178 million. This caused the cost- premium ratio to improve. This is in line with the policy of bringing about structural cost reductions and increasing cost flexibility, which is designed to have costs fluctuate with developments in premium income. In addition, steps have been taken to further reduce the variety of procedures that are being used for keeping policy records and running processes. Despite the contraction in the portfolio, the administrative expenses per policy were down. While premium income fell, the cost-premium ratio improved by 0.9%-points to 10.7% (2013: 11.6%). Gross written premiums In the Life segment, premium income fell from € 1,666 million to € 1,543 million (down 7%). Premium income from single premiums (€ 235 million) dropped by 4% and that from regular written premiums by 8% (€ 1,308 million). The drop occurred in the pension, life and funeral portfolios. The increase in new production to € 140 million (2013: € 65 million) was fully attributable to the bolstered position of the pension business. In addition to new policies stemming from renewals of existing pension contracts, 2014 also saw a few pension fund buy-outs. In the pension business, premium income showed an 8% fall to € 626 million as a result of a lower indexation rate for existing pension contracts, a reduction in the cap on tax-facilitated pension accrual (from 2.25% to 2.15%) and the raising of the statutory retirement age to 67. There was a sharp rise in the number of new production in 2014. The increase was attributable to the renewal of existing contracts as well as to newly signed pension contracts taken out by customers opting for the Werknemers Pensioen pension proposition that was introduced at the end of 2013. More than 700 employers, mostly SMEs, have now taken out this contract. In addition, a.s.r. assumed the pension obligations of a few pension funds through buy-outs in 2014; the premium income from the pension contract with Chevron will be reflected in premium income for 2015. These buy-outs tie in with a.s.r.’s strategy to raise its profile in the pension market. Brand New Day Premiepensioeninstelling N.V., an IORP that is a 50% subsidiary of a.s.r., doubled in size in 2014 now that it counts nearly 1,000 employers among its customers (year-end 2013: just over 500). The contraction in the Dutch individual life insurance market, which has dragged on for some years now, continued on into 2014. In a report about the viability of Dutch life insurers that was published in November 2014, the Dutch Central Bank, i.e. the regulator, expressed the expectation that this trend will continue and that the market will undergo major changes over the next decade. Regular written premiums fell in this market. Premium income from single premiums increased for immediate individual annuities thanks to a successful pilot for online sales. In addition, we offer savings or bank savings products to customers whose policies are about to expire. More and more customers are deciding to stay with a.s.r. At € 109 million, a 2% drop from 2013, gross written premiums from the funeral insurance business were more or less stable, despite attrition in the portfolio. The share of online distribution in the funeral insurance business is on the increase. Nearly four in ten policies are now taken out online (2013: two in ten). The increase was due, in part, to online media initiatives by a.s.r., including the ‘doodgaanendoorgaan.nl’ website, which offers practical information on funeral arrangements. This website has welcomed over 250,000 visitors since it was launched late last year.


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    a.s.r. 39 2014 annual report Report of the Executive Board Developments in 2014 De Amersfoortse successfully introduced Werknemers Pensioen, an employee pension product. Since its introduction in October 2013, 700 contracts have been signed with employers. a.s.r also managed to retain existing customers, thanks to both pension contract renewals and the new Werknemers Pensioen product. The Brand New Day IORP nearly doubled in size in 2014. It has now signed just short of 1,000 pension contracts with employers. The Dutch Payroll Tax Act was amended on 1 January 2015; some of the changes were that the cap on tax-facilitated accrual rates was lowered and that the threshold for the tax-exempt amount was changed. Another change was the introduction of a cap on pensionable earnings of € 100,000. All pension plans were required to meet these new requirements on 1 January 2015. Also, the statutory retirement age has gradually been raised to 67 with effect from 1 January 2013. a.s.r. will make an offer that meets the new requirements to all its pension plan customers. In addition to incorporating the changes in tax regulations, a.s.r. will also give them the option to convert their pension plan to the new statutory retirement age of 67 free of charge. The pension business organized Het Amersfoortse Pensioenprogramma, a programme for pension advisers in 2014. They need to take continuing education courses in order to meet the training requirements under the Dutch Financial Supervision Act. The programme consists of a combination of a series of knowledge sessions and software training, and is designed primarily for pension advisers from relatively small organizations. a.s.r. also promotes research into pension communications. As a sponsor of, and participant in, Netspar, a network of academics, government officials and pension administrators, a.s.r. contributes to the drive to improve pension communications with pension plan members. In 2014, a.s.r. also organized a youth debate with representatives of political parties, trade unions and pension specialists to engage in a dialogue about the future of the Dutch pension system. Reflecting developments across the market, a.s.r. is also seeing contraction in its individual life business. The drop in regular premiums written is due to routine surrenders, expiry and a fall in demand for life insurance products. Income from single premiums saw a limited increase in individual immediate annuities. The individual life business focused on three initiatives in 2014. The first was cost flexibility by streamlining systems, products and processes. The number of policies falls by 8% to 10% every year. Total costs will drop if we maintain the current price level for each policy. Costs per policy will eventually also be reduced. The second initiative was customer retention. By working in close collaboration with a.s.r. bank, the individual life business tries to get customers to deposit freed-up assets from expiring policies with a.s.r. bank or to retain them for the life business. It does so by gaining an understanding of customers’ financial situation and advising them on the options that a.s.r. has on offer. This is an example of ‘helping by taking action’. The third initiative was designed to spur customers who hold non-accruing policies into action. By focusing specifically on this group of customers in 2014, a.s.r. had managed to contact more than 80% of them by the end of the year. Over 90% of all unit-linked policyholders had been reached by the end of 2014. The Dutch funeral insurance market contracted by 13% in the first half of 2014. This is the fifth consecutive year that this market is showing a decline. Ardanta managed to grow its market share to 17.9% in a contracting funeral insurance market. a.s.r. is seeing a shift in distribution mix at Ardanta: nearly four in ten policies are now taken out online, which is double the figure for 2013. The doodgaanendoorgaan.nl website, which offers practical information about funeral arrangements, welcomed over 250,000 visitors in 2014, who awarded it a rating of 7.7. To provide even better services, Ardanta implemented a webcam advisory tool, which is used for personal consultations with customers. It has proven to be a great success. The NPS for the webcam consultation was +33. The webcam tooling has also been made available to independent intermediaries, so that they can use it to provide efficient advice to their customers too.


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    a.s.r. 40 2014 annual report Report of the Executive Board Outlook for 2015 The low interest rates are expected to persist, which will have an adverse effect on the pension market. The law for pension communications will be amended; the initial letter will be replaced by Pension 1-2-3, which is intended for new, existing and prospective members of pension plans. This document is required to be provided by the pension plan administrator or the member’s employer. Pension 1-2-3 is a joint initiative of the Federation of Dutch Pension Funds and the Dutch Association of Insurers. Research by the sector and by the Ministry of Social Affairs & Employment has shown that Pension 1-2-3 is an easy-to-understand, complete and attractive alternative to the initial letter. a.s.r. will investigate a new pension option, i.e. the general pension fund (Dutch acronym: APF). An APF allows multiple pension plans to be administrated alongside each other, which saves on costs and helps to meet the strict governance requirements at the same time. An APF might be the answer to offering more affordable pension plans, particularly for relatively small pension funds that are unable to operate independently. In the context of the continuous improvement of customer services and structural cost reductions, a.s.r. has outsourced the back-office processes involved in administrating a.s.r.-label pension plans to Infosys BPO with effect from 1 April 2015. 87 a.s.r. employees will transfer to Infosys BPO. a.s.r. continues to be interested in opportunities for buy-outs in the pension market. After the announcement in December 2014 of the successful acquisition of Chevron pension fund for deferred members as of 1 January 2015, a.s.r. will continue to explore serious opportunities for acquiring pension funds in 2015 too. To provide even better customer services, the individual life business will undertake extra efforts in 2015 to encourage the last group of customers with non-accruing policies, customers with mortgage-linked policies and customers with pension annuities to come forward. These customers have been actively approached before. By spurring them into action, a.s.r. wants to educate them about the product they have purchased and explain to them what action they could take if the product no longer meets its original objective. The individual life business will also try to retain customers, whether for a.s.r. bank or for the life business, by telling them about available options. a.s.r. wants to prevent customers from surrendering their policies by contacting them and offering them appropriate advice. Customers will also be contacted to tell them about options that are available once their policy expires in order to retain the freed-up assets for a.s.r. In 2015, the first life portfolio will be migrated to a new system, which will make the records more efficient, reduce costs per policy and make the policy costs more flexible. The other portfolios will be migrated over the years to come. The funeral insurance market is expected to stabilize in 2015. Ardanta has 2 million customers in this market, who together hold 4 million policies; in many cases, the average insured amount is lower than the cost of a funeral. Research has shown that there are three categories of policyholders in this business. A third will never need the policy because they have sufficient savings. A third have taken out a policy, but the insured amount does not cover the cost of a funeral (about € 7,500 on average). A third need the policy because they do not have the financial resources to pay for a funeral. Ardanta will approach its customers in a targeted effort to ask them whether their policy is in line with what they actually want. a.s.r. will streamline its funeral insurance business in 2015. The Onderlinge hulp uitvaartverzekering label will be dropped; the business will continue under the Ardanta label. Doodgaanendoorgaan.nl and Ardanta will be linked up more explicitly. Doodgaanendoorgaan.nl will be integrated into the Ardanta website; it will be included in the practical platform where Ardanta customers can arrange their insurance business.


  • Page 41

    a.s.r. 41 2014 annual report Report of the Executive Board 2.2.4 Other segment • Loss for the year reduced to €-25 million (2013: a loss of €-91 million), thanks mainly to a better performance of property development business and incidental income item as a result of amendments to own pension scheme. • Increase in operating expenses to € 148 million (2013: € 108 million) due, among other factors, to costs associated with preparing for privatization, costs of own pension scheme and new strategic initiatives. Key figures, Other segment (including eliminations) (€ million) 2014 2013 Operating expenses -148 -108 Provision for restructuring expenses -3 -3 Profit/(loss) before tax -38 -113 Income tax expense 10 17 Profit/(loss) for the year -28 -96 Profit/(loss) for the year attributable to non-controlling interests 3 5 Profit/(loss) for the year -25 -91 Profile The Other segment comprises all non-insurance business lines, including the banking and mortgage businesses (a.s.r. bank and a.s.r. hypotheken), the emergency assistance desk (SOS International), the financial intermediary business (Poliservice), the real estate development and asset management businesses and holding companies. Loss for the year In the Other segment, the loss for the year improved from €-91 million to €-25 million. The loss reduction was mainly attributable to the real estate development business, where further de-risking resulted in fewer allocations to loss provisions. An incidental income item of € 59 million as a result of the amendment of the own pension scheme in accordance with IAS19 also boosted earnings. These positive developments were partially cancelled out by an increase in operating expenses, which were up in 2014 due, for instance, to preparations for a.s.r.’s privatization and investments in growth and strategic projects. Developments in 2014 a.s.r. bank again saw its savings deposits rise in 2014 despite low interest rates. The 16% increase in the portfolio to € 1,032 million (2013: € 889 million) was chiefly attributable to deposits in annuity savings accounts. Customers appreciate the fact that a.s.r. bank offers a full online platform for them to take out and manage their annuity savings account, which is accessible around the clock. Margins at a.s.r. bank were virtually stable thanks, in part, to an increase in volumes and active focus on the interest rate policy. Sales of new WelThuis Hypotheek mortgages amounted to € 1,033 million in 2014 (2013: € 1,411 million). The average market share of new mortgage products sold declined to 2.2% (2013: 4.3%). In the Dutch mortgage market, the benchmark for mortgages in arrears for more than 90 days is 1.0%. At a rate of arrears of just 0.43%, the quality of a.s.r. bank’s WelThuis Hypotheek mortgage portfolio definitely qualifies as good. In line with the current trend, customers also made extra repayments on their WelThuis Hypotheek mortgages. Earnings from the real estate development business improved in 2014. The growth of the Dutch economy in 2014 and increased consumer confidence had a positive effect on the housing market, which the real estate development business saw reflected in the sale of new residential units. By contrast, the retail market contracted, which resulted in a drop in shop rents and hence lower sales proceeds from shopping malls under development.


  • Page 42

    a.s.r. 42 2014 annual report Report of the Executive Board The real estate development business continued its de-risking policy in 2014 too, for instance by scaling back, postponing and terminating various developments. Total assets dropped from € 201 million to € 143 million in 2014, a 29% fall. Over the past two years, total assets have been reduced by 50%. Outlook for 2015 a.s.r. bank will continue on its chosen path of moderate and sustainable growth in 2015. This approach is based on the strategy that a.s.r. bank aspires to be: a small and reliable savings and investment bank that offers transparent and easy-to-understand alternatives to annuities and asset-building products. a.s.r. bank sees potential for growing its tax-efficient bank savings products. The growth potential mainly stems from expiring annuities; holders of such annuities are actively approached. Given the market, investment returns will probably continue to be squeezed in 2015. Interest rates on savings deposits are expected to come under pressure. In addition to pursuing balance sheet expansion, a.s.r. bank will keep focusing on cost cuts. The cost reductions associated with the simplification of the system landscape will first manifest themselves in 2015. As a result, a.s.r. bank expects to operate on a cost-neutral basis in 2015. In keeping with the strategy of the past few years, the real estate development business will continue to take important steps to reduce risk exposures in its portfolio. Going forward, property developments will primarily be undertaken in city centres. The real estate development business has therefore strengthened its strategic focus and expertise in this area.


  • Page 43

    a.s.r. 43 2014 annual report Report of the Executive Board 2.2.5 Investments In 2014, a.s.r.’s investment policy was aimed at striking a balance between generating returns and preventing risks. Protecting the solvency position is an important factor in this context. Overall growth in market value of the investment portfolio was nearly 22% in 2014 (from € 27.7 billion to € 33.6 billion). Of this increase of € 5.9 billion, € 5.2 billion was attributable to fixed income and € 0.7 billion to mortgages and other loans. The exposures to equities and real estate were similar to those at year-end 2013. Assets (€ million, fair value) December 2014 December 2013 Fixed income (fair value) 24,060 18,791 Equities (fair value) 1,925 1,957 Real estate (fair value) 2,965 2,849 Mortgages/other loans (carrying amount) 5,636 4,909 Adjustment of fair value vs. carrying amount (real estate & loans) -1,066 -1,035 Other 86 228 Total investments (incl. derivatives) 33,606 27,699 Investments on behalf of policyholders 8,300 8,049 Other assets 8,988 6,688 Total assets a.s.r. 50,894 42,436 About three-thirds of the government bond portfolio of € 11.7 billion has been invested in Dutch and German sovereign bonds. In the course of 2014, the exposure to German government bonds was increased at the expense of Dutch debt instruments. The exposure to government bonds issued by peripheral eurozone countries (Italy, Ireland and Spain in particular) mounted to € 716 million. The exposure to financials rose from € 4.6 billion to € 4.9 billion in the reporting period, mainly due to higher exchange rates. Within the financial portfolio, the exposure to Tier 1 paper fell significantly in favour of Tier 2 instruments. The share of covered bonds increased. The exposure to non-financials rose by 12% to € 3.8 billion. The total fixed-income portfolio grew from € 18.8 billion to € 24.1 billion, which was chiefly attributable to the fall in interest rates. In 2014, the mortgage portfolio showed a 15% increase to € 5.6 billion. The interest rate risk on assets versus liabilities is actively hedged via an overlay portfolio. Because of the sharp fall in interest rates, the derivatives portfolio showed a major increase: its market value rose from € 0.5 billion to € 3.0 billion. At about € 2.0 billion, the equity portfolio was stable compared to last year, while the property portfolio climbed to nearly € 3.0 billion in terms of market value. 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. Investment portfolio 0% 1% 2014 2013 16% 17% Fixed income 69% 65% Equities 6% 7% 9% 10% Real estate 9% 10% 6% Mortgages/loans 16% 17% 69% 7% 65% Other 0% 1% Breakdown of investment Breakdown of investment portfolio at year-end 2014 portfolio at year-end 2013


  • Page 44

    a.s.r. 44 2014 annual report Report of the Executive Board a.s.r. vastgoed vermogensbeheer a.s.r. vastgoed vermogensbeheer, the real estate investment management business, invests for its clients in retail properties, residential units and agricultural land. The real estate investment management business 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. has increased the flexibility of its investment property portfolio without affecting the portfolio’s critical mass that has been built up in more than a hundred years. Boasting funds and in-house asset and property management specialists, the real estate investment management business has broad experience and a good reputation in the Dutch property market. A number of developments that were completed in 2014 were included in the residential and retail portfolios. These pipeline acquisitions are in line with the strategy of the real estate investment management business to strengthen the quality of the residential and retail portfolios in accordance with the fund strategies. The fourth placement of the ASR Dutch Prime Retail Fund was closed in 2014. As a result, the total share of the fund that has been placed since its creation now stands at over € 530 million. Early in 2015, there was a fifth closing, lifting the placed portion of the fund to nearly € 0.8 billion. The ratio of placed assets to a.s.r.’s assets was 41% to 59% at year-end 2014. After the fifth placement, this ratio stood at 60% to 40%. The ASR Dutch Core Residential Fund was created on 1 January 2013. This fund offers a portfolio of apartments and single-family homes in the Netherlands with a fair market value of approximately € 750 million. The fund will see its first placement early in 2015. a.s.r.’s portfolio of rural real estate continued to grow in 2014; its value rose above € 1 billion. Rural real estate is a sound investment and the quality of the portfolio is reflected in positive developments in value. The increase in the portfolio stems from growing interest in long-lease financing, in which process a.s.r. purchases agricultural land and leases it out to farmers. a.s.r.’s diversified property portfolio is made up of a broad range of retail outlets and offices in prime locations, well-maintained middle-class homes (mainly in the Randstad conurbation) and high-quality rural real estate across the country.


  • Page 45

    a.s.r. 45 2014 annual report Report of the Executive Board 2.3 Capital management Capital policy and management The a.s.r. capital policy ensures prudent monitoring and control of solvency ratios in the organization, at both the group and division level. Capital management comprises all activities that focus on controlling, managing and monitoring any available and required solvency. a.s.r. continued its sound and prudent capital policy in 2014, the aim being to maintain a strong and robust capital position that contributes to the corporate targets. a.s.r.’s capital position is governed by various rules and limits that were instituted to absorb losses and to guarantee financial robustness. Compliance with the set rules and limits is monitored and enforced by internal management and control models. a.s.r. seeks to actively monitor capital risks and to streamline the capital position within the parameters defined by regulators and stakeholders. One of the priorities in this regard is securing an A rating at group level. The regulator has based the current supervisory framework for capital policy and management on the Solvency I regime. The regulator will switch to the Solvency II regime as of 1 January 2016. a.s.r. has already prepared its structure and processes for the introduction of this new regulatory regime. The Solvency II regime requires a different methodology for measuring and managing available and required capital. a.s.r. regularly measures and manages its available and required capital under Solvency II; this process is an integral part of managing the capital position of a.s.r. as a whole. In addition to capital management based on Solvency II, the standard regime for European insurance companies, a.s.r. has fine-tuned the Solvency II regime and developed its own partial methodology (ECAP). The ECAP methodology, which quantifies a.s.r.’s integral risk in terms of economic capital, is a minor departure from the Solvency II standard model in that it uses self-developed methods for measuring a number of risks. This makes the ECAP methodology a better fit for a number of specific risks that a.s.r. incurs; it provides a more complete understanding of these risks and of the economic capital that is required to mitigate them. Besides the regimes mentioned above, the ECAP methodology also forms part of a.s.r.’s overall capital management. The self-developed ECAP methodology has been cascaded throughout the organization and is a standard element of the risk management framework. a.s.r.’s robust financial position in terms of market value is guaranteed by the routine and integrated management of its capital position, based on Solvency I, the standard Solvency II model and ECAP alike. Treasury & Capital Management is responsible for implementing the capital management policy. This guarantees the independent position and the segregation of duties, and is in keeping with the a.s.r. governance structure. Treasury & Capital Management reports on capital management issues to the risk committee structure that was created especially for this purpose on a regular basis. Capital and solvency Equity, including changes in the value of real estate, was up 1%, rising from € 3,799 million to € 3,833 million. Profit for the year, unrealized changes in the value of equities and real estate, and capital optimization in the second half of 2014 contributed to the increase in equity. By contrast, unrealized actuarial losses caused a drop, as did the dividend distributed for 2013 and interest paid on hybrid instruments. The fair market value of investment property exceeded its carrying amount by € 806 million, a € 22 million rise on 2013. Disregarding these changes in value, equity was up to a limited extent, rising from € 3,015 million to € 3,027 million.


  • Page 46

    a.s.r. 46 2014 annual report Report of the Executive Board Developments in total equity 5,000 Hybrid capital 156 22 -527 Profit for the year 381 186 -184 4,000 3,799 3,833 Equity 14% 18% 3,000 7% 10% 79% 72% 2,000 1,000 0 Unrealized revaluation real estate Impact of IAS 19 Other (incl. dividend and hybrid capital Profit for 2014 Hybrid issue Total equity 2013 Total equity 2014 Revaluation of Available solvency rose by € 802 million in 2014. The increase in the UFR effect as a result of the fall in interest rates played a major role in this rise. In accordance with regulatory requirements, the UFR has been applied since June 2012. The DNB solvency ratio (incl. UFR) stood at 285% at year-end 2014 (2013: 268%). The solvency ratio (excl. UFR) fell from 236% to 204%. This high solvency ratio is a reflection of a.s.r.’s robust foundation. Based on the standard model, the Solvency II ratio (SCR), which was calculated using the parameters known to date, was circa 175%. The effect of market risks on the solvency ratio was as follows (in %-p): Type of market risk Scenario 2014 2013 Total diversified Equities -20% -18% -21% Interest rate incl. UFR -1% 34% 30% Interest rate incl. UFR +1% -23% -29% Interest rate excl. UFR -1% -59% -17% Interest rate excl. UFR +1% 27% -1% Credit spread +0.75bps -16% -23% Real estate -10% -12% -13% In the calculation of the sensitivity of the solvency ratio including UFR to interest, the UFR is kept constant. The shock on the discounting curve for the liabilities is mitigated for maturities longer than 20 year through the application of the UFR. As a result, the assets are more sensitive than the liabilities including UFR. The solvency ratio including UFR increases with 34% when the interest-rates drop 1%. In case the UFR is not applied, the liabilities are more sensitive to interest-rate movements. The shock on the discounting curve for the liabilities is not mitigated and the present value of the cashflow after 20 year is higher. The liabilities excluding UFR are more sensitive than the assets. The solvency ratio excluding UFR decreases with 59% when the interest-rates drop 1%. The sensitivity to spread decreased, mainly due to a refined method to determine spread-duration. The sensitivities to interest changed as a result of the significant decline of the interest-rate curve. The ultimate forward rate (UFR), as prescribed by the regulator, starts from the assumption that the curve used to discount the insurance liabilities will converge to a level of 4.2% between year 20 and year 60. From year 20, the difference between the economic curve (as observed in the capital market) and the curve inclusive of UFR will visibly increase. Given the current extremely low interest rates, the difference between the curve exclusive of UFR and the curve inclusive of UFR has grown exceedingly large.


  • Page 47

    a.s.r. 47 2014 annual report Report of the Executive Board a.s.r.’s interest rate risk policy seeks to manage the interest rate sensitivity of the balance sheet based on an economic curve. Because of the large difference between the economic curve and the curve inclusive of UFR, the difference between the solvency position inclusive and exclusive of UFR will increase in the event of an interest rate shock. a.s.r. upheld the policy for hedging the interest rate risk based on an economic curve in 2014 subject to the condition that the effect of an upward interest rate shock of 1 percentage point on the Solvency II ratio (inclusive of UFR) cannot exceed 10 percentage points. The Solvency II ratio is calculated based on the curve inclusive of UFR. As a result, the extremely low interest rate climate has caused the sensitivity of the solvency position exclusive of UFR to increase in the event of a drop in interest rates. Funding As an insurer with a robust capital and liquidity position, a.s.r. has only limited need for external funding. As a result, a.s.r. makes limited use of money and capital markets. a.s.r. does aspire to have access to a broad and balanced spectrum of funding options. Access and costs of the money and capital markets may vary over time. Given that a.s.r. always has a range of funding options, it can guarantee its strong liquidity position, even when the markets are poor and the business is under stress. This is in keeping with the prudent policy and financial robustness that a.s.r. pursues. At present, a.s.r. achieves this both in terms of secured and unsecured financing by keeping its programmes up-to-date. This ensures access to the money and capital markets, which means that a.s.r. has plenty of options for meeting its financing requirements with the necessary flexibility where needed and appropriate. Over the past year, the market lent itself very well to raising liquidity and capital because of record low interest rates. a.s.r. also saw opportunities for renewing the duration of its capital, and hence creating capital security, and for optimizing its capital structure. As a result, a.s.r. decided in 2014 to raise new capital; the issue of a € 500 million hybrid loan marked a successful step towards further balance sheet optimization within the scope of Solvency II. The proceeds from the bond loan were used mainly to repurchase existing bonds. In addition to a capital increase under all capital regimes (Solvency I, Solvency II, ECAP and S&P), the market transactions also resulted in lower average finance costs for a.s.r. overall and in further expansion of its already robust balance sheet. a.s.r. also contracted a senior bank loan of € 250 million for the holding company in 2014. This liquidity was used mainly for general operational purposes, including the funding of a pension reserve that will be used to cover price inflation going forward. Combined with the financing options that are in place, a.s.r. currently has ample cash reserves to carry on its operations. Dividend The Executive Board intends to distribute € 138.9 million in dividend on ordinary shares. As in previous years, this represents 40% of the profit for the year after regular distributions on preference shares and hybrid instruments. Ratings a.s.r. seeks to secure an ‘A’ rating from Standard & Poor’s for the required capital of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. On 15 August 2014, Standard & Poor’s confirmed the ‘A’ rating of ASR Levensverzekering N.V. and ASR Schadeverzekering N.V. The Standard & Poor’s ratings were as follows at year-end 2014: Standard & Poor’s ratings Type Rating Outlook Date ASR Levensverzekering N.V. CCR A Stable 21 August 2012 ASR Levensverzekering N.V. FSR A Stable 21 August 2012 ASR Schadeverzekering N.V. CCR A Stable 21 August 2012 ASR Schadeverzekering N.V. FSR A Stable 21 August 2012 ASR Nederland N.V. (holdco) CCR BBB+ Stable 12 May 2014 For Standard & Poor’s rating report, please visit the a.s.r. website: www.asrnl.com.


  • Page 48

    a.s.r. 48 2014 annual report Report of the Executive Board 2.4 Risk management Risk management is an integral part of our daily business activities. a.s.r. applies an integrated approach to managing risks, ensuring that our strategic objectives (customer interests, financial solidity and efficiency of processes) are realized. This integrated approach ensures that value will be created by identifying the right balance between risk and return, while ensuring that obligations towards our stakeholders are met. Risk management supports a.s.r. in the identification, measurement and management of risks and monitors whether adequate and immediate actions are taken in the event of changes in our risk profile. a.s.r. is exposed to the following types of risks: market risk, counterparty default risk, insurance risk (life and non-life), strategic risk and operational risk. The risk appetite is formulated at both group and legal entity level and establishes a framework that supports an effective selection of risks. The notes to the financial statements contain a detailed description of the risk governance, the risk profile and the related trends in 2014 (see page 124). Risk management in 2014 a.s.r. has managed the risk profile of a.s.r. group, its legal entities and its business lines in order to ensure that the risk profile remains within the risk appetite and the underlying risk tolerances and risk limits. The risk appetite is defined for financial and non-financial risks and describes the level of risk a.s.r. is willing to accept. The risk appetite statements were updated by the Executive Board and endorsed by the Supervisory Board in 2014. The risk profile is reported in the risk committees on a quarterly basis. The non-financial risk profile is reported in the Non-Financial Risk Committee (NFRC) and the financial risk profile is reported in the Financial Risk Committee (FRC). The integrated risk profile is reported in the group risk committee. In case of breaches, the committees are mandated to decide on corrective actions. In this way the risk governance ensures the effective monitoring of the risk profile and timely action if needed. a.s.r. has conducted its own risk and solvency assessment (ORSA) at both group and legal entity level. The ORSA is a yearly process that measures the impact of adverse external developments or internally identified risks and threats to a.s.r.’s solvency position. Various strategic risks are transposed into scenarios that simulate the impact of the occurrence of these risks on the balance sheet, the solvency position and the income statement. Management actions are defined in order to mitigate the impact of the potential risks modelled in the various scenarios. In 2014 a.s.r. also performed an update of the recovery plan. The goal of the recovery plan is to ensure that a.s.r. has effective measures in place to deal with potential severe financial stress, resulting from a wide range of causes and various circumstances. The recovery plan enables a.s.r. to improve the chances of successful intervention in such extreme scenarios and ensures that a.s.r. is better prepared for financial crisis situations. a.s.r. has improved its system of internal control in 2014. The enterprise-wide internal control framework has been largely implemented in the business lines. Operational risks have been identified and controls were assessed and tested from an Enterprise Risk Management perspective. The implementation of the company-wide internal control framework has contributed to raising the


  • Page 49

    a.s.r. 49 2014 annual report Report of the Executive Board awareness of operational risks. Internal control has become a tool of management and it continues to enhance the effectiveness of operational processes. To be able to mitigate model risk, a.s.r. expressed the ambition in 2014 that at the end of 2015 the majority of Solvency II metrics such as the Solvency Capital Requirement and Technical Provisions should be established using internally validated financial and/or actuarial models. To be able to meet this ambition, a.s.r. has set up a model validation policy as well as a governance structure. Both model owners and model validation have worked out a detailed planning and secured the resources necessary. Management of financial risks in 2014 A robust solvency position takes priority over profit, premium income and direct investment income. The FRC 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. At year-end 2014 a.s.r. has sufficient capital to meet the limits as formulated in the a.s.r. risk appetite. In 2014, the exposure to market risk changed slightly. The exposure to equities and real estate remained (more or less) stable. The hedge of the interest-rate risk was improved over the maturity buckets by restructuring the portfolio of swaps and swaptions. The outstanding amount of mortgages increased by € 750 million during 2014. Since 30 June 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 for the solvency position for a.s.r. For the sake of prudence, the solvency position is also assessed without the UFR. a.s.r. periodically assesses whether the technical provisions are sufficient to cover insurance liabilities. These provisions were adequate at year-end 2014. The underlying assumptions for assessing the provision are periodically adjusted to economic and non-economic developments. Part of future expenses was modelled with a shorter duration than the portfolio and full scalability was assumed. Based on the 2014 assessment of the expense assumptions, all future expenses are recognized in the best estimate liability and the assumed benefits of scalability are not fully recognized at year-end 2014. a.s.r. also made changes to the calculation of the risk margin for Solvency I. The changes resulted in an increase of the risk margin. With this level of risk margin, the current Solvency I technical provisions (best estimate of Solvency I plus risk margin for Solvency I plus impact of surrender floor) exceed the Solvency II technical provisions (best estimate of Solvency II plus risk margin for Solvency II). As a result of the increase in life expectancy, the mortality table of the Dutch actuarial society (‘De Prognosetafel AG2014’) used for assessing the provision was updated in 2014. Management of non-financial risks in 2014 The NFRC monitors whether non-financial risks are adequately managed, determines non-financial risk limits at group and legal entity level and monitors whether the risk profile stays within the agreed risk limits. If the risk profile exceeds the limits, the NFRC takes mitigating actions. The 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 reports to the a.s.r. Risk Committee. In 2014 efforts were devoted to further aligning the risk profile of a.s.r. group and its business lines with the defined risk targets. The non-financial risk dashboard describes the performance of a.s.r. group, the underlying legal entities and business lines on certain key risk indicators. It is a tool that can be used by management to assess and identify key risk issues. The risk profile and performance of each business line on internal control are discussed on a quarterly basis with senior management in the business risk committees.


  • Page 50

    a.s.r. 50 2014 annual report Report of the Executive Board a.s.r. further improved its Management in Control system in 2014. This enterprise-wide internal control framework contains the key risks for a.s.r.’s most important operational processes. The framework has been largely implemented in all business lines. Operational risks have been identified and controls have been assessed and tested. Where needed, plans were designed to further increase the effectiveness of operational processes. The centralized Enterprise Risk Management department periodically reviews the quality of a.s.r.’s Management in Control framework. The NFRC decides if additional actions need to be taken to ensure that non-financial risks are managed appropriately. A Control Risk Self-Assessment (CRSA) is conducted annually to identify the most important strategic risks for a.s.r. group and its business lines. Key risks threatening the achievement of the organization’s strategic objectives are identified in the CRSA, including actions that need to be taken to mitigate these risks. These mitigating actions are defined such that they can be implemented within a one-year timeframe. The CRSA report and the mitigating actions are authorized by the management teams of the business lines and the Executive Board. Every year, senior management of each business line signs a Management in Control Statement (MCS), which is based on the CRSA findings and the results of their Management in Control process. Progress on mitigating actions to the risks identified in the CRSA is monitored on a quarterly basis in the Business Risk Committees and reported to the NFRC. Major risks in 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 partly on the CRSAs of the business units. The actual status of the risk priorities and progress on the defined actions is reported to the a.s.r. Risk Committee on a quarterly basis. The most important risk priorities are described below. Fundamental changes in the insurance market Changes in client behaviour and in the distribution channels, the diminishing insurance market, the current economic situation (low interest rates) and changing legislation will require a.s.r. to adapt to these developments. In addition, the current market is characterized by fierce competition and by growing client attention to prices. This pressure can manifest itself in an increase in non-life policy cancellations, loss of retention in the life business, a drop in sales of new insurance contracts and limited scalability of departments. It will be an increasing challenge to make timely adjustments to the product portfolio and the distribution channels and to realize the intended cost reductions with the decrease in premiums. These challenges put a.s.r.’s margins (profitability and solvency) and premium income under pressure. Unit-linked policies Court rulings and decisions by arbitration boards may have an industry-wide impact, as well as trigger widespread media attention, evoking negative sentiments among policyholders. This may increase the risks with regard to a.s.r.’s reputation. Although firm compensation agreements have been made in the current unit-linked dossier with the client associations to compensate policyholders, the risk of new claims remains. This risk may manifest itself as a result of an increasing claim culture in Dutch society and the new court rulings in the current legal disputes of other insurance companies. This risk is monitored constantly. During 2014, the technical provisions were not increased nor was solvency charged for additional claim risk. Uncertain financial markets and economic climate Because of weak economic growth in the eurozone, there is a high risk of long-lasting low economic growth, low inflation or deflation, low interest rates, high unemployment and lower investment returns. In the longer term, these lower investment results could erode a.s.r.’s profitability and solvency position. a.s.r. considers a scenario of stagflation to be possible as well. In a stagflation scenario, the inflation rate is high, the economic growth rate slows down and unemployment remains high. In this situation, the regulatory reported solvency and liquidity position of a.s.r. would come under pressure. Impact of supervision, laws and regulations The Dutch market is characterized by a strong increase in regulation and the introduction of new

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