Fomento del alquiler del parque privado de viviendas

The non-life insurance portfolio of a.s.r. focuses on Accident & Health and Property & Casualty (Motor, Fire and Liability). The insurance contracts are sold to retail and wholesale clients through intermediaries, underwriting agents and direct distribution channels. The non-life insurance portfolio consists mainly of the following categories.

Disability:

• Disability: disability coverage in the portfolio includes both individual coverage for self-employed persons and (semi-)group coverage for employees. The latter group also qualifies for employees disability cover (WIA, including WGA-ER);

• Sickness leave: coverage includes continued salary payments for the first two years of the individual’s incapacity for work;

Health:

• Health insurance: contracts cover medical expenses incurred by physicians and hospitals, and other medical expenses. Basic coverage (‘Basisverzekering’) is mandatory for all residents of the Netherlands and offers limited coverage as stipulated by the Dutch government. Additional coverage (‘Aanvullende verzekering’) is sold for a higher level of medical care.

Property & Casualty:

• Motor vehicle third-party liability: motor vehicle liability is a third-party liability insurance that covers bodily injury, medical care and/or loss of income following a road traffic accident, as well as damage caused to another vehicle; Fire and other damage to property: fire insurance offers policyholders financial protection against damage to their property and material consequences of interruption of operations as a result of the damage sustained;

• Other liability: this involves third-party liability insurance for both private individuals and businesses.

2014 annual report 2014 consolidated financial statements ASR Nederland N.V.

Non-life insurance risk

Non-life insurance risk primarily comprises of risks resulting from disability, health, third-party liability and general third-party liability. Insurance liabilities are formed to cover the scale and the long-term character of the claims (especially those involving disability).

Combined ratio

In 2014, the combined ratio decreased to 94.9% (2013:104.6%). The decrease of the combined ratio is for a large part attributable to WGA-ER where measures taken (adjust its prices, make its acceptance criteria stricter and make improvements to the claims settlement process) show a positive impact. Excluding WGA-ER and considering the storm in Q4 2013 the combined ratio in 2013 was 96.5%. The further decrease from the latter level can be explained by a favorable claims development in most Non-life product lines.

Managing non-life insurance risk

Insurance risk is the risk that future insurance claims and benefits cannot be covered by premium and/ or investment income, or that insurance liabilities and results are threatened because the assumptions, used in the development and premium-setting of a product are not realistic. Non-life insurance risk is managed by monitoring claims frequency, the size of claims, inflation, handling time, benefit and claims handling costs, and biometrical risks (disability, recovery, illness, death). Concentration risk also qualifies as an insurance risk.

Claims frequency, size of claim and inflation

To mitigate the risk of claims, a.s.r. bases its underwriting policy on claims history and risk models. The policy is applied to each client segment and to each type of activity. In order to limit claims and/or ensure that prices are adjusted correctly, the acceptance policy is continually refined using a number of indicators and statistical analyses. The product lines also use knowledge or expectations with respect to future trends to estimate the frequency, size and inflation of claims. The risk of unexpected major damage claims is contained by policy limits, the concentration of risk management and specific risk transfer contracts (e.g. reinsurance).

Handling time

The time required for handling and settling claims is an important factor. The settlement of claims that have a long handling time, such as injury or liability claims, can take many years. Analyses are performed regularly and based on a.s.r.’s experience in similar cases, historical trends – such as the pattern of liabilities – increases in risk exposure, payment of damages, the scale of current and not yet settled damage claims, court rulings and economic conditions.

Benefit and claims handling costs

Taking estimated future inflation into account, benefit and claims handling costs are managed on the basis of regular reviews and related actions.

Morbidity risk

Morbidity risk is the risk associated with the uncertainty of claims as a result of higher than expected disability rates and levels in portfolios containing disability, medical expenses and accident insurance products. An additional uncertainty is that recovery or mortality rates might be lower than expected. Illness, disability and recovery are affected by the economic climate, government intervention, progress in medical science and, in particularly, healthcare costs.

These risks are controlled by means of regular evaluation of historical claims patterns, expected future developments and price adjustments. Disability risk is mitigated by a.s.r. through underwriting criteria and a proactive reintegration policy. a.s.r. also mitigates its disability risk through suitable reinsurance.

Concentration risk

The risk exposure of a.s.r. on its non-life portfolio is geographically almost entirely located in the Netherlands. Concentration of insurance risks is particularly prevalent in the fire risk portfolio (i.e. home and content, with storm risk forming the most important factor). Storm risk is managed by means of suitable reinsurance (see also ‘Reinsurance’).

2014 annual report 2014 consolidated financial statements ASR Nederland N.V.

There is also a concentration of risk in group disability schemes. Group disability contracts are underwritten within the scope of disability cover for employees in the Netherlands (WIA).

25% 33% 42% 2014 2013 Disability 33% 32% Health 25% 24%

Property & Casualty 42% 44%

Gross written premiums 2014

24% 32% 44%

Gross written premiums 2013

2014 2013 Accident 73% 70%

Health 8% 9%

Property & Casualty 19% 21%

73% 19%

8%

Gross claims reserves 2014

70% 21%

9%

Gross claims reserves 2013

The above diagrams illustrate the distribution of gross premium income and gross claims reserves across the different business lines. Disability insurance contracts account for a relatively large proportion of the claims reserve in relation to premiums. Due to the rapid settlement of the P&C portfolio in general, which generates 42% of premium income, it only represents 19% of the total claims reserve.

Total gross written premium income from non-life insurance activities in 2014 amounted to € 2,359 million (2013: € 2,392 million). In 2014 the net reinsurance premium amounted to € 136 million (2013: € 118 million), which represents 5.76% (2013: 4.95%) of gross premium income.

Reinsurance

When deemed effective in terms of capital relief versus costs incurred, a.s.r. enters into reinsurance agreements for non-life portfolios to mitigate insurance risks. Reinsurance can be taken out for each separate claim (per risk), for the accumulation of claims due to natural disasters or to human actions (per event), or for both these risks.

The level of retention in the various reinsurance contracts is aligned to the size and the risk profile of the underlying portfolios, taking account of the cost of reinsurance on the one hand and of the risk that is retained on the other. By determining the retention, the impact on the statement of financial position is taken into account as well. The difference in the retention of disability depends on the structure of the contract (basic coverage or indexed).

To limit risk concentration, reinsurance contracts are placed with various reinsurance companies. The reinsurance programme has remained largely the same as 2013 in terms of cover and limits. Minor changes have taken place based on the current risk appetite where necessary. In 2014, a.s.r. purchased excess of loss reinsurance for accident year 2015 for storm in excess of € 30 million with a limit of € 344 million (accident year 2014 € 325 million), offering slightly more protection.

2014 annual report 2014 consolidated financial statements ASR Nederland N.V.

Non-life insurance liabilities

Provision for unearned premium income

Generally, the provision for unearned premium income is calculated based on the premium for own account, proportionate to the unexpired portion of the premium payments. A separate provision is formed for insurance contracts with increasing risk over the duration of the contract where premiums not related to the age of the policyholder are concerned. Changes in the provision for unearned premiums are recognized through profit and loss, which means that the income is recognized during the same risk period.

Provision for claims

The provision for claims consists of the estimated amount of the reported but not settled claims plus an amount for claims not yet reported or incurred during or before the financial year. The latter part is based on historical information. This provision includes a provision for payable external claims handling costs.

The adequacy of the liabilities arising from insurance contracts is tested every quarter.

The balance sheet of a.s.r.’s basic health insurance (‘Basisverzekering’) include an estimate related to the expected settlement because of equalization (vereveningsmethodiek’). The estimate is made by internal actuaries per year based on the latest updated health information for the Netherlands. At the end of the first quarter, a.s.r. monitors if the assumptions used are correct. The final settlement is recognized three years after the end of the financial year.

The provision for claims for disability insurance equals the present value of the expected benefits, taking account of the policy terms and conditions and waiting periods, as well as the chances of recovery and death.

The provisions for claims and the provision for unearned premiums at year-end 2014 can be broken down as follows (amounts in millions):

31 December 2014 P&C Disability Health Total

Provision for claims 770 3,036 346 4,152

Provision for unearned premium 200 194 25 419

Total 970 3,230 371 4,571

31 December 2013 P&C Disability Health Total

Provision for claims 799 2,682 345 3,826

Provision for unearned premium 206 203 5 414

Total 1,005 2,886 350 4,240

Provision for unexpired risk

A provision for unexpired risk is formed to the extent that future claims and expenses – in respect of current insurance contracts – exceed future contractual premiums, taking into account the current unearned premium reserve.

For the retained disability portfolio, a provision is formed for current risk exposure on contracts concluded in 2014 that run until 31 December 2015. This provision is based on the difference between premiums required for accounting and actuarial purposes.

For social as well as commercial reasons, and in line with most competitors, a.s.r. has set the Basic Health premium level for 2015 below its actuarial cost price. A provision of € 25 million has been established to reflect this.

2014 annual report 2014 consolidated financial statements ASR Nederland N.V.