VIVAT Group, and also Reaal, are having to contend with obligations that are the result of the unit-linked products.
Compensation for excessive fees charged for unit- linked policies
VIVAT Group has reduced the percentage fees charged for unit-linked policies to a level that is acceptable to all parties. Agreements were reached on this in 2009 and 2010 with consumer organisations including the Dutch Homeowners' Association and the Dutch Investors' Association. VIVAT Group has finished dealing with the resulting compensation scheme, and has paid € 360 million in compensation to customers.
In addition, complementary measures for all unit-linked policies have been agreed in consultation with the Dutch Minister of Finance. This will make it possible for all customers with a unit-linked policy to make changes or switch to another provider.1
Encouraging customers to act
VIVAT Group set itself the goal of encouraging customers who have a non-accruing policy to make a conscious decision regarding their insurance policy. Non-accruing policies2 are a group of unit-linked policies 1 The AFM appreciates the efforts made in relation to after-sales
services for unit-linked policies: Reaal scored 3.2 in the AFM's dashboard module on after-sales services for unit-linked policies (average of 3.1 for big six insurers 3.1 and 2.6 for market). 2 Non-accruing policy: A category of 'non-accruing policies' has been
identified in the context of unit-linked policies. The AFM defines non- accruing policies as unit-linked policies which are not expected to result in to capital accumulation based on the future premiums to be paid. In an effort to further improve the situation of these customers (and in addition to the compensation scheme they are also covered
that are covered by the compensation scheme. We want to talk to customers about their policies, through their intermediaries, and offer them an alternative if they so wish. VIVAT Group has sent out many hundreds of thousands of letters and e-mails since the start of 2013, and made phone calls to customers. In total, these add up to nearly two million attempts to reach customers with unit-linked policies (including non-accuring policies), either by telephone or by letters (by registered mail). To this end, we appointed a full-time call team of 80 people trained in contacting customers by telephone. They make between five and ten attempts to reach the customer.
We have also joined forces with advisers to set up the ‘Resolving it together’ programme. The online insurance check tool, Verzekeringscheck, is located on Reaal's website and is used frequently: by the end of 2014 it had been logged on to over 700,000 times by over 120,000 customers. This is all aimed at encouraging customers to talk to their advisers so that they can make a conscious decision.
In the course of 2014 we again stepped up our efforts to activate customers. At the end of 2014, again 42,000 letters were sent by registered post to customers who had not yet made a conscious decision, in which we specifically asked them to contact Reaal. Moreover, 4,000 additional meetings with advisers were purchased from financial advisers to ensure that customers can visit them to have a policy check performed.
VIVAT Group did its utmost to reach the activation target percentage as defined by us. Although VIVAT Group managed to activate the highest number of customers in absolute terms compared with all other insurers, to our disappointment we did not reach the 80 percent target. On 1 March 2015, VIVAT Group posted an activation rate of 67 percent. VIVAT Group did its utmost and favoured accuracy rather than speed.
Our choice to approach each individual customer to make a conscious well-considered choice is taking more time than expected. For advice on unit-linked policies, VIVAT Group seeks collaboration with the intermediary. Adequate advice is desirable to come to a conscious choice. We underestimated the extra time needed for
by), we have reached agreements with the AFM on encouraging customers to take action. VIVAT Group is making additional efforts to encourage customers to make a conscious decision regarding their insurance.
this. In addition, more customers than initially expected do not respond to our letters and telephone calls. Our target is and remains to have our customers with non-accruing policies make a conscious choice. We will again step up our efforts; in 2015 VIVAT Group keeps reaching out to the customers, in a joint effort with independent advisers.
4.3
Business developments
4.3.1
Financial results of VIVAT Group
VIVAT Group saw its gross premium income fall by 3 percent in 2014. At 16.8 percent, the share of the regular individual Life premiums market was slightly lower than in 2013 (19.3 percent); the market share of regular group Life premiums fell to 7.4 percent, down from 14.6 percent in 2013. The share of the new Non-life market stood at 4.7 percent, another decline compared with 2013 (5.8 percent).VIVAT Group reported a profit for 2014 (adjusted for incidental items) of € 78 million, compared with € 122 million for 2013. Adjusted for the effects of realised gains and losses on the investment portfolio and derivatives, underlying earnings plummeted to nil, down from € 71 million in 2013. The positive underlying earnings from the Life business were largely cancelled out by an underlying loss suffered by the Non-life business. The weak results were largely attributable to a drop in underwriting results and lower margins. What is more, the derisking of the investment portfolio over the past periods, in combination with falling interest rates, has led to a structural reduction in investment income.
VIVAT Group incurred a loss for 2014 of € 612 million (2013: loss of € 625 million). The loss for the year was entirely due to negative incidental items in the sum of € 690 million. These were primarily made up of an expense item of € 648 million that was recognised for the IFRS LAT shortfall.
In 2014, the solvency ratio of VIVAT Group fell
increasingly short of our internal minimum target of 175 percent. Regulatory solvency declined to 136 percent at year-end 2014 from 172 percent at the end of 2013. The decline was mainly due to the result of changes in models and cost parameters, partly due to envisaged
cost dis-synergies, valuation adjustments of mortgages and other valuation changes. Furthermore, unfavorable movements in the yield curve and increased interest volatility, especially in the fourth quarter of 2014, contributed to the decrease in solvency.
As part of the sales process, VIVAT Group has focused on balance sheet protection by further de-risking the investment portfolio. The main objective was to reduce sensitivity of solvency to changes in interest rates, equity markets and credit spreads under the Solvency II regime and only to a lesser extent under the current Solvency I regime. As a consequence, the development of the Solvency I ratio in 2014 does not fully reflect the additional derisking measures.
The underlying net result of REAAL Life remained positive but showed a sharp decrease by € 50 million, from € 115 to € 65 million, driven by lower direct investment income and lower cost margins. The underlying net result of REAAL Non-life fell by € 19 million to € 63 million negative driven by lower direct investment income and higher claims, mostly at fire and motor. Zwitserleven posted a lower underlying net profit of € 3 million compared to € 17 million for 2013. The absence of a provision charge for the compensation of unit-linked pension contracts was more than offset by lower technical and cost results and lower investment income. The underlying profit of ACTIAM was in line with 2013. Assets under management increased significantly due to the lower yields on bonds. However the growth in income was offset by higher operational costs, mainly driven by regulatory requirements for AIFMD services and growth of the customer base.
VIVAT Group segments its financial results by product group. A product group may encompass one or more of our brands (see the table below).
Business unit (BU) and brand/product group combination
Non-life Life Pensions Asset Management
BU Zwitserleven √
Zwitserleven √
BU Reaal √ √
Reaal √ √
Zelf √
Proteq Dier &
Zorg √
Route Mobiel √
ACTIAM √
ACTIAM √