• 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 5 1
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.
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
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
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.
2014 annual report Report of the Executive Board