ASR Nederland N : A.s.r. presentation IFRS 17 update

Contents

	Key principles and objectives IFRS 17 project	3
	Balance sheet	4 - 8
	P&L	9 - 10
	Project timelines	11
	Key take-aways	12

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Key principles and objectives of a.s.r.'s IFRS 17 project

Operational efficiency through alignment with Solvency II framework

No impact on business steering, value over volume approach continued

Maintain flexibility in management of investment portfolio, no introduction of hedge accounting complexity

Prioritize cost efficiency and avoid undue effort

Contribute to a robust, flexible and future-proof finance department

Alignment between introduction of IFRS 17 and IFRS 9, one 'catch it all' transition

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Balance sheet: IFRS 17 versus Solvency II; similar but not the same

Comparing balance sheets

(Liability side)

Shareholders'

equity

Contractual

service margin

Risk

adjustment

Present value of future cash flows

Available

Own Funds

Risk

margin

Best estimate

liability

• The aim of IFRS 17 is to facilitate comparability and transparency from an accounting perspective, similar to Solvency II from a regulatory perspective.
• Both apply a market valuation approach.
• Both place emphasis on the insurer's own assessment and management of risks facing the business and both are based on similar underlying cashflows.

While aiming at alignment between IFRS 17 and Solvency II, detailed reconciliation is complex, as multiple differences exist:

• Differences in discount curve (see slide 7 for more information).
• Expected future profits embedded in contractual service margin (IFRS 17) to be recognized over time.
• Risk adjustment (IFRS 17) vs risk margin (Solvency II).
• Possibility to use different (actuarial) assumptions.
• Other differences (e.g. foreseeable dividends, goodwill).

IFRS 17

Solvency II

Note: The relative size of the diagram is purely for illustration purposes

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Transition methods and measurement approaches

Measurement approach

• IFRS 17 requires a current measurement model, where estimates are remeasured in each reporting period. The measurement is based on the building blocks of discounted, probability-weighted future cash flows, a risk adjustment and a contractual service margin (CSM) representing the unearned profit of the contract.
• Three measurement approaches possible under IFRS 17.

Overview different measurement approaches

General Measurement	Default measurement model for all
Model (GMM)	insurance contracts. Includes a CSM.
Premium Allocation	Optional simplified approach for short term
contracts with little pre-claim variability (e.g.
Approach (PAA)
P&C and Health). No CSM.
Variable Fee Approach	To deal with participating business where
payments to policy-holders are linked to
(VFA)
underlying items (e.g. unit-linked).

Transition method

• Opening balance of IFRS 17 will be determined as from 1 January 2022 (start of the comparative year).
• Various balance sheet components will be highly dependent on the transition method and the discount curve applied.
• If feasible, IFRS 17 requires a full retrospective application of the standard, resulting in a complex transition (e.g. at a.s.r. the retrospective application for Funeral starts from 2002).
• If the transition is based on the fair value approach the insurance liabilities will be valued as if a third party were to acquire these liabilities. In this approach an implicit profit- assumption is included.

Overview different transition methods

Full retrospective approach	When all historical data is available.
Modified approach	When not all, but some, historical data is
available or can be constructed.
Fair value approach	When no historical data is available.

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