Annual Report 2022
6.7.1
Fair value of assets and liabilities

See accounting policy B.

6.7.1.1 Financial assets and liabilities measured at fair value

Breakdown of financial assets measured at fair value
Fair value based on quoted prices in an active marketFair value based on observable market dataFair value not based on observable market data
31 December 2022Level 1Level 2Level 3Total fair value
Financial assets
Investments available for sale
Government bonds9,002203229,227
Corporate bonds7,06711567,188
Asset-backed securities6-409416
Preference shares-2845289
Equities2,4347053333,471
Mortgage equity funds--303303
Other participating interests6--6
18,5151,3081,07720,900
Investments at fair value through profit or loss
Equities75-782
Real estate equity funds--3,9743,974
Mortgage equity funds--684684
75-4,6654,740
Investments on behalf of policyholders
Government bonds1,526--1,526
Corporate bonds1,386--1,386
Equities6,504--6,504
Real estate equity funds170--170
Mortgage equity funds--252252
Cash and cash equivalents9--9
Other investments624-66
9,65732529,912
Investments related to investment contracts
Government bonds261--261
Corporate bonds149--149
Equities1,449--1,449
Real estate equity funds97--97
Cash and cash equivalents37--37
Other investments6--6
2,000--2,000
Derivatives
Foreign exchange contracts-80-80
Interest rate contracts
- Swaps-4,782-4,782
- Options-275-275
- Futures102113-215
Inflation linked swaps-44-44
Equity index contracts31--31
1335,294-5,428
Cash and cash equivalents2,245--2,245
Total financial assets32,6266,6055,99345,224
Breakdown of financial liabilities measured at fair value
Fair value based on quoted prices in an active marketFair value based on observable market dataFair value not based on observable market data
31 December 2022Level 1Level 2Level 3Total fair value
Financial liabilities
Liabilities arising from investment contracts2,000--2,000
Derivatives
Foreign exchange contracts-29-29
Interest rate contracts
- Swaps-5,494-5,494
-5,523-5,523
Total financial liabilities2,0005,523-7,523
Breakdown of financial assets measured at fair value
Fair value based on quoted prices in an active marketFair value based on observable market dataFair value not based on observable market data
31 December 2021Level 1Level 2Level 3Total fair value
Financial assets
Investments available for sale
Government bonds13,889260-14,149
Corporate bonds10,762531210,827
Asset-backed securities175508530
Preference shares-3074311
Equities3,1106793214,111
Mortgage equity funds--398398
Other participating interests7--7
27,7861,3041,24330,333
Investments at fair value through profit or loss
Equities12-618
Real estate equity funds--2,2022,202
Mortgage equity funds--781781
Rural property contracts--215215
12-3,2053,216
Investments on behalf of policyholders
Government bonds1,954--1,954
Corporate bonds1,100--1,100
Derivatives-6-6
Equities7,950--7,950
Real estate equity funds249--249
Mortgage equity funds--234234
Cash and cash equivalents18--18
Other investments604-64
11,331923411,574
Investments related to investment contracts
Equities1,794--1,794
Real estate equity funds119--119
Cash and cash equivalents39--39
1,952--1,952
Derivatives
Foreign exchange contracts-25-25
Interest rate contracts
- Swaps-5,870-5,870
- Options-237-237
- Futures37--37
Inflation linked swaps-14-14
Equity index contracts28--28
656,147-6,212
Cash and cash equivalents2,306--2,306
Total financial assets43,4527,4604,68255,593
Breakdown of financial liabilities measured at fair value
Fair value based on quoted prices in an active marketFair value based on observable market dataFair value not based on observable market data
31 December 2021Level 1Level 2Level 3Total fair value
Financial liabilities
Liabilities arising from investment contracts1,952--1,952
Derivatives
Foreign exchange contracts-78-78
Interest rate contracts
- Swaps-678-678
- Futures-3-3
-759-759
Total financial liabilities1,952759-2,711

Cash and cash equivalents are classified as level 1 when not subject to restrictions.

Reclassification between categories
2022To level 1To level 2To level 3Total
From:
Level 1: Fair value based on quoted prices in an active market-503585
Level 2: Fair value based on observable market data----
Level 3: Fair value not based on observable market data----

Fixed income funds are adjusted from level 1 to level 2 (50 million) and from level 1 to level 3 (35 million). Those movements are based on decreased observability of the inputs during the period.

Reclassification between categories
2021To level 1To level 2To level 3Total
From:
Level 1: Fair value based on quoted prices in an active market-205-205
Level 2: Fair value based on observable market data171--171
Level 3: Fair value not based on observable market data38--38

Fixed income funds are adjusted from level 2 to level 1 (171 million), from level 3 to level 1 (38 million) and from level 1 to level 2 (205 million). Those movements are based respectively on increased and decreased observability of the inputs during the period.

The following two tables show the movement in financial assets measured at fair value including investment on behalf of policyholders and investment property that are categorised within level 3.

Changes in financial assets classified as available for sale categorised within level 3
20222021
At 1 January1,2431,085
Changes in value of investments, realised/unrealised gains and losses:
- Realised gains and losses-237
- Recognised in Other comprehensive income (unrealised gains and losses)-8320
Purchases129407
Repayments-53-80
Disposal-206-190
Amortisation--1
Impairments131
Reclassification of investments from/to level 3 valuation technique35-36
At 31 December1,0771,243
Changes in financial assets at fair value through profit or loss categorised within level 3
20222021
At 1 January3,4392,772
Changes in value of investments, realised/unrealised gains and losses:
- Fair value gains and losses-216121
Purchases420565
Disposal-184-21
Reclassification of investments from/to level 3 valuation technique--2
Net transfer of real estate equity funds1,457-
Other-2
At 31 December4,9163,439
Total revaluations of investments, held at end of period, recognised in the income statement-189122

The net transfer of real estate equity funds relates to ASR DFLF. During 2022, a.s.r. lost control of ASR DFLF as a result of the entry of third party participants in ASR DFLF. The net transferred amount consists of 1,703 million reclassification of investment property and rural property contracts included in ASR DFLF, minus 246 million rural property contracts already included in financial assets Level 3.

Unobservable inputs used in determining the fair value for financial assets measured at fair value (recurring basis) that are categorised within level 3

Available for sale investments
The main non-observable market input for the asset-backed securities and mortgage equity funds available for sale are based on quotes published by an independent data vendor. If the quote of the data vendor is not available, values or quotes from other pricing services are obtained, including a check on the validity of the value or quote by an independent third party, to base the fair value on. There is no material difference in the fair value of the asset-backed securities and mortgage equity funds if a quote was used from an alternative data vendor.

The main non-observable market input for the equities, including unlisted equities classified as level 3, is the net asset value as published by the investee. It is estimated that a 10% increase in valuation of these equities would have no significant impact on net result but would increase equity by 33 million (2021: 32 million), being approximately 0.5% (before tax) (2021: 0.4% (before tax)) of total equity. A decrease would have the opposite effect unless the impairment criteria are met.

Investments at fair value through profit or loss
The method of determining the fair value of the mortgage equity funds is similar to that of mortgage loans, however it excludes assumptions for originating cost and is determined within the funds structure. See chapter 6.7.1.2 for the main non-observable inputs.

The main non-observable market input for the real estate equity funds third parties is the net asset value as published by the investee. An increase or decrease in the net asset value of equities classified as level 3 will have a direct proportional impact on the fair value of the investment.

Unobservable and observable inputs used in determination of fair value
31 December 2022Change in theoretical rental value
Fair valueValuation techniqueGross
Gross theoretical rental value (€)
GrossGross yield (%)Change in yield-5%0%5%
Investments at fair value through profit or loss
Real estate equity funds associates3,557DCF110,918,3223.1%-5%-187374
0%-178-178
5%-339-169-
Real estate equity funds third parties417
Total real estate equity funds3,974
Unobservable and observable inputs used in determination of fair value
31 December 2021Change in theoretical rental value
Fair valueValuation techniqueGross
Gross theoretical rental value (€)
GrossGross yield (%)Change in yield-5%0%5%
Investments at fair value through profit or loss
Rural property contracts215DCFtotal4,378,039mean2.0%-5%-1123
max147,419max3.0%0%-11-11
min466min0.6%5%-21-10-
Total rural property contracts215
Real estate equity funds associates1,817DCF76,670,4134.2%-5%-96191
0%-91-91
5%-173-87-
Real estate equity funds third parties385
Total real estate equity funds2,202

6.7.1.2 Financial assets and liabilities not measured at fair value

The breakdown of the fair values of financial assets and liabilities not measured at fair value, and for which the fair value is disclosed in accordance with the level of fair value hierarchy, as explained in accounting policy B, is as follows:

Breakdown of financial assets and liabilities not measured at fair value
Fair value based on quoted prices in an active marketFair value based on observable market dataFair value not based on observable market data
31 December 2022Level 1Level 2Level 3Total fair valueTotal carrying value
Financial assets
Due from customers-1,9049,05310,95712,307
Due from credit institutions1,6592,667-4,3274,259
Trade and other receivables-605-605605
Total financial assets1,6595,1769,05315,88917,171
Financial liabilities
Subordinated liabilities-1,925-1,9251,980
Borrowings-15262214214
Due to customers-471-471471
Due to banks2,18775-2,2622,262
Other financial liabilities18812-200200
Total financial liabilities2,3752,634625,0715,127
Breakdown of financial assets and liabilities not measured at fair value
Fair value based on quoted prices in an active marketFair value based on observable market dataFair value not based on observable market data
31 December 2021Level 1Level 2Level 3Total fair valueTotal carrying value
Financial assets
Due from customers-1,51310,69612,20911,461
Due from credit institutions1243,558-3,6822,971
Trade and other receivables-827-827827
Total financial assets1245,89810,69616,71815,259
Financial liabilities
Subordinated liabilities-1,132-1,132992
Borrowings-13755192192
Due to customers-573-573573
Due to banks5,636105-5,7415,741
Other financial liabilities9216-108108
Total financial liabilities5,7281,963557,7457,605

The amounts due from credit institutions and amounts due to banks that are classified as level 1 primarily comprise of respectively cash collateral paid on derivative instruments and cash collateral received. The accrued interest included in other financial liabilities follows the classification of the underlying assets. Level 2 category financial assets relates primarily to the receivable due from credit institutions for savings-linked mortgage loans amounting to a fair value of 2,319 million (2021: 3,124 million).

The mortgage loan portfolio is classified as level 3 ‘not measured on the basis of market observable market data’. Non-observable market inputs are used in the valuation methods, in addition to the observable market inputs. The valuation method used to determine the fair value of the mortgage loan portfolio is based on the spread on the interest rate curve for discounting the mortgage portfolio cash flows on consumer rates and includes assumptions for originating cost, proposal risk, and the options related to early redemption and moving.

The mortgage loan portfolio consists of high quality mortgages with a relatively fixed return, limited impairments and arrears (see chapter 6.5.8). The mortgage loan portfolio consists only of Dutch mortgages with a limited counterparty default risk in line with the strategic investment plan (see chapter 6.8.4).

6.7.1.3 Property (including land and buildings for own use and plant)

The breakdown of the investment property, land and buildings for own use and plant in accordance with the fair value hierarchy, as explained in accounting policy B, is as follows:

Breakdown of the fair value of the investment property, land and buildings for own use and plant
Fair value based on quoted prices in an active marketFair value based on observable market dataFair value not based on observable market data
31 December 2022Level 1Level 2Level 3Total fair value
Investment property--664664
Land and buildings for own use--115115
Plant--480480
Total--1,2591,259
Fair value based on quoted prices in an active marketFair value based on observable market dataFair value not based on observable market data
31 December 2021Level 1Level 2Level 3Total fair value
Investment property--2,0522,052
Land and buildings for own use--145145
Plant--332332
Total--2,5302,530

The property portfolio is classified as level 3 ‘not measured on the basis of market observable market data’. Non-observable market inputs are used in the valuation methods, in addition to the observable market inputs. The fair value measurement is based on valuations by independent professional appraisers. These valuations have been performed for the entire portfolio of investment property, buildings for own use and plants. Independent professional appraisers use reference transactions of comparable properties, in combination with the DCF and income capitalisation method, to determine the fair value of the property or plant. The reference transactions of comparable objects of the property portfolio are generally based on observable data consisting of the land register ‘Kadaster’ and the rural land price monitor as published by the Dutch Government ‘Grondprijsmonitor’ in an active property market.

The significant unobservable and observable inputs to the Level 3 values of plant are the energy prices and the discount rate. An increase (decrease) of the discount rate will lead to a lower (higher) fair value measurement.

The property has a relatively fixed return. The property portfolio is well diversified and consists of residential, retail, offices and rural property, throughout the Netherlands. The retail portfolio focusses on high street locations with relative low vacancy rates. The following table shows a breakdown of the fair value and vacancy rates of the portfolio of investment property.

Breakdown of investment property
Fair valueVacancy rate
31 December 202231 December 202120222021
Retail1591613.1%5.0%
Residential11--
Rural2021,625--
Offices2902418.4%8.2%
Property under development-12-100.0%
Parking1312--
Total6642,0523.5%2.9%

In 2022, 1,430 million of rural investment property included in ASR DFLF was transferred to investments in real estate equity funds, see chapter 6.5.5.2. During 2022, a.s.r. lost control of ASR DFLF as a result of the entry of third party participants in ASR DFLF.

The movements in investment property and plant measured at fair value (recurring basis) that are categorised within level 3 are presented in chapter 6.5.2 and 6.5.3.

Significant inputs to the Level 3 values of investment property are the net initial yield and market rental value. These inputs are verified with the following market observable data:

  • Market rent per square meter for renewals and their respective re-letting rates;

  • Reviewed rent per square meter;

  • Investment transaction of comparable objects;

  • The 10 year Dutch Government Bond Yield (%) rate as published by the DNB.

Unobservable and observable inputs used in determination of fair value
31 December 2022Change in theoretical rental value
Fair valueValuation techniqueGross
Gross theoretical rental value (€)
GrossGross yield (%)Change in yield-5%0%5%
Investment property - Fair value model
Retail159DCFtotal11,340,229mean7.1%-5%-817
max1,641,470max9.6%0%-8-8
min14,940min3.7%5%-15-8-
Residential1DCFtotal76,600mean7.9%-5%---
max76,600max7.9%0%---
min76,600min7.9%5%---
Rural202DCFtotal4,754,747mean2.4%-5%-1121
max1,776,687max3.8%0%-10-10
min500min0.5%5%-19-10-
Offices290DCFtotal19,406,800mean6.7%-5%-1530
max5,280,212max9.8%0%-14-14
min52,513min4.4%5%-28-14-
Property under development-
Parking13
Land and buildings for own use115DCFtotal8,273,071mean7.5%-5%-612
max8,273,071max7.5%0%-5-5
min8,273,071min7.5%5%-10-5-
Plant480
Total1,259
Unobservable and observable inputs used in determination of fair value
31 December 2021Change in theoretical rental value
Fair valueValuation techniqueGross
Gross theoretical rental value (€)
GrossGross yield (%)Change in yield-5%0%5%
Investment property - Fair value model
Retail161DCFtotal11,096,858mean6.9%-5%-817
max1,617,540max12.9%0%-8-8
min41,519min2.4%5%-15-8-
Residential1DCFtotal75,501mean7.5%-5%---
max75,501max7.5%0%---
min75,501min7.5%5%---
Rural1,625DCFtotal36,171,938mean2.2%-5%-86171
max1,865,893max7.3%0%-81-81
min308min0.4%5%-155-77-
Offices241DCFtotal14,271,731mean5.9%-5%-1325
max5,015,714max9.2%0%-12-12
min38,656min3.4%5%-23-11-
Property under development12
Parking12
Land and buildings for own use145DCFtotal9,607,224mean6.9%-5%-715
max9,607,224max6.9%0%-7-7
min9,607,224min6.9%5%-13-7-
Plant332
Total2,530