See accounting policy B.

6.7.1.1 Financial assets and liabilities measured at fair value

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

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.

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.

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.

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:

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:

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.

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.