Capital requirement

The required capital stood at € 6,581 million per 31 December 2023 (2022: € 3,360 million). The required capital (before diversification) consists for 2023 € 4,803 million out of market risk and the insurance risk amounted to € 5,034 million.

a.s.r.'s Solvency II ratio, including financial institutions, complied during 2023 with the applicable externally imposed capital requirement. The capital requirements of the financial institutions fall under a different sectoral supervision regime.

The table below presents the solvency ratio at group level as at the date indicated.

The Solvency II ratio stood at 183% (excluding financial institutions) at 31 December 2023 (2022: 222%). The Solvency II ratio including financial institutions stood at 176% as at 31 December 2023 (2022: 221%). The Solvency II ratios presented are not final until filed with the regulators.

Under Solvency II it is permitted to reduce the required capital with the mitigating tax effects resulting from a 1-in-200-year loss (Shock loss). There is a mitigating tax effect to the extent that the Shock loss (BSCR + Operational risk) is deductible for tax purposes and can be compensated with taxable profits. This positive tax effect can only be taken into account when sufficiently substantiated (‘more likely than not’). a.s.r. included a beneficial effect on its solvency ratio(s) due to the application of the LAC DT. The LAC DT benefit was € 1,475 million at year-end 2023.

Relevant regulation and current guidance (Delegated Regulation, Level 3 guidelines, Dutch Central Bank Q&A’s and IAS12) is taken into account in the development of the LAC DT methodology.

a.s.r. uses an advanced model for the LAC DT of both a.s.r. life and a.s.r. non-life and a ‘basic’ model for a.s.r. health basic and supplementary. In the advanced model future fiscal profits are used to underpin the LAC DT, while in the basic model no future profits are used. Both models are and will be updated in case constrained by additional guidance or legislation provided.

The a.s.r. solvency ratio does not include any contingent liability potentially arising from any of the current and / or future legal proceedings in relation to unit-linked insurance contracts or for other products sold, issued or advised on by a.s.r.’s insurance subsidiaries in the past, the reason being that it is impossible at this time to make reliable estimates because the book of policies of a.s.r. dates back many years, contains of a variety of products with different features and conditions and because of the fact that rulings are diverse.

On December 14, 2023, a political agreement was reached on amendments to the Solvency II Directive, following the 2020 review of the Solvency II framework. The formal adoption of the amendments to the directive is expected to take place by April 2024. The amendments are expected to take effect in EU member states by mid 2026 or 1^st of January 2027. The proposed amendments consist of various changes to the Solvency II framework, affecting most notably the liability discount curve, the risk margin and the volatility adjustment (VA), the equity risk module for the SCR calculation, the introduction of a prudential climate-transition plan and sustainability-related considerations in the prudent person principle and in the ORSA and group supervision. Some measures could include a phase-in period. The amendments to the Solvency II Directive will require amendments to the Solvency II Delegated Regulation and/or the introduction of additional delegated acts and guidelines, to be developed by EIOPA.

In addition to the revisions to the Solvency II Directive, an agreement was reached on the Insurance Recovery and Resolution Directive (IRRD), which provides for recovery and resolution framework for insurance companies at European level and to be implemented by EU member states, comparable to the Act on Insurance Recovery and Resolution, currently in force in the Netherlands.

Standard & Poor’s confirmed the single A rating of a.s.r., a.s.r. life, a.s.r. non-life, Aegon life on 8 September 2023. For Aegon Bank (Knab) an update was received on 6 February 2024, containing a downgrade to BBB+ from A- due to the announcement to sell Knab to BAWAG Group AG.

ICR: Issuer Credit Rating

IFSR: Insurer Financial Strength Rating

Rating reports can be found on the corporate website: www.asrnl.com