See accountingpolicy E.

Derivatives consist primarily of derivatives used to hedge interest rate movements. Derivatives are classified mandatorily as FVTPL and changes in the fair value of derivatives at FVTPL are recorded in net fair value gains and (losses), see chapter 7.6.5.

Derivatives held for mortgage loans (Knab and Aegon hypotheken) are designated under fair value hedge accounting using the EU carve-out on hedge accounting, only net accounting ineffectiveness has an impact on the net result (for more information, see below under hedge accounting).

a.s.r. trades both cleared and non-cleared derivatives on the basis of standardised contracts and exchanges cash variation margin with its counterparties. The derivatives are valued daily and cash collateral is exchanged to reflect the change in mark-to-market (MtM) of the derivatives. Because of this periodic margining process, counterparty risk on derivatives is negligible.

In addition to the above variation margin obligations, there is also an initial margin obligation for central cleared derivatives which further reduces the risk of a.s.r. and its counterparties that they cannot fulfil their obligations.

Notional amounts are not recognised as assets or liabilities in the balance sheet, however notional amounts are used in determining the fair value of the derivatives. Notional amounts do not reflect the potential gain or loss on a derivative transaction.

The derivatives do not include the derivatives relating to direct participating insurance contracts of € 98 million (2022: nil).

Derivatives increased due to the derivatives acquired through the acquisition of Aegon NL, see chapter 7.4.5. In addition, derivatives increased primarily as a result of positive revaluations due to decreasing interest rates.

In addition to the use of swaps and options a.s.r. manages interest rate risk by using bond forwards, included in interest rate contracts futures.

The notional amounts of both receiver and payer swaps are included in the total notional amounts of foreign exchange contracts.

The fair value of interest rate contracts is calculated by first determining the cash flows of the floating leg based on the Euribor-curve corresponding the interest reset period (3 months, 6 months or 12 months) of the swap. Then the net present value of the floating and fixed leg is determined by discounting the cash flows with the relevant curve (such as €STR, SOFR and SONIA).

The fair value of the interest rate contracts using the above valuation method form the basis for the amount of collateral that is exchanged between a.s.r. and its counterparties in accordance with the underlying contracts. For more information see chapter 7.8 on risk management.

Of the derivatives € 11,638 million assets (2022: € 4,939 million) and € 8,967 million liabilities (2022: € 5,629 million) is expected to be recovered respectively settled more than one year after the balance sheet date.

Transition

Throughout the world, a transition is taking place from interbank offered rates (IBORs) to alternative benchmarks. In the EU, the transition to alternative interest-rate benchmarks is governed by the Benchmark Regulation (BMR). Pursuant to the BMR, IBOR based contracts need to be amended to reference alternative rates or to be provided with a fallback option.

The transition away from IBORs has mainly affected a.s.r.’s derivative book, which is measured at fair value through profit or loss. Although most references under these derivatives remain BMR compliant, the Cash Collateral Interest Rate, and consequently discount rates, have required amendments towards Alternative Reference Rates (ARRs).

In the past years, all relevant contracts referencing Ibors (except Euribor) have been amended to reflect ARRs.

Hedge accounting

Macro fair value hedge accounting under the EU carve-out is applied by subsidiaries Knab and Aegon hypotheken (continuing practice post-acquisition).