See accounting policies F.

Pre-recognition cash flows consists of prepaid premiums for insurance contracts not yet recognised.

The tables in the following paragraphs show the movements in insurance contract balances for the different measurement models.

7.5.13.1 Non-life - GMM and PAA

Non-life - GMM

Changes in the composition of the group relates to the liabilities acquired through the acquisition of Aegon NL, see chapter 7.4.5.

Non-life PAA

Changes in the composition of the group relates to the liabilities acquired through the acquisition of Aegon NL, see chapter 7.4.5.

7.5.13.2 Life - GMM

Changes in the composition of the group relates to the liabilities acquired through the acquisition of Aegon NL, see chapter 7.4.5.

For the Life segment the LRC includes the incurred claims from certain second order events (for example from future premium waiver at disability or incurred survivor benefits) following the option to account for these events as part of the LRC.

Changes in the composition of the group relates to the liabilities acquired through the acquisition of Aegon NL, see chapter 7.4.5.

7.5.13.3 Assumptions used

In estimating the fulfilment cash flows included in the contract boundary, a.s.r. considers the range of all possible outcomes in an unbiased way specifying the amount of cash flows, timing and probability reflecting conditions existing at the measurement date, using a probability-weighted average of all possible scenarios. In determining possible scenarios, a.s.r. uses all the reasonable and supportable information available to them without undue cost and effort, which includes information about past events, current conditions and future forecasts.

Actuarial assumptions

Cash flow estimates include both market variables directly observed in the market or derived directly from markets and non-market variables, such as mortality and longevity. The best estimate assumptions regarding mortality and longevity include recent trend assumptions for life expectancy in the Netherlands, as provided by the Dutch Koninklijk Actuarieel Genootschap (Actuarial Association).

Lapse, cancellation and surrender assumptions are non-economic assumptions and reflect the expected policyholder behaviour. As such the rates usually depend on issue year, policy year, major business lines and sales channels. Such granularity is usually enough to capture how the product terms and conditions as well as regulations can influence the timing and volume of lapse and surrenders. Calendar year based adjustments and dynamic policyholder behaviour are considered when needed in specific circumstances.

Expenses are included in the fulfilment cash flows, when they are directly attributable to insurance contracts and have been allocated to the business lines. These expenses include acquisition expenses, investment expenses related to direct participating contracts as well as overhead costs that a.s.r. considers to be unavoidable when fulfilling the in-force contracts.

Risk adjustment

The risk adjustment is determined for each portfolio of insurance contracts using a Cost of Capital (CoC) method similar to the risk margin used for reporting under the Solvency II. a.s.r. currently uses the Solvency II model to quantify the risks, adjusted for the following points:

• Excluding general operational risk;

• Excluding market risk (if any);

• Excluding reinsurance counterparty default risk;

• Added a reinsured risk adjustment by calculating the risk adjustment gross and net of reinsurance;

• A CoC rate of 6% is used, diversification effects are applied for disability, taking into account a going concern basis;

• ECAP is used where available (e.g. P&C Cat risk); and

• The IFRS 17 discount rate curve is used.

The risks that are generally incorporated through the risk adjustment are mortality, longevity, disability, lapse, catastrophe and expense risk. A projection of expected future risks is made and all these risks are projected into the future. The total risk for every future year is determined based on correlations between the risks described in Solvency II. The projected total risk for every year is multiplied by a cost of capital charge and discounted at the balance sheet date.

The risk adjustment is calculated at a range of confidence levels, as set out below in the table. The implied confidence levels are determined for both the one year and multiyear view, gross of reinsurance.

Discount curve

Discount curves to discount the expected future fulfilment cash flows are determined using a liquid risk free curve to which an illiquidity premium is added. The risk-free curve is based on the 6-month EURIBOR swap rate and includes a credit-risk adjustment and a first smoothing point of 20 years. a.s.r. uses an UFR of 3.40% in 2023 (2022: 3.45%) for the construction of the curve from the first smoothing point (FSP). The liability illiquidity premium (LIP) is the adjustment resulting from differences between the liquidity characteristics of the group of insurance contracts and the liquidity of the assets used to establish the yield curve. The LIP is derived from a.s.r.’s current asset portfolio using a top-down approach per entity or liability product.

The discount curves are also applicable to the liabilities arising from direct participating insurance contracts. Further information on these contracts can be found in chapter 7.5.14.

The range of application ratio’s follow the SCR Mass Lapse methodology, and include the harmonisation with Aegon NL.

7.5.13.4 Contracts issued and acquired in the period

The following tables summarise the effect on the measurement components of insurance and reinsurance contracts arising from the initial recognition of contracts measured under the GMM that were initially recognised in the year.

7.5.13.5 Expected release of the CSM

The following table illustrates when a.s.r. expects to recognise the remaining CSM as revenue for contracts measured under the GMM.

7.5.13.6 Claims development table Non-life

The table below is a ten-year summary of movements in gross cumulative claims in connection with the Non-life portfolio for the period from 2014 to 2023.

Gross claims in the claims development table include the Aegon NL claims as from the acquisition date.