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.

7.5.13.1Insurance contracts - Non-life

Other relates to the transfer of the Aegon P&C acquired claims portfolio from GMM to PAA, so that the complete P&C portfolio would fall under the PAA model. This could be done due to the very limited CSM that was remaining on this portfolio at the moment of the transfer (€ 1 million early release to the insurance contract revenue).

Other relates to the transfer of the Aegon P&C acquired claims portfolio from GMM to PAA, so that the complete P&C portfolio would fall under the PAA model. This could be done due to the very limited CSM that was remaining on this portfolio at the moment of the transfer (€ 1 million early release to the insurance contract revenue).

7.5.13.2Insurance contracts - Life

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.

7.5.13.3Reinsurance contracts - Non-life and Life

7.5.13.4Assumptions 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.

The following are key assumption and methodologies used in the valuation of the insurance liabilities and are discussed in more detail further in this chapter:

• actuarial assumptions: addressing mortality and longevity, lapse, cancellation and surrender assumptions and for expenses;

• risk adjustment;

• discount rate; and

• coverage units

7.5.13.4.1 Changes in estimates

Assumptions are reviewed periodically, based on historical experience, observable market data, including market transactions such as acquisitions and reinsurance transactions, anticipated trends and legislative changes. Similarly, the models and systems used for determining our insurance liabilities are reviewed periodically and, if deemed necessary, updated based on emerging best practices and available technology.

During 2024, a.s.r. continued with the harmonisation of assumptions and methods between Aegon NL and a.s.r., which is expected to continue in the coming years. The main impacts of the harmonisation process and annual update of the non-economic assumptions are the impacts on the mortality, expense, inflation and disability and the update of the coverage units.

Mortality assumption

For the mortality assumptions, next to the harmonisation of the mortality table principles, a.s.r. implemented several refinements to the mortality model and updated the model to the latest available data and experience factors. These updates resulted in a reduction of € 105 million on the insurance liabilities fulfilment cashflows, increasing the CSM. As part of the harmonisation of assumptions and methods between Aegon NL and a.s.r., a new mortality table was developed, based on the Aegon mortality table principles, with updated data as from 2024, which resulted in a reduction of € 71 million on the insurance liabilities, increasing the CSM. Previously a.s.r. applied the Dutch Koninklijk Actuarieel Genootschap tables. The mortality assumption updates also had an impact on the loss component, leading to a net future services dotation with a negative P&L impact of € 13 million

Expense assumption

The maintenance expense methodologies of a.s.r. and Aegon NL are aligned, and the parameters used for the maintenance expense reserve were updated. These updates consisted of numerous changes with partly offsetting impacts, which in aggregate resulted in a reduction of € 258 million on the insurance liabilities fulfilment cashflows, increasing the CSM. The annual update of the investment expense assumptions resulted in an increase of € 24 million on the insurance liabilities fulfilment cashflows from direct participating insurance contracts, decreasing the CSM of contracts measured under VFA (see section 7.5.14). The assumption update also had an impact on the loss component, leading to a future services release to the P&L of € 114 million.

Inflation assumption

As part of the harmonisation process, a.s.r.’s methodology for inflation is also implemented for the Aegon NL life portfolios, which resulted in a decrease of € 51 million on the insurance liabilities fulfilment cashflows, increasing the CSM. The annual update of the inflation assumption results in a partially offsetting increase of € 19 million in fulfilment cashflows, decreasing the CSM. The impact on pre-tax income in 2024 of these updates is limited, as the impact relates almost entirely to future services. 

Disability

For the Disability business, a.s.r. updated the non-economic assumptions, including updates for assumptions for disability percentage, incidence and recovery rates and mandated brokers, which resulted in a reduction of € 62 million on the insurance liabilities fulfilment cashflows, increasing the CSM. The impact on pre-tax income in 2024 of these updates is € 5 million, which concerns the impact on past services. The remainder of the impact relates to future services. 

Harmonisation on Coverage units

a.s.r. and Aegon NL reassessed the defined coverage units in a consistent manner for similar products, and reassessment of identified coverage units for dissimilar products. Subsequently, all information was incorporated in the updated a.s.r. CSM-engine model, which resulted in a fractional lower release of the CSM through profit or loss in 2024 (€ 19 million) than would have been in the situation before the alignment and integration.

7.5.13.4.2 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 and a.s.r.’s past experience and are generally developed based on a blend of company experience and industry wide studies, taking into consideration product characteristics, own risk selection criteria, the insured population, recent mortality trend assumptions. 

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.

7.5.13.4.3 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.

The implied confidence levels at 31 December 2023 were equal to those implied at 31 December 2024.

7.5.13.4.4 Discount

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 3.25 % in 2024 (2023: 3.40%) for the construction of the curve from the first smoothing point (FSP). The impact of the decrease in UFR is € 131 million on the value of the insurance contract liabilities and € 27 million on the liabilities arising from direct participating insurance contracts.

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 section 7.5.14.

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

7.5.13.4.5 Coverage units

Coverage units are determined based on the expected insurance contract services. The insurance contract services are determined considering the (weighted) quantity of the benefits provided from insurance and investment (return/related) services. If a contract provides coverage for more than one insured event or if it provides additional investment (return/related) services, the coverage unit reflects all material benefits.

a.s.r. has defined coverage units that differ per product type to best reflect a product’s characteristics and the nature of the services provided to the policyholder. Insurance services are typically depicted by a metric that is based on the maximum amount that a policyholder would receive if the insured event were to occur, such as the total benefits amount or the death benefit amount. For investment-type services, coverage units are based on the total service that a.s.r. expects to provide the policyholder over the lifetime of the contract, which is best represented by the coverage unit 'total premium'.

7.5.13.5Contracts 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.

Onerous Non-life contracts issued consist for about two thirds of Sickness Leave yearly prolongations at a combined ratio slightly above 100% due to an increased claims ratio, whereby cost synergies were not yet taken into account. The remainder consist of a part of the Group Disability production which was priced slightly above 100% for commercial reasons, which is more than offset by profitable other Group Disability products in the same portfolio.

In 2023, reinsurance contracts consist almost completely of contracts acquired of Aegon NL.

7.5.13.6Expected 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.

7.5.13.7Claims 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 2024.

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