Morningstar DBRS Changes Trends to Positive, Confirms Financial Strength Rating of "A" on ASR Schadeverzekering N.V., ASR Levensverzekering N.V. and Issuer Rating of BBB (high) on ASR Nederland N.V.

DBRS Ratings GmbH (Morningstar DBRS) confirmed the Financial Strength Rating of "A" on ASR Schadeverzekering N.V. and ASR Levensverzekering N.V. and the Issuer Rating of BBB (high) on ASR Nederland N.V. (ASR or the Company). Morningstar DBRS also changed the trends on all credit ratings to Positive from Stable.

KEY CREDIT RATING CONSIDERATIONS
The Positive trends reflect ASR's improved Solvency II ratio at YE2024, also supported by strong organic capital generation. ASR maintained a leading market position in the Dutch insurance sector, further underpinned by the recent acquisition of Aegon Nederland NV (Aegon NL) and is well-placed to benefit from arising business opportunities especially within the pension market.

The credit ratings also take into account ASR's sound profitability levels, supported by strong underwriting performance within the nonlife business, which positively contributes to internal capital generation. The Company has well-diversified product offerings in both life and nonlife exclusively focused on the domestic market. ASR's credit ratings also reflects the Company's significant exposure towards mortgage loans and real estate in the investment portfolio.

CREDIT RATING DRIVERS
ASR's credit ratings would be upgraded if the Company maintains similar levels of profitability without altering its risk profile and there is no material deterioration in the Solvency ratio.

The trend will return to Stable if ASR's profitability and/or Solvency ratio weaken significantly. The credit ratings would be downgraded if ASR's capitalisation, profitability and risk profile materially deteriorate.

CREDIT RATING RATIONALE
Franchise Building Block Assessment: Strong/Good
ASR is one of the largest insurance companies in the Netherlands, offering a wide range of financial products including property and casualty (P&C), disability (income protection), health, life, and group and individual pensions, as well as mortgages. In the life segment, ASR is a major pension provider in the Netherlands with a reported market share of 32%, which also benefitted from the acquisition of Aegon NL in mid-2023. In the life segment, ASR reported a market share of 29% in 2023. In the nonlife segment, ASR maintains a strong market position in the P&C market (15% market share in 2023, stable year-over-year (YOY)) and is the market leader in the distribution of disability insurance products. ASR uses a multichannel distribution strategy selling its products both directly (including online) and through intermediaries, independent advisors, and mandated agents. ASR's operations are exclusively concentrated on the domestic market.

Earnings Ability Building Block Assessment: Strong/Good
ASR's revenue generation continued to improve in 2024. Total premiums and DC contribution inflow increased to EUR 10,376 million, up 18% YOY. The result was mostly driven by organic business growth in P&C, disability, and pension, as well as an additional six months' contribution from Aegon NL, which more than offset the lower inflow in the health segment. On the other hand, ASR reported a lower net result of EUR 944 million in 2024 (from EUR 1,086 million in 2023). This was mostly led to higher other financial expenses of EUR 4,031 million in 2024 (EUR 2,451 million) driven by losses on derivatives. ASR's return-on-equity (ROE), as calculated by Morningstar DBRS, decreased to 10.3% in 2024 from 14.8% in 2023. The reduction is mostly attributable to the increase of equity. Underwriting profitability remains strong with nonlife combined ratio (CR) at 93.8% in 2024 down from 95.4% in 2023. P&C and disability CR improved to 91.9% in 2024 from 93.5% in 2023, which is close to the lower level of the CR target range 92%-94%.

Risk Building Block Assessment: Good/Moderate
ASR is subject to certain catastrophe risk within its P&C business; however, the Company reported no weather-related claims compared with the low levels of 2023. Within the P&C business, ASR offers motor insurance (51% of total P&C premiums); property insurance (30%); and other products including liability, legal-aid, travel, and pet insurance (19%). ASR's credit risk profile is penalised by the significant mortgage loans in the Company's investment portfolio of EUR 27.4 billion at YE2024, up from EUR 25.3 billion at YE2023. Another 44% of the portfolio at YE2024 consisted of bonds, which are mostly governments bonds (44%), financials (13%), and corporate (12%). Around 99% of the bond portfolio is investment grade.

Liquidity Building Block Assessment: Good
ASR's investment portfolio comprises a high portion of investment-grade marketable bonds as well as cash and cash equivalents. While Morningstar DBRS considers that ASR's liquid assets still provide significant buffer against unexpected liquidity outflows, the liquidity profile of the Company's investment portfolio is penalised by the significant portion of illiquid assets including mortgage (32% of total investment portfolio at YE2024) and real estate (11%). Overall, ASR's liquidity position is deemed sufficient, supported by positive cash flow from operations in both life and nonlife businesses.

Capitalisation Building Block Assessment: Strong/Good
ASR's Solvency position improved significantly at YE2024, thanks to organic capital generation and the sale of the banking subsidiary Knab N.V. As a result, the Company reported a Solvency II ratio of 198% at YE2024, up from 176% at YE2023. The sale of Knab had a positive benefit of 17 percentage points (pp). Organic capital generation had a positive benefit of 19pp. The Solvency II ratio was affected by market and operational movements (-2pp) and capital distribution (-12pp). At YE2024, financial leverage was 29%, a reduction from 30.1% at YE2023. The reduction is mostly attributable to the increase in equity. In recent times, ASR demonstrated support from its fixed-income investors to raise both unrestricted Tier 1 and Tier 2 capital instruments with issuances going systematically overbooked.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Environmental (E) Factors
Environmental concerns regarding Climate & Weather Risks are relevant to the credit ratings of ASR as a P&C insurer but did not affect the assigned credit ratings or trends. Morningstar DBRS considered these ESG factors as part of product risk when assessing the Company's risk profile. The Company is exposed to weather-related losses from natural catastrophic events such as wildfire, flooding, storms, and other extreme weather events. These events can lead to earnings volatility and unpredictable claims. However, in 2024, the Company reported no claims related to extreme weather events. Climate risk is incorporated in the Company's risk appetite framework and the scenario analysis of the own risk and solvency assessment.

There were no Social and Governance factors that had a significant or relevant effect on the credit analysis. 

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025) https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology is the Global Methodology for Rating Insurance Companies and Insurance Organizations (10 September 2024) https://dbrs.morningstar.com/research/439195. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The sources of information used for this credit rating include Morningstar, Inc. and company documents, ASR's consolidated annual reports in 2019-24, ASR's consolidated interim reports (H1 2019-H1 2024), and ASR's Investors' presentation, Capital Markets Day 2024 presentation, and press releases. Morningstar DBRS considers the information available to it for the purposes of providing this credit rating to be of satisfactory quality.

With respect to FCA and ESMA regulations in the United Kingdom and European Union, respectively, this is an unsolicited credit rating. This credit rating was not initiated at the request of the issuer.

With Rated Entity or Related Third-Party Participation: NO
With Access to Internal Documents: NO
With Access to Management: NO

Morningstar DBRS does not audit the information it receives in connection with the credit rating process, and it does not and cannot independently verify that information in every instance.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are under regular surveillance.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

The sensitivity analysis of the relevant key credit rating assumptions can be found at: https://dbrs.morningstar.com/research/454584/.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Mario De Cicco, Vice President, Global Insurance & Pension Ratings
Rating Committee Chair: Marcos Alvarez, Managing Director, Global Financial Institutions Ratings
Initial Rating Date: 27 May 2024
Last Rating Date: 27 May 2024

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