ASR Nederland N.V.

and welcome to the ASR Nederland Investor Call Full Year Results 2020. This call is being recorded. At this time, I would like to turn the conference over to Michel Hulters. Please go ahead, sir.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for switching to this channel. Welcome to the ASR Conference Call on our Full Year 2020 Results. On the call with me today are Jos Baten, CEO, and Annemiek van Meelik, our CFO, As is customary, we'll also kick off with some of the highlights of our financial results and discuss some of the business performances we've seen. Annemiek will then delve into the development of our capital and solvency position after that, and then we'll open up for Q&A. We've got scheduled till 12 o'clock sharp, and I think it will leave us ample time for Q&A. As usual, do please have a look at the disclaimer that we have at the back of the presentation. for any forward looking statements and so having said that Jos, the floor is yours.

Thank you Michel and good morning everyone. Thank you for switching to the ASR call after having already a busy morning with one of our most beloved competitors in the Netherlands. So hopefully in the future we can prevent you from having two presentations on one day on Dutch insurance companies. I hope all of you are still doing well in these challenging COVID times. Before we get into the numbers, let me just start by saying that I'm really proud of the way our company and our employees have continued serving our clients in this extraordinary year. The outbreak of COVID-19 and the measures taken to combat this pandemic continue to disrupt our personal lives, the business communities, and our society as a whole. And while our first and foremost concern is the health of our employees and customers, we of course also care for the well-being more generally as well, including job security and economic uncertainties for our customers who are entrepreneurs, business and business owners. We generally hope that we can leave this crisis behind us soon. At ASR, we've been able to keep up morale of our employees at a high level throughout the year. Customer satisfaction went up and we have maintained strong commercial momentum in our business as demonstrated by the growth of our business and our financial performance. As we reported, the overall impact of COVID-19 was benign thanks to the mix of our business in non-life and life that effectively neutralized this impact in 2020. We believe ASR has shown resilience against a challenging and uncertain uncertain economic background, and has again delivered against ambitious targets. Without further ado, let's turn to the financial highlights, and those are on slide two. I presume you all have seen the press release which we issued this morning, so I will highlight only the most important developments. As this dashboard shows, our performance in 2020 has been really strong. The 3.2 increase in the operating result to 885 million is driven by higher results in all our segments and includes, as I just mentioned, the impact of COVID-19 being a negative of one million. Operating return of 15.3% is well above our target between 12 and 14%. Our solvency two ratio based on the standard formula is up by five percentage points. to a solid 199. This increase includes 12% from organic capital creation, which at 500 million landed by coincidence exactly on the medium term target. Solid contribution from the business, higher excess returns and a higher net release of capital compensated the higher UFR drag due to lower interest rates. The combined ratio amounted to 93.6, ahead of our target of 94 to 96. This includes a positive effect of 0.6 percentage points out of COVID-19. Our efficiency ratios improved in all business segments, despite an increase of 45 million in operating expenses, which was mainly driven by acquisitions, holding costs and growth of our fee-based business. Based on the strong performance and in line with our existing policy, we propose a dividend of 2 euro and 4 euro cents per share. This is an increase of 7% compared to last year. Today we also announce a share buyback of 75 million, which is supported by our strong solvency and OCC. So in sum, we have shown a solid result over 2020. Let's turn to the next slide, slide number three. Our strategy will continue to focus on sustainable long-term value creation for all involved in ASR. We take our role as a sustainable company in society seriously, and we are happy to see that international investors aim more and more on sustainability. Our ongoing focus on customer service has led to an increase in the Net Promoter Score from 44 to 49. already well above the medium term target of 44. One of the drivers behind the increase was the more personal contact with customers during the COVID-19 outbreak when everybody was working from home. Our CO2 footprint has now been measured for 93% of our whole investment portfolio and with over 1.7 billion, our impact investments have already met the target for 2019 to 2021. Due to the lockdown restrictions and social distancing rules, our employees have not been able to do any of the activities we typically do for society. To protect the health of our employees and the people involved in these projects, we had to cancel or scale down these activities. In some cases, we have been able to convert the activities into an eversion, and as soon as social distancing measures are relieved, we, of course, we will scale up these activities again. ESG is more and more an integral part of our product development. For example, the sustainability repair and replacements in insurances, mortgages for sustainable home improvements, but also in pension DC with our specific ESG funds. And lastly, I'm very proud of the recognition we receive on our sustainability. In 2020, ASR has been included in the Dow Jones World Sustainability Index. We see this as a recognition of our successful strategy on which we will continue to build going further. Let's continue with some insight on the COVID-19 impact on our business. And that's on slide four. In dealing with this crisis, we continue to offer suitable solutions for customers who have been impacted by the COVID-19 crisis. After an initial rise in customer requests for deferrals on premium payments, mortgage payments or rents, we have experienced a decrease in these requests in the second half of the year. Also, rent arrears in our real estate portfolio have reverted to more normal levels. The number of requests have been very manageable. For instance, as per today, we have approximately 60 P&C customers with premium arrangements 400 in the disability area and roughly 45 corona related mortgage arrangements so all in all very manageable we continue to use a weekly mood monitor to track employee morale and this remained at a very high level we are focusing on the sense of connection and inclusion of our employees particularly now we are all working from home our approach since 2012 To build one culture based on time and place independent working proved to be a strong foundation for managing the current crisis. And financially, the negative impact of 1 million on our operating results consists of a positive 21 million in non-life and a positive effect of 4 million in health. Higher claims in disability and strengthening the reserves were more than offset by lower claims in P&Cs. More on this when we get to the non-live slide. In our live business, the impact was 22 million negative from lower dividend and rental income, mainly in the first half of 2020. And finally, our IFRS net result is lower, primarily due to the impact from financial markets and goodwill impairments. Also in 2019, we reported a purchase gain from Loyalis, which of course wasn't there anymore in 2020. Now let's move on to the next slide and talk a bit about how we did in progressing in executing our strategy. I would like to talk about some business developments here. First of all, the last year introduced vitality program is continuously growing with currently over 50,000 K active participants and 10,000 employees. at this moment. This is helpful in improving our customer relevance and loyalty. Also, we have brought the reintegration activities of Keerpen to ASR, of which we already owned 50%. This expands our expertise in the field of reintegration and sustainable employability and strengthens our connection with customer. But most importantly, it helps us to manage and control claims. In the life department, We delivered on creating synergies by reducing the number of applications and converting the systems to a software as a service platform, including the VVAA and Loyalis portfolios. This, ladies and gentlemen, completes the migration of all of our own books and all of the acquired books onto ASR's new platform on time and on budget. Our cost efficiency is illustrated in the live operating expenses, which decrease from 62 basis points in 2016 to 45 basis points in 2020. Our fee-based business are doing very well. Third-party assets and the management have increased by 3.4 billion to 25.4 billion and was mainly driven by growth in our mortgage funds and DC funds. Our mortgage origination was up 40% and amounted almost 5 billion in 2020. And lastly, We have transferred the remaining accounts in the divestment of ASR Bank to van Lansvoort Kempen and have withdrawn our banking license in December 2020. Now let's move to slide six and elaborate a little bit on our non-life result. A solid performance in non-life with operating result increasing to 241 million. In 2020, COVID-19 had a positive impact on non-life of 21 million. This includes headwinds of roughly 71 million in our disability business and tailwinds of roughly 88 million in our P&C business. In disability, we have seen a clear improvement in individual disability in the second half, where we have been able to pick up the reintegration processes and successfully managing the backlogs from the first half of the year. In sickness leave, we have seen some COVID-19 related deterioration in the portfolio, particularly as we experienced an increase in claims from customers due to mental and psychological issues. Moreover, these claims also tend to have a longer duration. This is something we are closely monitoring, of course, and we have strengthened our reserves for this development in age two. P&C mostly benefited from favorable claims experience. In the second half of the year, this trend has reverted as well, as traffic was significantly higher compared to H1. Also, reserves have been strengthened within P&C, primarily related to bodily injury, partially driven by a court verdict earlier in 2020. And you know ASR, we tend to take a somewhat conservative approach in these matters. And with respect to storms, although 2020 was a relatively calm year, we did record a 9 million hit from Chiara. This leads to a combined ratio of 93.6 for both P&C and disability together, beating the target of 94 to 96. Adjusting for COVID-19 effects, combined ratio would go up with 0.6 to 94.2, still at the lower end of the target range. Cost ratio decreased from 8.4 to 8.1, which is driven by a higher cross-written premium whilst realizing cost synergy from the Generali Netherlands IT migration. So all in all, we became even more efficient despite we had to work from home. The organic growth in the cross-written premium of disability and P&C amounted 4.6 at the higher end of our range of 3 to 5% per annum. This is hard work, ladies and gentlemen. Make no mistakes on this. And for 2021, this is the real challenge given the economic uncertainties in which we operate. And finally, the increase in health gross return premium reflects a strong increase in the new benefit in kind insurance product, which we launched at the end of 2019. So far, we have seen this increase to be continued at the start of the health season in this year. Let's move to slide seven where I will talk a little bit about the life segment. Some highlights to mention in our life segments, operating results of life segment increased by 34 million to 730 million despite the 22 million negative impact from COVID-19. This impact relates really to the first half as it is mostly reflected in lower dividends If you relate this to the total operating result for life, we believe the COVID-19 impact is benign. The increase in operating result is driven by higher investment margin. This is mostly due to a positive effect from our swaption portfolio of 42 million due to the amortized realized gains. Also, we have been optimizing the illiquidity premium and credit risk premium in our portfolio. For example, we have expanded our mortgage portfolio further in 2020, which represents in the meantime, 19% of the total investment for own accounts. The decrease in required interest is mostly due to maturing individual life book and the average guarantee declining. I would like to refer to appendix R and S as well, where we have displayed our stable investment margin over time. The decrease in technical result was mostly the result of favorable result on mortality in 2019. There was only a limited positive impact from COVID-19 on the mortality result given the diversification between our product lines. We have seen a positive impact in PensionDB, partially offset by a negative in PensionDC, and these pertain to premium paying customers and also having a surviving pension cover. Impact on individual life was slightly positive, offset by negative impact on funeral. Furthermore, our cost efficiency improved to 45 basis points, a share of the basic nominal provision, which is equal to the lower end of our target for 2021. So let's now turn to other segments which performed quite well, and those are on slide eight. The operating result for the two fee-generating segments, asset management and distribution and services, combined amounts to $57 million, up from $48 in 2019. This confirms that we are running ahead of the medium-term target. Asset management showed the stronger growth, $7 million, mainly due to strong inflows in mortgage funds and DC funds. Operating result of the distribution and services segments increased to $25 million mainly due to small acquisitions and organic growth. Operating results for the holding amounted to a minus of $143 million. The decrease is mainly driven by higher net service costs for our pension plan due to lower interest rates, which amounted to $20 million, and the increase in interest expenses of $6 million from the $500 million Tier 2 subordinated liability placed in April 2019. Please note that as of January 21, our pension plan for employees moved to a DC product. This means that going forward, the expense related to the employee pension plan will decrease and become less dependent from interest rates and hence more stability going forward. Before I hand over to Annemiek for the highlights on solvency and capital generation, I believe we have built a very strong, solid track record of financial performance and disciplined and rational allocation of capital. The results published today support our ongoing story of attractive capital return. Since the IPO in 2016, we have been committed to offering shareholders attractive returns in dividends driven by higher operating results and supported by a robust balance sheet and supplemented by share buybacks. During this period, ASR has returned 1.6 billion euros of capital to shareholders via dividends and share buybacks, including the one we announced today. This roughly equals 36% of our market cap. This year, we propose a total dividend per share of 2 euro and 4 euro cents, a 7% increase whilst remaining at the lower end of our payout ratio of 45%. And on top of that, we announced another share buyback of 75 million. We will continue to allocate our capital rationally. If sufficient capital remains from the targeted OCC of 500 million in 2021, after investing in organic growth, inorganic growth and market risk, And as long as we are above the well-known thresholds, we will decide on capital returns to shareholders. This way we can grow our business profitably and meanwhile offer an attractive capital return to our shareholders. Now I will hand over to Annemiek for solvency and capital.