ASR Nederland N.V.

Good day and welcome to the ASR Netherlands investor call interim results 2021. This call is being recorded. At this time, I would like to turn the conference over to Michel Holters. Please go ahead, sir.

Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us today. Welcome to the ASR conference call on the first half 2021 results. On the call with me are Jos Baalte, our CEO, and Annemiek van Meylik, our CFO. Jos, as a customer, will kick off with some of the highlights of our financial results. And he will also discuss the business performance, of course. Annemiek will then talk about the developments in our capital position and solvency. And after that, we'll open up for Q&A. We've got scheduled for a full hour for this call, including the presentation and the Q&A. And as usual, please do review the disclaimer that we have in the back of the presentation slide for any forward-looking statements. So having said that, Jos, the floor is yours.

Thanks, Michel. And also from my side, a good morning to everybody. And thanks for joining us on this call. I've understood some of you are calling in from their holiday addresses, so that has become in the meantime the importance of this call for you. I hope you're doing well. I noticed that we are the only insurance company today with results, so I guess this must be a pretty relaxing day for analysts covering the insurance sector. I'm sure you will understand that we are very pleased to present this strong set of results for the first half of this year. Momentum in our operations has remained strong, driven by happy and loyal customers. Our financial performance exceeds last year's record results with a considerable margin. And we continue to operate our business with a very strong balance sheet with a robust solvency. I want to thank our employees who are the driving force behind this performance. I'm proud of the fact that our employees have continued to keep moral high in this challenging period. In a recent survey executed by F-Factory, ASR is chosen as the best employer in the Netherlands. Now, without further ado, let's turn to slide two and take a closer look at our financial results. I presume you all have seen the data we released this morning, so I only will highlight the most important developments. As this dashboard shows, our performance in the first half of 2021 has been really strong. The substantial increase of 20% in the operating results to 536 million is driven by higher results in all of our segments. Combined ratios to that 90.2, well ahead of our targets of between 94 and 96, excluding COVID, by the way, the combined ratio improved to 94.1 from 94.5. H1 last year, so at the lower end of our target range. Our solvency 2 ratio continues to be robust at 197, still at the standard formula after interim dividend and share buyback, and absorbing the impact from the lowering of the UFR. Of course, Annemiek will provide further detail on this. The OCC improved by 74 million to 372, which means we are well on track of achieving our mid-term target of 500 million of OCC by the end of this year. The increase is a result of strong business performance and slightly increased investment returns. Operating return of 17.8 remains high and very well above the target of 12 to 14%. The increase in IFRS net result reflects the higher operating results and the absence of large negative incidentals and one-offs, which we have seen in the first half of 2020. We are happy to offer an interim dividend of 82 euro cents per share, which is an increase of almost 8% and represents 40% of last year's dividends. Let's now move to our non-financial targets on slide number three. As I'm sure you are aware, we are committed to deliver sustainable value to all of our stakeholders, specifically our customers, investors, employees, and the society at large. Our ongoing focus on customer satisfaction has led to a solid net promoter score of 48 and already well above the medium term target of 44. We are well on track to achieve the objective of measuring the CO2 footprint of 95% of our investment portfolio, and our impact investments are already ahead of this year's objective. Due to the lockdown restrictions and social distancing rules, our employees have not been able to do many of the activities we typically do for society. As soon as the social distancing measures are relieved, we will scale up again. As we focus on sustainable long-term value creation for all stakeholders, we are very pleased with the recognition in ESG benchmarks. Sustainalytics assigned ASR 10 points in its ESG risk rating, which makes us today the worldwide leader in our industry. In addition to being included in the Dow Jones Sustainability World Index, is a welcoming recognition. Let me now highlight some key developments and achievements in executing our business strategy on slide number four. Some business developments I would like to highlight. The non-live business is performing very well with strong organic growth, positive developments in our reintegration company and a successful conversion to a new IT platform within our commercial P&C business. 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. In April this year, we have decided on centralizing and modernizing our main pension IT system to Keylane's software-as-a-service platform Plexus, which, by the way, is the same provider as where our individual life business already is. With this, ASR takes an important step in the preparation for the national pension reforms, which will be fully effective from the 1st of Jan, 2026. Furthermore, we achieved good revenue growth in the Werknemerspension, which was up 31% in the first half and transferred the pension scheme of our own employees from a DB to a DC scheme. Our fee-based businesses are also doing very well. Third-party assets under management have increased by 1.5 billion to 25.8 billion, mainly driven by growth in the mortgage fund and the pension DC funds. Our mortgage origination amounted 2.6 billion in the first half of 2021 on track to exceed last year's production of 4.6 billion. And lastly, we now have fully finished the divestments we set out at our CMD of 2018 and therefore have no current divestments. Now let's move to slide five to elaborate a little bit on our non-life result. A record first half in non-life with our operating result increasing to 179 million, driven by an improvement of claims in disability and strong organic growth in all product lines. In disability, we have seen considerable improvement also in sickness leave despite some reserve strengthening driven by the adverse trend in absenteeism from stress and burnouts. We have started a new campaign to make people more aware of these risks. Also, we have invested in our reintegration service, which aims to help both in prevention and reintegration. And as you can see in the numbers, that worked out quite well over the first half. P&C saw a favorable claims experience partially offset by a one-off reserve strengthening related to motor vehicle liability, including a lowering of the actuarial interest rate related to a recent court ruling. Weather-related calamities were on a low level in the first six months of this year. We currently estimate the impact from the floods in the beginning of Q3 in Limburg, somewhere between 20 and 30 million, and this will be included in the results for the second half of this year. Combined ratio improved by 2.6 points to 90.2 for P&C and disability combined. beating the target of 94 to 96, excluding COVID-19 related effects, the combined ratio as said is 94.1 compared to the 94.5 in H1 last year, and therefore at the lower end of our target range. Organic growth in GWP in disability and PNC amounted to 5.2 above our target of 3 to 5 per annum. And finally, the increase in health gross written premium of 43% reflects the commercial success of the benefit in current insurance product, which we launched at the end of 2019, and a non-recurring premium that was received from the Health Insurance Act. So let's talk about our life business at slide number six. Some highlights to mention on our life segment here. Operating results of the life segment increased by 18 million to 379. with a less negative impact of COVID-19 amounting to a negative of $13 million compared to a negative of $25 million last year. The increase in operating result is mostly driven by a higher investment margin reflecting the recovery of the financial markets with higher dividend income, re-risking benefits on a lower required interest due to the runoff of higher guarantees in the life book. Gross written premium of our live business fell by 8% to 928. This is due to different impacts within our pension scheme, a non-recurring single premium paid in the first half of 2020, as well as timing differences in premium income related to the transition from DB to DC, which will show a catch up in the second half of the year. At the same time, we achieved good growth in our pension DC product, which saw an increase in premiums of 31% to 342 million over the first half. Furthermore, our cost efficiency improved to 42 bps as share of the basic nominal provision, which is below our target range for 2021. This is driven by lower costs through efficiency from earlier conversions and lower operating expenses in addition to a higher nominal provision due to the strong inflow in DC. Let's now turn to slide seven for the other segments. The operating result on the two fee generating segments, asset management and distribution and services combined amounts 34 million up from 28 million in the first half of last year. So a growth of 21%. This confirms that we are running comfortably ahead of the medium-term target for 2021 of 5% growth per annum. Asset management results improved by 3 million, which was driven by continued growth in the mortgage fund and to a lesser extent to the growth in the DC pension product. Operating results of the distribution and services segment increased 3 million euro, mainly driven by small acquisitions and organic growth due to the expansion of services provided. Operating result of the holding amounted to a minus 56 million as already announced at full year 2020. This is mainly due to the fact that as of the beginning of this year, our pension plan for ASR employees moved to a DC product resulting in lower costs. So now let's turn to slide number eight about our capital management. I'm always keen to show this slide as it displays our strong discipline and track record in offering attractive returns to our shareholders. This half year, we announced an interim dividend per share of 82 euro cents and an increase of almost 8% compared to the interim dividend of 76 at the half year 2020. and equals 40% of the regular dividend over 2020 in line with our dividend policy. Since our IPO in 2016, we have been committed to offering shareholders attractive returns in dividends and supplemented by share buybacks. During this period, ASR showed growth in DPS of over 12% per year and returned around 1.7 billion euros of capital to our shareholders. This roughly equals 38% of our market cap at June 30. We continue to allocate our capital in a rational manner, as we have shown in the past, with a strong balance sheet and robust solvency position. Having said that, I will wrap up after, and Annemiek has told you through all the solvency numbers and the OCC numbers, so I'm happy to hand over to you, Annemiek.