ASR Nederland N.V.

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

Thank you, operator, and good morning, ladies and gentlemen. Thank you for joining us today and welcome to the ASR conference call on our full year 2021 results. Now, on the call with me today are Jos Baten, our CEO, and Ewout Hollegien, our CFO. And Jos will kick it off with the highlights of our financial results, and as customer, he will also discuss the business performance. Ewout will then talk about the developments of our capital insolvency position, and after that, we'll open up for Q&A. As usual, do please have a look at the disclaimer that we have in the back of the presentation on any forward-looking statements that we may make during this call. Having said that, Jos, there are no any special items to mention, so the floor is yours.

Thank you, Michel, and good morning, everyone. Thank you for joining us on this call. I hope everyone is doing well. We are at least really glad to see some easing of the pandemic situation and government scaling down COVID-19 restrictions. Hopefully we can all revert back to our normal lives. We at least are looking forward to the opportunity of meeting you in person again soon. Now, beyond doubt, 2021 was a very good year for ASR. Despite the challenges coming from the pandemic, we actually recorded our best ever operating result and we have delivered on the medium term targets which we have set back in 2018. For this achievement, I really want to thank all of our employees who are actually the driving force behind our performance. Ewend and I will briefly present the highlights before we open the call to take your questions. So without further ado, let's now turn to slide number two. As you have seen in the press release this morning, our operating result rose 15% to over 1 billion. driven by a very strong performance in all our segments. The OCC increased to 594 million, exceeding our mid-term target of 500 million, reflecting the strong business performance as well as increased investment returns. Combined ratios to that 91.8, well ahead of our target of 94 to 96. This is including the impact of the July floods and COVID-19, Excluding COVID-19, the combined ratio is approximately roughly 3 percentage points higher. Our solvency 2 ratio continues to be robust at 196, still on the standard formula. This is after deducting the proposed dividend, and Ewout will elaborate more on solvency later on. Based on the record performance, we offer a significant step up in dividend at 242 per share. This is a 19% increase and This step up will be, as you already know, locked in as we move to a progressive dividend effectively this year. In addition, we announced today a share by back of 75 million, which is the final leg of our previous commitment to do a three times 75 million euro share by back program. So let's now move to slide three and look at our performance against the medium term targets. As shown on this slide, for consecutive years we have clearly delivered on our ambitious medium-term targets. The capacity of our business to deliver solid operating results and to generate capital has been very, very strong. The outperformance is driven by continued solid business fundamentals. Backed by a robust balance sheet and solvency, we were able to deploy capital profitably in organic growth, acquisitions, re-risking, and absorb impacts such as the lowering of the UFR. We also delivered on all of our non-financial targets except the employee contribution to society due to the COVID-19 related restrictions. So, looking back, our strategy was sound and we executed with discipline. Let's go to slide four. Our strategic focus is on creating sustainable value for all of our stakeholders. It is our ambition to be one of the leaders in sustainability. To further underpin our position as a sustainable insurer, we have recently joined the Net Zero Insurance Alliance. Together with our commitment to the Net Asset Manager Alliance, this means that both sides of the balance sheets are covered. To mention some examples, we acquired a significant part of the largest land-based wind park in the Netherlands from Vattenfall. This sustainable investment in renewables provides the equivalent of the energy consumption of 114,000 households in the Netherlands. And in our insurance portfolio, we are glad to see an increase in the adoption of sustainable repair instead of full replacements. Almost 25% of fire claims and almost 60% of motor claims are now being repaired in a sustainable manner. As a reliable employer, we have put a great deal of effort in inclusion and diversity, providing equal opportunity for career advancement and personal development and making sure our force remains healthy and at the same time engaged. And our achievements in sustainable value creation and ESG is increasingly being recognized by ESG benchmarks and indices, such as the leading Dow Jones Sustainable World Index, where ASR is among the top 10 best performing insurers worldwide. And of course, our number two position globally, according to the Sustainalytics risk rating. Before moving to our different segments, Let me just discuss a bit more about the recurring subject of COVID-19 on slide number five. With most of the restrictions recently lifted by the Dutch government, we are hopefully at the end of the COVID-19 period, which has kept us in its grip for almost two years now. COVID-19 has caused considerable stress on society, on individuals, both physically and mentally. The longer-term impact of, for instance, lung COVID are still quite uncertain and sickness leave due to COVID related mental illness can leave long lasting marks on people's lives and society. We as ASR have helped our customers from the beginning of the COVID-19 period with tailor-made solutions and payment arrangements. So far, fortunately, we have seen only a very low number of bankruptcies and arrears in our customer base. And our employees have been able to keep customer satisfaction at a high level. Measured by MPSC, this was stable at 49 in both 2020 as 2021. Regarding our own employees, the mood monitor, which measures our employee well-being, motivation, and vitality, remained very high during the period with a score of 7.5 out of 10 in 2021. From a financial point of view, COVID-19 had a net positive impact on our 21 results. On operating result, we see an indicative positive impact of 77 million. Same dynamics apply as earlier results with a slightly negative impact on disability due to higher level of claims and on life, mainly due to lower direct investment income. This is more than offset by a positive impact in our P&C business coming from frequency benefits in motor and lower claims in fire. So let's now move to slide six and talk a bit more of our non-life segments. In non-life, the operating result went up by 84 million driven by strong organic growth and lower claims in disability, lower than last year. COVID-19 had a net positive impact of 93 million compared to the 21 million last year. This was partially offset by the reserve strengthening in the first half of 2021, as well as the floods in the south of the Netherlands, which had a negative impact of 20 million. Claims related to the heavy storms this year, as we all have noticed last weekend, are currently estimated to range somewhere between 40 and 60 million. Please note this is a preliminary and rough estimate as it is still early days after these storms events. Up until now, we recorded just over 4,000 claims, but there are still new claims coming in. As a reminder, Our reinsurance kicks in at 35 million, and our program includes a second storm cover of 17.5 million. Our combined ratio last year improved by 1.9 percentage points to 91.8 for P&C and disability combined, beating the target of 94 to 96. And as mentioned earlier, excluding COVID, this would be around three points higher. With 5.2 organic growth for P&C and disability combined, we have even surpassed the upper limits of the target range, despite challenging market conditions, so we were able to grow the business organically. Especially in P&C, due to increased competition, this was quite a challenge. Momentarily, we do see the risk in the current market that some players are being tempted to become more actively apply the price instrument to gain market share. Finally, in health in 2021, we saw a significant increase in gross weight and premium due to commercial success of our new introduced product. In maintaining our financial discipline and pricing, our products rationally, we benefited from the opportunity in Dutch health insurance markets to grow profitably last year. And as you know, value over volume remains a key strategic principle. We have continued to remain disciplined in pricing in our health business also in the beginning of 2022, where we have seen the market become a bit softer in terms of pricing. As a consequence, not all of the customers that we won last year will stick to our business, and we assume that we will lose about half of the growth in customers last year. Let's move to slide seven and talk a little bit about the life segment. Operating result of life increased by 33 million to 763 million. COVID-19 had a negative indicative impact of 16 million, compared to the negative impact of 22 million in 2020. This impact is mainly related to lower dividends from the real estate funds and somewhat higher rent discounts. Operating result is up mainly due to a higher investment margin driven by the further optimization of the investment portfolio and the lower required interest due to the gradual runoff of the individual life portfolio. And Ewout will elaborate more on the asset optimization in his part of the presentation. Crosswritten premium increased mainly due to the commercial success of our Pension DC product, which saw an increase in premiums of 37%, 37 to 634 million. The total assets under management in Pension DC, including the acquisition of the brand new Day IORP, increased by 1.7 billion to 5 billion end of last year. And finally, our operating expenses remained at 45 pips at a lower end of the target range. And this 45 already includes the investments in our IT systems needed to adapt the ongoing transition within the pension business. So let's now turn to slide eight for the other segments. Operating results for the two fee-generating segments, asset management and distribution and services combined, amount to 64 million. up 12% and exceeding our medium-term target, as announced in 2018, of 5% growth per annum. Asset management result was driven by the continued growth in third-party assets under management, mainly related to the mortgage fund and pension DC-related mix funds. Mortgage origination amounted to a record of 6 billion, 1.4 billion higher compared to last year, Out of this 6 billion, 2.1 billion was allocated to the ASR mortgage funds. Operating result of the distribution and services segment increased by 2 million, mainly driven by small acquisitions and organic growth. In addition, as mentioned during the investor update, we have made the first step in increasing the effectiveness of the various distribution entities by putting them under one central management. This will be reflected in daily operations as well as the execution of our M&A strategy in the distribution landscape. Finally, holding and other operating results improved to minus 130 million, mainly coming from the shift in pension scheme for our own employees. Let's turn to slide nine and talk about capital distributions. As mentioned, we clearly raise the total capital return to shareholders. This is supported by the solid capital generation we expect from our businesses and our strong current capital position. This year, we propose a dividend of 242 per share, which is a 19% step up compared to last year. This is the basis for our progressive dividend going forward, where we define progressive, low, to mid-single-digit growth. On top of that, we will finalize our three-year share buyback program of three times 75 million to be executed in the coming three months. And as announced during our investor update, it's our intention for the coming three years to do a share buyback of at least 100 million annually. And with that, I'll part my end of the presentation hand over with a lot of joy to Ewout.