ASR Nederland N.V.

Good morning, ladies and gentlemen. Thank you for joining us today on this call. So welcome to the ASR conference call on our results for the first half of 2024. On the call with me are Jos Baten, our CEO, and Ewad Holagiet, our CFO. And Jos will kick it off with the highlights of our financial results. He will give a brief integration update and discuss the business performance. Ewad will then talk about the developments in our capital and solvency positions. After that, we will open up for Q&A. We have ample time planned for this call, but we'll stop at 10.30 sharp. Please observe a limit of two questions, so that makes sure that everybody has an opportunity to ask the questions that they have. And finally, as usual, please do review the disclaimer that we have for many forward-looking statements, which is in the back of the presentation. Having said that, Jos, the floor is yours.

Thank you, Michel and good morning everyone. Thank you for joining on this on this early morning call. I hope everyone has been able to to enjoy a very relaxing vacation and I am pleased and also proud to report a solid set of results for the first half of 2024. Notwithstanding the focus on executing a successful major business integration, we have continued our commercial momentum and I believe that we are firmly on track to deliver on the ambitious targets that we have presented at the Capital Markets Day in June. We report a significant increase of the figures. This mainly reflects our underlying business performance, which has continued at strong levels across the organization, as well as a step up from the addition of the Aegon NL businesses. we are happy to provide additional insights into our performance in this call today. So let's turn to slide two for the most important highlights. Our OCC increased by 244 million to 658 million, and it's reflecting the continued solid underlying capital generation from our businesses, as well as a step up from Aegon NL. Our strong OCC is also reflected in the increase of the Solvency II ratio to a robust 180%. If we take into account the impact of the sale of our bank that we expect to finalize in the fourth quarter of this year as well, as the redemption of the remaining part of our 5% G2 capital instrument, which we announced last week, our Solvency II ratio would, on a performer basis, be 196%. So clearly operating on a very, very strong capital base. Operating results increased with almost 50% to 677 million, reflecting an overall strong performance of our businesses, together with the contribution from EgoNL. Combined ratio of non-life, and that is, as you know, P&C and disability together, was 91.8. This is an improvement versus last year, and ahead of our target of 92 to 94. And importantly, we did this while we were at the same time growing our non-life premiums organically close to 5% in the first half of this year. Our business growth is further elevated by the addition of Aegon NL. Organically, besides higher premium volumes in P&C and disability, we see a strong increase in pension DC inflow as well. the operating return on equity is increased to 13.4%, well above our target level of 12%. And so let's now turn to slide three to see how we are progressing in our non-financial KPIs. This first half year, we delivered against the new non-financial targets, and we are very pleased with the progress we've made so far. The development of ASR reputation as a sustainable insurer has risen to 39% within the target range of 38 to 43, and this was supported by our campaigns focusing on sustainable damage repair. The carbon footprint in our investment portfolio decreased by 2%, and that is mainly due to the increased allocations to government bond portfolios to countries with lower emissions. Here, we aim to achieve a 25% reduction by 2030. We are making good progress with our impact investments, which now represent 8.1% of the total investment portfolio, leaving us well on track to reaching our goal to be above 10% in 2027. While not shown on this slide, we are also happy to see our customer satisfaction as measured by the NPSC has improved in the first half from 52 to 54. As mentioned on our CMD in June, we will start reporting on the new NPSI metric in 2025. Our compelling ESG profile remains acknowledged by a broad range of international ESG indices and benchmarks. This was confirmed by Sustainalistics earlier this year, awarding ASR a number one position in being the most sustainable insurance company in the world. Let's now move to the integration milestones. When talking about the integration, I am happy to mention that all integration activities are progressing well and overall we are on track. We've identified clear milestones and will execute accordingly in this and the following one and a half to two years. This year, most product rationalization decisions and IT preparations for life, pensions and mortgages will have been made and we are progressing well to almost fully finish the migration and integration of our asset management services, our non-live and our disability. We relocate staff functions in a single location per function. This will enable us to close the Hague location as planned by the end of 2024. We keep working on the implementation of the partial internal model to extend the EGEN model to ASR live. we still expect to have the live PIM implemented by the end of 2025. So let's now turn to the business performance on the next slide. And I'm very pleased to see our premiums received in P&C and disability increase with almost 17%, reflecting a strong organic growth and the contribution of EGLE Netherlands. The organic growth was driven by tariff adjustments and increased sales volumes in P&C, and the addition of a large collective insurance contract in disability. The non-live operating results went up with 46 million in the first half of 2024, mostly driven by improved underwriting results in disability, organic growth, and as said, the contribution of AGON. The combined ratio of our P&C and disability business improved with 0.6 percentage points to 91.8, below our target range of 92 to 94. In P&C, the combined ratio increased to 92.2, partly as a result of claims inflation. We already saw claims inflation picking up in the second half of 2023, which we have countered by implementing tariff adjustments. And as you already know, we implemented further price increases for our personal lines starting in Q2 of this year of a circa 10% on average. And as you remember, price increases become effective at the policy renewal date throughout the year. So it will take two years to be reflected at a full level. The combined ratio in P&C also reflects the absence of weather-related claims in the first In disability, the combined ratio improved by 2.9 percentage points to 91.5. The enhanced profitability of our disability book reflects an improved underwriting result. In the first half, just to remember you, of 2023, the profitability was impacted by a one-off strengthening of the provisions. The combined ratio of our health business stands at 99.3, being almost similar to the first half of 2023. At the start of 2024, we already reported a decline in our health portfolio as a result of disciplined pricing. Reduction of economics of scale is compensated by the improved claim development on the supplementary health portfolio. And let's now move to the important segment of life in the next slide. We're very happy with the solid commercial performance of our pension products. Our pension DC inflow benefits from the developments in the pension market due to the pension reform, as well as the addition of Aegon DC products. We see a growing premium volume from annuities as a result of the conversion of DC accumulation and the addition of Aegon. In the pension buyout space, we see a strong interest in solutions that we offer, and we have already received quite a number of requests for information and requests for proposal. But typically, decision-making in these type of deals just take a bit more time. We remain confident about a longer-term opportunity and meeting the target we have set there of $8 billion. The operating result in life increases with 182 million to 492 million in total. The increase primarily relates to the addition of aid on Netherlands. The operating insurance service result increases 62 million. The result is partly offset by a lower experience variance, which is mainly driven transfers of collective pension entitlements, which has a contra-entry in the CSM through the changes in estimates. Included in the operating insurance results are also the higher project expenses related to the implementation of a new IT system in pensions. The operating investment and finance insurance result increased by 125 million due to higher market valuation of equities, the addition of the EGON portfolio, and a negative impact from the higher LIB, liability illiquidity premium, on the accrual of the balance sheet. So let's now move to our fee-based business on the next slide. The operating result of our fee-based business consists on the one hand of asset management businesses, which comprise mortgages, real estate, and asset management, and on the other hand, the distribution services businesses, including TKP. Operating results of the asset management more than doubled to 50 million by predominantly the contribution of Aegon Mortgage Business, partially offset by a lower fee income due to the transfer of the management of the mortgages and private debt funds to Aegon, which was part of the transaction we did with Aegon Group. Mortgage origination increased by 2.9 billion and reflects the inorganic growth of the Aegon transaction and also an increasing demand for mortgages in the Dutch housing market. Assets under management for third parties increased with 3.2 billion to over 32 billion since year end of 2023. This was mainly by positive revaluation and net inflows of the DC products. Switching to distribution and services, the operating results rose by 9 million due to both organic growth of the existing business and inorganic growth of the acquired businesses Nidasco, Robidus and TKP. As announced at the CMD, we are making additional investments at the TKP to create a competitive platform enabling our customers a cost-efficient implementation of the new pension reform. By then, we mentioned that these expenses would be included in the operating result of the OCC. However, given the incidental nature of these investments, we have to exclude the expenses from our operating results. Operating result of the holding and other decreased by 48 million, broadly driven by higher interest expenses, optimization of our debt profile by the issuance of the RT1 and senior debt instruments, and the transfer of activities to the holding. I'm sure you all noticed that the banking segment is missing in our presentation. As we reach an agreement to sell KNAPP, the results are included under discontinued operations in our income statements. And this for now concludes my summary remarks on the business performance. And now I would like to hand over to Ewout to provide further detail to key developments like the solvency ratio, the OCC, and of course, the investment portfolio.

Ewout, the floor is yours. Thank you, Jos, and good morning to everyone on the call. I hope everyone had some time to enjoy the summer and relax before the earnings season kicked off. Happy to discuss our Sol-C and capital position with you, so let's start at slide 9 for the movements in our Sol-C ratio. Our half-year 2024 Sol-C ratio amounts to 181% after deducting the interim dividend. The increase of five Solstice points mainly relates to a strong level of capital generation of around 10 Solstice points, partly offset by market, operational, and capital movements. Capital movements did minus 2% points, which includes the interim dividend and the temporary benefit of around 2 percentage points due to the RT1 issuance and not full redemption of the existing P2 instrument. Within the market and the operational movements, The largest components are spread movements with positive impact for market spread tightening by around 40 bps, which drove an uplift of the solstice ratio of about six solstice points, offset by government spread widening, higher equity charges, and VA tightening. In addition, as you know, the UFR was lowered with 15 basis points, so all in all, a minus 4% from markets. And looking at our pro forma solstice ratio, we foresee an uplift of around 15 solstice points. The expected closing of the KNAP transaction in Q4 will give an uplift of around 17 solstice points based on the H1 2024 figures. The higher contribution than the earlier state 13 solstice points at the time of the transaction, reflecting the inclusion of the 18 million for the transfer of the servicing of the mortgage portfolio to BAWA and an increase a required capital by the end of June for us as an insurance company due to business growth and account cyclical growth. Next to KNAPP, we also include the announced redemption of the outstanding 120 million tier two instruments in the pro forma numbers, which will be executed by end of September. The high performer ratio means an acceleration of the pace we go back into the balance sheet and puts us in a good position to execute our plans as announced during the CMD two months ago. Before moving to the details on the capital generation, I want to quickly remind you about the changes we have made to the OCC methodology on the next slide. We presented this slide as well during CMD and shows a good summary of the changes we have made. First of all, we have remapped the different OCC components to better align it with the IFRS 17 operating results, which means that business capital generation will represent business impacts like the results from fee-based business, value in your production, your risk margin impacts, and holding costs. And BCG is with that now more comparable to the operating insurance service results and other results under IFRS 17. Finance capital generation is the excess return, finance expenses, including hybrids and the U of R drag. And this is the equivalent of the elements that are part of the operating investment and finance results in our IFRS operating results. And the last part is the net SAR release, which only shows the SAR-related impacts and does not have a counterpart in IFRS. Secondly, we have updated our OCC methodology, with the key changes being the OCC is now based on quarterly numbers, where in the past we had the U of R drag and the SAR multiplier on an annual average basis. This caused an echo effect in the U of R drag from one year into the next, which was not easily understood. And with this change, we have solved that. And the full year OCC will then, with that, be the addition of four quarters. OCC will be built up bottom-up from the underlying insurance entities instead of from a group perspective, which reduces non-cash components like the diversification impact. And the SCR release methodology is updated and now includes the release of equity and real estate SCR in line with the runoff profile of the live book. And the SCR impacts are now multiplied with the SCR target ratio from the different entities and not the reported group ratio. And these changes will further align OCC with the free cash flow generation And it will also enable us to disclose segmental numbers as per full year 2024. That being said, let's have a look at our half-year 2024 OTC figures on the next slide. What we see here is that the level of capital generation increased with almost 60% compared to the first half of 2023. This is mainly driven by organic growth of the business and the agon NL contribution. The business capital generation amounts to $156 million, reflecting the strong contribution from non-life and the addition of AGOM to the Netherlands. The finance capital generation is with $325 million, the largest component, reflecting excess returns being partly offset by higher finance expenses and, of course, the EU part rate. And all components have increased related to the AGOM NLD. The net SCR release shows the net impact of SCR release and SCR strain, which will be lower in age two, given the timing of the SCR new business for mainly group disability. On the opposite, we also expect an increase of the business capital generation due to the family of the same portfolio. An OCC of 658 million 658 million in the first half of 2024, and knowing that the second half will have a lower OCC contribution due to the seasonality pattern in most of your disability portfolio, makes that we are well on track to meet our target of 1.35 billion OCC in 2026. The OCC sensitivity for interest rates has been updated in line with our updated OCC methodology, and now includes the impact on excess return in addition to the earlier presented EU FAR DRAG. For a 50 bps movement in interest rates, the OCC sensitivity remains manageable with certain offsetting elements in either up and down scenario. In the graph on the bottom right of this slide, you can see a bridge between OCC and the IFRS operating result given the remapping of the OCC. And this analysis has become easier where the two buckets of tax and SAR release speak for themselves. The difference in business capital generation is mainly related to differences in timing of profit recognition. The new business strain and fairly new production is mainly recorded in Q4 in OCC. In IFRS 17, this is released across the following years through the CSM. And finance capital generation shows a lower number for IFRS 17. This mainly relates to the difference in balance sheet accrual, where the LIB is material higher compared to the 3A and the Solstice II. This is because the LIB is a more comprehensive proxy for the actual portfolio, including mortgages. In addition, under IFRS 17, the overall liabilities are larger due to the CSM, which is being accrued as well. Let us now move to our investment portfolio on the next slide. This slide shows our high-quality investment portfolio that hasn't changed materials since full year, with a slight decrease of the overall portfolio due to interest rate movements. The main changes relate to the execution of our re-risking plan regarding optimization within the sovereign bond portfolio, where we shifted from AAA rated bonds to more AA rated bonds for additional spread at the very low charts. This part of our re-risking plan has been almost fully completed in the first half of 2024. Exposure to mortgages increased slightly due to the net positive revaluation related to mortgage spread tightening. and the point case portfolio remains of very high quality with a low amount of payment areas and eligible credit losses on average LTV of 62%. Our real estate portfolio shows improvement after a difficult 2023. The two largest elements in our real estate portfolio being rural and residential both show a positive revaluation in the first half of 2024. The smaller retail and office portfolio shows a small negative revaluation, Both, but on average, our real estate portfolio increased with around 1%. For the remainder of the year, we also remain positive on this estimate. Let's now have a look at the financial leverage and flexibility of the balance sheet on the next slide. As you all know, our holding cash policy has not changed, so we only remit enough cash from our entities to cover dividends, coupons, and hold-go expenses. the first half of 2024 we remitted 513 million from the different entities with a special one of remittance from s management related to the sale of the mortgage funds to acre capital distribution of 342 million relates to the payment of the final dividend the bucket order represents different different items of which the largest being the net positive impact of the earlier mentioned rt1 issuance and the partial partial to redemption being offset by replacement of the senior bank loan of 200 million various intercompany current account settlements. The social ratio of the insurance entities have increased or remain stable with the OCC exceeding the remittance to the group. On average, since 2021, we have remitted around 80% of the OCC from the non-life and life entities while continuing to grow these businesses. And that was even excluding the 500 remittance to finance the Aegon NL acquisitions. and further evidence that OCC is pretty much the line of free cash flow generation. And with that, I would like to end my presentation and hand back over to Julius for the wrap-up.