Asr Nederland Nv Uns/Adr

Good morning, ladies and gentlemen. Thank you for joining us today. Welcome to the ASR conference call on the results for the first half of 2025. On the call here with me today are Jos Baat, our CEO, and Ewout Hollegien, the CFO. And Jos will kick it off with the highlights of the financial results. He will also give a brief update on the AGON transaction and the integration and discuss the business performance. Ewout will then talk about the developments of our financials, the capital, and our solvency position. After that, we will open up for Q&A. We have ample time planned for this call, but we will stop sharply at 10.30. And please do observe a limit of two questions so everybody can ask their questions. And if we have time left, we can go for seconds. Finally, as usual, please do review the disclaimer that we have in the back of the presentation for any forward-looking statements. So having said that, Jos, the floor is yours.

Thank you, Michel, in the house. Good morning to the crowd. Thanks for joining in. We're going to say it loud. We delivered strong numbers. That's the vibe, no doubt. Strategic plan, discipline, focus, all about. Results on the rise, yeah. Growth been strong. Momentum in the business, we keep it rolling on. Targets in our side, medium term we aim. Performance on the table, we're elevating the game. So take a closer look, see the work we've done. Slide number two, yo, the journey's just begun. So let me start with the integration of the Aegon business because that's been front and center for us over the past two years. As a result... of hard working and tremendous dedication from our colleagues throughout the organization. I'm pleased to say that we have achieved all integration milestones so far, and we're now entering the final phase. We've made significant progress this past half year, especially with the migration of the mortgages and the individual live books. And we're fully on track to implement the live PIM by year end. that puts us firmly on path completing the integration in 2026 and delivering our strategic targets. Secondly, on growth, we're experiencing tailwinds from the pension reform in our pension book with increased inflows into both accumulation and de-accumulation products. We've executed strongly in the pension buyout market, closing three deals so far this year, in total nearly 3 billion in assets under management. the margins are solid and comfortably above our 12% hurdle. And this comes on top of another strong half year of organic growth in our non-life and fee-based business. And thirdly, we continue to deliver attractive capital returns to our shareholders. The interim dividend per share is up 9% compared to the last year, driven by a 7% increase in absolute dividends and the execution of the 225 million in share buybacks split between H2 in 2024 and H1 in 2025. So all in all a strong delivery on the promises that we have made a year ago. Let's have a look at some other highlights. Our OCC increased close to 10% to 721 million driven by business growth, higher investment margin and the realization of cost synergies. Benign weather in P&C and elevated spreads, for instance in government bonds, have been beneficial to OCC. The Solvency 2 ratio increased with 5 percentage points to 2.03, reflecting the strong OCC contribution supported by market movements, especially the steepening of the interest rate curve. The 2.03 ratio also includes the impact of the 125 million share buyback completed in May and as well as the interim dividend. Operating results came in at 826 million, up more than 20%, driven by broad-based business performance and a higher investment margin. Operating return on equity rose to 14.4%, comfortably above our target of more than 12%. In non-life, the combined ratio for P&C and disability improved to 91.0%, ahead of our target of 92 to 94. And importantly, we achieved this while growing non-life premiums organically by 4.1%. So we are delivering profitable growth. Additionally, we saw solid inflows in pension DC and annuities. Combined with the four pension buyouts deals we've executed so far, we're clearly on track to meet our CMD growth targets. Let's move to slide four. and look how we are progressing on our non-financial KPIs. As we continue to create sustainable value for all of our shareholders, we are consistently recognized as a sustainable insurer. Our brand reputation score increased to 40% well without our target range of 38 to 43. This was further underpinned, among other things, by our new partnership with the Royal Dutch Walking Association. The carbon footprint of our investment portfolio reduced by nearly 7% compared to 2023 and impact investments now represent 8.7% of the total portfolio, keeping us firmly on track to meet our non-financial goals in this area. Employee engagement declined as we expected. The integration of Aegon Netherlands activities is a massive project and the merging of two corporate cultures have had an impact on our people. That is quite natural. And at the same time, we now see that in the areas where the integration has been completed, employee engagement is rising again. We also see positive developments in customer satisfaction as of this year measured through the NPSI. mixing both direct contact and digital contact in the online environment. The improvements reflect that we are able to execute the business integration while keeping focus on our customers. That said, our compelling ESG profile remains acknowledged by a broad range of international ESG indices and benchmarks. All in all, we are pleased with the progress we are making and the value we are creating across the board. Let's move to the integration milestones on slide five. We are now entering in the final phase of the Aegon NL integration and are confidently on track to deliver the 215 million synergy target by 2026. Earlier, we successfully completed the integration of P&C and disability, and we've now finalized the last steps in asset management. Legal mergers for non-life, IORPs and the holding entities have also been completed at an earlier stage. In the past six months, our focus has been on migrating individual life policies and mortgages. Around two-thirds of both portfolios have already been migrated and we expect to complete the remainder in the second half of this year. All new mortgage production is now processed through the SaaS solution on the Stata platform. We've also made solid progress on the partial internal model for ASR Live. The formal review by D&B is underway and on track to receive approval before year end 2025. And as a reminder, we expect the PIM to contribute somewhere between 10 and 12% points to our solvency ratio. The final phase will include the legal merger of our life entities and the remaining integration activities within pension. We will also decommission the remaining Aegon systems, in total 220 different systems, and terminate the remaining TSAs, bringing us to the full delivery of our Synergy ambitions. That being said, let's dive into the performances across the different business lines. Let me start with non-live on slide six. Premiums received in our non-live business grew by 4.1% comfortably within our medium term target range of 3 to 5%. This growth was mainly driven by tariff adjustments over the past two years and increased sales volumes in P&C commercial lines and group disability. We do see competition pick up particularly in certain selective product lines and primarily from foreign players. This makes the performance all the better because our strategic principle has been for many years value over volume and this remains the case. So we will continue to pursue profitability over market share. The combined ratio of our P&C and disability business improved with 0.8 points to 91.0. outperforming the target range of 92 to 94. The expense ratio has improved 0.7 points from the realization of cost synergies, further strengthening our cost leadership position in the Dutch market. We are delivering on both growth and profitability, striking the right balance and maximizing the absolute amount of profits. In P&C, the combined ratio remains strong and better than target. Similar to the first half of last year, also in the first six months of this year, profitability was supported by the absence of weather-related calamities. We also continue to see stability in the combined ratio in bulk claims, which further improved in H1 2025. These bulk claims, which are low in amount and high in frequency, are relatively stable And this represents about 90% of our total claims. Looking back over the past few years, the impact of bulk claims on the core has never deviated more than one and a half percentage points from the average claims ratio of around 53%. This is truly our bread and butter business. In disability, the combined ratio improved by 0.8 points. reflecting gradual price increases and a strong business performance. There was an offset between non-recurring benefits from provisioning harmonization and additional provisioning on group disability portfolios. Group disability has experienced adverse claims development due to elevated incidence rates, especially related to psychological absenteeism and long COVID. We believe This is a broader market phenomenon due to the long waiting times at the UWV, the Dutch Employee Insurance Agency, a nationwide development that we monitor closely and for the next year we will increase prices. Let's move to the live segment on the next slide. We're seeing strong commercial traction in our pension business with momentum clearly building across the board. DC inflows are up 16%, annuities are up 8%, and we executed three buyout deals this year, totaling 2.8 billion. Our pension DC inflow of 1.5 billion benefits from the developments from the pension reform and continues to grow steadily. The pension DC assets under management increased, although it experienced some negative revaluations from rising interest rates. Annuity inflows are also gaining pace, driven by maturing DC assets. The majority of inflows come from converting expiring DC assets from our own book, supplemented by external inflows. We're halfway through our planned period and have achieved 50% of our 1.8 billion cumulative annuity inflow targets. So really on track. In the pension buyout space, we've shown strong deal execution. The almost 3 billion in buyouts so far puts us well on track to meet our 8 billion cumulative targets by 2027. Let's dive into the pension buyouts on the next slide. ASR is leading the charge in the pension buyout market. And I would like to make clear from the onset that each of the transactions that we've executed meets our 12% hurdle rate. So no issues there. So far, around 7 billion of pension entitlements have been transferred to insurers, roughly 25% of the expected 20 to 30 billion markets. ASR has captured about 40% of that. thanks to our compelling pension proposition and strong capital position that ensures financial stability for pensioners, including protection against inflation. Our managers are hand-on from day one, showing clear commitment to drive to execute these deals. With TKP's top-tier platform, we've ensured smooth transfers to pension entitlements and demonstrated in the four deals already closed. with the operational capacity and capability to onboard our customers efficiently and provide the service they expect. As mentioned, margins on the deal so far have been attractive and above our 12% hurdle rate. With the average maturity of these buyouts being about 15 years, this is a long-term value driver to our OCC. Returns are driven by bespoke asset allocations geared towards internally managed assets such as mortgages and real estate, which matches really well with the illiquid characteristics of the liability. To us, this also confirms that owning your own asset manager pays really off. We're also exploring reinsurance options for the longevity risk. This appears an interesting capital alternative which could further enhance the stock flow trade-off and boost value creation from these buyout transactions. Moving on to the fee-based business on the next slide. In our fee-based business, we delivered a 7% increase in fee income, and we've taken further steps to enhance growth going forward throughout targeted acquisitions. The full acquisition of Human Total Care, the market leader in occupational health and reintegration services, strengthens our position in the value chain of sustainable employability. With absenteeism on the rise, a tight label market and a higher retirement age, prevention and reintegration are more relevant than ever before. We expect the closing in Q4 and this acquisition fits perfectly with our strategy of combining organic growth with selective M&A. We also agreed with the pension funds Zorg and Welzijn to split the real estate activities of AMVEST per the 1st of January next. As a result, ASR will independently manage the 7,500 residential dwellings previously overseen by AMVEST while the development activities will be split. The operating result increased by 13 million to 87 million, driven by business growth and the realization of cost synergies. Although there is some seasonality in DNS, which is skewed to H1, the fee-based businesses are performing really well. With that, I'll now hand over to Ewout to walk you through the financial and capital positions.

Yes, thank you, Jos. And I have to say Snoop Dogg has to watch his back because competition is on its way. Good morning to everyone on the call. I hope everyone had a fantastic summer. I'm genuinely pleased with the set of results we are presenting today. They reflect the strength and resilience of our financial and capital position and show that we are well on track to meet our ambition. Now turning to slide 11. Let's kick it off with our capital wheel. For yet another consecutive period, it is fair to say that we cut this wheel spinning. We are operating from a position of capital strength. Our sole ratio rose to 203%, giving us ample capital to fund our initiatives for profitable growth. We have in particular executed strongly in the pension by our market, one of the cornerstones of our deployment strategy. The capital generation benefited again from strong underwriting performance, the absence of large weather-related claims, and higher investment returns. Thanks to our disciplined deployment of capital in profitable growth, we are well on track to hit the 1.35 billion target by 2026. And our capital return remains strong. The interim dividend per share shows an increase of almost 10%, reflecting the growth of the dividend base as well as the positive impact from the share buybacks executed at the end of 2024 and in the first half of this year. Now let us zoom in on how our Sol-C developed in the first half of 2025. Over the past half year, we deployed capital at attractive margin. Despite that, our Sol-C ratio still moved up by 5 points, landing at 2 over 3. Let us look to the key drivers of the development of Solsci. The free buyout deals in the first half of the year, adding 2.8 billion of assets and liabilities, impacted Solsci by 4 points. As we did not use longevity reinsurance yet, this is about 1.5 Solsci points lower than anticipated. This is due to the fact that these deals only closed end of Q2 and that the majority of the assets still needs to be rebalanced to the targeted asset mixture. The OCC contributed roughly 12 percentage points to the Solve fee, and the market and operational movement shows a net positive impact of 2 percentage points. This includes a positive impact from the steepening of the interest curve. As you know, in our sensitivity analysis, we only include steepening between the 20 and 30 years point, but we also have experienced 20 BIP steepening between 10 and 20 years points. And at earlier stages, like in 2022 and 2023, we already have seen that steepening between 10 and 20 year is beneficial for our solstice as the UFR converges differently. Secondly, we have seen a tightening of the mortgage spreads compared to the full year level. And finally, positive revaluation in real estate, especially in residential and rural. And these pluses were partially offset by equity market movements that led to an increase of the equity dampener, driving a higher required capital. This all brings the SOLCI 2 ratio to 208% before any capital management actions. After deducting six points from the interim dividend and the 125 million euros share buyback and factoring in the 500 million RT1 issuance and the partial tier 2 redemption, we land at a SOLCI of 203. Quite some moving parts and may be useful to have a look on what we can expect on SOLCI for the second half of this year. Let me highlight six items. To start with, the first call date of the remaining 88 million tier 2 hybrids is in September and we already announced to call this instrument. Secondly, in H2 we perform our annual actuarial assumption update process and we expect to see one or two solstice points contribution from the capitalization of the Lausanne cost synergies. Thirdly, we have about one and a half percent additional capital consumption from the closed buyouts to invest fully in the targeted asset mix. And we might, when opportunities arise, also invest one or two solstice points in re-risking of the general account. As a fourth point, we also mentioned that we will explore the potential benefits of reinsuring the longevity risk of the buyout transaction. If we execute on reinsurance, it will of course provide capital relief and enhance the return on the buyout transactions materially. And five, as mentioned during our full year results, we are looking to explore a change in the mortgage SPAT methodology in order to dampen some volatility driven by timing differences between interest rate change and the subsequent adjustment to mortgage rates. The adjusted methodology will likely result in a slightly higher spread, meaning a small negative impact on the group solstice ratio at implementation date, but a small positive on OCC going forward. In fact, a stock versus flow impact, and on average, less sensitive for spread movements. And last, certainly not least, the impact of the implementation of the partial internal model for ASR live, which is still expected to add 10 to 12 solstice points to the group solstice. And of course, we should not forget the regular OCC contribution, which we briefly discussed later, and the final dividend that will be deducted at full year, which more or less offset each other. Let's turn to capital generation on the next slide. Capital generation increased by 9% to 721 million euros, mainly driven by the life segment. Re-risking in H2 of last year, positive equity and real estate revaluation and wider government spreads pushed the investment margin of segment life up by roughly 50 million. Secondly, in the non-life segment, we saw solid organic growth and improved combined ratio. This led to an increase of business and finance capital generation, which was offset by a lower net SCR impact, mostly related to the new business strain from the growth in health. and some growth in the other non-life businesses. Fee-based business added another 10 million to OCC due to the improved operating results. Holding and other decreased a bit reflecting temporary allocation of IT integration costs at holding level and higher refinancing costs from the RT1 issuance in H1. Looking ahead to the rest of the year, what's on our radar for the capital generation? Let us start with H2 2024 as the base. Our H2 2024 capital generation was 534 million, which benefited from mild weather and fewer large claims in P&C. Normalizing this to the midpoint of the combined ratio range means a 50 million deduction, bringing us to a normalized H2 2024 OCC of 520 million. From our business plan, we expect tailwinds from growth of the business, realization of synergies, slightly higher better investment margin, and lastly, the pension buyout though the impact will be modest, particularly for Q4, as assets weren't fully invested in the targeted mix by end H1, as already discussed. Altogether, we expect a 30 to 40 million uplift versus the normalized H2 2024 OCC, putting us comfortably above 1.25 billion and well on track for 1.35 billion in 2026. On the next slide, I will bridge the OCC to operating results. And I'm pleased to see that the bridge we are showing here tells a consistent story between capital generation and operating result over time. Firstly, business capital generation is higher in the operating result, driven by the CSM release in the live segment. Secondly, finance capital generation is lower in the operating result. That reflects the higher negative accretion on the balance sheet, specifically the CSM and the LIB versus the volatility adjuster. On average, we see 25 bps higher liquidity premium versus the VA in H1. Thirdly, the positive impact from net capital release in OCC doesn't show up in the operating result. I think this is also very much reflected in what we have seen in non-life. And finally, please don't forget the operating result is pre-tax while OCC is a post-tax measure. Let's move to the next slide and dive into the operating result. Operating results increased with 22% to 826 million euro. Life segment delivered a steep increase of 126 million, mainly driven by the high investment margin, which we also saw reflected in capital generation, and a less negative experience variance compared to first half of 2024. The other result in life benefited from gains related to the contribution of associates. In non-life, as mentioned earlier, we benefit from improved underwriting margins, cost synergies, and higher premiums. The segment added 26 million. For fee-based business and holding and other, the same dynamics apply as for OCC. Before we move on to the investment portfolio, I want to point out two incidental items that impact the IFRS result in the first half of the year. Firstly, to harmonize methodologies of Aegon and ASR, we updated the determination of the liability liquidity premium, leading to a lower average LIB on group level. This has a negative impact on liabilities, hence IFRS equity. However, this will have a positive impact on operating results due to the lower accrual of liabilities. Really stock versus flow dynamics on IFRS basis. And secondly, the revaluation of their own pension scheme. positive revaluation of the own pension scheme liability run through OCI, so through equity, and this presents a gap from the interest rates in the IFRS result. Let's now turn to the investment portfolio. This slide shows the strength of our investment portfolio, high quality, well diversified and resilient. I'll start with the fixed income, then touch on market spreads and real estate. Our fixed income portfolio is solid. Around 95% is investment grade and well diversifies from a geographical point of view with a skew to European countries. Our exposure to the US is limited, as you can see. And please note that the fixed income US dollar exposure that we have is fully hedged. Top left, you'll see the development in real estate. Residential property continues to show strong momentum with a 4% positive revaluation so far in 2025. It makes up about half of our real estate portfolio. The valuation gap slightly closed and remained positive on price development for the rest of the year. Rural property also performed well, increasing by 3%, and this accounts for roughly 20% of the real estate portfolio. Other real estate categories saw smaller but still positive revaluations. Then lastly, mortgage cases. Risk return profile of mortgage cases remained very strong. low arrears, negligible credit losses, and an average loan-to-value of 54%. 80% of the portfolio has a loan-to-value below 65%. I think we need to consider to change Swiss clockwork into Dutch mortgage cases when we want to express predictability and quality. We currently see mortgage spread levels of around 100 bps, which we consider as a normal level, though a bit lower than first half year. As mentioned earlier, on track to adopt the methodology to reduce volatility in temporary spread movements. Let us look at the flexibility of the balance sheet on the next slide. In March, we issued an RT1 instrument to refinance the maturing Tier 2 in September of 2025. By replacing the Tier 2 with an RT1, we have rebalanced our headroom over Tier 2 and Tier 3 versus the RT1, enhancing the financial flexibility. As you can see on the bottom right-hand side, our debt maturity schedule remains nicely staggered over time. And lastly, it's good to mention that the outlook to the S&P IFS ratio is positive, awaiting a final decision. And we are very happy that also S&P is appreciating the progress we are making both strategically and financially, and looking forward to monetize the positive outlook. And finally, let's end with our hardcore liquidity, which remains very comfortable. As you know, we only remit cash from our entities to cover last year dividends, coupons, and holdco expenses. Starting this year, we are now including a part of our unconditional revolving credit facility in our hold and liquidity definition to facilitate that we keep cash in the legal entities to get the best yield. Solci ratio at our live entities are benefiting from the steepening of the interest rate curve. Aegon's live ratio even held steady despite a 10 points deduction from remittances to group, and 11 points consumed by pension buyouts. The continued strong capital position at Acorn Life provides us capacity to remain active in the buyout market. And just a quick reminder, solvency ratios for ASR Life and Non-Life are based on the standard formula. If all goes according to plan, we will implement the partial internal model for ASR Life in H2 2025, which will further lift the solvency ratio of ASR Life and Group. The implementation is progressing well. The formal review phase by the D&B has started and on track to get the approval before year end. And with that, I'll close my presentation and hand it back to you, Jos, for the wrap-up or the wrap-up.

Thank you, Amos. This concludes our presentation. And before we take your questions, let me highlight the key messages. We achieved a very strong performance in all of our businesses, supported by increased investment returns. Our OCC is on track to achieve the medium-term target of 1.35 billion in 2026. Proven execution in the buyout market and further organic growth in all business segments. So delivering on our growth ambition and a solid base for our medium-term targets. Robust. Solvency 2 ratio of 203 comfortably in the entrepreneurial zone reflecting our increased OCC and positive market impacts compensating the deduction for capital return and deployment in the pension buyout market. The introduction of the PIM for ASR live by year end is on track and finally the integration of Aegon NL is entering the final phase and we are well on track to deliver on the synergy targets so we are happy to take

any questions and I'll hand over to the operator thank you so much dear participants as a reminder if you would like to ask a question please press star one one on your telephone keypad and wait for a name to be announced to withdraw a question please press star one and one again wisdom bar will compile the Q&A roster this will take a few moments and now we're going to take our first question And it comes to the line of Carl Cluys from ABN Amro Auto BHF. Your line is open. Please ask your question.

Good morning and thanks for asking the questions. And yours, thanks for your introduction as a rapper. My first question is about capital. The capital is quite good, of course, at 203%. And then you've got the AECOM PIM at the end of the year. So, yeah, quite high solvency if you also take that into account. Until now, we only have the of the 175 and the 225 in, I think, most models and guidance. Can you give a little bit more idea what to do with the capital going forward, especially from next year onwards? Do you see other material acquisition opportunities going forward, for example, or big capital consumption for buyout? excess capital situation maybe we look a little bit we're a little bit early on that we have to ask a question at the end of this year but that's the first question second question like what they were said is the mortgage spread model adjustment that that could have some positive impact on the OCC and going forward could you quantify that a little bit of what kind of figures do we have to think about that change And my last question is about pension buyouts. You already say that you, before hedging, have an IRR of above 12% of the pension buyouts, so that was good allocation of capital. Could you give an idea of the IRRs after hedging? Because I think you said somewhere that it could be quite a significant enhancement of the IRRs. Are we then talking about 13% or 40% IRRs? of these buyouts because that looks quite good from a capital allocation point of view. That's it from my side.

Thank you, Cor. Let me take the last and the first question to the pension buyout. Indeed, we are currently in all the transactions we have done exceeding the 12%. I think that's predominantly due to the fact that we have a very efficient operation and asset in the presentation. We believe that having our own asset manager is also helpful in optimizing value in adding the assets to the portfolio. We've done that until now without any reinsurance. And we assume that longevity reinsurance could add a couple of additional percentage points to the IRR. We haven't put an exact number on that because you have to ask for quotes per transaction and it depends on the population of the transaction. whether it will be one percentage point or even more than that. But it definitely gives us the ability to increase the IRR on those transactions. Then on capital deployment, of course, we are happy with the fact that we also going forward see further growth of the capital that puts us in the position that we can keep on executing the strategic plan that we presented during the Capital Markets Day. First of all, organic growth of the business, including further growth of the pension business. And the way we look at it today is we've set a target of 8 billion in buyouts. Let us first get there, but the strong capital position puts us in the position that If the market is larger than the 20 to 30 and we've reached the 8 billion, that capital will not be the limiting factor to further growth in the pension buyout business as long as the IRR remains above the 12%. That's one. Secondly, we have the feeling that M&A still is on the table. We do see some smaller... P&C companies that are thinking about their future and if they would reach out to us, then we would definitely be willing to talk with them. So having capital for that is always a strong position. And as I said, we believe that consolidation of the Dutch live market is not yet ready and we're willing to seriously look into that also. Having said that all, realizing that we have a strong capital growth path in front of us, if we can't do anything of that, we're fully realizing that we also should consider higher buybacks than what we have announced up until now. So we keep on track on the 175, 225. And if the capital keeps on growing and we can't spend it on profitable and our hurdle meeting investments, we definitely are willing to increase the capacity for buybacks. And with that, I hand over to... to a vote for the mortgage spread.

Yes, so on the mortgage spread, we don't know exactly of course what the impact will be by the full year numbers, but maybe to give some color on that. So let's assume that it costs two Solstice points, then you talk about 120 million of own funds that you lose. The contribution from the OCC, so the flow that you get back from that, you should divide that somewhere between seven and 10 and 10. That's the average duration of the mortgage book, and that gives you a flavor on what then the contribution of OCC will be, but it's also dependent on, by the end of the day, what the impact on the spread will be, and that you only know by the full year, but we expect a small impact from that.

Okay, very clear. Thank you very much. Thank you. Now we're going to take our next question. And the question comes line of David Barmer from Bank of America. Your line is open. Please ask your question.

Good morning. Thanks for taking my questions. And apologies for my lack of a good West Coast flow this morning. Firstly, on OCC, thanks for the 2025 bridge. Can you give us a similar color for 26, please? Because you're pretty much tracking in line with... 26 already, and we got more cost synergies to come, more re-risking benefits, more buyouts, maybe a bit of uplift to OCG if you do these longevity reinsurance deals. So is there any reason we shouldn't expect you to outpace your target next year? And then secondly, on an earned basis, top line is down in disability and only slightly up in PNC. So first, could you maybe give us a bit of color of the bridge between the the organic growth and the earned numbers, and if you can update us as well on pricing trends for these two lines of business. And I'll listen to Michel and stick to the two questions. Thank you.

Thanks, David.

Shall we also discuss the 230 OCC? No, just kidding. Let me try to give some direction of travel. I think what we expect for 2026 is more or less the same elements as we have seen in 2025. But you see that there's kind of a shift more to what becomes more material. In 2026, we expect further contribution from the synergies that we are realizing, even more than we have seen in 2025. What we also expect in 2026 to come through more is the buyouts. As I said, we closed most of the buyouts just before Q2, so the re-risking hasn't been done a lot for those buyouts. That will be done in Q3 and remain the portion in Q4. But that also means that you only have kind of a one-quarter really benefit in 2025, as you see from the buyouts. So that will definitely contribute also more in 2026. And thirdly, we also keep on growing the business. So also from that area, you can expect an improvement. There was a small offsetting element that we expect from the introduction of the partial internal model. for life, which reduces the required capital and will also reduce the SCR release for ASR life. But all in all, that brings us in a level, as we have said earlier, that we expect to do roughly 100 million more, 80 to 100 million more in 2026 compared to the normalized level of 2025.

On the second question, David, as said, we do see a bit more competition in the P&C and disability area predominantly from foreign insurance companies focusing on capital light business like fire and sickness leave. With that we have said we will stick to our philosophy value over volume and for that the growth of 4.1% represents roughly 75% of price increases and 25% of the growth comes from real organic growth. That's what we see going forward as the trend. So price increases will remain important. what we already know and I think I've said that also in the presentation. We see, particularly in the VIA business, we see need for further price increases and we already took the decision to increase prices for that. That is actually a disability group business for taking over the risk after two years of sickness. There we also already decided to increase premiums and that will impact our competitor position as the market is not following. But what we do see is that this is a market phenomenon so we expect that we as a market leader if we increase the premiums there that others also will follow. In motor and P&C, for this moment, we don't see any large additional increases of premiums. And of course, we have the regular indexation, so premiums will go up anyway due to the clause in the products that we, on a regular basis, will index the prices there. So hopefully that answers your question.

Yeah, thank you.

Thank you. Now we're going to take our next question. And the question comes to the line of Andrew Baker from Goldman Sachs. Your line is open, please ask your question.

Great. Thank you for taking my questions. The first one, just coming back to the sort of 12% or greater than 12% hurdle rate for the buyout. And obviously, as you said, it goes up to sort of a couple points potentially from the longevity reinsurance. That seems really strong. And then we're also hearing, though, from one of your other peers that they sort of don't see pricing as that attractive in the market and they can't get their double digit return. I hear you on what you're saying in terms of your efficiency and owning your own asset manager. But is that enough to sort of bridge from, I guess, below 10 percentage points return from a peer to what you're seeing as sort of 12 to 14? Or is there anything else going on there? And then secondly, just on the longevity transaction, how should we think about the size of any potential transaction? Is it linked explicitly to the buyout business that you're writing, so the close to $3 billion, or would you do anything in terms of the back book as well? Thank you.

Thank you, Andrew. I think I already mentioned the three important elements why we are able to gain traction in this market at profitable returns, a very efficient platform, a very strong capital position on a holding level and in the live entity, and at the same time, the ability to pick and choose your assets in the illiquid space in a way that from our perspective, it increases the profitability. So the better question might be giving David a call and asking him why he's not able to reach more than 10%. So I think we're comfortable with this. And you know us already for a long time, we don't do anything that is not delivering at least 12%. And the key statement we want to make today is, the return on the first four transactions is even without reinsurance already above the 12%.

Beautiful thing is also that we, in the H1 numbers, we already have the buyouts in our books. So we can also make a comparison on what we have put into the pricing and what we see in the reporting. And you see actually that that is matching. So that also gives us the comfort that we are doing the right things. Then on your question around the size of the longevity reinsurance that we are considering, what we also have said during the full year call is that we want to test the longevity reinsurance market because we don't need it from a kind of capital perspective, but we see that as some kind of way to optimize the IRR of buyout deals and maybe in the future also the capital structure of the company. But we want to test the longevity reinsurance market by doing it for a buyout. We have used the 1.6 billion buyout, so the biggest buyout that we announced to test the reinsurance market. And it gives us, when we look today and the quotes that are coming in, especially the appetite that we see from reinsurers across the ocean, do give us the comfort that there is the possibility to enhance the IRR material by doing a longevity reinsurance trade. That might also trigger the question, will you then also consider that for the portfolio that you have in force? I think if indeed it is attractive enough, we should definitely look into it. What we also will do is take into account the fact that when we look to our portfolio today, we also have mortality risk in our book. I think they distinguish us from other Dutch insurance. We will take into account that we bring ASR Live to an internal model, which also already makes longevity risk more capital efficient than under a standard formula. And we will also take into account the AOPA 2020 review, where you see that the risk margin will be lower than it is today, and that will also have an impact on the attractiveness of longevity reinsurance deals in the future. Having said that all, if we see that this material improving the IR of buyouts, we will assess whether we can further improve also the capital structure of the company.

That's great. Thank you so much, Ralf.

Thank you. Now we're going to take our next question. And the question comes from Michael Hutner from Bernberg. Your line is open. Please ask your question.

Fantastic. Thank you. My first question is on what I would call burnouts. You highlighted this just in your opening remarks, talking about the employee satisfaction and things. The speed at which you're operating is... It's almost unbelievable. Not only you're beating your targets, 185 raised to 215, and it feels like you're a little bit ahead even of the 215 now. On the integration, it also feels like you're a little bit ahead of plan. You're doing more growth than your peers. Is there a risk here that everybody becomes so stretched and so tired that they kind of say, I'm giving up now? I don't know how you can answer the question. Maybe you can give us another wrapper. And then on the 12% IR, can you help me with the numbers? Because I get to numbers which are way higher, but I'm obviously wrong. 40 million is, I think, the figure in the slide in terms of additional contribution from the deals just done on an annualized basis. 5% is the cost in terms of capital. Now, I never know whether you should apply this to the own funds or the SCR, but I get a roughly average figure of 200. Now, 40 divided by 200 for me is 20%, but I'm obviously getting this wrong, so any indication here would be great. Thanks.

So let me take the first question. A question I really like, Michael, thank you. I don't see that trend that people become too tired to keep on performing. And I think what we should realize, an integration is not one small group of people doing that. but it is the full 7,000 people that actually were involved. And if the P&C business is ready, they can continue to go back to business as usual, develop the business further and growing further. We measure on a weekly basis, we measure how our employees are feeling and are doing. And we follow the outcome of those measurements very closely. And on average over the last six months, we are above 7.5. So we are on the upper quarter of how people are doing and feeling. And if we do see in some areas that people, and we've seen that, for example, the last half year in the pension business, where it was very, very business, we're willing to invest in additional help and in additional people to lower the pressure on the workforce. So we fully are aware of the fact that we shouldn't burn out or burn down our people. And I think ASR in the Dutch society is also known as a good employer. So we take care of our people. And if we need to invest more in workforce, we definitely do. Or if we can help them out with investing in further technology, which we are also doing, we're spending, of course, on AI. And we do see a lot of benefits from AI already in our operational costs. And that's also going to be helpful. So thanks for the question. No worries there. We're on top of it. And we're managing it quite close.

Yeah, then thanks, Mike, for the question on the IRR and whether it is not higher when you do the MET. So I think... The invested capital way we're referring to, so let's say somewhere between four and five points is somewhere between 250 and 300 million. When you divide 40 million with that, let's say that the return on invested capital is somewhere around 15%. But we do look at this from an IRR perspective. And that means that we also take into account the time value. And you see that you first invest capital and that the flow is coming thereafter. So you take into account kind of the fact that the strain is coming actually before you get the flow. And that brings us to an over 12% IRR. Brilliant. Thank you very much.

Thank you. Now we're going to take our next question. Just give us a moment. And the question comes from Thomas Bateman from Mediobank. Your line is open. Please ask your question.

Hi, good morning. Thanks for taking my questions. And thank you for the wrap again. My highlight of the day. Just touch a little bit more on the growth in health. I guess there's an assumption that that SCR strain won't be recurring. But can you just give us some indication of the underlying drivers of why the health growth was so strong? And then just the second question on the Solvency 2 review, you alluded to it there. I might have missed the details, but any other guidance you can give on the potential benefit from the Solvency 2 review? Thank you.

Thanks Thomas for your question and welcome in the ASR analyst community. And you may not know it already, but I think you're joining us at lunch tomorrow and every newcomer has to do a wrap before we start. So maybe you can prepare for that. Thank you for the very warm welcome. Let me go into your question. Health business in the Netherlands is a specific type of business. Dutch people only once a year are able to choose their insurance company for the next 12 months. And that's always in the period between the 12th of October of any year and the 31st of December. We are always very strict on pricing in that area. And in the commercial year 23 and 22, we actually lost quite some customers because we were stricter in our pricing than some of our competitors. Last year, so in the commercial year 24, for a portfolio of 25, we were able to remain within our return requirements and were able to gain back a little bit of the portfolio that we lost in the years before. so so we grow a bit more due to the fact that we've lost in the years before and that created an additional strain in the in the OCC so actually it is financing the growth going going forward so that is that is the the main reason why why the OCC in the in the non-live business not fully did meet the expectation of the analyst community that we had a larger strain in the health business. But actually it is financing the growth of that business. And the second question.

Yeah, on the Solstice 2 review. So thanks Thomas and nice to have you on the call indeed. um so on the solstice 2 review i think for asr there are three elements that are important in the solstice 2 review one is the change in the calculation of the va and when we look today that there's not really impacting the the solstice position versus today secondly is the is the risk margin what we see is that the risk margin will be lowered to a level of 4.75 percent coming from from six percent but also the way you actually calculate the required capital of the insurance risk in the years to come. It's also done in a different way. It's called the lambda factor. And that is also beneficial how that calculation is changed going forward. So the risk margin positively contributes to the solvency position compared today. And the third element that plays a role is actually changing the way you have to discount your liabilities. Today, it's done with an ultimate forward rate at the 20 years point, and then you move towards the UFR. From when the AOPA 2020 review kicks in, then it's not an ultimate forward rate, but it's the first moving points where you also take into account the observable market rates at the 30 years point, at the 40 years point, and at the 50 years point. And that is a small negative compared to what we see today. When you bring that all together, by the full year numbers, we saw that it would bring roughly a mid-single-digit benefit into our solstice ratio. Today, that changed slightly positively, driven by the fact that the lambda factor is even more positive compared to what was proposed. And secondly, by the fact that you see a steepening of the curve. So we now expect that when we look to the H1 numbers and the calculations that we have done with the new legislation, that it will bring us a mid to high single digit benefit in our ratio. The moment of introduction is officially by end of January 2027. But there's still a debate going on. whether or not you already should recognize that by the full year 2026 numbers, given the fact that the introduction date is somewhere between you actually close your books and do the reporting to the outside world. So there's still a debate going on whether an official introduction by end of January 2027 actually should mean that you already should implement it by year 2026. It has to be seen how that evolves. But by the end of the day, we are positive on the contribution that the AOPA 2020 review will have on the soil-sea ratio.

Thank you very much for the details and congratulations again. Good set of results.

Thank you. Now we proceed to take our next question. And it comes from Benoit Petrarch from Kepler-Cheron. Your line is open. Please ask your question.

Yes, good morning. Actually, the first one is on the pension buyout. I just wanted to get an update on the pipeline you see on the market. I mean, you've reached a very strong 40% market share in the deals announced so far. But what do you see in the rest of the year? And do you see an evolution on the return on capital or the IRR? Basically, any evolution favorable or less favorable versus the first deals we've seen? And also, could you maybe provide a bit of more details on the share of illiquid assets you expect to put in front of the liabilities? You talked about the bulk being in mortgage and real estate, but how much is this roughly in illiquid? And just maybe the last question is on the 215 million cost synergies. How much you've realized roughly at the end of June 2021? and it will be interesting to see where you are on that.

Thank you.

Ewart will go into the liquid part of the investments behind the buyouts. I will take the the first part of your first question and the second question. Pipeline is actually developing quite well. As said in my presentation, we expect and I phrased it like I wouldn't be surprised that we could announce another transaction this year. And further on we see a pipeline in different phases already and we explained that in the past. It always starts with a first request for proposal and then it's getting more serious and they want to have more serious quotes and then you end most of the time up in exclusive phases. And if I look at the current pipeline, we are confident that we will be able to at least meet the 8 billion that we have projected for the full four years. And that's why I also mentioned that if and when there would be an ability to do more than the 8 billion, capital will not be the limiting factor. So also some positivity based on the pipeline we're seeing. Whether that will influence the IRR, we keep on making offers that at least meet the 12% IRR. Given the fairly limited number of insurance companies that are willing to do really this business, I don't think it will be a challenge to keep on meeting at least a 12% IRR and actually the lesser providers, the better the ability to increase the IRR going forward. So also positive on the developments there, but for the time being, we stick at at least 12% that we are delivering right now. On the On the 215, it's progressing quite well. We've decided not to put any number on it for the half year. I think at the end of the year, we will bring out some numbers where we are by then. But if you have listened carefully and knowing you, you've listened carefully, we're very positive on getting to the 215. We're really on track. And as I said in the past, we even wouldn't be surprised that there will be some additional synergies that will kick in in the year after we finalize the trajectory. Because as I said, we have to close down 220 different IT systems from Aegon and the benefit from that could even be additionally in 2027.

And then the portion of illiquids in the bio mix, Benoit, so it's roughly 40% to 50%. Please bear in mind, illiquids is not illiquids credits like private debt, etc., but it's mortgages that we invest in and real estate that we invest in. And that together is on a total of 40% to 50% that we use in the bio mix.

Great. Thank you very much.

Thank you. Now we're going to take our next question. And the question comes from Autonomous Research. Your line is open, please ask a question.

Thanks for running the business in poetry and describing it in a rap, but sadly I can only ask questions in prose, I'm afraid. Two questions from me then. Firstly, just on real estate, might you give us a sense of what you're seeing in terms of rent developments and valuation into the end of the year, and specifically in terms of the gap in residential between rental and private? Is that now normal from here? And then secondly, is there anything worth noting from the upcoming election from your perspective? In particular, might that cast a shadow on the rental market again? Thanks.

So let me start with the first question. Farke and Jos will then say something about the election and also related to the residential market. So what we have seen is that indeed the residential real estate that we have in the portfolio developed very well. So positive revaluation. We also have seen that house prices, so the private market also went up, but the value cap closed slightly. So we see now, and also what we assumed is that the value cap of, let's say, around 10%, that is now just below a quarter of that, has now been closed, still leaving upside at the table in the, let's say, in the coming one and a half to two years, also to our Solstice position.

And then to your second question, predicting the outcome of the elections is very difficult, but what we see today is that almost every political party in their programs are addressing the need to develop more houses and to solve the issue in being short currently of 100,000 houses. growing to 400,000 houses. So if any new cabinet and any new parliament will change laws, et cetera, and it's more of a personal expectation, I expect that it will be beneficial for the investments in the housing market. because there is a significant need for more houses. And I think the politicians are becoming more and more aware that for that you need the private market to invest Dutch investors, but also international investors. So without having the famous glass ball, we expect that if there is any change, it will be beneficial.

Okay.

Thank you. Now we're going to take our next question. And the question comes from Farouk Hanif from JP Morgan. Your line is open. Please ask your question.

Hi, everybody. Thank you very much. So my first question is on the lowering of the liquidity premium, your kind of non-operating items. Can you give us a guide to what that might do to your investment margin in the operating result going forward in life, just to explain what the payback would be from that? My second question is, if you look at the holding expenses, they were very high. Just kind of wondered, are there any non-recurring elements in that? And because my questions are so small, just one very small mini additional question. I just want to get to what your message is on the combined ratio because clearly weather is a benefit in P&C, but in disability it sounds like the underlying is just better because there's no kind of net one-off. So just kind of wondering in that 92 to 94 range, how are you feeling about it? Thank you.

Let me do the first one. So the changing the liability, the liquidity premium impacted the IFRS profits with 250 million. When you then look to the duration that we have in the portfolio, I should divide it by somewhere between let's say 15 to 20 years. And that makes an impact also of 15 to 20 million, I would say. That would be my best guess, around 50 to 70 and a half million benefit coming from actually the lowering of the liability liquidity premium.

And your second question was on the increase of the holding expenses. That was a temporary impact because we decided, for example, if different business lines are on one system and the first business line has put their business on the ASR system, then the last business line on that system would have significant costs And that's why we decided that the IT costs of the IT systems of Aegon that we will switch off in a later phase, that we will bring that over to holding costs. And that is the predominant increase in the holding costs. But it is clearly a temporary increase of that cost. Hopefully that answers your question on holding costs. The question on combined ratio, whether the development up until now will bring us to a sharper target than the 92 to 94. We still feel comfortable with the 92 to 94. Yes, we're doing better right now. keep on doing better than we definitely will. But we are also aware of the environment where we are working in. It is competitive and keeping the balance between profitable growth and a strong combined ratio, we feel that the 92 to 94 is still the target range where we should work from.

Great. Thanks very much.

Thank you for that.

Thank you. Now we're going to take our next question. And the question comes line of Jason Kolombosis from ING. Your line is open. Please ask a question.

Yes, good morning, gentlemen. Hopefully you can hear me. So I have some small follow-up questions, if I may. I mean, first of all, on the combined ratio, how much was the NADCAP benefit in the first half? And second, small follow-up is on the on the OCC from the buyouts, the benefits, the 40 million that you mentioned, should we pencil in 50% basically in 25% and 50% in 26%? And a third quick follow-up, it was on health. So could you give us, I mean, I know it's probably for, the strain would be for first half next year, but do you find that we are more likely to continue to see that growth where you are recovering your market share? So again, having a strain in the first half of 26. And one question I have, main question is on the longevity. I mean, could you give us an idea of if you are to ensure all the buyouts you have done so far, what the impact would be on the solvency too, roughly? And on the longevity in the long run, I mean, I appreciate you've got capital and you don't need to do anything. Is it something, therefore, that we should expect more in 2027, i.e. that you're thinking as far back, if you want, or am I wrong in this?

Thank you. Let me take the third question out of the four you asked on health. Our health strategy is to stabilize our market position like we have today. So we're happy with that market position. We're not focusing on further significant growth. It could happen if your price position is stronger than the rest of the market, but that's not what we are focusing on going forward. So we would be happy with keeping within the current market position. And I think the other questions are for you, Ewout.

Yeah.

I hope I get them all right.

I think for 2025 you could expect 25% roughly because we still have to do most of the reinvestments of the cash that came in. That will be done mostly in Q3. Meaning that we see the real benefits of that in Q4. So I should divide that by the full amount by four. And I think for 2025, sorry, 2026, we expect to get the full amount out of it. Then on the fourth question, I think the fourth question was, if I understand it right, how much Solstice will it cost when we do the 8 billion of buyouts in total, so the 5 billion that still needs to come. The rule of thumb that we always use is that 1 billion of buyout will cost us on average 1.5 Solstice points, average meaning half of it using reinsurance. So when we do another five billion of buyouts, that would cost us on average seven and a half solstice points. With your question regarding the longevity reinsurance, now we are really testing now for the deal that I already mentioned, whether the longevity reinsurance can really improve the IRR, and we will use the outcome of that also for the thinking on that in the years after. In the calculations that we will do, we will also take into account the departure internal model, the AOPA 2020 review, because we know the outcome of both of that, so we can also take that into account to assess also the attractiveness of longevity re-influence deals in the future. So we do not say hereby that it will be kind of back-end loaded, to use that term, back-loaded longevity reissues deals, we will just look how attractive they will be to do that at a broader scale than only one buyout.

And then the first question is 20 million pretexts based on the aged one.

Okay, that's great. Thank you very much.

Thank you. Now we're going to take our next question. And the question comes line of Naseeb Ahmed from UBS. Your line is open. Please ask your question.

Hi, morning. Thanks for taking my questions. Two for me. Firstly, on the investment-related incidentals, Ewa, I think you're saying the 500 million is roughly half the liquidity premium and half is the in-house pension scheme interest rates haven't really moved that much so why is there 250 million from the pension scheme negative below the line and related to that is there any way you can de-risk that pension scheme that you have your own pension scheme second question on the holding company cash and the change in the policy there can you tell us why you're kind of changing the policy it seems like you've got enough holding company liquidity or up around 800 million Thank you.

Sure. Yeah, on the iFresh investment-related stuff, so the pension scheme, so the way it works, and it has nothing to do actually with re-risking or whatsoever. The way it works is that when you have a rate movement, and it can be either positive or negative, but in this case, the rate goes up. then you see on one end, you see kind of that the liabilities on your IS-19 liabilities goes down, but that flows through equity while the related assets flow through P&L. And that is actually why there is a negative impact from the on-pension scheme. So it has nothing to do with re-risking or de-risking. The only thing that you see is that IS-19, and this is the beautiful world of IFRS 17, that IS-19 is then treated differently then you have to treat the assets that are related to that. Well, that's why we always focus more on the operational result side of things. Hopefully that makes it clear. Then on the holding cash policy. Yeah, so we always have said that we want to have as much as cash in the legal entities because it yields better there than it yields at the hold call. Because at the hold call, you can only invest it in short term, money market funds, coffees and that type of things, which is a very low yield while in the legal entities it just makes better yields. What we have seen is that the amount of holding cash over the last couple of years significantly increased and we want to ensure that we do the best with the money that we are having on the balance sheet. And that's why we said, okay, let's pour a maximum of 25%. can use the unconditional holding of a credit facility that we are having to capture the Holtco cash level. We still have enough real cash at the Holtco, but this is beneficial for the return that we are making as a company.

Thanks.

Just on the pension, the old pension scheme, I was just thinking, can you de-risk it like you're doing for the other pension schemes, like the 2.9 billion that you've done to fix the mismatch, or that's not an option?

So this is not kind of an option that you have, and this is just the way you work when you have a fair value through P&L methodology that we apply. That's why we always say look at the OCC, look at the operational profit. That is where it is all about. This is kind of accounting first. You should not focus on that. Okay, thank you.

Thank you. Now we're going to take our next question. And the question comes in the line of Michael Hutner from Berenberg. Your line is open. Please ask your question.

Fantastic. It's just a numbers question, please. On the solvency, you're very kind. You listed all the points, but I was very slow. I come to a number which is a little bit lower than I expected, so I just wondered whether maybe you could help me a little bit. So on the hybrid, I'm assuming that's 7%. Then you've got the actuarial review, I'm assuming plus 2, so that's minus 5. From a normalized level, I'm using normalized, so I don't have to think about the pension buyouts, reinvestment, and the re-risking, so normalized of 200. I'm at 195. The longevity, I'm assuming it's small. I mean, you're testing, so I'm assuming plus 2. Then we've got the dampener, which is minus 2, so I'm still among 195. And then... earning OCC and the capital management kind of equals, it's still the 195, and then I add the 10 to 12 from the partial internal model. I'd like to get to 215, but I'm only getting to about 205, 207. Can you just maybe indicate where I might be wrong? Thank you.

Now I am slow following you, so sorry for that, but it's I think what we mentioned is then when you start with the 203, it costs you one solstice points for the hybrid. We have an actuarial assumption of the capitalization of the cost synergies bringing you one to two solstice points. I think the re-risking of the buyouts is more or less offset by the... So those two are offset to each other, then the re-risking of the buyouts that we want to the target asset mix will be more or less offset with the longevity reinsurance. If we can do that, then you're still at the same number. maybe one or two solvency points from the normalization of the methodology, and then you have the internal model. So I think that will bring you back to the, I'll say, around the 210 level that you were starting with. Lovely. Thank you so much. That's super helpful.

Thank you. Dear speakers, there are no further questions for today. I would now like to hand the conference over to Jos Barton for any closing remarks.

Thank you all for joining us and hopefully we will see many of you tomorrow when we have our analyst lunch and then we can continue the conversation. after having listened to the reps of the new people at the table. So thanks for joining us and we see you tomorrow.