ASR Nederland N.V.

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.