Nn Group Nv Unsp/Adr

Good morning, ladies and gentlemen. This is the operator speaking. Welcome to NN Group's analyst conference call on its four-year results. The telephone lines will be in a listen-only mode during the company's presentation. The lines will then be open for a question and answer session. Before handing this conference call over to Mr. David Knibber, Chief Executive Officer of NN Group, let me first give the following statement on behalf of the company. Today's comments are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those projected in any forward-looking statements. Such forward-looking statements may include future developments in NN Group's business, expectations for the future financial performance and any other statements not involving a historical fact. Any forward-looking statements speak only as of the date they are made and an end group assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation or an offer to buy any securities. Reference is made to the legal information on the last page of the presentation. Good morning, Mr. Knibber. Over to you.

Yes, thank you, operator, and good morning, everyone. Thank you for joining our conference call to discuss Enning Group's performance for the full year 2025. I'm excited to be here with you today, and with me are Annemiek van Melink, our Chief Financial Officer, and Wilbert Auberg, our Chief Risk Officer. I'll begin with an overview of the key messages and dive into the excellent commercial momentum we have witnessed in our growth segments as well as our tangible progress on our Future Ready program. Next, Annemiek will give a detailed analysis of the strong progression of our capital position and financial performance over 2025. After my concluding remarks, we will move over to the Q&A. I'm excited to share that we have not only exceeded our 2025 targets, but also delivered a very strong Solve C2 ratio of 220%, giving us an even stronger foundation to deliver on our future-ready growth targets. I am also pleased to see our growth segments deliver significant increases in new business values for international and a growth-ridden premium growth of 6% in non-life, which is now surpassing the 4 billion mark for the first time. Next to this, we saw increased DC inflows of 2.6 billion at Netherlands Life. These results demonstrate a continuing shift towards high-quality fee and underwriting income. And we are making meaningful progress on our future-ready program, where I will share some compelling AI use cases later. And finally, on the back of our solid business performance and outlook, robust cash generation, and healthy capital levels, we are further enhancing our promise to shareholders by stepping up our capital return commitments by 100 million, with a 50 million step-up in our annual share buyback, and a 50 million increase in our dividend above the regular progressive increase. As I mentioned, we have exceeded our key financial targets for 2025 with an OCG of 2.1 billion coming in well ahead of the targeted 1.9 billion and our free cash flow slightly above the target of 1.6 billion, a growth rate of 7% per annum for both metrics. These impressive numbers are further evidence of our ability to deliver on our business plans and a further testimony that we can drive profitable growth, which is good for all stakeholders. Our capital position has significantly improved, as has the underlying quality of capital, with several tail risks being addressed, as pointed out on the slide. Anamika will provide the details on our financials later. This strong business performance, as well as comfortable cash and capital levels, have allowed us to increase capital return by 100 million above our typical progressive dividend, splitting this evenly between a step-up of the dividend and a higher annual share buyback. Consequently, we have increased the dividend per share with 13% to €3.88 per share, increasing the base level for our continued progressive dividend policy. And we are stepping up our annual share buyback program by 50 million euros to 350 million. Today's increase marks a continuation of our outstanding track record of capital return to shareholders, having now returned over 11 billion euros to shareholders since our IPO in 2014. We remain very committed to our capital return promise and to extend this strong track record which is based on our current market capitalization, still implies an attractive future DPS growth of approximately 7% per annum. We continue to deliver value to our customers, employees, and society at large, and with the Capital Markets Day, we have set new targets for 2028. Let me highlight a few. We aim for the customer satisfaction scores significantly above the market average and secure a position among the top three for broker satisfaction by 2028. Customer satisfaction has shown consistent improvement, especially in Europe, where all units are above market average. Additionally, we once again affirmed our number one position on satisfaction with the Dutch brokers, who play a dominant role in the distribution of our products. We also aim to be an employer of choice where people enjoy to work with a diversified population. Furthermore, we aim to cut greenhouse gas emissions by 45% by 2030, invest over $13 billion in climate solution, and support 2.5 million people's well-being by 2028. As you can see, progress on all these targets is well on track. With the Capital Markets Day, we took a deep dive into our Future Ready program. our plan to position us for greater competitiveness and adaptability in a rapid evolving landscape. We focus on standardization, automation, and reuse of AI with a clear focus to improve customer experience and growth. I'm proud to say we are making significant progress and happy to share that we are firmly on track with the new KPIs that we set at the Capital Markets Day. We now have 236 AI use cases in place and already 42% of our sales come from digital leads. From the 200 million annual target benefits by 2027, we have 40% realized in our run rate for the end of 2025. Let me just highlight a few of these use cases behind these achievements. First, a breakthrough in claim processing. We can now process third-party car liability claims fully straight through. This enables us to deliver faster service with processing time decreasing from one to three days to a few minutes, as well as reduce manual effort and improve customer satisfaction. And it builds on our existing AI modules and system integrations. It is scalable for other use cases as well. Second, we are now using AI-powered avatars to train and coach our TIDE agents, enabling them to practice complex customer scenarios. Data shows that following standardized scripts significantly boosts conversion rates, and we are now scaling this across more than 9,000 agents. The result is a higher sales conversion, improved agent retention through better support, and increased customer satisfaction. Third, our new generative AI tool, AI Reply. It drives high-quality email responses using historic interactions and templates. This frees up time for customer service agents to focus on what matters most, delivering value to our customers. We are rolling it out across all Dutch business units with international outgrow to follow. And these are just a few highlights because there is much more to come. We show excellent commercial performance in our growth business insurance Europe, Japan, and Netherlands . Our largest growth segment, insurance Europe, continues to show significant V&V growth with an increase of 16% versus 2024. with both higher sales volumes and increased margins play a part in this success. With the growth from 2025 included, new business in Europe has grown with an average of 12% annually over the last decade, clearly not incidental in showing that our strategy is reaping real benefits. Japan, our other international growth segment, continues its sales recovery with a significant 25% increase in new business value in 2025 versus 24. When comparing VNB year-on-year from Q2 onwards, the period since the launch of our new long-term savings product, we even see a 34% increase. Our market share has already been improving on the back of this performance. Going forward, we expect set gradual sales recovery to continue, also driven by further product introductions. This will help V&B to recover to 2022 levels by 28, as outlined during our Capital Markets Day last year. Netherlands Moonlight witnessed solid commercial momentum with gross written premium up 6% on-year, surpassing the landmark of €4 billion for the first time. This was driven by both indexation and volume growth. While the overall combined ratio remained within the 91 to 93 target range at 92.9%, the combined ratio of P&C was excellent at 90.3%. And now I'd like to take a moment to highlight some of the business specifics for Europe and Netherlands Live. Our European business continued its impressive growth trajectory, and I'd quickly like to reemphasize our strategy. The focus is on a simple capital-line offering favoring technical and fee income with a limited reliance on spread income. Our protection products have small ticket sizes, which makes these products accessible for a large pool of people who are increasingly aware of the usefulness of these products. With these small tickets, high-volume products The key is getting in front of customers, and this is an area in which we excel. We have a multi-channel distribution network, well-balanced with tight agents, bank assurance, brokers, and directors. The tight agent channel in particular is undergoing a digital transformation and is one of the key beneficiaries of the Future Ready program, as can be seen by the success of our digital leads generation. We took the decision to focus on protection more than a decade ago, and I am pleased to see how well that decision is paying off. With our presence in the highly underpenetrated markets, I have faith this trend can prove to be sustainable. Protection is the key pillar of our growth in Europe, but our pension offering is also a strong contributor. We're one of the leading providers of Pillar 2 and Pillar 3 pensions across Central and Eastern Europe, providing a source of AUM-based fee income, a business model with attractive operational leverage. And in 2025, this business model showed strong growth also held by financial markets in those regions. Moving on to a promising growth opportunity in our home market. We have a leading position in the Dutch immediate annuity market. Even in the new pension framework, it is mandatory that people convert their accrued pension investments into an annuity. This is an attractive market segment because margins are healthy and we expect the reform to improve our growth prospects. In 2025, our growth inflow into immediate annuities was around 0.8 billion, up from 0.5 billion in 2020, representing a CAGR of 10%. We expect these inflows to continue to grow, mainly fueled by the increasingly large DC pension costs. We expect to see a CAGR for immediate annuities of 10 to 15% going forward, leading to a potential growth inflow of 1.4 billion in 2030. This growth was not immediately visible in the growth of AUM. I won't bore you with the details, but this line item also includes a legacy retail portfolio that runs off at about 10% per annum. This runoff will be largely completed by 2030, where we expect the immediate annuity portfolio to have reached 10 billion in AUM. Together with the strong customer satisfaction, targeted pricing, and our market-leading position in the overall DC market, We are confident in continuing this upward trajectory towards more than 65 billion of AUM with an anticipated 15 to 20 business points OCG margin by 2028. In conclusion, our investor proposition rests firmly on three core pillars. First, our business mix will continue to diversify over time, where growth segments will become more dominant in our mix. Netherlands Life will also become a more capitalized business as the mix changes towards DC pensions. Second, with our Future Ready program, we continue to standardize and automate operations, improving efficiency and scalability across the group, and at the same time, improving customer experience. And third, we remain fully committed to delivering on our capital return commitments. And with today's announcements, we have taken another significant step in strengthening those commitments. And with that, I will hand over to Annemiek.

Thank you, David, and good morning from my side to everyone listening in on the webcast. I'll begin with our excellent financial delivery over 2025. As you can see on slide 14, our OCG is up 9% versus 2024, coming in at $2.1 billion. It's a strong print and testament to underlying business performance, whilst also benefiting from some non-structural tailwind. Free cash flow is up 7% versus last year, with improved diversification as Netherlands Non-Life, Europe, and the bank increased contributions. The delivery on both metrics reinforces our confidence in the 28 OCG target of 2.2 billion and our free cash flow target of above 1.8 billion. Our solvency ratio is strong at 220%, and as David highlighted, It's of significantly better quality since we've removed the unit-linked overhang and are less sensitive to market movements and longevity risk. Cash capital increased to $1.8 billion, although this has since reduced somewhat to $1.6 billion following the repayment of the remaining RTO1 debt that was called during January. These elements combined have put us in a position to reward shareholders beyond our normal capital return promise. we further enhanced our structural capital return with 100 million, equally divided between dividend and share buyback. As such, we present the year-on-year dividend per share increase of 13% and the 50 million increase in the annual share buyback to 350 million. Now let me give you some more insights into our capital progression. Looking at the capital bridge for the second half of 2025, strong operating capital generation of 1.1 billion euro added 13 percentage points to the solvency ratio, which is around 5 percentage points higher than the capital flows to shareholders in the form of dividends. Market variance increased the ratio by 7 percentage points, largely driven by the positive impact of interest rate movements and decreasing spreads on government bonds and mortgages, partly affected by negative equity variance. Mortgage spreads at the end of December were around 75 pips. We've previously communicated a normalized through-the-cycle level of 100 pips. However, we currently see tight spreads across basically all asset classes, and clearly mortgages are no exception. The bucket order added two percentage points to the ratio. This is mainly due to an update in the way we calculate non-available loan funds for Insurance Europe entities, which added four to five percentage points. We brought our approach more in line with the market after noting a more conservative approach versus peers. This was partially assessed by a number of other model and assumption changes. The solvency ratio of life showed a strong increase from 200% to 233% as well. Our three pillar capital framework with a focus on one, a solvency two ratio comfort zone of 150 to 200%, two, a half a billion to one and a half billion cash at the holding company, and three, a single A financial strength raising has not changed. With the current strong solvency two ratio, it's fair to say that we're currently sustainably above 200% and that our binding constraint for capital return has now moved from solvency to cash at the holding company. Of course, this could change under adverse scenarios. Now, let me give you some details on our high-quality private debt portfolio before moving into OCT. We're comfortable with our private debt portfolio, which is well diversified by industry and geographically focused on Western Europe, with an exposure to the U.S. below 10%. Over half of the book is either collateralized or government-guaranteed, around 60% is above investment grade, and there's no exposure to leveraged products. We put a lot of emphasis on manager selection. Our goal is to gradually build the right exposure, giving managers time to put the funds to work. Our enhanced oversight capabilities allow us to properly challenge the fund managers. One example of this is the sample testing that we perform on the credit ratings assigned to individual loans. So while the market has seen some isolated incidents on private credit exposure, we're confident that our credit exposure has a more conservative risk profile. And let's move to OCG. As already mentioned, our OCG came in at 2.1 billion, up 9% versus last year. This reflects ongoing commercial and business success driven by our growth segments, Europe, Japan, and Netherlands non-live. The strong underlying trend was further enhanced by some non-structural elements. Netherlands live OCG grew by 13%, helped by an affliction in experience, last year was negative, now is positive, and higher investment returns. The main moving part for life into 26 is the likely absence of positive experience variances, so we would expect a modest decrease in OCD for 26. For Netherlands non-life, which grew by 9% on a reported basis, we confirm an underlying rate of 400 million for 25, from which we expect to grow with GDP plus going forward. Benign weather and the positive impact from reinsurance renewals were key reasons for non-life to overachieve in 2025. Europe's OCG grew by 13%. As David explained, increased sales and higher margins drove this, and we're very pleased with the overall performance. Due to favorable markets, our pension fund service also benefited from performance fees during 2025. Sales recovery in Japan was strong and, as such, has put some pressure on OCG, as the current framework doesn't allow for deferred acquisition costs, as you know. However, Japan's OCG still grew by 8%, as this was more than offset by the benefits of a reinsurance transaction and favorable claims environment. For 26, we expect Japan to grow OCG, benefiting from the move to ICS and continued new business growth. Lower OCG at the bank is a large CD effect of NIM compression, which was only partly offset by one-offs. For 26, we expect a roughly stable OCG versus 25. With the above comments in mind, looking forward to 26, we expect the non-structural positive contributions in 25 to be offset by underlying continued business growth, leading to a flat reported OCG. As such, we're well on the way to deliver on a 28 OCG target of 2.2 billion in 28. Now a few words on operating results on slide 18. Since we steer the business based on solvency metrics, I'll only concentrate on drivers that are different from the OCG analysis. Operating results were up 17%, largely driven by a sharp increase in Netherlands life. Investment income benefited from the result on derivatives that fall outside of hedge accounting and higher dividends from private investments. Especially the first item, it's rather technical and has no economic substance. Japan's operating result was down due to a decline in the enforce book. This dynamic should be temporary as new business is rebuilding after the new long-term savings products that we launched in March. Future profits on the IVRS are largely determined by the CSM level. Our organic CSM grew 2% in 25, with high single-digit growth from both Netherlands non-left and Europe. Japan is now also contributing to CSM growth following its sales recovery. NN Group's net result decreased due to revaluations on derivatives outside hedge accounting used for hedging purposes. Bond sales and the final accounting results from the sale of Turkey. Now let's move to our cash capital position. Free cash flow slightly exceeded our 25 target and came in above 1.6 billion euros in 2025, up 7% versus last year. Although free cash flow is lumpy by nature, we expected to grow year on year to our target of over 1.8 billion in 2018. Remittances from business segments were also up 7% and benefited from increased diversification as Insurance Europe, Netherlands Normal Life and the bank all showed increased contributions. The bank benefited from additional remittance capacity due to the capital relief from Basel IV. Other includes the impact of increased debt costs and approximately 50 million euros of future ready investments. Capital flows of more than 1.2 billion include the payment of the final dividend over 24, the interim dividend over 25, and the Euro 300 million shareback that has been executed over 25. The change in our debt and loans reflect the impact of the untendered grandfathered RTL1 notes, which have been redeemed in January 2026. As such, our pro forma cash capital position per year and 75 is closer to 1.6 billion. Now that we achieved our 2025 targets, our eyes are set on 2028 and our improved investor proposition. We've increased confidence to deliver on our 2028 targets, which will not only grow, but also further improve and diversify our business. We're on track to grow our Dutch non-life and international segments, and the strong business and financial results of Netherlands Life underscore our commitment stable, and predictable remittances until 2040. We're on track in creating a highly digitalized future-ready platform and organization. We have a strong balance sheet to support these key pillars of our investment case. Based on this confidence, we enhanced our capital return proposition today with an additional $100 million on top of our regular progressive dividend policy and annual share buyback. Going forward, we will continue to return additional excess capital to shareholders unless it can be used for value-creating opportunities with a continued preference for small incremental steps rather than one-off lumpy returns. At our capital markets day, we indicated 1.5 billion of excess cash build potential over the four years from 2025 to 28. With today's enhanced capital return announcement of $100 million, we allocate more than $400 million of this excess cash bill to shareholders. In order to improve future financial flexibility and manage debt costs, we intend not to refinance the $600 million senior debt that was originally raised for the DeltaWare acquisition and asset for mature in 2027. Consequently, we expect the residual excess cash bill to be around $500 million over 2025 to 2028, which can be used for value-accretive opportunities or further enhance shareholder returns. Thank you all, and with this, I'd like to hand it back to David for the wrap-up.