Nn Group Nv Unsp/Adr

Good morning ladies and gentlemen, this is the operator speaking. Welcome to the NN Group's analyst conference call on its first half year 2026 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 Knibbe, 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 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 statement. 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 forelooking statements speak only as of the date they are made and NN Group assumes no obligation to publicly update or revise any forelooking 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. References made to the legal information on the last page of the presentation. Good morning, Mr. Knibbe. Over to you.

Yes, thank you, Sharon. And good morning, everyone. Thank you for joining our conference call to discuss any group's performance of the first half of 2026. I'm excited to be here with you today. And with me are Annemiek Van Melick, our chief financial officer, and Wilbert Ouburg, our chief risk officer. I'm starting off with an overview of today's key messages. I'm pleased to present another set of excellent results reflecting our continued business diversification towards our growth segments while making tangible progress on our future ready program. Operating capital generation reached 1.1 billion euros supported by business growth in Europe. This result was achieved against a particularly demanding comparative base resulting in a 5% year-on-year increase and this was better than the flat guidance we gave. Our Group Solve C Ratio strengthened to 224%, increasing due to the exclusion of the banking operations as per the end of June 2026. Consolidating the bank under Solve C2 penalized our ratio. With the exclusion of the bank from the ratio, the level playing field is improved. Future Ready continues to deliver tangible results. We are halfway into the program and it already delivered 65% of our target annual savings of 200 million, by the end of 2027. Commercial momentum remains strong. Value new business increased by 16%, and this was supported by a pension transaction in the Netherlands and by a 14% increase in VNB in Europe. In Europe, the growth was mainly driven by higher sales volumes in risk protection products underpinned by our strong distribution capabilities. This more than offset lower VNB in Japan, where demand shifted towards shorter-term products as new entrants affected the market and moderated sales growth. In non-life, gross written premium grew by 6%. At Netherlands Life, DC asset management increased by 13% to 48 billion, supported by higher net inflows and positive market movements. In line with our dividend policy, we increased the interim dividend to 1 euro and 55 cents, which represents an increase of 12%. versus last year's interim dividend. This builds on our proven track record of consistent delivery on capital returns to our shareholders. We continue to deliver value to our customers, employees, and society at large. We are well on track to deliver on our 2028 targets. Let me highlight a few achievements made. We aim for customer satisfaction scores significantly above the market average and rank amongst the top three for broker satisfaction by 2028. Customer satisfaction continues to improve with both the Netherlands and European unions significantly above the market average. Additionally, we reaffirmed our number one broker satisfaction ranking in the Netherlands. We aim to be an employer of choice where people enjoy to work with a diversified population. Our employee engagement remains consistently strong and above the benchmark. Alongside this, we increase the volume of our investments in climate solutions to 14.3 billion, demonstrating our commitment to supporting the transition to a more sustainable economy. Our H126 results once again demonstrate that our strategy continues to deliver. As a reminder, our investor proposition rests firmly on three core pillars. First, we continue to diversify our business mix. Future growth will, for both OCG and free cash flow, primarily come from international and Netherlands non-lives. Together with our banking business, these are targeted to grow over 55% of total OCG by 2028. Secondly, with our Future Ready program, We continue to standardize and automate operations, scale AI and improve efficiency and scalability across the Group. And at the same time, improve customer experience. As you can see, all the KPIs are well on track. Thirdly, we remain fully committed to deliver on our capital return commitments, a progressive dividend per share in an annual share buyback program of 350 million. As I mentioned before, NN has been building its AI capabilities for years, and that early experience is now becoming increasingly relevant. NN operates in an environment that is particularly well suited to AI adoption. Insurance is a service-based, data-rich industry with complex decision-making, high volumes of customer interaction, and extensive use of unstructured data. These characteristics create meaningful opportunities for AI to improve productivity, consistency, and decision quality. The key challenge is no longer the technology itself. It is how we manage adoption, scale proven solutions, translate AI into tangible business impact. And that is why we launched a Future Ready program in 2024. Through this program, we are simplifying our IT landscape, standardizing data, and build more digital and data-driven processes across the group. Our approach is deliberately selective. We prioritize scalable AI initiatives with immediate and visible business benefits. We focus on reusable capabilities and on copying proven use cases across NN. This allows us to benefit from our scale, avoid duplication and accelerate value creation across business units. The financial case is clear and disciplined. We expect to invest 450 million in future-ready initiatives over the program period, with annual benefits building up to 200 million by 2027. Around 180 million of the benefits are expected to come from expense savings, with the remainder linked to growth. These investments and benefits are already reflected in our target, so there is no hidden additional investment requirement. AI yields significant productivity gains which outweigh the increase in token costs. By the end of June we had completed 70% of the investment and already delivered 65% of the annual benefits. Last year at our Capital Markets Day we showed an example where we applied AI to handle glass repair claims. I'll show you later how we scale agentic claim handling. But let's move first to the commercial performance of Insurance Europe. Our leading businesses in Europe continue to grow impressively, capitalizing on the momentum across the region. In the first half, V&B grew with an impressive 14%, driven by both higher sales and attractive margins, which will translate into OCG over time. What is equally encouraging is that our V&B build-up is in line with our strategy and concentrated on capital light protection products with attractive margins. Next to protection products, our pension business has also been growing consistently over recent years, fueled partially by strong financial markets across the region. We are a leading provider of Pillar 2 and Pillar 3 pensions across Central and Eastern Europe, providing a source of AOM-based fee income, a business model with attractive operational leverage. Our pensions asset under management in Europe has been growing rapidly and has reached 50 billion euros during the first half of 2016. It is worth noting that over recent years our bank assurance channel in Greece has contributed strongly to the VNB growth in Europe due to a successful partnership with Piraeus Bank. This bank assurance agreement is still in place and we continue to see strong sales in 2026. However, we expect that sales via this channel will substantially be lower as of next year. At the same time, we remain optimistic that other opportunities in Greece will provide alternative sources of growth for the business. such as our tied agent channel which grew VNB by 30% last year and 25% year on year so far in 26. So despite development in Greece, we remain very confident in Europe's underlying growth trajectory and its ability to reach the 600 million OCG in 28. Making our European tied agent channel future ready is a strategic priority for us and we see continued progress in this area with 46% of our tight agent sales now coming from digital leads. We are also focusing our large language model visibility. And while it's early days, our initial efforts are proving successful with our average AI overview rank across insurance Europe, improving from the 12th position to the third position between December of 25 and May 26, already ranking as number one in several markets. As you know, in Japan, we operate in the sizeable Kole market with a total market volume of 250 billion Japanese yen and attractive IRRs of around 14%. After the business improvement order, we repositioned our offering towards long-term savings, a segment that has grown significantly in the recent years with a CAGR of 25%. This supports a strong recovery of sales momentum with VNB increasing around 30% in 25 versus 24 on a constant currency basis. In 26, however, we have observed a re-emergence of the short-term KOLI products, with sales in this segment increasing by 20% following new product offerings by new entrants. This has weighed on our sales momentum, with VNB decreasing by 5% versus the first half of 25% on a constant currency basis. However, we remain well-positioned to regain market share, given our SME focus, which brings important advantages. Firstly, we can utilize all available product approval windows for Kohli, allowing us to bring new products to the market more quickly than larger diversified players that prioritize retail products. In addition, our specialized Salesforce tools and customer service provides deep expertise and excellent support, helping us maintain broad and diversified distribution. As such, we continue to believe we can recapture market share independent of what type of products the market moves to. We managed to optimize capital solvency and sensitivities under the new capital framework via a landmark reinsurance transaction, which also added significantly to our local equity position and increased fungibility of capital. Netherlands Non-Life delivered solid commercial momentum with growth-ridden premium up 6% year-on-year, mainly driven by indexation, but also some volume growth. Profitability was strong as well, with a combined ratio of 90.5% ahead of our 91 to 90 target range, despite a severe hailstorm, leading also to several big event cancellations late in the period. These adverse weather events were more than offset by strong performance in building insurance and margin improvements in motor. Last year, we indicated elevated disability incident rates, mainly due to mental health-related issues, that affect our group disability products. Recent data points indicate that a further increase in inflows, which we have reflected in our provisioning. This barely affected our combined ratio, but had had some impact on our reported OCG for non-life. We monitor the situation carefully and will continue to prioritize margin over volume. At last year's Capital Markets Day, we introduced our first claim handling process using AI-backed straight-through processing. for simple windshield damage. Since then, we have brought in AI-enabled claims and underwriting across most product lines, including property, motor, and travel insurance, with liability insurance to follow in the second half of this year. For our retail business, the target platform is now fully operational, with 35% of retail claims straight through processed, backed by AI. We recently added the NM Bank distribution products to the platform, adding another 15% of claims processed through AI. So we are currently at approximately half of the retail portfolio. In the second half of the year, we will connect the remaining bank distribution partners, which should bring the SDP levels close to 100% across the retail business, supporting great efficiency and higher customer satisfaction. This will enable us to deploy our people where they create most value and where human judgment is most important, rather than where automation still has limitations. Moving on to life. We are the market leader in the Dutch defined contribution market, and that position becomes even more relevant under the new pension framework. Our broker relationships remain a clear strength. We are proud to have again achieved the number one ranking in broker satisfaction. These independently collected scores matter in a broker-led group pension distribution model, and brokers continue to value our digital services, the quality of our core processes, and our strong back-office execution. Our AUM in defined contribution during the first half of 26 grew further to $48 billion. Net inflows were strong at $1.7 billion versus $1.2 billion in the same period last year, partly supported by a value transfer. With strong customer satisfaction, disciplined pricing and our leading DC platform, we are confident that we can continue the growth trajectory towards our target of 55 billion of AUM by 2028, while maintaining an expected OCG margin of 15 to 20 basis points. Participants will still need to convert accrued pension investments into annuities, making this an attractive high margin segment with growth strong prospects. Growth inflows into immediate annuities were around 500 million in the first half of 2026, compared with around 400 million in the first half of 2025. This growth was not immediately visible in DC accumulation AUM development over the period, as this line item also includes a legacy retail portfolio that runs off. This runoff will be largely completed by 2030. We expect a 10 to 15% annual growth of DC decumulation mainly driven by the larger DC pension pots, potentially reaching 1.4 billion on an annual basis by 2030. Lastly, our track record of capital returns speaks for itself, with over 11 billion euros of capital returned to shareholders since the IPO. And we remain firmly committed to extending that track record with total capital returned to shareholders foreseen to grow over 15 billion by 2028 based on current commitments. In line with our dividend policy, we announced an interim dividend of €1.55 per share, a 12% increase versus last year's interim dividend. And with that, I will hand over to Annemiek.

Thank you, David, and good morning, everyone. Let me begin with our continued financial delivery over the first half of 2026. ROCG is up 5% versus an already strong 1H25, coming in at €1.1 billion. with strong online business performance, particularly in Europe. Free cash flow is up 7% versus last year, mainly driven by higher remittances from non-live in Europe, compensating for lower remittances from the bank, which included a much larger Basel IV remittance last year. We remain well on track to achieve our 28 targets on both of these metrics. Our solvency ratio increased to 224% driven by net capital build and the exclusion of NM Bank from Group Solvency. Cash capital came in at 1.7 billion, where repayment of the remaining grandfathered RT01 debt in January was largely offset by a strong net cash build over the period. Now, let me give you some more details regarding our capital progression. During H126, operating capital generation added 1.1 billion euro, or 13 percentage points to the solvency ratio, which is 4 percentage points higher than the capital flows to shareholders in the form of dividend and share buyback. Market variance decreased the ratio by 5 percentage points, largely driven by widening government bond and mortgage threats. The bucket other added 5 percentage points to the ratio. Here the positive impact from excluding the bank from the solvency to ratio was partially upset by the transfer of a large pension client from the separate account to the general account and model and assumption changes. We have furthermore mitigated a potential negative impact of the introduction of the ICS framework for solvency in Japan with two management actions. One being transitioning Japan to a partial internal model and the other being the reinsurance transaction that David referred to earlier. Overall, this led to a net neutral impact on capital. The solvency ratio of Netherlands Life remained strong at 213%, absorbing the adversities from bucket market variances and the bucket other, except for the positive from the bank exclusion. Now let's move to OCG. As you can see on page 13, we managed to grow our OCG by 5% to 1.1 billion euro, which includes very strong performance from Europe and some non-structural tailwinds. In the Netherlands live segment, OCG is slettish, where higher SCR release is partially offset by lower positive experience variance versus last year. Netherlands non-live was impacted by adverse weather events that took place late June, as well as increased group income claims inflows which more than offset the strong performance of the P&C portfolio where we saw growth across the book and improved margins on the motor line. Insurance Europe reports a significant increase in OCG driven by continued growth in capitalized protection sales and higher fees from pension fund related assets under management. We believe most of this growth is structural except for the part of the performance related fees in the pensions business. As David mentioned earlier, bank assurance sales in Greece were very strong in H1 and given the developments with our distribution partner, we expect these to decrease next year. Next to this, a proposed pension reform in Czechia will likely limit management fees that can be charged over rest of the management. Now strong organic growth across other European countries like Poland and Romania is expected to compensate for these developments and as such we remain very confident in Europe's underlying growth trajectory and its ability to reach the 600 million target for 2028. In Japan, OCG benefits from the move to our partial internal model and higher interest rates. More than offset These more than offset negative exchange rates and lower sales driven by the market dynamics as just explained by David. David already highlighted the Japanese reinsurance transaction which reduced lapse risk and sensitivity to interest rate, increased local equity by around 240 million, improving the fungibility of capital and ensuring a sustainable remittance pattern going forward. Since we exclude the bank from our Group Group O funds are only affected by the net remittances coming from the bank. Therefore, from 26 onwards, banks' OCG is set equal to net remittances. The net remittances in 1H26 from the bank still include a one-off related to the Basel IV windfall last year of a couple of tens of millions. At the full year results, we guided OCG for 26 to be flat, with organic growth offsetting the positive one-offs of 25. With these strong H1 results in hand, there is some upside to this guidance, mainly driven by Europe and non-life. We would expect H2 to be in line with H1 levels, with further organic growth and positive seasonality in non-life, broadly offsetting the positive one-offs and seasonally hiring new business at Netherlands Life in H1. Few words on our IVRS results. Operating result was up 4% versus the first half of 25. Since we steer the business based on solvency metrics, I will only concentrate on the drivers that are different from the OCG analysis. Netherlands live results reflects a lower investment result, which is largely driven by lower dividends from private investments, which can be lumpy and were elevated in H1 last year. Non-live showed an improvement in the combined ratio from 91.2% to 90.5%, despite the adverse weather, which also translates into a higher operating result. Japan's operating result was down, largely driven by adverse exchange rates and, to a small extent, a decline in the enforced book, all largely offset by a more favourable mortality result. NN Group's net result increased to €1.1 billion, mainly driven by the higher operating result and lower below-the-line negatives. where H125 included negative revaluations on derivatives. Future profits under IVRS are largely determined by the CSM level. Our organic CSM grew 2% in the first half of 26, benefiting from organic growth in Europe, Japan and non-life. Other movements include the negative impacts from higher incident rates in our disability book. Let's move to our cash capital position on slide 15. Free cash flow came in at 922 million euros, up 7% versus the same period last year. Free cash flow is lumpy by nature and therefore always makes more sense to look at it from an annual perspective. For the full year, we expect to be broadly in line with the 1.6 billion reported in 2025. 2025 includes a large Basel IV related contribution from the bank and some one-off payments within Europe. like the special dividends from the Polish pension funds. At the same time, Belgium didn't pay a dividend last year. Therefore, underlying free cash flow does show some growth and we remain confident in reaching our free cash flow target of more than 1.8 billion euros in 2018. The change in our debt and loans reflects the impact of the untended grandfathered RTL1 notes which have been redeemed in January 2016. Our cash capital ended at 1.7 billion euros and we typically build between 3 to 400 million euros per annum from free cash flow net of capital return. This provides us with ample flexibility for value accretive opportunities or to further enhance shareholder returns via small incremental steps in our structural capital return promise as we've demonstrated over the last couple of years. As we indicated earlier this year, We do not expect to refinance the 600 million senior notes that mature in 27. Let me quickly summarize our attractive investor proposition on slide 16. We're confident to deliver on our 28 targets, which is a testimony of our growth and further diversification. We are on track to deliver our future ready program. We have a strong balance sheet that provides optionality. and we continue to extend our excellent track record of remunerating our shareholders. With this, I'll hand over to David for the wrap-up.