ASR Nederland N.V. (ASRNL) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the a.s.r. Half Year 2025 Results Conference Call and Webcast. [Operator Instructions] Today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Michel Hülters. Please go ahead.

Thank you, operator, and good morning, ladies and gentlemen. Thank you for joining us today. Welcome to the a.s.r. conference call on the results for the first half of 2025. On the call here with me today are Jos Baeten, our CEO; and Ewout Hollegien, the CFO. Jos will kick it off with the highlights of the financial results. He will also give a brief update on the Aegon 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. [Operator Instructions] 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 and 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, yes, growth been strong. Momentum in the business, we keep it rolling on. Targets in our site, 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 #2 shows 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 2 years. As a result of hard working and tremendous dedication from our colleagues throughout the organization, I am 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 Life books, and we're fully on track to implement the Life 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 decumulation products. We've executed strongly in the pension buyout market, closing 3 deals so far this year, totally -- in total nearly EUR 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 EUR 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 EUR 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 II ratio increased with 5 percentage points to 203%, reflecting the strong OCC contribution supported by market movements, especially the steepening of the interest rate curve. The 203% ratio also includes the impact of the EUR 125 million share buyback completed in May as well as the interim dividend. Operating result came in at EUR 826 million, up more than 20%, driven by broad-based business performance and the 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 4 pension buyout deals we've executed so far, we are clearly on track to meet our CMD growth targets. Let's move to Slide 4 and look how we are progressing on our nonfinancial 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 nonfinancial goals in this area. Employee engagement declined as we expected. The integration of Aegon Nederland's activities is a massive project, and the merging of 2 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 digitally 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 5. We are now entering in the final phase of the Aegon NL integration and are confidently on track to deliver the EUR 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 of -- for Non-life IORPs and the holding entities have also been completed at an earlier stage. In the past 6 months, our focus has been on migrating individual life policies and mortgages. Around 2/3 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 startup platform. We've also made solid progress on the partial internal model for a.s.r. Life. 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-life on Slide 6. Premiums received in our Non-life 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 2 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 remained strong and better than targets. Similar to the first half of last year, also in the first 6 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 1.5 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 nonrecurring 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, and nationwide development that we monitor closely. And for the next year, we will increase prices. Let's move to the Life 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 3 buyout deals this year totaling EUR 2.8 billion. Our Pension DC inflow of EUR 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 plan period and have achieved 50% of our EUR 1.8 billion cumulative annuity inflow targets, so really on track. In the pension buyout space, we've shown strong deal execution to almost EUR 3 billion in buyouts so far, puts us well on track to meet our EUR 8 billion cumulative target by 2027. Let's dive into the pension buyouts on the next slide. a.s.r. 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 EUR 7 billion of pension entitlements have been transferred to insurers, roughly 25% of the expected EUR 20 million to EUR 30 billion market. a.s.r. 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 hands on from day 1, showing clear commitments to drive to execute these deals. With TKP's top-tier platform, we've ensured smooth transfers to pension entitlements and demonstrated in the 4 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 are 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 HumanTotalCare, 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 labor 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 en Welzijn to split the real estate activities of Amvest by the 1st of January next. As a result, a.s.r. will independently manage the 7,500 residential dwellings previously overseen by Amvest while the development activities will be split. The operating result increased by EUR 13 million to EUR 87 million, driven by business growth and the realization of cost synergies. Although there is some seasonality in D&S, which is skewed to H1, the fee-based business are performing really well. With that, I'll now hand over to Ewout to walk you through the financial and capital position.

Yes. Thank you, Jos. And I have to say that 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 view. For yet another consecutive period, it is fair to say that we got this wheel spinning. We are operating from a position of capital strength. Our Solvency ratio rose to 203%, giving us ample capital to fund our initiatives for profitable growth. We have, in particular, executed strongly in the pension buyout markets, 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 and profitable growth, we are well on track to hit the EUR 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 solvency developed in the first half of 2025. Over the past half year, we deployed capital at attractive margin. Despite that, our solvency ratio still moved up by 5 points, landing at 203%. Let us look to the key drivers of the development of our solvency. The 3 buyout deals in the first half of the year and EUR 2.8 billion of assets and liabilities impacted solvency by 4 points. As we did not use longevity reinsurance yet, this is about 1.5 solvency 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 mix. The OCC contributed roughly 12 percentage points to the solvency, 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 points, but we also have experienced 20 bps steepening between 10 and 20 years points. And at earlier stages, like in 2022 and 2023, we already have seen that steepening between 20 -- 10 and 20 years is beneficial for our solvency as the UFR converts differently. Secondly, we have seen the tightening of the market 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 Solvency II ratio to 208% before any capital management actions. After deducting 6 points from the interim dividend and the EUR 125 million share buyback and factoring the EUR 500 million RT1 issuance and the partial Tier 2 redemption, we land at a solvency of 203%. Quite some moving parts and may be useful to have a look on what we can expect on solvency for the second half of this year. Let me highlight 6 items. To start with, the first call date of the remaining EUR 88 million Tier 2 hybrid 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 1 or 2 solvency points contribution from the capitalization of the cost synergies. Thirdly, we have about 1.5% additional capital consumption from the closed buyouts to invest fully in the targeted asset mix. And we might, when opportunities arise, also invest 1 or 2 solvency points in rerisking 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 spread 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's solvency ratio at implementation date with 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 a.s.r. Life, which is still expected to add 10 to 12 solvency points to the group solvency. And, of course, we should not forget the regular OCC contribution, which we'll 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 EUR 721 million, mainly driven by the Life segment. Rerisking 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 EUR 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 share 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 EUR 10 million to OCC due to the improved operating results. Holding & 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 EUR 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 EUR 50 million deduction, bringing us to a normalized H2 2024 OCC of EUR 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 EUR 30 million to EUR 40 million uplift versus the normalized H2 2024 OCC, putting us comfortably above EUR 1.25 billion and well on track for EUR 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 results over time. Firstly, business capital generation is higher in the operating result driven by the CSM release in the Life 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 LIP versus the volatility adjuster. On average, we see 25 bps higher liability -- 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 pretax while OCC is a post-tax measure. Let's move to the next slide and dive into the operating results. Operating result increased by 22% to EUR 826 million. Life segment delivered a steep increase of EUR 126 million, mainly driven by the higher 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 EUR 26 million. For fee-based business and Holding & Other, the same dynamics apply as for OCC. Before we move on to the investment portfolio, I want to point out 2 incidental items that impact the IFRS result in the first half of the year. Firstly, to harmonize methodologies of Aegon and a.s.r., we updated the determination of the liability liquidity premium, leading to a lower average LIP 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 the 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 IFRS results. Let's now turn to the investment portfolio. This slide shows the strength of our investment portfolio, high quality, well diversified and resilient. And I'll start with the fixed income and then touch on Mortgage spreads and Real Estate. Our fixed income portfolio is solid. Around 95% is investment grade and well diversified from a geographical point of view with a skew to European countries. Our exposure to the U.S. is limited, as you can see, and please note that the fixed income U.S. 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 remain 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, Mortgages. Risk return profile of Mortgage has remained very strong, low arrears and eligible 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 mortgages when we want to express predictability and quality. We're currently seeing 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 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 stacked 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 HoldCo 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 holding liquidity definition to facilitate that we keep cash in the legal entities to get the best yield. Solvency ratio at our Life entities are benefiting from the steepening of the interest rate curve. Aegon's Life ratio even held steady despite a 10-point deduction from remittances to group and 12 points consumed by pension buyouts. The continued strong position -- capital position at Aegon Life provides capacity to remain active in the buyout market. And just a quick reminder, solvency ratios for a.s.r. Life and Non-life are based on the standard formula. If all goes according to plan, we will implement partial internal model for a.s.r. Life in H2 2025, which will further lift the solvency ratio of a.s.r. Life and Group. The implementation is progressing well. The formal review phase by the DNB 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 rap up.

Thank you, Ewout. 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 EUR 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. The robust Solvency II 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 a.s.r. Life 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.

[Operator Instructions] And now, we are going to take our first question, and it comes from the line of Cor Kluis from ABN AMRO - ODDO BHF.

And Jos, 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 got the Aegon PIM at the end of the year. So yes, quite high solvency if you also take that into account. Until now, we only have the share buyback of the EUR 175 million and the EUR 225 million in, I think, most models and guidance. Can you give a little bit more idea what to do with, yes, 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 buyouts? So excess capital situation, maybe we look a little bit -- we're a little bit early on that. We have to ask that question at the end of this year, but that's the first question. Second question, like what Ewout said is the mortgage spread model adjustment that could have some positive impact on the OCC going forward. Could you quantify that a little bit? What kind of figures do we have to think about of that change? And my last question is about pension buyouts. You already said that you before hedging have an IRR of above 12% of the pension buyout. So that was a 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 IRR. So are we then talking about 13% or 14% 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 as said in the presentation, we believe that having our own asset management is -- 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 1 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 a 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 EUR 8 billion in buyouts. Let us first get there. But the strong capital position puts us in a position that if the market is larger than the 20 to 30, and we've reached the EUR 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 said, we believe that consolidation of the Dutch Life 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 buyouts than what we have announced to -- sorry, buybacks than what we have announced up until now. So we keep on track on the EUR 175 million, EUR 225 million. 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 Ewout for the mortgage spreads.

Yes. So on the mortgage spread, Cor, 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 2 saucy points, then you talk about EUR 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 it somewhere between 7 and 10. That's the duration of -- or 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.

Now, we are going to take our next question, and the question comes from the line of David Barma from Bank of America.

And apologies for my lack of a good West Coast flow this morning. Firstly, on OCC, thanks, Ewout 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 rerisking benefits, more buyouts, maybe a bit of uplift to OCG if you do this longevity reinsurance deal. So is there any reason we shouldn't expect you to outpace your target next year? And then secondly, on Non-life, on an earned basis, top line is down in Disability and almost slightly up in P&C. So first, could you maybe give us a bit of color on the bridge between the organic growth and the earned numbers? And if you can update us as well on pricing trends for these 2 lines of business? And I'll listen to Michel and stick to 2 questions.

Thanks, David. Shall we also discuss the EUR 230 million 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 will -- 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 buyout. As said, we closed most of the buyouts just before Q2, so the rerisking hasn't been done a lot for those buyouts. That will be done in Q3, and the remainder portion in Q4, but that also means that you only have kind of a 1 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 a.s.r. Life. But all in all, that brings us in a level, as we have said earlier, that we expect to do roughly EUR 100 million more -- EUR 80 million to EUR 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 RIA business, we see a need for further price increases, and we already took the decision to increase prices for that. That is actually the Disability Group business for taking over the risk for -- the risk after 2 years of sickness. There, we also had already decided to increase premiums, and that will impact our competitive 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.

Now, we are going to take our next question, and the question comes from the line of Andrew Baker from Goldman Sachs.

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 of 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 is that attractive in the market and they can't get to 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 of return from a peer to what you're seeing in 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, sort of close to EUR 3 billion? Or would you do anything in terms of the back book as well?

Thank you, Andrew. I think I already mentioned the 3 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 life 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 asked -- giving David the call and asking him why he's not able to reach it more than 10%. So I think we are 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 4 transactions is even without reinsurance already above the 12%.

Beautiful thing is also that we today in the H1 numbers, we already have the buyouts in our books, so we can also make the 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 the size -- 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 do that, 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 EUR 1.6 billion buyout that we -- 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 that distinguish us from other Dutch insurance. We will take into account that we bring a.s.r. Life to an internal model, which already makes longevity risk more capital efficient than under the standard formula, and we will also take into account the EIOPA 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 it is material improving the IRR of buyouts, we will have -- we will assess whether we can further improve also the capital structure of the company.

Now, we are going to take our next question, and the question comes from the line of Michael Huttner from Berenberg.

My first question is on the, what I would call, burnout. You highlighted this just in your opening remarks talking about the employee satisfaction and things. The speed at which you're operating is almost unbelievable, not only you're beating your targets, the 185% raised to 215%, and it feels like you're a little bit ahead even over 215% now. Your -- 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 rapper. And then on the 12% IRR, can you help me with the numbers, Ewout? Because I get to numbers which are way higher, but I'm obviously wrong. So EUR 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. And I never know whether you should apply this to the own funds or the SCR, but I get a roughly average figure of EUR 200 million. Now, EUR 40 million divided by EUR 200 million for me is 20%, but I'm obviously getting this wrong. So any indication here would be great.

So let me take the first question, a question I really like, Michael. Thank you. I don't see that, 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 to -- 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 if I -- and we follow the outcome of those measurements very closely. And on average, over the last 6 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, in 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 a.s.r. 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 are spending, of course, on AI. And we do see a lot of benefits from AI already in our operational cost, and that's also going to be helpful. So thanks for the question. No worries there. We're on top of it. And we are managing it quite close.

Yes. Then thanks, Mike, for the question on the IRR and whether it is not higher when you do the math. So I think the invested capital where you're referring to, so let's say, somewhere between 4 and 5 points is somewhere between EUR 250 million and EUR 300 million. When you indeed divide EUR 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 -- yes, the strain is coming actually before you get the flow. And that makes -- that brings us to an over 12% IRR.

Now, we are going to take our next question, and the question comes from the line of Thomas Bateman from Mediobanca.

And thank you for the rap again, highlight of the day. Could you just touch a little bit more on the growth in Health? I guess, there's an assumption that the SCR strain won't be recurring. But could you just give us some indication of the underlying drivers of why the Health growth was so strong? And then just a second question on the Solvency II review. You alluded to it there. I might have missed the details, but can you just -- any other guidance you can give on the potential benefit from the Solvency II review?

Thanks, Thomas, for your question, and welcome in the a.s.r. 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 rap before we start. So maybe you can prepare for that. 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 the portfolio of '25, we were able to remain within our return -- in our return requirements, and we're able to gain back a little bit of the portfolio that we lost in the years before. 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 OCC. So actually, it is financing the growth going forward. So that is the main reason why the OCC in the Non-life 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...

Yes, on the Solvency II review. So thanks, Thomas, and nice to have you on the call indeed. So on the Solvency II review, I think for a.s.r., there are 3 elements that are important in the Solvency II review, one is the change in the calculation of the VA. And when we look today that it is not really impacting the solvency position versus today. Secondly is the risk margin. What we see is that the risk margin will be lowered to a level of 4.75% coming from 6%. But also the way you actually -- yes, you calculate the required capital of the insurance risk in the years to come is also done in a different way, we call the LAMBDA factor, and that is also beneficial how that calculation has changed going forward. So the risk margin positively contributes to the solvency position compared to 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 up at the 20 years points and move -- and then you move towards the UFR from when the EIOPA 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 20 -- at the 30 years point or the 40 years points and at the 50 years point. And that's 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 solvency 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 in -- by end of January 2027, but there is still a debate going on whether or not you already should recognize that by the full year 2026 numbers given the fact that, yes, 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-end 2026. It has to be seen how that evolves. But by the end of the day, we are positive on the contribution of the -- that EIOPA 2020 review will happen on a solvency ratio.

Now, we proceed to take our next question, and it comes from the line of Benoit Petrarque from Kepler Cheuvreux.

So 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 year 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 EUR 250 million cost synergies. How much you've realized roughly at the end of June? And that will be interesting to see where you are on that.