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

Good morning, ladies and gentlemen. On behalf of the entire Management Board, welcome to the a.s.r. Capital Markets Day 2024. We are really delighted to see so many familiar faces here with us today in Utrecht. But I should also say a very warm welcome to everybody who's watching us via the webcast. I'm Michel Hülters, Head of Investor Relations. And I have the pleasure to be your host and the moderator for this event. So today, a.s.r. is going to present its new strategic plans. And Jos Baeten, our CEO, will kick off with the presentation on how we will continue to pursue profitable growth, create sustainable value and become the leading insurance company in the Netherlands. And of course, he will also discuss the new ambitious medium-term targets that we have published this morning. After that, Ewout Hollegien, our CFO, he will discuss the developments that we see in our capital base, and our rational deployment of that capital will in its turn create new capital and the foundation for capital returns. These 2 presentations will be followed by Q&A session, and we have ample time for Q&A until 11:00. And that concludes the first part of the program. Now the second part of the program consists out of 3 consecutive breakout sessions, which will be hosted by various members of the Management Board and the responsible business managers, directors that we have. But I should also say that, in the room available today, it's not only the presenters, but basically the entire senior management of a.s.r. And they are here for you for any questions that you would have on their areas of expertise. So please feel free to reach out to them. They're here for you today. In the booklet, for your reference, we've put their names and the areas of responsibility. And so during coffee break, lunch or closing drinks, reach out to them. I'm pretty proud of the fact that they are here with us today. Before we get started, I would like to make you aware of our cautionary note regarding any forward-looking statements, which is presented here also in the back of the presentation, probably something to read on your way back home. But that is my introduction. I'd like to get started. So without further ado, Jos, may I invite you to the podium.

Thank you, Michel. Welcome, everybody. With so many friendly faces in the room, I dare to share a dream I had a couple of weeks ago while preparing this Capital Markets Day. And actually, it is a pretty realistic dream. It was a pretty realistic dream. It was about a road show organized by Michel, and the day started with a very early breakfast with the analyst community. And after that, he had organized 8 meetings of an hour with investors. That's roughly the normal day if Michel organizes a road show for us. And we started with the breakfast and analysts started to ask questions and to challenge us. And during that breakfast, a number of analysts said to us, well, you should present a.s.r. more as a capital return story. You're generating so much capital and you have to return that. And I said, well, that could be true, but is that the best story. And then we ended the breakfast. We went to the bus. Moved to the first investor, a very loyal investor to the company, and we discussed the strategy and everything we've been doing and that investor said to us, well, be aware of the fact, I am an investor. I'm not a trader. So please don't return the capital, but invest it in the business. And then we moved on to the second and the third and the fourth one. Some investors also pointed out in my dream, well, you should return more capital. But most investors said to us, please invest it in the business. And with that, I was turning in my bed and my wife woke me up and said, what's going on? You feel so restless. I said, well, I had a dream and I have to think about it. So I went down, took my regular 5 cups of espresso. That's how I start the day. And I started to think, well, what is the message in this dream. And actually, the message is the theme of this Capital Markets Day for us. a.s.r. is not either a growth story or a capital return story, I think we are both. And with that, I want to look back a little bit to what we've recently done. I think we've shown that we are able to execute our strategy in a very disciplined way. The way we've allocated capital over time has always been rational and based on economics. And that for all of you delivered, at least that's what I think, very good and attractive returns. Currently, of course, we are focusing on integrating the Aegon business into a.s.r.. And with that, we think we will create further opportunities for capital generation and also for further growth. And that will -- and already it was already mentioned by Michel, that will bring us to the foundation of one of the leading insurance companies, the leading insurance company in the Netherlands. And we do that on a daily basis with, rounded, 8,000 very dedicated employees. And today, we are serving over 4,500 customers in the Netherlands. And our general goal in the Netherlands is that we want to be value creative for all of our stakeholders. For our customers, we want to be the best financial service provider. For our employees, we want to be the preferred employer in the Netherlands. For the society as a whole, we want to deliver impact through our products, but also through our investment portfolio. And finally, for the investment community, we want to be an attractive long-term investment. And managing such an ambitious plan is very important. And we manage the company with those 6 colleagues, including myself. And with the 6 of us, we have 170 years of experience in the financial industry. And within that 170 years, 109 years of experience within this company combined with Aegon, the Netherlands. And all of us have expansive experiences in M&A, in running the business and integrating the business. So that creates a tremendous platform for further growth going forward. And talking about growth, in my dream, I also had a moment thinking back on our IPO and what we've done since the IPO. If you take a look at the consecutive periods of target-setting, I dare to state that in every period when we set targets, we were able to realize them, but we were also, in a lot of cases, able to exceed them. And of course, last year, we had to state due to the introduction of IFRS 17 and the fact that we were integrating Aegon, that the targets from them were not viable anymore. But if I look at the realization in 2023, I dare to state, we also there delivered on our promises. And not only in terms of the financial targets, also if I look at the nonfinancial targets, if I look where we were in 2018 and where we are today, we are considered by Sustainalytics as the best-performing company in the world, in the insurance world. We, in the meantime, have been included in the Dow Jones Sustainability Index. And also in the Dutch List, we are the top performer, and we are very proud with that. And we're keen to remain one of the industry leaders also going forward. And across the board, our performance has led to very attractive returns for you as shareholders, and let's have a look at them. In 2016, we were IPO-ed. Our valuation by then was EUR 2.9 billion. In the last 8 years, we have returned EUR 3 billion of capital through our dividends and through share buybacks. So an investor that is with us since 2016 had already a return of 265%, and we're outperforming almost every index over time. And I'm very proud of that. But with that, let's start looking ahead. I already mentioned the integration of Aegon. And with the combination -- with the business combination between a.s.r. and Aegon, we have created a platform with the potential to be the leading insurance company in the Netherlands. Currently, we are the #2 in the Netherlands. But if I look to our position in pensions, we're also the #2, and that will create, and I'll talk about it a bit later, opportunities for further growth. In the Disability area, we are the clear #1 with the combination of the Aegon and a.s.r. portfolio. And in P&C, we've added significant scale. And we're, there, currently the #3 with potential for growth. And also important in the area of mortgages, we are the leading mortgage company amongst all the insurance companies in the Netherlands, and mortgages are for us a very interesting investment category. So with that, with that platform and a successful integration, I think we are ready for further growth. And having mentioned the integration, we already, in length, talked about it on the 30th of November last year, but let me quickly update you on where we are today in the integration. We have finalized a lot of discussions with our workers council in a positive way, and that's a step we needed to take. We are moving towards our final target operating model. In a number of areas, we're already almost done with the integration. For example, in the Asset Management area, but also in P&C and Disability, we expect that we will be done with the integration before the end of this year. For next year, integration will be predominantly about mortgages and Individual life and the Pension integration probably will be finalized before the end of 2026. So we're going to live up to the promise we made that we will finalize the integration within 3 years after the closing, which was actually roughly 1 year ago. So we're 1/3 on our way. Looking forward to the strategy, I think it's important to stress what is the fundamental -- what are the fundamentals of our business strategy going forward. And people that are already for a longer period with us will not be surprised. First of all, it remains key that we steer the business on a value over volume base. We rather don't do any business if we can't create value. Growing the business without creating value is very easy, but we want to grow the business while we create value. So value over volume remains very important for us. Of course, in a country where growth is not the natural thing, cost discipline remains very important. And we think we have shown that we are able to run the business with a significant cost discipline, and we will keep on doing that going forward. Maintaining a flexible and strong financial framework is, of course, important for financing further growth, et cetera. So also the financial discipline we have shown over the last period, will also, going forward, remain very, very important. So let me talk you through the key priorities for the next couple of years. And this type of slide, I could talk hours and even days about it, but I'll try to keep it brief. And where do we see opportunities for a.s.r. to continue our growth path. First of all, in the P&C and Disability market, we still think we will be able to grow in an organic way. So we will continue to grow the P&C business and the Disability business in an organic way. In Pensions, we have created, with the transaction with Aegon, a very strong position. And we expect, and I will come to that in a moment, we expect that we will be able to grow the Pension business as well in the DC area. And with that, setting a foundation for further growth through annuities, But also, because we are now also having TKP within the group, we will be able to grow through pension buyouts, and I will come to that in a moment. In the area of our fee business, we already have a strong position, and we expect that we will be able to continue the position and building the position while we are investing in, for example, TKP. We aim to continue the growth of the fee business also, and that includes our Distribution and Services entity and our Mortgage business. Being the leader in the consolidation in the individual -- in the consolidation of the Individual life market, we expect that we can capture more efficiencies there going forward, while we keep on serving our customers in the best possible way. And with the changing distribution environment, it is very important for us to be close to our customers, and we think that getting even more closer to our customers and our intermediary will support growth for -- growth going forward. And that will include becoming more and more gradually an online player in the Netherlands. And of course, our capital base could be more enhanced, especially because of the integration of Aegon the Netherlands, we do see opportunities to enhance the outcome of our investment portfolio specifically, and Ewout will talk about it in a bit more specifically on the Aegon part. And then a very interesting part of our strategy. We still think maybe -- unlike some others, we still think that there are opportunities for growth with further M&A, with bolt-on acquisitions. And I will talk about that on a specific slide where we do see those opportunities. And last but not least, I already mentioned it in my introduction, we are keen to maintain our leading position in terms of being an ESG insurance company. So with that, let's look at how we -- next slide, please. Yes, thank you, how we look at the deployment of capital. And actually, this is one of the slides that Ewout wanted to present. But when I saw it, I said, well, I'll nick this one. And so we will see how he will deal with that. And it is actually about an important sentiment. It is about how strong is our capital base, how are we deploying capital, how are we generating capital and what's our view on returning capital. And let me just give, because I don't want to mow all the grass for Ewout, let me just give some examples. We expect that total of capital catalysts will generate roughly 40% solvency points going forward. In terms of capital deployment, we think we will be able to create further growth. And with that capital generation, we are able to raise the OCC target for the full year 2026 towards the EUR 1.35 billion, and I will talk about it in a moment. And with that, we will be able to generate capital return through our dividends and to the daily -- to the announcement of the resume of the share buyback program of today. And I already mentioned M&A, because there is no M&A in the targets we present today, but I like to talk about it anyway. Where do we expect that we will be able to grow further through M&A? At the end of this year, we are done with the P&C integration and with the integration of our Disability business. Specifically in P&C, the top 3 in the Netherlands owns, rounded 65% of the market. And we expect that we will be able to do M&A in the tail of the remaining 15 to 20 companies in The Netherlands. Because as a P&C company, you have to invest in online, you have to integrate GenAI, et cetera, and we expect that not every insurance company -- small insurance company in The Netherlands will be able to do so. And therefore -- maybe one back, please. And therefore, we still believe that in the P&C area, there are opportunities. But also in the Life area, there are still some small pension platforms that probably may need to find a safe home going forward due to the fact that everybody has to move towards a new pension model. There is still opportunities from our perspective in the funeral area, and we're hopeful that we, over time, can do M&A in there. And finally, after we have finalized our own integration in Individual life, we expect that there are important opportunities in the Individual life area. And with that, we think, and as I said, it's not included in the targets we present today, we think there is still room to grow also in an inorganic way going forward. Having said that, let's talk you through the targets, you probably have studied them already. Let me start with the organic capital generation. Overall, we have raised the ambition. And I think OCC has quite a nice uplift with over EUR 100 million because it -- when we announced it, it was EUR 1.3 billion on a run rate base, and it's still included Knab, Knab is now sold, so you have to deduct that. And we have raised the target to EUR 1.35 billion, not anymore on a run rate basis, but annually in 2026. So I think quite ambitious in the Dutch market. Regarding our Solvency II ratio, we keep the hurdle at 160% and that is important because everything above 160% for us is what we call entrepreneurial capital, which we can use to do M&A, but also which is helpful to absorb potential market shocks in the financial markets. We call it our entrepreneurial zone. And as you know, as from 175%, we might consider to do share buybacks. Our operating return also under IFRS 17 needs to be above 12%. So the hurdle remains 12%, and we always want to be above it. And if we can do more, of course, we will. But the limit is 12%. And of course, that's nothing new. The synergy target for the EUR 215 million is still the target which we are aiming for, and we're confident that we will be able to realize that before the end of 2026. But also a number of important business targets. First of all, combined ratio, and combined with the growth target, we aim to have at least a combined ratio between 92% and 94%. And at the same time, growing the business with 3% to 5%. And we can have a lengthy debate whether the combined ratio is ambitious enough. But in our view, and we've done a lot of calculations on that, this will, at the end of the day, create the highest absolute profit growth and it's a way to protect our in-forced profitable portfolio. So it's a balance game and we believe this will create, at the end of the day, the highest absolute growth. In Pensions, we have 2 targets. First of all, due to the change in the pension law, we think that there will be growth acceleration in the pension DC market. Almost every employer in The Netherlands has to think about the pension plan, and we expect that until the end of 2026, we will be able to grow the assets under management in the Pension DC business with, rounded, EUR 8 billion. And that will create a tremendous platform for further growth because all those pension plans will end up in having an annuity if people are pensioned, that will end up in annuities. And in 2026, we already expect by then that we have done EUR 1.8 billion of annuities, and that will create also further long-term OCC growth. Second target in the pension area is on pension buyouts. If we look at the pension market, there definitely will be a number of pension funds, and Ewout will talk a bit more about it and it will also be addressed in the breakout session this afternoon. We expect that there will be a number of pension funds that we'll seek for a different solution than moving the in-force liabilities to the new pension law. We expect that the market will be between EUR 20 billion and EUR 30 billion. And that we, as an important player in the Dutch market, will be able to grab our fair share in the market. So we assume that before the end of '27, we are able to generate an additional EUR 8 million of pension buyouts in a profitable way. Because as you all know, the hurdle for every business decision we take is it needs to have a return of 12%. So if and when we're not able to get a return of 12% in the pension buyout market, we just won't go there. But for now, seeing all the quotes that are asked, we expect that it will be a market and that we will be able, over time, to reach that EUR 8 billion. And in our fee-based business, we have said, well, at the end of 2024 -- sorry, 2026, we want to have reached the level of EUR 140 million of operational profit. So that part of the business is becoming more and more important for us, specifically because of this business -- fee business with a low capital requirement. And then let's move to the return to shareholders. When we announced the transaction with Aegon, we have raised the dividend bar already with 12%. And on top of that, we have said by then, that we will move from low to mid-single digit towards a mid-single-digit to high single-digit growth of the dividend up until 2025. Today, we announced that we will extend that period, and from now it will also include 2026. And because of the fact that we don't have already worked out plans for the period after 2026, for the time being, we assume that we, after 2026, might decide to return to normal growth levels in terms of the dividend. And as you know, today, we also announced the resume of the share buyback. And we have a clear intention to do share buybacks up to EUR 525 million before the end of 2026. Over 2024, we assume a share buyback of EUR 125 million. Over '25, EUR 175 million. And over '26, a share buyback of EUR 225 million. And with that, I think we've set a clear set of financial targets with a clear ambition, growing the business, but also the right balance between growth and capital return. But we don't have only financial targets. Today, we've also announced a new set of nonfinancial targets. First of all, being a customer-oriented company, it's very important that customers perceive you as a positive company. That's why we introduced a new target for customer satisfaction, the so-called NPS-i, and that's a Net Promoter Score balancing how customers look at you after they have had contact and how customers look at you from an online perspective. So the combination of those 2 will create the NPS-i, and we cover with that actually all customer interaction, which we think is important. Further on, having a dedicated workforce, having fun working at a.s.r. is very important. And we've said, well, we want our employee engagement in 2026 back at the level where we were before we announced the transaction with Aegon. And as you can imagine, during such a period of integrating 2 companies, it is difficult to remain at that high level. But in 2026, we want to be back at that same level. We also included a new target on gender diversity One of my key learnings is that having a diversified management, and we're now 50-50 in the Management Board, is helpful to grow the company in a balanced way. And we have set a target that in 2026, we want to have at least 40% of our management people being either a female or a male person. We're not yet there, but we believe that in the next 3 years, we are able to grow towards that number. And it's also important as a financial institution to have a positive attribution to climate control. That's why we introduced 2 targets. We already had 2 targets. First -- the first target is a target on CO2 reduction. Up until last year, we were able to reduce the CO2 footprint of our portfolio with 70%. But now we've added the portfolio of Aegon, we had to create a new base year. So the new base year is 2023. And as from 2023 up until 2030, we aim to reduce the CO2 footprint in our portfolio with 25%, and we want to be fully neutral in 2045. And on top of that, we also have set a target on impact investment in 2027, we want to have at least 10% of our total portfolio in the area of impact investment. And with that, I come to the final target being the brand reputation. I don't know how it is in other countries, but in The Netherlands, it's very important that you, as a company, are perceived positively in society. And that's why there is an important target being perceived as a positive brand. And that's why we have set a target on brand reputation, and that needs always be between 38% and 43%. So at least roughly this percentage of the people in The Netherlands should think positively about a.s.r.. Very ambitious targets. And with that, I think we present today a very compelling investment case. A resilient balance sheet also going forward with a strong financial flexibility. The ability to deploy our capital in a rational way with a very compelling business plan, offering growth in, an organic and inorganic way, an ESG profile reflected in clear targets going forward, very attractive capital return through either the dividend and the share buyback, and a potential return over the next 3 years where we did EUR 3 billion in the last 8 years, a capital return of over EUR 2.5 billion for the next 3 years. And with that, I'd like to wrap up. I think we have the proof that we are able to deliver because we have a very solid track record looking back. We're quite excited about the opportunities to grow the P&C business, the disability business, have a strong position in Mortgages and specifically in the Pension business. We have a compelling strategy for that with ambitious targets in the Dutch market and a strong record, and that's returning to my dream, that we are able to grow the business combined with capital returns to shareholders. And with that, I'd like to hand over to my dear colleague, Ewout, and he will talk you through a lot of interesting things in terms of our capital position. Thank you.

Let's do that. And thank you, Jos, and good morning to you all. I mentioned yesterday to many of you already, but I really appreciate it that so many of you actually came to Utrecht to visit the Capital Markets Day. And of course, also a warm welcome to everyone who's dialing in through the webcast. And Jos already made clear in his presentation that a.s.r. has attractive growth opportunities. And we have the capital actually to support that. And at the same time, the growth in the business will go hand in hand with increasing level of capital returns. And the title of my presentation actually says it all: Putting the balance sheet to work. And look to my key messages. I think it's important to mention that a.s.r. has a strong and resilient balance sheet, which is the foundation on which we can operate and realize further growth. It's also what we have done when we did the Aegon NL acquisition. We used EUR 500 million of excess cash from our balance sheet to actually invest in growth and in a profitable manner. We see 4 main areas for capital deployment: organic growth, pension buyout, rerisking and M&A. And these opportunities with the exemption of M&A will result in the higher OCC ambition of EUR 1.35 billion in 2026. And this is also the basis for our capital return to shareholders with a strong and progressive dividend. And as promised with the Aegon NL acquisition announcement, we will have a mid- to high single-digit dividend increase until 2025. And today, we actually increased that with 1 year until 2026, which underpins the trust that we are having in the business plan that we are presenting today. And in combination with the share buybacks, we expect our capital return to exceed EUR 2.5 billion in the coming 3 years, which is actually very close to the EUR 3 billion that we have done since IPO 8 years ago. A few years ago, we have introduced this capital wheel, and this is actually still the way we are looking to it. A strong and robust balance sheet is really the foundation for everything. That, together with a strong financial performance, has been the foundation that enabled us to execute our strategy over the past years. And my definition of a strong balance sheet is a strong and highly quality solvency capital, with manageable sensitivities and ample financial flexibility. Because we value this highly, this is also why we have said we want to grow back into the balance sheet in 2024 to absorb the impact of the Aegon NL transaction and strengthening the balance sheet, which brings us back in a position to invest in growth again. And that gives us the opportunity to deploy capital regionally, like we have been doing since we get IPO-ed and actually also the years before IPO. We expect to allocate around 20 percentage points of solvency in rerisking and pension buyouts, and we will have ample room to grow even more. Through this deployment of -- and of course, running our business successfully, which is always a very important element, we will grow the business and our level of capital generation to EUR 1.35 billion in 2026. And this will, in turn, lead to an increased shareholder return with progressive dividends and share buybacks that also will keep pace with the growth in the OCC.. Yes. This slide shows our solvency management ladder, and I hope that is familiar for many of you, because actually, the setup hasn't changed before. And actually, we could also have skipped this slide. But still, I feel it's important actually to look at it and discuss it a bit. Because when -- because it is actually true that we now also maintain the solvency management ladder, now we bring a.s.r. Life to partial internal model as well. And some of you, and we have the discussions in the past, thought, okay, so you actually lower your required capital, so then you will probably increase the level of your management ladder. Others ask us the question, now you have better assess the risk on the assets and liability side, and you have the capital that you hold is more related towards the portfolio, there's actually less risk available so you can lower your capital, your management ladder. I think both are fair views, and that's why we say, okay, we keep it as it is. Because we are actually very comfortable with this solvency management ladder, and that's why we maintain and stick to this Solvency II management ladder. And it remains important to keep the sensitivities manageable. And from that point of view, we are very comfortable to be entrepreneurial above the 160% level. And of course, pay-out our progressive dividend policy over the 140% level. And when we are above the 175% level, we are in an additional capital return shown. And where we look at additional capital return in a way that is most efficient for you as a shareholder. And it can be halted as we have done with the Aegon NL acquisition, when large M&A or other value opportunities arises. As you know, our post-acquisition solvency ratio by full year was 176%. And we mentioned that we want to grow back in our solvency position. And we see 4 catalysts for the solvency. The sale of bank is someone -- something you already know, which we announced in the beginning -- the 1st of February 2024, which will lead to a EUR 510 million proceeds that we received from BAWAG, and an increase of the solvency position with 13 solvency points. Secondly, in light of our presentation that we did in November, we have increased the level of synergies that we expect from the Aegon NL transaction that will flow into the OCC, but also partly be recognized in the level of solvency. There are still 9 solvency points to come from actually the level of synergies that we realize in the Life segment. Thirdly, we are on track to implement the partial internal model. The first phase is to implement the partial internal model for a.s.r. Life by end of 2025, and that will also be included in the full year 2025 figures as we see it today. And after that, we will continue to implement the partial internal model for the Non-life business. And we expect that the total solvency uplift will be somewhere between 10 to 50 solvency points, of which the a.s.r. Life partial internal model is the largest component of that increase in the solvency position. The fourth element to mention is the Solvency II 2020 review. It is something that has been discussed for many years already. But it looks like we are in the final stretch of getting this passed and translated into the adjusted delegated X. Currently, we expect as of -- that it will be implemented as of full year 2026, could also be the 1st of January 2027. But it's also -- everyone is working actually to be -- to recognize that by end of 2026. At full year 2023, we expect -- we estimated the positive impact to be around a high single-digit number. And the driver behind that is the lower cost of capital for calculating the risk margin, which is only partly offset by a change in the regulatory curve, where you now take into account also market data of the 40 years in -- 30 years and 40 years points on the curve. All of these elements together, as presented on the slide, will lead to around 40 solvency points uplift on the a.s.r. Group's solvency ratio until 2026, a real significant uplift one could say. At the same time, we also expect some extraordinary capital deployment, and we have discussed it already. But mostly worth mentioning, pension buyouts and the re-risking part, which, in total, will take roughly 20 solvency points over the next years. The number that we present over the year does not reflect the retained OCC, nor the capital return, but should already give a clear visibility on the improvement of the solvency ratio in the planned period. And that provide us with ample flexibility to operate with a robust balance sheet. Extra so if you take into account the leverage ratio that we are having, ample Solvency II headroom and a nicely staggered debt profile. And I think also the confidence is recognized by S&P, which already confirmed our single A rating and stable outlook after the acquisition. Looking at the own funds and the required capital development over the last few years, it actually doesn't really capture what happened since our last Capital Markets Day in 2021. In 2021, I told you about the benefits of, I think, diversification in your portfolio, both in operating results term, post-COVID, but also from a capital diversification perspective. What happened since then is either further proof of our resilient balance sheet and business portfolio and just to name a few. We have seen a lot of geopolitical uncertainty, various wars as well, an energy crisis with a huge and increase of energy cost and electricity prices. And we have seen banks in the U.S. and in Switzerland even go bankrupt and getting into trouble, also leading to an RT1 and AT1 market that's actually -- that actually crushed. Interest rate, we have seen rising from 0% to 4%, which is a huge shift if you are not equipped for that. And we, of course, as a.s.r. and like others in the sector also have settled the unit-linked profile. This, in combination with 2 other factors, namely the introduction of IFRS 17 accounting standards and the acquisition of Aegon Nederland, resulting in a situation that is barely similar to what it was 3 years ago. And the fact that all of these elements have been absorbed in the eligible own funds and in the required capital without any notable impact is a testament to the robust approach that we have on risk management. The underlying quality of own funds have significantly improved and today, reflecting much more economic reality. UFR benefit in the solvency position has reduced significantly. So it's almost disappeared. And because of that, you also see that the UFR rate is at a much lower level than it was before. The capitalization of cost synergies will further improve the eligible own funds and add additional positive impact to that. Also, organic growth will, from our business and plans and the organic capital generation, will further improve the quality of our own funds. The required capital increased a bit more than the own funds. But bear in mind, the required capital is also impacted by the bank that we still have in these numbers. And the underlying division in the different risk categories, between market risk and insurance risk, have remained roughly unchanged. And the implementation of the PIM for a.s.r. Life will lead to an overall reduction of the required capital. Having said that, let's look to the next slide on how we look to capital deployment. So basically, we now discuss the robust balance sheet and now we will look to capital deployment. We see actually 4 main areas for capital deployment. That's organic growth, which has been discussed by Jos. So let me focus on the other 3 parts, being the pension buyout, the balance sheet rerisking and shareholder return. And we start with the pension buyouts. And I'm sure this will also be widely discussed in the breakout session later today, but let me give you some insights on how we look to this opportunity. The main buyout opportunity are coming from corporate pension funds. Roughly 90 corporate pension funds, we believe, will look for an -- may look for an opportunity to actually hand over their business via buyout. The market, the 92 corporate pension funds in total represents a kind of EUR 300 billion of AUM. On the back of the new pension legislation, corporate pension funds have to take a decision what to do with their pension obligation. They can either convert it the existing entitlements into new DC type of business. That's one opportunity that they have. Or they keep the existing setup for accumulated reserves themselves, which is difficult because there's no new business added to it. Or they can enter into a buyout agreement with selected parties like a.s.r.. We expect by the end of the day, that EUR 20 billion to EUR 30 billion of AUM will choose for a buyout selection -- solution, which will most likely be the smaller corporate pension funds. And we target EUR 8 billion of the total -- of the EUR 20 billion to EUR 30 billion that we can aim ourselves. And that is the target that we are having. Please note that the plan that we are having exceeds the 2026 because the pension reform no longer allows DB per the 1st of January 2028. So there's also a 2027 year that we expect buyouts will come to us. EUR 8 billion is roughly 1/3 of the market that we expect. And knowing that the competitors are NN and Athora, we are actually saying here, we believe we can have our fair share in the market. And on competitive -- and why is that the case? Because it's all about competitive advantages. We believe the competitive advantages in this field are the following. It starts actually with that the Board of Director's corporate pension funds will have a look at the company profile. And a.s.r., being 100% Dutch name, a reputable name, a fort leader in pension area and we have a strong track record, makes actually that it's a reputable name to choose and pick as corporate and pension -- both of corporate and pension funds. The MN capability of TKP is widely regarded a top-notch, being able to onboard large pension MNs and provide high-quality services and also participant communication are a differentiating factor to this. In pricing itself, there are 3 areas where you can stand out. One is the level, of course. With TKP, we believe we have a cost-efficient platform which provides us a competitive advantage in pricing. The second element, which is also very important, is actually the day 1 strain that you have. So when you calculate an IRR, it's -- the day 1 strain is very important in the IRR calculation, and then you have a benefit when you have a partial internal model like a.s.r. is having compared to a standard formula. And so that's the second benefit -- distinguishing factor. And the third distinguishing factor is in the asset mix that you choose and the excess return that you are applying. And I do not want to inform our competitors too much, but you have to seek a healthy mix between liquid assets and illiquid assets, and also a high return on capital versus and in absolute terms and attractive yields. And as communicated earlier, we will strive for an IRR of at least 12%, which is regular to our M&A approach that we are having. And also the M&A team is highly involved in all buyouts that we should have as a Management Board on the table. And if we can't do the deals for this 12%, we will withdraw. The potential impact of doing buyouts will differ per portfolio and is dependent, for instance on the duration of the portfolio. That's one. It's dependent on the asset mix that you choose, but it's also dependent on whether or not you use longevity reinsurance and buyouts. On average, we expect that EUR 1 billion of AUM will roughly cost us 1.5 solvency points. And EUR 1 billion will probably bring around EUR 10 million of OCC, and that brings you to a payback period somewhere between 8 to 10 years. That's how we look to buyout with a duration roughly on average about 19 to 20 years. And the OCC impact that we calculate is done on a quarterly basis and we -- so it will be visible in the OCC in the first quarter after the deal has closed. Let's now turn to the next slide to start on the second part of capital deployment being rerisking. Running a robust balance sheet also means that you have to have an attractive risk return profile in your asset portfolio. Each year, we run a thorough strategic asset allocation study, and we included some additional information about this process in the breakout presentation of the segment asset management. In the strategic asset allocation, we run over 2,000 of scenarios to find the optimal investment portfolio, taking into account solvency and liquidity position. In general, the a.s.r. balance sheet is already in a relative optimal state. But given the addition of Aegon NL, we see additional room to optimize the investment portfolio. For the medium term, we see a potential uplift in the OCC of EUR 30 million to EUR 50 million and the optimization mainly relates to 3 key areas. One is the spread optimization within the core FI portfolio. So we have seen that the Aegon NL balance sheet is heavily invested in AAA core FIs. And we see room actually to invest more in single A and AA core FI, actually picking up some additional yields that these instruments are offering. The second one is that we see opportunity to increase the portion of equity by moving out of mortgages. And that's the effect because we have seen that there's a kind of underweight in the position of equities in the Aegon Life balance sheet. The third optimization that we are seeing is actually moving more from the liquid credit side to the illiquid credit side, and these are assets that fits well with our long-duration liabilities and a way to monetize actually the liquidity premium. The increase -- the required capital, of course, will increase also on the back of this rerisking side, and we expect it to be somewhere between 5% and 10%. We, on average, say, it's roughly 8%. The rerisking is an outcome will, of course, be dependent on market circumstances. And we will always run this as a strategic asset allocation process every year, so there will also be a room to further optimize in the years after. But this is the view that we are currently having when we'll talk about the revising of investment portfolio. A large part of the plan to optimize the sovereign portfolio is actually already done, as you can see also on the slide. I will expect that it will take until 2025 before we do the full rerisking in equities and in the illiquid side because we want to take a patient and economic approach in re-risking. And with our in-house asset manager, we can act swiftly when opportunities come up. And let me turn to the next slide to see how this is impacting the OCC going forward. So Jos already said it, we expect to make a significant step-up in the OCC in the coming 3 years. In October 2021, with the acquisition announcement of Aegon NL, we targeted a run rate OCC of, rounded, EUR 1.3 billion after 3 years after the closing of the transaction. With the sale of Knab this year, the EUR 1.3 billion would be lowered with EUR 50 million related to the loss of earnings from the bank, but also the loss of earnings from not managing any longer the Mortgage business on the balance sheet of the bank. From this adjusted level, our now new target represents more than EUR 100 million of uplift, resulting in the EUR 1.35 billion OCC in 2026. And let me discuss the main moving elements in this uplift. One is the updated cost synergies that we presented in November last year, leading to an OCC uplift of EUR 20 million compared to the original target. Second one is the OCC contribution, and we discussed that coming from the buyouts -- from the buyouts that we are expecting to realize in the planned period. The third element is the rerisking side, EUR 30 million to EUR 50 million, on average EUR 40 million, that we also expect in the planned period to come through the OCC. Furthermore, we would foresee an increased OCC contribution from the updated business plan that we have presented today and a small positive impact from the updated OCC methodology, which I will explain in more detail later on. Our new target also includes higher debt expenses and a lower expected OCC contribution from the TKP platform related to additional investments that we are doing over there to become the winner in pension administration. And as a reminder, our current number is a reported number, 2026, and not a run rate number as it was before. So I believe all in all, a very strong and ambitious OCC target for 2026, which is based on the assumption of normal financial markets and current expectation in relation to interest rates and spread development. And I think this one is a very nice, because 3 years ago, we presented the 10-year projections of the organic capital generation from the Life segment to show you all that the contribution to the OCC from this segment is actually very stable going forward despite the fact that we are looking to a runoff book. And on this slide, we show you actually a similar projection, now including the Aegon NL business, to prove and show that this is actually still the case. And in this number, already in this picture, already included is, after 3 years, the fact that we moved towards a partial internal model, which lowers the release of required capital but also the implementation of these AOPA2020 review, which lower the release of risk margin over time. So that's already included in this picture. For the medium term, the strong expected growth in Life OCG is mainly due to buyouts. In the years thereafter, the OCC contribution from pensions include an increase in contribution from Pension DC and annuities, partly offset by a declining contribution from Pension DB. The funeral business is actually expected to remain stable contributor, given the long duration of the portfolio and because we still add some new business to it. The OCC contribution from Individual life shows a declining pattern in line with the run off of the portfolio. This actually also proves the same that Jos was making that we still expect also other Individual life place to seek for a solution. So to summarize, what we actually see over here is that DC annuities, pension DC annuities and buyouts will more than offset the decline of the Individual life book and the in-force pension book. So again, OCC contribution from the Life segment for the next 10 years is expected to be stable to slightly growing. And let's now look to the updated OCC methodology on the next slide. We have decided to remap organic capital generation components to enhance the comparability with IFRS 17. As of H1 2024, we will start disclosing our OCC according to this new methodology and marketing. In addition, we further aligned OCC with the concept of free cash flow generation, and that will enable us also to disclose segmental numbers as per full year 2024. Let me briefly touch upon the remapping first. As you can see on this slide, the remapping will result in some differences. The idea behind the buckets are the following. Business capital generation will represent business impacts, like the results from fee-based business, value new production, risk margin impacts and holding expenses. The net SCR lease will now only relate SCR-related components. And the finance capital generation represents the excess returns, the finance expenses, including hybrids and the UFR drag, which is actually the equivalent of the elements of -- that are part of the operating finance and investment results that are part of the IFRS operating result. And that will improve comparability between those worlds. And we will still have differences in the outcome between IFRS 17 and OCC, for instance, the interest rate curve that you apply, the credit risk adjustment, the volatility adjustment, et cetera, et cetera. So a lot of differences are still there. But because of this, it will become much more transparent and possible to bridge IFRS to OCC. The main changes that we have made to the OCC methodology relate to the following points. OCC will be a quarterly number going forward, where in the past, we had UFR drag and the SCR release is on an average basis between beginning of the year and the end of the year, and we will now do this on a quarterly basis. So the full year OCC will be an addition of 4 quarters. The OCC will now be built up from the underlying insurance entities and instead of from a group perspective, which reduces noncash components like diversification impacts. The SCR release methodology is updated and SCR impacts are now multiplied with the SCR target of the underlying insurance entities and not the reported ratio at the group level. There's by the way, no change in excess returns, let that also be clear, and there's also no change to the existing seasonality pattern regarding new business. So H2 OCC will still be lower than H1, especially given the new business rate in Disability. All of these investments will have the benefit of further align OCC with free cash flow generation and enable segmental disclosure in the future. I see Jason coming in, because during the full year call, we already received a question from you, Jason. So hopefully, this commitment also make you happy going forward. And on this slide, you can also find a rough indication to expected OCC per segment as a percentage of the total OCC before deduction of the holding and other segments. And that brings us to the capital return. As you can see, we have a strong -- a very strong and increasing track record of capital return. With a total EUR 3 billion capital return since IPO 8 years ago, we actually returned more than the market cap that we had at the IPO. After last year, the payout ratio has been somewhere between 60% to 70%. And with the capital commitment, we expect the buyout ratio of OCC will be between 70% and 75% in 2026. This will reflect that we first grow back into our balance sheet and then grow our OCC related to the synergies and the capital deployment. And that enables us to offer a strong capital return in combination with business growth. Let's have the next slide and Jos did it for me, but I will discuss it myself as well. In the new plan period, we offer attractive return to shareholders as said. Starting our progressive dividend policy, we continue to deliver on the promise that we made on the 25th of October 2022 with the -- when we ended the Aegon NL deal. We did a step-up of 12% in dividend per share at that moment in time, and we increase actually the progressiveness of our dividend policy from low to mid-single digits to mid- to high single digit. And we have promised to do that until the period of 2025. And as said today, we actually extend that period to 2026. So mid- to high single-digit progressive dividend also in 2026. And we are confident in doing this because of the business plan that we are presenting today, where we have a lot of confidence in. After the present period, we expect this to normalize again, but we will see how things are going at the moment in time. In addition to the dividend, we have -- we intend to have a progressive share buyback also, which is announced every year at the full year results. And the share buyback will grow from EUR 125 million in 2024 -- over 2024, EUR 175 million over 2025 and EUR 225 million over 2026. We have the intention to participate in the potential sell down of the a.s.r. stake by Aegon if and when that would happen. And this participation will be funded from the total EUR 525 million and share buyback of the planned period, which actually could lead to an acceleration as well in the timing of the share buybacks. So if -- so in total, our capital return is expected to be more than EUR 2.5 billion in the coming period, just below the EUR 3 billion that we have done since we got -- IPO-ed 8 years ago. And that brings me actually to the key messages that are presented over here. To summarize. We have a strong and resilient balance sheet. That is the foundation for future growth and capital return. And where most of the corporates are focusing on one, we are actually focusing on both. We'll deploy capital in organic growth, rerisking, pension buyouts and, if possible, also M&A, always sticking to our financial discipline. Our business plan drives our OCC ambitions up towards a level of EUR 1.35 billion, and that allows us to offer attractive shareholder return with a progressive dividend and EUR 525 million of share buybacks, resulting in a EUR 2.5 billion of our expected capital return in the next 3 years. And with that, I conclude my presentation and would like to hand it over to you, Michel.

Thank you, Ewout. And let me invite Jos also to the podium because we're going to start the Q&A session. Okay, some housekeeping rules here. [Operator Instructions] I thought Cor Kluis.

Cor Kluis, ABN AMRO ODDO. I got 2 questions. First question is about the pension buyout. You put EUR 40 million of pension buyouts in your 2026 target, but you target EUR 80 billion in bench buyouts. So that is another EUR 40 million. So does it mean that for the years after '27, '28, we will get an extra EUR 40 million? So that's a little bit guidance for OCC after 2026. But is that correct? And are there other things we have to take into account what's going to happen after 2026? And my second question is about, I think it's also more for Jos, the excess capital. If you make a little bit back of the envelope calculation of the excess capital by the end of 2026, we come quite close to maybe EUR 1.5 billion -- EUR 1.2 billion excess capital, around 220% solvency ratio. It's a lot of excess capital even after this big share buyback of -- that you announced today. Can you elaborate on what you could do with that? You already have included share buyback, are there pension buyouts in this one, so that's out. So is it through all M&A and share buyback, what's the thinking about returning that extra excess capital by 2 years from now?

Maybe you want to answer the first one and...

Yes. No, on the -- I think on the pension, so what we take into account is the real -- so we -- the ambition that we set is a reported number, right? So that's -- I think that's important with this. So in the reported number, we expect a contribution from the buyouts in total EUR 40 million. And we expect the buyout. And what that actually means is that we expect buyouts to come in, well, maybe some by end of 2024, some during 2025 and some during 2026. But the full amount of what you realize in 2026 will not be recognized in the reported number. And indeed, we also expect still in 2027 the buyouts will kick in. So that's the reason that you don't see the EUR 80 million, but the EUR 40 million. And then to your question, if we are able to indeed live up to a target of EUR 8 billion of buyouts in the coming 4 years, actually, then we would expect that, in total, EUR 80 million will be the contribution from buyouts, so that's correct.

And to your second question, Cor, I think well done with the calculations, but we still have to see to get there. That's I think the first reaction, we never put a number on -- as from which exact solvency number. We consider that we are in an excess cash situation. I think learning, and Ewout presented what happened during the last couple of years and the economic movements, et cetera, the wars, the energy transition, et cetera, I think we are comfortable to be always somewhere in the zone between 195, 205. So theoretically, you could consider that higher solvency numbers could end up in a discussion on excess cash. The way we look at it is as long as we are able to deliver above the 12% return on investment, and we're still doing the right thing with shareholders' money. We prefer to invest it in the business. So it might give us the ability to look to more M&A, et cetera. And at the same time, we've always been clear if we can't use the capital for the business and our ROE starts to erode, that is the natural moment to start to think about additional capital returns. So we don't want to be capital hoarders. If we can't use the capital in an efficient way and as long as it is above the 175, we always will consider what to do with the capital towards shareholders. And if we can't use it for the business, then we definitely will find the most efficient way to return it to shareholders. It's like having a mortgage, if you have a higher mortgage than you need, at the end of the day, you return it to the mortgage provider.

Our visual focus is quite narrow. And I saw Benoit hand-raising as well. So I will come to the periphery a little bit later on, guys. But, Benoit.

Yes, Benoit Petrarque from Kepler Cheuvreu. So just to come back on this excess capital, so the fast forward, 196 plus the capital generation, so towards the 215% plus by '26. Clearly, you could get significantly above the 205% level you just mentioned. So could you reconsider the EUR 525 million share buyback during the plan? Or will that not change whatever happens on capital? So is that fixed for the time being?

Maybe first to respond to that immediately. The -- what I've said, we feel comfortable in the 195%, 205% range. That is not setting a hard number, let that be clear. We don't want to be capital hoarders as said, and I consider those kind of situations as quite luxurious situations to be in. And we will take decisions when we get there. I think the key message is we don't want to be capital hoarders. If we can't spend the capital on growing the business, we definitely will find a way to return it to shareholders in the most efficient way.

Yes, clear. Just maybe on the M&A opportunities. Do you think that we could get something during the plan by end of '26? It seems that the tail will take time -- it's a bit -- you have companies, smaller companies who are really waiting a bit longer. And linked to that, could you also use the leverage, because you have also leveraged capacity, obviously, and could you leverage up a bit to fund the M&A side?

It all depends on the size of a transaction. We prefer to finance from the on balance sheet if the returns are above the hurdle of the 12%. And if we might need additional capital, of course, we still have room in our debt situation. And whether that will happen in the planned period, by definition, M&A is more or less opportunistic. It depends on market situations. It depends on decisions from others. We're always keen to talk with parties, and we never mentioned whether we are in conversations or not. But be aware of the fact we're always on the lookout. And if there are opportunities, we're keen to entertain conversations with the clear remark that our preference for the short term might be more in the area of small pension portfolios, P&C and funeral. And we first have to finalize the integration of the Individual life book because that is a large integration. So hopefully, if there are opportunities in the Individual life business, they start to arise, let's say, somewhere as from midyear next year.

Michael?

Yes. And you've got more -- I worked out, you've got more capital. So that's one question. And then the other one is TKP, where it sounded you were going to put more money in and I was interested in that. And on the capital, so EUR 3.6 billion is roughly the OCC earnings for the next 3 years. EUR 2.5 billion is what you give to shareholders, so there's a next EUR 1.1 billion, which is about 20 points. So you'd actually reach 235%, not 215%. So I just wondered if the math is right and what you do with it. . And on TKP, it appeared as a negative in the slides, you didn't put a number to it. But I'd be interested to understand what your thinking is. And because I sat next -- at the same table as Pol last night and he said, actually, I'm the facilitator, I thought he was actually the switch, allowing pension buyouts to happen. So maybe you could give us a little bit more color there, that would be lovely.

Maybe you want to go into the first question.

Yes. No, absolutely. I think that it comes down to the same questions as Cor and Benoit asked. So indeed, so we expect, when you look to the catalysts that we have in our solvency position, the fact that we generate more OCC than we return, that we can grow into our balance sheet. We believe actually, that's a good thing, because it offers us the opportunity to grow even more. So that will -- that is actually the key preference that we are having and that we also want to pursue is that we believe we can further grow the business. And by growing the business, it can also -- will also result in a higher level of capital generation in the years thereafter. Like Jos said, if there is a moment in time that you actually see that the growth opportunities are not there, it's eroding the return on capital that we are making. Yes, we haven't been capital hoarders in the past, we will not be capital hoarders in the future. So if there are no deployment opportunities, we will be rational like we have been all the time. So that would be my answer to the question. Actually, hopefully, consistent with what Jos already mentioned to that.

I think it is. On your second question on TKP. Actually, TKP, if you zoom into the organization, you will see two different organizations within one company. One is, a rounded number, roughly 75% of the TKP business is serving the admin of pension funds. And roughly 25% of it is working for the insurance business. The investment we're doing in TKP currently is not specifically on the insurance part. So if we do pension buyouts that -- the fact that we're still developing TKP is not harming that part of the business. Because the investments are predominantly in the servicing of the pension funds that are already a client of TKP and because all those customers have to move towards a new -- the new pension system, we have to invest there. It's right, we haven't put an explicit number on it. The investments will be predominantly this year. I do it by heart, I think it's this year around EUR 18 million. The next -- in '25, around EUR 7 million. And the last year, another -- rounded number, EUR 2 million. Payback time of the investment is very interesting. It's a very short-term payback time, and we expect that we, in '26. Will be already neutral. So as from '27, the business will add additional value. So we were happy to do the investment because it is a very short payback time.

Looking also at that side. Yes, Iain?

Iain Pearce from Exane BNP Paribas. Just a couple on the growth that you've talked -- spoken about, mainly on the organic side. On the 3% to 5%, is that just an in-line with market assumption? Or are you expecting to grow ahead of the market? And if you are expecting to grow ahead of the market, why? And then secondly, just on growth strain. You've spoken a lot about the growth strain coming from some of the inorganic opportunities. What do you see as the growth strain in the organic opportunities? And are there any other investment costs associated with capturing some of this growth beyond what you've spoken about the TKP?

Okay. If I look, for example, at the P&C market, the last couple of years, I think most competitors were able to grow the business with 1% to 2%, we were able to grow the business with 3% to 5%. And I think that's predominantly to a number of factors. First of all, our relationship with brokers in the Netherlands is considered to be as one of the best. . Secondly, what broker hates is a policy that 1 year premiums go down, the next year, they go up significantly because it's necessary, because there are losses and then it goes down, et cetera. We've been fairly consistent in how we deal with pricing going -- in the past and going forward. And thirdly, the way we are servicing brokers and customers is perceived as very positive, that we do see that in all kind of investigations done by independent organizations. So that together, and the fact that we are rational pricers, made us as one of the preferred suppliers. And the predominant growth in especially the P&C business was in the area of SMEs. Our market share in the retail, it also grew, but that was more towards premium increases. But especially in the SME market, we were able to grow the business harder, more towards the normal market share we have also in retail. And maybe you want to reflect on the second part of the question.

So correct. So the inorganic growth strain is what we presented separately also to make clear that there's also kind of deployment that you are doing. When we look to the OCC ambition that we have set there, the organic growth strain is actually included in that. So if you grow in the Non-life business, that also costs you capital and that is part of the OCC vision that we set. Having said that, let's assume that you grow in, for example, annuities or that you grow into Non-life business, you also receive more premium that you are having today. You always try to optimize, for example, the investment portfolio also for that type of business. That's not included in the OC, so that could be a kind of additional capital deployment that you get, but might also offer additional returns. But in general, the business plan that we are presenting, it brings growth, it beings indeed strain, and that is included in the OCC ambition.

Okay. Steven?

Steven Haywood from HSBC. I know it's not really looked at much, but on your IFRS target, your 12% operating ROE, it seems challenging to me after the bank sale is taking out some earnings. And the deployment of capital into pension buyouts takes time. So if you look at the second half 2023 earnings, which then you annualize because they're fully consolidated, it doesn't seem like it's getting close to the 12% return on operating equity here. . What am I missing, is really my question on here, is it there's some further positives to come from synergies or integration costs falling out? Is there some improvement in the margins coming through, et cetera? Any kind of help on the IFRS side. And then -- sorry, second question. You've announced a EUR 525 million share buyback, do you actually have to take it out of the Solvency II ratio right now?

Yes. So let me start with the first question. So what are you missing? Let me start with saying how we are actually running this process. So a lot of people ask yesterday the question, so is this the end of a long journey that you are running? And actually, that is the situation where we are looking at. So already in -- by end of 2023, while we become one company, we actually run a multiyear budget planning process to look, okay, how is the combination looks like in terms of financials. We harmonize a lot of elements also in the full year results. We created an opening balance sheet. And that's why we said, okay, we do another multiyear budgeting -- multiyear budget planning process in actually the first half of 2024. And actually, that is the basis for the plans that we are presenting today. So this is not something that we say, okay, this is probably what the analyst and the investment community is expect us to say, no, this is kind of the outcome of a bottom-up process that we run with the whole company. And we would not present an ROE ambition if we do not have the confidence that we can reach that. That's one. Then second on the H2 numbers, I think a lot of elements plays a role. But I think one to mention is kind of a seasonality pattern that is there. For example, also in the P&C domain, H2 was a bit -- was not as good as H1 was. And when we look to the ambition that we are setting today, we are confident that, for a full year, we actually again will be on the level of the full year combined ratio. And that kind of have impact on the, for example, the multiplying the H2 by 2. There are also investment results changes in that, so the investment income changes in that. So actually, a few elements play a role why you can't multiply H2 by 2. And then the second one, so that's why you have always to be very carefully in what you say around share buybacks. I also have said we -- if we decide to do a share buyback, we will announce that by the full year result numbers, and that also helps to ensure that you don't have to take something already upfront into your solvency calculation. So it's something that is, well, you have to find the right words also to avoid that actually.

There are also auditors in this world looking strictly to how we are saying things and whether we should already include it or not.

David?

David Barma from Bank of America. First question on the EUR 140 million in the fee-based earnings, which surprised me a little bit because you're already above that, even adjusting for the mortgage servicing business. So is the gap only the TKP investments? And maybe can you talk about the OCG contribution you expect from the Pension DC overtime. That's the first question. And secondly, on Non-life, the 92%, 94%. So there too, you're around the top end of that today. I think you're talking about high single-digit price increases, hopefully, visibility you showed underlying improve quite a little bit too. So why couldn't you get quite soon to the bottom end of that target?

You take the first one, I'll take the second.

Let's say that's fine. So that's another answer to the question of Steven actually. So there are 3 elements that plays a role while you can't because -- why you can't do the kind of the fee segment multiplied by 2 because that's the question. So for the audience, it's around EUR 70 million for H2 2023. And when you multiply that by 2, you would expect EUR 140 million already to be reached in 2024. The reason that that's not possible is indeed the TKP investments that we are doing, Jos already mentioned that we see, especially in 2024, a significant portion of investments there. Secondly is that we benefit in the mortgage company. We had a good net interest margin, higher net interest margin that you would expect on a regular basis. So that's one also to be adjusted and normalized. And the third one, which is more kind of an internal element. But we have brought 2 companies together. We have kind of also expenses for your staff, for your IT, for your HR, et cetera, et cetera. And you have to allocate that also over your business line -- of your business lines, and that resulted in towards the fee business to a somewhat higher allocation, which also makes that the -- on a pro forma basis, actually the starting position is at a somewhat lower level. And that's why all those elements together make that you can't multiply actually the H2 results by 2. Actually, where we -- what we expect is that when you more or less take the normalized numbers on the fee-based segments, it's kind of the high single-digit growth that we are actually expecting in the planned period.

And to your second question, the 92% to 94% is the combination of Disability and P&C. And as I said during the presentation, it's a balanced number together with 3% to 5% growth going forward, and also to protect the in-force portfolio. So this is how we deal with the pricing. And of course, if we can do better than the 92%, we will not stop at 92%. And if we can deliver 91%, that would be great. But from our perspective, protecting the in-force portfolio, taking into account that specifically in the Disability business, we -- and this afternoon, there is a slide in the presentation of the breakout in Non-life, that we see a gradual shift percentage-wise from the Individual Disability portfolio, which historically requires more capital. But it's also, in terms of the combined ratio, delivering lower combined ratio. There is a gradual shift towards more sickness leave and group disability, and that impacts the average of the combined ratio number. So from a capital return perspective, I think this is the right number to steer the business on, to price the business on. And of course, if we can deliver 91%, we definitely will deliver 91%. But we also have an in-force portfolio, and if we would go overboard in terms of requiring more from the business, then it would, one, harmonize our growth ambitions, but it also could irrigate the profitable part of the portfolio. So it's a very balanced approach of combined ratio target.

Okay. Nasib?

Nasib Ahmed from UBS. First one, a quick one. Can you walk us through the moving parts on the mark-to-market on the solvency year-to-date? Second one is on margins. So you say EUR 1.8 billion of annuities, what kind of IRR are you expecting in those annuities? And is that the right metric to look at? And on DC, you're doing EUR 8 billion. What's the margin on that? And how much of the margin is coming from asset management? What I'm trying to get at is how much benefit do you get from having the asset management on the DC business?

Okay. I hope I remember all the questions. It started with -- the first question was...

Solvency to mark-to-market.

Solvency to mark-to-market. Yes, solvency to mark-to-market. As always, we have always have to discuss that amongst us the sensitivities that we disclose, as you will appreciate. What we're actually seeing is that the market spreads normalize relatively. So I think it came down with, let's say, around 35 bps. It's -- I mean, today, I haven't seen the rates because it can change by rate movements. But I think yesterday, it was around 30 to 35 basis points normalization of market spreads. I think when you look to sensitivities, let's say, around 5 solvency points addition. So that's 1 element to take into account. Second element to take into account is that we actually see that core FI spreads are widening. So that's a minus, let's say, around minus 3%. We have seen some lowering of the volatility adjusted. So the volatility adjusted, which is also minus 1%, minus 2%, depending on the last situation. So when you bring that all together, you actually see that we are probably market to market back at levels of -- there is no impact from a mark-to-market perspective.

And question on DC margins.

The DC margins. Yes, on the DC margins. So we expect that the DC margins in the end period is around 10 basis points that we are seeing. The way we calculate it, we receive a fee from the customer, and that's a fee for both the asset management business and the insured business. So there's no direct split between those elements. Then you have to take the cost of those -- both of the doing the pension administration, as doing the asset management activities, and that will bring us somewhere between a 10 basis points margin over the plan period. Important to say over here is that the margin that we have, this is a real business -- it's a real scalable business, so the bigger you get, the higher the margin that you will see. And I think this is a real promise also for the future is that the margin will improve further, but also the assets that you have under management will definitely improve further after the plan period that we present today. And that -- and then you will also see both the growth in the AUM as they're both in the margin. And then to your third question, that's actually related to that. When we talk about DC and margin that we get there, it's not only about DC which makes it attractive. By the end of the day, what you see today, and because of also the change towards DC schemes, is that the annuity business will also become much bigger than it has been in the past. And it's part of the actually pension opportunity that we are seeing, is that you -- yes, we are the administration for pension funds, we can grow in Pensions DC. We do the buyouts with annuity actually is directly related to the Pension DC business. So over time, we will also see the annuity business growing. So I think this is also something that's really nice to discuss also in the pension breakout session, because you also see that we have an ambition there to gain. But then to your question on what profitability do you get, in my view, it is possible to get a good IRR there. Well, we always talk of an IRR of 12%. But I think because it's kind of in-force business and there's a high retention from the business that you are having in-house from DC towards the annuities, there might be a potential to even get better IRR than you see, for example, by us.

You want to mention the target that we have on the annuity business?

Yes, I didn't want to -- didn't want to say, everything otherwise the breakout session is not as relevant anymore. But it's -- so in the annuity business, we also aim to have EUR 1.8 billion in the coming 3 years actually, yes, to grow. So that's also part of the growth that we are seeing in the Pension business, EUR 1.8 billion.

And maybe one addition to the returns on the DC business. In the 10 bps, there is still the investment we are making to move the a.s.r. admin towards the new pension platform. So after the planned period, actually, the 10 bps will gradually improve and could end up at a much higher number in years from now.

Looking at Anthony.

It's Anthony from Goldman Sachs. The first question is actually on the OCC calculation. Are there any change to your expected return assumptions for the underlying assets? That's question one. And then question 2 is coming back to the 20 percentage points Solvency II strain, could that reduce with the new partial internal model transition?

Yes. Thanks. So starting with the question on -- of the question on the OCC methodology. No, nothing changed when it comes down to the excess return. So when we look fundamentally actually to the excess return, you do see that, of course, the risk free rate are higher. One could argue fundamentally that the excess return are, well, 10, 20, 30 basis points higher, but we actually decided because that would be eating up the story not to change anything on the excess return. So we keep it as it is today. Then on your question towards the, can the partial internal model impacts the level of the -- impact of re-risking on the solvency position. Actually, the re-risking that we are seeing is on the Aegon Life balance sheet today, which is already on partial internal model. And that also means that when we do the re-risking on the balance sheet, there's no -- there will be no future change in developing of future change in the level of capital. So the -- let's say, the 5% to 10% on average 8% that we expect will also be what we see at -- this is how we look at it today.

Okay. Michael.

Again, just one question. So EUR 525 million is the buyback. If we assume 10% to 15% participation in any Aegon sell-down and their stake is worth EUR 3 billion, so that would be EUR 400 million -- EUR 300 million to EUR 450 million. So basically, if Aegon decides to sell, there's just one buyback coming to the market and then there's nothing until 2027. Is that roughly how we should think?

I think we discussed this question through other different angles questioning already. Let's see how the world looks like when we get there. If everything develops in the way that we are now projecting and expecting, I think we are in the luxurious position to take decisions. And if we can't invest our generated capital in the business at the right returns, and our ROI starts to decline, we will look at the most efficient way to return it to shareholders. But we're not going to put any number on that today.

Maybe I'll add one element to it. So when we look to the progressiveness of dividend, I think because we -- it seems to be missed in the discussions that we are having. So we expect also in 2026 to have -- over 2026 to have a mid- to high single-digit dividend growth. When you look at the numbers today, it will probably bring us from, well, EUR 610 million to EUR 650 million, to EUR 700 million to EUR 750 million when we assume kind of the 7% what we have done over 2023. If you then add also the EUR 225 million, it brings us almost to a EUR 1 billion capital return that we are doing over 2026. When you then look to the EUR 1.35 billion OCC that we are expecting in 2026, we are already in a kind of a range of the 70% to 75% that we have mentioned often in the past. So I think also when you look in via this lens towards capital return, I think we do exactly what you know us to do, that we are very consistent in how we approach things. And to add to that, if you see that the capital is still very strong, always be rational, always look to further capital deployment opportunities. And if not, then probably we will find a way to return it back. But actually, what you see to the plan that we present is very much in line with the way we have communicated over that in the past.

One follow-up from Michael and then David.

Sorry about that. And this is really a cheeky question. You're probably saying you can't answer.

We're used to that.

If you're allowed, what share price would you sell at?

Well, I think you know his e-mail and his -- you probably also have got his mobile number, so give him a call. We're interested, too, in that question.

David, please.

Just 2 small follow-ups. I'm sorry, just to be sure on the timing of the capital return, you're saying you want to do it the EUR 525 million during the planned period, but it's only on an annual basis. So the EUR 225 million will be paid in '27. Is that correct?

After the announcement of the full year 2026, we will take the final decision on that. And that's -- Ewout and I already referred to it, if we would frame it too hard today, we already needed to take it into account in our solvency and that's not the way we would like to do that. So we will take the decision at the full year 2026 numbers.

But we used to do it kind of in -- kind of the -- when you announce it after the full year numbers, we most of the times, use the H1 period actually to realize that.

And on Pension DC, what are your expectations beyond the plan period in terms of AUM growth per year? Does the EUR 8 billion apply to an annual run rate beyond that? Or does it change after the transition phase?

Okay. Well, what you see in the Pension DC, those are all annual contracts. And the growth will continue quite steeply after that period, because it are all in-force contracts where still premiums are paid. So the larger your portfolio is at 2026, the steeper the growth will be after that period. Maybe the new addition of customers will decline a little bit. But if you already have a portfolio, it's an annual premium payment. So the growth will be pretty steep. But we haven't -- because our plan is up until 2026, we haven't done any calculations that are already ready to communicate. But there will be a steep growth also after that. And that's, at the end of the day, ends up in annuity. So the combination of the 2 and the high return we expect on annuities compared to, for example, pension buyouts, it's a very promising and profitable future.

Michele?

And Michel, there was also a left wing in...

I know, I'm moving from left to right. It's in the flow, Jos. It's all in the flow.

Some people are getting tired.

Michele Ballatore from KBW. If you think about the let's say, the components of your capital creation. If we think about the -- especially the exposure to investment risk, so how much is coming from, let's say, stable source of earnings like fees, like underwriting or biometric risk in Life versus investments brand and investment risk, of course, you are doing the rerisking. So I'm just curious about how you are thinking about this different -- this evolution in the next 10 years, let's say.

That's -- so we give kind of a rough indication also on the slides on what the relative size is from Life versus Non-life in the fee segment. I think it's also important to mention to your question, Life in itself is also a very stable cash flow that you actually expect, because excess returns that you make on the portfolio are there. You have -- you get your annual payments. So you have the spread of your -- of the liabilities that you are having. So to that extent, I believe that maybe that's even the most stable cash flows actually over time. But again, yes, I have the exact numbers, I think it's 20% to 25% was Non-life business. I think 5% to 10% was more the fee-based business and the remainder is Life. So that's more or less the deviations. But again, I would not say that the Life segment is less stable cash flows than the Non-Life segment. But that's more or less the split. Like I said, we did take into account also the feedback that we received, especially by Jason, on the full year call and that you are also looking for the -- for more segmental numbers. So we are now actually moving towards that. And by the full year results of 2024, we also expect to present actually the segment on them. So that is also -- the split is also available actually in the reporting that we are doing. So you can even follow that better than you can do today.

But I think the question was also relating to the market risk in the OCC and what's your view on that, the development of the market risk within the OCC. I think that was also what Michele was pointing to.

The market risk and OCC. I think when we look today, we've seen the market risk are quite moderate. I think we have seen over the last quarter of 2022, last half year of 2022 and 2023, we have seen that real estate, of course, was under pressure. So that resulted in lower valuation because you apply an excess return methodology of real estate and equities that resulted in somewhat lower excess returns on that side. I think since the beginning of 2024, we see actually that real estate has become much more stable compared to the period before that as we also have expected and communicated over that in the past. So actually, neutral to positive to that element. Equity markets, of course, we have all seen it raising quite significantly in end of 2023 and also the first half year of 2024. So actually, also that is, I think, quite stable at this moment in time. But yes, no one can project the future in that. And when we look for the last part, credit portfolio, there, we see actually no losses on the credit portfolio at this moment in time, and we are actually quite comfortable there. So all in all, from a purely an investment portfolio risk perspective, we are neutral and not seeing significant risk at this moment in time coming towards this.

Farquhar.

Farquhar Murray, Autonomous Research. And maybe starting with dreams actually. I just wondered if you could outline maybe what your dreams scenario would be in terms of M&A. Obviously, you've done some deals already. I just wondered what you're seeing and whether the reality you are seeing in the moment, there might be of interest to us just to understand. And then are any of those dreams outside of Netherlands just as a double?

Actually, the dream was not about M&A. So I have to return to reality on that. It's always difficult that you know that, Farquhar, to give comments on potential targets, et cetera. And we know there are a lot rumors in the Dutch market about a well-respected competitor, considering whether they should get rid of the part or the whole Individual Life and Pension businesses. I think that's an ongoing process, at least that's what we understand and we have to see where that will end. We would be very interested under certain conditions to look in such a target. But as said, the priority now is finalizing the integration of the Individual life book of Aegon. And we will see whether that opportunity will be there at the moment that we are ready to go there. More of a personal view, it's probably a process that will take some time and we will see where it will end up. And we really believe, in general, looking at the Dutch market, there is more consolidation to come. It is really needed because there are several as well in smaller pension players, but also in the P&C business, there are players that have to rethink their future. And they may not be there yet, because they still have a significant high solvency ratio level. But if I see -- if I look into the dynamics, for example, only due to AI and this afternoon in the Non-life breakout, you probably can talk a bit more about it. If I see those developments, the speed of those developments, I can't imagine that every smaller company in the Netherlands will be able to capture that and to invest in that and to keep up the pace. So we really expect and unlike some respected colleagues of us, we really expect that in that market, there will be a dynamic over the next couple of years.

Just a follow-on, just hopefully not the stuff of nightmares. But in terms of re-risking, which geographies would you be looking at in terms of the kind of single A and AAA categories in turn?

Before you answer that question, I didn't answer your question fully. But well, let's wait where he comes back to it. You also asked are your dreams also outside Netherlands. Yes, they are significantly specifically thinking about holidays. And sometimes roadshows, and that was my dream was about a roadshow in London, so that was already abroad, but not about M&A.

Okay.

So what geographies we are looking at when we talk about the core FI spread optimization. So then talk about Belgium, for example. France is an additional yield to pick that out. Typical countries that we see that Aegon was actually -- Aegon Life benefit was actually underweighted. There were a lot heavily invested in Germany and the Netherlands. And that you see you can actually pick up some additional yield against low cost of -- a low capital, which gives a very nice return on capital from an investment portfolio perspective. Question could also be in this situation with France and Belgium should you do that? What we actually see is that when you look, for example, to the European reference portfolio as presented in the volatility adjusted, we see actually that we are still very much underweight in this type of countries. So it's not that we are now bringing the branches in heavily exposure to what's the type of countries. It's just optimizing a bit by picking up some additional yield that is there to gain.

Focusing on, yes, Jason.

His arm is already tired.

Jason Kalamboussis, ING. First of all, of course, I very much appreciate the new disclosure on overseas. Thanks very much, Ewout. Quick questions. The one is first on the dividend. You mentioned that you extend it to 2026, and then you're going back to normal in a certain way. Did I understood it wrongly, either this is more of a firm statement? Or do you think with what you see in the market, there is a potential to hope that could extend as things develop? And also, when we're talking about normal dividend, is it -- I mean would I have '27, '28, when I'm thinking about it's more of a 3% to 4%. So what are your thoughts, and free to go well beyond the 5 years, at what we should be thinking at? And the second is on the combined ratio target. Is there any color you can give on how you think about a split between P&C and D&A, that would be helpful?

Okay. Maybe you want to take the second one to the first one. I was thinking about the second one. The first one was on...

Dividend.

On the dividend, yes. Well, the way we framed it was actually that because we don't have a plan for -- a plan that is already in details worked out, we framed it in a way that, at this moment in time, one may expect that we would return to more normal dividend growth after the plan period. And of course, during the planned period, we will start to work on detailed plans for the period thereafter. And we will see by then whether we are able to keep up to the current dividend level or that we indeed have to return to normal dividend levels. And normal dividend levels always have been between low single digit to mid-single digits. So let's say, around 3% to 4%. It's not a firm statement that we will do that, but I think it's realistic that the market should realize that it's not a certainty that we will continue from the mid- to high single level just because of the fact that we haven't worked out all the plans. And we always try to be responsible and not to increase market expectations above what we have already planned in our multiyear budget. And the second question.

Yes, I think historically, when you look to Disability and P&C, you also have seen that Disability was kind of the lower -- at the lower combined ratio, and P&C is somewhat higher combined ratio, which -- it was what historically was there. Nowadays, you see that both the portfolio is more or less of similar size. P&C in terms of gross-written premiums, a bit high -- larger than Disability, but it's almost at the same size. And you also see that P&C and Disability are moving towards each other. I think a few reasons for that. One, as Jos already explained, in Disability you see that sickness leave becomes more and more important. That also means that sickness leave is a kind of a -- type of business like P&C, so short duration. And when you have a healthy combined ratio, your return on capital is actually very good. So that's one reason that you see kind of a small trend upwards in the Disability side. Actually, on the P&C side, see that the combined ratio is going down. We have seen a lot of consolidation over the last couple of years in P&C. And you also see that, that is actually helping in the remaining discipline in that market and growing at the same time. And that also helps actually to lower the combined ratio in the P&C domain. And within Disability, that consolidation was already there for many years. So the largest player already had a big chunk of the market for -- actually for many years. So now on one hand, you see Disability is slightly going up and P&C coming down because of this dynamic. In total, also, they're moving to each other. Not a clear target, one to another, but actually moving closer to each other is I think the way to present it and the businesses of the same size.

Steven? I'll get to you guys in a minute.

Steven Haywood, HSBC. Just a point of clarification on the mid- to high single-digit dividend growth. That's on a nominal basis, is that correct?

So on an absolute dividend level. So that's indeed should also be taken into account if that was not clear. So we are not -- the buybacks that we are doing is not actually kind of financing the dividend payment is in kind of a mid- to high single-digit growth on the absolute level of dividends.

And then just following on something that's not been talked about is on any plans to deleverage on your debt. I see there's a couple of calls coming up in '24, '25. Any plans to deleverage?

Our leverage ratio is now below 25%. I think we are perfectly happy when we are within the 25% to 35%. So 25% to 30% we see as kind of optimal. So actually, we don't intend -- we don't, by the way, intend to do more, but we also not intend not to -- have no intention to lower actually the leverage ratio also. So actually quite happy with the debt -- the leverage -- size of leverage that we have as part of the total group.

Okay. Benoit, please.

Just a question on the '26 OCC, I think you trade on that business at a 14.5% OCG yield -- OCC yield. So it seems that this is somewhat confidence program in the OCC figure, sounds very high. And yes, could you just explain again your view on the quality of the OCC, how close it is from the cash definition, and that's basically sustainable also in terms of definition and assumptions?

Yes, I think we, as an insurance company, actually -- insurance industry actually need you, the analysts, to explain indeed to the whole investment community that insurance are trading at low multiples. Having said that, when we look to our own OCC definition, we have made some small changes. We were already very close to actually free cash flow. What we did see is that there are kind of diversification effects, for example, in the -- because take into account the group ratio to multiply the SCR release. That we say, okay, there are still elements that actually are noncash components. So the step that we took actually brings it further towards the free cash flow definition. So there's no misalignment between operating capital generation and the free cash flow that we have in the legal entities. And that's actually the -- especially from this way of thinking, we have made the small amendments. So OCC is free cash flow.

I see we're approaching the end of the Q&A session. So we have time for one final question. Michael then.

A really simple one. So do we have quarterly earnings in September or will we have them next year? Because you said you would have quarterly OCC.

We intended to do that from September, but probably it will not be necessary because that has everything to do with the relationship with Aegon and they are reporting quarterly. I think the current view is that we will start with that next year and not already in September.

To add to that. So it's the buildup of the OCC we're talking about. So the buildup of the OCC is now done per quarter instead of an averaging between the beginning of the year and the end of the year, so that makes it also closer towards free cash flow again. So that was one of the few elements that we had and we changed. So -- and indeed, like Jos said, Q1 will be the first moment to also report quarterly results, which we only do, by the way, because of the agreement that we have with Aegon because we are part of Aegon Group. So this is not something when Aegon step out, that we envisage to continue actually thereafter. Because insurance business is a long term business and we believe much -- we believe actually in the fact that you should also look at it and communicate it more on a -- well, a semiannual basis than on a quarterly basis. But again, doing it on the quality basis for a certain period is not wrong, we can do. But it's not something that we envisage to continue for a long, long period.

Maybe to reframe one thing. You said we're part of Aegon Group. We're not part of Aegon Group. We're part of the reporting of Aegon Group.

Thanks. Yes, that was...

Otherwise, we would have new headlines going forward. That's not the intent.

Part of the report. But I think in reporting...

Yes, I know. That's your world.

Let's take another final question.

There's still 1 minute to go, so.

There's 1 minute ago. So we really do have time for one final question. I'm looking at -- particularly also that side of the room. No, I think we have had all the questions. Yes. Cor then?

Cor Kluis, ABN AMRO ODDO. Then on CPI, that's a big thing, of course, rental increases. Can you give us an update on the latest there? When can we expect a high court verdict and how conservative or how do you already take this into account in your...

We're pretty confident in that. It's an ongoing discussion. We have seen some lower courts with an outcome stating that because of the fact that everything is in one clause in most of the contracts, that you can't increase rentals. I think the discussion at the end of the day will not be about the increase of CPI and we'll probably be more about the additional increase. From our perspective, we already, for a longer period, we're very limited on that. We have seen some increases from others up to 3%. We, on average, have never been higher than the 1%. That is actually the percentage that is also in the most recent law, that additional increases should be not more than that 1%. So we -- it is some turbulence at this moment, specifically because there is one newspaper presenting -- discussing it a lot. But we also have seen, for example, the court in Rotterdam gave an adverse judgment. They were much more in favor of the industry. So it might take some time, but we already started to act at the end of last year to change the -- everything in -- having everything in one clause to bringing it to different 2 different clauses. The renewal of our portfolio is roughly 12% per year. So we expect that over time we will have changed it if and when the outcome might be negative over the longer term. But that's not -- that's actually not what we expect. So we actually are confident on the item. There's a lot of discussion on it. As for the longer term, we feel confident.

Maybe one thing that is important to add to that. So when we look to the valuation of rented real estate that is nowadays less than 70% of actually the fair value of real estate. So we already see -- I think it was since Q4, 2023, that we see house prices increasing in the Netherlands quite rapidly. So wages increases, and because of that, you see that the consumers are better able to pay their mortgages. That drives actually house price in Netherlands quite significantly already in -- for 9 months. And you don't see that value increase in the rented value, so the gap between that is now more than 30%, which is in a historical context, quite a high gap actually where we are looking at. Which also gives a sense that the market is also taking this into account and the conservative approach on fair value actually, so it's also an element of lowering any risk in this situation.

That concludes the Q&A. So we have a break now until 11:30, but this also concludes the webcast. So I'd like to thank all the viewers on the webcast for attending this in a virtual way. We have now break. 11:30 sharp we'll start with breakout sessions. They're on this floor in the conference center just down the hallway. So enjoy your coffees.