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

Good day, and thank you for standing by. Welcome to the a.s.r. Half Year 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michel Hulters. Please go ahead.

Thank you, operator, and good morning, ladies and gentlemen. Thank you for joining us today, and welcome to the a.s.r. conference call on our results for the first 6 months of this year. Now on the call with me today are Ingrid de Swart, our CEO; and Ewout Hollegien, our CFO; and Ingrid will kick it off with the progress of our strategy and the highlights of our financial results. Ewout will then talk about the development of our financial capital proposition and solvency position. And after that, we will open up for Q&A. . Now we have ample time planned for this call, but we will stop sharply at 10:30 the latest. Please observe a limit of 2 questions so that everybody has a chance to ask questions. And finally, as usual, please review the disclaimer that we have at the back of the presentation for any forward-looking statements that we may make. So having said that, Ingrid, the floor is yours.

Thank you, Michel. Good morning, everyone, and thank you for joining us. It's a pleasure to welcome you to my first results call as CEO of a.s.r. I look forward to engaging with you as the investment community in building a constructive dialogue with our shareholders and analysts. And together with Ewout, I'm proud to present our strong first half 2026 results. So let's turn to Slide 2, showing our strategic progress. Over the past years, we have successfully pursued our strategy of profitable growth to create long-term value. following a string of smaller bolt-on acquisitions over some years, the transaction with Aegon Netherlands was transformational and has put us into various leadership positions. On the 2nd of July, the legal merger of the Life entities came through, and this marks the final step and a successful completion of the integration. At the same time, we've already started the next integration. The acquisition of Bovemij has been closed on the 1st of July. Now I will discuss the Bovemij deal in a minute, but it's clear that this deal is another proof point of a.s.r. as a disciplined consolidator in the Dutch Non-Life market. We also show discipline in the pension buyout market. The market has clearly become more competitive, particularly in larger transactions. But so far this year, we have announced 2 smaller transactions and importantly, only at terms that make sense for us. The progress we have made across the businesses gives us confidence that we are on track to deliver on our 2024 CMD commitments. Over the first half of this year, we report a record OCC and a record operating result. We also see strong commercial performance with continued growth in Non-Life and Pensions. Together, these results give us confidence in achieving our OCC target of EUR 1.35 billion for this year. And lastly, we continue to operate from a position of capital strength. That enables us to invest in value accrue to opportunities as both my and the pension buyouts. At the same time, we are committed to offer our shareholders an attractive return. And to that end, we announced the interim dividend per share of EUR 1.39, an increase of more than 9% and we completed the EUR 175 million share buyback, which we announced at the full year results. So we made significant progress so far this year. Let's turn to Slide 3 and look at the financial performance. Our OCC increased by more than 7% to EUR 773 million. This was driven by a strong performance in P&C, contributions from the pension buyouts completed in 2025 and the continued delivery of cost synergies. These items more than offset the increased investment in new technology and AI. The Solvency II ratio increased by 4 percentage points to 22%. This reflects strong capital generation and the resilience of our balance sheet in volatile market conditions. Our operating result rose by almost 10% to EUR 901 million. And as a result, our operating ROE reached over 15% constantly above our target of more than 12%. In Non-Life, the combined ratio for P&C and Disability was 91.6%, better than our target range of 92% to 94%. This reflects, amongst others, favorable came experience in P&C. Our organic growth rose 6%, supported by targeted price increases in group disability at the end of last year. In Pension DC, we have seen solid inflows and the annuity inflows showed positive momentum. This was driven by renewed focus on the customer journey and offering attractive retirement solutions. Overall, we remain well on track to deliver our organic growth ambitions for this planned period. Let's move to Slide 4 and look at our non KPIs and how we continue to create sustainable value for all stakeholders. As this slide shows our investment portfolio is already meeting its targets, both carbon footprint reduction and impact investments. We continue to make good progress in reducing emissions across the portfolio, and I'm pleased with that. However, I should also mention that the significant decline is primarily driven by improved and updated data regarding the government bond portfolio. Just to be clear, this concerns not our own data, but data from external data providers. Our sustainable reputation improved further in the first 6 months of this year, and we are pleased with the increasing recognition we get from society. Our other nonfinancial metrics are also progressing well. I'm pleased to see that our customer satisfaction measured through MPSI has already outperformed our 2026 targets. This reflects the investment we have made in both technology and service delivery. By using AI in customer interactions, we can handle routine tasks more efficiently and give our people more time to focus on what matters most, personal contact with customers and helping them when they need us. Lastly, our strong ESG profile continues to be recognized by a broad range of international sustainability indices and benchmarks. Let's move to the next slide and discuss the acquisition of Bovemij. Small bolt-on acquisitions are for many years already a firm part of our strategy to create value. The acquisition of Bovemij is a very good example of how we deploy capital in a disciplined way. This deal strengthens our #3 position in Non-Life and gives us a unique presence in the Dutch mobility sector. Through Bovemij, we gained access to the BOVAG ecosystem. And in addition, we will establish a joint venture with BOVAG for the distribution activities. This gives us a strong and embedded distribution platform in the mobility sector. Bovemij adds roughly EUR 400 million of annual premiums and further strengthens our #2 position in the Dutch motor insurance market while also reinforcing our leading position in Non-Life more broadly. The deal was closed at the start of July, and we expect the integration to take about 1.5 years. Actually, this year already, we have planned for the lead merger with our Non-Life entity. From a financial perspective, transaction fits squarely within our investment framework. We expect the deal to exceed our 12% return hurdle and contribute around EUR 25 million of run rate OCC after the integration period. And as mentioned in our press release in January, we expect the impact on our Solvency II ratio to be around minus 3.5 percentage points. And finally, I believe Bovemij is a good example of a broader trend that we may see materialize in the Dutch P&C market in the coming years. Beyond the 3 largest players, which together already account for around 65% of the market, there is a long tail of smaller insurers. For some of these companies, the investments required to remain compliant with increasing regulation, digitalization, data capabilities and AI may become increasingly difficult to absorb on a stand-alone basis. The minimum size for insurers to run their business in an economically viable way just continues to creep up every year. The Bovemij acquisition demonstrates that we are an active and disciplined consolidator. Over the past years, we have built a strong track record to successfully integrate acquisitions and realize their full potential. And we have the capital to continue to pursue attractive opportunities. With that, let's move to the next slide. And let me talk you through our business segments. Firstly, Non-Life, where we delivered another strong performance. Premium income increased by 6%, clearly above our organic growth target range of 3% to 5%. Growth was primarily driven by targeted pricing actions and both Disability as well as new volume. Premium growth is really strong in H1, helped by some single premiums and price increases in portfolios that mainly have annual upfront payments. So the premium growth in the second half of the year is expected to be somewhat lower. But on an annual basis, we still expect growth towards the upper end of the 3% to 5% target range. Our combined ratio for P&C and Disability came in at 91.6%, exceeding our target range of 92% to 94%. And P&C was particularly strong with a combined ratio of 89.9% which benefited from favorable claims development on prior years, and there were also some one-off expense benefits. Weather-related claims increased compared with last year, but we remained within our semiannual budget. In Disability, the combined ratio came in at 93.3%. This reflects the pricing actions in the second half of last year, particularly in group disability to address higher incidence rates related to psychological absenteeism. I should also mention that the uncertainty around the challenges remain and the backlog at the employee insurance agency has worsened and it's something that we monitor closely. We will reassess our assumptions as part of the usual year-end review and will not hesitate to take further actions where necessary. Lastly, Health continued to perform steadily. The combined ratio was 99.6%, while our customer base grew to more than 700,000 customers. Premium volume increased by 10%, supported by both pricing actions and higher benefits received from the Dutch equalization contribution. With that, let's move to the next slide and discuss our Pension business. In DC Pensions, inflows increased to EUR 1.5 billion in the first half of this year, and we remain well on track to achieve our medium-term target of EUR 8 billion in cumulative inflows. Supported by favorable financial markets or DC assets under management increased by 14% to EUR 34 billion. Annuities, our pension decombination product gains momentum. Inflows increased by 38%, driven by growing volume of maturing DC assets and an improved customer journey. Our focus remains on retaining these assets through a high customer satisfaction and competitive pricing. Based on current developments, we are on track to exceed our medium-term cumulative annuity inflow target of EUR 1.8 billion. In Pension buyouts, we remain highly disciplined. During the first half, we successfully executed the Kring Bavaria transaction, adding over EUR 200 million of assets under management. The Ecolab transaction representing a further EUR 150 million has already been announced for the second half of the year. We will maintain our value over volume approach and will only pursue transactions that meet our term requirements. While competition has increased, we remain confident in achieving our EUR 8 billion buyout ambition, although part of the opportunity may materialize beyond 2027. With that, let's now turn to our fee-based businesses, where acquisitions and cost synergies supported another strong performance. Fee income increased by 33% and driven primarily by the addition of human total care to our Distribution & Services segment. Human TotalCare operates in the growing market for occupational health and reintegration services. With absenteeism levels elevated, we see attractive opportunities across the broader employability value chain. The Human TotalCare contribution also supported the operating result of fee-based business, which increased by 32% to EUR 150 million. Next to the acquisition, this was mainly driven by the realization of cost synergies from the mortgage platform migration. In mortgages, production amounted to EUR 3.6 billion. Volumes were lower than last year as we see spreads tightening. Competition is particularly strong from banks, especially at the shorter end of the maturity spectrum. Nonetheless, we remain disciplined in pricing and only originate mortgages that meet our desired spread levels. Overall, our fee-based business continued to demonstrate their value, a scalable capital-led growth platforms for a.s.r. With that, I will hand over to Ewout, who will take you through our capital generation and solvency position.

Thank you, Ingrid. Great to have you all on the call, and I hope everyone enjoyed a nice summer bake. The CFO cannot be more happy when these results are not only strong, but also a very clean set of numbers. Let's move directly to Slide 10 and start with the capital wheel. This slide shows what we mean by putting the balance sheet to work. We continue to operate from a strong capital position. This gives us room to invest in growth, while the balance sheet remains robust. We deployed capital in a disciplined way that includes organic growth, optimization of the investment portfolio, the Bovemij acquisition and Pension buyouts. And every growth we achieve value over volume is the starting point. Our level of capital generation increased to EUR 773 million. Our business performance gives us good confidence on delivery towards the EUR 1.35 billion target for 2026. And capital return remains attractive as well with 9% interim dividend per share growth and the completion of the EUR 175 million share buyback announced at the full year results. So in short, the wheel is turning we invest in profitable growth. We grow OCC and we increased capital return. Now let's zoom in on the development of solvency on Slide 11. As this slide shows, the largest contributor in solvency development is OCC. OCC added 13 percentage points to the ratio. The market and operational movements had only a small negative impact of 1 percentage point, where the positive impact for mortgage spread tightening and real state revaluations were offset by negative impacts such as the downgrade of Belgium government bonds and the growth of the equity portfolio. After capital distributions, the ratio lands at 222%. Looking ahead, there are 2 relevant items to keep in mind. Those do not differ from what I've mentioned at the full year results. One is the Bovemij acquisition, which is closed in July. Two, is the removal of the DA as part of the legal merger of the life entities. And as you all know, we have chosen not to apply for the DA in the Pagenternal model for Life knowing that the DA has to be eliminated anyway when EIOPA 2020 kicks in, in the beginning of 2027. Combined, the impact of those 2 points is around 7 to 8 percentage points. And then in the first half of 2027, the implementation of the EIOPA 2020 review kicks in, and it is still expected, like by the full year to at around 10 percentage points. So overall, we remain in a very strong position with ample room to support profitable growth and attractive capital return. Let's turn to the next slide for further detail on our OCC. The main driver for a 7% increase in OCC was higher finance capital generation. This reflects the contribution from the pension buyouts that we closed in 2025. We also benefited from strong revaluation in equities and real estate over the past year, which are compensated by spread tightening throughout the fixed income portfolio. The Non-Life contributed positively with a EUR 55 million uplift. In P&C, performance was strong with a combined ratio below 90%. Disability showed a solid performance in H1, proving portfolio discipline and at the same time, knowing uncertainty remains given the situation at UWV. Next to the strong business performance, the increase also includes a lower business strain of around EUR 20 million. This was a result of an increased upper limit of our net GAAP cover in H2 last year. And though it does not make a difference for the full year, we see an outperformance from H1 to H1 due to this timing effect. So actually this half year, is a solid base to think of also going forward. Segment asset management shows an uplift of EUR 50 million, mostly driven by the migration of the mortgage portfolio in H2 last year. The increase in Distribution & Services segment mainly relates to the full contribution of Harts, which has been reallocated from holding to distribution and services after we acquired the remaining stake of 55%. For the Holding and Other segments, we see a couple of elements driving the EUR 22 million decrease. Firstly, as you know, we are investing into new technology and AI. Secondly, a modified treatment of the employees' visibility arrangement. Lastly, I had to say this no longer contributes to the holding segments. And before we head to the operating results. Let's look at the outlook for our full year OCC. The OCC of EUR 773 million per half year 2026, should be your starting point. Then if we add the EUR 594 million OCC from the second half of 2025, you should take into account a few elements. Combined ratio in H2 last year set within our targeted range. Growth of the business, increased investment return and cost synergies should provide an additional uplift -- and those are offset by headwinds from the impact of the introduction of the PIM to Aegon Life, the transfer of mortgages to BAWAG, the timing effect on the SCS strain as just explained, and additional investments that we are doing in AI and other technology. All of these developments combined should roughly be a wash. So that would keep the OCC for the second half a touch below EUR 600 million and the full year 2026 OCC north of the targeted EUR 1.35 billion. Let's turn to the next slide and talk about the operating results. Given that the most underlying drivers in the operating results are the same as I will focus on the drivers that are different from the OCC analysis. The operating result increased by 10% to EUR 901 million. The Life segment delivered a strong increase of [ EUR 70 million, ] mainly driven by a high CSM release, reflecting, amongst others, the higher release of CSM due to the capitalization of cost synergies in H2 2025 last year. Positive experience fans observed in pensions was offset by a lower contribution from associations compared to last year. And lastly, for Life, we realized a higher investment margin from the 2025 pension buyouts. The increase in operating investment and finance result is higher than the increase in OCC finance capital generation because the tighter that market spreads led to a lower liability liquidity premium and IFRS but does not impact the VA and the solvency. In Non-Life, the increase in operating results mainly reflect higher investment income. For the insurance results, the business growth is offset by a slightly higher combined ratio compared to last year. and the development of our fee base business and holding are equal to OCC. So let's turn to the next slide and talk you through our updated source sensitivities. Slide 14. As mentioned during the full year call, we would give an update on our sensitivities that also reflects the removal of the determining adjustments, which now actually already has been removed after the legal merger on the 2nd of July. And as a reminder, the DA was an Aegon-specific mechanism that corrected for mismatches between our own portfolio and the VA reference portfolio via the required capital. And what you now can see in our sensitivities is that they stay benign, and our sole resilience remains strong also after the removal of the determining adjustment. The current sensitivities are actually now more aligned with market practice. Let me now focus on the fee spread sensitivities since those sensitivities are mainly impacted by the removal of the BA. For government spreads and mortgage spreads, the outcome is quite intuitive. If strats widen, valuation go down and for both investment categories risk is low and therefore, limited compensation in recreated capital, net negative effect on source from spread widening the other way around from stretch tightening. For Credit spreads, the picture is different. Here actually leads to an uplift in the solvency.And there are 2 drivers for that. Firstly, in the European context, our fixed income portfolio has a relatively large allocation to mortgages, the VA reference portfolio as a relative large allocation to corporate bonds. So when credit spreads widened, the VA reacts more strongly than it would on the basis of our own portfolio. Secondly is the application of the IAS 19 for the valuation of the pension scheme liabilities for our own employees. The IAS 19 discount curve is based on the corporate bond yield curve. So why the credit spreads therefore also have a positive impact on our solvency. So overall, the sensitivities to our balance sheet remain very manageable and in real life, spread movements in fees, credits and mortgages have historically been positively correlated. That means a different direction in the spread sensitivities also provide a natural offset. Let's move to the next slide where we discuss our investment portfolio. This slide shows our robust and high-quality investment portfolio with over 80% allocation to fixed income assets, including mortgages, derivatives and cash. The fixed income bond portfolio covering government bonds, credit and alternative is a high-quality and well-diversified portfolio that I'm very comfortable with. We believe that more cases offer historically a very attractive risk return profile. The average loan to value is around 50% and credit losses remained below 1 basis points. So from a risk perspective, this is a very strong portfolio. As Ingrid mentioned, new mortgage production was lower. That's mainly due to the current interest rate environment which increases customer appetite for short-term maturities, where there is more competition from banks and resulting in lower spreads. Let's move to real estate equities, where performance was very strong. In the first half year, real estate revaluation were up almost 3%, and this was mainly driven by residential, which was up around 5%. And helped by the lowering of the transport that we discussed in fuller stages and remains the backbone of the portfolio together with our rural portfolio that also continues to show solid performance. In equities, next to positive revaluation. We used the recent geopolitical volatility to expand our portfolio a bit at attractive buying moments. And that is another example, we're having your own asset management and be really on top of the market creates real value. Let's look at the flexibility of the balance sheet on the next slide. This slide shows that we continue to have ample financial flexibility, and that is really supported by the composition of our balance sheet. Financial leverage is 21%, interest coverage ratio well above our internal limit. And on top of that, we still have significant debt capacity. There is room for more than EUR 2.5 billion RT1 and Tier 2 issuances. And as you can see on the bottom right-hand side, our debt maturity schedule remains nicely spread over time. So from whatever angle you look at it, the balance sheet gives us significant financial flexibility. Let's turn to my last slide and end with our HoldCo liquidity. At half year, the HoldCo liquidity position is temporarily elevated, reflecting the cash upstream needed for the Popema acquisition. The cash was already remitted before the half year closing date while the actual cash out took place the day after. The additional remittance came specifically from our well-capitalized life entities, and that's also reflected in the solvency ratio for a.s.r. Life, which still remains very strong. So OCC good, group solvency good, cash at holdco good, legal entities is also good. But could I say more? I think this is a good moment to hand it back to you, Ingrid for the wrap-up.

Thank you very much, Ewout. This brings us to the end of our presentation. Let me briefly close with the key messages. First, we have pursued profitable growth and strengthened our platform. The integration of Aegon Netherlands is now finalized, and the acquisition of Bovemij was completed in July. Those are important steps in creating a leading insurer in the Netherlands. Second, we delivered a solid performance across all business segments. Our OCC is on track to reach the EUR 1.35 billion target in 2026. Third, our capitalization remains very strong. The Solvency II ratio increased to 222%, reflecting strong capital generation and well positioned to pursue value-accretive opportunities. And finally, we will present our updated strategy and new targets at our Capital Markets Day on the 1st of December of this year. With that, we are happy to take your questions. Looking forward to answering them.

[Operator Instructions] We will now take our first question from the line of Cor Kluis from ABN AMRO - ODDO BHF.

It's Cor Kluis from ODDO. Congratulations with the results, especially I think the organic growth, the premium growth in Non-Life was quite high, better than expected. Could you elaborate a little bit more on that. So in Disability and P&C, could you split it in price increase and volume. How was the churn and are you satisfied with the price increases in Disability, especially given the VA situation. So that's a question on premium growth in Non-Life organic. Second question is about M&A. Yes, Ingrid you as new CEO, of course, doing acquisitions has always been an important part of a.s.r.. So you will probably also continue that in the future. Could you give your first views and context and way of looking to M&A is probably a continuing way of doing business, but your own view on that. And last question is about the VA. I get it -- of course, you were doing a bit Q3. Yes, could you give some comments about what's going on, how the government is acting what your interactions with the government indicate we get the backlog in our , et cetera? So that be my questions.

Thanks, Cor, for those questions. We will -- I will start with answering the question around M&A and able to take care of the P&C and disability questions that you post. And thanks for the compliments of Secor. We're also very happy with the clean set that we presented this morning. So have been part of this company for almost 7 years, and M&A has been an important part of the strategy and an important source of growth for years. I think that the Ag on the Netherlands as integration and deal was really transformational to a.s.r. And we are really proud that we completed the integration within the 3 years and delivered on all the targets that we promised. And more importantly, also, we're very successful in bringing 2 cultures together. I'm also very happy that while we have just closed down the integration and really completed it, we have already started the next integration of Bovemij. And I love the blueprint of Bovemij that well fits into what we have always said, that in the Non-Life space, particularly in P&C, there may be opportunities in the coming years. because of the 65% that's divided between the 3 biggest players in the market. There is a players. And we see now that Bovemij is, I think, perfect proof point of that it's quite's difficult for a smaller P&C insurer to stay economically viable to do the advances into digitalization and AI and to remain relevant to customers. And that's why I'm very happy that we were able to have such a nice deal together with BOVAG and Bovemij, and we are very keen to explore additional opportunities. So I would say, as expected, no change here, but looking forward to creating more opportunities. And the same goes for the financial investment return point of view deals, while we also always have looked at life and also funeral. They are also very keen and interested in by portfolios both in Life with back books that have predictable cash flows, but also in funeral. And we still believe that there is 1 big insurer that we think may come to the market at some point in time. And we will be keen to have a look at that, as you can imagine. And in the last couple of years, we have also required a range of smaller distribution companies, such as also Human TotalCare that we mentioned in our presentation today. And we also of continued interest to add those to our portfolio. So that's how I would look at it, looking forward to all the opportunities feeding forward. And with that, please, Ewout, can you do the PSC and income.

Yes. So on the premium growth indeed, we were very happy with the strong growth in Non-Life that we have shown. So 6% growth and we look underlying, we see a 4% growth in the PC market. So we were able to grow in the middle of -- actually the target range that we're having to and at the same time, having a very strong combined ratio, so definitely very happy with that. In disability, we grew even 8%. And what we see there is that the price increases that we pushed through as a result of the developments in group Disability, which I will answer after this question. . Actually resulted in less losing customers than we actually were expecting. And as a consequence of that, we actually saw that the increase in Disability rose to 8%. Good to mention is that we see the increase mostly in Disability in group Disability and also a bit in, but it also means is that we have more customers that actually do annual payments. So we do, as a result of that, expect that, that growth in Disability flattens a bit in the second half of the year. But with the strong growth that we are presenting today, we are having the confidence that we can land somewhere in the higher end of our target range. Then on Disability, definitely an important topic to answer as well. As you all know, in improved Disability, I think also the market is seeing in group Disability, we are observing elevated incident rates, which is mostly driven mental illness and also long coat, a broader market trend and something we also observed last year. That was also the main reason for repricing our business significantly in group Disability for the year 2026. And when we actually look today into our portfolio, we see that the payments that we are doing. So the claims that we are having is actually more or less in line with the actuarial assumptions that we are having. And this, in a way, proves the effectiveness of our portfolio discipline and also of the repricing. At the same time, and the net is already referring to that. We do see that situation at the UWV so the Dutch employee Insurance Agency is further deteriorating and that their backlog is also increasing. The risk that comes with that is that we might not have the full view on the inflow of disabled people as not everyone is assessed yet. And the second order effect can also be that reassessments are executed less because of this backlog. And this could mean compared to the past that individuals return less back to work, less often back to work and are also less often reclassified into a group which is not expected to return at all because they are lifetime disabled. And in that situation, actually, the payments are no longer covered by the insurer, but by the government. What we are doing to actually solve that backlog is that we, together with the insurance association are very close contact with UWV and the government of social affairs, and we see definitely solutions there. but it might require and we don't know that exactly time and also change in legislation. What we will do is actually bringing all those developments, the conversations that we are having, the risk that there might be some delay the inflow in the reassessments that we bring that all together as part of the annual review that we are doing on our actuaries assumptions in H2. And we will definitely look at this in a conservative as you know us, in considering further actions. And that's actually the situation where we are looking at today.

We will now take the next question. From the line of Andrew Baker from Goldman Sachs.

First one, just on the Non-Life OCC. I know you touched on this in your comments, but can you just give a little bit more detail on the year-on-year SCR development that you saw in 1 half 26. I guess what drove the differences year-on-year? I think you said the first half is a good base to project off going forward. How do we think about the second half then in '26 versus the second half in '25. So just picking a part of those moving pieces would be really helpful. And then secondly, are you able to give us a sense of the amount of investment in technology and AI that you're running through the holding company cost line in the first half. What type of investments these are in? How should we think about this level of investment going forward? And I guess when should we expect to see the benefits flow into the results.

Andrew, thank you for your question. As a former CTO, I will take the AI and technology question. You should think about tens of millions. Ewout, can you take the LC question?

Absolutely. Absolutely. So on the -- so we already call it internally the nat cat question because it's a maybe to start with what we now see in H1 of 2026 is really kind of the normal level of what we should expect. What happened is that during -- given the continued growth that we had in the P&C portfolio, we actually saw in H1 of 2025 that the exposure levels temporarily exceeding the coverage assumptions underlying parts of our net cat program. As a consequence, we saw that additional consult capital was required during the first half of 2025 until the reinsurance program was adjusted at year-end. . So the subsequent update to that program released this additional capital requirement in the second half of 2025. As a result, we benefit from lower capital strain in the first half of 2026 compared with the prior year period and this created a positive year-on-year effect. But again, the level of H1 is normal. What it does indeed mean is that around, let's say, EUR 20 million, that's around the number. We expect around EUR 20 million less capital release or EUR 20 million higher strain in H2 compared to last year. And that was also part of the OCC bridge that I provided, that is included in that. That's 1 of the reasons that we expect more or less to land at the same level on OCC of -- in the second half of the year as last year. Hopefully, that helps, Andrew.

Very clear.

We will now take the next question from the line of Michael Huttner from Berenberg.

And I have two, one is on real estate and the other one on reinsurance. On real estate, I saw the -- you said in 3% in residential -- 3% in real estate, 5% residential, I think, and solid in the rule. In your 13% OCC increase, how much of the -- was that from real estate? Or is it somewhere else? And how much more -- could we expect some real estate in the second half? And then on reinsurance, you just said, you got negatives on or not negative, but the highest strain due to the high exposure numbers. Is there a benefit from buying more reinsurance? Or did you decide not to buy more reinsurance? Just curious.

Yes, thanks for those questions. On the real estate, so what we have as a kind of the total return assumption in real estate is a pretax return 5.5%. So every revaluation that is actually exceeding that number and the 5.5% is also including the direct yield. So everything that is excluding the other is outperforming those assumptions, it's not part of the organic capital creation, but is part of the market and operational developments. That's why I also mentioned in the kind of market and operational developments, there was some positive effect from the revaluation of real estate. . In the second half of the year, we are neutral in our view on restate. So we see still attractive direct yields revaluation more or less a neutral view. Then the second question in buying reinsurance. So the way we are looking to reissue is actually always in 2 ways. One is what is effective from a cost of capital perspective? So we assessed the reinsurance program from a cost of capital perspective. That's one element. And also what we like just as a.s.r. being predictable is that because of our reinsures program, we also have a performance that is -- that if there is kind of happens that our performance remains also strong in that type of situation. And with those 2 kind of criteria in place, we are actually happy with the reinsurance program that we are having today. So we don't foresee to further expand our reinsurance product. Maybe you can free up some solvency, but then it comes at a really high cost and from a cost of capital perspective that they're not really interesting.

We will now take the next question from the line of Farooq Hanif from JPMorgan.

Two questions, which may be more for Ewout. But just firstly, you gave that bridge on OCC. It sounds like a lot of the elements that neutralize OCC in 2H are not what you would apply to operating profit. So I'm kind of thinking that the expansion that you had an operating profit will that be more normalized. So if you could talk about some of the one-offs that we should not repeat in 2H for operating profit. And actually, just digging into 1 really large amount of detail apologies, but the other line in the life result, which went negative, I think that's where you mainly earn your DC fees. So can you explain what happened there and what we should expect in that line going forward?

Thank you. Thank you very much, Farooq for the questions. And I think like you guided already. These are typical questions for Ewout, I would say.

Yes. So I think you're right. So when we talk about the strain in P&C, the benefit compared to last year was not part of the IFRS operating profit that we presented. -- and the fact that will be normalized in H2 will also not be part of the operating profit. So net-net, one could say that, that amount of EUR 20 million is not normalized in an operating profit base. So you're definitely right on. And I think your other question was also relating to the operating profit and then mostly the other results what we actually see in the operating profit of the Life segment is 2 elements that is worth mentioning. . One is the -- is indeed the lower operating results -- of other results, sorry. And that has to do with the fact that in H1 last year, we had a couple of associations, so participations in the Life segment that's really made a strong performance and that landed in the other result, and that is not there in 2026, that is actually compensated by a positive experience varies. And the mostly on the kind of the experience mostly also have to do with the expense level that we assume on IFRS versus the expense level that we were actually seeing in the Life segment, and that resulted in the positive Xpeng. So there are actually 2 elements that are more or less offsetting each other lower contribution from participations, which was very high last year, with good strong experience variance, mostly driven by a little bit of mortality and the other part is expenses in the experience variance.

And, sorry, just to follow-up as well quickly on that. So in Non-Life you also benefited you in the combined ratio from nonrecurring elements. What's the size of that?

Yes, that was EUR 5 million and the offsetting effect of the EUR 5 million was, by the way, in holding and other. So there was kind of the offsetting effect. So there was EUR 5 million benefit in Non-Life, EUR 5 billion lower result in the holding and others. So it's more or less neutral for the second half of the year. .

So you're implying that 1H is kind of a run rate in operating profit.

That's exactly why I'm so happy as the CFO that I not only present strong numbers, but also very clean set definitely yes, true.

We will now take the next question from the line of Benoit Petra from Kepler Chevreux.

Yes. So actually, the first one is on the clean OCC. Could you give us kind of the clean run rate for H1? I think you had some prior year's provision release in on Life and also one-off expense benefits. So just wondering how much it is on a clean basis. The second 1 is on disability. So -- if I remember well, last year, you lost clients after the repricing put through in '25. Now the churn is quite limited in H1 '26. So are you kind of reaching a point where clients are becoming less sensitive and you could be more active on the pricing into '27. And on Disability given all what you said on the backlog and the repricing, do you think you can maintain a combined ratio in the range of 92% to 94% for the Disability business given what you know currently? And just the final 1 on the pension buyout. So you've done 2 small deals. I was wondering how you see the pipeline for the rest of the year on the Pension buyout.

On the EUR 5 million of -- sorry, on the OCC run rate OCC, that was the question. there was -- so the release that was mentioned was only EUR 5 million on the expense side, but we wanted to flag that because you actually see that the expense ratio goes down 1.2% in PBC. And that's a high number. And that's why we want to flag that EUR 5 million was kind of a more -- has to be seen as a one-off. But again, the compensating effect is involving and other. And with that, you can also see this as a run rate number. So the SCR strain is in a run rate number because of the net cap program or the right level, but also this is a run rate number. So that's on the OCC H1. And then if I understand your question correctly, on the pricing and whether we can push even more price increases to the market and that they will easily accept that. Well, that's -- it would be lovely if the market works like work that. I think in all fairness, we do see that it is a hard market. So you should -- can definitely as the margins that you want to achieve. And at the same time, there's also competition so also corporates can also go to the UW fee to insure themselves. And I think there, you will probably see the most competition out of it. What we have said is we see uncertainty, and as you can expect from us that we will address that uncertainty in a conservative manner and then it's up to the clients to decide whether or not they want to stay with us. That is the position that we are taking when it comes down to this business. Will that keep us in the target range somewhere around 94%? Well, when we look today, that's actually the case. But again, we have seen that uncertainty that I described on the -- given the backlog at the UWV. And that is something that we will assess in the second half of the year. But definitely, when we look today, we do see that the portfolio is performing in a solid way.