Welcome to the ASR half year 2026 results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michel Hülters. Please go ahead.
Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us today, and welcome to the ASR conference call on our results for the first six months of this year. On the call with me today are Ingrid de Swart, our CEO, and Ewout Hollegien, our CFO. 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 financials, capital position, and solvency position.
After that, we will open up for Q&A. We have ample time planned for this call, but we will stop sharply at 10:30 the latest. Please observe a limit of two questions so that everybody has a chance to ask questions. 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. Having said that, Ingrid, the floor is yours.
Thank you, Michel. Good morning, everyone, and thank you for joining us. It is a pleasure to welcome you to my first results call as CEO of ASR. I look forward to engaging with you as the investment community in building a constructive dialogue with our shareholders and analysts. Together with Ewout, I am proud to present our strong first half 2026 results. Let us turn to slide two, 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 Nederland 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 have already started the next integration. The acquisition of Bovemij has been closed on 1st of July. I will discuss the Bovemij deal in a minute, but it is clear that this deal is another proof point of ASR 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 two 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. Lastly, we continue to operate from a position of capital strength that enables us to invest in value-accretive opportunities such as Bovemij and the pension buyouts. At the same time, we are committed to offer our shareholders an attractive return. 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. We made significant progress so far this year. Let us turn to slide three 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 222%. 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%-94%. This reflects, amongst others, favorable claim 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 plan period. Let us move to slide four and look at our non-financial KPIs and how we continue to create sustainable value for all stakeholders. As this slide shows, our investment portfolio is already meeting its targets for both carbon footprint reduction and impact investments. We continue to make good progress in reducing emissions across the portfolio, and I am 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 six months of this year, and we are pleased with the increasing recognition we get from society. Our other non-financial 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 number three position in Non-Life and gives us a unique presence in the Dutch mobility sector. Through Bovemij, we gain 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 number two 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 a year and a half. Actually, this year already, we have planned for the legal 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. As mentioned in our press release in January, we expect the impact on our Solvency II ratio to be around - 3.5 percentage points. 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 three 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 standalone 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 into acquisitions and realize their full potential. 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%-5%. Growth was primarily driven by targeted pricing actions in group 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. 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%-5% target range. Our combined ratio for P&C and Disability came in at 91.6%, exceeding our target range of 92%-94%. 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 remained within our semi-annual 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 i nsurance agency has worsened, and it is 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 risk equalization model contribution. With that, let us 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, our DC assets under management increased by 14% to EUR 34 billion.
Annuities, our Pension deconsolidation 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 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 ring-fencing 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 return 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 us now turn to our fee-based businesses, where acquisitions and cost synergies supported another strong performance. Fee income increased by 33%, driven primarily by the addition of HumanTotalCare to our Distribution and Services segment. HumanTotalCare 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 HumanTotalCare 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 as scalable capital light growth platforms for ASR. 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 break. A CFO cannot be more happy when the 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 sheets remain robust. We deployed capital in a disciplined way. That includes organic growth, optimization of the investment portfolio, the Bovemij acquisition, and pension buyouts. In 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.
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. In short, the wheel is turning. We invest in profitable growth, we grow OCC, and we increase 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 from mortgage spread tightening and real estate revaluations were net offset by negative impacts, such as the downgrade of Belgian government bonds and the growth of the equity portfolio. After capital distributions, the ratio lands at 222%. Looking ahead, there are two 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 has closed in July, and two is the removal of the DA as part of the legal merger of the Life entities. As you all know, we have chosen not to apply for the DA in the budget internal model of ASR Life, knowing that the DA has to be eliminated anyway when EIOPA 2020 kicks in the beginning of 2027. Combined, the impact of those two points is around 7- 8 percentage points. 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 add around 10 percentage points. 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 the 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 9%. Disability showed a solid performance in H1, proving portfolio discipline and at the same time knowing uncertainty remains given the situation at the 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 cat 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. 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 and Services segment mainly relates to the full contribution of HTC, 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 employer's Disability arrangements. Lastly, HTC does no longer contribute to the holding segment. 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 ASR Life, the transfer of Knab 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. 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 OCC, I will focus on the drivers that are different from the OCC analysis. The operating results increased by 10% to EUR 901 million. The Life segment delivered a strong increase of EUR 17 million, mainly driven by a higher CSM release, reflecting, amongst others, the higher release of CSM due to the capitalization of cost synergies in H2 2025 last year. The positive experience variance observed in Pensions was offset by a lower contribution from associations compared to last year.
For Life, we realized a higher investment margin from the 2025 pension buyouts. The increase in operating investment and finance results is higher than the increase in OCC finance capital generation because the tightened mortgage spreads led to a lower liability and liquidity premium under IFRS but does not impact the VA and the Solvency. In Non-Life, the increase in operating results mainly reflects 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-based business and holding are equal to OCC. Let's turn to the next slide and talk you through our updated Solvency 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 deterministic adjustment, which now actually already has been removed after the legal merger on the 2nd of July . 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. What you now can see in our sensitivities is that they stay benign and our Solvency resilience remains strong also after the removal of the deterministic adjustment. The current sensitivities are actually now more aligned with market practice. Let me for now focus on the three spread sensitivities, since those sensitivities are mainly impacted by the removal of the DA. For government spreads and mortgage spreads, the outcome is quite intuitive.
If spreads widen, valuation go down, and for both investment categories, risk is low and therefore limited compensation in required capital. Net it, an active impact on Solvency from spreads widening, and the other way around from spreads tightening. For credit spreads, the picture is different. Here, a spread widening actually leads to an uplift in Solvency, and there are two drivers for that. Firstly, in a European context, our fixed income portfolio has a relatively large allocation to mortgages. The VA reference portfolio has a relatively large allocation to corporate bonds. So when credit spreads widen, the VA reacts more strongly than it would on the basis of our own portfolio. Secondly, it's 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 a corporate bond yield curve, so wider credit spreads therefore also have a positive impact on our Solvency. Overall, the sensitivities to our balance sheet remain very manageable, and in real life, spread movements in COFIs, credits, and mortgages have historically been positively correlated. That means the different direction in 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 bonds portfolio covering government bonds, credits, and alternatives is a high quality and well-diversified portfolio that I'm very comfortable with. We believe that mortgages offer historically a very attractive risk-return profile. The average loan to value is around 50% and credit losses remain below 1 basis point.
From a risk perspective, this is a very strong portfolio. As Ingrid mentioned, new mortgage production was lower. That is mainly due to the current interest rate environment, which increases customer appetite for shorter maturities where there is more competition from banks and resulting in lower spreads. Let us move to real estate and 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%, helped by the lowering of the transfer tax we discussed at full year stage, 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.
That is another example where having your own Asset Management and being really on top of the market creates real value. Let us 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 at 21%, interest coverage ratio well above our internal limit. 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. As you can see on the bottom right-hand side, our debt maturity schedule remain nicely spread over time. From whatever angle you look at it, the balance sheet gives us significant financial flexibility. Let us 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 Bovemij 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 is also reflected in Solvency ratio for ASR Life, which still remains very strong. OCC good, group Solvency good, cash at holdco good, legal entity Solvency good. What 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 Nederland 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 capital position remains very strong. The Solvency II ratio increased to 222%, reflecting strong capital generation and well-positioned to pursue value-accretive opportunities. 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.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We kindly ask to limit yourselves to two questions per person. We will now take our first question. One moment, please. From the line of Cor Kluis from ABN AMRO-ODDO BHF, please go ahead.
Hello, good morning. Indeed, Cor Kluis from ABN AMRO-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? In Disability and P&C, could you split it in price increase and volume? How was the churn? Are you satisfied with the price increases in Disability, especially given the WIA situation? That is a question on premium growth in Non-Life organic.
Second question is about M&A. Ingrid, you as new CEO, of course, doing acquisitions has always been an important part of ASR, so you will probably also will continue that in the future. Could you give your first views and contacts and way of looking to M&A as probably a continuing way of doing business, but your own view on that. Last question is about the WIA. I get it that, of course, you will do an update in Q3. Could you give some comments about what is going on, how the government is acting, what your interactions with the government indicate will get the backlog in order, etc. ? Those were my questions. Thank you.
Good morning. Thanks, Cor, for those questions. I will start with answering the question around M&A, and then Ewout will take care of the P&C and Disability questions that you posed. Thanks for the compliments as well, Cor. We are also very happy with the clean set that we presented this morning. I have been part of this company for almost seven years, and M&A has been an important part of the strategy and an important source of growth for years. I think that the Aegon Nederland integration and deal was really transformational to a.s.r., and we are really proud that we completed the integration within the three years and delivered on all the targets that we promised. More importantly, also, we are very successful in bringing two cultures together.
I am 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. 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 is divided between the three biggest players in the market. There is a tail of smaller players, and we see now that Bovemij is, I think, a perfect proof point of that. It is quite difficult for a smaller P&C insurer to stay economically viable to do the investments into digitalization and AI and to remain relevant to customers.
That is why I am 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. I would say, as expected, no change here, but looking forward to creating more opportunities and t he 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 buy portfolios, both in Life with the back books that have predictable cash flows, but also in Funeral.
We still believe that there is one 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. In the last couple of years, we have also acquired a range of smaller distribution companies, such as also HumanTotalCare that we mentioned in our presentation today. We also are of continued interest to add those to our portfolio. That is how I would look at it, looking forward to all the opportunities, feeding forward. With that, please, Ewout, can you do the P&C and income?
Yeah. Cor, on the premium growth, indeed, we were very happy with the strong growth in Non-Life that we have shown, so 6% growth. When we look underlying, we see a 4% growth in the P&C market. We were able to grow in the middle of actually the target range that we're having of 3%-5%. 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. 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 sickness leave. What that also means is that we have more customers that actually do annual payments. 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 group Disability, and as I think also the market is seeing in group Disability, we are observing elevated incident rates, which is mostly driven by mental illness and also long COVID, 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. When we actually look today into our portfolio, we see that the payments that we're doing, so the claims that we're having, is actually more or less in line with the actuarial assumptions that we are having. This, in a way, proves the effectiveness of our portfolio discipline and also of the repricing. At the same time, and Ingrid was already referring to that, we do see that the 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.
The second-order effect can also be that reassessments are executed less because of this backlog. This could mean, compared to the past, that individuals return 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. 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 Dutch Insurance Association , are in very close contact with the 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 conversation that we are having, the risk that there might be some delay in the inflow and in the reassessments, that we bring that all together as part of the annual review that we are doing on our actuarial assumptions in H2. We will definitely look at this in conservative, as you know us, in considering further actions. That's actually the situation where we are looking at today.
Okay. Very clear explanation. Thank you very much.
Thank you. We will now take the next question from the line of Andrew Baker from Goldman Sachs. Please go ahead.
Hi. Thank you for taking my questions. The 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 1H 2026? 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 2026 versus the second half in 2025? Just picking apart those moving pieces would be really helpful.
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? Thank you.
Good morning, 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 OCC question?
Absolutely. So we already call it internally the net cat question because it's raised. 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 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 solvency capital was required during the first half of 2025 until the reinsurance program was adjusted at year-end. The subsequent update to that program released this additional solvency 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. That was also part of the OCC bridge that I provided that is included in that. That's one of the reasons that we expect more or less to land at the same level on OCC in the second half of the year as last year. Hopefully, that helps, Andrew.
It's really clear. Thank you.
Thank you. We will now take the next question from the line of Michael Huttner from Berenberg. Please go ahead.
Thank you very much. I have two. One is on real estate and the other one on reinsurance. On real estate, you said 3% in real estate, 5% residential, I think, and solid in rural. In your 13% OCC increase, how much was that from real estate or is it somewhere else? How much more could we expect from real estate in the second half? Then on reinsurance, you just said you got negatives on, or not negatives, 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? I was just curious. Thank you.
Yes. Thanks for those questions. On the real estate, what we have as the total return assumption is real estate is a pre-tax return of 5.5%. Every revaluation that is actually exceeding that number, and the 5.5% is also including the direct yields. Everything that is outperforming those assumptions is not part of the organic capital creation, but is part of the market and operational developments. That is why I also mentioned in the 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 real estate. We see still attractive direct yields, revaluation more or less a neutral view. Then the second question in buying reinsurance. The way we are looking to reinsurance is actually always in two ways.
One is what is effective from a cost of capital perspective there. We assess the reinsurance program from a cost of capital perspective. That is one element. Also what we like just as a side being predictable is that because of our reinsurance program, we also have a performance that if there is gaps happens, that our performance remains also strong in that type of situation. With those two kind of criteria in place, we are actually happy with the reinsurance program that we are having today. We do not foresee to further expand our reinsurance program. Maybe you can free up some solvency, but then it comes at a really high cost and from a cost of capital perspective, that is then not really interesting.
Brilliant. Thank you.
Thank you. We will now take the next question from the line of Farooq Hanif from JP Morgan. Please go ahead.
Hi, everybody. Thank you very much. Two questions which may be more for Ewout. 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. I am thinking that the expansion that you had on operating profit, will that be more normalized? If you can talk about some of the one-offs in 1H that we should not repeat in 2H for operating profit. Actually just digging into one really large amount of detail, apologies, but the other line in the Life result, which went negative, I think that is where you mainly earn your DC fees. 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. I think like you guided already, these are typical questions for Ewout, I would say.
Yeah. Farooq, I think you are right. 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. The fact that that will be normalized in H2 will also not be part of the operating profit. Net-net, one could say that that amount of EUR 20 million is not normalized in an operating profit base. You are definitely right on that one, Farooq. 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 two elements that is worth mentioning. One is indeed the lower other results.
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 really made a strong performance and that landed in the other results, and that is not there in H1 2026. That is actually compensated by a positive experience variance, and they are mostly on the positive experience variances mostly also have to do with the expense level that we assume on the IFRS versus the expense level that we were actually seeing in the Life segment, and that resulted in the positive experience variance. There are actually two elements that are more or less offsetting each other. A lower contribution from participations, which was very high last year, with good strong experience variance, mostly driven by a little bit of mortality, and then the other part is expenses in the experience variance.
Just to follow up as well quickly on that. In Non-Life, you also benefited, didn't you, in the combined ratio from non-recurring elements. What is the size of that?
Yeah, that was EUR 5 million, and the offsetting effect of that EUR 5 million was, by the way, in Holding and Other. There was the offsetting effect. There was EUR 5 million benefit in Non-Life, EUR 5 million lower result in the Holding and Other. So it is more or less neutral for the second half of the year.
You are implying that 1H is kind of a run rate in operating profit.
That is exactly why I am so happy as a CFO that I not only present strong numbers, but also a very clean set. Definitely. Yeah, true.
Thank you so much. Thank you.
Thank you. We will now take the next question from the line of Benoît Pétrarque from Kepler Cheuvreux. Please go ahead.
Yes, good morning. Actually the first one is on the clean OCC. Could you give us the clean run rate for H1? I think you had some prior years provision release in Non-Life and also one of expense benefits. Just wondering how much it is on the clean basis. The second one is on Disability. If I remember well last year, you lost clients after the repricing put through in 2025. Now the churn is quite limited in H1 2026.
Are you reaching a point where clients are becoming less sensitive and you could be more active on the pricing into 2027? 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%-94% for the Disability business, given what you know currently? And just the final one on the pension buyout. You have done two small deals. I was wondering how you see the pipeline for the rest of the year on the pension buyout. Thank you.
On the OCC run rate, that was the question. 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 P&C, and that is a high number. That is why we want to flag that EUR 5 million has to be seen as a one-off, but again, the compensating effect is in holding an order. With that, you can also see this as a run rate number. The SCR strain is in a run rate number because of the net cat program at the right level, but also this is a run rate number. That is on the OCC H1. 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 would be lovely if the market works like that. I think in all fairness, we do see that it is a hard market. You can definitely ask the margins that you want to achieve. At the same time, there is also competition. Corporates can also go to the UWV to insure themselves. 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 is 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, around 94%? Well, when we look today, that is actually the case. But again, we have seen that uncertainty that I described 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.
Thank you. Then the last question, Benoît, around the buyout pipeline. We still believe that the market opportunity of EUR 20 billion- EUR 30 billion is there. We also think and see that a part of that is likely to materialize over a longer period than we initially anticipated. Market competition is increasing after Achmea entering the market, and we see that ASR is willing to play the game, and we also see that returns are coming down.
However, we really remain disciplined in pricing and are very true to our value over volume principle and will not deploy our capital if we can't make our 12% hurdle rate on these deals. We see room for us in the smaller mid-size deals, proven by the two announced buyouts that I mentioned before. We still believe and expect to be able to take our fair market share over the market of the EUR 8 billion, of the EUR 20 billion- EUR 30 billion market in total. But we do believe that it will extend beyond 2027.
Thank you.
Thank you. We will now take the next question from the line of Nasib Ahmed from UBS. Please go ahead.
Perfect. Morning. Thanks for taking my questions. Firstly, on AI, where do you see the biggest benefits coming through within AI? Which segments? I think previously, you mentioned health as an easy win. Related to that, the combined ratio, what you mentioned is 1.2 points of benefit from a reallocation of expenses. It feels like that's a run rate, like you said. So your combined ratio, 92-94, seems like it's going to come down just of the reallocation of expenses, maybe some AI on top. So you should be running a little bit lower than that range. Is that my correct interpretation? Just last question on longevity reinsurance. Is there still more capacity to do that based on what you've got on the books? Thank you.
The last part I didn't get fully, Nasib, but I will answer. Just to the one-off was not 1.2%, it was a part of that 1.2%. So around EUR 5 million, I think that's around 0.5% or 0.6%. That was the one-off that we saw in the expense ratio of P&C. So that is just to clarify that. Sorry for not being clear. Whether or not that result in a structural lower combined ratio, I think that's too early to say. It's something that we also will assess with respect to the Capital Markets Day.
But in all honesty, and we also have that dialogue in the past, we do see that the Netherlands is a well-consolidated market, and at the same time, there is still a lot of competition. Having a combined ratio at the low 90s is already very attractive from a return on capital perspective. Whether or not the combined ratio can be structurally lower, that's really a question mark and not something to answer during this call.
Okay. Thanks, Ewout. I will take the AI question. Thanks for asking such a nice question because I really like this subject, as you all know, I think. You were mentioning already the health part of our business. That's the part where we started experimenting with AI, and we used health as a nursery for the whole company. Why? Because we were in the middle of an integration with Aegon Nederland. Health was not in that integration since Aegon didn't have any health. So that was one. Two, we were able to have a lot of direct customer contact there, so a lot of data. So we built some use cases there, especially in the customer contact area. That's a very good area to start because there is a lot of customer contact.
And we were able to really develop those use cases a bit further through. We have seen, that was your other question, that when you combine AI with very well adoption by people, because it's 30% around technology, 70% is about people, processes, and also culture. We see if you do combine that in a correct way, and I mean a way that really creates value for businesses, that we see an increase in customer satisfaction and employee satisfaction, and we see costs go down. That's a very important proof point that we have seen. And of course, as you might imagine, we have a lot of businesses outside of health that can benefit from the same. We do see that there is ample opportunity to really scale this from health towards all the big business segments within ASR.
And we see that not only operational efficiency, operational effectiveness is an important driver for ASR towards the future driven by AI. But we also do see that customer experience also really benefits from AI digitalization and automation. As one would expect, we have a focus on creating long-term value, and we see the combination of people with technology as an important driver for this. And we truly believe that there is an accelerator for our strategy feeding forward if we can successfully combine the technology, AI, and people components with each other.
We have programs in place to drive this successful adoption and also build a lot of proof points within the company. And I'm really looking forward to telling you the whole story on the 1st of December of this year at the Capital Markets Day, because there's so much to AI technology and how you can really place it in the middle of your businesses that it would be a shame to just have a couple of minutes more to talk about it.
Perfect. Thank you, guys. The last question, Ewout, was around longevity reinsurance. What's the capacity?
Sorry, that was the one I didn't get. We are currently in the middle of assessing to do additional longevity reinsurance. Also to give some context, is that we do see longevity reinsurance on one hand as an important tool to optimize actually the insurance risk that we have in our portfolio because in the whole ASR book, longevity risk is the largest insurance risk that we have on the balance sheet. Simultaneously, it also provides a balance sheet optimization opportunity against attractive cost. When we look to the current portfolio, roughly EUR 50 billion of our liabilities has longevity risk in it. A part of that risk is already being mitigated, let's say a sixth by the natural hedge that we are having between longevity and mortality because of the Funeral book that we are having.
A third is something that we already have reissued in the past. Of course, we also think about this more going forward, that we might add in the future additional Dutch Funeral business, and then you also want to have some mortality risk. After longevity risk still on your balance sheet. I think with that in mind, roughly EUR 10 million- EUR 15 million of remaining liabilities is really applicable for longevity reinsurance. That will be probably be separated into several tranches, if any.
I think general rule of firm is that a EUR 5 billion deal will bring around roughly 2%- 3% level solvency benefits at group level, and that is currently still our stance, mostly driven by a low risk margin. That's actually where we are in the middle of assessing it. We see that the solvency benefits that we mentioned in the past seem still more or less be the case. Good risk management attracted from a cost of capital perspective, and we hope to give further clarity on H somewhere in H2 whether or not we enter into a longevity deal.
Perfect. Thank you very much.
Thank you. We will now take the next question from the line of Iain Pearce from BNP Paribas. Please go ahead.
Hi. Morning. Thanks for taking my questions. The first one was just on the fee business. I am just trying to get a feel for the underlying growth in the fee businesses. There has been a bit going on in terms of resegmentation, HTC, the mortgage trends. Just trying to get a feel, if you can give us some sort of feel for the underlying growth rates that you are seeing and also on the operating expenses in the Asset Management segment, which went down year-on-year.
If you could give us, obviously, synergies as part of that, but is there anything we sort of need to factor in terms of the cost income ratio outlook for Asset Management? On the P&C segment, just trying to think about the impact of Bovemij on the combined ratio, just looking at the OCC guidance sort of implications that might have a bit of a negative impact on the combined ratio for H2. Again, if you could give us any sort of feel for the headwinds that it might provide to the combined ratio going forwards. Thanks.
Yeah, on the fee basis. In detail, we saw an increase in the result of our fee businesses. Actually, the two main drivers there. One is the HTC business that we acquired the remaining 55% stake. As a consequence, it actually moved from a participation that was part of holding an order fully to the fee segment. The total contribution in the fee segment on the OCC level, so net of tax, is around EUR 15 million, EUR 50 million. The other contributor, EUR 50 million- EUR 20 million. The other contributor is actually the synergies that we realized from migrating the mortgage portfolio of Aegon to the ASR platform. That resulted in the lower expense base that you were referring to, also roughly EUR 12 million is what we are seeing on a lower expense basis, roughly EUR 20 million of contributions coming from that.
That's actually on the fee-based business that we are seeing. I think the second question was on the combined ratio of Bovemij. What we already mentioned during the full year, we don't expect a material contribution from Bovemij in 2026 already. That's because we added actually a portfolio that needs to be repriced, but even more importantly, where synergies needs to be realized so that you end up with a kind of healthy P&C portfolio of Bovemij. As we integrate from end of 2026 onwards, you really will start seeing benefits kicking in from 2027 onwards and the full amount from 2028 onwards.
Thank you. We will now take the next question from the line of Farquhar Charles Murray from Autonomous. Please go ahead.
I'll add two questions, if I may. Firstly, thanks for the guide towards Non-Life premium growth kind of moderating back into the 3%-5% range. A lot of that turns on the Disability market. My question there is whether ASR would be willing to perhaps go below the 3%-5% target range, particularly in full year 2027, if it's not possible to address the kind of issues in terms of the Disability market, gain visibility on claims costs on which to build appropriate pricing. Secondly, thanks for your earlier comments on M&A. Those are helpful. More specifically, do you think the opportunity set is opening up a bit more than recent years? Is that mainly at the kind of smaller end of the spectrum in terms of what you're seeing? Finally, can you outline your thinking on business expansion outside the Netherlands? Is that still mainly for holidays? Thanks.
Thanks, Farquhar, for your questions. I will answer the last two questions around M&A and abroad, and then Ewout will take your first question. Starting with the abroad still for holidays question. ASR is really focused on becoming the leading insurer in the Netherlands. I am really happy where we are today, but we do believe that we have a lot of organic growth opportunities, but also see that there is further consolidation possible and will occur in the Dutch market, and we are more than willing to participate in that. That is, I think, quite clear. We continue to believe that has not changed, that it is incredibly difficult to find a compelling business case for ASR to buy another insurer outside of the Netherlands. So, really focused on the Netherlands. Then to your question around P&C and especially the longer tail of smaller insurance
Like I said, we are really happy with both Bovemij being a blueprint, and we do believe that with the current revolution going on around AI technology, digitalization, also changing customer behavior and the investment money that needs to be put into a business to successfully meet the standards that are nowadays normal for P&C players. That is incredibly difficult for the smaller companies to do that on a standalone basis. So we are happy and thinking that the blueprint of both Bovemij will have, how do you say, new transactions in the coming time.
Farquhar , on your question around the Disability growth and are we willing to accept growth below actually our targeted range. The simple answer is yes. The reason is that we strongly believe in the value of volume and that every business that you write needs to deliver on the right return. That is why I also mentioned we will definitely look at the whole situation more on conservative side and take that into account, for example, in our price level.
If that means that we lose more clients, and that we then will come below the 3% growth in 2027, then that is what it is. We also have to make a margin, and that is how we are always in the market. For the long run, we believe that is actually the right position also to have as an insurance company, because that makes you also predictable for advisors and for clients.
Thanks.
Thank you. We will now take the next question from the line of Michele Ballatore from KBW. Please go ahead.
Yes, thank you for taking my call. Just one question from me. If we look at the good trends, especially in the finance capital generation, both in Non-Life but particularly Life. How should we look in terms of the outlook on this line? How do you see this trend continuing next foreseeable future? Thank you.
I think if I understand your question correctly, is how do we look to the trend on the finance capital generation in OCC?
Yeah.
What we see actually in the portfolio also in H1 compared to 2025, is on one end, we saw actually spreads were tightening a bit. Because of that, you see spreads tightening. We have small spread tightening, and we have seen in most cases spread tightening in COFI and also spread tightening in credits. That brings you a somewhat lower return, for example, compared to the full year 2025. At the same time, we saw positive revaluation in real estate more than expected.
In our total return assumption, we saw good developments of equity markets, and that all contributes actually to a high investment margin. If we look going forward to our finance capital generation, we expect that will develop in the same direction as we have seen over the year in the first half of 2026. No really worries there. But by end of the day, always depends a bit on how markets will develop.
Thank you.
Thank you. We will now take our next question from the line of Jason Kalamboussis from ING. Please go ahead.
Yes. Hi. Quick follow-ups, if I may. The first one is on longevity. We get more clarity, maybe in the second half, maybe you can do a deal, but looking at your Solvency ratio three years out, it looks very high, building up quite a lot. Is that fair to say that actually you do not need to do longevity deals at this stage given your stronger capital position? The second thing is a follow-up, again, is on the buyout market. Could you differentiate between Achmea and Athora? Because as far as I am aware, maybe I have missed it, but we have not seen a lot of large deals as last year. Do you find that even though there is competition in pricing, it takes more time for the Pensions funds to take the decision?
Are there also softer factors than pricing that could make things come back to ASR? Or do you think that at the end that is a lot more pricing, it will be more Achmea and Athora battling it out and you focusing on the mid-size deals over the next 12 months? The third question is on Non-Life. Could you give us, specifically for the P&C combined ratio of 89.9%, what is the percentage benefit you got from the prior year reserve releases? Maybe it was given earlier. I am not sure. I think that you said that expenses was -1.2%, but if I could have the PY answer, that would be great. Thank you very much.
Thanks, Jason. You called it follow-ups, but I think there was one follow-up and two new questions that you raised. Let me try to give a clear answer to that. On the longevity part, I think that is the beauty where we are looking at today. We do not need longevity reinsurance from a position of weakness there because we need solvency. No, we are in a strong solvency position, and we only want to do longevity reinsurance because on one end it is good risk management. So an important risk that we have on the balance sheet, you can offload. That is one element that we take into account.
The second element, just as important, if you can do this against the right prices and you see that your cost of capital can become close to CBO of such a deal, that makes it also from a balance sheet optimization attractive. That is the reason that we are considering this. So it is just good balance sheet management, good risk management, and that is the main drive and not because we need solvency. The second element on the Non-Life, how much reserve release? Well, that is a simple answer, so thanks for that. That is actually negligible. So this is a real strong underlying number. There is the EUR 5 million that we discussed with, which has had an offset of the holding, but it is a clean number that we present here today, which is very strong and we are very happy with.
Then on the buyout market and how that is developing. So indeed there we saw H2, H1 2025, Athora and ASR both winning quite some deals. H2, Athora have won a lot of deals, a lot of activity in the buyer market. H1 of 2026 is a bit less, and at the same time we see deals happening, and also ourselves actually have won two smaller deals. I think Ingrid described it very well in a way that what we see is that because the main competitor being Athora in this market really won a lot of bigger deals, their appetite for smaller deals seems to fade away a bit, and that provided us the opportunity against the right return levels that we want to have to win those deals.
I think so it is not because of pension funds are now thinking differently to the market. It's just sometimes you have a bit more activity in the market, sometimes you have a bit less activity, but H1 of 2026, there were still a couple of buyouts. Also, when we look going forward, there's still a pipeline, and that's why we are still confident, though it might take two more years that we will reach the EUR 8 billion.
Great. Thank you.
Thank you. We will now take the next question from the line of Michael Huttner from Berenberg. Please go ahead.
Fantastic. Thank you so much. To you two, one, you spoke lots of times on Funeral business. I just wondered, could you remind us who is the lucky competitor who you might be looking at or any indication? Maybe you can't say, I don't know. Then we had the question on pension buyers. Can you talk a little bit about the individual annuities? So that's the one you're exceeding. Can you give us a feel for how much more growth there is? Because it's clearly not a closed block. It's linked to the DC growth. Thank you.
I will answer your last question, Michael. If you look at the annuity, so we have a big book of DC that's accumulative, accumulation business, and now we have the deaccumulation, that's where the annuities come in. What we do see is that if you have a very good customer journey and competitive pricing and people are already used to your brand service and happy with that they've experienced over the DC time of period that they have been customer with us, we see that people really like to stay with ASR because of the very good customer journey where we have invested in to the new standards that are there today.
With that, I mean more digital, more AI, etc. , more personal. And if you also have competitive pricing, people do stay with us because they liked during the accumulation phase, and they do also like us for the deaccumulation phase. That is why we have indeed a very exciting increase of our annuities and of 38%. Also, we really think that we will exceed our target for this year.
On Funeral, please be with me, Michael, that it is not really good to mention names in a call like this when it comes down to Funeral insurance. But to answer your question, of course, we are open to onboard closed books of Funeral businesses there. So there are a couple of closed books of Funeral business, and we are also more than willing to look more to open Funeral businesses. There are a couple of bigger players where the largest players has 50% market share. Probably that is not possible for us also from a competition perspective to really be interested in, but other players would be of our interest.
Brilliant. Thank you so much.
There are no further questions at this time. I will now like to turn the conference back to Ingrid de Swart for closing remarks.
Thanks a lot, and thank you all for listening in and also for your very nice and interesting questions. We enjoyed being with you this morning and are looking very much forward to meeting, hope lots of you in London in the coming days. With that, I would like to really look forward toward the London engagement and meetings and hope you all have a very nice day with our clean set of results. Thanks very much.
This concludes today's conference call. Thank you for participating. You may now disconnect.