Earnings Call: H2 2019

Feb 19, 2020

Good day, and welcome to the ASR Investor Full Year Results 2019 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Michel Holters, Head of Investor Relations and Ratings. Please go ahead, sir. Thank you, operator. Good morning, ladies and gentlemen. Welcome to the ASR call with me today are Joos Baader, CEO and Annemiek van Meelijk, our CFO. Joost will kick off as customary with an overview of the highlights of our financial results and then discuss the business performance. And then Annemiek, she will delve into the developments of our capital and solvency position. And after that, we'll open up for Q and A. I have to remind you that we have scheduled till 12 o'clock sharp. We need to catch a flight to London to see some foreign investors and also some of the analyst community. So we need to keep it within the hour. To make sure that everybody gets a turn in asking questions, we would appreciate it if you could observe a limit of 2 questions for each per round. And as usual, please do have a look at the disclaimer that we have at the back of the presentation. So with that said, Jos? Thank you, Michel. I'm happy to be here again today with Annemiek, our new CFO, who joined us very recently. So together with Ingrid de Swart, the board team of ASR is complete and ready for a bright future of ASR. Ladies and gentlemen, as you have seen from the numbers which we have published this morning, 2019 was again a very, very strong year for ASR beating the record operating performance of 2018. I'm proud of our overall performance as it demonstrates our discipline in executing our strategy and our successful pursuit of profitable growth. ASR is consistently delivering against ambitious targets. And also in 2019, we offer our shareholders an attractive progressive dividend and we intend to do so going forward. And as I am sure you have noticed this morning, we also announced a share buyback of $75,000,000 as part of our review of our capital management policy. More about that later in our presentation. So let's move to Slide 2. As said, our performance in 2019 has been really strong. Operating result of €858,000,000 exceeding the already record level of 2018 by €109,000,000 Especially favorable weather related claims compared to 2018 helped our operational result and the acquisition of L'Orealis. This on top of overall improvement of all our business segments. The operating return 15.1 percent well above our target combined ratio also well above target with 93.5 percent and we remain sharply focused on our cost levels. Operating expenses declined slightly by €5,000,000 when adjusting for the cost base of the acquisitions like for example Loyales and some incidental costs mainly related to M and A projects. Solvency II ratio still based on the standard formula remains robust at 194 after the proposed full year dividend. There are quite a number of items that impacted solvency such as the 18% point impact from the lower VA, the impact of the acquisition of L'Orealis, but also the issue and redemption of hybrid capital. Organic capital creation amounted to €370,000,000 stable with last year and absorbing the additional UFR unwind, higher new business strain and threatening of the yield curve. In 2019, we also reviewed as promised our OCC definition and return assumptions on this new definition, which is now more aligned with the market. Our OCC for 2019 based on new definition amounts to €501,000,000 Annemiek of course will provide further detail on this. Based on the strong performance and in line with our existing policy, we offer a progressive dividend. We propose to raise the dividend with 9% to €1.90 per share taking into account the interim dividend we paid already in September. There remains a final dividend of €1.20 per share. So in sum, a very strong set of results achieved in 2019. Let's move to slide 3 and talk a bit about our capital review. You are all familiar with the Solvency II management letter here on the slide on the left. With a Solvency II ratio of 194, we are comfortably above the management level of 160, and 60, the level we tend to call the entrepreneurial zone. This means that we can allocate capital to pursue profitable growth both organically and through bolt on acquisitions such as we did with, for example, Loyales and we remain active in optimizing and rerisking the balance sheet wherever we see attractive opportunities. It also provides a buffer to absorb the impact from regulatory changes such as the ongoing decline of the UFR. As announced at the half year results, we undertook a review of our capital policy in the second half of twenty nineteen, in particular, with regards to the possibility of additional capital distributions. In doing so, we took into account the level of solvency, our organic capital creation and potential opportunities for allocating capital for acquisitions or end re risking. While we still continue to see opportunities to allocate capital to profitable growth, we also believe there is scope for additional capital distributions. We are comfortable with the current level of stock. Our intention for the medium term is to make an additional capital distribution of €75,000,000 per year. A condition is that our solvency ratio needs to remain above 180% as we aim to maintain a robust balance sheet. And as is shown on the right of this slide, we expect that regular dividend additional capital distribution and value creation opportunities will be covered by the OCC. If larger and value creating acquisitions present themselves, we will of course give priority to those. As you know, we maintain strict financial disciplines and require at least 12% return on invested capital. We will assess the possibility of additional distribution on an annual basis. The new policy will be implemented with immediate effect and we have decided to buy back €75,000,000 of shares starting as from tomorrow. So let's now move to Slide 4, business strategy. This slide is mainly self explaining, so I will restrain myself to 2 remarks. I'm especially pleased with the inflow of 11 1,000 customers in the 1st 2 months of the vitality program, which is aimed at prevention. This marks our long term ambition to become an even more relevant insurer in the daily lives of our customers on top of providing cover for risk and the accumulation of financial assets for later. 2nd remark I would like to make is we finished the migration of all ASR own individual life books to our variable cost next in line to migrate to our new platform. And so we're again open for new business for new acquisitions. On slide 5, we elaborate a little bit on our strategy in the pursuit to become the most sustainable insurance company in the Netherlands and possibly in Europe. A few remarks there. We consistently aim to improve the service we provide to customers. The increase of the net promoter score from 42 to 44 and even more important for our intermediaries from 60 to 60 to show as an example that we are successful in this. Also as an investor, we are committed to a more sustainable world. Our impact investments amounted already €900,000,000 and the CO2 footprint has been measured for close to 90% of our investment portfolio. So we are on our way to meet our targets there. We increasingly receive external recognitions for our achievements. For example, for the 3rd year in a row, we are the number one sustainable insurer in the fair insurance guide and we have been voted the most sustainable invest by VBDO, a Dutch organization twice in 1 year. And finally, in our business operations, we focus on reducing our direct CO2 footprint. Since this summer, our office is no longer makes use of gas and is fully CO2 neutral. Let's move to the Non Life segment on slide 6. In Non Life, a very strong year, up 83,000,000 to 226,000,000 euros All major product lines are doing better as demonstrated in the improved combined ratios. The 2 key drivers, the significant improvement in weather related claims, the Gen storm in 2018 added up to 32,000,000 euros and the addition of L'Orealis, which is for the full year €24,000,000 of which €17,000,000 in the second half. Combined ratio asset 93.5 a beat on the target of 94% to 96%. And on top of that, our gross written premiums increased by almost 6%, driven by a solid 4% organic growth by P&C and Disability. By the way, for L'Orealis, it makes sense to look at the net earned premiums and annual contracts, gross written premium not appropriate measures to this broken year. The uptick in the expense ratio is first of all a consequence of the inclusion of the L'Orealis portfolio. Without L'Orealis, the expense ratio would have declined to 8%. The absenteeism portfolio reported better performance as we took measures within this portfolio. And as you may have noticed, we took some additional provisions disability and P and C for changes in the discount rate for bodily injury, which added up to a total of 15 $1,000,000 Let's move to Slide 7, our Life business. Some highlights to mention here. Operating result up by 3.7. The increase was primarily driven by higher investment margin 44,000,000 This reflects lower required interest for individual life and higher direct investment income as a result of re risking of investments and the integration of the L'Orealis investments, partially offset by lower amortization of realized gains. Operating results from H2 last year to H2 2019 is relatively stable and it is up when adjusting for the €10,000,000 non recurring benefit from generadi Netherlands in 2018. Gross written premiums grew 3.4%. The additional contribution from L'Orealis, which was close to €60,000,000 and new pension DC portfolio growth exceeded the decline in the individual life and the decrease of the existing DB pension portfolio. Life operating expenses and basis points of the basic life provision improved to 53%, so already meeting our medium term targets. So last slide before I hand over to Annemiek. Other segments, I think mainly self explaining two remarks. As we already expected, the Distribution and Services segment declined a bit towards €23,000,000 but still better performing than target. This was mainly due to the lower fees for mandated brokers and which is a market phenomenon and this was offset by solid organic growth. Operating results of the holding amounted to a minus of 112. Decrease in percent decrease in operating result of holding and other is mainly driven by the increase in interest expenses from the €500,000,000 Tier 2 subordinated liability placed in April. So having said this, I will now hand over to Annemiek and she will deep dive into solvency and capital. Thanks, Joss, and good to meet you all by phone. And I see some familiar names from my time as a bank CFO and some new names and looking forward to meet you live at one point. I was asked by IR to keep it relatively short, so I will try to restrain myself. Having said that, I do want to take you through solvency stock flow, the new OCC definition and some sensitivities. So it won't exactly be 2 minutes either. If we go to Page 10 and start with the stock, Solvency II came in very robust at 194% on a standard model, especially robust if you consider that we absorb the impact of a further U of R decline of 3% points, a VA decline of 18.4 percent points and the acquisition of L'Orealis of 6.5 percent points. We added €410,000,000 of unrestricted Tier 1. And if you would exclude the impact of roughly €490,000,000 in hybrid capital, the owned funds we acquired through L'Orealis of $176,000,000 as well as the impact of owned funds of the lower U of R and VA decline of $91,000,000 $582,000,000 respectively, we would have added around $900,000,000 of OOM funds during 2019. Now I believe this $900,000,000 of own funds generated reflects the company's resilience to absorb the UFR decline and VA volatility, while still being able to invest in organic and inorganic growth as well as returning capital to shareholders. With that in mind, we have announced the intention for a yearly additional capital return of €75,000,000 as Jules already pointed out earlier. Capital generation is also reflected in our IFRS equity. You can see that in Appendix E, which grew by $611,000,000 last year. In terms of required capital development, we've made a conscious allocation this year to the acquisition of L'Oreal as a non life growth, particularly in disability and P and C as well as some re risking into mortgages. We've reduced capital allocated to counterparty default and concentration risk. Now obviously in terms of required capital, the real movement here is the increase of market risk, which only for minor part is driven by rerisking. It's mainly driven by positive revaluation of equities and real estate. And it also includes some additional risk to interest rate risk driven by lower interest rate, which we partly mitigated by increasing our hedge primarily in the first half of the year. And despite these developments, our market risk as a percentage of required capital remains well under the soft limit of 50% with 44%. Now insurance risk also saw some increase with slightly over $500,000,000 and that predominantly relates to life and health. Life due to the impact of lower interest rates on longevity risk and health primarily due to the acquisition of L'Orealis. Our diversification benefits increased by $248,000,000 and we've seen a slightly higher LACDT impact, which was mainly driven by the changed tax plans, the VPP change from $20,500,000 to $21,700,000 there. Good to point out that we still have ample headroom available, actually slightly more than in 2018 with 923 for restricted Tier 1 and 500 for Tier 2, Tier 3 combined. So all in all, strong solvency level of 190 4% based on a standard model with ample headroom. And if you were to adjust that for the announced buyback of $75,000,000 which will start tomorrow and which will actually flow into the stock in H1 solvency would be 192%. A bit on flow now, if you turn to Page 11. As Joss already indicated, we've reviewed the OCC definition in H2 and we've aligned it a bit more with market practice. Now in terms of consistency and transparency, I'll first present the OCC on the old method and then indicate the delta set towards the new methods. If you start at 197 percent in 2018, you can see that we issued the $500,000,000 Tier 2 to absorb the Lialis acquisition and we issued and redeemed some Tier 1, Tier 2 capital and H2 basically offsetting each other. Now if you lease those exogenous factors aside and look at what was really generated by ASR itself, I. E. The OCC, you can see the $370,000,000 which is close to 10% points of our required solvency. That OCC number is roughly the same as last year's, but within that OCC, we see an increase of business capital generation with $61,000,000 to 3 44,000,000 dollars and that's really the capital generated by running the business, I. E. The underwriting result, investment results, fee income. And that $61,000,000 increase there more than offsets the $35,000,000 higher UFR unwind, which you can see in the technical movements at minus 125, really caused by lower interest rates. Now please be aware that our methodology takes the average over a year in terms of U of R unwind. So that basically means that there will be a comparable echo of an additional U of R drag in 2020, obviously, depending on rates this year. The release of risk margin was somewhat less compared to last year, primarily reflecting the new business and the contract renewal cycle of L'Orealis, which typically occurs at the end of the year. So we'll see that impact. We've seen that impact in Q4. But it's profitable business and it will generate OCC in the future. Impact of markets and VA decline as well as the lowering of the UFR rate fall in our bucket market and operational developments as you are aware. So all in all, OCC comparable to last year absorbing a higher UFR drag with $61,000,000 higher contribution of business capital generated. As we already indicated previously, we were looking at a more market consistentharmonized OCC definition. That has been worked out through the second half of last year and is now finalized and will be introduced in 2020. Now let's go to the next slide, Slide 12, so I can talk to you a little bit through the changes that we've made there. On the new definition, the OCC would have been €501,000,000 which is an increase of $131,000,000 versus the old definition. Key changes here really relate to the return assumptions for the investment portfolio. For fixed income, including VA, we will move from excess returns to market observable spreads. And for equities and real estate, we will move from an excess return over swap to a total return assumption and that total return assumption is post tax 5% for equities and 4.1% for real estate. These new return assumptions align better with market practices we see around us and the total return assumptions for equities and real estate are actually consistent with the long term assumptions we use in our strategic asset allocation. If you look at the impact of that change in LTIM assumptions, you would see $182,000,000 more of business capital generation. And you can break that down in fixed income, which is $56,000,000 and then equities and real estate, which is $124,000,000 Within fixed income space, we lost a bit of COVIs, both core and non core, but we gained the corporate bonds and the mortgages there, and we actually gained on VA a bit. And within Equities and Real Estate, the split is relatively equal between Equities and Real Estate in terms of gains that we made there. We've also made some other model refinements whilst we were at it, and those included the net release of capital bucket. In the old OCC, we only included a release of insurance risks in line with the unwind of our life book. And in the new OCC, we will also include the related market risk capital requirements, I. E. Predominantly related to interest and spread risk. We've also included a revision of the new business train methodology leading to a higher but more accurate required capital for new business. Now that those two factors combined had an impact of minus $63,000,000 in terms of release of capital. Technical movements, we only used to look at the unwind of the UFR there, but we consider it more appropriate to also include the unwind of the T VOG. That time value tends to get smaller as time passes by. All in all, that new definition OCC would have come in at $501,000,000 for 2019. And bear in mind, it still remains quite sensitive obviously to movements in interest rates, U of R drag, and it is more sensitive now to market observable spread movements for fixed income and VA. In terms of target setting, we did introduce an OCC target at the Capital Markets Day of 2018 of more than $430,000,000 for 20.21. You would obviously need to add L'Orealis to that and then you would get to $465,000,000 all based on interest prevailing interest rates at the Capital Markets Day, I believe that was in October 2018. If you would adjust for the additional U of R drag of 90,000,000 dollars since then and for some flattening of the curve, which knocked another $40,000,000 you would get to around $335,000,000 dollars if you would translate that 465 targets at full year 2015 2019 rates. And you'll get some more you can find some more information on that on Appendix I. I think we've done well reaching an OCC of 370 in 2019, But bear in mind that there will be some echo impact of the UFR drug on that going forward and that you will also see on the new OCC model. The new OCC came in at $501,000,000 and you may consider the $500,000,000 target for 2021 not that challenging. But I said bear in mind the U of R drag echo that we will have and bear in mind that 2019 was a very strong performance year weather wise for P and C. The new OCC is really the basis from which we intend to invest annually in organic growth, in some inorganic growth and re risking. And obviously, it's the basis from which we intend to pay the regular dividend and the additional capital return of 75,000,000 dollars Page 13, we show some sensitivities. I think you're all familiar with this page. It really presents an indication of the stock solvency today if a lower U of R would be applied without any capital generation added to it. You can see what the impact would be of applying an economical U of R, I. E. Closely linked to our actual investment returns, we've kept at 2.4% this would actually lower the stock to 153%, but it would obviously simultaneously enhance the OCC by $63,000,000 annually. That economical UFR has actually been pretty stable for the last year. We've added a broader sensitivity in Appendix G, which is broadly in line with H1 2019, indicated that our current 194% solvency is still well placed within the entrepreneurial zone even after applying the sensitivity similar to what we've seen at the half year. Returning to balance sheet on Page 14. As already touched upon earlier, a strong balance sheet with ample headroom within our capital structure, Both market risk and financial risk are low. Market risk at about 44% of total risk, something we feel very comfortable with. We aim to keep that below 50% pre diversification benefits. Financial leverage today at 29.2% on an IFRS basis, slightly up versus last year as we issued a Tier 2 instrument, but still well below our mix of 35%. Risky asset as a function of unrestricted Tier 1, our risky asset ratio relatively stable at 107, which we feel very comfortable with. A few words on cash and then I'll hand back to Jos on Slide 15. Holding cash at the end of the period was $458,000,000 It was up from last year and it's still aligned with our policy to cover holding expenses, coupons and dividends. In addition to that cash position, we have an unused RCF of $350,000,000 We've upstreamed cash from life $356,000,000 non life $80,000,000 and other entities $65,000,000 There was no need to upstream more as given our holding policy, but there are also no impediments to upstream more. And the remittances that we've done are in line with previous years percentage wise. We are comfortable with the OpCo solvencies with life at 192% and non life at 162% levels all well above management targets. Our debt maturity profile, as you can see, very robust, evenly spread, our next maturity date 2024 something, again that demonstrates that we have some more flexibility. Double leverage as expected just above 100%. So all in all, very comfortable with the balance sheet and cash position as it currently stands. And with that, I'd like to hand it back to Joss for a final wrap up. Thanks, Annemiek. Well done. Let's move quickly to slide 17. So we're not making Michel more nervous than necessary for the Q and A. Two graphs on this slide. The first one to highlight our steady multi year increase in our operating results. And as you can see, our non life business and capital light free income generating business in Asset Management and Distribution represent a greater part of the total company and the new business we are writing in those businesses will push this further going forward. And second remark, those results will fuel our capacity to pay attractive dividends to our shareholders. And as you know, it's our ambition to offer shareholders a progressive dividend per share in the long term. As said, full year dividend will grow towards $1.90 per share, an increase of 9.2%. And on top of that, we aim to provide additional capital distribution as we announced this morning with the share buyback program of $75,000,000 for this year. So all in all, since our IPO in 2016, we returned well over $1,000,000,000 to our shareholders in dividends and share buybacks. If we would be able to execute on our intention as we just discussed, then we would again return another $1,000,000,000 in the current plan period. So concluding on Slide 18 and guiding you a little bit towards the outlook for for 2020. Again, a very strong set of numbers, so a very solid performance again from ASR. As is evidenced from all the key metrics that we discussed, our business is running very, very well and we're happy that everything we can influence has done according to targets or better than targets. Looking ahead, we are positive about the commercial and operational outlook for ASR. However, we are keeping a close eye on developments in the financial markets and in particular the impact of the exceptionally low interest rates. And while there are no new facts on the EIOPA review, we will of course monitor any regulatory change that may have an impact. At the same time, we remain interested in growth through small and medium sized acquisitions. We still see opportunities there. Our strong capital position provides sufficient scope for this. So looking forward acknowledging that our performance in 2019 was very strong and significantly increased compared to the prior year, we would be very happy if and when we could deliver those results again in 2020. So with that, I hand over to the operator to go into all the questions you probably will have. Thank We'll now take our first question over the phone from Cor Kluis from ABN AMRO Bank. Please go ahead. Your line is open. Good morning. Kourkluis, ABN AMRO. I've got a couple of questions. First of all, maybe just for the record, the Ceara storm and the Danish storm, maybe you could give some clarity on that and related to that, of course, the reinsurance contracts that you have for such kind of events. The second question is about M and A. Currently, you basically make clear that you will be turning around 70% or a little bit more of your capital generation back to share, obviously, a dividend and share buybacks. There's still around a little bit less than 30% left for M and A and rerisking. Could you elaborate a little bit more on the M and A pipeline? Or you say you see sales opportunities. Each year you delivered us, since the IPO that you found a few acquisitions. Did anything change after Vivat? Or do you still see similar kind of pipelines and possibilities and interest for acquisitions? And my last question is a technical one. On the €500,000,000 OCC target of at least €500,000,000 OCC target that you have, what amount of UFR strain is included in that figure? And you mentioned there will be a little bit extra UFR direct, of course, for 2020 versus 2019. So the UFR direct would be a little bit higher. But in that €500,000,000 how much UFR direct is there? And if we would bring it back to your which you put on the slide, to a lower level, what might be the offsetting positive effect? Is it the €63,000,000 or have you not included that €63,000,000 for the extra UFR direct that you look at this year in 2020? Those were my questions. Well, thanks, Cor, for those questions. And van der Meek will go into the last one. I will take the first two. Keyara and Dennis together, they make a nice couple and the proof that Chiara caused a bit more claims than Dennis proves that in most families, females are the boss. Having said that, the weather related claims in 2018 added up to 32,000,000 euros We had lots of large claims by then. Looking at the first feeling this year, We had again lots of claims, but very small ones, fences and some smaller car incidents. Our first feeling is that the total claims for the 2 storms jointly will be somewhere between €10,000,000 €15,000,000 hopefully on the lower side, but the projected range today is between €10,000,000 €15,000,000 On your second question, M and A, we still do see in line with what we said last year chances for M and A. They may not be as big as Generali or L'Orealis, but there are still some medium sized chances we see going forward. And that's why we've explicitly said that we want to reserve a little bit of the OCC that we expect for M and A and rerisking. So actually the story line there didn't change over the last few months. And yes, we are looking at a pipeline, but it's as usual, we're not communicating about what's in the pipeline and what when could happen. M and A is lumpy business. It could happen overnight, but it also can take a couple of months more. And then for the 3rd question, I hand over to Annemiek. Cor, on the question on target OCC, if you look at €500,000,000 target we have, that includes this year's U of R drag, which was €125,000,000 And then you would have to add the echo of U of R drag of 2019, which would add another 35, so that would be around 160. Okay. I missed one. Sorry, go ahead, Cor. Yes. As you said, the following on that UFR drag offset $160,000,000 that you on Slide 13 that you showed there, where you basically say if we bring the UFR down from 3.9% to 2.4%, it will be €63,000,000 positive for the OCC. Did that was the base on the €125,000,000 or was the base on the €160,000,000? That was based on the current 125. Yes. Okay. Okay. Very clear. Thank you. You mean on the sensitivities to stock, Slide 13? Yes. Yes. And one addition to the question about Keyara, our reinsurance cover starts at £35,000,000 for the 1st storm. So this is all on account. We'll now take our next The first one is, I mean, ASR has always been known to be conservative and you have a good track record of under promising and over delivering in the end. And now today, you're aligning the more the excess spread assumptions in the OCC. But I was wondering, are there also maybe further alignments possible and other, for example, let's say, product lines where you are maybe excessive prudent in terms of reserving that you could revise as well? So in a way, do you think you're still also in a way understating operating earnings in certain areas? That's the first question. The second question on the capital return decision in the dividend. I noticed that you keep the link with operating earnings there with the 45% to 55% as a base payout ratio range, and you're clearly at the low end, so you can basically grow that and show the progression. But the reason that you did not decouple like one of your peers, should I also take therefore confidence that you still see room to grow operating earnings despite a very solid level of operating earnings we saw over 20 19, so a bit of thinking around that. And finally, on the progression itself, now you have announced a buyback, which will, of course, result in a reduction in the share count. Yes, what kind of progression and as a percentage, yes, you would feel comfortable with? So to frame that a little bit. Thank you. Okay. Annemieke will take the first one. Should I start with the on the promising overdeliver question and whether that's also somewhere in our operating results? I don't think there is a lot of additional conservatism or prudence versus our peers on that side. I think where we've mainly seen it was really related to the OCC and a bit to the solvency side. So no, I don't see that on the operating results side. On the solvency side, I think on the OCC definition, we've now really aligned it with peers. If you look at stock solvency, it's good to bear in mind that we're still on standard model there. And I think, yes, that probably sums it up. And to your second question, we think it remains important to base dividend policy on an audited number. That's why we've said we will stick to the 45% to 55% of the operational etcetera. There is still a lot of room to increase the nominal dividend because we're now at 45%. We also trust that we will be able to continue to grow ASR as provided in the targets on the Capital Markets Day, the 3% to 5% growth in P and C and in disability. And we've always said we want to have a stably growing dividend and we're happy with the current 9%. So everything that is between 5% 10% will make us and shareholders hopefully also happy going forward. We'll now take our next question from Farooq Hanif from Credit Suisse. Please go ahead. Your line is open. Hi there. Thank you very much. Firstly, there's been a further decrease in interest rates. So as well as the echo of UFR, its potential its potential for further UFR drag in 2020. So I was just wondering, is there a rule of thumb we could use for each basis point in swap curve reduction to measure that? And aligned with that, mortgage spreads going down as well, will that impact now your OCC? And second, obviously, with the change of CFO, is there now a change potentially of policy towards internal model? Thank you. Thanks, Farooq. In terms of your first question related to the year to date OCCsolvency position, yes, obviously, we've seen lowering of the UFR further to 3.75%. We've seen interest rates decrease. We've seen some movements on mortgages spreads. So all in all, that may have an impact on it. There's no real rule of thumb to use there. And I understand that you would like to know that as of year to date, but we're not going to give any numbers there. In terms of change in CFO, whether that would impact the internal model stance, The answer is no. I think an internal model is quite costly. If we were only to do that to get the capital out, that may not be the right movement. Having said that, if the standard model is very punitive to us or if we really see M and A opportunities where we would have to need that, we will definitely look at that. So I can assure you it is something that is constantly on my mind and that we're constantly evaluating and looking through it to see whether and at which point it may be a good move to do. We'll now take our next question from Fulin Liang from Morgan Stanley. Please go ahead. Your line is open. Hello. Thank you for taking my questions. I have two questions. So first of all is, if I so you have 500,000,000 OCC and then your ordinary your cost of ordinary dividend plus buyback or special dividend would be like roughly €340,000,000 €350,000,000 that will leave you like €100,000,000 budgets for M and A, which I understand that you still have a pipeline for M and A. Just wonder that if you don't use all the capital for M and A, what's your time frame or kind of way of returning the unused M and A budget? Will you like say, okay, every 3 years, 5 years, I will review what's not used? Or will the review frequency by per annum every year? So that's my first question. And the second one is, if you talk about that using the use the capital to rerisk. But if I look at your investment portfolios, your mortgage is substantially lower in 2019, is substantially lower than the percentage in the percentage in 2018. So apparently you are shifting your investment out of mortgage. Is that is my understanding correct? And then also if I compare the allocation of within the like the fixed income or by credit rating bucket, I did not see any kind of sign of taking higher risk. Could you just give a bit of clarification on what do you mean by rerisking? Thank you. Okay. Annemiek will go into the second one. In terms of what to do with unused M and A budget. First of all, we assume that the part of the OCC that not will be used for dividends or buybacks that could be used for rerisking and or M and A. Even when we in a certain period haven't done any M and A, we take it from there and will on an annual basis decide whether there is a nearby pipeline, which we believe that we can invest in or that there is no pipeline and then we'll decide at that moment in time what to do with the potential additional OCC that we have generated. And in terms of your question on investment portfolio, in the appendix on Slide 30, we indeed have an overview of that. We did add over a $1,000,000,000 of mortgages on nominal value last year. You only $400,000,000 of that in the actual category mortgages, other loans, around $700,000,000 $800,000,000 is allocated to the fixed income portfolio because it's done through mortgages funds, partly our own, partly some other funds. So we did add over a 1,000,000,000 of mortgages. In terms of relative size of mortgages, the other components have increased the market value. So the relative size is not a true reflection of the additional investments that we've made there. Now if you look at further room to optimize the investment portfolio, I think overall we're pretty comfortable with equities and real estate as it currently is. We do see some more room to re risk into mortgages and a little bit within the fixed income space where we could move a bit more from govies to credits. We'll now take our next question from Johnny Vo from Goldman Sachs. Please go ahead. Your line is open. Yes. Thank you. Just three questions. I mean, if I look at Slide 11 and then I look at Slide 28 and I look at the change in definition, it just looks slightly disingenuous that you're taking in your new definition of OCG all the benefit through own funds, but no negative benefit through SCR. So I can look at the pretty much a $200,000,000 transfer into own funds and none of the or minimal amounts of the SCR moving in. Given the fact that your solvency has remained flat broadly for a long period of time without the buyback, then this suggests to me that the OCG that you currently report is broadly about correct. Can you comment on the 2 Slides 1128? In terms of the remittances that you've got as well of about 500,000,000 at the half year stage, you said that the solvency position of the Non Life business should have been CAD 174,000,000 it's CAD 162,000,000 So there clearly was some one offs in that in terms of remittance that you received this year. In addition, we had a very strong bull market in equities. Most of your equities reside in your life business. So of the remittances, how much of the remittances is really one off and how much is sustainable? And finally, the third question on the EOPRA review. If I look at what they're suggesting, if they put through a negative interest rate shock, what is the impact on your solvency? Thank you. To start off, Johnny, with your first question on comparing Slide 11 with Slide 28 and then the new OCC definition, a couple of points to make there. Obviously, the excess returns and the change that we've made there, that's something that will flow through the through the own funds there. We have seen some changes to the SCR in that new definition also related to release of capital where we've included new business strain, which actually added quite a bit there. You see there that we went from minus 45 on the release of capital to minus 13. Now within that, there are 2 big chunks. Obviously, we have the release of market risk, but the impact of the new business strain was actually more than double that. So we did take some new business strain SCR into account there as well. On your questions of remittances and the actual non life position, And I'm going to move to the slide where we have that which is I think Slide 15. Yes, we did guide at the half year results that the then prevailing non life solvency ratio would have been 174 if you would have taken a loyalist in a good way into account. But what was in there is that we didn't do any remittances out of non life in H1. We did the remittances out of non life in H2, which is basically what you see there in terms of impact going from 174 to 162 that explains that jump. So it's not a one off, it's more a different in timing of the remittance. But shall we see the solvency decline year on year then every time you take a remittance out? Not really because you also have the generation within there. It's more the timing of when you take it out. And in the H1 figures, we did already take some remittances out of the life, but not yet out of the non life. So that's why you see a bigger chunk movement into the non life part from a half year to a half year basis there. In terms of EIOPA, I think it's still pretty early to say what the actual impact there will be. Yes, of course, we will see an impact if everything they have now checked in the market would come true, but it's probably good to bear in mind that all supervisors including DNB have said that it should be a balanced approach and they're not aimed at increasing capital. We've seen some opening towards discussion on the risk margin. We've also found DNB quite constructive and open minded to explore measures to counter any negative impact arising from the changes. So it's still wait and see. It's an early stage. It has to go to European Parliament, probably be a 2023 event. So we still have some time to absorb whatever comes out of there. And with that in mind, it's we still have the potential to move to an internal model. And maybe to add on that, Johnny. Part of your question on the remittance was the sustainability of it. And the answer to that is quite clear. All remittance we've made last year are sustainable also going forward. So no worries about that. Thanks. We'll now take our next question from Stephen Haywood from HSBC. Please go ahead. Your line is open. Thank you. Actually, just another three questions from me. On your going back to John's question about the non life ratio, have you thought about what sort of normalized remittances you'll be doing from this business every year. I know the ratio went up from 154% to 162% throughout the year, but you only took out one dividend in the second half. Is it going to be similar going forward? Or is it going to be every half year on that? Thank you. Second question is this €75,000,000 per annum share buyback, is that a limit? Is it a minimum limit or is it a maximum limit? Or is it just that €75,000,000 set in stone? And then on your total return assumptions and real estate, you state 5% for equities and you state 4.1% for real estate. And these are total return assumptions. So these include dividends. And do they include capital gains for the real estate side of things as well? It seems again, it seems a bit conservative considering the AEX index already has a yield of about 3% on average for equities anyway. Thank you. So Annemiek will go into the remittance on Non Life and your last question, Stephen. On the €75,000,000 let me put it this way, it's a promise as long as we are above the €180,000,000 for the medium term. And if and when the OCC is as earlier said in this call is not fully used, we take it from there. If there are other ways to spend it, as you know, we've always said we don't want to be capital hoarders. So if we can't use capital, we will always look at the most efficient way what to do with it. But €75,000,000 we wanted to be clear about the number. And I think that's what analysts and the market is used to. ASR is always clear about what they will do and want to do. That's why we said, well, let's just put the number out at 75. In terms of remittances, what we've historically always done given the cash holding policy and that only needs to cover holding and hybrid expenses and obviously dividend is that we remitted 70% of the operating profit of the underlying companies. We don't see any reason to change that policy right now. So as far as that's concerned, we try and stick to that and see what the future will bring. In terms of the new LVM assumptions that we use for the OCC, yes, they are total return assumptions. So it does include dividend, etcetera. It doesn't include gains in the real estate portfolio. And it is more in line with markets. If you it's hard to see what all the other peers have that. It might be slightly, slightly conservative on the equity side, probably not so much on the real estate side. Okay. Thanks very much. We'll now take our next question from Ashik Musaddi from JPMorgan. Please go ahead. Your line is open. Just a few questions. First of all, this change in the new OCC, the drag from new business train, can you give a bit more clarity as to what has happened so that you have a more drag from new business train? Why it was not taken in past? Why is it taken now? So what is the change there? Because I mean, if I look at your new release, capital release, it feels like it's only minus $13,000,000 in a year, which is like rounding error on your SCR. So does this mean that the LifeBook is not going backwards even by a penny? Or because in past when it was $45,000,000 it was around 1.5% of SCR. I mean you're growing P and C somewhat. So it was fair to say that in past your life back book was running off at around 2%, which sounded more reasonable. But if it is a zero number, then it just sounds a bit weird that your life book has no runoff at all. So are you growing in Life book or are you able to maintain it flat with the new business? So that would be the second first question, I mean, why this change now? The second thing is in that cash flow chart, the holding cash one, there is something called $236,000,000 other. Sorry, I might have missed it. Can you just give some clarity as to what this is in total? I mean, what this other is? And just on that remittance, like if you just I think you did mention on the previous question, you have a 70% policy on remittance. So if you just remind me again on that, would be great. And just the last question is, I mean, how should we think about dividend growth? You clearly mentioned that 5% to 10% would be ideal for investors as well. So if I think about this 5% to 10%, is it fair to say 1.5% comes from the buyback? Now you're saying that your current OCC is about $450,000,000 Your target is north of $500,000,000 So that's a 10% growth in 2 years, so that's a 5% growth in OCC. So is that like 6.5% reasonable to bake in or do you think that it could be more or less? Thank you. A lot of questions. I'm trying to 3 actually. And still remember the first one. The first one was on the OCC drag to a new of the new businesses, Sriano. As you can see on Page 28, I think that's the page that you're referring to actually. And there you see the minus 13,000,000 in the range of capital, which used to be minus 45,000,000. There is definitely a release of the life book in that SCR. So obviously, you can see the release of the life book back in the risk margin, which remains unchanged. But you also see it in the SCR where we have if you would break that down, the largest chunk and that would be slightly over €200,000,000 release in SCR still comes from the release of insurance risk related to the life book. Now in the old definition, there was a new business strain, which was below 200, but in the new definition, the new business strain and the SCR that's added to that is over 200. A market release related to the Life business that flows out, that's less than 50. So it's really there the uptick in the new business strain that has the impact and that causes it to go down. The reason why we did not have that in the old definition is that we were working there from the assumption that actually the New Life growth was roughly the same as the redemptions that we saw in New Life in Non Life, sorry. But Non Life has actually grown quite a bit last year, and we continue to focus on that as a growth area. So it feels actually more transparent to as of now lease that old assumption and actually include the full new business strain of Non Life in that regards. In terms of the cash for other, several moving parts are in that EUR 236,000,000 that we see on I Slide 15. On the cash position, it covers all hybrid expansions. It covers the redemption of the revolving credit. It covers a bit of the smaller acquisitions that we have there and it also covers pension expenses. So it's really a mixed bag of lots of stuff that's in there. I mean, just a request on that. Sorry, just a request on that. It would be great like going forward if we can get the remittance and recurring costs like hybrid expenses, holding company costs, so that we can figure out as to what's like a one off like repayment of debt or M and A and what's a normal course of expenses that would be helpful in future? Thank you. Sorry. We'll think about it. On your last question, I think the 1.5 percent that you assume due to the lower number of shares as a result from the buyback, I think that number is correct. And to be honest, Ashik, the second part of your last question, I didn't get anymore. So what was the second part of your last question? No, I mean, the thing I mean, if I look at your OCC of €500,000,000 at the moment, I mean, there is not fully UFR is reflected in that as well as you have some better weather. So if I adjust for that, let's say your OCC, clean OCC, the base OCC should be 450 for 2019 and you're targeting north of 500 for 2021. So that's in 2 years, you expect to grow OCC by about 10%, 11%. So that's a 5% growth. So is that what we should add to the lower share count to get to a normalized growth in dividend? Well, we've said the ambition is to deliver 500 OCC. I'm glad you recognized, by the way, that it is a fairly damaging target. Yes, it is. And I don't know whether I agree that you could calculate those to grow because you mix up IFRS accounting and Solvency II accounting. So let us think a moment about the real answer to your question. And if there is a good answer, we will come back to that tonight. Is that okay? Yes, absolutely fine. Yes. See you this afternoon, otherwise. Thank you. Thank you. We'll now take our final question from Andrew Baker from Citi. Please go ahead. Your line is open. Hi. Thank you for taking my questions. Just two for me. So just interested on why now is the right timing to commit to a reoccurring buyback. So understand the buyback, but on the reoccurring side, you're committing €75,000,000 a year. At the same time you're flagging headwinds to OCC and we have the OPA sort of noise in the background. So just a little bit on what went into that thinking and why now on that? And then just on the partial internal model, is it still 2 to 3 years before sort of after you made the decision to move to a partial internal model until it's fully implemented? Thank you. Annemiek will take the last one and I'll give the last answer immediately after they close the call. So Anne Marie? Yes. If we were to move to an internal model before we have it all implemented and have done the use tests on it, it will definitely take about 3 years, yes. And on your first question, why now? At Capital Markets Day, we guided the market when if and when we would think about additional capital distribution. And then we came up with this famous formula, it starts with a 2, etcetera. At that time, we took into account that there was an ongoing opportunity called VIVAT. And when that didn't occur, we promised to the market that we would reconsider our earlier guidance. And the why now is because we made a promise on the reconsideration. And we feel comfortable with our current level of capital. And also having heard all the noise on the EIOPA review going forward and reaction from as well EIOPA and our own regulator at this moment in time giving the opportunity that we still have to move towards an internal model if we would end up all wrong. We feel comfortable with the outcome of that going forward. And that's why we've said, well, we've made a promise and we want to live up to the promise. And that's why we've guided the market now with this new guidance on the €75,000,000 buyback, which we intend to do for a longer period if and when the solvency is above 180 and we will make a final decision on that on every New Year. So having said that and having answered the last question, many of you we will see tonight. Thanks for attending. Hopefully, you are going to like the new team as you liked the old team. I'm happy with Annemiek being part of the team, also happy with Ingrid being part of the team. We face a challenging future, but we feel very comfortable that we, as we have done in the past, keep on delivering on the promises we have made. At least that's what we work for every day very hard. And we will hopefully enjoy a nice dinner with the analyst community tonight. So thanks for attending and see you all later. Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.