ASR Nederland N.V. (AMS:ASRNL)

Earnings Call: H2 2018

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Feb 20, 2019

Good day, and welcome to the ASR Conference Call 2018 Results. Today's call is being recorded. There will be time for Q and A at the end of the call. At this time, I would like to turn the conference over to Mr. Michel Poulters. Please go ahead, sir. Thank you, operator. Good morning, everybody. Welcome to the ASR conference call on the full year 2018 results. On the call, we have Jos Bade, CEO and Christian Re, our CFO. They will present and give you an update on the financial results, strategy and solvency and capital position. After that, there's ample time for Q and A. But before we start, I would like to mention that we have a disclaimer at the back of the presentation. And I would like you to review it at the end when I have some time today for that. So without further ado, Jos, can I give you the floor? Thank you, Michele, and good morning, everyone. Happy to have you all here. Thank you for joining on this call. And as you may have seen from the numbers ladies and gentlemen, which we have published this morning, 2018 was financially a strong year with overall surpassed the record operating performance of 2017. 2018 concludes a string of 3 consecutive years since our IPO in 2016, during which we showed consistent delivery against ambitious medium term targets. All targets have been met or exceeded. And as announced at our Capital Markets Day, we have raised the bar further for the next planned period. Also from a strategic point of view, we are very pleased with the progress that we delivered in 2018. We acquired Generali Netherlands and the integration is running smoothly and ahead of plan. Generali is, as you may have seen in the numbers, also delivering higher results than originally planned for this year. We're also quite excited about the acquisition of L'Orealis, which we believe is truly is a truly promising transaction that enhances our unique position in the field of sustainable employability. Further strengthening our position is the exclusive cooperation with Discovery and agreement to introduce the vitality program to the Netherlands. So in sum, clear financial success and disciplined execution of our strategy. Now without further ado, let's look into the financial highlights of 2018, which you can find on Page 2 of the presentation. As this dashboard shows, our performance in 2018 has been really solid. Operating result amounted to €742,000,000 exceeding the already record level of 2017 by €14,000,000 Despite the €30,000,000 impact on the severe January storm in 2018, while 2017 had an exceptionally favorable claims experience. Underlying, our non live performance continues to have very strong and to be very strong and each of the other segments reported higher results reflecting higher investment margin, particularly driven by the acquired business of Generali and good momentum in the fee based business segments. Our business yielded an operating return of 14.2 percent, well over our targets of up to 12. Combined ratio of ASR stood at 96.5 ahead of our target of 97. This number includes the impact of the January storm of roughly 1% point and the Generali Netherlands portfolio with a combined ratio of Operating expenses declined 3% or $17,000,000 when adjusting for the cost base of the acquired generadi business. Our Solvency II ratio remained robust at 1.97 after the proposed full year dividend. And as you know, we are still using the standard formula. Organic capital generation amounted to EUR 372,000,000 being 10 solvency funds 10 solvency points. Our solvency ratio also takes into account the 9 percentage points impact from the acquisition of Generali and roughly 6 percentage points impact from the forthcoming lower tax rates, which we decided to take upfront. There are a number of other items that impacted solvency in the past year and Chris will provide further details on this later on. Our strong solvency position and financial flexibility enables us to remain entrepreneurial. As we have said at our Capital Markets Day, we see good opportunities to be entrepreneurial and to pursue profitable growth for both organically and through acquisitions, which we have proven to do so with the acquisition of Generali and the announced acquisition of L'Orealis. Based on the strong performance and our confidence in the outlook for 2019, we propose to raise our dividends almost 7% to €1.74 per share. Taking into account the interim dividend, which we paid in September, there remains a final dividend of €1.09 per share. In line with our dividend policy, we strive to offer our shareholders a stable stable to moderately rising dividends per share for the long term. So let's now move to Slide 3, which reports on the progress made in executing our strategy. I will not discuss all the developments we listed here and which we have reported in our press release, but let me just mention some key developments and achievements in executing our strategy. Starting with our solid back books in Box B, we finished last year the migration of 3 individual life books towards the software as a service platform, making costs more variable and in line with the decline of that book. The Generali Individual Life books are next in line for migration and this will be fully realized in 2019 And the pension book of Generali will be completed early 2020, which will be roughly 9 to 10 months ahead of our schedule. We also completed the integration of the funeral portfolio of generale and the Pesce Hoft funeral book in October. Key message on this box is we got a team that has actual experience in buying and integrating books of business successfully and we are open for business. New books will just be added to the queue for smooth integration. In the top left, the non live business that provides opportunity of growing cash flows. Very pleased to report that we have continued to deliver solid organic growth in gross written premium of 4.7% overall in 2018. And this is business that generates profitable growth through attractive combined ratios. Key message in this box is our products and services clearly appeal to customers allowing us again to outstrip overall market growth. Also not mentioned in this slide that we recently completed a major migration in our P and Over 1,000,000 policies have been migrated from the mainframe to a new software as a service platform, another step in simplifying our organization as this business is now running on one single system. In the asset management related growth business, we have made considerable progress as well. Within D. C. Pensions, we continue to see good momentum for the Werneckenemus pension. We have reached over 55,000 active participants and assets under management for this product rose to roughly 675,000,000 up from 4.80,000,000 last year. In new business, we are a clearly top 3 player. And another example of interesting developments in asset management, our mortgage fund continues to appeal strongly to institutional investors. Mortgage fund run mortgage fund recorded an inflow of €1,300,000,000 driven by 3 party by 3rd party mandates and committed external assets under management exceeds in the meantime 2,300,000,000. Key message in this box is, we are gaining traction in the shift to generating income from capital light products. Now, most recently, we announced the acquisition of L'Orealis and I can add, as said in my introduction, the exclusive cooperation with South African Discovery. These 2 play very well to our strategy in disability in the disability ecosystem. Let me now show our unique proposition in this domain on the next slide being Slide 4. This graph depicts our unique coverage in the field of sustainable employability. It encompasses capabilities in 4 areas of expertise. First of all, distribution. We are able to target the right customer with the right product. We have added prevention and added services, which is aimed at enhancing employees' productivity and reducing absenteeism. Thirdly, claims management aimed to be shortened the duration of absenteeism and to provide income during absenteeism. And lastly, price and risk selection to optimize our underwriting result. As you can see, both L'Orealis and Vitality proposition of discovery fit and complement our coverage in this area. This is another example of how we execute our strategy both to pursue profitable growth and to remain socially relevant. So let's now move to Slide 5 on our group operating results. This slide shows the momentum in our operating results since the beginning of 2017. Despite the severe January storm, we managed surpass last year's results, which benefited from exceptionally low level of claims. Comparison of the first half of twenty eighteen to the same period of the prior year shows the impact of the storm on non life. Also clearly visible to the performance in the second half of twenty eighteen compared to the second half of twenty 17 and this shows healthy recovery with an increase of 5.6%. Higher results from Life, plus €31,000,000 bank and asset management plus €11,000,000 and distribution and services plus €8,000,000 more than offset the decline in non life and holding. IFRS net profit is above net operating profit for both for the full year and the two half years. So overall, also below the operating result line, there has been a positive contribution from non operating and incidental items to the net IFRS results. Let's have a closer look at the business segments and let's start with Non Life on Slide 6. We are generally pleased with our performance in Non Life. While operating results shows, as said, the impact of the storm in January and a higher level of large claims, the underlying business performed strongly and better than previous year. The bulk of the claims, so to speak, showed ongoing favorable developments. Claims frequency in bulk improved from 43.1% to 42.7%. Percent. The combined ratio of 96.5 beats the target of 97%. The Generali portfolio ran at a combined ratio of approximately 100 and did not yet contribute to the operating results. When adjusting for the exceptional impact of January storm and taking into account the higher combined ratio from the acquired Generali portfolio, a normalized combined ratio would be in the 95% range, so fairly stable to the prior year. Our gross written premiums increased by almost 17%, driven by a solid 4.7% organic growth by all business lines and the inclusion of Generali Netherlands. And as mentioned earlier, we continue to update on the organic growth opportunities in the Non Life segment. In the breakdown of the combined ratio, the uptick in the commission ratio is a mix of business effect as Generali Netherlands portfolio. This portfolio comprises mostly P and C products, which in general come at a higher commission ratio. Our cost ratio improved from last year's 7.6% to 7.3% in 2018. If we were to look at the combined ratio for each of the different business lines, you can see continued strong performance in the disability portfolio. Last year, however, we experienced unfavorable claims development in the absenteeism portfolio, but we took measures over there resulting in margin expansions within this portfolio. Nonetheless, we will continue to monitor claims experience in this business closely in order to keep pricing appropriately in sync with the underwriting risks. So let's now turn to Slide 7 on Life. In Life, we saw a solid increase of operating result of 4.7 percent to €663,000,000 This increase was mainly driven by an increase of investment margin of $37,000,000 mostly driven by the addition of the acquired Generali business. The increase of investment margin was driven by a number of factors. Firstly, our direct investment income benefited from rerisking of the investment portfolio including the generale portfolio. This more than offsets the impact of the decline of the individual life portfolio on direct investment income. It also offsets the decline in amortized realized gains, I. E. From our Shallow Accounting. Furthermore, as the individual life book runs off, there is also a decline of required interest, which is positive for the investment the Generali Netherlands had a total contribution to the operating results of approximately €14,000,000 mainly within the investment margin. While there were some nonrecurring positives in the technical results, we believe that going forward €30,000,000 is a sustainable recurring number for the Gemalay portfolio. Gross written premium is up almost 8% and reflects both organic growth and the addition of generale asset. I already mentioned our continued success in the DC pension products. Currently 73% of new business APE is for new DC solutions, which is a very positive development from our perspective. Let's now turn to the other segments where we are clearly gaining fractions and that's on Slide 8. Operating results for the 2 fee generating segments, Asset Management and Distribution Services, combined amounts to €41,000,000 and is now already adding a full percentage point of organic capital creation on an annual basis. Asset Management showed a very strong increase to $16,000,000 dollars This was driven by strong inflows in the mortgage funds and in the ESG funds, which resulted in additional fee income from third parties for the asset manager and higher fee income from the real estate funds. As bank has been classified as non core, it's no longer included in these results. Operating results of the Distribution and Services segment increased to $25,000,000 This was driven by a strong contribution from Dutch ID, which we acquired 2 point 5 years ago and the contribution from the Generali Netherlands distribution companies, namely Anakt and Stautenberg. However, we anticipate some pressure on fees in 2019 as a result of lower commissions for mandated agents. The operating results of the holding amounted to a minus of 108,000,000 dollars The decrease is mainly due to a one time alignment for of personal benefit schemes. In addition, interest paid also increased due to the full year inclusion of the interest on the RT-one, which we issued in October 2017. So let's now move to Slide 8 and measure our performance against our targets set at the IPO. Our performance has been strong on all key metrics in 2018. We've been able to keep our business momentum at a high level and our performance is better than our medium term targets. The strong ongoing operating performance of the various segments, the disciplined execution of our strategy and our robust capital position make us confident that we can continue to attain operating results of recent years throughout 2019. And having said this, I would like to hand over to Chris for further details on our capital and solvency. Thank you, Joss. Ladies and gentlemen, let me walk you through our solvency and capital position. In order to speed up and quickly go through the Q and A, I'll take what I call a magpie approach to presenting, taking just the nuggets, the shiny elements and not going through each and every slide in the fullest detail. Picking out the key elements, let's move to Slide number 11. You can see the development of our Solvency II ratio moved up to 197%. Couple of points I'd like to make irrespective of what's said on the right hand side of the chart. The solvency number includes the tax effects that we already implemented or reflected the lowering of the corporate tax rate in the LACBT that shaved off about 6 percentage points of our solvency. So if we had not done that, our solvency would have been around 203, 204. The solvency also includes the benefit from the VA. Admittedly, the VA includes what I would call an Italy premium from a VA perspective. We are short Italy, so when Italian spreads widen, our solvency is supported. We estimate the Italy effect to about 4 points of 4 VA points or 4 points of solvency. So if you take that perspective, the 197,000,000 you add that the tax takeout Italy effect, the underlying we end up around 200% after dividends. Interestingly, in the absence of future M and A, that 200% and the ongoing capital generation brings us in spitting distance of what we would call the capital distribution moment as we communicated during our Capital Markets event. Of course, we're always trying to deploy capital in the business organically or inorganically if and when it meets our existing and unquestionable return targets. But again, the solvency level moves closer and closer to the distribution threshold that we communicated. 2nd point to make, we still have a net DTL position. I'm actually very proud of that. It's a great asset to have. We have sufficient amount of tiering headroom. As you can see on the page, the Tier 3 headroom itself was already EUR 500,000,000 and if you actually include L'Orealis, which is not on the page with pro form a, we'd estimate that adding L'Orealis would add another 100,000,000 to the Tier 2 headroom and another $50 odd 1,000,000 to the Tier 3 headroom, which actually means that if you think about funding the Loyales transaction with the hybrids, we always said we consider either Tier 1 or Tier 2 taking potential transactions and capital synergies in mind. We estimate today with the amount of Tier 3 capacity we have, we could issue a Tier 2 hybrid instrument, still be left with well over €300,000,000 of surplus Tier 3 capacity after this instrument, which would give us more than ample room to absorb any ineligible capital of a potential acquisitions. So, what we're trying to say is, including L'Orealis, we have sufficient headroom to issue a Q2 and have remaining room for capital synergies going forward. Final point on this chart I'd like to make is that we managed to still grow our own funds. The eligible own funds grew about CHF 100,000,000 even after dividends. And after the rocky second half of the year, the own funds and unrestricted Tier 1 both grew in absolute amounts. And yet in the long run, looking at book values or looking at market values still is a good measure for performance. Moving then to Page number 12, the Solvency II ratio movements throughout the year. The chart is by now well known the way we decompose or bucket the delta in solvency in the various components. You can see the organic capital generation of CHF 372,000,000 for the year, then taking out dividends leaves you with 197% solvency post year. Again, three things I'd like to point out on this chart, EUR 372,000,000 OCC for the year. If you compare H1 to H2, actually we added CHF14,000,000 of CapGen in H2 of H1. So OCC went up by CHF14,000,000 in the year CHF9 1,000,000 versus last year. If you look at the business capital generation, the stuff that the business generates excluding book release, excluding UFR unwind was 283 for the year. Actually that was up significantly. It was 130 in H1, €153,000,000 in H2, so the business cap gen actually went up by €23,000,000 during the year. So in that perspective, we've seen an increase in capital generation in the year driven by an increase in business capital generation in 2018. So business CapGen up CHF 23,000,000 versus H1 and up CHF 40,000,000 versus the same period last year. 2nd point I'd like to make is the market and operational development. You can see minus SEK 59,000,000 in EOF. Actually, the number in H1 was minus SEK 53,000,000, which meant that the other element of OMS funds accretion was flat in the second half of the year. And I'm actually very proud of that given the fact that we've financial markets go down, significant movements there. We've been able to keep the own funds generation above and beyond what's in the OCC, keep that flat in a couple of months where we see so rocky development on the financial markets. 3rd point to preempt the question that undoubtedly will come, what is the impact of your long term investment margins? As you know, we reported OCC based on long term investment margins. We confirmed that stance again during our Capital Markets Day in October. If we had actualized and took the actual end of year long term investment, actual spreads, plotted them into the OCC, our OCC would have been €30,000,000 higher. If you look at the individual components, you can see government moving a bit away from our long term investment margins, but non core sovereigns, credits and mortgages actually moving towards or even above our long term investor price. And so at this point, our mortgage assumption and credit assumption is actually conservative versus the actual set we observed today. So where we can move from long term investment results to actual investment spreads, our OCC would have been CHF 13,000,000 higher. And then if we had removed our equities and real estate to an absolute return number to do a spread, indicative of the, if we plugged in 7%, we would add kind of than €30,000,000 of additional OCC. And that's something we will not do ourselves. But for comparison purposes, it's always good to have that in hand. No doubt you can ask questions on the further details on the OCC and business Capgem. We'll leave that to the Q and A. Page 13 talks about the sensitivity of your Solvency II ratio. As you will understand, the UFR is likely to decline. The formal decision is about to be announced, but we expect it to decline by 15 basis points from 405 to 309. That would take out another 3 to 4 points of our solvency, similar as happened in this year. It will add about SEK 8,000,000 to our annual flow from stock to flow SEK 8,000,000 to our OCC. At a UFR at SEK 2,400,000,000 which we consider to be the most economic form of UFR. So a UFR that is consistent with or in line with the actual cash returns we make on our investments. So U of R in line with the coupons, dividends, rental income and what have you at €2,400,000,000 gives us solvency €156,000,000 and 156,000,000 we actually did adjust any tiering impact of that level as well. So it's a fairly robust and kit solvency ratio at 156, slightly above our risk appetite of 120%. So again, there gives you comfort on the robustness of our solvency. Final point, if we were to strip out the UFR, altogether, our solvency ex UFR is over SEK130. Actually, it went up a few points during the year. Page 14, strong balance sheet with ample financial flexibility. We show a number of pages the interest and debt capacity that we have. In our thinking, our balance sheet drives the amount of debt capacity. Our solvency drives actually the amount the instant we would choose. Our balance sheet has sufficient amount of debt capacity. The leverage is about 26% points in the year. Interest cover is still safely above 10%. On S and P leverage ratio, the last time S and P lived was 2017. And the 19% ratio, we think that number is broadly unchanged. We have surplus capital compared to the AA and if anyhow you look at the AAA component of the S and P model. So sufficient room absorb additional debt if we wanted to. Just for your perusal, at 26.7 percent leverage, if we wanted to move that leverage to 30%, we could add a net of SEK 300,000,000 of debt. If we wanted to move to 35%, we could add net CHF 800,000,000 of debt to our balance sheet. Given the fact that we've got 2 instruments up for coal for CHF 200,000,000 and of course the coal decision we can and will only make at the time of coal, but these are 10% coupon instruments. So we need to see humongous spread movements for us to make another decision, assume that net CHF300 1,000,000 or gross CHF500 1,000,000 debt increase will bring us towards a CHF500 1,000,000 room. And as I said, we've got Tier 2 and Tier 3 eligibility and the pro form a analysis including Loyana shows us that if we were to raise a Tier 2 instrument, we still have surplus Tier 3 capital available. Final point, financial leverage at 26.7%. If we were to include our realized capital gains, which is got industry practice, but we don't do that given our share accounting methodology. If we were to include capital gains reserve in our leverage calculations, that ratio would drop to just over 20%. So on a like for like basis or more like for like basis, our leverage ratio is more like 20%, including the capital gains reserve. Page 15, our holding cash. We take a very mechanical approach to holding cash. Maybe by German ancestry, but it's not we take the model holding cost per annum plus dividends is your holding cash aiming at €394,000,000 and ending up at €394,000,000 We upstreamed about €216,000,000 in the second half year versus CHF 179,000,000 in the first half, so more upstream than H2 and H1. Not just on Life, but also, for example, in the supplementary health business, we have seen a benefit of capital. We show that every business unit in early business contributes to holding cash. And so we have streamed our capital to the holding and achieved our holding cash target. You can also see our Solvency II ratios of our legal entities. Life is very strong at 202, non life is 154. We're a bit less pleased with that, to be quite frank. Five reasons why our solvency in non life is, I would say, temporarily lower than we would normally strive for. Of course, the tax effect, so we fast forward the implementation of tax, which affected the lagged tea in the life business. Market effects where the VA, the corresponding VA effect has less impact on non Life than in Life. It is the growth of our book. We grew our Non Life business substantially. Organic growth was about SEK 100,000,000 of premiums in P and C and disability. It is the impact of Generali. Net net Generali acquisition was a positive. I mean, we spent less capital on Generali than we originally anticipated. But all the pluses were in life and the drawbacks, the additional reserves, the rotations were in Non Life for a net net less capital investments, but the pluses in Life and the additional reservations in non life. And finally, we made a small additional reservation on the absentees in business because we see sickness leaves actually growing across the board in our country. The trend is up and we applied our trend. That together caused the nonlife solids to move to 154. If I look at the business today, I would expect it, I'm pretty confident, moves to something north of 165 before the summer already. So that will restore itself organically. Page 16, asset and financial leverage. Of course, we're living in an unstable environment with lots of risks, lots of volatility and volatile financial markets as we did in the Capital Markets Day present our leverage from a liability and an asset perspective. Our leverage is actually stable on a solvency basis down a bit on average basis up a bit, but effectively very stable lower leverage. And on the asset side, reduced our market risks during the year from 46% to 43%. And the risky asset ratio, the asset leverage ratio is effectively stable. It's a more an old fashioned approach. Would say we're riding coach and horse through market risk models. But in times of fluctuation, I think we should move from market risks, move to nominal exposures. We've given you lots of details in the appendix. H2L, you can see more details on our investment portfolio than before and also the calculation of the asset leverage, which I think is increasingly an important metric for us to look at. It looks at the nominal asset risks compared to the solvency cap that we have. It's effectively stable. For those of you with a sharp eye, you can see it's slightly twisted, slightly amended versus the Capital Markets Day. We made a little bit more deeper analysis on our nominal exposure on risky assets. To remind you, it's the equity position. It's a real estate excluding land, because we think land is really not a risky asset. It's collateralized lending to farms. We took out as opposed to the capital markets, the real estate own use, because we are own office, we're own tenants, so that's a less risky position. We actually added mortgages with a loan to value of over 110 as the deck and we specify we went a bit deeper into the whole non rated fixed income segment, almost on a line by line item to estimate which of those elements have a lower rating or not. This includes equities, real estate ex linked land and non investment grade debt. That is about 100% of our unrestricted Tier one ratio that we feel comfortable with. So we think it's very important to look at nominal exposures in these volatile times as well. But the summary of my perspective is stable and low on financial leverage, stable and very well controlled on the asset leverage, which has allowed us to sail relatively well through the volatile financial markets. So before I give back to Jos some final perspectives from the CFO, good H2, capital generation up from an organic perspective and a business perspective, operational profit up in H2, underlying metrics have been good, combined ratios in H2 have been better than H1, Production in DC better than H2 than H1. So, solid underlying performance by the business. Secondly, I think we sailed relatively well through the volatile financial markets in H4. You can see that we managed to still grow our own funds and our unrestricted Tier 1 during the year. The solvency impact after those market fluctuations were very well manageable. We reduced our market risk and kept our nominal asset exposures very much in check and given you more disclosure on the asset exposures in our appendix. And as Joce said, I can only confirm comfort on the earnings outlook for 2019 if I look at the way we ended last year and the momentum that we have in the beginning of this year. With this, I give back to Fijs. Thanks, Chris. And if this is the less detailed version of the story, I would love to hear the detailed one later on. So as you may have noticed, we are quite pleased with our financial results, the operational performance of our business and the strength of our balance sheet. This makes us, as Chris already reconfirmed, very confident that we can continue to attain the operating results of recent years throughout 2019. So where does this lead us in terms of dividend for 2018? We propose a full year dividend of €1.74 per share, which is an increase of almost 7%. This outstrips the growth of the operating results and reflects our confidence in the outlook for 2019. This provides us the comfort to raise the payout ratio to 48%. Within the framework of the existing dividend policy, it's our intention to offer shareholders a stable slightly growing ordinary dividend. Capital that we generate in excess of our ordinary dividend will be deployed for profitable growth and value creating opportunities. As we've pointed out in our earlier meetings and in our on our Capital Markets Day, we believe a very disciplined and rational approach to capital management. Excess capital that we cannot deploy as said before will be returned to shareholders. Now before my final conclusion, a remark on larger scale consolidation that may take place in the Netherlands. As we have done in the past and what we continue to do today and in the future, our approach is a rational one and we will maintain in all cases our strict financial discipline when evaluating emerging opportunities. You all are well informed on our strategic priorities and our views in the importance of maintaining a strong balance sheet post any transaction. And frankly, at this point, there is not much we can add to this. I do not want to add to any speculation or be in the way of any orderly process. As soon as there is information to share, we, of course, will do so. Now to wrap up this call, I would like to conclude that I am very pleased with the strong set of results. We were able to surpass our records of operating results of 2017 despite the impact of the severe storm in January. Our businesses all are very performing very well and that enables us to remain entrepreneurial. We have shown that we put our excess capital to work. And as said, we started 2019 with lots of confidence. And everything being equal, we are convinced to be able to deliver strong results on this year. And with that, I would like to conclude the presentation and to hand over to our operator. Thank We'll now take our first question from Farooq Hanif of Credit Suisse. Please go ahead, sir. Hi, everybody. Thank you for that. I just want to go back, Chris, to what you said about operational capital generation. So all other things being equal, so ignoring UFR impact, ignoring L'Orealis, are you basically indicating that the second half that we can basically multiply by 2 as a basis? That's question 1. Question 2, on the combined ratio, as you integrate and improve generality, can we see the P and C going back towards the sort of 95% to 96% level over time, how quickly will that happen? And very lastly, if I may just say, on your getting close to distribution threshold, what does that practically mean for us? Thank you. It's Birgitte, On your question, could we multiply this OCC in the second half was 193, 1,000,000,000, 1,000,000,000, 1,000,000,000, could we multiply it by 2? I think that's a reasonable approach. I can make a very long story short, but the answer is probably yes. I mean, what will happen in the next year is that if you look now let me spend a few minutes on this now that we are talking about this and just wants to have more details, so I'll take that on. So if you look at what happened during the year and you're going to have half of the year, I mean the UFR unwind in our OCC was less than last year. H1 to H2 stable, but less than last year given the fact of the UFR decline. So that's actually that's going to continue probably into the next year. If you look at the release of capital, some changes happened in H1 to H2. We made a small restatement during the Capital Markets Day. I'm referring to those figures. We saw in this year slightly higher release of SCR, a slightly lower release of risk margin, but also a significantly higher new business strength because we actually wrote more new business organic growth in non life of higher. So if you look at the release of capital buckets, H1 to H2, effectively the SCR release was roughly stable, the EUF release was less. Why is that? SCR release is stable. SCR was kind of up a bit, but new business stream was also up. Net net release of required capital was stable. Risk margin release was a bit less. And on the new business, we also write more new business margin. So the new business trade actually takes out a bit of additional release of book is netted out. Then on the business capital generation, we saw actually during the year gradually moving up technical results in non life, no storm in the second half of the year. So technical and underwriting result up, investment results relatively stable, holding costs up a bit because of 1 offs, I think we just explained in our press release. And finally, fee based business up first of last year, first half a bit higher than H2, but not really meaningful. So, in that number, we can see gradual decline of the UFR unwind, gradual decline of a risk margin release, captured by an increase in SER release, but new business strain may hold back CapGen at this point. Obviously, we think it's a good point, because our non life business clearly is value creating. So new business trained on non life to us is often a prediction of good results to come in the future. And thirdly, on the business side of things, gradually improving technical results towards a level that you expect it to be irrespective of any storms, investment results stable, holding cost off by a one off. So, it's a long story short for saying multiply the second half by 2, probably yes. But I wanted to give you a little bit more clarity and detail on that. And on your second question Farooq, on the combined ratio, the main driver that influenced the combined ratio this year was threefold. First of all, we had a storm that influenced the P and C combined ratio negative with 2.1 percentage points. So if and when we wouldn't have a such a storm or a comparable event in this year, that would be a positive. Secondly, the combined ratio of the Generali portfolio is still not to the level where we want to have it. We're working on that. So that will definitely add some positive trend. And the 3rd driver in the combined ratio for non life is in absenteeism. As Chris said, we have added some reverse because of the trend, the underlying trend we have seen in sickness leaf in this area. If that doesn't need to happen again in the ongoing year, then your assumption that we would return to the level within our targeted combined ratio, the answer to that question is clearly yes. Okay. If you look into your given distribution point, we said in our Capital Markets Day, the threshold at which we will distribute capital through a supplementary additional distribution to shareholders is when the solvency ratio is 200 and something. That's kind of where we got to. And the something depends on where the market is and what the economic situation is. In that point, we will, of course, take out some of the, for example, lesser economic factors like VA support by spread widening Italy. A new government in Italy should not improve our solvency, but it's actually it does. So when I say I adjust for the Italy effect, I adjust for the tax effect, I mean that the underlying solvency, the kind of more economic solvency moves towards 200%, which means in the absence of M and A, in the absence of deploying our capital to a large extent in value enhancing activities, we get to the point that we meet this 200 and something mark of economically justifiable capital and then I think it's fair to engage in a debate with our shareholders whether we should deploy it and in what way. So I think we are getting there. But again, if there would be ways to deploy this capital on a meaningful and value creating way in line with our investment philosophy and our thresholds. That's probably a better use of capital to our shareholders. But again, I'm looking at a situation where maybe in a year from now, no M and A has happened and then we might look at things differently. Thank you very much. Very Thank you. The next question will come from Kare Klaas of ABN AMRO. Please go ahead. Good morning. Cor Kluis, ABN AMRO. I've got a couple of questions. First of all, your investments in real estate, I think it went up by EUR 500,000,000 approximately in 0.5 year, especially category other funds. Could you elaborate a little bit on what the expansion is there? And also related to that, have you done some real estate revaluations in the second half of the year? And if so, what was the size of that, turning to solvency ratio? And second question is about the partial internal model. If you've been doing quite a few acquisitions now, Cinerandi, Realas, who knows more. How are we still looking to PIM? I understand, of course, that you still believe that the standard model is more logical. You've been looking somewhat towards the PIM. The larger you are, it might have more benefits. Could you give some progress on what you think about it going forward and if you have already some insights on that one? And last question is about the solvency ratio. I thought that you said during your comments that the Solvency ratio of the market effects rose by a few percentage points year to date. And in the piece where you were talking about the ex UFR Solvency ratio, could you elaborate a little bit on that what the solvency ratio was of markets effect separately year to date? Thank you. Yes. On real estate, Cor, yes, we are investing in real estate. If you recall the investor call we had in the summer, we think there's value a room to re risk and spend some money on capital on risky assets. The initial thinking there was possibly equities. We quickly adjusted it given where equity markets were and given the realistic opportunities that we saw. We are predominantly invested into Dutch domestic and Dutch direct real estate, where we think those assets are in today's fundamentals, I think more or less decoupled from global market generation. I mean, never fully, of course, but trade wars, Brexit do not take away the shortage of housing in the Netherlands. So we're looking for asset classes that have their own supply demand dynamics and their own fundamentals. And if you allow me to walk you quickly through where we are on real estate on the direct and the other funds, We invest in high streets in our retail fund. Actually, we've got a very strict investment policy there. We invest in high streets of the top 20 cities. And actually in those high streets, we look at the best parts of those streets. And if you challenge our real estate people, they tell you that the investable space in retail is less than 10% of the total retail space in Ireland. So it's high streeted occupancy cities plus effectively Albert Heijn Auel Supermarkets. And that is kind of our universe is about 10% of the universe in the Netherlands. Vacancy rate today is literally 1.4% in those high schools. Then we've got an office strategy. Again very strict, We invest in offices that are in walking distance from train stations. So it's actually literally 7 50 meters away from an intercity station and 500 meters away from a non intercity station. And that's literally the investment guide that we have. The vacancies are less than 5% in those offices and fitting actually rapidly. And again, that investable universe within walking distance from trade stations, obviously less than 10,000 square meters is or at 10% to 12% of the investable office universe in the Netherlands, again a very focused strategy. Then we have residential housing. We invest in middle income housing. I mean, the average monthly rent is €922, the bulk of our business is between €700,000 and €1200,000 So it is actually housing affordable housing where there is real shortage. I mean, it's estimated that the Netherlands has 230,000 too few houses at this point in time, 240,000 houses or apartments. We're building 70,000 a year and we need 100,000 a year. So the shortage is increasing by 30,000 a year, which doesn't mean that house prices can't go down, but we think they're reasonably well protected. Vacancies are less than 2% as well. And then of course our land portfolio, which is 80% agricultural positions and effectively it is leased it leases to farmers with land as collateral. That is the heart of the investment portfolio. And our strategy is very core, very disciplined on a very small focused investment universe and don't do anything outside. That actually drives our investments in real estate. On the side, we do a couple of funds. We've invested in a few housing funds in the Netherlands by some of the larger housing asset managers simply because they came available and we got to buy them relatively cheap and want to add housing experience in the Netherlands. And we've done a little bit in Europe. You can see we've partnered with BlackRock on the European Core Fund, where we can act as an anchor investor in those funds. And as an anchor investor, you tend to have relatively good terms in terms of fee, in terms of co decision rights, in terms of co investment rights. So we have a small portion of what I call other, which is funds by other investment managers. Often is actually supplementary to our Dutch real estate business and it has some European exposure to it. That is actually at the heart of our real estate portfolio. And if you look at the total risky assets, the increase in real estate actually is a mirror image of the decrease in equities. Effectively, we move out of equities into real estate. And we think at this point in time, that is a more protected, more robust investment strategy. And on your second question, Carc, where are we on the discussion on PIM? Let me put it this way. PIM is a good friend, but still at a distance. We have added Generali and L'Orealis, but that actually didn't change the profile of the company. So from that perspective, there is no direct reason to invite Finn to live with us. We, however, have said before that if and when we would do a large transaction, that would be the first moment to reconsider that view. And from that point in time, we would need 2 to 3 years to implement it. So currently, we prefer to implement the acquired businesses to get IFRS 17 done and not spend too much time on implementing a partial internal model. However, if the future of the company would in terms of profile would become different than it is today, then we would reconsider that viewpoint. Okay. Corie, to your point of what happened, what are the market movements that went through our solvency? Market movements back to your solvency in a couple of points. You can see decline in your own funds as the market value of your asset decline. You can also see a compensated decline in required capital because if your own fund if your assets value declines, the required capital also declines and then there is the VA. If you net own funds and required capital excluding the VA, so just what happens in the asset classes and if the VA had moved, we probably have lost around 5 points of solvency, which is kind of minus 2% to 3% for equities, minus 2% in credits, minus 2% in sovereigns. And then on real estate, our valuations were plus 3% in the year. So that gives you a net of minus 3%, minus 4% on market movements. And that is then compensated by an increase in the VA, of which a part is the Italy effect, which we see. We take it as it is, it's great that the solvency go up, but there is a non economic component to it. But think about growth effect minus 5, which is minus 3, minus 4, which includes around the 3 percentage points revaluation of our real estate business. How do we do real estate valuations? All our assets are physically revalued once a year. So basically we have a quarterly process. Every quarter, we do a 25% of all our buildings and objects are visited in person and the remaining three quarters is has a desk revaluation based on the physical revaluation and based on market trends. And next quarter another round. So every asset, every piece of brick and mortar is visited in person by a valuator once a year. So every asset is being revalued 1 in physics in Ermel in person during the year. And the year to date development? On what is that the core on real estate? No, on the market movements. So because you said Oh, 2019, you mean? 2019, you mean, yes. Yes, correct. Very stable. Sorry, the market up, so that's a plus. VA down, I think, net net neutral. I mean, the VA moved down a bit. I think it's good that there's some air out of the VA. Some of the Italy effect actually appears to be disappearing. So I think year to date, markets effect were relatively neutral with the decline in VA countering the positive revaluations on equity markets and the contracting spreads. Wonderful. Thank you. Very clear. Our next question will come from Ashik Musaddi of JPMorgan. Please go ahead. Hi, this is Ashik here. I'm using Jackie's line. I have a few questions, if I may. So first of all, I mean, Chris, you mentioned about business operating capital generation, just the first bucket of the 3. I mean, I look at it like that, there's a significant increase from $118,000,000 in first half to $283,000,000 That's like 50% increase in second half. What's driving that such a big jump because I mean you have reduced your equity exposure as well. So any thoughts on that would be great. Secondly, if I look at your remittance for the full year, it was 395,000,000 which if I look on your full year operating profit before holding company costs, it's around 70%. How shall we think about this remittance? I mean, because you're releasing capital from book as well, non life is all cash business. So shouldn't this number be more like 80%, 90% or even 100%. So when shall we expect this number to move towards operating earnings? And thirdly, I think, Ghos, you mentioned about you want to maintain a strong balance sheet after M and A, but then at the same time, you mentioned that going to PIM may take 2, 3 years. So without PIM, how would you define a strong balance sheet immediately after an M and A? I mean, any sort of metrics you can give like, okay, this is a solvency to ratio, it should be above this, etcetera? Any thoughts on that would be great. Thank you. Okay. On the first time, as a business cap, Jan, you're right, it decreased. There was a small restatement, which we explained in the Capital Markets Day, Shik. It has to do with the reclassification of risk margin. The EUR 180,000,000 moves to EUR 130,000,000 on a restated basis and €130,000,000 is then comparable to €153,000,000 And the €23,000,000 really is the improvement in underwriting results, by and large. Then it's okay, yes. It's effectively no storm, but a bit more larger planes in H2. And then that's what it is. On the remittance, I mean, I think our policies, we don't need to hold cash at the holding. That's with our policy. And I understand that it may deviate from some other market practice. We feel very strongly about it. Holding cash is a function of holding costs. So you want to what we keep at the holding is one times the operational holding cost, a full year holding cost plus the committed dividends. So that means if we were not able to upstream cash at holding, we could then be paying Jos and my salary for a year and other holding people as well. So it's 1 year holding cost plus dividends. The remainder we keep in our business as long as the business yields an attractive return. And if you look at the ROEs, the return on equity of our business and I may dwell a bit, but I think it's important. In Non Life, the return on equity was around 10%, 10.3%. But at Excluding STORM, if we hadn't had a STORM, the loan life ROE would have been about 13% operating ROE. The life operating ROE is about 13%, 12.7% to be precise. So our businesses create ROEs that exceed the cost of capital. So we feel comfortable keeping the cash in those businesses. If we want to, if we need to, we can upstream. So every year, as I said, it's kind of mechanical. We say, what's annual holding cost plus dividend commitment? That's what we want to have at holding. If we were to for example distribute more cash to our shareholders, so we would increase dividends or special buybacks that we upstream the cash, keep it holding until we dispute. That's kind of that's the model we work. So, there's no impediment to upstreaming cash. It's just our policy that we keep our cash in the business not as holding. As to your point, what does a strong balance sheet look like or what do you want to have a strong balance sheet? I think today we have a strong balance sheet. And we said in terms of leverage in the Capital Markets Day we outlined 35% is a ceiling that we could live with, not something we need to strive for, but we could live with a leverage up to 35%. About 35%, you need to have a very good cost and you want to bring it back. So moving into 30% would give you sufficient room to absorb an increase of 35%, but levels up to 35% would be variable and consistent with a single A rating. In terms of solvency, solvency today is very strong. We don't need to hold €197,000,000 per se, but it depends a bit on the situation at hand. I think what we want to have is make sure that the solvency in the UFR of 2 point 4 is safely and significantly above the 120 and you want the solvency as is to be able to absorb the decline in the UFR, the decline in the UFR was 3.6 and that still be safely above 160. So I work my way back technically saying, look, our management letter is 160. The UFR is going to decline. I want to make sure that I can absorb that UFR decline, add that back to 160, because it's a small buffer and that's kind of the lower limit to which you want to run a standard model solvency and still claim to have a robust balance sheet. Yes, that's very clear. Thank you. Our next question will come from Johnny Vo of Goldman Sachs. Please go ahead. Yes. Hi, guys. Thanks for allowing me to ask my question. Just the first question, I noticed that there's an extra senior loan of about a bit of €105,000,000 that you've issued since the half year stage. Was that issued at the holding company? And what was the purpose of that? The second question is just can you give us an update on I mean, I think you've given a little bit of an indication on the refinance of the bridge loan that you took out for L'Orealis. So can you give us an update on when you hope to refinance that bridge loan? And the third question is just in regards to the €200,000,000 of debt that is due to mature this year. Are you still committed to paying that off? Or will you look to refinance that? And just one more final question, just in regards to the dividend payout. I know you lifted the dividend payout now to 48,000,000,000 but how do we determine where in the range of between 45,000,000 to 55,000,000 you're likely to go with that dividend payout? Thank you. On the senior loan, that is actually very opportunistic. It's a Holdco loan. At the end of last year, we said that our holding cash target is $394,000,000 So literally, Johnny, we have ready to upstream on the push of our upper button €100,000,000 from the Life business. And then we found that a couple of banks who were really washed with cash wanted to acquire this holding financing at a negative yield. So then we thought that, I can finance myself at a negative yield or I can take out cash from the Life business where the ROI is north of 12%. And we thought having a negative yield financing could be hard to reduce. It's really opportunistic, but negative yield financing at Holdco to benefit from the amount of cash. Yes. So just on that then, the remittance that you say from the last business of 300 and whatever, 100 of that is actually a senior loan that you've issued? No, no. The remittance is in the other. The remittance in the other is in the whole is in the bucket other. It's in the other. Okay, fine. Yes. So that's net. So the SEK 395,000,000 is actually what was really remitted from the Life business and the bucket other. The bucket other contains a senior loan from another bank minus holding cash payments, minus during the year the injections that we made in the generality business as well. But actually the 395,000,000 is actually what is actually upstream in cash from the Life business. Okay? Okay. Thank you. Yes. On the bridge, we haven't taken out the bridge yet because the deal with Loyales needs to close. The terms and conditions are all committed, are firm. If and when the day comes Ooyala closes, we'll take out that bridge, which I assume to be early May. If we look at the timetable at which we submitted the request for a DNO by DNB at the normal time period, I think it's going to be early May for closing of that transaction and then we'll take out the bridge. In terms of refinancing it, as I said, we have the option to use either a Tier 1 or Tier 2 instruments. As we said at the Loyannis call, it requires a bit of a look through on potential M and A opportunity to determine which instruments you would want to use, because it might be the case that you want to protect your Tier 3 eligibility for future capital synergies. So that means that you'd rather issue a Tier 1 or Tier 2. However, Johnny, if you look at what happens in the second half of the year and you add the pro form a loyalty situation to it, we think the Tier 3 headroom that we have is actually quite large. And it is estimated that if you were to issue a benchmark Tier 2 because they tend to come in benchmark sizes, you still have sufficient Tier 3 capacity left. So we will keep our options open, but working hypothesis is that a Tier 2 at this point is more likely than a Tier 1. It's cheaper. It's simpler to place. And the Tier 3 headroom is actually far sufficient to capture any future capital synergies. So base plan is Tier 2. When we will do it? When the time suits? Somewhere during the year. It depends on market, depends on preparation and you need to be very opportunistic in it. The bridge loan on L'Orealis has a 2 year maturity at reasonably effective rates. So we're not at all in a hurry to do that. When it comes to the Tier 1s, Johnny, I can't commit to confirm whether we'll call them or not. That's actually there's a call date, an announcement date at which we will make that formal decision. Of course, it had a 10% coupon, so that call decision is probably relatively easy. But as we've seen in the AT1 market, easy decision when it comes to calls no longer exist, but it's fair to assume that we'll make the easy decision, but we can only make the decision really when we get to that point. We have sufficient cash in the Life business to upstream and rebalance it at 202% solvency. It's all baked into our plants. So that's kind of what you probably should expect as plan A, but we can only confirm it when we get to that point in October. As for the dividend payout ratio, interesting to note that our dividend payout ratio today is 48% of our net operating profit. If you look at our business today, it is not a law, but I would think that you should be very careful not to commit to dividends that exceed your business cap gain. Because if you want your capital to be supported by release of your book, at some point, the recent book will be over, right? So I think it's fair to assume that your business cap gen should what your business generates should drive your dividends. Interestingly, which is pure coincidence, but sometimes things work out nicely, If you were to move dividends today to 283,000,000 that would exactly be a 55% payout ratio today. So, I think if you look at the business as it is today, we committed to 245 as ASR is today, you could move it to 283 and be still in line with your payout ratios. Where will the payout ratio move? We'll be very careful. We want to make sure that our dividend never goes down. Down. We want to be the quality stock and behave as the quality stock that our investors expect from us. So we want to have a safe and gradually moving up dividend and we'll set our payout ratio in line with that. Okay. Thank you. Thank you. We'll now take our next question from Albert Ploegh of ING Bank. Please go ahead. Yes. Good morning. Albert Ploegh, ING. Yes, a couple of questions, maybe coming a little bit back also to the previous questions on the dividends. And I heard what you said, Chris, on linking that with capital generation. But when looking at your Capital Markets Day plan 2019, 2021, in terms of operating earnings, it seems you're pointing towards something like 2% to 5% growth, again, without any bolt on M and A. And I think the OCC growth probably as of this year's basis, probably around a 3% CAGR as well. So stable and growing, should we then link also your, let's say, base case dividend growth in line with something like 3% to 5%? Or as you now already did 7% and you expressed quite some confidence in 2019. That will be a little bit on the conservative side. So maybe you can grow it by 5% plus. So maybe a little bit color there still. And then 2 small questions on outlook, if you like, on Life and Non Life. On the Life, your operating earnings were €664,000,000, reflecting €10,000,000 kind of one off. But I guess, let's say, the Capital Markets Day guidance or some kind of flattish outlook excluding this €10,000,000 is still a reasonable starting point, again, excluding any bolt on M and A impacts there. And on non life, I think if you add back to storm, you basically report something like €175,000,000 operating earnings level. Is this also a good starting point? So is this reflecting, let's say, what you would say a normalized level of large claims and then that kind of figure as a starting point to for our models? Thank you. Albert, this is Joss. Let me start with the last question. That's the most simple one to answer, and that's yes. The €175,000,000 I think that's a number that we would recognize and not argue that you have seen it wrongly. On your first question on dividends, I think the scenario you painted is not an unrealistic one. It's let's call it the base scenario. However, including your summary, you said, well, not accounting with all kinds of acquisitions you do. In the meantime, we have done L'Orealis. So we will add L'Orealis to our potential dividend stream. So I think the way you mentioned it is the base case scenario, but running the company based on a base case scenario is not as exciting as building a franchise. We keep on building the franchise and looking how we can deploy capital in the most efficient way to investors. But let's assume your numbers could be the base case. Okay. And then on the Life outlook? So, Halbert, on the Life outlook, I think our Life earnings were supported by the inclusion of Generali. I mean Generali really added a fair amount of profit to the Life business both from a rerisking, but also from a mortality and technical result perspective. If you allow me to give a little bit more color on Life, investment margin was up by CHF 37,000,000 both actually in absolute terms and in relative terms. The capital gains released was down a bit, which is actually fine. I mean, the quality honestly, the quality of the earnings goes up. We think that is reasonably sustainable level. There may be Gennaro had a few one offs, but I think that level is probably reasonably sustainable. On the technical result, it was down from 99 to 90 mostly due to the decline of the book. Some one offs, I'm reasonably okay on technical results. They seem to be relatively stable here with this twist, a tendency to decline as your book runs up. Cost results, it was 24% to 26% stable. I think the movements that we see today in our cost base will allow us to keep our cost base stable. I think both technical results and results on cost may have under the long run some headwinds because the book that declines every year may shave a bit up from that, although the short term outlook is relatively favorable. And on the investment income, the €37,000,000 is probably really sustainable. So to make a long story short, I'm okay with keeping the life earnings where it is. If you want to be conservative, take the efforts in 2017, 2018, that's probably a reasonable estimate for Life earnings going forward. Okay. Thank you for the details. Thank you. We'll now take our next question from Robin van den Broek of Mediobanca. Yes, good morning everybody. My first question is on the financing of M and A. You basically connect that to hybrids. I was just wondering also in the line of the remittance flexibility you seem to have, surely, the excess capital within your units are not generating the return on equity of the average. I was just wondering to what extent could the remittance power of your subsidiaries become a financing source? And at what cost would that actually come? That's my first question. The second question is on Generali Netherlands. Could you give a little bit more indication on the path? I think you mentioned €10,000,000 €20,000,000 €30,000,000 from a net perspective when you did the deal. I think you said that rerisking should come on top. For Life, you have EUR 30,000,000 sustainable growth already. So can you tell us what's going right there and to what level should we expect this to grow on a revised basis? Then thirdly, I'm still a bit confused on the guidance for OCC. I think you say 193x2 basically is reasonable. And in the answer to that question, I didn't get whether L'Orealis probably still needs to come on top of that and potentially also the further improvement of Generali. Could you talk a little bit more about the operational building blocks rather than the technical ones? Thank you. So Robin, on the thanks. On the source of financing, look indeed, we could remit cash up from our operating entities and use it to finance acquisitions. The cash is not idle at the operating entities. I mean effectively it's invested. It supports the business, but effectively the surplus cash is invested. It's invested today in asset classes debt. But we look at the debt surplus capital and the investments. I want to make sure it's invested into the assets and asset classes add some value to our shareholders, value from a return perspective and value from a sourcing perspective. If you think about the Life business where surplus capital is mainly invested into mortgages and real estate because those are assets that we can uniquely source. Most of our shareholders cannot source mortgages or that's real estate themselves. So we add value by sourcing those assets and we add value by creating value with the return on those assets. So I think it maybe the surplus return on the marginal euro in the Life business is not 12 point something percent, but it's I think it's certainly about 10%. So it would be a very cost effective it's yielding investment in our Life business. Could we upstream it? Yes. Honestly, Robin, any acquisition, I would need to look at the balance sheet of what you acquire and take a new co approach. So there is no impediment as such to upstream cash from the life business. But if you were to acquire, for example, a life legal entity with a solvency of 156 percent, it takes us into account with ultimately you want to merge it to life entities. So to me it's more a function of what does NewCo look like and what is how do you construct a balance sheet of NewCo that is robust, solid and can withstand any market gyrations. And then we solve around that. That means there is no impediment to Upstream Cash For Life, but that's not it starts with what do you want your target balance to look like and then work your way back. On the OCC, in these old numbers that we've guided to our ex Loyales, we still don't officially own Loyales. The ownership of Loyales will only come in early May. So, the Loyales results will probably kick in and count for 7.12 of the year. So, what we guide to today is ex Loyales. And the one that's 93 times 2 is I think a reasonable guidance where there could be a bit of upside indeed if the generale non life performance is gradually improved, but also the renewal of the Generali P and C portfolio takes place on a commercial basis. So we've done a look, technical leverage, but the Generali P and C portfolio we renew commercially. We basically mean that everybody who has a Generali policy gets an ASR policy in return, which means it takes about 12 months for that to take place. So, some of that will happen during the year, the first half, some in the second half. So, the Generali non life operating improvement will gradually kick in and fade in during the year. So I'd be happy to add a huge number to that. So that's why I think 193x2 is probably a good estimate if you look at what's happening underlying. Then on the Tylorari earnings contribution, I think the operating result contribution actually is quite large this year. It's around SEK40 1,000,000 to be quite precise. It contrasts with the 10, 20, 30 prediction that we have. Delta 1 is of course the investment results. So the 10, 20, 30 is the operating result contribution, not so much the investment results. So there is an investment element to it. Secondly, there's 1 or 2, what I'd say, non recurring elements more PPA effects, purchase price accounting effects in the generality numbers that I would not see as recurring. So the recurring level of generality earnings contribution this year ex investment portfolio is probably on the €25,000,000 to €13,000,000 mark. I think that's reasonable to assume and that we should be able to grow further. And I think what it all tells us that the De Nivani benefits will be achieved certainly earlier than planned and probably go up a bit higher than planned, not double. So the idea of 10 and 10 expected for TTFs does not mean we're going to go multiply the numbers by 4, but it's earlier than planned and it's going to be a bit more than planned. Okay. And then maybe on the OCC generation, I mean your market risk is still, I think, at 43% compared to 50% where you feel comfortable. I think your rerisking assessment always takes place at the end of last year, I guess. Any conclusions there? Conclusion for now is you think our market risk is stable. I mean, we need to be a bit opportunistic here. I think you expect our market risk to be broadly stable. I feel comfortable in today's volatile markets with only 43% in market risk and be a bit away from the 50% in today's environment. So no rerisking plans, Vincent? Nothing major, certainly less than what we did last year. Okay. Thank you. We'll take our next question from Stephen Heyward of HSBC. Please go ahead. Good morning, everybody. Thank you. On your 2019 to 2021 targets, which one of these targets do you think is going to be the hardest medium term target for you to achieve? And then secondly, I wondered if you can give us an update on the process or how you're finding getting a new member for the Executive Board? Thank you. Thank you, Stephen. I think all the targets we have set are realistic and doable, otherwise we wouldn't have set them. I think the most challenging one will be combining profitable growth in the Non Life area and at the same time keeping up the combined ratio in the lower side of the set target of 94% to 96%. I think that will be most challenging because that is also set by market developments competitive behavior. I think that will be the most challenging one from a managerial perspective. The other ones like the €40,000,000 in the Capital Life business, as reported, we are close to delivering that in a sustainable way. We delivered a bit more this year, but said also that in the business of the distribution, we already know that the commissions will go down a little bit because all the insurance companies like ourselves have lowered the commissions on mandatory agents. That will influence that number a little bit, but it's not going to be challenging to move towards the 40. So all in one, we feel confident that we are able to deliver on those targets. However, it will be hard work. On your second question, where are we in selecting a new board member? We've seen a number of candidates of which we are quite enthusiastic. We are in the middle of the process hopefully, within a number of weeks, we can take a decision on the right candidates. But as you may know, then we have to take the DNB hurdle. And normally, a process at DNB for new people takes around 2 to 3 months. So hopefully, somewhere in May, we can be clear on this. Okay, that's great. Thank you very much. Our next question will come from Kepler Cheuvreux. Please state your name before posing your question. Your line is open. Hello? Benoit, go ahead. Yes. Hi, guys. Sorry. Yes, a question on the side on the business capital duration in H2. I think you've done EUR 153,000,000 is up 4% versus H2 at 2017. Benoit, can you repeat your question? We could not hear your question actually. The line is pretty bad. Benoit, can you please redial because perhaps you would have a better connection and then we can hear you. So operator, can we go to the next question, please? We will now take our next question from Mr. Andrew Baker of Citi. Please go ahead. Thank you for taking my question. So just on the debt side, can you give me a little bit more detail on how you guys are thinking about interest coverage? So I know you have the minimum level, which is 4 times, But what is the level that you'd actually be comfortable running the business out there? And then just on Solvency II, can you give a quick update on where we are in the Solvency II standards formula review? So there were 3 elements that I think impacted you guys. So the interest rate risk shock, the government guaranteed mortgages and lack DT. I think the interest rate risk has been pushed out to 2020 review now. Are you still expecting the benefit from the government guaranteed mortgages? And I don't think you changed your liability assumption in these results today, correct me if I'm wrong there. So is that still a potential benefit to come through? Thank you. Andrew, it's Chris here. Thank you. On the interest cover, the single A target rate is 4 to 7 times. We want to be safety single A, so we should be want to be at the upper end or above that 4 to 7 times. I think if you were to move to 4 in today's environment, you'd be pushing it in terms of your rating. And I think at today's amount of debt, you'd have a humongous amount of debt in order to get to a 4 times in Discover. So think north of 4 times to 7 times. And let me just do for a few for full clarification purposes on the debt and refinancing side. On L'Oreal, as we said, we'll finance it with a hybrid. We'll pre finance with a bridge. We'll just issue a bridge, which is a senior. And then that gives us time to optimize the hybrid capital situation, pick the instruments and pick the moment we need to issue the instrument. And hybrid CDs can become relatively or bridges can come relatively cheap. On that, in terms of picking the instrument we choose, we will weigh potential future M and A and protect our capital eligibility, which turns it into us thinking you wanted to have more clarity on the FIFA situation because that drives that you want to issue a Tier 1 or Tier 2. The new insight we have this year is that our Tier 3 capital is actually quite large, L'Oreal is at Tier 3. So actually, we have less need to wait for that situation to evolve because base case is we can do a Tier 2 anyway and still have sufficient capital headroom to absorb capital by someone we acquire. So that means Plan A is probably a Tier 2 instruments and actually we've got more flexibility to do that. On top of that, there is the coal option on the Tier 1 instruments, which we have in October. We can and will only make that decision at that point in time. It's fair to assume or to expect that we could do it if you look at the coupons, but we can only and will make a decision at that time. And we have got plenty of cash in the life business to upseam cash to do that. So in practice, think about L'Orealis as a hybrid with a bridge allowing us to pick and choose the moment to issue the hybrid at the most attractive rate for our shareholders. And then there is the replanting of the Tier 1s, which we will do in principle out of existing cash from the Life business. Now that altogether will integrate into funding plan, but that's the way how we think about it. I just want to make that very clear to all of you. In terms of interest cover, 4 to 7 times is what the single A rating stipulates. We want to be on the upper end. We want to be a very safe and sound A credit. So think about north of the 4% to 7% or 4% to 7 times cover. When it comes to the Solvency II review, interest rate delta has been pushed out a bit. The impact of that is limited. Our interest rate risk is small. Actually our rate exposure has declined in the second half of the year. So I think that is something that's going to be could be a small negative, but relatively small because our interest rate also has weak exposures declined. Moving to non recognizing the non sort of government guaranteed on LHC mortgages is a small plus. And on LACBT, it's kind of neutral to a plus in a sense that we've been very conservative on our LACBT assumptions, LACBT usage. We have actually increased the life factor a tiny bit from 70% of potential to 75% of the potential in the last half year, which is still not full. I mean, we could take it further than that. If we really wanted to max out the model, we could take the life factor up by a fair amount. Today, the use of what I'd say, the future component in likely T substantiation is still relatively small. It's less than a third of the potential is included today. So life went up to 75 a tiny bit. We will be unaffected by the likelihood review because the elements that the likelihood review refers to are actually not used by us. So that means, likely fee neutral, upside left, government guaranteed mortgages, a plus, interest rate risk could be a small minus, but that's what we thought before because we've tightened our interest rate risk. Very clear. Thank you. The next question will come from Matthias De Wit of Kempen. Please go ahead. Hi, good morning. I've got 2 questions remaining, please. First one is on the 2019 earnings guidance. You mentioned that you want to obtain results similar compared to the one in recent years. Just wonder, does that include L'Orealis? Also, yes, I'm a bit surprised by the flattish guidance because of the growth we see in non live, the Generali synergies coming through, etcetera. So can you be a bit more precise on that, please? And then the second question is on M and A. I think you mentioned in the past that you're targeting a return of at least 12%. Does that incorporate any benefits you could get from an internal model that could lower the requirements of the target? Or would you not be willing to share those in calculating these hurdle rates? Thanks. On the earnings guidance, Matthias, I think the message we try to bring across is that we are very confident that we can keep on running ASR as it is on the base on the healthy business. So as said, if and when we wouldn't have a storm like we had last year, that would be a plus in our earnings. And the guidance we have given is that does not yet include L'Orealis. As Chris already said, we don't own that business yet. So we haven't included that into our guidance. On the 12%, the answer can be very brief in short. That's a no. That's based on how we look at our solvency today and how we calculate our today's numbers. And I think we have been clear on the partial internal model. Even when we would do a large transaction, we would start to build that model and to add it to ASR. But in assessing whether a transaction is a good transaction, we should not yet take into account any potential further movement towards an internal model. We will now move to our final question from Benoit Petrarque of Kepler Cheuvreux. Please go ahead. Yes. Thanks for taking my questions. The first one was on the business capital generation in H2, EUR 153,000,000. It's only EUR 4,000,000 that you said to 2017. I will say despite the consolidation of generally strong online earnings in H2 2018, also better asset management and distribution earnings. So I was wondering if you comment on the kind of increased H2 2018 versus H2 2017, especially if there is any kind of one offs on the Life tax generation. I will be interested by that. The second one was on the premium growth outlook in normal for 2019. I think you've done like 4.7% underlying this year. Could you talk a bit about your outlook on the growth and also on pricing? And the last one was on the rewisking. I've seen exposure to financials up EUR 4,000,000,000, especially in H2. So it looks like you've taken opportunities in the market in the Q4. You maybe come back on that, what's your plan here to release going forward? Thanks. Yes. Benoit, on the first question on your business CapEx H2 to H2, so the second half of twenty seventeen, the second half of twenty eighteen plus €14,000,000,000 Basically what happened there is a combination, I think. So technical result up, but also we had somewhat larger somewhat more large claims in the second half of the year. So in our P and C business, we see in the absence of storms, the bulk claims ratio falling. Claims frequency is actually below that of last year and going down. Large claims were up, so a little bit more higher large claims in the second half of the year. Secondly versus last year, we had slightly higher hybrid costs because of the RTE-one financing we did last year and we had slightly higher holding costs and those are one offs, as Jorg said, a one off holding cost metric one off holding cost that fit in. So in the year on year comparison for the last 6 months of the year, bulk claims ratio much better, excess returns up a tiny bit compensated by higher larger claims and higher holding costs and some higher hybrid costs. That explains the delta between second half of last year and second half of this year. And Benoit on your question on growth and pricing, let me start off with pricing, especially in the P and C nonlife area. We still see price increases. The market still is hardening and is getting better, but I don't think we are yet there, especially in car insurance. I think the combined ratios are not at the level where they should be. So we expect and we will raise our prices ourselves also over the next few months. We expect further price increase in the P and C business. If I take out the storm in Fire Insurance, then I think the results are satisfying, but still room for improvement in terms of pricing. So I we expect that prices will go up slightly, not as fast and as high as we have seen over the last 18 months, but there will be continued price increase in Non Life. In terms of growth, if I take a look at how the year started, we are confident that we are able to deliver on our growth objectives, especially C and Disability business. P and C continued in the same pace as we closed the year, so still lots of new business. Same for the disability business, positive developments in terms of new production there. And also in the pension DC, which we aim at, we still see the same trend as we have seen over the last year. So we're confident that we will be able to deliver the growth base organically that we have delivered over the last 12 months. And there was your third question, the investment portfolio, you indeed see some increase in financials. Actually in the second half of the year, when spreads widened, especially on the banking sector, we added short dated, we thought there was value in relatively short duration financials, all investment grade. As you can see, the order of non investment grade asset hasn't barely moved. So it's basically short dated subordinated papers, quality banks. That's exactly what it is. So BBB and subordinated paper by quality banks with relatively short durations we felt from a return on capital perspective that's where we saw value after the spread widening in the second half of the year and those don't consume that much capital. So that explains actually the movement in financials. Maybe one final point to make on guidance on the coming year. We talked about our business capital. We talked about our organic capital generation. We talked about multiplying numbers. Ultimately, there are a number of moving factors in this. Multiplying H2 by times 2 is a safe bet, but it's also reasonably conservative way of looking at our solid generation. We know we'd like to under promise and over deliver. We will try to do this, continue to do that. Multiplying it 2x2 is always a good idea. It gives you probably the floor and the lower end of what we can deliver next year. That's the number we can probably confirm to. And you know it's when we confirm to a number, then often we try to outperform that. Should I get back to Joss for some final words of wisdom? Yes. I think I couldn't spread more wisdom than you have done in your last comments. So thanks for joining us. And hopefully, you feel that we are very confident in how the company runs at the moment. The business is doing well. People at ASR are happy. So we are very confident to keep on delivering the results as we have done before, and we look forward to meet some of you in your time. Tomorrow, we will start our roadshow in London. And I believe Michel and his team have invited some nice people to have dinner with us tomorrow night, and then we can continue to discuss ASR and the market in a broader way. Thank you for being with us, and I wish you all a very nice and good day. This concludes today's call. Thank you for your participation. You may now disconnect.

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