Earnings Call: H2 2017

Feb 21, 2018

And welcome to the ASR Investor Call Annual Results 2017. This conference is being recorded. At this time, I would like to hand the conference over to Michel Holders. Please go ahead. Thank you, operator. Good morning, ladies and gentlemen. Welcome to the ASR conference call on the full year 2017 results. On the call with me here today are Joos Baate and Chris Cifay. And we're here to discuss the results and give an update on the business performance. After that, we'll open up for Q and A. We have scheduled this call till 12 o'clock today, so 90 minutes. And before handing it over to Joss, please, as his customer, we have a look at the disclaimer that we have at the back of the presentation for any forward statements. So having said that, Jos? Thank you, Michel, and good morning, everybody. Ladies and gentlemen, from a management perspective, 2017 is a year to remember with a very strong set of results. Happy stakeholders across the board, customers, employees, shareholders, including our former shareholder, the Dutch state. In particular, I am pleased to see that this is driven by continued solid performance of each of our business in delivering great results. But also the sale of the remaining stake, the acquisition of Generali Netherlands and First Investments. Before we dive into the financial, I would like to mention that we are also proud of the performance on non certain non financial criteria. During the past year, we have seen more and more happy customers and intermediaries doing business with ASR. The Net Promoter Score has gone up to a score of 40 points 57 points for intermediaries. And let's not forget that happy customers turn into has risen in the past year and customers increasingly appreciate all of our efforts to be a social responsible insurance company. As you may have seen in the past weeks, we announced to team up with Firdaus Bank and jointly committed to invest EUR 600,000,000 into ESG and sustainable projects. Another example is the ESG Credit Fund that we have established in 2017 and which is now open to 3rd party investors. And these are just two examples of many initiatives we have taken in this respect. In short, we aim to be relevant for our customers and contribute to society at large as this is the foundation on which we build our company and create long term value for all of our stakeholders. Having said this, let's discuss our financial performance and progress of our business and that's on Slide 2. Performance, as said, over 2017 has been strong on every key metric. Let me highlight some. Operating result was up 17.2% to EUR 729,000,000 by the way, a record high result. This yielded an operating return of 15.6 compared to our target of up to 12 and also up compared to the 14.6 of last year. Our IFRS result net of tax also highest on record at €906,000,000 Combined ratio of €95,100,000 has improved from 2016 levels and reflects continued underwriting excellence as well as the improvement in our cost ratio. I'm also pleased to see that these healthy and market outperforming combined ratios, our non life business delivered close to 6% top line growth. Our Solvency II ratio remains robust at 196 after deduction of the proposed dividend. As you know, we are still using the standard formula. This is a 7 point increase from the beginning of the year. The main moving parts are strong organic capital generation of $377,000,000 and favorable financial markets that outstrip the impact of share buybacks 7 percentage points, VA declined 9 percentage points and the rerisking of the investment portfolio, which account for another 6 points. Quality of our capital remains high as well, with unrestricted Tier 1 capital alone, representing almost 152 percent of the Solvency II and then there is still plenty of headroom to maneuver in restricted Tier 1 more than 800,000,000 in terms of Tier 2 and Tier 3 almost SEK 700,000,000 Our strong solvency position enables us to remain entrepreneurial. As we have always said, everything safely above $160,000,000 allows us to be entrepreneurial and to pursue profitable growth. Our strong solvency has also enabled us to participate 3 times in the sell downs from the Dutch state. In 2017, we purchased 9,000,000 our own shares for a total amount of 2.55 €1,000,000 including paid dividends, we have returned over the last year €440,000,000 to our shareholders. Speaking about dividends, given the strong results of ASR in 2017, we will propose a record high dividend of €229,700,000 which is €1.63 per share. This is an increase of 28.3 compared to last year's dividends of €1.27 We assume going forward a stable growing dividend per year. I think everybody realizes that an increase of 20 point 3% is beyond what I would call stable growing. Hence, we assume sorry, hence, I would caution you on that and I believe that in our industry, low to mid single digit ordinary dividend growth assumptions sounds more realistic. Let's now turn to our business portfolio and the key developments in 2017. I'm sure you're, in the meantime, familiar with this matrix in which we plot our businesses. Let me highlight some recent developments and achievements in executing our strategy. Let me start in Box B on the left angle down. There, you will find our large service books. Maintaining a low cost base and verbalizing the cost base is crucial. In lowering the cost, we were able to decrease the cost per policy with 3% from €66 per policy to €64 per policy in 2017. This despite of a 3.2 higher than planned Lexus. We continued in the same area to migrate our service books to the new platform and plan to finalize 2 new books in the Q1 of this year. With the acquisition of Generali, we also acquired a new individual life book, which we will migrate towards this platform. In executing initiatives to migrate pension clients to capital light solutions, in 2017, we were able to close down 9 separate accounts and to move them towards our DC solutions. In the top left, in box A are our businesses that provide stable cash flows. Here we focus on organic growth. In P and C, we don't only talk about robotics. We actually use robotics for Tender Street for Tender Street to make offers towards customers from an intermediary competitor portfolio, which we acquired from Armea. We are learning from this how to use robotics in migrations, which is going to be helpful in future non live migrations. Furthermore, we saw a top line growth of almost 6%. This is this doubles more this doubles the Dutch GDP growth, which we said at our IPO would be our growth guidance in the P and C area. Within disability, we see a stable top line with some moving parts underneath. As mentioned in the past, our value over volume principle led us to lose some customers due to the BISANAVA legislation. This is compensated by other segments in disability, resulting in a stable top line, all in all, a satisfying growth of €8,000,000 to €765,000,000 in this area. The last segment in Box A is our funeral book. We completed the Nivo migration within budget and within time. So our funeral business people is ready to migrate the 300,000 generale policies in 2018 and is also ready to absorb any future further organic or inorganic growth, if and when. In the Capital Light space, Box C, we have made further progress 2017. In the asset management space, we have, as you may know, our buy and build strategy. In 2017, we acquired the 1st Investment, a niche investor, which runs with some specialized skills and adding SEK0.6 billion of assets under management. Furthermore, we built this segment with the successful launch of the ASR Dash Mobility Office Fund with external placements and the successful launch of the ASR Mortgage Fund with €500,000,000 of firm commitments already in 2017. The pension DC solution of ASR called the Berg Neumenschun is gaining track and had a very good year in 2017 with 25.6 percent of new recurring gross written premiums. In terms of new business, DC is now 77% of our total new business. ASR, in the meantime, has become the number 3 DC pension producer in the Netherlands. Gross written premiums are up 42% compared to last year. Furthermore, with the conversion of the DC of the old DC solutions towards the new Red Neamus pension, the assets under management in this proposition doubled in 2017. Assets under management base is up €200,000,000 and now close to 500 €1,000,000 in total. We're also very happy with the retention rate of our existing customers. This retention rate was last year 99.6%, so lots of heavy customers in the pension. For the Distribution and Service segment, we have medium term target of 7% to 10% growth. And with this year growth of 39.5%, we significantly outperformed this target, mainly due to the strong growth from Dutch ID and the acquired companies are now fully contributing towards the operating results. This segment is well on track to achieve the €20,000,000 operating results. And finally, Box D, the potential divestments, The real estate projects are no longer classified as held for sale, although it is still excluding operating results and we made progress there. IFRS result was SEK 17,000,000 pretax in 2017 by an increase in the sale of the residential housing and furthermore 77% of the retail space is rented. Overall, occupancy rate of over 80% is achieved. So now let's turn to what the overall operating result has done for half year in the next slide. And that's Slide 4. As mentioned in my introduction, operating results up with 17.2% compared to last year. 2017 was a strong year and business momentum maintained at a very high level. As the chart shows, 2017 record operating result was driven by an extraordinary strong first half year of twenty seventeen, where we benefited from favorable weather conditions within non Life and the dividend season within Life. 2nd half year showed from our viewpoint a more normalized result because as we already indicated at the half year results, H1 ran roughly €30,000,000 above what we would consider as a normalized level. Slide 5 shows the breakdown of the operational results. As said, up SEK107,000,000 to SEK729,000,000. As you can see on this slide, all four business segments contributed to the higher results. Non life, €36,000,000 to €172,000,000 while life was up €74,000,000 I will talk about those two segments in a moment. But first, a few comments on the other segments. Banking and Asset Management improved due to an inflow of assets under management, resulting in higher fee income, partially offset by placement fees due to the launch of new funds. As mentioned, we see good business developments in Asset Management and this segment has the potential to grow to a €20,000,000 business in some years' time. Acquisitions of Forance and Superkavant contributed to an increase in the operating result in Distribution and Services. This segment is geared up and is gaining further mass and could potentially contribute as such CHF 20,000,000 to results this year already. To finalize, holding and other decline, a decline of SEK 12,000,000 shows impact from higher current net service costs for pension obligations owned personnel due to lower interest rates. So overall, a strong increase in operating results, driven by gains across the various businesses, and we are happy with that. Let's turn to Slide 6, where we highlight the developments in our expense ratio. Our ongoing focus on cost containment is one of the key drivers of operating earnings and long term value creation. We believe we may be we may well be the leader in terms of cost discipline and culture as demonstrated by expense ratios in our Non Life as well our Life business. Overall, operating expenses increased with 2.6 percent, but those include absorption of the additional cost base of the acquired businesses, the additional current net service cost of CHF 11,000,000 and a one off because we granted all of our staff an extra monthly salary in 2017 due to the successful privatization and the results over the last few years. I will provide some more insights on the next slide. In non life, the expense ratio improved from 8.3 to 7.6, driven by the strict cost discipline and portfolio growth without any FTE growth. In fact, we have been able to fully absorb top line growth in non life in our existing platform and the nominal cost base in non life is approximately CHF4 1,000,000 lower compared to last year. Also in life, the expense ratio improved from 11.7% last year to 11% in 2017. Rough written premium decreased, but operating expenses decreased even further benefiting from the efficiencies of acquired portfolios and regular cost savings due to our migration projects and 18% lower FTE base. Let me now turn to Slide 7 to provide some insight in the operating expenses related to our target of CHF 50,000,000 cost savings over the medium term. This slides to provide an overview of the development of our cost base since IPO and to assess whether we are on track to deliver our targets. At IPO, when we announced the cost saving target of €50,000,000 we had a cost base of €575,000,000 This cost base needs to be revised for acquisitions that added €32,000,000 Next year, the cost base and that's not in the graph will also be added for generale and for comparisons reasons, you need to adjust €44,000,000 of additional operating expenses for generality. The current net service cost, which is a result of interest rates, decreased in 2016 as a result of interest rate increase in 2015 from 2% towards roughly 2.5%. This interest rates declined in 2016 towards 173,000,000 resulting in an 11,000,000 additional expenses as this is largely, largely interest rate development is largely outside of our control, this fact was not taken into account at the time of setting the cost saving. And an additional final adjustment we have made is what I already mentioned, the allowance we gave to all of our staff of roughly €10,000,000 to €11,000,000 because we did a very successful privatization and the results of ASR and it's that's also to consider as a runoff. If we were to correct for these items, this would lead to a €23,000,000 cost saving in 2016 and €18,000,000 already realized on the structural cost base in 2017 of €18,000,000 So we've realized €41,000,000 out of the 50 €1,000,000 planned cost savings. So another €9,000,000 needs to be done in 2018. And I guess concludes that we are well on track to achieve our targets to realize these cost savings. Let me now turn to the next slide where we can look deeper into the Non Life segment. In Non Life, our expense ratio is market leading combined with our underwriting expertise leading to a very strong combined ratio. All non life product lines showed combined ratios below €100,000,000 again for the 3rd consecutive year. And as you can see in the graph as you can see in the graph at the bottom right hand corner, operating results increased with 26.5 percent to €172,000,000 The increase was driven by excellent underwriting and claims handling, the absence of large claims and favorable weather conditions in the first half year of this year, while last year we had €25,000,000 of claims related to hail and water damages. This is reflected in the favorable development of the combined ratio in P and C. Allow me already to make one remark on 2018. In the first half, the first half will definitely be less favorable than last year. In January, we already used our annual storm annual storm budget due to the hefty January storm on the 18th. We estimate a €13,000,000 of claims in total, which is equal to the annual average storms over the past equal to the average of the storms in the past 4 years. Returning to 2017, gross written premiums rose by 6% due to the growth in P and C and Health. The market developments towards more rational pricing allowed us to grow our top line while maintaining our value of volume discipline. In the P and C business, the increase was mainly driven by the success of the new Forte Alpaca Cat. Also in disability, we stuck to our discipline and experienced a pull from the government owned UWV proposition for Gazaha customers. Nonetheless, we managed to keep the gross written premium and disability stable. The value over volume focus resulted in switching and sorry. The value of volume focus resulted in switching health customers since the pricing was a bit more tailored to the top end leading to a decline of approximately 20,000 customers. Overall combined ratio of 95 point 1 percent, well below the target of 97 percent, an improvement of 0.5 percentage points compared to last year, and this reflects improvement in the expense ratio also. Claims ratio of non life rose slightly from 72% to 70 2.8%. The significant improved this significant improved claim failure in P and C due to the absence of light storms was offset by higher claims in health and disability. In health, the claims ratio increased due to mainly the higher cost calculation of 2016, leading for instance to higher expenses for medicines hospitals. In discipline, the claims ratio increased mainly as a result of more claims in absenteeism. In response, we raised prices on average with 20% for 2018 and this will compensate the impact going forward. Let's now turn to Slide 9. Operating results of the Life segment, this increased with 13.2 percent to 633,000,000 The investment margin increased to CHF 70,000,000 due to higher direct investment returns. Those were up CHF 90,000,000 as a result of the rerisking into higher yielding investments, mainly equities and mortgages within our investment portfolio and the higher contribution from realized capital gains, those were up CHF 53,000,000 partially offset by higher interest on liabilities. Result on cost is stable at SEK24 1,000,000. Decline in cost coverage for the individual life is absorbed by improved cost results for pensions and funeral. Strict cost control, migration of books and cost synergies from acquisitions were partially offset by higher than expected lapses. Technical results remained stable Despite decline in the Life individual book, in the Q1, we experienced adverse mortality results due to the influenza, which has been offset by improved mortality results in the last quarter of 2017. Large segment premiums decreased mainly due to the one off effects of the 2 acquired portfolios in 2016. Recurring premiums decreased 2.8%, higher gross written premium in pension DC were offset by lower premiums in the individual life. So going forward, growth in life premiums should come from VC Business. In 2017, we added more than 500 employers to our portfolio and we have become, as said, the number 3 pension producer in the Netherlands. So we trust we can continue to grow our DC business going forward. I'm on Slide 10 and let me provide with an update on the Generali acquisition. The closing has been finalized on the 5th February. So this is for us the starting point of integrating the business. Let me remind you of the strategic rationale for this acquisition. This is a compelling opportunity to further consolidate the Dutch market and the bolt on acquisition of the type we prefer. The cash consideration has been paid after the closing and the recapitalization of the operating companies has been done. The guidance from the announcement still stands and therefore will be a pro form a impact of 9 percentage points on our Solvency II ratio in Q1. A few remarks what we have done since the closing already. We already established the reporting lines towards ASR. All control functions in the meantime are reporting to ASR, control asset allocation and interest rates interest rate hedge is now over to ASR and we, as I said, injected capital according to earlier commitments and started the rerisking of the Generali portfolio. On the progress going forward, the merger of the top holding GeneraliNL within into ASR will be before the summer. Legal merger of the non life and life entities will be right after 30 June this year. Relabeling of all the businesses from generai to ASR Brands will be done within 6 months. And finally, all the staff will be moved this summer to the ASR building and the Cinerahalli build is available for sale. And we already identified the 1st interested buyers. Please bear in mind that we will first have restructuring expenses in 2018 before generality can fully contribute to its potential. This will happen over time with an expected impact of €25,000,000 of organic capital generation in 2020 €30,000,000 of euros contributing to the net operating result at the latest in 2020. So on Slide 11, the comparison with our targets and I will cut this short a little bit. We have met and exceeded all of our targets and we're proud on that. And before I hand over to Chris for further details on our capital and solvency, I would like to conclude with a final slide on our dividend. Clearly, as this slides as this chart demonstrates, over the past year, we have built a very solid track record in paying dividends. Our ambition is to pay a stable growing dividend. The strong increase in operating results drives the higher proposed dividend for 2017, maintaining at a payout ratio of 45%, and this leads to the already mentioned 229,700,000 dividend payout. Proposed 2017 dividend per share is, as you know, EUR 1.63 per share, an increase of 0.28.3 on the 2016 dividend per share. This year, we will introduce an interim dividend with a payout ratio of 40% of the last year's dividend. Based on proposed 2017 dividend, this would amount to 0.65 interim dividend per share payable in 2018. We've also proven not to be orders of capital. In 2017, a total of 9,000,000 owned shares have been purchased for an amount of 2.55,000,000. Since the IPO in June 2016, €672,000,000 of capital has been returned to shareholders, including proposed 2017 dividend. And as we have mentioned before, we are keen to deploy capital first, both in organic or inorganic growth opportunities. Should those not materialize, then we will explore appropriate ways to return capital over time. Chris, the floor is yours. Very good. Yes, thank you so much. I will continue our presentation and go to the solvency and capital section. If you follow me and stick to Page 14, where we will discuss and elaborate on our multiyear equity and Own Funds movement. These are the book values that we report, book values from an IFRS perspective or a Solvency II perspective. We're proud to show a continued growth in book value. IFRS equity grew again even excluding hybrid capital instruments. Book equity moved up by 652,000,000 especially when we consider that absorbs a cash distribution to shareholders in the year of over $453,000,000 That means net $652,000,000 after we shared with our shareholders 4, not $50,000,000 in cash. And we are proud that we are able to combine an increase in IFRS equity with also 100 basis points increase in our ROE. So the numerator and the denominator both went up and which is conferred by the perspective on Solvency II, you can see the eligible loan funds moving up to 5,300,000,000 unrestricted Tier 1 and SEK 6,800,000,000 of full own funds. Hybrid instruments now compose only 23% of our total own funds. So again solid growth, solid development in book values and we still believe that development in book values in the long run provide a good indication of where companies are heading. Now that we're talking about stock, I'd like you to turn to Page 15, 15, on our solvency, the solvency stock. This page shows its own funds and required capital to 196 percent solvency ratio, up 7 points in the year. If you look at the longer term perspective, up from 186% in the Q1 of 2016, if you go back kind of 2 years end of Q1 2016 were 186%, today we're 196%. Despite us returning in that very period almost 700,000,000 in cash to shareholders. So we gave back 20 points of solvency to our shareholders roughly and still increased our solvency to 196. We're proud of the level of capital and the composition of capital. It's 196% in the standard formula. Unrestricted Tier 1 is 77% and the Tier 1 ratio unrestricted Tier 1 ratio would be 152 or Tier 1 as a total is 166. No Tier 3 capital at this point to this, no tiering risk. We don't use any Tier 3 element in our solvency. And we have headroom in all the available solvency categories. And the combined Tier 2 and Tier 3 headroom is now at €697,000,000 increased against it last year. So significant amount of financial flexibility. Market risk is still under 50% required capital at €47,000,000 Appendix E in the presentation gives more feeling on the composition of the SCR, the required capital and the delta as I know you can see market risk still below 50%. So our claim that we're an insurance company not just an investment fund is with that sense still substantiated. And finally, the LAC DT, the ever famous loss observing capacity of deferred taxes is at 74%. It increased, we moved the longevity of life from 60% to 70% and non life from 75% to 90%. Please note that the increase is solely due to the inclusion of the BTL. There are no future profits in the substantiation of our LAGP. In this year, we made various efforts and we created a significant DTL in the year. As a matter of fact, both our life and non life entities now have a net DTL position, so no DTH, but a net DTL position. And it's the increase in the deferred tax liability that we felt comfortable to use to further strengthen our liability ratio. So very well founded, no future profits and delta really is only a DTL movement, moving our likelihood to 74%. In the later page in the past, you can see the solvency of the underlying entities both life and non life are solvency due at 185 percent mark. So in terms of solvency stock, we feel comfortable with the level of solvency that we hold. Moving from stock to flow, Page 16. As you know, there are various ways to decompose or to bucket the delta in solvency. From beginning of year to end of the year, our ratio improved by 7 points. One way of analyzing that delta is by using capital accretion, which is on Page 16, and where we define sources and uses of capital. Sources of capital is operational cap generation. What does the business generate in terms of long term investment margins and additional returns? What is the book release of capital? And what are the deltas or net effects of assumptions changes in business developments that would generate SEK1.1 billion organically and SEK300 1,000,000,000 of additional Tier 1 issuance. And then the use of capital, while it's absorbed by the UFR unwind, absorbed by the cost of hybrids and capital that we require that we invest into market risk lead to a capital accretion of 742,000,000 out of which in the last year. We paid roughly 2 thirds, SEK 255,000,000 in share buybacks, 2 thirds in dividends and we retained 1 third in our balance sheet. So one way of depicting or decomposing the delta insolvency is capital accretion sources and uses of funds. The alternative more classical wage is on Page 17, which is the organic capital generation. As said, our solvency increased from $189,000,000 to $196,000,000 or about 7 points. Of this, in our definition, which is reasonably conservative, we find an organic capital generation creation of SEK377,000,000 or about 11 points of starting solvency. Appendix G in the pack gives more information on that very number. There's a lot of analysis going out there on the assumptions that are embedded in your OCC, especially around market returns. I think it's a great piece of work by Farquhar actually on looking at various metrics that people use. In the appendix, we try to give you alternative views. Page 17 is our definition on our long term investment assumptions the way we run the business. But we don't mind providing a service to the Alvest community. So we've done some work for you in aligning it to market consistent numbers. On the PAG, please note the total owned funds in the year increased by €712,000,000,000 If you add the numbers above the line delta EUS 712, which includes the absorption of the decline in VA. In the standard model, the VA during the year declined by 9 points, which shaped off 9 points of solvency. So, like I said, even excluding the VA, we would have generated growth almost 30 points of solvency in the year. Other points to note, the risk margin release is kind of similar to the UFR unwind. It's not our achievement, but it's a nice coincidence, which means UFR unwind risk margin release roughly similar. So I mean the SCR release actually really contributes to free capital. Also note that our dividends at the €230,000,000 of ordinary dividends represents about 60% of the organic count generation and 80% of the operating and business cap generation, which means the 60% is a number that those of you who have been following the Cinti IVO are familiar with. Although we pay our dividends based on operating profits, 45% of operating profits, but given that the OCC tends to be around 70%, 75% after the operating profit, 45 times 70% equals roughly 60%, which is the payout ratio as a function of capital. So our ordinary dividend is about 60% of the total organic capital or 80% of the operational cap generation. I think that's a capital excluding book release. So that means that dividend payment to our perspective is sustainable and well founded in replicable capital generation. Page 18 shows the sensitivity of the solvency II ratio to the UFR. As you know, the UFR will be lowered actually has been lowered in the beginning of the year from 4.2 to 4.05. That will cost us 3 points of solvency, which is it's a given. Interesting to note that we steer the business increasingly on an economic UFR. We've talked about it before. At this point, we've estimated economic UFR at 2.2 because 2.2 is a UFR that's consistent safely consistent with the investment yield that we're generating today. At that level, our Solvency II ratio would be 150% and we believe that number should be compared to 100 plus a margin, 100 plus a buffer. We could even see throughout the year that if interest rates continue to go up, the 2.2 might be gradually moved upwards. We'll do some careful homework before we go out with formal guidance. But the direction on that number, the direction of travel is up rather than lower. So, the 2.2 should go up rather than down given where markets are, which should give you comfort on the economic UFR adjusted solvency position of the Group. And if you were to strip out UFR and the VA altogether for what some people claim to be an exit value for the Group, that's safely over 130% and for the life business, but also significantly above 0. So ex UFR, ex VA, the group is at 133%. And if you adjust for tiering, it would be 122%, but then you can do the refinements of the model, safe to say ex VA, ex UFR, this group is still very solvent and very well able to pay any difference. And we're obviously at the UFR ratio at a 2.2, so our economic UFR actually also increased by 8 points in line with the headline increase. Consultancy to balance sheet, Page 19 shows you our numbers on our balance sheet. We would think or we're convinced that we have a strong and resilient balance sheet. You can see the solvency position and the headroom that we have, the leverage and the maturity profile. Couple of points to make. You can see the financial leverage of the group stable, €25,200,000,000 to 25,300,000, despite adding a SEK300 1,000,000 RTE1, the financial leverage ratio stayed stable. And to preempt your questions, if you had a debt over equity, so very basic D over E calculation, that also ratio would have stayed stable at 33.7 to 33.8. So there is no numerator, denominator play at hand here. So it's leverage of the group very, very stable. Actually, if you look at our leverage, we report 25.3 percent on an IFRS basis. If you adjust for the fact that we have a shadow accounting IFRS scheme in which we do not add real life capital gains to our book value, if you would adjust for that, the leverage ratio would be in the low 20s around 20%. If you think that if you take into account that the S and P leverage ratio is 18%, the norm for the group is 40%, also really well below the single a norm. And finally, if you look at solvency as a percentage of capital or leverage as a percentage of solvency, it's about 28% of unrestricted Tier 1, which is low for the industry. So in summary, headline leverage 25.3 percent. Actually, if we redeem the Tier 1 notes that we've where we've refinanced the coal, that leverage will go down to 22%. Shadow accounting adjusted, that's the lay is low 20s. SFP leverage, 2018, only half of the 40% and in total we do weighted only 28% of unrestricted Tier 1. Again, it's a long way of saying we have substantial financial flexibility. We have room to add leverage. And because we've got all the instruments out there, we've got headroom, we can pick and choose the instrument that we like. We have headroom in Tier 1, Tier 2, Tier 3 and we've got various Tier 1, Tier 2 instruments. So we can pick the instrument we like were we to add leverage. There is no constraint for my balance sheet whatsoever. Page 20 is called unencumbered access to pools of liquidity. Not sure who we came up with this title, but I guess our IR team was close to its Karma when they made the pack. Anyways, I think what we're trying to say is that we have been able and are able to upstream cash to the holding. You can see the bridge from holding cash beginning of the year, the end of the year at CHF580,000,000. Totally upstream funds up 27% in the year from CHF 407 to CHF 518, which is excluding by the way the benefit that we have from creation of DTL. The DTL creation led to envelope $200,000,000 of cash, which we deliberately kept in the life insurance business. So, upstream is up from 5.18 to the holding. Whilst the upstream cash, think about the 5.18 roughly 400 in life, the remainder in non life. While to upstream, the solvency ratio of the entities are 185186, up plus 5 or plus 4 during the year. So the life and non life entities, upstream cash during the year and still increases solvency by 4 to 5 points. And our remittance exceeds the organic capital generation and it actually exceeds the result after tax and after hybrids. And finally also low double leverage. So to compound and to build on the previous sheet's message, we can raise debt if we want to. We've got substantial flexibility and also there is no blocking issues to cash. We cannot upstream cash to the holding. We just decide strategically to hold the cash in our operating entities. But the combination of upstreamable cash, solid solvency levels at the operating entities, low double leverage gives a huge amount of financial flexibility for the group. Have to take your questions if you have those in the Q and A. We also expect to use for wrap ups and some final words of wisdom. I hope that's not a message according to my age. Thank you, Chris. I will conclude with the key takeaways from a management perspective. We are pleased, as said, with the strong operating results. We had truly a very good and record year, driven by strong performance in all of our business segments. We deployed the capital the capital profitability generating and operating return on equity at 15.6%, and we can offer our shareholders quite a considerable increase in the dividend per share and the prospect of an attractive interim dividend starting in this year. Our balance sheet is strong, as Chris explained, and we have substantial financial flexibility. The insurance entities are highly capitalized, offering ability to upstream cash to the holding if and when needed. On all counts, we are outperforming current medium term targets, put differently our business delivering top quartile performance, while these provides us a comfortable start into the New Year. However, while we strive for nothing less, it does represent a level that is very challenging to outperform this year. Before we open up for questions, a few words on how we look at 2018. Based on the strength of our balance sheet, our financial flexibility and current high performance of our operating businesses, we believe we are in excellent shape to seize all key insurance opportunities over the medium term. Our businesses are simply doing well. Our dividend paying capacity is strong, and we assume a stable growing dividend going forward. At the same time, when taking into account the already high level of operating result in 2017, which is partially driven by exceptional favorable operating conditions in 2017 and the low amount of large claims in Q1, the uncertain developments in today's financial markets as a result of which direct investment yields have been reduced and the €30,000,000 impact from the January storms we reckon with a slightly moderated earnings level in 2018. This will be partially countered by the earnings contribution from the Generali acquisition and selected re risking. The earnings contribution from Generali will normally grow over time as synergies are received. Also, we will act responsibly in further rerisking our balance sheet given the state of financial markets. With that, ladies and gentlemen, we are happy to take all your questions. We will take our first question from Cor Kluis from ABN AMRO. Please go ahead. Good morning. Kor Klaus speaking, ABN. A couple of questions. First of all, about the solvency II ratio, the roll forward from the Q3 to the Q4. And the outcome is around, of course, 1.93%, 1.93%, but the dividend is minus Second question is about operational capital generation, especially for the Own Funds piece. I think if I calculated, they come to around €40,000,000 in the Q4. That was somewhat lower than previous quarter. So could you give some indication why the owned funds was a little bit less enhanced by debt? And my last question is about this Solvency II ratio year to date. We had a followed the start of the year, of course. EVA probably went up somewhat. I think it's at least the market effects year to date for your Solvency II ratio? Those were my questions. Okay. Cor, it's Chris. When it comes to the roll forward of SOVEST during the Q3, net net we moved up on 193 to 196. You're roughly thinking that the VA took out about 3 points from that number in the quarter. The dividends took out about 7 points in the quarter and the Laggedy T addition added about 5 and the remainder is the combination of 3 things, which is business capital generation, excess return in markets and further investments into required capital into especially real estate. In the Q4, in the required capital, we added more real estate to our balance sheet and the lowering interest rate in the 4th quarter increased the SCR requirement simply because the capital charge on longevity and lapses go up simply as an NPP phenomenon. When rates go down, life capital goes up. So basically, you take out €10,000,000 for VA and dividends at €5,000,000 for the last 80, which will get you to 188, we got to 196 and the remainder really is the company is the combination of operating cash generation, good financial markets and addition of capital. And the owned funds development in the 4th quarter was lower than expected. I think it was roughly in line with where we were. The 4th quarter as you see on the business was slightly lower contribution from non life in the Q4 from disability, but in line with previous with the average of 1st earlier quarter. So to us nothing peculiar, nothing that was out of the ordinary in the Q4. In terms of market development this year, solvency, a couple of things happening, 3. 1 is UFR was officially lower, so that takes up 3 points out of your solvency. Secondly, markets were down a bit. That shapes a bit of solvency out as equities were lower and the VA was up a bit. So, basically, the solvency take out the UFR of 3 points, which bring you from 196 to 193 And then I think the markets are a very small drag. But the last time I look was a week and a half ago and since that the markets are up. So we didn't really look at it on a weekly basis. Think of it as roughly stable in the year. Better to hear. Thank you. We will now take the next question from Arjan Vanveen from UBS. Thank you, gentlemen. A couple of questions on the Life side and one on the integration, please. The Life rerisking of the asset side, does that help your investment margin in 2017? So just curious as to how much more to go and then should we expect that to drive earnings a bit more in 2018? The second question is more on the reduction in the life gross written premium as well as new business APs. So just curious as to whether that's kind of in line with your plan? Or are you a little bit disappointed with the growth in the Life given the missed consensus on probably on both metrics? And then finally, just on the Generali acquisition, what date do we assume the or what date do you start coming through in terms of numbers just for our modeling purposes? And then I assume you'll update on that in more detail at the Capital Markets Day on 10th October. Yes, very good. Let me talk about Life and re listing. The Appendix L from LEO has actually more details on the Life segment. There you can see the direct investment income in the year. So it moved up from €981,000,000 to €1,000,000,000 Actually, direct cash income during the year. So, they really received coupons, rent, etcetera, so no capital gains, etcetera, at all. So, you can see how this thing deals during the year. Normally, the first half tends to be higher than the second half because the dividends are recorded in the first half. But you can see, Philippe, that there was €19,000,000 of additional direct investment income, partially as a consequence of the re risk of the business. How to think about going forward? Best estimate is to have it stable. There are a couple of things at play. 1 is yields are still depressed and falling. It's getting more and more expensive to buy a certain earnings stream these days in the markets, whether it's you buying a stream of rental income, whether you're acquiring mortgage income, whether you're acquiring credit spreads. So there is some downward pressure on direct investment yields, also because in a mortgage book, some of the very profitable vintage this year, the 2018 vintage year is being redeemed as we speak and replaced by lower rate mortgages. So that is inevitable trend that all financial institutions have. However, we see some room to continue to add risk to our balance sheet at 47% market risk. We can continue to add risk to the balance sheet of ASR. So we can probably cover up of Okta compensate the gradual downward push on yields with gradual rerisking. We're putting through a number of initiatives like the triodos initiative that Jozse mentioned to acquire more in illiquid assets. We believe there's opportunities to continue to add to real estate business to keep the direct investment income in the Life business stable, but it will require some gradual rerisking in the year where we see opportunities mainly in the real estate space. So stable and if we continue to re risk during the year, there might be a bit of upside that depends a bit on how markets develop. Before I give details on the Generali earnings, we indicated a 30,000,000 dollars potential net operating profit contribution from Generali. That number still stands in our work on the integration. OVC and Zobark confirms that opportunity. I would safely say that is not going to come overnight. So safety would be a third, a third, a third in the next 3 years with some room to move to a little bit faster in the 1st year as we start cutting off and add the investment business to our book. So SEK 30,000,000 adds 1 third each of the 3 years with some upside in the 1st year if we indeed succeed on the moving of staff and the legal merger that we plan to conduct in the second half, I mean the moving of Generali staff into ASR buildings, the legal merger that will be important triggers and if we indeed succeed in that, we may outperform that rough timeline. But just to just on generality, from an IFRS and to see it through your account, it starts from the 5th February or is there a different date we should think about? Well, maybe the 5th of Feb to 1st Jan, we'll ask 1st Jan. It means that the 1 month Okay. You'll be back there again. The value earnings before cost cutting are not so big that the 1 month will make that much a difference. So, 1st of you. And I am just on your second question on the development of the gross written premium in the Life area. To judge that, you should take into account in 2016, we had to add in total roughly €500,000,000 of one off single premium due to the acquisition of Nivo and a large pension contract called the Asda contract. If you strip those 2 out and you would compare the organic development of the Life premiums, we are relatively satisfied given the fact that in the Dutch market, individual Life books are declining and we were able to almost compensate them and not fully by the growth in our pension book. So the total decline of Life premiums, if I take out those 2 one offs in 2016, it's roughly 2.5% to 2.6%, which is in line with our expectations. We will not be able to fully compensate the decline of the Individual Life book by growth in our pension business as long as we keep up to our strategic value of volume. We only want to do business in this area if we can offer prices that enables us to deliver the value also from a shareholder perspective. So nothing unexpected from our perspective. And yes, it is down a little, but we are happy that we were able to compensate those gross written premiums that declined in Individual Life with the new business in DC, in pension DC. Okay. That's very clear. Thank you. We will now take the next question from Farooq Hanif from Credit Suisse. Hi there. Thank you very much. Just wanted to go back quickly to Cemaron in Nederland. I remember you talked about roughly, I think, €15,000,000 or €17,000,000 of synergies, which I think are included in your €30,000,000 already. As you look at the business, I mean, what are the main areas that you've allowed for in that? What have you not allowed for in that? And then secondly, on in the disability business, at what stage will you get an indication from UVW on pricing for the Bayezavar for 2018? And do you anticipate a time where that will become more reasonable given the data that's coming through and will allow you to step into that market to grow more? Thank you. Farooq, it's Chris. On the generality synergies, those are the 15% to 70% are all cost synergies, the real cost that's in there, because it really is a cost play. So that's what I think that what is not in there is the benefits from re risking as we think that additional there could be potential value from that, but that will require the commitment of capital. At this point, we have reserved 2 to 3 points of solvency capital to add to re risk the Generali business. But we'll do it carefully given the state of financial markets. We're not going to go overboard and play risk. The business case in Generali should be a cost gain. So we want to meet our targets based on generating cost synergies as we planned. So the $15,000,000 to $17,000,000 is costs and those are all on track and with that we'll meet our return hurdles. That could be on top of that additional room for re risking, which will gradually feed in during the year. Think about 2 to 3 points of solvency that we could add. Think about between $5,000,000 $10,000,000 of potential additional investment earnings that will feed in during the year. And Farooq, I'm happy to take your second question on the disability. The UWP calculates its premium based on the claims cash out in a certain year, and they divide this to the number of customers they have, and that is the actual premium in a certain year. As an insurance company, we have when we calculate a premium, we have to take into account future claims, solvency developments, etcetera. So to your question, it will take a number of years before we will be able to compete with the cash based system that is used by the government. But as soon as their customer base grow, their claims will grow. And so the average premium they have to calculate will go up. And somewhere in near future, the premium level of the government will meet ours. So we are in the market. We have customers in the Bissapa, but the growth was not as big as we projected at the IPO because we also need to make money. So we want to be careful to compete with structural unprofitable premium from an insurance point of view. So it will be not from the 1st January of this year to the 1st January of next year. It will grow gradually over the next 2 to 3 years. Very clear answers. Thank you very much. The next question comes from Robin Vandenberg from Mediobanca. Yes, good morning, everybody. Referring to Slide 19, it seems that you have quite a bit of firepower on the S and P framework. But on your website, you've also disclosed a document on the Article 1 issuance, which stipulates a cover of only 5.7x. And I think that S and P in the past did indicate that if you would drop below 4x, that would mean a downgrade for the group. So how does that tie into the flexibility on financial leverage these slides are telling us? That's question 1. And then question 2, if you have that much space on financial firepower, What should we think about what you will do with it? I mean, I think you've been quite clear that you have a focus on M and A at the moment, but you thus are always focused on small bolt on. Could you consider larger deals? I think press was recently indicating that CEVA and maybe even Achmea Life books could be up for sale. Is that something you would look at? Or would you remain committed to small bolt on M and A? And how would that affect your capital distribution policy? I mean, the DPS announcement today is very welcome, but it seems you could do more. Last year, you indicated that your capital distribution would be capped at the capital being generated in the year. Is that something we should also consider for this year? Or will you deviate from that path? And my third question is on the Life operating result for the 4th quarter came in at $167,000,000 Do you feel comfortable with this level going forward excluding the potential add on effects from Generali? Or are there some one offs in that $167,000,000 number for the quarter? Thank you. Let me start with the middle question and Chris will come back to the first and the last one. The way we look at the market currently in relation to our capital position is that the base of our strategy is organic growth combined with inorganic growth in certain areas. And like we have said in the past, that, that is in the funeral business. We like nonlife portfolios. That's why we acquired the Generali book. And if we would find further potential investment opportunities in the asset management area, we would certainly look at it. So that is the core of our strategy. In terms of would you be willing to look to other opportunities and like you mentioned, the potential individual Life books from Dutch competitors that want to get rid of it. Now we almost have concluded the conversion of our own books to the software as a service platforms. We are perfectly willing to look at further consolidation of the Dutch individual life market. I think we are well positioned. As far as I know, we are the only insurance company in the Netherlands with a variable cost platform in Life. We've always said we first want to do our own books and that's not fully done, but we're now convinced that we are able to transfer portfolio to dose to this platform. The first one will be the generality portfolio going forward. But if and when there are interesting opportunities in the Dutch marketing regarding to Life, individual Life books, we certainly will take a look at those. And that's the way we would love to deploy capital. So we're happy with our current capital position and willing to deploy towards all kinds of organic and inorganic growth. On top of that, we have announced the interim dividend stating that we are willing to deploy capital also to shareholders. And as said in my presentation, even when we can't find any organic or inorganic growth opportunities and our capital continues to grow, we're willing to deploy to look how to deploy this capital. And that's why we, as said, have announced the interim dividend already. So and the last remark to make is, even when there would be something big in the Dutch market, we've always said that's not our primary aim. We're not calling people. But if somebody would call us, we're always willing to have a talk and have a discussion whether it fits within our strict financial criteria. So then, I just explained how we will decide about let me share some light on how we can raise. Your point on fixed tariff coverage is valid, although the prospectus really had pro form a numbers, as I recall, using last year's operating profit divided by the interest charges of the hybrid including Tier 1. This year's operating profit number is already substantially higher. So if you run it at this number that means you have a 5.9 or 6 times interest cover. Secondly, and on an IFRS basis, it's 16 times. So it's not 100% clear which number S and P will look like. I think S and P does not necessarily look only at operating profit. They look at a sustainable earnings power. So, in their perspective, the number is between the operating cover and the IFRS cover. So operating is now at 6 times IFRS coverage at 16 times. Also note that in that as 2 very expensive hybrids at a 10% coupon, If those are being called or refinanced or even called because we did the RT1, the aim of calling these old T1s, that 20,000,000 pretax interest charges drop out. So the very expensive ones drop out. So that means if you do that, the interest cover goes back to 8 to 9 times on an operating basis and on an IFRS basis even higher. And my IR people tell me that actually S and P tends to live at IFRS rather than an operating income. So operating is our own conservative view. So to take it into account from a leverage perspective or from an interest cover perspective, there is no limitation or there is some limitation, but not an immediate limitation on the horizon. If we were to raise €500,000,000 to €1,000,000,000 that is something that the group could bear. And if you allow me to make a statement about the 30% mark, there is some misconception on the 30% leverage norm. We said we strive to have a norm that's below around 30% on an IFRS basis. In my little speech, I showed to you that there are various metrics that we could look at. I think we should not take given where rates and yields are today, given where the interest cost is today and given the way our balance sheet is structured, I think we could even look with something at north of 40 between below 40, between 30 35 leverage would also be definitely feasible for us. So, in terms of financial flexibility, we should not feel ourselves to be overly constrained. Final question was on the liabilities. I think as I said, the income from investment is probably stable. As I said, the income from the operating income from the capital gains reserve is stable at about SEK 3,200,000,000. So it has been north of SEK 3,000,000,000 for I've been here for 4 years, so as long as I can remember. So it's substantially about SEK 3,000,000,000. So we think the release on cap gains to Europe should be there. The only thing we and I think on the cost side, our cost result is likely to be stable. The one thing where you can see some downward pressure is the mortality result simply because the book will shrink over time. So you may see some downward pressure on the mortality result. So fair to say stable to a gradual downward pressure from the inevitable shrinkage of the book over time. But we feel pretty comfortable with that. Are there one offs in the Life business? Yes, a few positive one offs, but my history tells me you always have one offs. So even if they don't reoccur, there will not be such a massive change in life earnings. Okay. Thank you. Those are very clear answers. As a reminder Lutzer tells me, in the end, we're all one offs. That's a very good way of looking at our business. We'll now take our next question from Kunal Devari from JPMorgan. Yes. Hi. This is Ashik here. I'm just speaking with Panal's line. Just a couple of questions I have. So first of all is your asset book value has gone up considerably in 2017. Can you give us some sense about what is the reason for that? I can understand that operating profit and dividend, there is a bit of difference, but I think there is something to do with cap gains as well. So why is cap gains reflecting in our assets book value? If you follow Shadow accounting, so that what are we missing here? So any thoughts on that? And secondly, just for modeling purpose again, if I look at your amortization of this realized gains reserve, should we keep it at stable at 2017 level, which is around $320,000,000 or do you reckon that it could go up or down? Any color on that would be great. Ashik, well David, the book value went up because of a couple of points. We think earnings not pay our dividends. Secondly, revaluation of those assets that are not shadowed in a shadow accounting reserve. So shadow accounting has fixed income, but those assets that are not in fixed income, I. E, real estate or equities, those revaluations are reflected in our IFRS equity, but not in our operating profit, right? I mean operating profit only has direct investment yields, so no cap gains. But in the IFRS equity, the cap gains on those asset classes are not part of share of accounting are a positive contribution. And finally, there is a IAS 2019 deduction, which declined a tiny bit during the year. So it's a smaller negative actually becomes a positive. So those three elements, retained earnings, revaluations of asset classes not part of shadow accounting and a smaller deduction from our IAS 19 pension accounting, those account for the delta in IFRS book value and your capital gains reserve release. I plan with a stable number. If you look at our multiyear budget, it has a number stable over time. So we feel comfortable sharing a message with you, stable number. We will now take the next question from Johnny Vo from Goldman Sachs. Just a couple of questions. Just look, if I look at the solvency of the Life entity alone and forget about the consolidated solvency, which is influenced by debt issuance and so forth, it actually declined by 1 percentage point half on half despite you actually adjusting the LAC DT, which added north of 5 percentage points of solvency. And then it looks like you significantly paid out more than you generate. So is this remittance coming from the entity abnormally high? That's the first question. The second question just comes back to like further buyback potential. If I look and I take into consideration your solvency is likely reduced by 9 percentage points for the transaction with Generali. You'll have some negative adjustments for UFR of 3%. Cash in the holding will have to reduce by the dividend you're yet to pay. Also, your dividends are going up and there's a bond that you need to redeem in 2019. Unless you raise further debt, it doesn't look like you have that much cash available. And given the pressure on solvency, it also doesn't look like you can sustainably transfer high remittances out of the entities. Can you comment on that as well? Johnny, thank you. When it comes to our solvency in the life business, it declined by 1 point during the year. But no, it increased by one point in last half year, but has increased by 4 points during the year, in spite of in total, I think about SEK400,000,000 that we upstreamed from the life entity during the year. So in spite of SEK400,000,000 upstream, it moved up by 4 points during the year. 1 point decline in half year, I don't the solvency rate is 186%. If we were to eat 1 point per half year, we could continue to eat for a long, long time. If you think about solvency in the life business ex UFR or ex UFR NDA, that's still substantially high. Ex the UFR of 2.2, the life solvency level is about 122 of the life insurance entity. So the economic solvency of the life business is still safely well above 100x with a UFR of 2.2 and that the 2.2 is more likely to go up than to go down. So with that, we feel that the licensure that we sell is very well capitalized with 200,000,000 of up to 400,000,000 upstream in the year. If you think about further about the solvency in the EOF during the year is about SEK 5,000,000,000. It declined by SEK 100,000,000 in the first quarter in the second half of the year because of up streams. So what happened to the solvency ratio, especially the addition of risk, so we added more real estate risk in the Q4. We had a higher charge from longevity capital and from lapses because the rate fell. So the below the line numbers increased from real estate asset allocation and from longevity and from lapses. So we are not at all concerned about the solvency level of life at 186 standard formula increasing by 4 points during the year, at 122 standard formula at 2.2 UFR. These are just very solid levels that give no concern about what, if and how we can upstream to the market. And if you look at the amount of fungible capital on the amount of EUFs, still 5,100,000,000. So in that sense, we are not concerned about further upstream ability. When we look at share buybacks and our potential, I mean, fair enough, I mean, we ended the year at 190 6 solvency, take out an initial 9 points of generality, which will add back will add solvency back during the year in the integration. But the first closing of the deal and the merger of a lower solvency business with a higher solvency business we'll erode 9 points of solvency from our group, take out 3 points of solvency from the UFR, we'll give you a slightly lower solvency level, but the UFR decline will also add back to OCC. So it's basically moved from stock to flow. So the UFR decline as such, I'm really not worried about. That's already taken into account when we look at the 2.2 metric. So we see no impediment to return capital to shareholders. The Generali will take out some capital in the beginning, but there will be capital synergies during the year later on as the integration takes place and the Gimli Ali business will add to earnings. So you should see our business as a dividend stock with substantial dividend paying potential, Dividend as a function of organic capital generation of own fund generation is still very, very safe. We've committed the year this year or we aim to reduce give over 300,000,000 of capital back to shareholders in a base dividend and an interim dividend. I do not see why that would not be sustainable as even the combination of this year as base dividend plus interim dividend is less than the OCC that we generate. So if we continue to do this and distribute €300,000,000 plus to shareholders, which I think is about 6 percent of our current market cap, that means then still the Life business would not erode solvency except for the gradual decline in the UFR that will get back to flow in higher OCC. So, Johnny, I hear your point, but in terms of numerical analysis, you're probably correct in terms of what the business is doing and our policies, we see no limitations there. We will now take the next question from Benoit Particou from Kepler. Yes. Good morning. It's Benoit Petrarque from Kepler Cheuvreux. Yes, a couple of questions on my side. The first one will be on your long term investment return assumptions. Any updated levels into 2018 on your assumptions? What do we need to plug in our models on that one? On the cost base, so you have a cost cutting target of €50,000,000 you reached 41. Out of the €41,000,000 I was curious how much is actually coming from the M and A you have realized since the IPO. So much has been coming from the inorganic well, basically consolidation of the cost base and the cost reduction on M and A versus what is coming from the more organic cuts of the cost base? And then maybe the last one will be on the passenger internal models. A clear update is on potentially your view on the standard formula. Also looking at the YUPAL plan changes on the formula. Any thoughts on that? Any plans to move to the passenger and some models? Thank you. Okay. Benoit, thank you. I'll take a question. Finally, someone asked a question about Apendic D. I would thought you guys would be all over it, but apparently it's clear. Let me go to APD APD and our market because it's an assumption. We will not change our long term investment assumptions. I mean, they are public and we look at our business to move measures across the cycle. So we believe these are across the cycle assumptions. So where do they move over time? Where have they moved? What we're seeing, if you look at the actual spreads and the modeled spread that the government bond spread has moved closer towards our model. It's a small drag from core Gottlieb to what we assume, but they've moved very close to where we are. So, that drag is actually kind of meaningless today, which by the way also means that our swap spread hedging trade has worked well. I mean, remember in this year we hedged the swap spread risk and that trade has come come out very well as a swap spread between core governments and swaps has narrowed. So we're seeing the drag, if you wish, from Govee's core government has narrowed substantially. At the same time, last year, this credit spreads have also tightened. So, there is a bit of a drag from the credit side. There is sort of plus on the mortgage side. Mortgage is still used more than the OCC assumption. And non core peripherals have also tightened a lot, although that has changed in the past few weeks. So, we don't change our long term investment assumptions. We believe they are fair over the cycle, Where core governments are getting closer to our model, currents have drifted away a bit. Subgrants have drifted away, but our recovering end on the mortgage side, that's still a substantive spread. So if you look at the page number Page Appendix Z, the net net of all of it, there's still about a €9,000,000 to €10,000,000 understatement of the OCC from this perspective. On equities and credits, the 300 basis points or 3 30 basis points are still very conservative. If you work with 7% as some of our peers do that would add substantive more to the OCC. We continue to work with these spreads, but this is actually what has been realized. And the actual return equities last year was even larger than that. Maybe if you allow me to make few other remarks, we've also showed the impact of our hybrids. I mean, it's unclear where the industry is landing in terms of hybrid expense in OCC. If you exclude the 56 of hybrids, this is the number of this €20,000,000 date stuff that goes through the P and L, €36,000,000 is curbs that goes through OCI. So you can play around with these numbers. And finally, it's the UFR drag. We've noted that there's also various ways to deal with the UFR drag in the industry. We think we can observe the few. 31 December pinpoint or I think Q4 last year UFR drag and Q4 this year UFR drag gives 101. If we had done a more frivolous calculation, I could have argued the number was like €10,000,000 better. That will gradually show the numbers as rates develop. So we still believe we've got a fairly conservative way of doing stuff where the UFR grant you could have argued it's $10,000,000 less. We could have argued part of all the hybrids not in the OCC and you could have argued how you work with spreads. But we work with a long term across the cycle assumption that's kind of in line with how we run our business. So that's going to we will stick to that. But we hopefully Appendix Z gives you a bit of more handle on to analyze these numbers. Should I also take your question on the standard model? Yes. And then I'll take the cost question. Yes. We are running on a standard model. We firmly believe in that. It's the best it's a very cost efficient way to measure capital. However, we are aware that EIOPA will come with a review of the model sometime soon. It is probably expected any day, any week now. That could give us potentially reason to revisit the standard model if we feel it's no or much less appropriate than what it was today. And sometimes we look at where some of the numbers are that other players use or would give a slightly different outcome. So it's not that we're it's not in principle against its internal rules, certainly not. For now, we think it's the most cost effective way to use the Standard Model, but we will keep a close on the EIOPA rules and regulations. We will keep a close eye on the progress on IFRS 17 because moving to an internal model will keep the same people busy that also do IFRS 17 implications, but we certainly will not do not rule out we certainly do not rule out ever moving to an internal model. Thanks, Chris. Benoit, on your question on which part of the cost reductions already realized in 41, which part came out of the M and A and which part is, let's say, organically. The larger part is organically. It's not exactly to pinpoint how big the numbers are because an integration never takes place overnight. They flow in gradually. So let me give you a few examples. Last year, for example, we did no integrations in the P and C business and there the cost reduction was €4,000,000 In the Non Life business, we reduced the cost per policy from €66,000,000 to €44,000,000 That was mainly organically. And there was one cost reduction, which I can put a number on and that was the cost reduction on Accent. That was last year €5,000,000 So let's say roughly 2 thirds to a bit north of that is organic cost reduction and the remainder is due to already in 2015 announced M and A transactions. Okay, great. Thank you very much. Does that answer your question, Piran? Yes. Yes, thank you very much. Okay. Thank you. Thank you. We've understood there are no further questions. So thanks, everybody, for joining us today. As said, we were very happy with the results we were able to present. Some of you, we will meet over the next few days. So we're looking forward to that. Others, we may meet at the 10th October when we will organize our 1st Capital Markets Day. In the meantime, we continue to do all the good work to deliver the results as promised. And as said, we are fully convinced that our underlying business will deliver performance again in 2018. However, we, of course, see the movements in the financial markets, and we already have had our first storm in 2018. But having said that, we're fully convinced that we will be able to deliver healthy and market outperforming results going forward. Thanks, everybody. Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.