Earnings Call: Q3 2017

Nov 29, 2017

Good day, and welcome to the RSA Conference Call on the 9 month trading update. Today's conference is being recorded. Before we start, I would like to ask you attention for the disclaimer on Slide 12. Now I would like to turn the conference over to Mr. Chris Vigee, CFO of ASR. Go ahead, please sir. Good morning, everybody. Welcome to the conference call corresponding to the ASR Q3 trading update. As you've experienced, luckily, ASR is better in selling profitable insurance contracts than organizing conference calls. Although I can assure you that our client contact center is slightly more effective than the quarter today. So rest assured, this is not normal practice for ASR. Anyways, having said that, let's talk about the Q3 or 9 month results of ASR. As you will be aware, this is a trading update, a relatively light set of reports. We don't report full IFRS profits in a quarter on quarterly numbers. And we're also a bit more light on the debt and solvency reports, but we'll give you a little bit more color on the voice line along the way. Q3 was a fascinating quarter in the sense that a lot of significant strategic events happened in that quarter. We may have already forgotten, but we actually did announce the acquisition of Generali in the 3rd quarter. We announced acquisition of First Pensions Investments in the 3rd quarter and we managed to sell the final stake of the Dutch government in the 3rd quarter. And on the brink of the Q4, we launched and placed it €300,000,000 in overall euro Tier 1 instruments. So on the strategic side, lots of things going on, lots of good developments at ASR. On the business side, a reasonably ordinary quarter where things happened as planned, happened as we envisage and the businesses continue to work its way through our plans. If you go to Page 2 on the presentation, which I hope you'll be able to see on our website, you can see the numbers. Operating results year to date, EUR 550,000,000, up almost 24% versus last year. Result in the quarter, EUR 165,000,000 up about 13% versus last year. Operating ROE north of 16%, still well above our target of up to 12. A robust solvency ratio of 193%, we'll give you a little bit more color on that later on. In that number, we absorbed a 3 points worth of share buyback at the final sell down of the state. So we believe a continued set of solid results, ASR to operate structurally at an elevated level, even in the Q3 where we tend to have more claims in non life, more claims especially in the travel and leisure insurance business. In that quarter, elevated performance versus last year, up 23% on the year to date. If you flip to Page 2, you can see the results on a quarterly basis. The quarter 2016 and the quarter 2017. As you noticed last year and this year, Q3 is a result indeed where our travel and leisure insurance business tends to receive its claims. I mean, as a matter of fact, people Dutch people do take out their caravans in the summer. They drive around as a time when they have their claims and they have no claims in the winter. So that's a very peculiar Dutch phenomenon and as a travel and leisure insurance business, that's something we have to record with. So think about €8,000,000 of additional claims due to that seasonality effect in the summer. Just a few interesting points to note on that very business. For example, due to the lower roaming charges, we see actually more people taking their phones with them on the holidays, actually receiving more claims on damaged phones along the way. So you can see some of the societal developments being reflected, but ultimately in the insurance business. But again, typically in the Q3, we incur the claims on the overall pace of the travel business, and they no longer reoccur in Q4. Also in Q2 to Q3 from the development from the second to the third quarter, In the second quarter, we use that we always have our dividend reporting season, so the dividends flow into the operating earnings. So that's about $20,000,000 of seasonal plus seasonal benefits in the Q2. So if you look at the year that we've gone through so far, the movement from Q2 to Q3 actually is a loss or relatively disappearance of €20,000,000 of dividends that we only have in Q2 and the typical Q3 occurrence of €8,000,000 of travel and leisure claims. That together explains and drives the move from Q2 to Q3 in this year. And then compared to last year same time, both years had similar claims and travel measure. But 2017 reports about €19,000,000 higher earnings predominantly in the Life business, where the impact of our more yield investment portfolio is structural and is there on an elevated level. So EUR 19,000,000 more versus last year, where you have a seasonally adjusted comparison. So as from our perspective, you can see the developments in the quarter during the year and versus last year. Let's move to Page 4. You can see the segmental results. All segments drive a strong increase in operating results. All our business segments continue to do better than last year. Most notably, the core business is non Life and Life, totally €104,000,000 up versus last year in the 1st three quarters. In the quarter itself, Q3 to Q3, we find non Life stable versus last year and we find Life elevated by about $20,000,000 $22,000,000 to be precise in terms of elevated earnings in the quarter, offset slightly in the holding, where in Q3 as in most quarters, we do have slightly higher pension charges. As you may be aware, the annual current net service cost is to some extent driven by the level of interest rates, lower interest rates increase for this year the current net service cost. So in Q3, stable in non life, up significantly in life and like for like, slightly higher holding costs, slightly higher pension charges, reducing the holding other elements, eliminations in our P and L. But overall, all segments continue to do better than last year, dollars 104,000,000 up in the core segments and about $5,000,000 up in our growth segments, banking and distribution SMS and distribution. So we feel very comfortable and confident with the amount of trading that this group actually shows and displays. Moving to Page 5, premiums. If you exclude 1 offs, so 1 off single life premiums, premiums up 3% on the year, in life declined a bit 2%. Though in life, we're observing that, of course, our life book is gradually declining. So it's a decline of business that is reflected in the development of the life premiums, countered by significant growth in the defined contribution business, albeit from a relatively lower base. Today, DC makes about 3 quarters of our new pensions business and it's very attractive, low margin, but 0 capital requirement business. So from a return on capital perspective, you can see an ongoing growth in attractive businesses. So in life, the decline of the back book countered by growth in defined contribution, and that's exactly strategically the shift that we want to make. For net net, a small decline in Life premiums. In P and C, premiums versus last year up about 5% versus the last 9 months of 2016. We continue to see good growth in new production in P and C, although we are actually on the process of sanitizing our portfolio somewhat, if you double click, if you zoom in on the P and C volumes, you'll see a couple of developments. I think general gaining in market share in the intermediary channel. Sanitize, it's a plus. There's gradual sanitizing of our business portfolio using the current conducive market circumstances to support our margins as to selectively grow our business. And finally, you'll see gradually feeding in some tariff increases that we announced and put through in autumn and that will gradually feed into our premium levels as policies are renewed. So overall, we see this a healthy development in premiums in line with our value over volume mantra towards DC, towards high return on capital business intentions and towards profitable new business in P and C. Talking about Non Life, moving to Page 6, shows you the results in the Non Life business. You will be able to read the text on the right hand side, but let me give you some color on the different business lines. Disability, you can see premiums and disability recovering. Remember in the Q1 of the year, we had some headwinds where the new Bezavah market shaved off some volumes in disability. That is recovering. We see some business back flowing back to us. So actually premiums are stable to slightly up last year, where we were looking at a small decline in the beginning of the year. So top line recovery on the disability side. Q3 was a very good quarter for disability. My combined ratio year to date is still at the 90s. In Q3, we were actually below 90 combined ratio of disability, very strong and very stable when it comes to inflow of new claims. So comfortable on the visibility business, very profitable and Q3 was actually very, very strong. In Property and Casualty, premiums up significantly from $8.44 to $8.87 continue to gain market share as we said. You will see going forward some further support for top line from tariff increases as they will gradually feed into the business. In terms of claims performance, bulk claims, very strong. Bulk claims, I mean, the ordinary guy who puts his car against the tree, someone who loses the phone, Berkeley, really small average claims. Our bulk claims ratio continues to hover around 45%. So that's a very attractive level and that's unabated Q1, Q2, Q3, good performance on bulk, We just did the bulk of the frames that we have. We had some larger claims in the quarters. In Q3, some larger claims for a total of about €8,000,000 There were no top claims, but midsized fires. To give you some color, that was just not addition to the reserve the bodily injury reserves. It was just a number of the month of October already normalized. So that's got a couple of one off events in claims in Property and Casualty, no sign of a trend there. So if you think about our non life business in the quarter in Q3, think about an uptick in earnings from disability of about €8,000,000 think about €8,000,000 higher claims in travel and leisure, think about €8,000,000 in higher claims due to large fires. And those travel leisure and large fires are typical issues for that season, for that event and appeared not to be continuing in Q4. So overall, we feel very comfortable with the underlying performance of the non life business, especially as our bulk claims ratio, which is the majority of our claims, is still every quarter now around 45%, 46%. So comfortable on that business line. Moving to Life, Page 7, the Life segment. Operating results year to date up 15%, driven mostly by the investment margin, investment margin up €85,000,000 in the year. As you can see, part of it was due to go management actions. Before some of you claimed that's a one off event, these management actions actually is a dedicated rerisking of our investment portfolio to create structurally higher direct investment returns. So the €34,000,000 is something that you've seen, I guess, in the 1st quarters and is here to stay a more elevated level of direct investment income due to allocation to real estate, allocation to mortgages and allocation to credits and the higher release of the capital gains reserve of €51,000,000 Our capital gains reserve was €3,500,000,000 at the beginning of the quarter and about €3,500,000,000 at the end of the quarter. So no erosion yet of the capital gains reserve. So this feels makes us feel comfortable about a more elevated level of trading in the Life business with most notably good $13,000,000 of actually higher cash investment income from higher coupons, dividends, rental income and what have you. Capital gains reserves stay about SEK 3,500,000,000 Other good thing to note, in the first quarter, 1st and a half quarters, we had a lower result on mortality due to an influenza wave in the winter. That actually appears to be an influenza wave in the winter that not continued in the summer. So in the Q3, we saw the result on mortality stabilize, confirming that this was actually unincidental. And finally, again, in terms of new business, no pursuit or very limited pursuit of large single premium business. We have very strict value criteria before we write single premium products. And if you don't meet our value hurdles, we just don't underwrite these contracts. But a lot of good movement in the defined contribution business, which is now 75 percent of our new business. We have upped our DC target and are already meeting that upped targets even if it's only November. So we're very pleased with development of our defined contribution, the event contribution business. Even if it's from a low base, the development of the growth is actually quite promising. Solvency ratio, Page number 8, the number you've probably all been waiting for. Yes, a standard model 193%. We do not provide you the full bridge in the quarter simply because those numbers are not supposed to be looking on a quarterly basis. But let me give you some color on where we are. Please note that the owned funds of ASR before share buyback increased by €92,000,000 So there's a continued amassing growth in owned funds out of which we paid, we got $101,000,000 back to our shareholders as part of the government sell down. Organic capital creation in line with our earlier guidance. And in terms of the bridge, you guys will all have pen and paper ready, so think about the following developments. Start the quarter with 194%. Organic capital creation adds about 2.5% in the quarter. The net of market movement and model movement adds about 2%. The VA declined in the quarter, that caused us to drop shave off about 2%. Slightly higher SCR due to increase to rate effect increasing the longevity charge shaved off about 0.5%, which gives you a gross movement of plus 2%, you buy back shares for 3% and then you get back to 193,000,000 to where we were. So just to repeat, 194,000,000 start, plus 2.5% OCC, plus 2 net markets and model adjustments minus 2 VA contraction, minus 0.5% higher capital charge due to longevity risk gives you a growth moved up plus 2 and we paid back 3, which brings the number back to 193. So the result we've seen is fully, as far as we can see, in line with the guidance and suggestions we gave before and supports a very stable and predictable organic capital generation. The mechanical capital generation itself was slightly lower on the P and C side. We said we had some large claims, so that feeds into the organic capital generation in the quarter, but higher from an investment side. The rerisking that we engage in during the year actually start to feed into the OCC that's now compensating the higher claims in the Q3. Also good to notice solvency of our main subsidiaries, the life insurance solvency to north of 190,000,000 the P and C Life Solvency II north of 180,000,000. So very solid solvency levels across the board and consistent and predictable capital generation. We did place the inaugural RT1 in October. So technically speaking, it's not part of our trading update, but we mentioned it here at a pretax coupon of 4% 5%, 8%. So it was something we're very pleased with, partially used to fund the cash payment of the On Dinerale itself, we announced the transaction in the quarter. We spent lots of time on that transaction around the sell down. Please remember, we provided CEU with a guidance of $30,000,000 profits over a $200,000,000 of fungible capital contribution for about a 15% -ish ROE. If you were to allocate CHF 100,000,000 from the hybrid to the Generali deal, that actually boosts the ROE in the transaction a lot more simply because of the very attractive cost of capital of the RG1. Brinkley's picture Page 9 rounding off that presentation. Not before I said that Generali integration as far as it comes to the preparation of the integration is still fully on track. We have submitted the request for DNO, a declaration of no objection. When do we expect it back? We don't know. It's not in the hands of our regulator, but it's safe to say that we expect the closing of this transaction to be happening in the Q1 of the year. Somewhere between the 1st working day and our full year results presentation, we expect the closing. End of Jan, early Feb is where we see that closing to take place. And the integration preparation work that we've done so far suggests that what we're seeing is in line with the assumptions that we made when we embarked on the acquisition altogether. So we feel comfortable and confident on this deal. Where does it leave us in the quarter? Well, a reasonably uneventful quarter when you look at the numbers. Eventful when it came to strategic developments, uneventful because the numbers confirm the trend that we've been displaying so far when it comes to profit when it comes to capital generation, some seasonality effects. The dividend season is unfortunately over in the summer. We have some higher claims on Travel and Leisure. Some large claims in the P and C business countered by continued strong performance and even better performance in the disability business. Leases with a result of $550,000,000 about 24% up versus last year and ROE of 16% and a solvency level of 193%. So we're still proud of the robust and solid results that this group is able to deliver. Having said that, back to you and happy to take your questions. Thank you very much. The first question is from Mr. Cor Kluis from ABN AMRO. Go ahead, please sir. Good morning. Cor Kluis, ABN. I've got a few questions. First of all, about the premium growth in disability. As we calculated this, there was a 13% premium growth in the Q3 year on year. And then in H1, it was minus 2%. You explained, of course, that it was due to the less headwind from the Bissaha legislation. What can we expect on disability premium growth going forward at Q4, but also going into 2018. Will we see structural growth improvement there? Could you give some comments on that one? And also about premium, the health premium was quite high in the first year first half of the year, 90% growth. I think in Q3, it was a flat health premium. Could you also comment on that? Why is there certainly a lower growth on health premium? Are you becoming more selective? Or did something technical change there? And second question is about the solvency ratio. You've got the 193 plus the 809 for the hybrid, so you're around 201%, 2 0 2 percent. Could you give a little bit more on update when you saw, obviously, 2 ratio in the 4th quarter, already 2 months in the quarter, of course, given the market circumstances and other developments. And last question is about Chedrati. I don't know if you already have full access to the books, etcetera, but could you give some comments about how the results are developing over there? Those were my questions. Very good. Cor, thanks. In terms of premium growth and visibility, indeed, in the Q1, we lost some business due to these Bezavah developments. That actually reversed or is much less pronounced in the as the year progressed. So actually, we're seeing the resumption of some growth in disability. But it has to do mostly with I think, some of the Bezavah trends not following through and some of the clients actually sticking to the private sector rather than going back to the public sector. What's the long term growth outlook? I would reckon, generally speaking, growing in line with GDP is the safest way to predict it. Although in one particular segment called absenteeism, so ZEIM in Dutch, we would expect to see for us and the market some premium increases in the coming year, which means 2018. So in the long run, grow with GDP with some uplift for price increases, tariff increases in the Fosan absenteeism business. In health, well, premedilevelinhealth during the year only varied because of technicalities. I mean, last year's sales season in health gave us about 20,000 new customers. That is the uptick in the growth within premiums. But there are also various elements that add to do with the health equalization system that we flow through the premium line item. So movements during the year tend to have a technical nature. So there could be some volatility, but it has nothing to do with us underwriting more timely or not. Your underwriting moment is once a year. We gained 20,000 customers last year and that was it. Not sure whether we'll return or keep growing at that level. If you look at the pricing level of health, we're probably pretty strict move to a mantra value over volume. So I don't think going forward, you'll see the same level of growth in health. But during the year, technically, fluctuations that are more technical in nature. 3rd question on the SCR. Your point is on that you 93 plus RT1. Where does it go to from here? In principle, our solvency ratio is developing as planned. You need to be aware of that the VA is declining during the quarter. The VA lost about 4 or 5 points quarter to date. And that is a technical thing that provides a bit of a headwind in our solvency. If you look at the VA reference portfolio, our fixed income portfolio compared to the reference portfolio is a bit overweight in Dutch and German bodies, is a bit underweight in corporate, most notably financials and a bit underweight in peripherals. So when spreads tighten, paradoxically speaking, we have some headwinds because the VA premium declines a bit faster than the spreads on our actual portfolio. And rule of thumb, 1 point VA is 1 point of solvency. But again, these spreads widen if the market deteriorates, that works that way around it works for us. So the VA is a bit of a dampener in both directions. So it takes away the punchable when the part is getting hot. But again, it provides a good use when the market is turning against us. So in Q4, we still have a month to go. Take the SCR at your RTI, but adjust for the technicalities from the VA. And of course, in the final year number, we'll also put the number ex dividend. But we'll give you a full disclosure on that in the 4th quarter numbers. As far as the Denali development is concerned, we have not closed. We win this interbellum between signing and closing. There is interaction, but we're very careful on not sharing undue information on the business whilst we're not officially the owner. So we're preparing the integration, but don't have control on the business. And this is not the time and the place to report on the results of Generali and L. I think it's something for Generali to report. But again, there's nothing there yet that keeps me awake at night, if that could help you answer the question. Absolutely. Thank you. The next question is from Albert Pluch from ING. Go ahead, please sir. One moment. It's from my end. First, looking at the investment portfolio and the rerisking budget potentially for Q4. Should we expect any rerisking of the investment book in Q4 or maybe the first half of next year? So maybe that's some guidance around capital consumption of that. And the second question is on the cost result in Life. I think, yes, it was clearly down year on year. You were flagging cost discipline. Can you maybe give some color on potential additional measures to address the cost base on the Life side? And the third question is a bit more top down on the, let's say, on the target set at the time of the IPO, where you're clearly ahead on many. I know Q3 is probably not a logic stage to come back on the targets, but how are you looking at your, let's say, overall combined ratio group targets that was set at the IPO and where you're currently running and also on your, let's say, return on equity as well? So should we expect some sharpening of targets maybe at the full year stage? Thank you. All right, Alba, thank you. On the investment portfolio, we've gone through a significant rerisking program that is by and large now completed. So don't expect a rerisking run-in Q4. That's not something that will add or take away. So it will add solvency, but not take away solvency, because the rerisking basically is done. At this very point, we are actually running the strategic asset allocation studies. They're going to be in on the Board's agenda in the coming weeks. So early to say whether we'll continue to do the re risk. My left pink tells me there is some opportunity to continue to re risk during the year given our solvency base, but it hasn't been formally decided yet. That's something we'll give you more color in when we do the full year results because by that time we'll have the formal decision making around it. But there could be some opportunity there, but not in Q4. And we need to weigh your course development in the market as well. In terms of cost discipline in Life, you will see, I guess, what you saw in the year is a sharp decline on the cost result on Life. So the result on cost, which is assumption on the declining Life book. We are countering that by migrating all our policies to variable cost platforms and by taking down staff costs as well, shrinking the cost base. I think that is going in line. The migrations are happening in plan as planned. You will see the majority of the migrations behind us in 2018. So we've done a couple of complicated ones and we've been successful in that. So with that, I think our cost countering measures in terms of migration and shedding individual staff are going as planned. So I would believe that the cost result from here, I think the worst is behind us and you will see some stability at least for the coming period. Perhaps in the long, long run, if the book really declines further, we'll need to take further measures. In the medium term, we're comfortable with the measure we're taking on the cost side and you'll gradually see more stable cost results in life. In terms of our targets, as you rightly point out, a trading update is not the venue, the place, the time to revisit the official targets. But actually, if you look at the results today, it would be hard to argue that we would not be comfortable where we are, which is a very complicated way of saying actually we're doing well, we're doing better than our targets. But the trading update is not really the moment to go into details on that. But the business is doing better than that. Maybe one brief follow-up on the cost result. You mentioned the migration to the more variable cost platforms. And so by and large, that seems then completed. So are you basically ready and maybe second question, will you also willing to consider maybe to add some small closed books on your existing platforms? Or is that not yet on the agenda? The Genentech actually we're doing it. If you look at the generality business, it has a small to midsized life business, it's €100,000,000 premium equivalent life insurance book. So the generality will effectively will be the first test on the actual integration. I mean, there's a bit of pinches in there, but the Generali Licensure business de facto is a small closed life block. So I think sneakily we started doing that on the back of what a big with a non live oriented transaction, there is a live closed block that comes along. That will be the interesting first test to see how we manage that migration. I think the teams are confident that they can actually pull off this migration in parallel to the existing migration that we still are to do. And when that's in progress, then we know for sure how good we are about it and we've got the real proof point. But the Girari one effectively, Albert, is the first life closed lock transaction that we're adding on our life business. Yes. Thank you very much. The next question is from Farooq Hanif from Credit Suisse. Go ahead please. Good morning. Thank you very, very much for taking my question. Firstly, there's obviously been a very, very big merger in the Netherlands between 2 companies involved in pensions and also life and non life. In the context of the non life business, firstly, I mean, what impact is this having on the landscape in the short term while these guys are busy trying to integrate? But in the longer term, what do you think it might do to tariff increases generally in the market? Do you think this could be a positive development? That's kind of question 1. And question 2, on the DB business specifically, what do you think is outstanding in terms of generically in terms of acquisition opportunities from others that want to shut down or leave that market? Do you think that there is still quite a lot of potential, both in bulks and in companies in the TB space to acquire? Thank you. On the larger merger, I think generally, we applaud consolidation in the Dutch insurance markets. So let me say it's a bit like the French Revolution, right? It's too early to say it was successful or not. But in principle, the merger between NN and Delta takes out a competitor. So we think in general it's good. We do expect it to support rational pricing in the market. We do expect it to support healthier developments. Whether it will lead to increased tariff increases, I think there is a trend of hardening in the market today, which is happening kind of independent from the NN Delta Lloyd merger. I mean, if you we're seeing competitors that have unprofitable books and increasing prices, no better what happens in The Hague or not. So to me, it's a bit disconnected. I think in general, we're seeing a hardening market. We've seen a hardening market. I personally believe that you will now see a slight pause when it comes to tariff increase because most of our peers have gone through a significant round of price increases and people will see want to see how the dust settles before we resume that trend. So I would expect a healthier market going forward possibly to be continued in next year, but a little pause today because most of our peers and everybody wants to see if you have gone through a 10% price increase, what does that do? Secondly, taking out a competitor is always a good thing. So we think this will support a more structural rational pricing in the market. When it comes to volumes, hard to see. Maybe there's volumes coming our way. It isn't always easy to see where it actually comes from. When it comes to defined benefit books, I think very few people today write new DB business. We've seen some competitors coming up with interesting pricing on DB contracts and we're happy to let go of those. So on defined benefit and both annuities, the market is fairly quiet. Most customers that we see are contemplating defined contribution or APF solutions for new business and seeing what to do with the existing business. Little volumes today, little appetite from competitors as far as I can see. So that market part, that part of the market relatively slow. There could be opportunities, but we are very cognizant of the capital consumption of bulk annuities and then to be more capital intense business. So we've got very strict return hurdles. We'll try to do them on a reinsured basis. In fact, our first perspective is always reinsured a deal to limit capital consumption in our book and that's how we look at it. At this point, the market is actually very quiet and the action is actually in the DC space. That's where the excitement is on the pensions market. If I may just quickly return on that topic. I mean, do you think you need a DB book to write DC? No, you don't. A bigger one? Okay. It helps, it don't. You don't. If you look at the DC business, there is various DC players that have do not have a DB business to write this. I think we see the game the name of the game is scale, want to scale to get good pricing and get margins. 2nd is portals. So clients for some reason still want workstation, workplace marketing and all sorts of portals. Surprisingly, we will use it of the actual portals, but still customers want to see it. So I think the success factor in DC is more volume, is your ability and willingness to invest in portals and systems, and then it's good decent investment results. That together drives success in DC. Having a defined benefit book on the site helps, but it's not the determining factor. I mean, it helps to say to clients, look, if you bring your DC business to me, we're willing to consider your DB book as well. But that is the order of the discussion that we're having, not the other way around. And I think having a defined benefit book helps, but if we it doesn't necessarily change the outcome of the selection process in defined contribution. Okay. That's really helpful. Thank you very much. The next question is from Dave van den Broek, Medio Banker. Go ahead please, sir. Yes, good morning everybody. My first question is on the impact of UFR coming through as of next year. I was just wondering if you can share your thoughts how this might speed up the consolidation in the funeral insurance business given the fact that that business will have a quite long duration. So maybe your thoughts there. 2nd, with the H1 results, you were very helpful in giving some color on the outperformance of the long term investment margins. And I was wondering if the run rate you mentioned with H1 basically saying that if you would align assumptions with peers and you would get a gun against your head, capital regeneration could be €50,000,000 to €100,000,000 higher. Is that the similar run rate you would see in Q3? And thirdly is on the pending standard formula revision, which is quite a lengthy document. I was just wondering if you could share maybe some initial thoughts on the potential impact for ASR. Seems that in particular NHG mortgages could get a more favorable treatment, which for you guys is about, I think, 10% of the asset mix. So that could be quite a big positive move for you. That's it for me. Thank you. It's Robin, Terjeet. Well, as you're about to point a gun to my head, I'm very glad we're doing this all rather than a physical meeting. But in any case, I'll still answer your questions even without the gun, Robin. Now when it comes to the UFR lowering, for us, the lowering of the UFR will shave about 3 points of solvency, given where the development is, which for us is a not so much a material it's an immaterial event. It will take out some solvency and add back some flow. So it's a trade off between stock and flow. What does it do to funeral insurance companies? You'd have to ask them. I think it's for funeral insurance companies, is it lower UFR could be a challenge. If you refer to the EIOPA consultation paper, there is discussion on mortality charges, which is might be difficult for a funeral business. Generally speaking, I would say, whatever happens in Solvency II, and I make a step to your third question, the more diversified you are, the better you're shielded against changes in models, changes in regulation. So what does it do to fewer insurance companies? Definitely, it will be a challenge for them to absorb a lower UFR, to absorb a higher mortality charge. But what it do strategically, I mean, I don't know. You'd have to EDF has to ask them. But it helps having a diversified business. When it comes to the EIOPA consultation paper, if I jump on that, it is a consultation paper. And if you look at the past, I mean from consultation paper to final recommendation has seen significant movements and shifts. In terms of timing, we expect end of Feb advice to the European Commission, then the European Commission will debate, discuss and then convert some or all of it into law. And we expect the final to be introduced January 1, 2020. In that document, just 200 pages of hard work, hard work through week, through all that stuff. I mean, there are still really many, many moving parts. It's kind of hard to say what the outcome will be. If you look at the document and you actually manage to reach the last page, which is an achievement per se, There are a couple of points that let me share with you some point that we look at without giving you a final conclusion with the company. We look at the recalibration of premium risk. There's a piece on premium risk recalibration. There's a discussion of recalibration of mortality risk, which is of interest. Indeed, the document recognizes that NASG mortgages, government guaranteed discusses a number discusses a number of alternative downward shocks as well. And finally, there's a PhD thesis on LAC DT, where you find interestingly that for most elements, the document gives options and recommendations or emerging recommendations. Like it is the only component where there is there's no blue box in docking with a clear advice. AOPA just makes notes of different applications across Europe. So those are the five points that we've been and we are studying and trying to get through. There are many moving parts. Each of those five parts can move individually. So the sum of those parts can also move significantly. So this is it's too early to draw a conclusion from it. But our view is, if I go through it and look at all those moving parts and see what the upsides and the downsides are, Note first is having a diversified business helps. Your monoline business are much more vulnerable to a single change and diversification diversified businesses. Secondly, I feel pretty comfortable with this. I mean, I lie away from the amount of work that comes from this. We do not yet lie away from the outcomes of those rebuilds. But also we know that it's at this point, it's mere speculation and we don't know what the ultimate outcome will be. So I've given you the 5 matter of substance that we look at that could have each individually an impact, but collectively they might diversify, might mitigate and might result in a reasonably flat outcome. And that's kind of the best where we hope for at this point in time. And the more we can say more when we see the final results. When it comes to your question on OCC, indeed, if you look at the long term investment margin and the actual spreads that we have, you will find that the entire fixed income book, ranging from GOVI's including mortgages is about flat versus the LTIM. So as is the beginning of the year, our LTIM assumption on governments actually overstates actual returns on mortgages. It understates the actual returns, but the fixed income book is relatively flat. The accrual of liabilities still assumes a VA of 20. Well, I think that actually is an understatement of the actual overstatement of the actual VA and thereby an understatement of the actual OCC. And equities and real estate have done well. So in the quarter, our organic capital generation added about 2.5 points and then the net of all the other points added another 2 points to our solvency, 2 points of market movements. And if you zoom in on that 2 points of market, actually the market movement was a bit higher than 2. But during the quarter or during the year, we are observing a higher level of lapses in the life insurance business Dutch people are redeeming their policies, most notably to pay down mortgages. So we've modeled through a structurally higher lapse level. Because I think it's fair to see these observations at airport 9 months, you have to put them through your best estimates. So in the bucket other when it comes to solvency movements, the net effect is 2, but there is a growth effect that markedly plus and a small minus from models to lapses to give you 2. So that illustrates that we believe that the ultimate assumption that we've used are still reasonably conservative and there's a structural continued adding to the sovereignty from that. So it's a very very long winded answer, but I want it to be as complete as possible. That's very helpful, all the color you've given. Thank you very much. The next question is from Matthijsiewicz, Kempen and Co. Go ahead, please sir. Hi, good morning. A few questions remaining. First is on P and C. Can you be a bit more specific on the quantum of the rate increases you have implemented there, first of all? And I also wonder to what extent market you referred to, to what extent that's a reflection of higher claims inflation that could be expected going forward. So yes, or not from the higher rates? Or not from the higher rates? Just secondly, just to continue on regulation, next to EIOPA, there was also a DMB document on supervision and supervisory outlook. Yes, just eager to get your thoughts on whether or not there was anything impactful or worth mentioning there. And then lastly, on capital, if I look at your solvency position pro form a for the AT1 and Generali, it still looks quite strong. So can you elaborate on how you plan to spend any excess going forward? Yes, I guess it will be a mix of re risking buybacks M and A. So any color would be helpful there. Thank you. Yes, very good Tobias. Good to see that you've landed well. Thank you. On P and C tariff increases, think order of magnitude 5% points on generic motor, house, what have you. So think about a 5% is order of magnitude in terms of price increases. That will dig out by the way, feed in gradually, right. It's 5% on new business and then the same 5% on renewals and that will take about 12 months to be fully factored in before the existing client base is completely renewed. I don't think it's at this point a function of claims inflation. It's a function of the combined ratios and claims ratios as they were as they are today. So if you look at the Dutch P and C market, I still have a cohort of P and C insurers that is a low margins on the P and C business. So I think tariff increases are more a function of profit as it is today than the reflection on expected in claims inflation or tariff inflation in general. So that's not yet in that's not in the cards yet. And obviously, we don't see at this point major claims inflation. There is some upward push the bodily injury side, which is not so much claims inflation, but more a regulatory change. We've seen some action in the market there. Again, we have looked carefully and are still looking carefully at our portfolio. There's no reason to ask to do take the reserves there. But on bodily injury is the only area where you can see prices moving up in response to general claims inflation, but at the specific market segment. Nothing for us with the existing book, it just exists where we are very careful in pricing new business. B and B Supervisory Outlook, nothing to report there. I mean, we are taking note of the EIOPA documentations. We are taking note of the exits value discussions of DNB, but nothing that concerns us in particular. When it comes to Stolvency, indeed, you will see in the coming months adding the RTI, taking out generality, which is still a relatively high number on the standard model. What do we do with all this? Our strict criteria is the cost of capital, the cost of equity. To be very precise, the cost of unrestricted Tier 1 to be fully solvency II compliant and solvency speak, We consider to be 10%. So anything we do needs to exceed 10%, ideally 12%. So are the four areas we have to deploy this capital is market risk, which is the most straightforward and simple to execute, where we also look at market the return on capital applied should also be substantially more than 10%. And secondly, we would like our market risk budget to stay less than 50% of our total risk, because after all, we're the insurance company and the investment fund. So there could be deployment in market risk as long as the return on additional market risk capital exceeds 10% by a margin. And as long as the total market risk does not exceed 50%, then we'll be looking at acquisitions as we continue to do. We believe there are opportunities in the Dutch markets. They will take time to develop, will take time to mature. I would also be very much aware of that. The P and C and Individual Life business is probably busy during the year integrating and you can't load acquisitions on acquisitions. You want to make sure that what you acquire is fully and effectively integrated. So if we do something else, you probably see it more in the adjacent businesses than in the P and C and Life business as such. The world doesn't look and you know our return hurdle is 12% return on fungible capital and that's pretty clear for us. And then there is giving capital back to shareholders through dividends, share buybacks is something that we are always on the cards. Don't expect a share buyback in the remaining 4 weeks of this year. But next year, we'll look at our distribution policy where we look at the actual dividend. We'll also be looking at an interim dividend next year, safe to say. And that will together make up a decent amount of capital distribution to shareholders. And then, Matisse, it depends a bit on how the acquisition space develop and what we see there. Yes, that's clear. Thanks a lot, Chris. The next question is from Shayk Moussavi, JPMorgan. Go ahead please sir. Just a couple of questions. First of all, after you raised this recent debt, it looks like your IFRS leverage ratio is more or less around 30%, maybe a couple of points lower. So how do we think about that IFRS leverage hurdle that you have of 30%? Is that relevant or for you can be at around 30%, forty percent for longer term as well? So that's something, one question. The second question is, how should we think about this realized gains that you book on the Life earnings? Because for past 3 years, this number has gone up. So is it fair to say that next year also this number could go up because you have a lot of reserves in that? Or is there a formula as to how this number moves? Because based on my understanding, shadow accounting means your earnings should not your total investment income should not move up. Your direct income goes down, but your realized gains reserve goes up. But it looks like this realized gains reserve is going up every quarter. So any thoughts on those formula? And thirdly, it would be a bit simple if we can move to a bit more market consistent assumption on the fixed income assets for OCC just because to see where what is the real number versus the assumed numbers. So just a suggestion, but totally up to you. Thank you. All right, very good, Ashit. When it comes to the leverage ratio on IFRS basis, it moves towards the 30%. I think we'll end the year still below 30%. As far as I can see, if we look at our balance sheet, So it will be south of 30. I think 30% is a decent number. I think we in the rating space that we have in our own capital policy, we could move up to 40, although 40 we'd consider to be a relatively high number. So something at around 30,000,000 is something we feel very comfortable with. End of the year, we'll probably be somewhat below 30, given what I know what I can see today. Depends a bit how book equity develops. I mean, you can also look at it depends a bit on how you define your book equity, right? We don't have realized capital gains in our book equity. We didn't have unrealized capital gains in our book equity. So if you look at our leverage ratio compared to book equity, 30% to 40% is actually pretty fine. If you look at it compared to our own tons, our leverage is still relatively low. So I'm pretty comfortable with where we are. And I think the number the headline number will drop a bit in the last couple of months of the year. When it comes to the realized capital gains reserve, I think interestingly, I have no control on this number. I mean, it's a formulaic approach. When you realize a capital gain because you switch, you change an asset, actually the capital gain is amortized over the lifetime of the corresponding liability. So it's a given. I mean, the only way I could tweak it is realizing huge amount of capital gains, then the number would go up. But then you would immediately see it in my IFRS equity when equity goes up because of capital gains realizations. And that's something you do not see at this point. So it's not that we're gaming or playing it. It's a bit of a No, no, I mean, this is what I'm not able to understand is why will it go up? I mean, I get your point that you're not tweaking anything, but then you mentioned that you can realize more capital gain, put in the reserve and then that number will go up. This is what I'm not able to understand. Why should why could it go up even in that scenario? So anyways, maybe we can take it offline. That number goes up, but I mean there's something else goes down. I mean what so in principle you're right, if the number goes up, your direct investment income should go down and the sum of the 2 stays relatively stable. What you find today is that the direct investment income has gone up because we re risk and move to other more yieldy asset classes. So that actually compensates that development. Where we are today, it's about $3,500,000,000 in terms of reserves. I would expect this number to be relatively stable in the coming year. I mean, this year has gone up due to a variety of reasons, mostly technical in nature. Going forward, expect the release of the capital gains reserve to be stable. That is the way I plan it. When it comes to assumptions in the OCC, we believe we're reasonably market consistent. At least we're giving you fair amount of disclosure on this. Maybe interesting point, we also include the hybrid expenses and hybrid charges in the OCC, which is about a good €50,000,000 a year, which others I think do not. So the market, there is no one consistent OCC definition. Your point is noted, something to chew on. We'll try to give you as much color as we can, but also not particularly to not change the model over time. And in essence, it's a fairly complete number. But your point is noted, something for us to chew on. That's very clear. Thanks a lot. The next question is from Johnny Fow from Goldman Sachs. Go ahead. Yes. Thanks very much. Just a couple of questions. Just in terms of the cash in the holding company, I guess, at the first half, you had cash in the holding that stood around about 200 $1,000,000 and that was before the buyback and the acquisition. So you've obviously raised money. So where are you in terms of cash? And then also just in terms of the operating profits, In terms of some of your assets are mark to market through the P and L, is there any mark to marketing of some of those assets through the P and L in the operating line or not? And then finally, just in terms of, again, the realized gains were higher than it has been. So how much higher is it above the normalized level? Thank you. Could you repeat the last question? I didn't your last question completely. Just in terms of the realized gains, you made a note in the press release that the realized gains were a little bit higher than normal. So how much higher than normal is it? Okay. When it comes to cash at holding company, Johnny, it's not a metric we steer on a lot, I think you are aware. But they are indeed the holding company has got the proceeds of the RT-one issuance. What you see during the year, there will be a combination of things where we will continue to upstream cash from the OPOs, of the OPcos. As I told you, the life OPCO sold is above 190 and P above 180, P and C above 180. So expect a couple of points, expect some further upstreaming from the OpCos during the year. We'll end the year with a cash level north of 350. I'm pretty comfortable with that, but it's not something we spend a lot of time on. We rather have the cash in the uplift, but it will be north of $1,350,000,000 by the end of the year for sure. But many things play there. I mean, there is tax payments, there is pension charges, as I've seen, etcetera. So we'll feed them into together. If you think about the capital in the operating result, there's no real mark to market effect. I mean, all the mark to market effects are not in the operating result. Operating result really contains a direct investment income. Okay. Finally, when it comes to the realized gains, well, there's a release of the realized gains reserve, which is 51,000,000 euros during the year. As I said, I think that's kind of a given. I think that level will be at that level going forward as a reasonable continuation of that thing. I can see what the model spits out. I can't see it. I can't say I can see what the model spits out. If you look at the investment margin in Life, there are €34,000,000 really higher direct investment income, which is coupons, yields, dividends that are coming in, in cash and it is $51,000,000 of increased capital gains reserve release. That's what we're going to come to Poustais. Okay, great. Thank you. There are no further questions. Please continue. Well, everybody, thanks so much for the call. A lively call for a trading update. Sorry for the late start. Good for all of you to hang in there and just do our story. We are again we look back at a good solid quarter treating as it was, treating as it is and comfortable with where we are today with our group executing our strategy. So thanks for your questions and hope to see you all in person sometime soon. Hopefully without a gun this time, but hope to see you in person and continue to answer your questions. Ladies and gentlemen, this concludes the ASR event call. You may now disconnect your lines. Thank you. Have a nice day.