ASR Nederland N.V. (AMS:ASRNL)

Earnings Call: H1 2016

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Aug 24, 2016

Ladies and gentlemen, good day and welcome to the ASR Conference Call on the First Half Year Results of 20 16. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Michel Hilders, Head of Investor Relations at ASR. Please go ahead, sir. Thank you, operator. Good afternoon and good morning to those of you listening in from the U. S. Welcome to ASR's conference call on its first half year results of 2016. Presenting today are Jos Baate, CEO and Kessi Gee, CFO. Jos will start today's presentation with the highlights of our financial performance and he will also discuss the most recent business developments. And Chris will then provide further detail on our financial performance, the investment portfolio and last but not least, our solvency and capital position. Following the presentation, there will be ample opportunity to ask questions, but please do also review our disclaimer on forward looking statements in the back of the presentation. Having said that, Jos, the floor is yours. Thanks, Michel. Good day, everybody. Thanks for joining us. Michel Avel already mentioned, I will discuss some highlights. I think that the main highlights in the first half year for EASR was our very successful IPO. It was an exciting and challenging period for us and we are happy we succeeded just for Brexit. And following this intense period of preparation and having met a lot of potential investors, it has been very rewarding to find such strong support for our equity story. And today will be the first time we report on the progress on our equity story. Our strategic principle is, as you know, value over volume. And we believe that with our customer orientation, very important in the Dutch market, strong underwriting skills and financial discipline, we are able to generate organic capital for the long term. And this organic capital generation for the long term will be in line with our guidance as communicated at IPO, assuming that UFR drag as it is per assuming UFR drag as it is per today. We truly appreciate the trust and confidence our existing and new shareholders have given us at IPO. We look forward to building a constructive dialogue with them as our shareholders and with the wider analyst community. So let's now talk about our first half year results. We're very pleased to be able to report very solid and strong results for the 1st 6 months of 2016. We believe our financial performance, strong solvency position and organic capital generation underpin our equity story. Our performance is in line with or even better than the targets we have set for the medium term. Our capital position was further strengthened by high operating results and favorable impact from financial markets. Solvency ratio, by the way, we still use the standard model, is strong at 191 and this is exclusively the effect of the recent agreed Mass Labs reinsurance contract, which would add another 5% of SCR and is comfortably above our 160% management threshold. So our strong solvency level enables us to remain entrepreneurial and to pursue profitable growth going forward. Organic capital generation has remained strong as it was in 2015 and amounted €159,000,000 representing 4.7 percent of the required capital. This number, by the way, already includes the additional UFR drag, roughly €75,000,000 as a result of the decline in interest rates. And it also includes the runoff of the equity transitional roughly 21 €1,000,000 The return on our investment portfolio exceeded our assumption. So additional to the organic capital generation, we had a 6% of extra capital generation on our SCR. Chris, later on in the presentation, will provide further detail on our investment portfolio and the capital generation and how we realized it. At the level of all of our operating units, we maintain solid solvency positions. So all are above there and our thresholds. So cash remittance to the holding today is on track. We expect to meet the targeted cash position as we communicated of €360,000,000 at the end of the year. Mid year cash at the holding amounted €181,000,000 Talking about the operating result. This operating result is mainly driven by our strong business performance as well in Life as in Non Life. The increase in the Life segment reflects higher investment income and the contribution of the recently acquired businesses of Aksend, De Eindracht and Nivo. Our non life operating results, as you may have seen, include the significant hail and water damage claims. These claims amounted to €25,000,000 after reinsurance. I will come to that in a moment. Absorbing these claims led to a combined ratio of 96.4%, still ahead of our targets of our medium term target of 96 percent for this year. So I think we've done very well despite the severe hailstorms we had in the Netherlands, and we show better combined ratios than the average Dutch market. Excluding these exceptional claims by the way, combined ratio would be 94.2. Talking about only the P and C business, the combined ratio including the claims for hail and water was 99.5% and excluding 94.6%. And finally, on our financial results, the operating return on equity for our business was 14.5 percent and remained well above the medium term target, which was up to 12%. Let's go to slide number 3. At the introduction of the equity story of ASR, we have discussed the way we run our diversified portfolio. The key message there is we focus on value creation. ASR's equity story is about cash generation. And we have a very structured and disciplined approach for reviewing all of our businesses and assess potential opportunities in the market. And let me summarize our portfolio as we see it today and talk a little bit about the achievements we've made during the first half of twenty sixteen. First of all, we have several stable cash flow and value generating business mainly in the non life area. We consider those businesses as business with a relative strong growth potential and we focus running those operations cost effective, focus on profitable underwriting as proven in our numbers over the first half year and delivering absolute style returns. For example, last year ASR had the highest absolute return in non life. And also having seen some of the numbers of our competitors, the first half year, our absolute return in non life was the highest in the Dutch markets. Our focus in those areas is predominantly on organic growth, expanding in distribution and expanding in underwriting skills. The achievements in the first half year in this area was that we have announced the acquisitions of Corins. And Kourins the acquisition of Kourins means an investment in underwriting skills. So it is a capital light investment. We didn't need a lot of capital for that. And now we are able to grow our non life market for especially small and medium sized companies. 2nd area of our business is our service book area or if you want our closed books, especially in Individual Life and Pension DB. Our focus in this area is preserve the value by lowering and verbalizing the cost, limits unnatural lapses and balancing longevity and mortality risk. And if there are any closed books available, we always will have a look at them, especially if they add mortality risk. What we've done in the first half year our achievements over there, we are on track with our back book conversion, which means that we are on track with variableizing our cost in the individual life area. And with the acquisition of Nivo, we have acquired mortality risk helping to offset the longevity risk in our books. Let me talk about the 3rd area of our portfolio, which is the capital light growth opportunities area, where we can either grow organically or inorganically such as in pensions DC, asset management and distribution and services. Achievements in this area is in the pension DC market, we have seen strong increase in the sales of our employee pension product. We almost doubled the portfolio, mainly in small and medium enterprises. At the same time, we feel price pressure in the corporate DC markets. And we are currently carefully balancing between increasing our market share in this area and profitable growth. So the shift from DB to DC is happening, be it in a slow pace. In asset management, we have closed in the meantime and integrated the acquisition of B and G. It's now part of ASR that was done in the Q2. And there we have added 3rd party asset management capabilities and €5,000,000,000 of assets under management. And finally, we've announced the acquisition of Supergherrands, a large Dutch broker specialized in disability that was announced in July. And this adds disability distribution skills. Another capital light initiative we've taken and already talked about is the APF. Our application for the APF has been filed and is currently awaiting approval by the regulator. So hopefully, this will be in the next quarter. Finally, we also dare to divest. Last half year, we have divested 2 businesses SOS Alarms Centrale and most of our real estate development projects because for both businesses, we felt no longer the right owner for this business. So let's turn to page 4 and have a look to the effect of all of those acquisitions. Most acquisitions drive have driven the increase in our premium income. €377,000,000 of the premium income in Life was due to acquisition. They also drove the cost base in the first half year. I will talk about it in a minute. Life premium income first half year was up 14% to over €1,300,000,000 and as I said, driven by the acquired businesses. But not only by those businesses, we were also successful in getting new business. Part of the growth here was due to large new contracts such as the transaction of AstraZeneca. The operational profit contribution from the acquired businesses during the first half was €22,000,000 So they add really value to ASR. All acquisitions, by the way, met our investment criteria as defined upfront. In nonlife, premium income increased slightly to €1,400,000,000 due to organic increase of the volumes in mainly P and C and disability. Of course, acquired businesses also raised the cost base. So let's turn to the operating expenses on the next slide, which is Slide 5. Over the last few years, ASR is known for its capabilities to reduce costs on an ongoing basis. Cost efficiency is part of the day to day business culture. And the underlying cost decline is ongoing. For the medium term, we've announced a cost reduction of €50,000,000 and we are on track to meet the medium term targets. With the addition of the cost base of the acquired businesses, our operating expenses went up to 2.83 Excluding those acquisitions, our operating expenses were stable. Despite we had to absorb roughly €8,000,000 of 1 off costs related to the IPO. So if I take out the 1 off IPO cost, the underlying cost decrease is ongoing, which is also proven by the decrease of the number of FTEs as you can see on the right side of the slide. So cost is on schedule. Let's move to Page 6 and talk a little bit about our operating results. As mentioned, it went up 4.3 percent to €292,000,000 The operating result in non life asset decreased by €52,000,000 This was mainly due to the hail and water damage, €25,000,000 after reinsurance and €34,000,000 before reinsurance. So €9,000,000 was covered by our reinsurance contracts. And further, last year, we had higher results in the comparable period in our Health business. By then, it included a settlement of the equalization system from prior years, which was €17,000,000 So if you take out the hailstorms and the difference from the equalization of health, operational profits roughly remained at the same level. The increase in Life operating result was primarily driven by contribution of acquisitions as said €22,000,000 and a higher amount from the realized gains reserve in our life business. In the non insurance business, we see that the acquisition and distribution become material. They contributed already for €10,000,000 over the first half. In the results of Bank and Asset Management, you will see the cost reflected due to the acquisition and integration of B and G. So there we are a little bit behind schedule. So finalizing my part of the presentation before handing over to Chris. If I compare our performance with the targets which we have set at the IPO For the medium term, we are on schedule. We are in line or better than our targets and we are happy with that given the Dutch market circumstances. And we believe those medium term targets are the right targets in this competitive and challenging markets for the medium term. And having said that, Chris, let's hand over to you. You will discuss further the financial results, investment portfolio and especially capital, capital generation and our solvency position. Thanks. Very good. Joss, thank you. Ladies and gentlemen, Chris Vigee speaking. Going through the financials, let me start on Page 9, the operating results. As you may recall, the definition of our operating result effectively is the full IFRS net result, but then excluding capital gains and actually incidentals and results that do not relate to the core insurance business. So the operating profit really is the all inclusive profits of the insurance business yet excluding capital gains or any results from methodology changes. You can see the bars for 2015 2016. If you look at the increase in the operating results from H1 to H1, euros 280,000,000 to €292,000,000 In Life, operating results underlying stable but up due to acquisitions and due to additional release from our capital gains reserves. In Non Life, operating result down mainly due to the hail and water damage. And finally, in all insurance segments, stable and up stable in some parts and up in distribution due to the acquisitions that we've made. On the IFRS side, the full inclusive IFRS result that Deltas mainly originates from a fact that last year, we made an additional provision to our real estate development business. And we had substantive one off capital gains in last year's half year's numbers. This year, our capital gains were a bit less, and we had a positive contribution from the release of an IAS 19 pension provision due to the fact that we reduced significantly our inflation commitments to our retired employees. So effectively, IFRS profit down virtually stable where delta and capital gains balance half a delta from IFRS 19 minuteus last year's addition to the real estate development provision. Operating result up €12,000,000 from €280,000,000 to €292,000,000 actually mostly in the Life segment. In non Life, we were affected by the hail and water damage. Let me walk you through each of the different business lines and I go to Page number 10 on Non Life. An absolute results operating result of €62,000,000 As we understand, it's probably still the highest absolute number in Non Life profit in the country, down €25,000,000 due to the hail and water damage. We had significant storms at the end of June. One of our reinsurance partners told me this was the most intense, as they call, convective hail and water storm on record with, as illustration, 20 millimeters of precipitation in the build in 10 minutes and the highest level of humidity ever measured in our country. That costs about CHF 25,000,000 after reinsurance. However, after absorbing a CHF 25,000,000 net loss of net claims, our combined ratio in property and casualty still at 99% and excluding those storms, a combined ratio in P and C of 94.6%, so still underlying very strong. If you look at the claims ratios, they actually hover around 63% in the last half year. Actually, we're coming down before the storm. If you normalize before the storm, we're still around 60% to 63% claims ratio in P and C, so a very healthy underlying property and casualty portfolio. In disability, a combined operating ratio of 90%, again still in the low 90s across all the lines, very stable and strong performance. And a combined ratio of 90% is commensurate to a very substantive and attractive ROE business. It's our understanding that in both disability and P and C, you can see the volumes are up, and we're actually quite proud that we're proud of the combination of an underlying strong combined operating ratio and an increase in volumes, which has signed a very healthy underlying market position. In our Health business, results declined by €17,000,000 or 17,000, percent mainly due to the fact that last year, we had a bigger contribution from the National Health Equalization System. That contribution was down about $17,000,000 versus last year. It's understanding that across the board, across all the health insurance companies, contributions from the health equalization system are down. Secondly, on a full year basis, this effect may wash out because we tend to give back to customers what we receive back from the equalization system. So less receipts in H1 is less giving back in H2. So over the full year, this impact will be much less. All in all, we're very proud of a non life segment with an absolute return of €62,000,000 absorption of a significant storm and a combined operating ratio for the entire Non Life segment of 96 percent and underlying combined ratio in around 94%. So very strong continued delivery on the Non Life side. If you allow me to move to Page 11, looking at our Life segments. Life, SG and A recall, contains individual life, pensions and funeral. Results up from CHF 222,000,000 to CHF 273,000,000. Two broad courses of the increase. One is the contribution from the acquisitions, Aksent and Eindracht, that we acquired last year, added about €22,000,000 to the operating results. And the remainder is filled by additional release from a capital gains reserve, which is a combination of capital gains reserve release, release and gains on swaptions minus additional amortization of swaptions premia and slightly lower direct investment yields. So net net, a positive contribution from release from capital gains as a function of our shadow accounting. So all in all, Life business up, half of the increase by acquisitions and half by additional releases from the capital gains reserve. If you further look at the individual Life business, as Jos said, we manage it for cost and lapses. I think on cost, we are investing in the migration skills of our systems with a number of important migrations ahead of us in the next 6 to 9 months. Those will and I like to deliver additional cost savings. Secondly, we invest or manage for low lapses. We saw a small uptick in lapses, mainly due to the fact that people are increasingly moving house in the Netherlands, paying down their mortgages and also lapsing the corresponding life coverage products. So a small increase in lapses due to the increased moving and housing behavior in the country. In funeral, we acquired last year Aksent. This year, we added the buyout of the Nivo portfolio. Together, the funeral business is now approaching €5,000,000,000 liabilities. So busy life and funeral together, funeral is now a quarter of the entire life and funeral business. And acquisitions are adding €40,000,000 of premiums and about €2,000,000,000 of AUM into our funeral business. And integration of Axan and Evo is going at or in some areas even ahead of plan. In the pensions business, as Joao said, our focus is on defined contribution. We've seen a significant growth in our defined contribution portfolio in two sources. First of all, in the SME space, where we find it's very attractive to add clients. Those are small tickets, but very sticky tickets. The retention ratio in a defined contribution, this is about really 99% in our SMEDC business. 2nd contribution is from the AIMDOG portfolio that we acquired last year, where we're migrating clients from DB to DC. And as Joao said, the upmarket large corporate market in DC is still characterized by pretty heavy price competition as we are focusing on the less price sensitive SME and midcorpclientbase. Finally, we note that actually pricing in the DNB market is improving. We're not very active in DB, but we're seeing less price competition in that field. And actually, the old fashioned Van B measure that very few people actually use, we don't communicate because it's a very old fashioned measure, but we were able to write new business at a positive VAN B in the DB space. We do not write a lot of DB. We retain clients. We extend contracts, but that can be done today's market today positive than Fendi due to the reduction in competition in that field. So overall, very strong performance also in the Life Pension and Funeral business. Page number 12, non insurance, consists of in the operating side Banking Asset Management, Distribution, Holding and Other. Banking Asset Management results operating results down from 5 to 0, especially because we invest in 3rd party asset management skills. So we're building up the team. We're investing in our franchise. We added B and G Asset Management to the group, adding almost €5,000,000,000 of AUM. But again, this is cost goes ahead of the benefits that we're investing today and the benefits are planned to come once the APF approval has been received, and once the pension fund assets become really approachable to the insurance community, which is kind of a function of the launch of the APS market. In distribution, results up from €4,000,000 to €10,000,000 mainly because of the acquisition of Boval. We're actually very pleased with the acquisition we've made in the last years. We've acquired from Campehrupp and Boval, which are 2 service providers in respectively P and C and distribution. And this year, we added Super Herant, which is a specialist intermediary function business in disability in the Supermarkets and Retail segment. And we added Coolidge, which is an underwriterbroker in the Midcorp segment. With that, our distribution segment now really has body and we believe it's moving towards a full year run rate earnings around €20,000,000 once business included in for a full year basis. So gradually, the distribution segment is getting lean, real body, real cloud as meaningful size in the group, holding other results effectively stable. In non core businesses, mostly around real estate development, as you may recall, we split that business into 2, real estate development business, which is in runoff, which is a completion of a large retail project. In the last years, we made substantive contributions to the provision for this business. They were no longer repeated. The €5,000,000 is just the accrual of the NPV provision. And in discontinued operations, we closed the sale on in April, I think it was in the 26th April, the close sale of a substantive set of projects. Of the remaining holdings in that for sale part, mainly the land banks, property development land banks, sales process ongoing and we revalued them adding €12,000,000 to the IFRS financial results. So in summary, non insurance Banking and Asset Management investing before benefits distribution, the acquisition investments are paying off and start providing real meaningful contribution to the bottom line and in noncore, research development effectively stable or preparing and continuing the sales process with commensurate valuations. That turns me to the investment portfolio, which is on the pages 14, 15 16. I will not go to all the details in this portfolio. I'll give you a few highlights. At ASR, we run a yieldy investment portfolio. Luckily, our solvency and our capital enable us to run an effective investment portfolio that adds value and adds to the bottom line of the group. However, the market risk component, and we'll talk about it later, market risk is still less than 50% of our total risk. So the core of our business is underwriting, but it's supplemented with an attractive investment portfolio that makes up still less than 50% of our total risk. The total assets of the group and I'm on Page 14, went up from 53% to 59%, partially due to revaluations, partially due to the acquisition of B and G and partially due to the decline of the Life book where actually assets gradually flow out. The quality of the book, the riskiness went down a bit. You can see in the bottom right that the share of fixed income assets and within fixed income, the share of high quality assets, assets, AAA and AA, moved up towards 63%. So 63% of our fixed income portfolio is AA or better. Page 15 talks about further details on our fixed income portfolio. You can see we added about CHF 300,000,000 in mortgages in our fixed income portfolio. Notably, the actual credit loss on our mortgage book are still less than one basis point. So the quality of our mortgage book is still very high, both the government guaranteed and non government guaranteed with losses less than 1 basis point. Also, we made some adjustments in our portfolio in the first half, and I'll talk about it later, reduced some equities, reduced some credits, and we spent our interest rate hedge. But I'll talk more about that in a few minutes. Finally, on Page 16, the equities and real estate portfolio. We continue to believe that real estate, in this in our definition, is a core holding of our business. I've seen some analysts and some market participants thinking we have a really aggressive real estate portfolio. Please note that of the SEK 2,800,000,000, SEK 1,200,000,000 is in land and SEK 700,000,000 is in housing. So 2 thirds of our real estate portfolio is in land and in housing, both very stable, very sought after high demand, yieldy assets. So we believe that the quality of our real estate portfolio is very, very high. 2nd point to note, our offices do contain offices for own use. We have consolidated offices our own offices into one building. That means that the vacancy in the portfolio went up because we actually moved people from our own offices to one of our to our central building. Mind you, the yields of the vacancies per HAVI is still 4.2%, so a very attractive portfolio. And just to be sure, our land portfolio is the agricultural land, not development land, not development properties. It's agricultural land aimed at renting it out to farmers and getting farmers' yields. So all in all, we believe we have an attractive yield investment portfolio in which we actually decrease the risk somewhat in the first half of the year by moving out of equities, moving back into some of the sovereigns. We actually served as well. And we have an effective real estate portfolio, which is predominantly in the EOD land and in housing and the offices consist of a significant part of offices for our own use. That brings me down to solvency and capital and I'm moving towards Page 18. As you may be aware, in Solvency, we always talk about stock and we talk about flow. And both in today's day and age should be sufficient, should be strong. In terms of stock, our group solvency ratio remains strong at 191 percent using the standard model. We run our capital base using the standard model. We have an ECAP model. We have an internal ECAP model that set us at solvency substantially above 200%, but we manage our capital, we manage our dividend base using the standard model at 191%. And all of the solvency ratios of the operating companies exceed the risk capitalized savings exceed our risk limits. In terms of flow, in terms of how much capital do we create, continued organic sole integration of €159,000,000, very much in line with the guidance and expected expectation raised during the IPO. If you allow me to Page 19, development of capital. That was a call me old fashioned, but I'd like to look at multiple type of book values. In this chart, you can see the IFRS equity, the SCR owned funds and our ECAP owned funds. SCR equity continues to go up. In the first half of the year, the headline IFRS equity declined from €4,200,000,000 to €4,000,000,000 That really is an accounting phenomenon from an IAS 19 accounting of our pension exposure. If you correct for that, which is really an accounting phenomenon, excluding if that IAS 19 provision would have been stable, it's called actuarial gains and losses, our IFRS equity would have been at SEK4.5 billion or increased by about 5 percentage points. So underlying an increase in IFRS equity masked by actuarial gains and losses, which really is the accounting treatment of our pension obligations. FCR owned funds and ECAP owned funds both continue to increase. However, as I said, the ECAP ratio is solidly and safely above 200%. Mind you, the difference between ECAAP and SCR are that in ECAAP, we have a more precise, more granular measurement of market risk. We use some of our own models in market risk. And especially on the LACDT, where we believe some of the SCR assumptions are fairly uneconomic. We issue a full fiscal unity for the group whereas in the SCR world, you're made to believe that fiscal unity does not exist, whereas in practice, of course, it does and we correct for that in our ECAP modeling. Page 20 shows the development of the actual solvency figures, the numerator and the denominator. Owned funds, eligible owned funds of SEK 6,500,000,000 required capital SEK 3,400,000,000. If you divide 1 by the other, you get the 191% solvency ratio that we've communicated. On the owned funds, some key data points, factoids on the right of the page. Our Tier 1 capital is 85 percent of total loan funds. Tier 1 capital alone represents 162 percent SCR. If we just had Tier 1, our Solvency II ratio would have been 162% already in our Safe Management zone. So any doubts on tiering? Not in this building. And significant further headroom available. Tier 1, we have room to issue qualifying capital for €1,100,000,000 Tier 2 room to issue €700,000,000 of qualifying capital if we wanted to. We do not contain Tier 3 capital. On the required capital base, as I said, market risk is still less than 50% of our pre diversification risk. So any claim that we run an excessively risky book, no, we do not. We have a reasonable and attractive market book, but the heart of our risk is underwriting risk. Where were the deltas insolvency? Well, in owned funds, we'll talk about it later, mostly profit creation. On SCR, we saw an increase in life risk, mostly because of lower interest rates. Lower rates increased the NPV of, for example, longevity risk. So the deltas were in life risk, mostly interest rate effect. The deltas were in counterparty risk for two reasons. One is we are long collateral in our derivatives book. Being long collateral increases counterparty risk to banks, So counterparty risk went up. Secondly, we invested into our mortgage book. And with the increase in mortgages, also our counterparty risk went up. So the two source of increases in risk the dominant source of increase in SCR were life risk, mostly the NPV of longevity risk and counterparty risk from collateral against banks and from the mortgage book, but again, very much in line with the 191 solvency ratio. And again, with the €1,100,000,000 Tier 1 or €700,000,000 in Q2, we have headroom to achieve further capital if you want to. And for the IAS specialists out there, our LAT, liability adequacy test number is all still very positive. So positive LAT surpluses in life and a positive LAT surplus in non life. Page 22 21 talks about our sensitivities. As you can see here, we've got our management range where we strive to run the business at a solvency level solidly and safely consistently above 160. That's our management level. At 191%, we're really on the upper end, but very stable and solid into in the range. You could see some of these sensitivities. On the U of R, a lot has been talked about it, a lot has been said about it, a lot has been asked about it. We are aware there's an EIOPA consultation paper around that defines a preliminary UFR target 3.7. There are a number of discussions. As you know, our own regulator has sent a letter a privacy letter saying that we they would recommend the EOBA to move to a long term moving average UFR, which effectively would be around the 3.2 mark depending on where rates are. So therefore, we disclose our sensitivity to those numbers, which means that's the range in which the UFR discussion in the industry at Ecofin at Eova takes place. So the 3.2 to 3.7 is probably the range that's relevant to discuss. If the UFR would drop to 3.7, which is a 50 bps drop, our solvency II ratio would drop to around 1.79. If UFR will drop to 3.2, so full percentage point deduction, our solvency II will be around the 166% mark. So in the range of discussions with Aopa, with Acuprene in the industry, any of those drops would still allow us to stay safely in the 160% plus the management range. By the way, this is all still excluding our mass lapse reinsurance contract that was signed in July. You can see also the development on the VA. Roughly speaking, one VA point is one point of solvency. The volatility adjuster per period of June was 18 bps, down from 22. So from 22 to 2018, we reduced VA by 4 points, which affected us roughly also by taking out 4 points of our solvency. Reason being that the VA portfolio contains much more peripheral Italian and Spanish and Portuguese and Greece government debt that we have in our portfolio. And actually, we feel comfortable. We have our own asset mix. We don't try and want to mimic the volatility adjuster. We follow our own asset identification, which means that if spreads contract, especially if peripheral spreads contract, that causes the VA to decline relative to our portfolio and cost of solvency. Similarly, if spreads blow out, if there's a safe haven scenario, the VA tends to protect us. Roughly speaking, 1 point VA is 1 point insolvency. That's why if credit spreads widen and the VA spread widened, they tend to be supportive to us. You can see also the sensitivity against real estate and in equities, those are really manageable numbers. And finally, on the right hand side, you can see the interest rate sensitivity. Please note in the last half year, we increased our interest rate hedge, and I'll talk about it more in a minute. We lengthened the duration of our portfolio that actually changed the sign of our sensitivity against an interest rate increase. So now it's minus 2 when interest rates go up by 100 bps and plus 5 interest rates go down by 100 bps. And the change in sign really is a function of the adjustment we took through our hedging portfolio. Talking about interest rate hedging, Page 22 gives additional disclosure in our interest rate sensitivity in our hedging portfolio. We at ADR, we follow a dynamic hedging program. Basically, we take into account the actual cash flows of the business bucketed by durations and we take into account the SCR as is. And we'd like to stabilize the SCR as is as much as possible, but also prevent the SCR excluding, for example, UFR effects, excluding other measures, other what we call uninvestable areas not to drop too much. We look at the probability of developments on the various scenarios. We literally meant when that when interest rates fall, we increased our hedges. We added about €900,000,000 notional of receivers options to our book to extend the money duration of our business, which means we're actually long duration versus the official SCR curve. We're substantially long duration, which means that if interest rates fall, our solvency goes up. If interest rates increase, our solvency goes down, which is a function of the fact that we are long durations versus the SCR curve. If you look at the implied UFR, we did some analysis on the implied UFR. At what UFR level would we be fully matched? That will be around the IOPA target level. That's not a goal in itself, but a de facto outcome of hedging policy where we weigh cash flows, where we weigh durations, where we weigh solvency, excluding UFR effect as well. And as a result, when rates fell in the last half year, we added interest rate sensitivity and increased the duration, which also served us very, very well. Page 33 talks about our response to market developments. In the first half of the year, we saw interest rates going down, we saw credit spreads going down and we saw volatility going up. Together, that led to, in our view, a reduced risk tolerance for the group. We believe that was the environment in which you we want to reduce some of our risk exposure. So we reduced some equities, reduced some credits. You shouldn't think too much of it, but there was a further optimization in equities and credits taking out some risk and we increased money duration mostly to receive results and swaptions to reflect or reduce risk tolerance, which again is a function of rates, of spreads and of volatility. After the 30th June, we signed a mass lapse reinsurance contract, which is not yet in the figures, simply because it was signed after half year. But pro form a, it will add about 5 points of solvency to our CR ratio. A bit of color to that. Maas Labs is the 6th largest risk category in our books, relatively heavily charged. And we signed a reinsurance contract, which actually is an actual risk transfer. This is not an arbitrage deal. It's an actual risk transfer with actual reinsurance counterparties. So we made sure that we actually signed a proper, almost like old fashioned reinsurance contract, not with some banalary from Bermuda, but with like some old fashioned classical reinsurance counterparties. And I must say, credits to Guy Carpenter and to RGA and Munich Green for helping us structure this deal, effectively adding pro form a 5 percentage points of solvency. It's a UFR independent solvency for those of you who'd love to add it to the notes, 5 points of additional solvency after the half year figures. As a result of all this, we believe we have a very strong balance sheet. Given market uncertainties, given political uncertainties, given low rates, we believe this is the time to build a fortress balance sheet. This is the time to build strategic flexibility and we believe the combination of optimization of market risk, increased interest rate hedging and additional reinsurance programs provide us with the fortress balance sheet that you'd be looking for, provide us with strategic flexibility that allows us to optimize our position in the current very uncertain world. Page 24 is the page that most of you have been waiting for. I realize you've all been holding your breath to talk about organic capital creation, so I will do that just right now. At the end of last year, we noted reported 185 percentage points of solvency with a modeling bandwidth of about 10%. We went through some other day 1 adjustments that shaved off 5 percentage points from that solvency figures. From the 31st December to the 1st Jan, we saved about 5 percentage points from our solvency to day 1 adjustments. Where are they? First of all, in the disability space, where we have a future management action in our solvency, we added some additional prudency into the assumptions on how, if and when to apply that management action. So additional prudency in the future management action in disability. And we made adjustment to the calculation of interest rate and spread risks. Both of these metrics or adjustments affected very much the required capital and to a smaller extent the available capital, so really an increase in the required capital. Gives us a starting once solvency level of 180. Actually, you get to the 180 by dividing 6,076 by 3,374. So in our day 1, 6,076 divided by 3,374 gives you the 180% starting solvency. Then we added organically created capital to it in market operational developments for a total increase of 11 points. Now we believe it's important to disclose what is inside organic capital creation. There is one number and the one number is relevant. And the one number is what we see about. It's important to understand what's in there. In our view, there are 3 buckets: business and operational capital creation capital release from a net decline of the book and finally, the technical components that represent the interaction between stock and flow. Key to show is that we generate capital from our business, from operations that we run, not just from the run off of the back books. We are a capital generation story, a capital generation business supplemented with capital release from the back book. So we've got the cake, which is operating capital release and the icing, which is the runoff of the back book. But both of these sources add capital. And finally, there are technical movements between stock and flow. Now let me start with the latter. The minus 3% is 2.9% to be precise. It includes the UFR drag. As you may be aware, if interest rates fall, the UFR goes up but gradually declines over time. The UFR drag was about €75,000,000 in the first half year, leaving CHF 22,000,000 for decline of amortization of the transitional rule. Please note that some insurance companies exclude transitional rule in defining organically cleared capital. We're all free to make our own choices. We've included, but if you want to have a like for like peer for peer comparison, the CHF22 1,000,000 will need to be added back to our CHF159 paid to a total of CHF 180,000,000 Of course, the UFR grant is depending on the interest rate, but effectively, it's outside our control. It is what happens. So that's why we find it important to show it to you. If rates would fall, yes, stock would go up, flow would go down by increasing UFR drag. If the AOPA would lower the UFR, you'd see the opposite. A lowering of the official UFR by AOPA would reduce stock and thereby increase the resulting flow. We believe there's no point in calculating all sorts of sensitivities. It is more or less more or less a given. Some of you are going to ask us about the amortization of the UFR book, so let me anticipate that question. The UFR applies our life pensions and funeral book. Our life and pensions business is tilted towards the next 10 years where the heaviest, the weight of the firecracker takes place, but our funeral book has a much longer exposure. So is there a weight? Is there an average maturity of our life and pensions book? There is one, but it's actually meaningless to calculate because it's driven by life and pensions on the one hand and funeral on the other hand. We believe you'll see a significant amortization of UFR in the next 10 to 20 years, but there will be UFR effect with a much longer duration because of our funeral book. And please note, the way we run our funeral business, we do write in policies, we do acquire businesses, we will add UFR benefits to our portfolio even as they mature over time. One step to the left, the net release of capital. This is the release of SCR Capital, release of risk margin net of new business strain. Roughly speaking, SCR minus new business strain, so the release of required capital minus new business range is about 1.6%. The release of the risk margin is about 1.9%, together around the 3.5% mark, additional capital generation from running off our individual life books. And finally, to the left, the business generation, the operational generation of capital is around 4.1%. In there is the assumption that our investments yield the long term investment margin. You may recall, for those of you who participated in our IPO stories, the long term investment margin assumes equities generate 3% above the Solvency II curve real estate about 2% credit about 30 basis points or 50 basis points noncore sovereigns 30 bps mortgages around 80 bps. If you throw that in the mix, we give a long term investment margin, which we guided to about 50 to 60 basis points. It has been a bit higher in the first half year, giving us a significant long term investment margin. That feeds into the operational capital generation. Any additional return over and above that long term investment margin is reflected in market and operational results. But the numbers that I showed you together give us 4.7 percent of capital, €160,000,000 on a net basis, €180,000,000 if you exclude traditional and €260,000,000 if you exclude traditional and the UFR drag. But again, very much driven by both organic business capital creation plus the release of capital from our Life business. Some of you are going to ask me about the conversion factor. So let me answer the question also before you can actually ask it. We've guided you that the conversion factor in capital tends to be at about the 75% to 85% range. In the first half, you really need to wait for the full year to run this number because it's a full year number that is very relevant. But in the first half of the year, it was in line with a 6 about a 75% conversion ratio. And it was 75% because part of the increase is a life operating profit was from release of the capital gains reserve. So if you take the operating profit after tax and you compare it to the €160,000,000 organic account generation, the conversion ratio was about 74%, 75%, slightly lower than the 80% because in life operating profit, there was a release of the capital gains reserve. A few words about the market and operational developments. Again, this is market developments and business developments over and above what was in the organic operational capital creation. The 6 actually is a positive number from market and a small negative from business. In markets, we have the positive impact from our hedging program. We have the positive impact from returns over and above the long term investment margin minus a 4 point drag from a decreasing volatility adjuster. That was a significantly positive number and a small deduction from the business due to delta in life cost, where we took into account the investment cost and migration cost in life. And what we took into account, the fact that in the mortgage business, the moving behavior, the house moving behavior in Netherlands goes up. People are buying and selling houses again. They're moving again. And therefore, prepayments are up in the mortgage side. So in summary, market is significant plus, which is returns over above the LTIM minus 4.VA, minus business changes mostly in the mortgage book. Net net, a 6% addition over and above the organic capital creation. At the end of the day, we end up with a 191% Solvency II standard model level, up 11% versus last year. I once said last year, insurance investors look at capital the way Winnie De Pooh looks at Honey. I think you guys still do that. But in today's day and age, sort of a bit like Snow White looking at the House of the 7 Dwarfs, looking for a place you can find shelter, looking for a place you can find safety. Well, with 191, I'm looking at 7 dwarfs around the table, we have a very safe and stable building here. Finally, let's move to our balance sheet. Page 25, balance sheet management. You can see that solvency ratios at all our insurance entities above the target solvency levels, enabling us to upstream capital. We paid €170,000,000 of cash to of dividends to the NLMI. We remitted £190,000,000 to the goods holder holding company, predominantly from the Life business. So the cash remittance exceeded the dividend paid and exceeded capital generation. And we're on track with the cash at the holding of 181 to move towards a €350,000,000 year end cash target for the group. Also one thing to note is that we are in the process of integrating and merging the various legal entities that we have. We have received or are hopeful to receive the official approvals to merge our non life entities into 1 entity and all our life entities into 1. So that allows even more flexibility and freedom with regard to capital management. But please note that on a consolidated basis, all our operating entities exceed our Solvency and EBITDA ratio and are therefore able to upstream cash to the holding. Finally, before I hand back to Joss, our risk indicators, you can see our claim. We have a fortress balance sheet, Financial leverage about 26 percent. Interest coverage around 13 to 14x. If you do this number, not just on an operating basis, but on an IFRS basis, it would be even higher. The rating confirmed at single A neutral, AA also double leverage up a bit to 108.7%, but that was really due to the accounting phenomenon, the delta in actuarial gains and losses. If you would keep the actuarial gains and losses element in our IFRS equity stable, our double leverage would actually have fallen to 99%. So all in all, we continue to have a very strong and very stable balance sheet, East Fortress balance sheet, allowing us to stand and to provide shelter in volatile times. With that, I end my part on the financials and give the floor back to Joss. Thanks, Snow White. To conclude this presentation, I think ASR delivered very strong results over the first half year with a capital stock of 191 calculated based on the standard model with potential uplift 5% due to the Maas Labs contract. We have a conservative calculated capital flow of 159, 4.7 of the SCR due to our strong operational results and disciplined execution of the strategy, we will be able to grow we've been able to grow our top line profitably over the last few years. And all things being equal for the remainder of the years, we're confident that we will be able to deliver on targets. Having said that, I will hand back to the operator and he will open the floor for Q and A. Ladies First question comes from the line of Mr. Ashik Musaddi of JPMorgan. Your line is open. Hi, good morning. Ashik from JPMorgan. Just got a couple of questions. Can you give us some sense about the additional UFR drag that can happen because of year to date interest rate decline. I'm not sure because I'm not sure if your numbers are based on the organic capital generation and UFR drag is based on the beginning of the year assumptions or the current assumption because for other companies, this has this number has moved quite a lot. So that's the first question. The second question is, can you give us some sense about if I look at your operating capital generation, looks at around, say, dollars 200,000,000 which is operating capital generation net of UFR and adding risk margin. So is that what is the main driver of dividend or is IFRS the sole driver of dividend? So how should we think about that? And last one is, it looks like your capital is running off at around, say, 4%, which is SCR release. So will that impact life earnings as well or do you have other measures such as just M and A to counter that? Thank you. Pris? Yes, Ashik, very good. Thank you very much. On the UFR drug, I mean, it's our understanding, Arcema, that we run the UF hard drag based on the beginning of the year numbers, all take into account the developments during the year. So at current level, at today's rates, the UFR drug will go up a bit. I think it's actually not relevant to continue to cover the UFR drug every single day because interest rates move. As Joost said, at today's rate, at today's number, we feel confident that we can and will deliver on the guidance we've given at the IPO in terms of total capital and capital generation. When it comes to the underlying capital generation of the business, well, there are various components, right? There's a component of the business capital creation, which is about 4%. There's a component on SCR release and risk margin release, both in the 2% mark more or less. And then there is a UFR drug and the physician rule. We can all slice and dice however we want. It's 2. I tend to look at the fact that both if you look at the business that we have and the combined ratio that we show, the business capital creation, the 4% is actually pretty strong and pretty stable. If you look at the underlying combined ratios that we have delivered for quite some years, they tend to be good. There is some downward pressure, of course, from low yields. But again, that's pretty strong. And please note that the LTIM assumptions in that number are pretty conservative. So there's always a bit of spillover from organic capital creation, operational into market development. So if the yields drop, there may be a decline actually in operational generation, but the market component will actually increase. So it will show up in a delta solvency. It will just show up in a different bucket. Secondly, the net release of capital is pretty stable. The life insurance book will inevitably decline. That will continue to add capital. And then the technical movements are again a function of interest rates. They may increase. They may also decrease depending on where rates are. Net net, we believe the guidance we've given at IPO and where the consensus is, it sounds like we can actually we feel very comfortable in delivering that going forward. So I look at the total number, whereas each the first, the 4% and the 4% are both pretty stable actually, especially if you combine to the fact that some of the 4 operationals may spill over into market developments. In terms of dividends, we've our official dividend policy, we link dividends to our IFRS results. We've done that because that's actually in audited and more stable now. It's at this stage, common industry practice to link dividends to operating results. We've stuck to that. If there's more capital available and we have sufficient capital, we'll find ways to share it with our shareholders. At this point in time, we believe it's appropriate to link dividends to the operating result. And our official policy is 45 between 45% 55% of the operational result. We will pay cash dividends from an SCR of €140,000,000 And we already last quarter at IPO communicated that we are going to pay €175,000,000 of dividend over the full year 2016. Thank you. That's very clear. Just a follow-up on the beginning question that I had with respect to UFR. I mean the only reason I'm trying to get some sense around that is because in your prospectus, you somewhere mentioned that ex UFR for 100 basis point decline, your own funds go down by say $1,700,000,000 That is Solvency 1 basis, but I think own funds for Solvency 1 and Solvency 2 is not that materially different for Dutch companies? I mean, that's a big number. So based on that understanding, I guess, for first half interest rate decline, the UFR benefit must have increased quite a lot, I mean, 700, 800 maybe more. And that could lead to a significant erosion of your the 3rd bucket, which you have shown, I. E. Instead of 2 points of UFR drag, it could be, say, 4 points. So that's the reason I'm just trying to get a sense, I. E, if interest rate don't go up, what would that number look like? Because ultimately, your operational capital generation, the first bucket is not changing. The second bucket is not changing. But the 3rd bucket can be a chunky number. That's the reason. Thank you. If interest rates don't go up or go down, of course, the U. S. Market goes down. But again, that will probably also be compensated by the latter bucket, which is the market and operational improvements. So that's why the total delta and solvency, I don't think will change that much from any interest rate changes. And secondly, as I said, we reiterate our fact that we believe there's sufficient room in the first two buckets to absorb any deltas in the UFR drag over time at current rates. That's great. Thank you. Very clear. Next question comes from the line of Mr. Albert Bloch of ING Bank. Your line is open. Yes, good morning. Good afternoon all. A few questions from my end. Maybe to come back to the mass lapse reinsurance contract. I can basically give a little bit more background to this transaction, what the exact reason was? Because maybe I read this wrong, but I guess that a lot of, let's say, kind of guarantees you have on different insurance products are actually in the money, so to speak, with the current low yield environment. So if a client lapses, it could actually release capital. So I'm a bit confused what the reason behind this reinsurance contract is. And then the second question is on the ongoing shift from defined benefit to defined contribution. You see that basically continuing to happen. Maybe the pace in the future can only will only increase. I mean, what kind of implications might that have, let's say, for your cost flexibility assumptions? Is there some more risk of cost overruns? I know you already took some conservatism last year in your Solvency II numbers on that. And also, what does it mean for your release of SCR Capital? Could that actually go up more than we expect now? And maybe I missed that in the comments already before, but on the close book of Individual Life, can you maybe add what had actually contributed to the €159,000,000 capital generation over the first half? Thank you. Alberts, thank you. On the mass labs, in Solvency II, one has to hold capital against a mass labs event. Actually solvency II stipulates you have to hold capital against an instantaneous lapse event where 40% of your life customers actually walk like within a second instantaneously, which is a pretty tough capital requirement. Now at this point, we the amount of less is relatively low. But I can think of I can imagine scenarios where there will be sudden interest rate movements, where there will be sudden news events where mass lab shock could take place. And we found that we could attractively reinsure ourselves against this risk. So there were reinsurers willing to take on this mass lapse risk from us. There's certain attachment point and a certain detachment point. So we defined an area where we reinsured ourselves against such a mass lapse event that we actually transferred the risk against such a mass lapse moment, mass lapse event. And we did it because it released capital and released cost capital at a relatively attractive cost. I mean, there was a real risk transfer with real insurance counterparties, but the cost of this capital was, for example, significantly below the cost of a hybrid bond. And we felt that, 1, it was a great opportunity to add capital to our business at a relatively attractive cost of capital. Secondly, we felt given the political uncertainty, market uncertainty, this is the time to build what we call the fortress balance sheet to increase the strategic flexibility of the group. So if you want to use this opportunity, it's the time to do it. And I also think in the when we had the IPO roadshows, many investors asked us, how do you think about strengthening your balance sheet and various options? And we said, look, we have had room for capital market instruments. We believe actually from a cost of capital perspective that reinsurance is a at this point a more attractive instrument than Capital Markets instruments, also because there's a lot of reinsurance capital out there, a lot of reinsurance capital available. So at the end of the day, it was a tangible risk that you might say get a significant charge in a Solvency II environment. But we actually transferred the risk and pay a price, which is a very attractive transaction to us. Okay. Alberto, your question on our flexibility, if the shift from DB to DC takes not place in the speed we expect or will be faster than we expect, Our current and old DB platform already has been outsourced, including 80 people. And there we already are on a more flexible cost base than we were in the past. And our new DC platform is a so called software as a service platform, which we which is run by a subsidiary of APG, the Dutch pension company. So on the leaving side of DB and the incoming side of DC, we already have a high level of cost flexibility. So I think the speed of the transfer will not affect our ability to reach the cost objectives we have set ourselves. Okay. That's very clear. Next Yes, good afternoon. First question is on Slide 24 again. Just wonder how M and A and the derisking is captured in that slide. Derisking presumably had an impact on the required capital. So just if you could quantify that and provide me with some comments on which buckets that derisking is captured, that would be helpful. And then secondly, also on that slide, on the 6% market and operational developments impact, could you maybe be a bit more specific on how much the contribution was from investment returns above your assumptions? And on what assets are you currently outperforming your assumptions? So I'm just trying to assess whether this is a recurring benefit at current spreads or whether it is more, yes, sort of unsustainable in nature. And then lastly, yes, yes, one other question on capital generation. That is if you could provide the breakdown between Q1 and Q2 from the for the organic capital generation, please? Okay. Matthias, thank you very much. Just to wrap it up, I think we could do a paper going forward. We'll only produce Page 24 in the next results. On the market operation on M and A, look, in the first half of the year, we didn't do any major M and A. There were some transactions that were closed after the 30th June. The cumulative price that was really less than 1 solvency point. So, that's not the numbers yet. Even when they come, you will not find them to be materially effective. So they will rather be small transactions. In terms of contribution of historical transactions, they are either in the operational capital generation in terms of the long term returns they generated and to some extent in the operational and market and operational developments as far as they deliver excessive returns. I don't have the split by acquisition by bucket. But trust me, in terms of new transactions, nothing in these figures is small, maybe one point, less than one point in the coming half year. From existing deals, they were basically in the operational and in the market development block. What's in the market developments? Again, this is 6%. If you take into account that the VA was a negative 4 percent and the market was a positive and the business was a negative, so you'd safely assume that before VA developments, the market was safely above 10% in terms of market performance over and above the LTIM. I think it's mostly where do we outperform the LTIM assumptions? Mostly mortgages, credits and real estate. That's really where the additional performance was over and above the market developments. In terms of the derisking, there was also in this bucket. We sold about 300,000,000 shares and 200,000,000 notional in credits. So that's still less than 10% of the total investment group. So it did support the SCR ratio, but you shouldn't think too much of it. I mean, it wasn't the major driver, the largest driver in the market variances. So in summary, market variances before the VA impact, certainly above 10, driven by long term investment returns in mortgages, credit and real estate that outperforms LTIM plus a contribution from derisking in setting up some equities and some credits, that's a small portion, then minus the business developments, which as I said in my presentation, really were all about changes in the mortgage assumptions and changing some of the temporary cost assumptions in life. On your final question, do we provide breakdown of capital ratio by quarter? No, really, we don't because this is a number that you really look and track in the long run. Interest rates fluctuate over time. Markets fluctuate over time. And we're in the long run business. I don't I have no reason to believe that Q1 was really that much different from Q2. But frankly speaking, I don't have that number. We do it on a half year basis. Okay. That's clear. And maybe just one follow-up, if I may. Just to come back on Ashik's question. So your guidance for capital generation is still roughly in line with the guidance provided at full year results of around 9% organic capital generation, whereas spreads came down, rates dropped, you derisked a bit. So just wondering what's offsetting that. So is it M and A? Is the restatement which might have a positive impact later on? So could you maybe help me understand that better, please? Yes. I think that number is still true. So what is different? I think, yes, rates and spreads came down. At this point in time, our underwriting results are very strong in the first half year, excluding hailstorms. So that's a very strong result. Although rates came down, we believe a significant part of our portfolio, for example, our real estate portfolio, our mortgages portfolio continues to perform very well. We actually added some mortgages to our book. After the 30th June, after Brexit, we saw some real severe dislocations in the market. So we rerisked a bit after 31st June where we found there was value in some peripherals, some of the stick paper. So there was some small rerisking after Brexit in combination with the stickiest of yields in our real estate book in combination with the solid underwriting results, we believe we can continue with the 9% ish type of guarantee. And finally, if rates fall, we just work a bit harder. And thirdly, the one thing where you may see some spillover is spillover between operational and market developments because I find that if rates fall and returns go up, sometimes they should excess returns do show up in the market and operational variances. But all in all, we believe that the guidance given at the IPO still holds. Very clear. Thanks a lot. Next question comes from the line of Mr. Ron Heidenreich of ABN AMRO. Hi, good afternoon gentlemen. Few questions. Firstly, on your combined ratios in the P and C business. You have 94.6% excluding June storms in P&C, which compares to the I think, I seem to remember 98% guidance on the medium term. What's the immediate outlook for that ratio? Secondly, the same question basically for the disability combined ratio, 90.2% versus 95% medium term guidance. The outlook there as well, please. Then secondly, you give the sensitivity of your Solvency II to a UFR drop of 50 basis points and 100 basis points. Could you also give the reduction in UFR drag on the 50 basis points and 100 basis points as well, please? And that's it for now. Thank you. Thanks, Ron. On the disability and P and C combined ratios, the medium term target for disability is not 95%, but 93%. So with 92%, we're pretty much on schedule. So the 93 stands and we hopefully will do a bit better like we've done in the first half. The medium term target for P and C is indeed 98. The hailstorm we had is a realistic storm and we had to pay €25,000,000 So we just wanted to show what it would have been excluding Hale to tell you something about the quality of the underlying book, but it is a real payment we had to do. So our medium term 98% for P and C stands. And we will have to work pretty hard because today P and C is 99.5% including the hailstorm. So both targets we've said there are still the right targets to our opinion because we already took into account that we expected in the P and C business as we have seen an increasing number of weather events over the last few years. We already took into account that it could happen in the P and C business. And as we expected, it has happened in the first half. So both are still solid rock targets, which we will be able to realize. And second question, Chris? Yes. On the EFR drag, what happens to EFR drag if EFR goes down by 50 basis points? Well, one of the other is I don't have that number. If EFR goes down, also the drag goes down. We really honestly do not calculate that number because we could speculate what the UFR could become. We think it's relevant to give the level of solvency stock for various UFR levels. But then calculating the various levels of solvency flow, I mean the flow of capital generation is to me is driven by business capital plus release of the book. And the final components to me are technical components between stock and flow, which I have really no influence. I'm a taker of the receiver of the outcome, not a driver of the outcome. So Ron, do you want to sound just I don't know? And I'm not going to find not going to try to find out. I will just see what the EFR actually ends. I'm focusing on the business generation of capital and the effective release of capital from the book. Fair enough. Thank you. Next question comes from the line of Mr. Benoit Petrarque of Kepler Cheuvreux. Yes. Good afternoon, gentlemen. Three questions on my side. The first one will be on the bank and asset management earnings, which were quite low this quarter around 0. So you said that you have been invested in the business, I guess, on the asset management side. What type of outlook you have on the profitability for this segment? Because you the benefits from the investment in the APF could take some time. I think that's my understanding of the market. So are we going to kind of model the business line in the coming quarters? That would be the first question. 2nd one will be on your kind of statement that you have a significant headroom to increase Tier 1, Tier 2. I kind of agree on the ratios, but then there will be some impact on the financial leverage. And you currently stand, I think, above 26%, not that far from the 30% target. So, or do you reconcile basically your leverage target to your statement that you have significant room there to increase your Tier 1 and Tier 2? And then the final question, sorry for that. It's just maybe a lack of knowledge on my side. But on the IFRS 19 adjustment of €426,000,000 on the equity, which took place in Q1 in H1, I think it mainly comes from lower discount rate. Why do you I do not see any impact on the Solvency II ratio from this adjustment? Thank you very much. Very good. The first question is on the Bank and Asset Management segment. You can see the operating earnings are around 0. Actually, they're slightly misleading because the financial earnings are positive. In this segment, you've got real estate asset management, capital market asset management plus the bank. Actually, the bank has a positive IFRS income due to some capital gains on the bank's investment portfolio, but not a positive operating income. So that's why the financial income in that segment is actually better than the operating income. Secondly, on Real Estate Asset Management, last year, we had significant performance fee. That was not in numbers this year. Thirdly, we've been building up a team. We've been adding the cost base of B and G to our business. We've been investing into new staff and investing in the APF. And of course, it will take some time before the APF takes off. When we IPO that business, we said in the long run, we're looking at a 7% to 10% earnings growth on this segment using 2015 numbers as a starting point. We still believe that in the medium term, this 7% to 10% growth is actually feasible. But it will fluctuate over time. And again, the cost will unfortunately come first and the benefits will come later. So we're awaiting the formal approval for the APF. And finally, if and that will happen, we'll see asset management going up. So I would model this as a long run development where the actual benefits will come once the full APF permission has been received and once the APF and the asset management business can actually go live. And secondly, please note there is a positive IFRS income in the bank, which does not show up in an operating income. In terms of Tier 1, Tier 2, your question has to be right. We've got qualifying headroom for Tier 1 and Tier 2, yet we couldn't do all of that. We wouldn't go out and raise €2,000,000,000 of capital because that would add €2,000,000,000 of leverage to it. We just wanted to point out we have room to issue solvency qualifying capital. We've got about a good five points of additional headroom to issue leverage before we get to above the 30%. That will still be a significant issuance. Would we go out tomorrow and issue qualifying hybrid capital? Probably not, but it's great to have the opportunity. But please note, for example, in 2019, we've got 2 older issues coming up for coal. They have a 7% 10% coupon, respectively. Now of course, we can never give you commitments or can even give slightest guidance whether we should call them or not. But at today's coupons and today's refinancing rates, that decision whether to call or not is relatively easy to make. And you could, for example, imagine a scenario where you'd redeem €200,000,000 of existing bonds with a €500,000,000 of new bonds. So there is very ways to optimize the capital structure, use the headroom that we have, but not use the not exceed our leverage targets. It's more of a fact we have sold to hybrid headroom. Now on IAS 19, if you think about the impact, we had actuarial gains and losses in our IFRS equity, which is an IFRS assumption change that does not directly impact Solvency. It's really an IFRS phenomenon. It has to do with the fact that we at ASR are in a unique situation. We, ASR as an employer, reinsure our pension obligation with ASR as an insurer and the insurer then subsequently adopts shadow accounting. Whilst we wrote the prospectus, we discovered we're actually the only insurance company in the world that has this phenomenon, where we actually are both our own clients and we apply share accounting, which leads to volatility in the actuarial gains and losses in the group. So it is really an IFRS phenomenon. It is not a Solvency II effect. And solvency II really doesn't show up. So in market value balance sheet, you don't see this. It has to do with the fact that actually the intercompany exposure is eliminated between the Life business and the Holding business. Yet part of the exposures cannot be eliminated because they're in the shadow accounting methodology, especially to be very precise. The interest rate hedge that the Life business undertakes to hedge the interest rate exposure from ASR as a client cannot be eliminated because it's part of our set of accounting agreement. Now we've had auditors writing PhD thesis about this subject, but it's something that is really an almost unsolvable IFRS issue that will lead to an IFRS volatility due to rate environment changes that we have. There was another 4.26 percent natural loss in this quarter. If rates go up, that actually might disappear. In Solvency II, it doesn't show up at all. This is the one thing where Solvency II actually is more clear than IFRS. So in that sense, we have to be very pleased with this. Okay. Thank you very much. Next question comes from the line of, I hope I pronounce this well, Mr. Anjo Kamsagra of Barclays. Your line is open. Hi, good afternoon all. I just have two questions. The first one is on the combined ratios on disability. I see that the commission ratios fallen a lot to 9.5%. Is this something which will continue so that we'll need to adjust the model or this was just one off? And the second one was on the operating ROE. You're running quite ahead of your target of up to 12% in the medium term. Even excluding the impact of pension remeasurement, the ROE would be like around 13.7%. So what's your guidance for the full year? Would you be running significantly ahead? Or do you see a fall in the ROE in line with your medium target? Thank you. Thank you, Angel. On your first question on the disability commissions, indeed they are a bit lower than they were last year. There are two reasons for that. The first one is a change in the portfolio mix. Traditional, there is a higher level of commission in individual that was even sometimes up to 20%. That was lowered years ago to 17.5%. And in the group business, the average commission is somewhere around 10%. And because the mix has changed a little bit, our portfolio slightly shifted a bit more to group business. That was that's one reason why the commission is lower. The second reason is there is a few years ago for individual business, there has been a ban on commission that didn't affect the existing portfolio, but it affects new business. So any new business, any real new business, new customers come in at a different commission percentage. So over time, the commission percentage will be a bit lower than it used to be in the past. That actually doesn't affect the results of our disability business because if advisers take out the commission by customers, the price will be a bit lower. So from our point of view, doesn't affect the results of the business, but it only changed the relationship between commission and premium. Is that clear? Yes. So what you're saying is that in absolute terms the commission might fall, but the ratio would not be impacted much? The absolute business result will not be impacted over time by the fall of the commission ratio. Okay. Angel, on your ROE question, just for the record everybody, if you if the IAS 19 actual gains and loss would have been stable at the same level at the end of last year, if you hold pen and paper, the IFRS ROE would have been 19.8 percent operating ROE, 13.4 percent financial levers, 24.3 percent and double leverage, 99.4 So again, still very strong, very solid numbers. Indeed, it exceeds our midterm targets of an ROE up to 12%. Is it time for us to change our earnings guidance? I think that's not the case. We stick to the guidance we've given at the IPO. But please note that the biggest threat to the ROE is the E, not the R at this point in time, which is, relatively speaking, a good problem to have. Yes, indeed. Thank you. Ladies and gentlemen, before moving on to the next question. Next question comes from the line of Mr. Bart Horsten of Kempen and Co. Your line is open. Yes, good afternoon, gentlemen. If I may have a few follow-up questions on capital creation. You indicated that the net release of capital also included the runoff of your individual life book. And I was wondering what part of the net release of capital was that in the 4%? And also what can we expect going forward? Will this 4% be for a longer period a release of capital due to this runoff? My second question is more factual question on the solvency ratios of your subsidiaries, so life and non life, whether you could give us these numbers? And I have a more generic question on your health insurance business. In Dutch parliament, there's currently a discussion going on whether health insurers would be able or would no longer be able to pay out dividends. And I was wondering if that would pass this law, what would that mean to ASR? Thank you. Let me start with your last question. Actually, the debate is a reverse debate. It is currently forbidden to pay dividends, and there is a discussion ongoing whether it should be allowed to pay dividends. So we will await the results of this discussion. And as we have said at IPO, we will not further add any capital to our health insurance business. The health insurance business has to earn its own right of existence, has to earn its own capital. And if they realize further capital growth, we will use it to invest it in the health business. And the reason we are still in Health business is it is connected to our disability business. We have one very successful product where we offer the combination of disability insurance and health insurance for employers, where they are able to insure their employers and to help employers to return to work if they call in sick. That is from the viewpoint of the disability business, a very attractive business. Secondly, we sell a lot of health insurance through our Ditso brands And we have a high level of cross sell between the health business and the P and C business within Ditzo. So for us, we don't add any capital, I think, by heart. 1.5% of our total capital is in the health insurance business currently. So it's very capital light. And the takeaway from that business is that it provides us with growth in the disability and in the P and C business. So that to your question, Bart and I for the 2 other questions, I think Chris is ready to answer. Yes. On the question on the release of capital, what was the contribution from the Individual Life business? And how stable is the 4%? The 4% really the bulk of it was Individual Life. If you think about our life business, it has life, pensions and funeral. Actually, the funeral business continues to accrue liabilities. We invested in NIVOL. And given the duration of those liabilities, it still tends to grow. It actually consume a bit of capital because of the long duration of the assets. And that the reduction really think about the bulk of it, probably 80% to 90% is the run off of the Individual Life book and the smallest portion really is the gradual decline of our defined benefit business. So it's really predominantly individual life. Does that make the 4% stable? Probably, yes. There will be some lumpiness over time because business capital runs off as portfolios expire. And we have chunks of portfolios that were written in the past. You've got these in Dutch, Yarlagen annual layers cohorts of businesses written in a certain year and that will expire in a certain year. So in the long run, the next foreseeable period, this is a reasonable assumption, but there may be some volatility as in some years a bigger chunk of the book, a cohort of policies expire and the second half year, you have to wait for the NUC cohort to expire. So it really so they have chunkiness when different cohorts, groups of policies expire. But on average, this is the number you can you should feel pretty comfortable about. In terms of giving the solvency ratios of our subsidiaries, at this point in time, we don't. The reason is we are in a process of merging various individual subsidiaries, creating 1 ASR Non Life business and 1 ASR Life business. We have already integrated the Eindracht. We're awaiting approval for Accent. And we just received approval for our non life businesses. So giving numbers on individual entities that are about to be merged doesn't make that much sense because they tend to be outdated the moment you put them to paper. So what we do today is let's give you the comfort and confirmation that the consolidated solvency level of these facilities is sufficient and that we have been able to upstream significant amount of capital into the holding, especially from our Life business in the first half of the year. Okay. And maybe a follow-up on that. Is it does it deliver any additional capital synergies both on the requirement or available funds with merging these separate entities? Well, basically what it does, it pushes diversification benefits from the holding into subsidiaries. So it makes them tangible because diversification across legal entities happens at holding once your merger merger happens into the legal entities. It does not mean that we'll go out upstream all these benefits immediately the day after the merger has taken place. That would be not a responsible thing to do. Please note that we have a policy of moving towards a certain amount of holding cash at group, €350,000,000 And for the rest, we believe in giving and leaving the capital as much as possible inside the operating entities because that really where is where the money is made. And as long as our operating entities generate attractive returns on capital, we were very comfortable leaving the capital cash in the subsidiaries. But at least it improves and it has our flexibility when it comes to capital submission to the group. Okay. Thank you. Ladies and gentlemen, if there are no more questions, no further questions, then I would like to hand over to Juss Borten of ASR for the final remarks. Well, everybody, thanks for joining us and being with us for almost 2 hours. ASR had an exciting first half year with our IPO at the 10th June and all the preparations. After that, we felt Brexit. We have seen some severe hailstorms. And despite all this, we've delivered upon the promises we've made at IPO a capital stock of €191,000,000 based on the standard model. We're meeting the target on the capital flow of €159,000,000 over the first half year. And we execute our strategy in a very disciplined way. So we're very confident that also the second half of the year, everything being equal, will be a successful year and that ASR will be able to deliver its promises as made at IPO. And hopefully, we will be able to report on that somewhere around the 22nd February next year because in that period we will present our full year figures of 2016. I wish you all a good day. In the Netherlands the sun is shining. Hopefully you're somewhere where the sun shining too. And some of my colleagues promised me to look for a terrace and to drink a cool glass of beer on the results we've presented today. And Chris will be go back to Snow White and join his seven dwarf children. Thanks everybody. Thank you. Ladies and gentlemen, this will conclude today's presentation. Thank you for attending. You may now disconnect your phones, and we hope you have a very nice day.

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