Good morning, ladies and gentlemen. This is the operator speaking. Welcome to NN Group's Analyst Conference Call on its First Half Year twenty twenty one Results. The telephone lines will be in listen only mode during the company's presentation. The lines will then be opened for a question and answer session.
Before handing this conference call over to Mr. David Knibber, Chief Executive Officer of Enen Group, let me first give the following statement on behalf of the company. Today's comments may include forward looking statements, such as statements regarding future developments in NN Group's business, expectations for its future financial performance and any statement not involving an historical fact. Actual results may differ materially from those projected in any forward looking statement. Any forward looking statements speak only as of the date they are made and NN Group assumes no obligation to publicly update or revise any forward looking statements, whether as a result of new information or for any other reason.
Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Mr. Knibbe. Over to you.
Yes. Good morning, everyone, and welcome to our conference call to discuss NN Group's results for the first half of twenty twenty one. As always, I'm joined today by Delfin Rueda, our Chief Financial Officer and Bernad Kaufmann, our Chief Risk Officer. I will start off this presentation with the highlights of the first half year results, including the strategic and commercial developments. Delfin will then talk in more detail about our solvency position as well as the financial results of the group.
After wrapping up the presentation, we will open up the call for Q and A. Let me start with the financial highlights shown on Slide 3. Our businesses Across the Group delivered an excellent performance in the first half of twenty twenty one. We saw a strong recovery in sales in Europe and Japan As COVID restrictions are easing in many countries and online sales are becoming more common practice for agents, brokers and customers. Our value new business doubled to €242,000,000 on the back of higher sales as well as improved margins and business mix.
At our Non Life business, we see encouraging signs of improvements, partly thanks to the measures we have been taking. The integration of FIFA Non Life is also progressing well with 90% of FIFA Premiums already migrated to NN Systems. NN Group's operating result increased 21% on the same period last year to €1,100,000,000 driven by strong operating performance at all segments. Operating capital generation, or OCG, increased by 44 percent to €780,000,000 This increase reflects a strong business performance with better non life underwriting results, High new business at Insurance Europe and a higher net result at Asset Management. OCG was further supported by a higher investment Our capital position remains strong with a Solvency II ratio of 2 0 9% at the 30th June 2021, And we have announced today that we will pay an interim dividend of €0.93 per ordinary share.
More details on the solvency position and financial results will be covered as always by Delfin later in the presentation. Now let's turn to Slide 4. We continually strive to provide relevant products and services that meet our customers' evolving needs and to be there when they need us most. As I mentioned on the previous slide, we saw higher sales in the first half of twenty twenty one, which is really encouraging and illustrates the strength of our distribution channels as well as all the hard work in our units. The consequences of the pandemic in the past 18 months has highlighted the need for protection, For example, in the event of illness or loss of income as well as the current under penetration of insurance in many markets.
We continue to launch protection and living benefits products. For example, an income protection product in Japan, which safeguards SME's CEOs and their employees against the risk of not being able to work due to sudden illness or accident, as well as payment protection product in Spain. Besides the higher sales, we saw the business mix in Europe shifting to more protection products as well as an improved margin in Japan as a result of management actions, including repricing. All these actions resulted in a very strong value new business in the first half of twenty twenty one, as you can see on the slide. On the other hand, we did all we could to help our customers deal with the damage caused to their homes and businesses during the recent in the Netherlands and in Belgium.
NN's claims managers were immediately available on-site to directly assess damages and where possible Process and pay out the claims straight away or to provide an advance on the claim amount. We are proactively approaching customers in the affected areas to check if they need our help. Our insurance products are designed to help people at times like these, and our customers can rely on us to As should be expected from the market leader in the Dutch market, the full extent of the damage caused by the floods will only become apparent once buildings have tried out And all claims have been submitted. While there is still quite some uncertainty, we currently estimate the financial impact on our results of around €70,000,000 net of external reinsurance in the second half of the year. Now turning to Slide 5.
We are making good progress on executing our strategy as set out at Market Day last year with a commitment to achieve resilient and growing long term capital generation. Our strategy is built on 3 pillars: The first one being our resilient balance sheet, and Delfin will talk about that later. The second pillar is on generating strong cash flows in the Netherlands. The actions we are taking to improve the results of our non life business are starting to come through. We have a leading position in Dutch pensions as well as strong defined contribution, or DC, propositions.
And we continue to attract inflows in line with our market share of around 40%. In DC, assets under management are currently amount to €27,000,000,000 At the same time, mortgage origination at Enenbank remained at high level in a very buoyant Dutch housing market. These assets are also very attractive for our insurance investment portfolios, and a large portion is transferred to Group Companies as part of our shift to higher yielding assets. And NN Investment Partners continues to attract new mandates With close to €4,000,000,000 of net inflows of 3rd party assets, while continuing its leadership in responsible investing and increasing the percentage of ESG integrated assets. The 3rd pillar is to achieve profitable growth in Europe and Japan.
Our distribution strength in Europe As well as the strong increase in lead generation have both led to a growth in new sales. Our strategy is focused on organic growth, but we are open to inorganic opportunities that create value. Announced the acquisition of MetLife's businesses in Poland and Greece as well as a 70% stake in Heine Noord, one of the largest non life Both these acquisitions strengthen our proposition in the relevant markets, And they are also accretive to operating capital generation, offering an attractive return on investment. At the same time, we continue to manage our portfolio and we perform a regular and thorough assessment of our individual businesses against our financial and strategic criteria. This has led us to announce the sale of our business in Bulgaria in February, and the transaction was completed in July.
The strategic review of our asset management business that we announced in April is ongoing. We will update the market when we have any news to share. When we talk about generating value, we mean value for all of our stakeholders, and we measure this against our non financial targets for Excellent customer experience, engaged employees and our contribution to society, which are shown in the appendix. I am particularly proud of our highly engaged employees We are committed to helping our customers while also actively volunteering in community projects. Moving to Slide 6.
Our commitment to shareholders is to provide attractive and growing capital returns, and we have been consistent in delivering on that promise as our track record shows. We announced today that we will pay an interim dividend of €0.93 per ordinary share in September, which represents an increase of 8% compared to last year. This amount is calculated in line with NN Group's dividend policy, so as 40% of the pro form a 2020 full year dividend per ordinary share. And with that, I pass you over to Delfin.
Thank you, David, and good morning, everyone. Let me start, With the movement in NN Group solvency ratio in the first half of twenty twenty one, our solvency ratio remains strong At 209% at the end of June. There are a number of items that impact the ratio, so let me take you through them. Firstly, operating capital generation added 9 percentage points to the ratio. I will talk more about the drivers of operating capital generation on the next slide.
Market variance was positive, mainly reflecting the positive impact of the tightening of the spreads, in particular mortgage spreads and added 8 percentage points to the ratio. These two positive items were partly offset by the category Other, which includes an increase in the capital requirement due to the shift to higher yielding assets and the replacement of part of our swaps with government and corporate bonds with very long durations. In addition, the ratio was lowered by the impact of the UFR reduction from From 3, 75 percent to 3.60 percent as of the 1st January this year as well as capital flows to shareholders in the form of the announced 2021 interim dividend and The €250,000,000 shares buyback program that commenced in March. Please note that the expected impact on the solvency ratio from the recently announced acquisitions of MetLife and Heine North as well as the sale of the Bulgarian business will be reflected at the time the respective transactions close. Let's now turn to Slide 9, which shows the operating capital generation by segment.
Total operating capital generation in the first half of twenty twenty one increased to €780,000,000 compared with €543,000,000 in the same period of 2020, with most segments contributing to the increase. The main drivers of this significantly higher operating capital generation were the improved non life underwriting result In both P and C and D and A as well as the higher new sales at Insurance Europe. In addition, the contribution from banking in the first This year is based for the first time on the new methodology and reflects the statutory net result offset by a limited increase in risk Let me just remind you that in previous years, the operating capital generation of banking was based on dividends remitted to the holding. The ongoing shift to higher yielding assets as well as higher equity valuations led to a higher investment return mainly at Netherlands Life. On the other hand, higher sales at Japan Life lead to new business strain, which has negative impact on operating capital generation in the short term.
A breakdown of operating capital generation by source can be found in the appendix to this presentation. The next slide shows the capital position at the holding. Let me begin, As usual, with Netherlands Life, which reported an operating result of €520,000,000 The increase compared with the first half of twenty twenty sorry, I think I moved too fast within the presentation. So we are back to Slide 10 And we're talking on the cash capital position at the holding, which increased to €1,500,000,000 at the end of June 2021 compared with €1,200,000,000 at the end of December 2020. Total remittances received from subsidiaries reached € 978,000,000 in the first half of twenty twenty one.
While we saw the gradual resumption of dividend Payments from some units regularly regulatory restrictions are still somewhat impacting remittances, mainly from NN Bank. As usual, details of other remittances upstream by each segment can be found in the appendix to this presentation. Cash outflows in the first half of the year were the payment of the cash portion of the 2020 final dividend of €252,000,000 and the repurchase of own shares for an amount of €165,000,000 The amounts to be paid for the announced acquisition of MetLife in Poland and Greece and Henenorff in the Netherlands will be deducted from the cash capital position at the time that the transactions are closed. Moving on to the next slide, I will take you through the IFRS financial results of the group. Starting on the left, NN Group's operating result in the first half of the year was up 21% compared with the same period in 2020, With almost all business units reporting higher results.
Please note that the current period benefited from 20 €4,000,000 of private equity dividends, while the first half of twenty twenty, including €16,000,000 of private equity dividends and non recurring benefits. I will take you through the results of individual segments on the next slide. On the right hand side, you can see that the net result For the first half of twenty twenty one was €1,400,000,000 The increase compared with the first half of last year And is mainly driven by higher non operating items, which include capital gains on the sale of public equities and government bonds in the current period. The operating result by segment is shown in Slide 12. Let me begin, as usual, with Netherlands Life, which reported an operating result of €520,000,000 The increase compared with the first half of twenty twenty is mainly driven by a higher investment margin in the current period As we continue to shift to higher yielding assets as well as higher dividends from equity investments following the postponement of some dividend payments in the first half of last year due to COVID-nineteen.
The operating result Of Netherlands Non Life increased to €189,000,000 from €111,000,000 in the first half of last year. The higher results in P&C were mainly driven by favorable claims development in the fire portfolio, also supported by frequency benefits due to COVID-nineteen. In D and A, we saw favorable claims Development in individual disability as well as a higher underwriting result in the accident and travel portfolio. The combined ratio improved to 92% versus 94.9% in the first half of twenty twenty. This is a strong result, but please keep in mind that non life results can be volatile.
And as David already mentioned, We will see the claims from the flooding in the Netherlands and Belgium coming through in the second half of the year. Insurance Europe's operating result increased to €161,000,000 As COVID-nineteen restrictions are eased in many countries, The recovery in sales led to higher life and pension fees across the region. We also saw a recovery in sales of COLI products In Japan, the operating result of Japan Life was up 23% on the same period last year, Excluding currency effects, reflecting a higher technical margin, lower DAC amortization and trade commissions And higher fees and premium based revenues. Asset Management's operating result increased to €91,000,000 driven by higher fees on the back of higher average assets under management and a more favorable asset mix. The operating result of banking was broadly stable at €79,000,000 in the first half of twenty twenty one.
Higher operating income, mainly reflecting fees earned on the larger serviced mortgage portfolio, was offset by higher total expenses. Finally, the operating result of the segment Other improved to minus €76,000,000 mainly driven by the higher operating result of the reinsurance business, which last year included claims related to Netherlands Non Life's disability portfolio. And with that, I will now pass you back to David for the wrap up.
Thank you, Delfin. We can look back at an excellent first half of twenty twenty one with a Strong financial and commercial performance at all of our business units. Operating capital generation increased 44%, and our solvency ratio remained strong at 2 0 9%. We have announced today that we will pay an interim dividend of €0.93 per ordinary share in September, in line with our dividend policy. Even if COVID-nineteen continues to impact the lives of many and uncertainties continue, our employees remain dedicated to providing excellent products and services to our To help them care for what matters most to them.
We are committed to delivering on our strategy to create long term value for all stakeholders, and we are progressing well to achieve both our financial and our non financial targets. And let me now hand you back to the operator to open the call for your questions.
Thank you, Mr. Knudis. Ladies and gentlemen, we will start the question and answer session now. Our first question is from Mr. Andrew Baker of Citi.
Go ahead sir. Your line is open.
Great. Thanks for taking my questions. So the first one is just on OCG. I'm just wondering if you could provide the outlook for OCG for the second half based on where Current market conditions are. And if you're not willing to provide that, maybe you could just provide the mark to market impact that you see in the second half from interest rates And mortgage credit moves?
And then secondly, if you were to dispose the asset management business, just curious what Would be your plans for any proceeds that you may receive? Thank you.
Yes. Thank you, Andrew. Delfin, can you cover the first question and I'll take the second one.
Certainly. Thanks. Good morning, Andrew. Thanks for your question. On the OCG outlook for the second half, first, let me remind you that, of course, OCG It is more volatile than operating result as it is dependent, as you rightly point out, to the condition of The market of the rates in particular.
Nevertheless, of course, the first half of the year has been very good, Driven by many factors, so it certainly will be wrong to just use the first half of the year and multiply it by 2. There has been quite a few elements positive during the first Half in several segments. For example, in Life, we mentioned the private equity dividends that I'm not expected to come in the second half of €24,000,000 Non Life has Got a very good result and at a 92% combined ratio, we do expect things To evolve more within the range of our target of 94% to 96%, but also Europe has had strong sales And benefited from a strong market performance, providing some additional performance fees of Pension Business. Keep in mind that also the bank has a good OCG contribution as the strong origination of mortgages, there was a significant Transfer to 3rd party that impact positively in the operating results and in the OCG. So overall, There is an elevated level in the first half that we don't expect repeated in the second half.
On your question on the rates, When you look at the OCG in the first half, these are based more or less on the average monthly rate in that period. And When we look at the current level of interest rates, they are close to that average. So Overall, the impact on the markets are expected, as you know, to be limited. Of course, don't forget The impact of the floating in the second half.
Yes. Thank you, Delfin. Then your question on potential proceeds. Just as a reminder for everybody what we have announced So we have announced a strategic review of our Asset Management business to see if we can accelerate the growth of this business by making it Part of a larger platform, options on the table are joint venture, a merger, a partial or a full divestment. Now this review is ongoing.
And obviously, if we have news to share on that, we will do that immediately. So Yes. In terms of then speculating on capital return, we have a very clear capital framework. And in the past, we have been disciplined Around returning capital to shareholders, and we and all I can say in this stage is that we will remain also disciplined on returning capital to shareholders, Not only in the past, but also going forward.
Great. Thank you very much.
Our next question is from Mr. David Barmah of Exane BNP Paribas. Go ahead. Your line is open.
Good morning. Thank you for taking my question. The first one is just a comeback on the operating capital generation.
So I
think you mentioned $700,000,000 as an underlying capital number for the first half versus the $780,000,000 reported. Can you just help bridge the 2? Because from what you're saying, it seems like the gap is a bit bigger than that with the private equity dividend, the Very strong on that business and the European Union business contribution. So that's the first question. And then secondly, On M and A and more generally on your appetite for Life portfolios, can you talk a little bit about Yes.
The type for, I'd say, more guaranteed books of business, especially following The MetLife transaction where the portfolio differs quite a bit, what you were rumored to look at in the past? And then maybe sorry, just a last small one on NNIP. So just to check-in the press release, I see you referred to growth mostly and now you seem to mention all the options are still on the table. Is that still the case? Just to confirm.
Thank you.
Thank you, David. So let me start with your question on M and A and NNIP and then I'll give To Delfin on the OCG question. Yes, let's start with M and A. I think Let's start with a comment in general. I mean, we obviously have our hands full now with trying to close the transactions that we did and preparing The integration.
Overall, our base case is organic growth, and that's why we're also pleased to see the progress that we're making In driving long term capital generation, that is really driven by our businesses, whether this is the non life improvements that we have seen or, for example, the commercial growth where we have been doubling our value new business or the mortgage growth. So and that is our base case. Also, we'll continue to do active Portfolio Management and the divestment of Bulgaria is an example of that and the strategic review That we're doing on NNIP. So currently, the priority is really around preparing and running the integration of our acquisitions. And we'll also going forward, we'll remain disciplined on M and A.
I think specifically on your question on MetLife, I think MetLife had a very good overlap of business with our businesses. And that helps in many ways. It helps obviously to create More synergies on the expense side, on the product side, but it also helps on the distribution side that you can easier Align distribution channels and create a larger platform for growth. And that's why we were very interested in the MetLife business, both in Greece and in Poland. And it will support our growth profile in these markets Also going forward and thereby also supporting our operating capital generation and the EUR 50,000,000 that we have Given as a guidance on the back of this deal, overall, it provides a double digit return.
So we're very pleased with the transaction and are Now working to close it and prepare the integration. For NNIP, I'm not exactly sure what your questions are. Indeed, all options are Still on the table, if we look at the underlying performance of NNIP itself, it had a very good half year. So we saw an inflow of 3rd party business or a net inflow of 3rd party business of SEK 3,900,000,000, which is, of course, very good news. But also, the performance was very strong.
We've seen an increase of our outperformance versus the benchmark at now 162 basis points, Which is very good news, and 70% of our alpha funds are now outperforming peers. So for us, it's really a combination of good Customer inflow, but also strong investment performance and certainly the ESG angle has the sustainable and Investments of NNIP have always been a priority, and we see that also coming through in the portfolio There's a good growth also in that asset category. So overall, NNIP had a good half year.
And David, then on your first question, I always have a bit of To define what is normalized run rate or underlying, the truth is that the OCG in the first half of the year Don't have, let's say, many sort of one offs. It is supported by a strong underlying business driver. So the only thing is that these drivers were very strong. And in terms of guidance or Going forward, we do believe that it is not prudent to use that same Figure for the first half for the rest. I mentioned before the private equity dividends, which Actually, it's an one off that we have indicated impacting operating result, but that actually is not And a special item within the OCG.
As for operating capital generation, we do consider the Return on Equity and the actual performance, over performance or under performance is reflected in the market movement. But with that clarification, I think the areas that where we see that Has been very strong in the first half and might be less so going forward related to the Non life combined ratio, as I mentioned before, the level of strong sales in Europe, we think that As you know, they can be maintained, but some of the outperformance fees for the pension business, It depends on maintaining a strong market performance and can be a bit less strong. So overall, when you look at, as you know, the overall expectations for the second half, certainly will be lower And probably closer to the €700,000,000 that you mentioned, but with no specific one off to mention. Maybe, of course, this raises questions in relationship to the target for 2023, On which apart from the positive momentum that we have seen across the different businesses, We see therefore some upside on this segment targets, but also we have to take into account the expected Contribution from the acquisition of MetLife Poland and Greece and also Hainenhorf In the Non Life segment.
So overall, just the 2 acquisitions together It might bring something between €70,000,000 €75,000,000 for 2023 apart from the positive momentum there.
Thank you.
Next question is from Mr. Ashik Musaddi of JPMorgan. Go ahead. Your line is open.
Thank you, Anne. Good morning, Dalvin. Good morning. Just a couple of questions I have, if I may. So let me stick with this OCG.
Sorry to come back on this OCG. So if I hear you correctly, you were saying like second half 700 is more normalized. So If I do times 2 of 700, it looks like your normalized OCG at the moment is about 1,400,000,000 And you said that a couple of acquisitions would add about €70,000,000 €75,000,000 So that basically takes you to about €1,500,000,000 just shy of 1.5 And then there are dynamics of lower UFR in the future, some more underlying improvement in your P and C business, Some growth in asset management sector. So I mean, how do we think about like $1,500,000,000 Are we talking about $1,600,000,000 $1,700,000 Any color on that would be very helpful. That's the first one.
Secondly, I mean, David, Just wanted to say thanks that your capital management has been absolutely very spot on with respect to dividend, buyback, etcetera. But if your capital generation OCG is moving higher and remittance is moving higher, then how do we think about the buyback? What needs to happen for you to say that, okay, instead of $250,000,000 now I'm doing $500,000,000 buyback? So that is one thing I would like to understand is when do we get a higher buyback? Clearly, M and A is good as well.
It is adding value, but Any color on that? And thirdly, on Asset Management. Now if I understand correctly, I mean, you delivered like 90,000,000 Profits in first half, that's €180,000,000 for the year without any growth. Post tax is €140,000,000 I mean is that the right way to look at the math On Asset Management earnings, because the speculated $1,400,000,000 then looks relatively low For a business that is making €140,000,000 and is generating cash on a recurring basis? Thank you.
Yes. Thank you, Ashik. Delfin, can you start with the OCG question?
Yes. So thanks, I think, Asik. You're right. I think there is certainly clearly upside to the EUR 1 €500,000,000 target for 2023. I don't think is now the time In order to set the new targets, but apart from the acquisitions that we have mentioned, there are Some positive underlying drivers within the different business and the rerisking, we are also progressing [SPEAKER CARLOS GOMES DA SILVA:] Quite well.
In terms of the CAPA, how to think about the share buyback, I mean, certainly, we have been very clear and actually, we have acted With the same clarity in terms of delivering returns to shareholders with the Surplus capital, when we have excess capital, is part of our capital management policy, and we will do so Going forward, we have a range forecast capital between 1.5 and 1 between 0.5 and 1.5. So any excess above that, we will over time, you know, trend to come bring it back to that level. Of course, there are some acquisitions that we are expecting to close in the case of Henin North before year end And in the case of MetLife in the first half of next year, so this will be some cash outflows and we will continue be acting In that same
manner? Yes. And then on your question on asset management. I mean, the way we look at the asset Benjamin, this is, as you know, Ashik, we really look from an operating capital generation point of view. So the operating capital generation in for the asset manager in the first half was EUR 67,000,000.
We've given an OCG target for the NNIP business Of EUR 125,000,000 in 2023. And well, as you can see from the results that we're well on our way to deliver on That 125,000,000 OCG target.
Thank you.
Our next question is from Mr. Michael Huttner of Berenberg. Go ahead. Your line is open.
Fantastic. Thank you. So congratulations on amazing results. And I mean, Yes. Look, anyway, I was trying to I feel sorry for myself for not having you survive, but that's me.
Just Two questions, if I may. The first one is, could you possibly give us a kind of walk through what could be the cash at the year end? I derived at the figure, but I forgot that some of the deals closed after the year ends. I'm completely confused now. So any kind of help On how we can using kind of because some of the subsidiaries do emit quarterly and some don't and maybe the bank will do a catch up And I got confused with all this.
So that's been very, very gratefully received. And then the second is on the strategic review The asset management. Can you help us a little bit on this? So the business is doing fantastic. You do not need the cash.
You don't see in travtell risk like some of your competitors. I don't get it. I still don't understand what prompted you to review something which you had firmly embedded in your strategic plan for 2023. And clearly, I'm missing something. It's not you're a very sensible company.
So you've thought this through. Any help on explaining Why it makes sense would be great to receive. Thank you.
Yes. Thank you, Michael, and thanks for the compliment Also, I think let me start with the strategic review on the asset management and then Delfin can talk about the cash position at the year end. Yes. So indeed, to your point, we're not trying to address here an underperformance issue or a big problem in our business. This is really a long term strategic review.
And then the question is, do we have the right setup? Is this the right way to further develop the asset Management business, I mean, and we all know that there's a scale is an important element. We know that having scale to invest in the right capabilities It's important. There's an ongoing pressure on fees. There is still a shift to passive.
So there's a lot of Macro trends that are happening. At the same time, we also see that customers become more demanding. There's a wide capabilities are needed From LDI up to the general kind of the alpha products all the way up to alternatives and everything that is in between. So there's a lot happening in this space. It's clearly also becoming more and more a global space, a global competition, Which I would argue is not necessarily the same for insurance where we often compete in very much in local markets With local regulation and local tax laws and local pension systems.
So there's a lot happening. And this has led us To say let's do a strategic review, not because of that today, we don't have a good performance. And to your point, and I made that point earlier, we're very pleased with the performance. But is this also long term the best way to run our asset manager and or should we think about accelerating the growth by making it part of a larger platform? That's what we're investigating.
And I trust that we will also come with a sensible outcome of this review. And once we know this, We'll obviously come back to you. Dan, on the cash position, Delfin?
Yes. Good morning. Thanks, Michael. So let me see if I can provide you a bit of guidance on that front. For the cash position, 1st and important is the expected remittances.
2020 was A year where we saw restrictions on the payment of dividends, although there is still Some prudency and some limitation in some markets, we see that this has already more normalized and this is already reflected in the Remittances of the first half with the exception mainly of the bank on which the amount of dividend was Of €13,000,000 following the limitations, current limitations, but we do expect That as from September, this will be clear and they will be we will come back To the normal payment of dividends from the bank. Also, of course, in order to look at the dividends of the second half, You need to take into account that there is seasonality on which Insurance Europe and some other entities tend to pay More dividends in the Q2 of the year. The long term guidance in terms So free cash flow, not only remittances, but also the expenses of the holding are to be in the range of the operating capital generation. There are of course other cash flows that are happening. 1 is still the execution of the Share buyback program that we are now more or less around half of that program, so that will continue over time.
And then the different transactions. We will have some proceeds From the disposal in Bulgaria, not that large. And then in the second half of the year, We are expecting to close the acquisition with of Heine Nord And that will be approximately €300,000,000 and that is the cash outflow related to the acquisition of 70% And also the fact that we refinance, we take a loan on board of €129,000,000 So for the second half Of the year, there will be this €300,000,000 outflow in terms of cash. And then the acquisition of MetLife, Which is of course more significant around €600,000,000 a little bit less €584,000,000 expected. This will only happen in the second half of sorry, in the first half of twenty twenty two.
That's very clear. Thank you very, very much. Thank you.
Our next question is from Ms. Sir, Fulin Liang of Morgan Stanley. Go ahead. Your line is open.
Thank you. Very good results and congratulations. Got 2 quick questions hopefully. So the first one is, obviously in Dutch you have seen the frequency And are you seeing the severity actually going up in Dutch market at the moment? And also Are you making any provisions for this potential severity kind of going up?
So that's the first one. And secondly is, I just wanted to look at your VNB. So obviously, your VNB actually grows year on year It's very impressive. But then if I compare the VNB versus the pre COVID word, which is the first of 2019 number, first half 2019, it kind of really kind of flat. However, so that is based on the fact I if I understand Japan is still in partially lockdown and maybe many of the CEE countries there are still kind of restrictions in the place.
So therefore, your current capacity may not be the full capacity. So I just want Do you have assessment of the real organic growth of the business In CE countries as well as in Japan. Thank you.
Yes. Fulin, thank you. So let me first With the your question on VNB. Indeed, we had a very strong development of VNB Versus last year, Europe was up 61%. I think there's a couple things happening here.
We do see a higher demand from customers in general. I think COVID, maybe even the extreme weather, everything that's been happening to the world has That's an increased awareness of vulnerabilities that people have. And certainly in some of the markets outside the Netherlands where we operate, The level of Social Security protection and the insurance penetration is relatively low. So I think that is One factor that contributes to our growth. I think there is also a bit more of a one off effect.
We have seen that households have, In general, spend a bit less, maybe less holiday. So there's a bit of a catch up effect as well that People are spending have a bit more money to spend. So I think that obviously is more of a short term effect. And The other thing I've been doing, we've been really moving our sales more into the online world. So I think we made very good steps in further making our business online.
We set up also we've shown a 40% leads increase To our agents. So I think part of it is market, part of it is around doing. And we've also seen that while tight agents were very resilient During the height of the pandemic, now also banks and brokers are really picking up again. If you look at the numbers, if you would compare it to 2019, I think Europe still shows a good growth. The value of new business in 2019, the first half was 108, It's now 135,000,000.
So also versus 2019, the first half, which was obviously pre COVID, we're showing a good growth. Going forward, we've always said that the VNB growth for Europe, high single digit growth should be achievable, certainly On the back of these macro factors that I mentioned and the strength of our distribution channels. So yes, this has been a Very impressive number, but also over the longer term, we believe we can continue to grow the value new business and therefore also the capital generation of Europe. Japan indeed is a different story. We saw a phenomenal drop after the tax reform and after Then the COVID lockdowns, but also here, I think we're very well on our way back up.
We more than doubled our I think that puts us in the number 2 position in the market with an overall market share of around 13%, fourteen 1%. We continue to sell a lot of protection products, which is also supportive For our value. So we see also for Japan going forward, we do see Further growth, even though competition is, of course, also adapting to the new products like we have done. But overall, We've given a target of 150,000,000 for Japan in 2023, and we're well on our way to deliver that as well. So all in all, indeed, I think it has been a very strong growth And but also going forward, we do expect that probably at a bit different pace, we do expect to grow our business.
And by the way, this is not only around sales. If you look at Japan, for example, for the first time, we passed the mark of 100,000 SME customers. So also, we're putting significant effort in our retention. Q2 is typically a bad retention month, but we managed to do that a bit better. And therefore, now for the first time, we also passed the 100,000 number of customers in the SME space In Japan.
Then your question on the Netherlands. I think I mean, obviously, the flood has a big impact. I think we also need to acknowledge that even though weather has become more extreme, If you look at the last period, the weather has been relatively favorable. Certainly, in the first half year, the floods obviously happened after The first half year, the weather has been favorable. We are looking, of course, at our model.
So what does this do In terms of the premiums that we need to add as to customers, the fire market is still a relatively hard market, Especially in the SME segment, maybe not as much as in the past, but there's still a possibility to Increased premiums were needed. Retail probably also, but a bit less. I mean, we see less burglaries, but there's more people at home, But there's still some room also for the increases. So I think that's on the short term. On longer term, obviously, we also For a reinsurance cover, that is very helpful for this event that happened.
We do think that over time, there is a possibility that we'll see more of these More of these extreme weather is happening, and that's something we need to account for in our pricing and potentially also for our in our reinsurance coverage.
Thank you.
Very clear.
Ladies and gentlemen, if there are any further questions or remarks, you can Our next question is from Mr. Naseeb Ahmed of UBS. Go ahead. Your line is open.
Hi, thanks for taking my question. So just coming back to the 2023 targets, you're progressing well against the SEK 1,500,000,000 total target. But if I look at the divisions, as you point out, Insurance Europe, your target was €3,000,000 to €5,000,000 It's looking that it's going to exceed P and C. I think it was $225,000,000 that's looking to exceed as well. But the one where it's you probably need to catch up is Life, which was a target of $900,000,000 So and you're making good progress on the rerisking And you had a target of €200,000,000 So just question, where are you currently with respect to the €200,000,000 And can you exceed that €200,000,000 target?
And then related to that on the solvency, there was a CHF 3,000,000 increase in the FCR. How much of that is driven by rerisking? And second question, you just mentioned that the online sales are driving BNB. Is there a lower persistency on this business? I guess it's Too early to say because you've just started selling this business.
But in terms of the assumptions that you're making in the BNB, are you expecting lower retention from this business going forward? Thank you.
Yes. Thank you, Nassim. So let me start with the online sales question and then I'll give it to Bernard on the, Let's say the impact of rerisking and Delfin can cover the target of NN Life. Yes. So maybe just to clarify, when we say online sales, we don't necessarily mean so you shouldn't compare this to direct sales.
There are still agents, brokers involved. It's just the way they do it. There's a they can do it like via a screen. There's a lot more Online possibility to do policy amendments, online underwriting. So the amount of tooling is a lot more online.
And we don't need to have agents driving through countries anymore for a few hours to meet a customer. And then there's obviously the online leads model that can support these agents so that they get enough leads, but also they can do it in a more efficient way. We don't have any indication that this would lead to a different retention level. In fact, I would argue that it's also Positive for customers that they are now in an easy way, an easier way can do business with us in an online way. And generally, we see that The more online active customers are, the higher the NPS, the higher the net promoter score, so which Could potentially be a plus even for your retention.
So we don't have any indication that this would be a reason for lower retentions. Then on the target of €200,000,000 Bernhard?
Yes, Nasiv, where we are With our rerisking program, we have already now reached our target of additional €200,000,000 OCG contribution coming From rerisking of our investment portfolio compared to our 2019 OCG numbers, so we successfully reached our targeted level.
But please keep
in mind that 2020 was a very special year where we were able to size opportunities in the markets that were impacted By the pandemic and now in the first half of this year, we shifted also to high yielding assets but at a much lower pace. And what we will do going forward is we will continue but gradually To shift to high yielding assets, mainly focusing then on the illiquids like mortgage, real estate and loans. And yes, the SCR related to rerisking activities in the first half Was roughly half of the numbers that we also show in the bucket others.
Yeah. Thank you, Bernard. Delfin, the overall targets?
Yes. Thank you, Naseep. So for the 2023 target, you are right that we are progressing well. There is clearly upside to the 1 point €5,000,000,000 And I could go segment by segment, but I think overall there is a positive Underlying business drivers, so for Bernard has mentioned the ability on the Further improvements on the re risking on the investment margin, I mentioned already the Two acquisitions that are going to contribute positively and we do expect also Some additional benefits here and there. So indeed there is clearly upside to the €1,500,000,000 in 2023.
Thank you. Thanks.
Our next question is from Mr. Robin van der Groek, Mediobanca. Go ahead please. Your line is open.
Yes, good morning everybody. Thank you for taking my question. Only one left. I mean with your Investor Day, you You guided for free cash flow to grow towards OCG over time. And I was just wondering, given your flagging out Performance on OCG delivery versus €1,500,000,000 I was just wondering how you're thinking on the fungibility of that capital generation towards free cash flow looks like In 2023 or share some words on how you're thinking on how that correlation should progress over time?
Thank you.
Yes. Thank you, Robin. Delfin?
Yes. Thanks, Robin. The link between the OCG and the free cash Flow is an over time reference because it's logical. The OCG is measuring How much is additional surplus capital is generated, let's say, on a normalized basis or driven by the normal business? Of course, always there's going to be fluctuations around that as market impacts The actual OCG market impact, the actual surplus capital is not reflected in OCG and the rest.
And in terms of therefore, this guidance is maintained. Obviously, in some units, the OCG might be Usually a bit lower than the remittances might be lower than the OCG, But also we have other units like the segment Netherlands Life on which we are currently Distributing slightly above the level of the OCG and is expected that to be maintained for the future. So overall, that guidance is maintained.
Okay. Very clear. Thank you.
Our next question is from Mr. Farquhar Murray, Autonomous. Go ahead please. Sir, your line is open.
Good morning, all. Just two questions, if I may. Firstly, just on the floods estimate. I presume that $70,000,000 there's kind of limited risk around that. So I presume it's kind of capped by the reinsurance coverage.
And also could I just ask what the gross claims are within that estimate? And then secondly, just sorry to come just back To NNIP. Could I ask how you're managing the uncertainties around the process there within the business? It is ultimately a kind of people business. And I do just wonder, just is there any sense of urgency about trying to reach a conclusion there?
Thanks.
Yes. Good morning, Farquhar. Yes, on the flood, so indeed, the estimate is around €70,000,000 pretax net of external reinsurance. Growth claims estimated around €90,000,000 And again, there's also here some uncertainty around these Numbers, but this is broadly the ballpark of where we are. On NNIP, yes, obviously, we're Managing this and I think also both the customer performance and the The investment performance has shown that we're managing the uncertainties well.
We also do a lot of measurements On staff and engagement, we've also seen that NNIP has a very strong engagement also in the company. So from that point of view, The uncertainties are well managed. Obviously, in terms of timing, yes, we're doing this on the one hand As fast as we can, because there's no reason to delay it, but we also need to do it the right way. And this is important. So we're going to take the time that it requires.
Obviously, as quick as we can, but doing it right in a responsible way is a leading principle here.
Okay. Thanks a lot.
We have no further questions, sir. Back to you, Mr. Knibbe.
Yes. Thank you very much then for all your questions. And before we close the call, let me just wrap up by saying that we can look back on Excellent first half year of twenty twenty one with a strong financial performance at all of our business units and a very encouraging growth in our sales and a solid capital position. Have a good day.